– Tourism industry is aIntroductionsetofinterlinkedacvitiesthat serve the needs of tourist with accommodation being the fastest growing sector in this industry
– In 2014, Canada boasted of 8, 090 hotel properties with approximately 440, 123 rooms with overnight stays that that totals to $19.7 billion a year.
– Hotel properties offer a wide range of accommodation types to both business and leisure travellers..
– The hotel industry NAICS code is 721111
– The NAICS code consist of establishments that involve in selling accommodation, travel and tour services to commercial clients as well as the general public.
– British Columbia the area under study is located in the western most province of Canada between the Rocky Mountains and the Pacific Ocean.
– In British Columbia, there are approximately 19,243 tourism-related business employing more than 137,800 people.
– The hotel industry under tourism sector is one of the most contributing sectors to the country’s Gross Domestic Product (GDP).
– This industry supports and sustains jobs in every region of the province with over 62,000 employees.in 2011.
– In 2012, the tourism sector is estimated to have contributed approximately7.1 billion dollars to BC’s economy and tax revenue of more than 1.2 billion dollars.
In 2011, the tourism sector in British Colombia produced huge revenue in accommodation & food services followed by transportation, retails services and other services respectively as shown in the figure below.
Market size and growth
– The hotel sector in British Columbia is one of the driving forces of the economy due to the elimination of hotel room tax..
– The market size of hotel industry has dramatically grown over the years with mining, natural gas, technology, forestry taking the largest junk of the market share.
– In 2017, the hotel industry generated $18.5 billion in revenue which is reported to be an increase from 2016 by 8.4%.
– Market share of different sectors in terms of revenue generated and number of employees with accommodation having 4.2% and 2.0%
– The hotel industry faces stiff competition from food & beverage sector and the transportation sector.
– Food and Beverage is over $32 billion industry with over 700,000 employees who are majorly youth.
– The transpiration sector in tourism is another competitive sector that provides transport and employs over 300, 000 people with the sector being divided into air, water, land, rail.
– Channels of distribution for hotels are generally the platforms or methods in which bookings are made.
– The channels can be the hotels booking website or engine, making reservations via a phone call, using a third party website such as Airbnb, an OTA etc.
– Hotel industry mainly uses forward integration by selling their services directly to their customers without using other distribution channels.
– Hotels are differentiated by their location, size, opulence, services offered, popularity etc.
– The different hotels include deluxe hotel, all suite, smaller/privately owned, resort hotels and lodging, motels, motor hotels and inns.
– There cost depends on the number of persons, services provided including food and the level of luxury.
– Technology plays a very important part in the accommodation process since most bookings are done online on the companies website.
– The accommodation fee depends on the occupants capacity on a particular room. Single rooms attract high fees compared to double rooms for the purpose f maximizing on profits. Deluxe rooms are far much expensive
– .Profitability in the hotel industry has been growing over time and it has reached its peak since people have discovered the importance of travelling and having fun.
– The segments in the hotel industry that affects profitability and competition include pricing strategy and branding and its value.
Step 1
Identifying of various parties involved as well as particular factors bring the competitive pressures. pressures.
Step 2
Assessing the strength of the pressures emanating from the porters five forces if they are strong, moderate or weak.
Step 3
Determining the competitive forces strength to earn attractive profits in hotel industry.
– The five forces model was used to determine the forces that influence the hotel industry.
New Entrants threats
– The entry barriers in the hotel industry in BC include
– Huge capital requirements amounting to over $500 billions of shillings are required.
– Strong network effects
– Economies of Scale
– High economies of scale
Rivalry among existing competitors
– The rivalry among competitors exist when
– The market is flooded with many hotels with over 9, 000 hotels.
– Competition is concentrated on numerous strategic stakes as well as fixed costs.
– Competitors promoted their products to the same people
– Training costs are high
Bargaining Power of Suppliers
– Some of the challenges faced in the bargaining power of suppliers include
– Switching costs
– Numerous channels of suppliers.
– Swiftness in supply
Bargaining power of Buyers
– The challenges faced by hotels in BC include
– Many sellers as compared to buyers
– Switching costs to others
– Low buyers’ profit margin
Threat of substitute products
– Substitute products contribute to
– Price reduction
– Stealing of the market share
– Relatively high quality products
– The main driving forces in the hotel industry include
– Globalization
– Technological changes
– Marketing innovation
– British Columbia has numerous variety of hotels. One of the leading hotels in the region include
– Wickaninnish Inn
– Four Seasons Resort Whistler-CHF 293
– Abigails Hotel-CHF 200
– The main success factors for the hotel industry include
– Better customer service
– Advertising
– Cost control
– Product differentiation
– The hotel industry business is an attractive business in British Columbia because
– The competition in the area allows sufficient profitability
– Secondly, the industry profitability is favoured by prevailing driving forces such as globalization, market innovation and technological changes
– There is potential of the company to capitalize on the vulnerabilities of the weaker rivals.
– The degree of uncertainty and risk in the industry is limited.
References
Jayawardena, C., Pollard, A., Chort, V., Choi, C., & Kibicho, W. (2013). Trends and sustainability in the Canadian tourism and hospitality industry. Worldwide Hospitality and Tourism Themes, 5(2), 132-150.
Cheng, D. S. (2013). Analyze the hotel industry in porter five competitive forces. Journal of Global Business Management, 9(3), 52.
Dominici, G., & Guzzo, R. (2010). Customer satisfaction in the hotel industry: a case study from Sicily. International Journal of Marketing Studies, 2(2), 3-12.
Hoque, K. (2013). Human resource management in the hotel industry: Strategy, innovation and performance. Abindgon, UK: Routledge.
Redmond, G. (2011). Changing styles of sports tourism: industry/consumer interactions in Canada, the USA and Europe. Changing styles of sports tourism: industry/consumer interactions in Canada, the USA and Europe., 107-120.
Punitha, S., & Rasdi, R. M. (2013). Corporate social responsibility: Adoption of green marketing by hotel industry. Asian Social Science, 9(17), 79.
Shaw, G., Bailey, A., & Williams, A. (2011). Aspects of service-dominant logic and its implications for tourism management: Examples from the hotel industry. Tourism management, 32(2), 207-214.
Segarra-Oña, M. D. V., Peiró-Signes, Á., Verma, R., & Miret-Pastor, L. (2012). Does environmental certification help the economic performance of hotels? Evidence from the Spanish hotel industry. Cornell Hospitality Quarterly, 53(3), 242-256.
Zervas, G., Proserpio, D., & Byers, J. W. (2017). The rise of the sharing economy: Estimating the impact of Airbnb on the hotel industry. Journal of marketing research, 54(5), 687-705.
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