Porter's Five Forces Analysis Of Hotel Industry Essay

In order to catch up the opportunities and to cope with the threats, it is important to recognize the external environment for the industry. This part will use Porter’s Five Forces Model to make a deep understanding of the hotels and motels industry. With the following analysis about the industry, we can find the hotels and motels industry is still moderately attractive to start business.

1. Buyers’ Bargaining Power (Figure 1)

The main buyers of the industry are the customers travelling for both leisure and business. The customers are numerous but mostly small in size, so the buyers’ power is reduced. In addition, the number of the customers consuming each time is small, which makes the buyers less powerful. The tendency for the customer to

It is difficult to make the difference with the existing hotels to attract new customers, as the services are similar within the industry. Although the switching costs are very low, the customers are willing to choose the familiar brands and the image of brands plays an important role in the customer brand loyalty. As the hotels industry is a kind of service industry, the economies of scale are not so important. Overall, the threat of the new entrants is low.

4. Threats of Substitutes (Figure 4)

Substitutes to the hotels and motels are alternative forms of leisure accommodation, including camping facilities and informal accommodation with friends and families.

The switching costs have a wide range from the relatively low to very high. For example, choosing a local family to live with is very cheap and can offer the customers with an opportunity to communicate with locals. While, the choice of recreational vehicles needs large switching cost because of the high purchase price of the vehicle.

However, the quality of these kinds of accommodations needs improving. As a result, the treat of substitute is moderate.

5. Intensity of Rivalry (Figure