Globalization refers to the movement toward a more interdependent and integrated economy. As international trade expands, there is no question that global linkage will become unavoidable for the hotel industry (ZhenJia, 2005). In the initial stages, most hospitality institutions have hosted foreign guests at one time or another. Then with the development of transportation systems and technology, the structure of the hospitality industry has become more complex in terms of scope, management, and affiliation. Also, competition has increased, prompting most hotel companies to expand their operations into the international market to expand their consumer base. However, this move is mostly dictated by both political, economic and cultural variables as discussed in this assignment.
It is essential for companies in the hotel industry to understand that political stability dictates how business is conducted in the global market. While political approaches can vary according to the business location, this can immensely influence the propensity of tourists and customers to visit a country (Frink, 2009). For instance, customers may be concerned about going to Northern Ireland due to the political instability being experienced at the moment. This can reduce the amount of revenues earned by hotels. Additionally, London experienced acts of terrorism executed by religious extremists that placed a threat to the development of the hospitality industry in London, with companies like the Intercontinental Hotel Group (IHG) recording a reduction in the number of customers. Therefore, hotel companies should understand the political stances before establishing their operations in a particular country or city.
A range of macroeconomic factors influences the efficiency of business growth within hotel companies that operate in the global market. Such factors include employment, wages, prices, and interest rates. The level of employment is one of the primary factors that influence the demand for goods and services (Bellinger & Son, 2019). People who are employed and receive steady incomes tend to spend more on discretionary purchases. The primary objective of companies for expanding into the global market is to increase the customer base and profitability. The only way hotel companies can increase their customer bases in the global market is by attracting a large pool of customers for their products and services. For example, according to the IMF report, the rate of inflation in Venezuela at the end of 2018 was 80, 000% which is the highest in the world, due to political stability (Bellinger & Son, 2019). This means that there is, high poverty and unemployment rate in Venezuela, which ultimately contributes to a reduction in consumer purchasing power. Therefore, a hotel company may not expect to derive a broad customer base by establishing its operations in Caracas city in Venezuela, especially when it is offering premium products and services.
The world can be described as a global village where different places have different traditions and culture. According to Frink (2009), hotel companies may be prompted to alter their approaches and adapt to a different culture when they expand into another country. Expanding to a country with an entirely different culture may be a significant risk to many organizations because they have to understand the cultural values and norms of the people living in that country including the types of foods prohibited by religion or local laws, the language spoken by the natives, and the preferred leisure activities. For example, Indians don’t eat beef. Alcohol is not allowed by Muslim societies while gambling is prohibited in many countries. Frink (2009) also argued that hotel companies must appreciate the language and currency differences in different countries if they need to operate profitably. For instance, the Hilton Tokyo Bay Hotel situated in Japan cannot employ many English speaking waiters and receptionists who cannot understand Japanese language to serve local Japanese guests. They must have employees who understand the Japanese language to serve the guests.
Bellinger, N., & Son, B. (2019). Is Authoritarianism Bad for the Economy? Ask Venezuela–or Hungary or Turkey. The Conversation.
Frink, D. (2009). Globalization in the Hospitality Industry. Consortium Journal of Hospitality & Tourism, 13(2), 79-88
ZhenJia, Z. (2005). Impacts of Globalisation on Hotel Companies’ Internal Operation Environment. Canadian Social Science, 1(3).