The industry is also labor intensive. In a competitive industry, sales people who take the time to understand clients’ needs can hold an advantage. Staff costs are significant as success in the hotel industry is strongly influenced by the quality of the service provided. Supplier power is assessed as moderate overall. The hotels & motels industry is strongly influenced by travel and tourism trends. The situation within the industry has changed significantly in recent years. The business used to be strong and the biggest challenge was finding space to book. Now that it is a buyer’s market, most hotel sales people are faced with the challenge of finding customers.
The recent global economic downturn had an adverse effect on the industry’s performance and now more than ever, most hoteliers are searching for demand generators and are relying on direct sales to impact revenues and fill the significant void left by the ailing economy. This may act as deterrent for newcomers; however, the growth forecast is positive, which may boost the risk of new entrants in future. It is possible to enter the industry in a relatively low-key way by opening a small, independent hotel or motel as a sole proprietor. However, the industry is capital intensive, and for a large-scale entrance, upfront investment in buildings, decor and furnishings, ICT infrastructure and staff is expensive.
In a highly competitive business, conducting operations using all the latest technology, as well as constantly developing the tools and skills required, is essential (e. g. allowing travelers to check in to hotel rooms remotely). The more demanding customer of the future will want to engage with a hotel across all touch points (i. e. text, email, and social media) where appropriate. Hotels will need to capture and store more data, yet access to it must be faster and more targeted in order to personalize the guest experience. As tourism is not a vital consumer good, it will tend to be cyclical and travelers are increasingly expecting bargain rates while refusing to tolerate lapses in quality and service.
To sustain revenue growth in the premium market, operating a chain of hotels is often an important strategy as it reduces dependence on tourism in any particular location. However, in order to open an international chain of hotels, regulations in terms of real estate and buying abroad need to be taken into consideration and can therefore be restrictive in some countries. The purchase, leasing, and management of property may involve legal and financial complexities, necessitating spending on professional services. Globalization is an important key driver within the industry, with emerging markets, i. e. Russia, India and China, offering significant opportunities, but it also involves employing various business strategies and extra costs.