Jul 24, 2017

What strategic advice would you give to Hotel “Glorious” facing these market changes if it wants to maintain its previous occupancy?

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Economics of Hotel Industry


Part 1 Hotel “Glorious” is a small family run hotel in the well-known ski resort of Leysin Switzerland. It has had many ups and downs in the past 6 years. The hotel was affected firstly by the great recession of 2008 / 2009 and then by the strong Swiss franc. Explain and justify with valid references the effect of the different negative factors, and illustrate the effect on Hotel “Glorious” using demand supply and price with diagrams. What strategic advice would you give to Hotel “Glorious” facing these market changes if it wants to maintain its previous occupancy? Justify your advice with reference to hotels and hotel chains that have carried out similar strategies like pricing, added value or promotional campaign in order to shift demand curve back to the right. Part 2 Recently Hotel “Glorious” has been taken over by an international hotel chain (your free to name one?) What effect will this have on costs in terms of economies of scale? Credit will be given for referenced examples of cost reduction in the hospitality industry. What are other advantages that economies of scale can bring to Hotel “Glorious”? Your Report should be Ariel / 12 font and double-spaced. The Harvard Referencing System should be used and if you are not sure about this, ask directly in the library for more information. All References should come from academic books and journals (Emerald, professional journals etc.) or official ‘serious’ sources like hotels, government, tourism office or professional associations, professional business or bank sites (economic data). No other .com sources are permitted (e.g. monster.com, ask.com, Wikipedia and the likes) Your Report should be 2500 words in length (+/- 10%) and include: • An introduction • A main body with the different points • Conclusion • Recommendations • Bibliography

Economics of Hotel IndustryNameCourseInstructorDate Introduction The hotel industry is not immune to the global economy problems, because the resort town of Leysin in Switzerland depends on both locals and foreign tourists to flourish. Since the global recession started in 2008/ 2009, there has been slow down in the hospitality industry. Recession is associated with contraction of the economy and the business cycle phase and the recovery has been slow. The global recession was also accompanied by slowdown in investment, and consumer spending with the two having a direct effect on Hotel “Glorious” because of a fall in the demand of the hotel’s services. The appreciation of the Swiss Franc has mostly occurred because of the Euro crisis, and the country has been losing visitors to Austria, France and Italy (Falk 2014, p. 101).Effects of global recession on demandThe global recession had a more long lasting effect on the global economy, being the most serious recession since the Great Depression in the 1930’s. The direct effects was that there was higher consumer debt, rising unemployment and stagnant wages and income meaning which all directly affected consumer spending in the hotel and catering sector. Similarly, the rise in the Swiss Franc led to more cautious spending from outsiders who contribute a big percentage in the growth of the hospitality industry. Overall the hotel industry is driven by GDP trends in Switzerland, and this influences the market forces of demand and supply (United Nations., & United Nations Conference on Trade and Development, 2010).GDP=Consumption+ Investment+ Government Spending+ (exports-imports)There is leftward shift in the demand curve following a fall in consumer spending, while an increase in the spending would have led to a rightward shift of the demand curve. In essence, the leftward shift in the demand curve shows that there is a decrease in spending which could either be one of the following or a combin...

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