TOURISM AND HOSPITALITY BUSINESS MANAGEMENT
Name Inese VaitkaiteUnit aim The aim of this unit is to develop learners’ understanding of the main internal and external factors that influence businesses in the tourism and hospitality industry. Learners will understand how to analyze the micro and macro environments in order to influence management decisions. Learners will apply tools to gain information relating to the tourism and hospitality business environment.
Word count 2500
Date 5th October 2018
Tourism and Hospitality Business Management
CONTENTS
S. No.Description Page No
Public Sector
The role of the Public Sector
The characteristics of Public Sector organizations
Factors influencing the Public Sector organizations
Private Sector
The role of the Private Sector
The characteristics of Private Sector organizations
The role of entrepreneurship in Tourism and Hospitality businesses
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Macro – Environment
Key factors influencing Macro – Environment in Tourism and Hospitality
PESTEL analysis
Micro – Environment
Key factors influencing Micro – Environment in Tourism and Hospitality
4.2 SWOT analysis
1. Public Sector
The Public Sector in the tourism and hospitality industry is an organization which provides services and goods by and for the government and its citizens. Public sector organizations are funded by the national and local government (e.g. Museums, Visitor Information Centers, Parks, National Gallery and Regional Development Organizations). Government regulates the tourism sector through the Ministry of Tourism or National Tourist Organizations (NTO), and indirectly through appropriate leverage, support for its infrastructure and international policy. The state influences tourism in two ways: manage demand and income or manage and price.
The Role of Public Sector
In tourism and hospitality public sectors play an essential role making more aware of publicity with the business environment. The purpose of the public sector is to educate, advise and offer services to its customers. In general the state admits that the duties of the public sector must cover such matters as:
Health
Safety
Fair trading
Consumer interests
Employment
Financial support
Infrastructure in transport (roads, railways, ports)
The Characteristics of Public Sector organizations
Public sector travel and tourism organizations in the UK occur at several different levels:
Government-controlled – National and Regional Tourist Boards get funding from central government, e.g. “VisitBritain”.
Local government-controlled- Most local councils have a department or members of staff involved with advancement and expanding tourism, e.g. Birmingham city council, Torbay Council in Devon, Pembroke-shire County council and Belfast city council.
Membership organizations- get funding from the public money, but also raise income through membership subscriptions.
Factors influencing the Public Sector organizations
Economic. In relation to economic impacts the following are usually considered to be positive effects:
Contribution to foreign exchange earnings;
Contribution to government revenues;
Generation of employment;
Contribution to regional development.
Negative consequences:
Inflation;
Opportunity costs;
Over-dependence on tourism.
Environment. The natural treats can negatively impact on visitors decrease such as pollution, natural disasters, seasonal pressure and depletion of natural resources as well. Otherwise, tourist places situated closely to rivers, beaches, mountains, forests or other ecosystems can major attracts plenty of tourists.
Social. The Social factors refer to emerging factors, such as the changing face of consumer behavior in tourism like destination preferences, quality expectations, popularity of object, booking behavior, traditions, gastronomy, shopping, leisure activities etc.
2. Private sector
The Private sector in Tourism and Hospitality is an organization which is owned by individuals, either as sole traders, partnership or limited companies. It plays an urgent role in both economic and urban development as most of the organizations in the travel and tourism industry is owned and operated in the private sector (e.g. Airbnb, British Airways, Four Seasons Hotels and Resorts etc.)
2.1 The role of the Private Sector
Private companies and organizations deliver goods and services to the customer with the direction of making benefit for the owners and shareholders of the private enterprise. Economic growth created by a vibrant private sector is a necessary condition for sustained and substantial poverty reduction. Private sector is an inalienable part in tourism and hospitality development. The following areas show the main aspects:
Providing increased livelihood
Purchasing opportunities
Equal employment opportunities
Creating business friendly environments and additional value-added business activities in the region
Associating the local community in tourism projects and securing that the benefits of tourism accumulate to them in right measure
Undertaking industry training and manpower development for gaining excellence in quality of services
Taking a part in the preparation of investment guidelines and marketing strategies and assisting in database creation and research
Ensuring safety and security of tourists
2.2 The Characteristics of Private Sector organizations
Public limited company (PLC): a company registered under the Companies Act (1980), with lawful minimum capital requirements and shares offered to the public subject to conditions of restricted obligation.
Private limited company (LTD): an economic company established by one or several individuals, the constituent capital of which is divided into the proportions of the sizes specified in the constituent documents and the number of participants is limited by the Law on Limited Liability Companies.
Limited liability partnership (LLP): a partnership, where each member who is responsible for the obligations of the firm with his property regardless of the size of the unit. Full partnerships are mainly distributed among companies that provide legal, accounting and other services.
Sole proprietor: is a company owned by one person who is fully responsible for the results of its activities and is entitled to receive all profits.
Franchise: an object of the franchise agreement, a set of benefits, consisting of the rights to use the brand and business model of the franchisor, as well as other benefits needed to create and conduct business.
2.3 The role of entrepreneurship in Tourism and Hospitality businesses
Entrepreneurship in restaurant and foodservice suggests an interest in starting, owning, and operating a profitable independent or franchised operation. Entrepreneurship covers the full range of the restaurant business including, but not limited to:
Concept
Conducting analyses
Understanding entrepreneurial potential
Financial planning, borrowing, and control
Franchising
Location and property analysis
Ownership and management
3. Macro – Environment
Macro – environment ( ‘large’ from Greek)- is a combination of demographic, economic, natural, scientific, technical, political, cultural and other factors that are independent of the company, but which have a significant impact on its marketing activities. Conditions may continuously change, so require constant monitoring, tracking. Analysis of the macro-environment considers the wide range of environmental factor that conceive opportunities and create the threat of danger to the destination or to the organization. These are efforts that the tourism organization can’t control and to which it has to adapt.
3.1 Key factors influencing Macro – Environment in Tourism and Hospitality
The management system functions in a social environment that represents the economic, technological, political, social and environmental systems. The environment of indirect influence determining factors, factors of demographic, natural, scientific and technical nature, socio-cultural factors, the state of the economy, international events and other factors that do not directly influence the functioning of the tourism sphere, but are displayed on them.
3.2 PESTEL analysis
PESTEL-analysis is a marketing tool designed for users of political, economic, social and technological aspects of the external environment that affect the company’s business.
As it shown on the PESTEL analysis box (adapted from Drummond and Ensor, 1999; Tribe, 1997) political/legal factors (P) – the most important factor of this group. The study of politics is connected with the fact that this sphere carries out the regulation of power. The authorities are engaged in determining the environment of the company and obtaining the main resources for carrying out business processes in it. For instance, visa regime and a high level of security can be attributed to political factors.
Economic factors (E) – the most important condition for the work of the organization. The study of the economy is necessary, because for the successful operation of the company you need to have a clear picture of the distribution of resources at the state level. Economic factors (E) include the level of development of tourist infrastructure, investment activity, etc. For example, favorable development factor is a relatively low level price for a number of goods and services.
In the PESTEL analysis, Social factors (S) are also studied. The goal is to identify consumer preferences, such as psychological background, emotions, smiles, etc. can lead to tourist’s impressions. Also, the most important factor is the language, it’s important to translate your services into as many languages as possible to appeal to travelers worldwide and earn their trust.
And finally, the Technological factors (T). The purpose of the PESTEL analysis from the point of view of studying technological components is to identify trends in technological processes, often acting as the reasons for which the market suffers losses and undergoes changes. Technological factors of the PESTEL analysis also influence the appearance of new products.
As an example, in the face of a clear lack of existing tourist information centers have a very important role electronic resources, including information Internet which, on the one hand, are a favorable factor for the development inbound tourism, on the other – the lack of English versions of many sites limits their availability. Negative factor is the complete absence of free Wi-Fi points in pedestrian areas of cities, gas stations, railway stations and shopping centers as well.
Political/legal factors
Employment law
Environmental legislation
Foreign trade agreements
Political and governmental stability
War and terrorism Economic factors
Monetary and fiscal policy
Unemployment and labor force issues
GDP and GNP growth rates
Economic and business cycles
Exchange rates
Inflation
Socio-cultural factors
Age profiles
Social mobility
Population growth
Lifestyle trends and changes
Family structures
Educational patterns and levels of achievement
Income distribution
Social class
Attitudes and values
Consumerism Technological factors
Technological developments
Internet and e-technologies
Government research and development
Computerized reservation systems
Development cycles
Production technology
To sum up, for the last decade is undergoing positive change: liberalization visa and border formalities, the development of tourist infrastructure, including transport, the creation of the necessary conditions for the promotion of independent tourism and the formation of a sustainable image countries in the international environment. However, the various impacts of each factor, and the extent to which an individual or collaborating organization is able to accommodate or respond to them, will tend to vary.
4. Micro – Environment
Micro – environment ( ‘small’ from Greek) – is an internal marketing environment, a set of elements related to the company, the company and its opportunities in the market for carrying out marketing activities, including: staff, finance, space, equipment, technology, organization of labor.
4.1 Key factors influencing Micro – Environment in Tourism and Hospitality
According to Porter (1980), there are five forces that typically shape the industry structure and the state of competition in it: intensity of rivalry among competitors, threat of new entrants, threat of substitutes, bargaining power of buyers and bargaining power of suppliers. These five forces delimit prices, costs and long-term profitability prospects. These factors in turn determine industry attractiveness, which provides the groundwork for strategic plan of action.
4.2 SWOT analysis
References
http://www.assignmentpoint.com/arts/social-science/government-and-ngo-role-to-develop-tourism-sector.htmlhttp://present5.com/lecture-12-the-role-of-government-in-tourism/http://stravelandtourism.weebly.com/public-private-and-voluntary-sector.htmlTravel and tourism (2005) 1st edition by Christine King, and Gillian Dale (p.74, 87)
https://www.ukessays.com/essays/tourism/role-of-government-in-tourism-tourism-essay.phphttps://sites.google.com/site/travelandtourismassignment21/public-sectorhttps://www.researchgate.net/publication/293263713_Study_on_Factors_Influencing_Tourism_Way_Forward_for_Sustainable_Tourism_in_Bangladeshhttps://fp.brecorder.com/2011/06/201106201203750/https://books.google.lv/books?id=Qs44DwAAQBAJ;printsec=frontcover;dq=private+sector+in+tourism;hl=ru;sa=X;ved=0ahUKEwjxkdbgvOXdAhUHESwKHfrqBzwQ6AEIJzAA#v=onepage;q=private%20sector%20in%20tourism;f=false
