ipl-logo

Porter's Five Forces In The Hotel Industry

1178 Words5 Pages

2.0 Environmental Analysis In order to better evaluate the business environment in which this business is involved, a Porter’s Five Forces analysis is conducted. This analysis would be able to give a clear view of the competitiveness and profitability of the hotel industry. 2.1 Threats of New Entrants- Barriers to Entry For an industry, the threat of new entrants is mostly determined by barriers to entry. The barriers of entry could be made of financial and non-financial factors as well as the competition already present in the industry. The hotel industry in characterised as an industry with high capital costs which would include the costs of construction, furnishing and equipment, pre-operational expenses and finance.The two most important …show more content…

A higher bargaining power on the buyers side could impact the industry in various ways. They may influence the prices of the products or services, lower the industry’s margin, give cause to the players to increase costs and may even also lose their buyers as various alternatives may be available. In the case of the hotel industry,the main buyers would be the guests and potential future customers. They are the driving forces that decides the make or break of a hotel. Individuals or small groups may have smaller bargaining power as their at a diseconomies of scale. They are not able to negotiate price reductions or be subjected to special rates and packages. However, the group that may hold a high bargaining power would be those that come in group tours or conduct bulk purchases of hotel rooms for purposes of conferences and conventions alike. An alliance between hotels and airlines may also see the airline side(buyer side) exercise some bargaining power. This could be in form of the airlines offering their customers a travel package which includes accommodation and air tickets. The loyalty formed between these two parties would allow the airlines to negotiate room rates . An example of this would be with the Air Asia airline. When the passengers purchased tickets online, Air Asia often includes special offers of accommodations at the destination chosen and with the loyalty programme conducted by Air Asia, hotels that are associated with such offers would be more confident as it ensures a steady stream of potential customers. As for the bulk purchases or tour groups, their side would certainly be booking a handful of rooms making them eligible to negotiate prices and obtain lower hotel tariffs. This may seem disadvantage to the hotel side as their are lowering prices and rates. However, if we analyse closely, this might as well be a

Show More
Related

  • Situation Analysis: Chipotle Mexican Grill

    1324 Words  | 6 Pages

    Chipotle Strategic Profile and Case Analysis Purpose Chipotle Mexican Grill founded in 1993 by Steve Ells became known as the fast-casual dining in the restaurant industry (Hitt, Ireland, & Hoskisson, 2013). It was the first of its kind when Ells first opened his first restaurant and brought the idea of made-to-order burrito. The concept is so simple, and the consumer is in control of what ingredients goes into their burrito. “The immediate success from Ells’ first restaurant allowed him to repay the $80,000 loan that he borrowed from his father within a month of opening” (Hitt, Ireland, & Hoskisson, 2013, p. 71). Furthermore, this gave him the confidence to open his second restaurant in just two years.

    Read More

  • Premier Inn Swot Analysis

    1718 Words  | 7 Pages

    Weaknesses: 1. The high seasonal dependency for most of the hotel facilities. 2. The imbalanced market coverage and business portfolio. 3.

    Read More

  • United Airlines Market Segmentation

    1027 Words  | 5 Pages

    Quality vacationers: These customers treat the travel as a part of their holiday experience and therefore they fly with carriers that provide extremely superior services. Frugal flyers: These types of customers tend to seek out the lowest-cost carriers for economic reasons, but still expect their flight experience to be a good

    Read More

  • Capsim Porter's Five Forces

    506 Words  | 3 Pages

    A supplier with strong bargaining power has the advantage of charging their price higher or selling low quality of the product to them. The bargaining power of suppliers will be low as there are many suppliers in the market offers similar products and this allows courts to switch to other suppliers that offer lower cost. Intensity of rivalry within industry High Threat Competitors in the industries There are quite a number of businesses involve home furnishing and electrical appliance.

    Read More

  • Business Analysis: Outrigger Hotels And Resorts

    961 Words  | 4 Pages

    1 What is Outrigger Hotels and Resorts’ strategic position? What are the firm’s Critical Success Factors (CSF)? Outrigger Hotels and Resorts are currently using geographical and product diversification strategy. The firm expend their firm around Pacific Ocean and diversify its product portfolio by adding condominiums resorts and OHANA hotels.

    Read More

  • Porter's Five Forces Of Competitive Analysis: Vera Bradley

    1068 Words  | 5 Pages

    External Environment The Five Forces of Competitive Analysis The industry market is considering a large pool with significant of competitors competing with each other. The stronger the forces of competition, the harder it becomes for industry members to earn attractive profits. The ideal competitive environment for earning outstanding profits is when both suppliers and customers are in weak bargaining positions. Suppliers Bargaining Power Vera Bradley as a company that provides luggage and accessories industry gets raw material from many suppliers that have differentiated inputs.

    Read More

  • The External Environment In The Airline Industry

    1563 Words  | 7 Pages

    Thus, the power of the suppliers is high, since the suppliers have a grip on the market due to the huge demand of their manufactured products. Moreover, suppliers can affect the industry through their capacities to raise prices or reduce the quality of purchased goods and services. Bargaining Power of Buyers The buyers in the airline industry are demanding more and better quality services .The

    Read More

  • Holiday Inn: Porter's Five Forces Of Industry

    1384 Words  | 6 Pages

    The Five Competitive Forces of Industry will influence prices, costs and investment (Porter, 1980). The potential retaining of customers, profitability of a holiday inn can be determined by being aware of the strengths and weaknesses of the hotel industry. (Figure 2.2: Porter’s Five Forces Model (Source: Adapted after Porter,2008) Porter’s 5 model helps in success of Holiday inn between suppliers and buyers. Giving customers the service they are looking for, acquire customers, retain customers and looking externally how the competitors are doing is very important. To ignore the power of customer relationship is not an option.

    Read More

  • Price Discrimination In Hotel Industry

    777 Words  | 4 Pages

    In the case of hotels, suppliers create different consumer segments, we can relate to them as lower-end consumers, and higher-end consumers. Obviously, hotels cannot set the price that higher-end consumers are willing to pay, because all lower-end consumers will not be able to afford the good. Inversely, if hotels set the price that lower-end consumers are willing to pay, higher-end consumers gain huge consumer surplus, thus lowering the profit for the suppliers. In order to take the consumer surplus, hotels keep lower prices for some rooms in order to target lower-end consumers and offer some higher quality rooms (for example presidential suits) to target higher-end consumers. The difference in revenues providing different rooms and the same ones is seen below.

    Read More

  • What are Porter's Five Forces in Port Services?

    984 Words  | 4 Pages

    The bargaining power of port users 5. The bargaining of port service providers These forces will impact ports of all sizes, which drive requirements for expansion of ports, service improvement, pricing decisions, and other management actions. These forces will impact ports of all types and sizes which want their ports to expand improve in service, pricing decisions etc. 1.

    Read More

  • Porter's Five Forces In The Oil And Gas Industry

    1601 Words  | 7 Pages

    Threat of Substitutes 4. Bargaining Power of Buyers 5. Power vested by Suppliers 1. Competitive Rivalry: According to Porter the competitiveness in any sector is significantly increased by the number of players operating in the field and their major competencies.

    Read More

  • Role Of Stakeholders In Aviation

    963 Words  | 4 Pages

    A company 's customers are entitled to fair trading practices but they are not entitled to the same consideration as the company 's employees. Stakeholders around the hotel: 3.1. Local governmentThe decisions of government, inevitably affect different groups within society. Increasingly, the government are

    Read More

  • External Factors In The Hospitality Industry

    1245 Words  | 5 Pages

    Every industry to include the hospitality industry is impacted by external factors which directly influence organizational behavior and decision making. There are numerous factors to be considered, but political, economic, and social are three of the most influential. These outside factors sway managerial operational decisions daily regarding personnel, spending, policy, and short-term and long-term strategic planning concerning both core and exterior operations. As within every industry, the hospitality industry has unmanageable elements that affect management or ownership of hospitality establishments (Lewis 2017). Understanding these factors is important because it provides an opportunity for contingency planning (Lewis, 2017).

    Read More

  • Intercontinental Hotel Marketing Strategy

    1794 Words  | 8 Pages

    Market segmentation has been the positioning strategy for Intercontinental Hotels, and it is important that it is done well to consider critical features of each segment adequately. Moreover, market differentiation must promote the difference between the different brands so as to create awareness to each target consumer of the most appropriate brand. For instance, the strategy must inform the market of the difference between the Holiday Inn brand and the Holiday Inn Express brand. This differentiation is important since it will encourage business travelers to opt for Holiday Inn Express while those looking for recreation chose Holiday Inn. Consequently, each consumer will get the best service that is suited to their needs and hence create customer satisfaction in the varying

    Read More

  • Relationship Between Hospitality And Tourism Industry

    1572 Words  | 7 Pages

    To be sucessful in this industry we need a lot of and loyal customers. The loyal customers will keep coming back to the same place if they satisfied through the place they have visited. Customer loyalty give the most important impact towards hospitality and tourism industry. “Hospitality refers

    Read More

More about Porter's Five Forces In The Hotel Industry

Open Document