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Hospitality Industry

Table of Contents

Introduction. 3

Starwood Hotels and Resorts – An Introduction. 3

Task 1. 4

Scope and Scale of Hospitality Industry. 4

The Interrelationship between hospitality and travel and tourism business. 6

Task 2. 6

2.1(a) Integration to the hospitality industry. 6

Example – Starwood Hotels and Resorts. 8

2.1 (b) Impacts of Integration. 9

Task 3. 10

3.1 (a) project Proposal for New Hospitality Industry. 10

3.1 (b) Financial Feasibility of the Project 13

Conclusion. 14

References. 17

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Hospitality industry is very important part of travel and tourism. Tourism involves the accommodation as well as catering services that are handled by the hospitality industry. The arrangement of food beverages etc increases the importance of overall tourism and is important part of income generation of the tourism industry. The products and services offered by hospitality industry can attract more tourism to the country. The quality of services provided helps in differentiating them from competitors. For example – customers tend to visit the same hotel or use the same airlines for repeated travels just because of their good catering services and comfortable ambiance. To be successful and staying ahead of competition the hospitality industry must cater the customers with efficiency and provide the services to meet their expectations.

Starwood Hotels and Resorts – An Introduction

Starwood hotels and resorts is an American hotel company. Its headquarters are located in Stanford, Connecticut. This is the largest company of the world that has its operations in almost hundred countries. It owns nine major brands of the hotel industry that are Westin, Sheraton, The luxury collection, Four Points by Sheraton, W Hotels, St.Regis, Le Meridien, Element by Westinn and Aloft- A vision of W hotels. Starwood have nine customer contact centres in all over the world.

The Westinn Brand is the largest resort and upscale brand. This is the oldest brand within the Starwood. The company has a very powerful program for customer loyalty. As a marketing strategy it gives the amazing rewards and points that can be redeemed at any location of Starwood hotels and resorts. It gives the endless options for choosing between the services of accommodation across locations. The company keep updating and introducing the offers with a perspective of retaining the customers. It is referred as a responsible brand for tourism industry. The company has also tied up with various travel agencies to boost the tourism and provide the convenience to the customers. The company has a huge turnover and contribute largely in the revenue portion of travel industry. It has created a benchmark in the hospitality industry.

Task 1

Scope and Scale of Hospitality Industry

Scope of this industry is comprised of wide range of business that is responsible for providing the facilities and services like accommodation, entertainment, food and beverages and related products. Hospitality is an emerging industry and showing the significant growth from last two decades. They provide various services to tourists and the travellers. The industry is very complex and diverse and is very crucial for the country’s economy.

Hospitality industry is consist of various different fields of service industry that majorly includes restaurants, lodging,  theme parks, events planning, cruise and transportation services. The hospitality industry is still unexplored to an extent (Hilberath, 2001). The main reason behind this is the complexity behind the operations of the industry. Laurens (2002) said that hospitality industry is the most important part of the tourism industry. It is important element for identification of the tourism in the country.

In United Kingdom there are almost 180,000 hospitality establishments that employ almost two million people that is seven percent of the country’s population. It gives out the huge turnover and contributes largely to the country’s economy. It has given a wide scope for women worker as well. The industry is responsible for providing different services to the different people and their needs from around the world.

The most important sector of tourism industry is the hotel industry. The hotel industry is classified as a permanent establishment that provides various services of lodging and catering. The hotel can either be small in one location or a very large establishment in different locations. Small hotels are relatively cheap and provides les amount of services. Large hotels have the advantage of economies of scale. Expansion of hotel industry plays very major role in expansion of tourism industry. For the international tourism, the services from hotel industry are the decisive factor of revenue generation. It impacts the overall economy of the country. The United Kingdom’s economy is generating huge revenue from the tourism industry which is facilitated largely by the hotels as a part of hospitality industry.

Hotel management includes the staff members that are working with the establishment. To manage the operations smoothly managers have to ensure the proper functioning of the hotel they need to ensure that guests are totally satisfied with their services. The manager has to look after the performance of the entire staff. The management of hotels has to practice the following:

Planning:  it involves setting of objectives with the aim of increasing the profit and catering the particular customers in a specific ways like planning for business travels and arranging the facilities for the families. The planning should be done in a way so that the cost is reduced and the customers are served well. The best example for this is setting up of a standard menu that caters all the customers. The planning should be done on the following terms: market standing, productivity, innovation, profitability, public responsibility, workers and manager’s performance and financial resources.

Policy Formation: The management is responsible for laying down the policies for staff as well as for guests. The policies must be clear and specified. It should be told to the guest well in advance so that they don’t feel cheated later. The policies guide the specific actions of guests and staff. This is a very important management tool that secures the consistence behaviour.

The Interrelationship between hospitality and travel and tourism business

Hospitality industry is the main services provider to travel and tourism sector. The tourist either coming for business or leisure spends the quality time in the hotels. So the services provided by the hotels plays a major role in the revenue of tourism industry. Hotels experience is the integral part of overall travel experience and is very crucial for international travel and tourism. Whenever the tourist arrive to the destination their first look out is for the hotel. The services provided by the hotels lay down the first impression of the tourist destination. The hotel industry has to operate with utmost care to contribute to the success of tourism industry. They must keep increasing the quality of their services and try to introduce the freshness in their services to keep the customers satisfied. The relationship between hospitality and tourism industry is direct and sensitive.

Task 2

2.1(a) Integration to the hospitality industry

Integration gained the popularity in 1900 century. This was the time when the business has the focus towards the economies of scale and this in return benefitted them to lower the operating costs. Integration of the hospitality industry enabled them to gain the global presence and increase their share in the market. The integration can be divided in two parts: vertical integration and horizontal integration.

Vertical Integration: it is a process which enables a company to buy another company of the similar distribution chain or allows them to enter the agreement of merger. This is done with the aim of increasing the profit and lowering the cost of operations. The traditional characteristic of this integration was named as lateral, backward and forward integration. This enables the companies to gain the control of suppliers of transportation and accommodation providers. Vertical integration is basically the process of mergers that allows two companies to join together as per the agreement. This allows the company to take the entire hold of another company.

For example: a chain of hotels decides to merge with a leading travel agency so that both the companies join together and lowers the cost of their operations along with providing the additional  set of services that will increase their business opportunities. This will also enables them to lead the market and potential competitors. The integration happens between the companies which have directly or indirectly same set of services.

Horizontal Integration: For expanding the customers the horizontal integration is very important. It gives the benefit of maximized profits and economies of scale. The horizontal integration is said to occur when a company merges or purchases the other company that are on the same stage of distribution chain. This type of integration is complementary in nature.

For example: the airlines industry works closely with the hotels that helps in reaping the benefits that are offered by the merger between the two. This helps the airlines industry to gather the data from the hotels and try to make the schedules of flights that corresponds with the availability of accommodation. However this is actually not 100 % successful due to the complexity and dynamism of the travel and hospitality industry.

Implications of integration on hospitality industry:

The success of tourism industry also depends on the brand name. The branding techniques involve the way message is delivered to the target customers. The companies tend to integrate with the branded groups to gain the advantage of their popularity. For example the big names like Westin and Sheraton belongs to the Starwood’s resorts and hotels. This is a leading and upscale brand that offers the luxurious services to the customers. It provides the best amenities to business ventures and comfortable and romantic gateway to the couples from around the world.

Some major tour operators of United Kingdom purchased some hotels overseas for increasing their presence around the globe and profitability. This ensures to control their costs and introduce the various packages at affordable rates to their customers. This type of integrations enables the growth of hospitality industry that in turn enables the growth of tourism sector. The integration on the one hand gives lots of benefits to large organizations but on the other hand it gives the possible threat of losing business to small sized organizations. The employees also suffer due to mergers and take over as there are chances of job reduction.

The integration has also increased the globalization in hospitality industry. The hotels that have operations in various countries provide the services to their customers worldwide. It has given the access to overseas market.

Example – Starwood Hotels and Resorts

This is the most powerful international chain of hotels. They provide the best example for integration. They have achieved the tremendous success through integration process. In the last few years Starwood hotels chain acquired the famous Le Meridien hotel brand and the entire portfolio, which is about 130 hotels and luxury resorts internationally. This acquisition increased the Starwood’s customer base to a huge extent with mega attractive properties in Europe, Africa, Middle East and the Asia Pacific

The guest program of Starwood also gave the benefits to the loyal guests of Le Meridien. The Le Meridian as well as Starwood gained the growth and international recognition through this integration. So to conclude, this is clear that integration gives lots of opportunities to the companies and helps the growth of tourism industry as a whole.

2.1 (b) Impacts of Integration

The integration in the hospitality industry have the following impacts:

Economies of Scale: With successful integration the operating cost lowers down significantly. It has various benefits like extended services to customers, increased profits and global recognition. It is beneficial for both the hotel industry and the guests. The hotel industry as mentioned above gets the benefit of cost reduction and better services, the guest can enjoy the stay and other services of their desired hotel in many different countries on the affordable rates. It increases the customer loyalty. For instance, integration between travel agency and hotel is also very beneficial. The hotels can provide their guests with easy and economical transport facilities and transportation industry can enjoy the loyalty and brand image of hotels. This integration gives benefits to both the industries.

Market Share: The main impact of integration is seen in the form of increased market share. Companies through integration can increase their client base extend their market share.  This is important for increasing the revenues of hotel industry as well as entire tourism industry. This also allows the hotels to enter the new markets internationally and enjoy the brand image of the existing hotel in that country.

Standardization: Hotels industry gets the standardization of their services and policies through integration.  The best example for this is McDonalds, they have the standardized process and style in all the destinations they have their chain. Likewise integration of Starwood hotels have maintained the standard set of policies of check in and checkout time at all the destinations. This increases the efficiency of the hotels and the satisfaction level of the customers.

Quality: Integration helps in increasing the quality of the services. With integration among two hotels, the management can decide upon the best policies and services that were offered by either of two before. This will also ensure that guests enjoy the new or the existing services. Employees also get benefits of change in management as they get the fresh opportunities.

To conclude, this is clear from the above mentioned points that the impact of integration in hospitality industry has many positive impacts. Along with the increases profits and revenue the quality of services and market share is also increased. This positive impact also benefits the tourism industry in increasing the tourism and revenue.

Task 3

3.1 (a) project Proposal for New Hospitality Industry

The project proposal for a new hotel must be made with the following questions in mind (Turkel,2000):

Q.1 What is the reason and objective behind opening a new hotel?

Q.2. What is the scope of Hotel development?

Q.3. Where is the location and the benefits of the location?

Q.4.What is the market, its size and its need?

Q.5 What services will be provided and to what customer base?

The above questions are important for getting into the new hotel business as these all have the direct impact on the success and failure of the hotel. To elaborate further the questions are answered below:

Objective: The objective behind opening a new hotel should be clear. It can be either for providing the luxury services or for business events. If the project is big it can accommodate both the fields. The accommodation facilities and other services like conference rooms etc can be decided on the basis of these. Further the marketing is also impacted by this decision. The services can be decided only on this basis and the finance allocation is also dependent on this.

Scope: This involves the growth and expansion scope in the future. Also the present scope for operations is included in this. The hotel must be developed with a scope of serving the guests so that they can gain the recognition and revenue. This must be clear as it has impact on the operations of hotel industry as well as individual profits.

Location: The location must be chosen in a way that it can attract the maximum number of guests. For instance the hotel location near airport or railway station can attract large number of tourist. Otherwise location near the sea side or nearby famous market is attractive to tourists who are visiting for the leisure purpose. The location must be decided very carefully and obviously taking in mind the available financial resources.

Market: The market must be studied properly before setting up the new hospitality business. The trends must be considered diligently. It should be studied well that what kind of services the others are provided and at what costs. The customer loyalty programs should also be considered properly.

Services: After studying the market trend, this can de decided that what type of services should be included and at what costs. The hotel services are the bundle of features and various benefits (Powers, 1996). The services provided are the key to success of the business. Various facilities like telephone services, complimentary tea, newspaper etc has lots of importance in creating positive impact on customer’s mind.

Along with these various other fields like hotel segmentations, interior designing, layout, transportation facilities should also be considered while designing the proposal.

With above the point the proposal for new hotel will be as follows:

Objective To serve the business as well as families with professional and luxurious services
Scope The scope is to provide the best services as per the specified group to gain the customer loyalty
Location The location will be near the famous market of central London
Services This will include the basic services like pick and drop from airport, telephone services, internet services and comfortable living conditions. Exclusive services will include the organizing of business meetings and country tours for the couples and families.

3.1 (b) Financial Feasibility of the Project

The success and failure of the business depends 80% on the cash flow analysis. It is a very important business tool. It tells the business about available finances and resources to run and expand the business.

Details Amount in £’000
Cash balance at the start 5000
Cash receipt from Customers 2200
Receivables 2745
Other operating revenue 0
Total Operating Revenue 4945
Stock purchase 1000
Bank Charges 17
License Fees 22
Business Insurance 10
Marketing Expense 200
Other operating Expense 100
Employee Expense 1000
Telephone expense 30
Total Outflow 2379
Net difference 2566
Cash Balance at the end 7566

(Source: Self Study)

The above cash flow analysis clearly states the initial financial feasibility of the hotels. Initially the revenue may not be very high but with the growth and proper marketing this can be increased significantly. The cost of services can be covered with the revenue from the guests. The estimated cash flow can be very helpful for proper allocation of financial resources. The proposed project can be successful if the finances are allocated properly with the above estimations.


To conclude, this can be said that hotels as a part of hospitality industry plays very significant role in growth of tourism industry as a whole. The hotels are the first thing that tourists experience when they visit the certain destination. So it is important for hotel industry to provide the comfortable and quality services to the guest. This is important for promoting the tourism of a particular country. The integration has given a new shape to hospitality industry. The two hotels that merge together can inherit the advantages of each other and increase the quality of the services provided. The integration has very positive impact on the hospitality industry. The example of Starwood Hotels and Le Meridien shows the beast and successful integration in the recent past.

The decision of entering into hospitality industry is profitable but the proposal must be drawn carefully to ensure that all the important factors are covered properly in that. Further the estimated cash flow shows the financial feasibility of a new hospitality development. It should be followed and studies well for proper allocation of the funds


Hilberath T,(2001),  real estate hospitality and services group. Cairo, Egypt 28 September, 2001

LOURENS, M. (2002) [Interview with Mrs Marlien Lourens, Senior Consultant, Grant  Thornton Kessel Feinstein Tourism, Hospitality &  Leisure Specialists] Johannesburg, 29 April 2002

RALEIGH, L.E. & ROGINSKY, R.J. (1999) Hotel Investments: Issues and Perspectives (2nd ed.) Lansing: Educational Institute – American Hotel and Motel Association.

TURKEL, S. (2000) “A fresh look at feasibility studies”, International Society of Hotel Consultants. [Online]. Accessed September 2001 from http://

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