TLE

3rd quarter module 2

Unlocking Content Area Vocabulary

• Challenges - Difficulties or obstacles faced in the tourism industry, such as economic uncertainties and sustainability
demands.
• Innovations - Creative and new solutions, like advanced technologies and eco-friendly practices, that improve and
update the tourism experience.
• Issues - Concerns or problems within tourism, including overcrowding, responsible behavior, and safety, requiring
attention and solutions
. • Trend - Trend is a general direction into which something is changing, developing, or veering toward. The term may
also mean a fashion or craze, i.e., a fad.

Issues in Hospitality Industry

1.1 Sustainable Development Calls for Green Hospitality Going green is a white-hot issue in the hospitality-design
industry. People are beginning to look at sustainable solutions in a whole new way. The perception of green has
changed; it has gone from a fringe movement to mainstream. As a sign of its sweeping popularity, one of the best-
attended sessions at the recent Lodging Conference in Phoenix was: “Going Green: Environmentally Profitable Hotels.”
Some of the pioneers of the green hospitality movement were to share their challenges and triumphs in working
toward a carbon-constrained future. The basis of sustainable hospitality operation is a three-part balance, expressed
as “profits, people, and planet.” By taking those three elements into account, thus, a sustainable green hospitality
development program becomes economically viable, as well as beneficial to the community and environment.

1.2 Labor Cost Issues In 2005, labor expenses remained the largest single expense item for hospitality managers,
accounting for 44.6 percent of total operating costs. Consequently, any trend or issue that could potentially impact
labor costs must be taken seriously by hospitality owners and managers alike. "Due to the magnitude of the expense,
labor costs and issues have always consumed a substantial portion of the time and efforts of hospitality managers.
Now, with news of union contract negotiations, changes to immigration laws, and proposed legislation to increase the
minimum wage, hospitality managers are on edge.

The cost of labor is the biggest expense in all categories of hotels. Even with the advent of select service properties,
hospitality developers cannot avoid the human component of hospitality operations. While managing labor expenses is
important, hospitality managers are also aware that employees are an integral part of the lodging experience. The
interaction between hospitality guests and employees has a dramatic impact on the customer experience and the
success of the business operation. Therefore, a fine balance must be drawn between cost controls and guest
satisfaction.

1.3 Multicultural Issues The newest trends and topics surrounding hospitality research and development are the
management of multicultural talent and the political landscape affecting the hospitality industry. Franchises are
becoming the biggest industry in the world, the success of franchises lies in the understanding of ownership, internal
and external customer- and workforce-related - and top legislative matters, and insights into marketing and promoting.
With the development of globalization, multicultural issues are facing and disturbing industry operators.

1.4 Higher Education Tremendous changes are taking place in the hospitality industry which poses several challenges
for the transformation of the whole educational process including educational curricula, learning materials,
instructional practices, and education stakeholders. Education systems and institutions must take the challenges of the
knowledge economy seriously

2.1 Operating Issues

2.1.1 Labor Shortages Labor shortages and their impact on the industry in almost every geographic location are
consistently among the most difficult challenges noted by others. In many communities, hospitality expansion is
limited not by capital, but rather by human resources. A shrinking labor force is the number one challenge facing the
global hospitality industry, according to the International Society of Hospitality Consultants, which recently convened
to brainstorm world issues and rank them according to importance.

2.1.2 Cost Containment

Hospitals are increasingly challenged to find ways to reduce costs without sacrificing the quality standards imposed to
consistently meet guest expectations. The idea of “doing more with le” requires managers to think about ways to
operate more effectively (in other words to “do the right things in the right way”) and to examine possibilities for cost
savings that will not affect the guest’s perception of value.

2.1.3 Increased Competition Hotels everywhere indicate that their community is overbuilt; there are too many
available hospitality rooms relative to the guests desiring to rent them. The resulting competition, which often involves
price cutting in efforts to provide greater value to guests, reduces still further the profits generated.

2.2 Marketing Issues

2.2.1 Market Segmentation and Overlapping Brands Market segmentation is increasing as lodging chains focus on a
specific niche of travelers. Additionally, brands overlap. Some industry observers are concerned that franchisers may
expand their number of brands to the point that investors who purchase from the same franchiser will be in direct
competition with themselves! Also, as the number of brands increases, the ability of consumers to differentiate
between them decreases.

2.2.2 Increased Guest Sophistication Consumers have become more sophisticated and, as a result, so have the types
of products and services that they desire. Amenities, including business centers, exercise and recreational facilities,
and guest-room innovations, increase costs but, if not carefully selected, may not appeal to many guests being served
by a specific property.

2.3 Technological Issues The challenges of keeping up with the fast pace of technology is difficult and expensive.

2.3.1 Interactive Reservation Systems Guests can now use the Internet’s interactive reservation systems, and
hospitality companies are sometimes criticized for the (alleged) large number of keyboard clicks required to make a
reservation. The number of reservations made via the Internet continues to increase. Surveys in the United States
show that currently 20% of all reservations are made through the Internet, and this percentage is increasing every
year. With such a high percentage of reservations done through the Internet, hospitality cannot afford not to be
connected. If the potential guest cannot book online, a reservation will be made at the competitor's website.

2.3.2Guest-room Innovations Multiple telephone lines, interactive opportunities for ordering room service, and guest-
room check-out are examples of amenities that guests increasingly desire, but that are very expensive to install and
implement.

2.3.3 Data Mining This technology allows marketing and sales personnel to find new ways to use guest-related data.
(Data mining: using technology to analyze guest and other related data to make better marketing decisions.)

2.3.4 Yield Management This computerized process allows managers to match guest demand with room rates (high
demand means higher rates because of lessened discounts; low demand results in higher discounts.) (yield
management: demand forecasting systems designed to maximize revenue by holding rates high during times of high
guest-room demand and by decreasing room rates during times of lower guest-room demand). Yield management is
critical to maximizing a hospitality’s profitability. The concept is applied to every revenue department and across
departments. The yield manager's job is to maximize the revenue per available room by selling rooms to the right
customers, at the right price, at the right time.

2.4 Economic Issues

2.4. 1 Dependence upon the Nation’s Economy When the nation’s economy is good, business travel generally
increases. Hospitality occupancy rates and rack rates increase, which results in higher profit levels. The reverse is also
true: business travel slows when the economy slows. Then occupancy and rack rates decrease. Discounts to increase
occupancy are offered, which yield lower revenues and profit decreases.

2.4.2 Globalization Globalization impacts the lodging industry dramatically because it influences the extent to which
people travel both within the country and around the world. Therefore, it is not only the economy of the nation but also
the economies of individual countries, that play an increasingly larger role in the financial success of lodging
properties. To compete, they must pay closer attention to the trends of globalization. The industry must reflect the
requirements of the global village in many aspects of its operations, including food, services, amenities, staffing
policies, and training.

3. Trends in Hospitality Industry

3.1 Rapid Growth in Vacation Ownership Vacation ownership is the fastest-growing segment of the lodging industry and
is likely to continue growing as the baby boomers enter their fifties and sixties in the U.S.A. The World Tourism
Organization has called timeshares one of the fastest-growing sectors of the travel and tourism industry.

3.2 Integration & Globalization Vertical integration is a trend that began a few years ago. Lodging companies realized
that guests’ accommodation needs were not just at one level; rather, they seemed to vary by price and
facilities/amenities. Almost all major lodging companies now have properties in each segment of the market.

3.3 New Management The complex forces of capacity control, safety and security, capital movement, and technology
issues will require a future management cadre that is able to adapt to rapid-paced change across all the traditional
functions of management.