Challenges Faced By Hotels And Their Impact On Profitability And Operations

Classifications of hotels

Discuss 4 different issues that hotels are facing currently and how it affects the Operations and Profitability of the Property. Review in detail each of these Issues and provide alternative solutions to assist in overcoming these issues.

The hotel business has grown so much over the years and very business models have been implemented in the operations. Hotel operations and developments have been impacted greatly by the social and environmental life of many. The social and environmental developments are in the range of customer support systems, environmental concerns, technological and health concerns (ARUSTEU, 2014). Hoteliers and investors have become aware of these impacts and have changed their desires and ambitions to incorporate the right changes for sustainable development. They have also focused on changing operations for reduction of costs/prices, pay attention towards meeting legal regulations and also focus on environmental and social developments.

According to (Ahmad, 2015), the hotels under the hospitality industry are classified into four major categories including;

1. The five star hotels. These hotels are huge and offer services to tourists and visitors in the metropolitan and urban settings. They are considered very costly since they serve tourists, travelers and businessmen.
2. Heritage hotels. These are second in rank and are less expensive. Expenditure on capital is less and they are much affordable to middle income earners.
3. Budget hotels. These provide reasonably affordable services and are a favorite to domestic travelers. Good services and seasonal special offerings are characterized by the hotels.
4. The unclassified. These are found across the country and provide services a very low price and affordable to many. There selling point lies in a low pricing policy.

The hotel industry currently faces some challenges that are slowing their development pace. According to (Airey, Dredge, & Gross, 2014), there are a number of issues that hotels have to battle with in the hospitality industry. They include; increasing customer demands and their changing tastes and preferences, intensified competition in the industry, technological changes among others. (Al-Nujami, Idris, & Al-Ferokh, 2014), the major challenges that are really giving hoteliers and investors sleepless nights include;

Financial availability.

Many hoteliers and investors face financial challenges and fixed costs. The fixed costs such as facility sustenance, payment of bills and salaries lead to varying and reducing revenue streams.  The deadlock created between the customers demanding for affordable services and the hoteliers increasing prices to fix the financial challenges are great (Cantallops & Salvi, 2014). The financial challenges have really put hotel managers on the task of finding the solution to financial challenges without destroying their market reputation or lowering the quality of their services. Capital and finances are responsible for the confidence level that will be between the investors and lenders.

Human resources

Many hotels and hospitality industry face personnel challenges. The growth in the industry has increased the demand for more employees and staff in the business. The roles and responsibilities have been redefined with the changing customer’s tastes and preferences, and the shrinking labor pool. The challenge of demography, failure to address employee satisfaction and wage levels can be said to be the main contributors to difficulty in attracting and retaining employees by hotels (Chiu, Chiu, Sung, & Hsieh, 2015). Worker satisfaction is also another challenge in the human resource area. Failure of organizing on the job training, or creation of enrichment programs on training the worker may fail to make the employee participate in other innovative activities like improving brands. Since brands have become so essential in enabling an organization keep its competitive edge, the hotel management may go at a loss if these training programs are not created and employee satisfaction not met.

The Contemporary Issues on Hotels

Various strategies and approaches are being sought by hoteliers to find and retain highly qualified staff with provision of standard wages in order to maintain them (Chou, 2014). Many qualified employees always want to work for bigger, popular hotels with good salaries and wages, the reputation of the hotel in the market will therefore enhance the number of employees it will attract and be able to maintain. Hotels are working hard to ensure they meet the demands of the customers who have become more knowledgeable on luxuries offered by different hotels. The internet has assisted them decide on their hotel of choice and leaving hotel managers with a hard task to ensure staff are enough and available to attend to their needs.

Seasonal businesses.

Hotels face a lot of fluctuations in the industry during off peak and on peak seasons. Maintenance of the business in order to earn more profit during the off peaks seasons has proved to be great challenge and it’s during these periods that some even become bankrupt after too much borrowing (Galliers & Leidner, 2014). The managers have an uphill task of scrambling for the few customers during these off peak seasons and are even embracing the use of ubiquitous media for advertisement of the services and products they offer. The seasonal business is characterized by changes in demography, and the travelling trends of both tourist and domestic travelers.

This has forced hotel managers find an alternative of diversifying their services and products to customers in order to satisfy their desires, wants and multigenerational needs. Designing, adopting and executing means of enhancing customer experience notwithstanding the age or generation is part of their major concerns during the off peak season (Grobelna & Marciszewska, 2016). Serving their varied patterns, habits and needs brings the generations together which is very important for the hotel management. These is a strategy to enable retain their customers, during the off peak season and maintain their competitive edge.

Branding issues

Since brands have become so essential in enabling an organization keep its competitive edge, hotel managements have decided to focus on improving their product and service brands. The explosion of branding new hotels with their services and products have been a great challenge to hotels that were existing earlier before the explosion and have put customers in a frenzy of deciding on which among the many brands is actually unique as exclaimed (Hall, Gossling, & Scott, 2015). According to (Liu, Guillet, Xiao, & Law, 2014), the major branding issues faced by hoteliers include;

Financial availability

Branding has created a challenge of imparting realism of local culture into the standards of the brands.
The intensified competition of brands has increased the divergence of interests between owners and the brands themselves. The competition has also increased the amenity creep between the brands and owners.
The explosion of branding worldwide has resulted in commoditization of hotel products.

The branding explosion and blitz only happen in a cycle and mostly occurs in the peak points of the hotels business cycle. When hotels get into the off peak business seasons, the branding of products and services goes down. Customers taste and preferences change frequently with time and hotel management are always on toes to ensure they brand a product in relation to customers’ needs (Mitchell, Font, & Li, 2015). The idea of branding and rebranding is put in a way that the products and services are expected to meet the customers’ changing taste buds and evolving needs in sufficient qualities.

Unfortunately, the more brands created only lead to creating more confusion to the customer hence not a better option for hoteliers. Hotel managers are focusing on mitigating this branding challenge by creation of alternative uses of marginal properties and brands to retain their customers and avoid worrying of the branding psychosis that waste a lot of time that could be used for other innovative purposes. According to (Nelson, 2014), other contemporary issues that the hotel business has to lock horns with include some of the following:

Technological challenges
Future of hotel profits due to technological challenges and demography.
Distribution revolution and travel restrictions.
Global emerging trends and globalization.

The emerging issues discussed have a lot of impact to hoteliers in terms of profitability and operations of the facilities. The issue of capital and finances are very important in the running of any business in terms of acquiring raw materials and consumable products for the business, paying bills, wages and salaries, acquisition of miscellaneous materials, and the overall maintenance of the facility and its activities (Prebezac, Schott, & Sheldon, 2016). With limited funds, hoteliers face a great challenge in running the business.

 The hotels can diversify their sources of income without necessarily depending on sales from the hotel. Banks and other financial institutions could help them increase their funds for running and maintain the business. The seasonal businesses also have effect on the hotels and are very much in connection with financial issues (Sharpley & Telfer, 2014). The hotels could find alternatives by diversifying in provision of other services or products like outside catering for wedding, funerals or other social functions especially during the off-peak seasons in order to maintain their capital flow and retain their employees.

Human resources

The human resource issue is a major one as without staff no functions can run in the hotel. The hotels could set training and enrichment programs for the employees to increase their skills and innovativeness. The improved skills will enable them come up with proper branding skills and better methods of diversification during off peak seasons. The hotel management could also improve their wages and salaries to a standard amount that leads towards employee satisfaction.

The hotel could also work hard to ensure only quality is served to customers in order to maintain their popularity and market reputation (Weeden & Boluk, 2014). This will in turn result to attracting more qualified employees from different regions. In the case of branding, hotel management could rather increase the quality of services and products they offer. These alone will spread by word of mouth and the customer attraction will be overwhelming even without the hotel branding its services (Yang, Luo, & Law, 2014). However, older brands could be repainted or given a face uplift just to ensure they don’t look too outdated.

Conclusion

In the recent times, various social and environmental changes have changed customers taste and preferences. This has been reinforced with the issue of globalization and increased use of technology. Hotels are struggling within these changes to meet their customer needs and concentrating on improving their businesses at the same time. The challenges they face in these journey as mentioned above in areas of finances, staff, branding and seasonal businesses have actually put them on toes. The hotels can overcome these challenges by improving and diversifying their funding sources, their activities during off-peak seasons, improve the quality of products and services to work on branding and employee attraction/retaining.

References

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Ahmad, S.Z., 2015. Entrepreneurship in the small and medium-sized hotel sector. Current Issues in Tourism, 18(4), pp.328-349.

Airey, D., Dredge, D. and Gross, M.J., 2014. Tourism, hospitality and events education in an age of change (Doctoral dissertation, Routledge).

Al-Nuiami, M., Idris, W.M.S. and Moh'd AL-Ferokh, F.A., 2014. An empirical study of the moderator effect of entrepreneurial orientation on the relationship between environmental turbulence and innovation performance in five-star hotels in Jordan. International Journal of Business Administration, 5(2), p.111.

Cantallops, A.S. and Salvi, F., 2014. New consumer behavior: A review of research on eWOM and hotels. International Journal of Hospitality Management, 36, pp.41-51.

Chiu, C., Chiu, N.H., Sung, R.J. and Hsieh, P.Y., 2015. Opinion mining of hotel customer-generated contents in Chinese weblogs. Current Issues in Tourism, 18(5), pp.477-495.

Chou, C.J., 2014. Hotels' environmental policies and employee personal environmental beliefs: Interactions and outcomes. Tourism Management, 40, pp.436-446.

Galliers, R.D. and Leidner, D.E., 2014. Strategic information management: challenges and strategies in managing information systems. Routledge.

Grobelna, A. and Marciszewska, B., 2016, April. Undergraduate students’ attitudes towards their future jobs in the tourism sector: challenges facing educators and business. In Proceedings of the 4th International Conference on Management, Leadership and Governance (pp. 138-145).

Hall, C.M., Gossling, S. and Scott, D. eds., 2015. The Routledge handbook of tourism and sustainability. Routledge.

Liu, W., Guillet, B.D., Xiao, Q. and Law, R., 2014. Globalization or localization of consumer preferences: The case of hotel room booking. Tourism Management, 41, pp.148-157.

Mitchell, J., Font, X. and Li, S., 2015. What is the impact of hotels on local economic development? Applying value chain analysis to individual businesses. Anatolia, 26(3), pp.347-358.

Nelson, R.R., 2014. Developing a Successful Infrastructure for Convention and Event Tourism. Routledge.

Prebežac, D., Schott, C. and Sheldon, P. eds., 2016. The tourism education futures initiative: Activating change in tourism education. Routledge.

Sharpley, R. and Telfer, D.J. eds., 2014. Tourism and development: concepts and issues (Vol. 63). Channel View Publications.

Weeden, C. and Boluk, K., 2014. Managing ethical consumption in tourism. Routledge.

Yang, Y., Luo, H. and Law, R., 2014. Theoretical, empirical, and operational models in hotel location research. International Journal of Hospitality Management, 36, pp.209-22