Also, there is free entry and exit to and out of the market. Considering all these factors, we can clearly say that hotels belong to monopolistic competition. Hotels are price makers, meaning that there is not one market price, at which all the suppliers have to sell
Threat of New Entrants – Barrier to Entry-Moderate According to Michael Porter (1980), threat of new entrants in hotel industry is considered a medium level. Although it requires large a sum of capital costs for branding, advertising, product creations, high proportion of fixed costs and need to conduct differentiated strategies to compete with rivalries; it is not a difficult industry for companies to enter (Cheng 2013). Despite of the fact that capital requirements includes cash and financial resources, which are essential for operating a business; political requirements is regarded as another important role in hotel industry, such as licensing, tax laws and different regulations in terms of real estate and property investments in various
fierce between 2 LCCs or when a LCC plans to enter a full service airlines sector. This is also true the other way around. Bargaining Power of Buyers can be ranked as moderate with LCC’s coming into the picture since the deregulation of the industry and internet making it easy to book and fly. Customers tend to stick to known companies which have a strong presence in the market. Thus, it is safe to say that there is low-to-moderate bargaining power of buyers in this sector Bargaining Power of Suppliers The three main costs for the airlines are fuel, labour and Airport charges.
Opportunities: By utilizing information technology, Air Asia was able to be the first airline in Southeast Asia utilize e-ticketing and bypass traditional travel agents. This enabled the airline to save on the cost of buying physical ticket, it also can eliminated the need for large and expensive booking and reservation systems, and agents’
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 bargaining power of buyers in the industry is high due strong as low switching costs and plethora of options in the market. Now, e-ticketing has improved the chance and flexibility to search for different airlines companies leading to down word cost pulls and upward services push. Furthermore, it eases of switching between different airlines companies.
3. Bargaining power of Suppliers: Low degree of bargaining power of suppliers. OYO rooms take care of complete hotel operations where owner doesn’t have to think of the day to day operational issues/Occupancy issues and other OTA’s(other market channels) inventory issues. They are getting sufficient money with brand integration with OYO every month which they were not able to generate earlier. Currently in the market there is not a single competitor who takes up the complete property and runs the operations under their brand.
Proper management of the process of formation of hotel chains in the market of tourist services is an essential factor for the success of economic activity in this area. The author analyzes and evaluation of various exit strategies hotel chains on the market represents the most effective arms control process of the formation and development of hotel chains
Problem discussion Hotel industry is one of the part of all services, and the trend depict that is still growing all over the world. The information can be support by the fact that the value of the GDP is almost 2/3 globally (Lovelock & Wirtz, 2010). Services are economic activities offered by one party to another in exchange of money, time and effort. (Lovelock & Wirtz, 2010). Hotel industry is developing in some trends and it is accompanied by the theme and process.
Globalization is a key issue for the hospitality industry. When hotel group is deciding to open a new property in other country, they must change their products and services in order to adapt and attract locals and tourists. “Think global and act local” is a strategy for every hotel which decide to be international. The big impact is on economics too.