The Role of Tourism and Hospitality in the Australian Economy

Introduction

Background to the study

Tourism and Hospitality industry plays a significant role in Australian economy. The industry is expected to witness an annual growth rate of 4.3% by 2015.The industry is composed of various business activities such as clubs, tours operators, tour guides, restaurants and cafes. An example of a firm that operates in the Australian tourism and hospitality industry is Holiday Inn Surfers Paradise.

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The firm is strategically located at Surfers Paradise off the Gold Coast and is surrounded by a rich environment of shops, cafes, nightlife attraction sites and secured beaches. The hotel is well refurbished and offers a number of services to ensure increased customer satisfaction. The management of the firm is committed to ensuring that the firm attains a high competitive advantage compared to other firms in the industry. For instance, in 2007, the firm’s management invested $ 15 million in an effort to rejuvenate its operation. The firm’s strategic location at Surfers Paradise and the provision of various amenities makes the firm to attract both individual and industrial customers for business and relaxation purpose (Holiday Inn Gold Coast, 2009, ¶ 1-3).

In the 21st century, the hospitality industry has become very complex. This makes it important for firms in this industry to incorporate strategic management concepts to enable them survive in the long-term as going concern entities. One of the strategic management elements that the management of these firms should consider is marketing. Accordingly, this report explores the Australian hospitality industry with reference to Hotel Inn Surfers Paradise.

Aim

The objective of the report is to conduct an analysis of the Australian business environment in which Hotel Inn Surfers Paradise operates with a view to developing an effective marketing strategy.

Scope

A macroeconomic analysis is conducted through market research. Various techniques are used in the analysis of Hotel Inn Surfers Paradise. These include SWOT analysis, PESTLE analysis and Competitor Profile Matrix. The firm’s strengths, weaknesses, opportunities and threats are analyzed. The PESTLE analysis entails a consideration of the political, economic, social, technological and legal environment in which the firm operates. The CPM is used to evaluate the competitive environment through a comparison of the firm with other firms in the industry. The problem facing the firm is identified and a set of marketing strategies developed to enable the firm overcome the problem. Finally, a conclusion and a number of recommendations are made.

Market research

The Australian hotel industry is a feasible investment destination due to the country’s rate of growth in the tourism industry. During the 2007 financial crisis, there was a reduction in the industry’s level of revenue. This resulted from a shift in consumer’s purchasing behavior from luxuries to necessities. The global economic crisis reduced the consumers’ propensity to travel. The result is that there was a reduction on revenue generated from room accommodation, entertainment and meals. Reduction on spending on leisure also resulted from an increase in the interest rate, which was experienced in 2009. The effect is that there was an increase in price of various hotel amenities (Rutgers, 2009, ¶ 3).

Porter’s five forces

Threat of new entrants

Hotel Inn Surfers Paradise is faced with the threat of new domestic and foreign investors venturing the industry through internationalization. One of the locations being considered as a viable investment destination is the Surfers Paradise. Entry of new firms poses a threat to success of Hotel Inn Surfers Paradise. This is due to the fact that there will be an increase in competition culminating into a reduction in the firm’s level of revenue. The new firm’s will bring with themselves new resources in an effort to attain a high market share. The ultimate effect is that the there will be an increment in the level of competition.

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Supplier’s bargaining power

Supplier’s bargaining power is relatively low in Australian hotel industry. This is due to the fact that the industry is concentrated. In addition, the industry is characterized with a wider range of differentiated products. This makes the consumer’s switching cost to be low (Hotel trends, 2009, ¶ 5). However, Hotel Inn Surfers Paradise has been able to attain a relatively high bargaining power through service customization of its services and its superior location.

Buyers bargaining power

Buyer power in Australia is relatively high. This results from the fact that there has been an increase in consumer purchasing power over the past few years in Australia. Increase in the consumer’s purchasing power has culminated into an increment in demand for a higher satisfaction through consumption of various hotel services. Hotel Inn Surfers Paradise has been able to increase customers switching cost through incorporation of diversification of services.

Substitutes

The survival of Hotel Inn Surfers Paradise is faced with a threat due to existence of substitute products to their amenities. For example, some of the amenities provided by the hotel are being offered by other businesses such as tourist resorts. Availability of substitutes results into the demand for services offered by the hotel being elastic. This is due to the fact that the consumers have a wide range of alternatives to select from. The result has been an increase in price war between Hotel Inn Surfers Paradise and its competitors.

Rivalry

Australian hotel industry is characterized with a high level of competition. According to Porters (1980, ¶ 2), a high level of competition culminates into a high level of rivalry within the industry. The large number of players in the industry has resulted into a reduction in consumers switching cost. The management of Hotel Inn Surfers Paradise has formulated customer loyalty programs as a competitive strategy in an effort to attain a high competitive position by attracting and retaining its customers.

Political environment

The political environment plays a significant role in the success of every business. Australia’s political risk is relatively low. Most of the country’s population is concentrated in the eastern coast. In 2009, the country was ranked the 2nd in terms of political stability. In addition, there is a high level of transparency in the entire Australian government (‘political stability, 2009, ¶. 1). Hotel Inn Surfers Paradise has been able to effectively operate in its domestic market due to effective policies implemented by the government. These policies relate to taxation.For example; government abolished the expenditure tax in its 2007/2008 budget which greatly benefited the firm.

In addition, the government recognized that the hotel industry is a key exporter of services and hence exempted businesses in the industry from the Minimum Alternative Income Tax (‘A curtain raiser: hotel industry’, 2008, ¶ 2-3). The Australian government has reduced its degree of intervention of firms in the hotel industry. This has enabled Hotel Inn Surfers Paradise to operate in a free market.

Economic environment

The occurrence of the financial crisis in 2007 did not spare Hotel Inn Surfers Paradise. The global economic melt down culminated into a decline in consumers’ purchasing power and a change in their consumption pattern. Consumers paid more emphasis on purchasing necessities. The result is that there was a decline in the firm’s level of revenue. However, the firm was able to survive through the crisis since it had a well-established financial base. As a result, the firm was able to offer great room rates to its customers. With the recovery of the global economy recovering in 2010, the management of the firm expects that there will be an increase its level of revenue.

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Social environment

Australia is characterized by a high level of social stability which has been a major factor contributing to growth of the hotel industry. The location of Hotel Inn Surfers Paradise acts as a major factor contributing to the firm attracting a large number of customers. Its location offers the customers a magnificent view of the beach. In addition, its vicinity has different businesses such as shops, which create peace amongst the customers. The society has developed a positive attitude towards the firm. This results from the fact that the firm has well trained staff which ensures that service delivery is to the customers’ satisfaction (Travelers reviews of Holiday Inn Surfers Paradise, 2010, ¶ 5).

Technological environment

Over the past decades, there have been rampant changes within the technological environment due to increased innovation. Development in Information Communication Technology (ICT) is amongst the changes that have greatly contributed into an increase in Hotel Inn Surfers Paradise revenue collection. The technological environment has also enabled Hotel Inn Surfers Paradise to attain a high competitive edge. In addition, the firm has been able to differentiate its services from those of competitors. For example, the management of the firm has equipped the hotel with the current security technologies such as the Digital Door Viewer (DDV). As a result, there has been an increase in the level of confidence amongst the domestic and foreign customers who patronize the hotel (Innovative technology benefits the hotel industry, n.d. p.2).

The hotel is also fitted with flat screen television, which ensures that the customers are satisfied. In addition, development in electronic commerce has enabled the management of the firm to tap the international market through conduction of online booking. The firm is also fitted with internet connections, which enable the customers to conduct their business while in the hotel premises (Holiday Inn Gold Coast, 2009, ¶ 3).

Legal environment

The country has an effective legal system which results which supports the operation of the Hotel Industry. According to a report by World Bank, Australia ranks amongst the top ten countries globally with a good business environment due to its legal system. Effective legal system has resulted into an increment in the degree of confidence amongst the management of Hotel Inn Surfers Paradise in dealing with their business partners. This is due to the fact that the legal system enables effective product and service innovation amongst investors in the country through implementation of intellectual property rights (‘your competitive edge’, 2009, p.18).

Competitor analysis

Over the past few decades, there has been an increase in the number of firms venturing into the Australian hotel industry due to its lucrative nature. This has resulted into an increase in the degree of local competition within the industry. A comparison of the firm’s performance with other firms is illustrated through a Competitive Profile Matrix (CPM) in the appendix section through consideration of key success factors.

Problem statement

  • There is an increased complexity in the operation of the hotel due to increased sophistication of the customers. Both individual and organizational customers are currently being more conscious of value attained in their purchasing behavior.
  • The firm is also faced with increased demand for high quality services from the hotel industry.
  • The global economic crisis has resulted into an increment in consumer price sensitivity. This means that the firm has to change be price conscious in setting the price of its services and room rates.
  • Innovation in Information Communication Technology (ICT) has also resulted into an increment in consumer product and service awareness. This means that the firm has to provide efficient product awareness mechanism.

Strategy Action to attain customer satisfaction and growth

Incorporating the concept of brand management

Customer satisfaction is paramount in the success of firms in the service industry. To attain a high level of customer satisfaction and growth, the management of Hotel Inn Surfers Paradise should incorporate the concept of brand management. This means that the firm should ensure that its brand name is enhanced through the provision of high quality services. In addition, the management should also incorporate the concept of diversification and service innovation.

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In its brand management, the management of the firm should ensure that it develops a strong brand culture, brand image and brand identity. This will ensure that the society associates its self with the services it provides. The ultimate result is that the firm will be able to attain a high level of customer loyalty. The ultimate effect is that the firm will increase on its level of profit.

Integrating franchising

The management should also incorporate the concept of franchising in an effort to tap the entire market. Through franchising, Hotel Inn Surfers Paradise will enter into a contract with already established firms which will be controlled by Hotel Inn Surfers Paradise. This means that the firm will enter into enable the firm to attain its intended growth.

In developing its marketing strategy, the management of the firm should incorporate the Ansoff matrix. Franchising will enable the firm to effectively penetrate its current and new Australian market. In addition, service innovation and diversification will ensure the firm develops new services. This will result into a high rate of customer satisfaction.

Conclusion

Australian hotel industry is very competitive due to its lucrative nature. This has resulted from an increase in the country’s rate of economic growth over past decades culminating into an increase in consumer purchasing power. This has greatly contributed to the success of Hotel Inn Surfers Paradise.The success of the firm is also associated with effective political, economic, technological, social and legal environments. However, there are a number of challenges facing the firm. These relate to increase in competition, customer sophistication, increased product and service awareness and demand for quality products. As a result, it is important for Hotel Inn Surfers Paradise to formulate effective marketing strategies to enable it attain a high competitive edge.

Recommended Actions for change

  • In its effort to incorporate customer satisfaction, the management of the firm should integrate the current CRM software. This will enable the management to effectively understand the demands of the customers.
  • The firm should incorporate the current electronic commerce technology in its operation so as to increase its customer base.
  • In diversifying its services through venturing into other market segments, the management of the firm should incorporate the concept of franchising.
  • To attain a high profit level through franchising, the management of the firm should scan the environment to identify the best firm to form a franchise with.

Reference List

Abraham, P. (2009). The global financial crisis and its impact on the hospitality industry. Florida: University of Central Florida. Web.

AMB. (2009). Country risk report: Australia. Web.

Australian Government. (2009). Australia: your competitive edge; stability resilience, innovation. Sydney: Prentice Hall Publishers.

Department of State and Regional Development. (2009). Political stability. Web.

Gold Coast Information. (2009). Holiday Inn Gold Coast. Web.

Hotel Trends. (2009). Change in the air for Australia’s major hotel owners. Hotel Trends. Web.

Porter, M. (1980). Industry structure and competitive strategy: keys to profitability. (On-line). Financial analyst journal. New York: The Free Press. Web.

Run-up to Budget. (2008). A curtain raiser: hotel industry. Web.

Rutgers, S. (2009). The Australian hotel industry –econometric demand forecasting. E.hotelier. Web.

TravelIpod. (2010). Travelers review of Holiday Inn Surfers Paradise. Web.

Vintia, M. (2000). Competition in the international hotel industry. International journal of contemporary hospitality management. New York: MCB UP Limited.Vol12, issue 2, pp. 114-118. Web.

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