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PREFACE

This learning material is intended for the exclusive use of the students of Eastern

Samar State University (ESSU) enrolled in the course Organization and Management.

It has undergone thorough and proper review, evaluation, and validation in both

college and institutional levels, including the use of the plagiarism checker. This is to

ensure that the learning material has been properly prepared by the assigned faculty, and

has followed prescribed guidelines.

Each module in this learning material can be learned in a self-paced or individual

format. It is the responsibility of the students to maximize their time and exert

determination in completing the course with the best learning strategies. However, the

contents of this learning material may not be enough for their learning needs, so it is

suggested to consider using other references related to the topics.

For each chapter, there are discussions, examples, exercises, and other further

assessments as course requirements that will contribute to 60% of the students grade.

Ideally, all of the outputs shall be accomplished at home, and shall be submitted on the

agreed schedule. Students may contact their instructor for any concerns or clarification in

relation to the topics, tasks, and required outputs to be accomplished. As to major

examinations, the Midterm examination will cover Chapters 1 to 3, while the final

examination will cover Chapter 4 to 6. Both aforementioned examinations will comprise

40% of the student’s grade.

A course guide is attached to this learning material to serve as reference for other

important details that the students may need.

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 TABLE OF CONTENTS
Page
Cover Page i
Preface ii
Table of Contents iii
Chapter I. 1
Lesson 1. 1
Lesson 2. 17
Lesson 3. 25
Chapter II. 36
Lesson 1. 37
Lesson 2. 57
Lesson 3. 77
Chapter III. 87
Lesson 1. 88
Lesson 2. 95
Lesson 3. 102
Chapter IV. 108
Lesson 1. 108
Lesson 2. 115
Lesson 3. 121
Chapter V. 127
Lesson 1. 127
Lesson 2. 134
Lesson 3. 140
Chapter VI. 147
Lesson 1. 147
Lesson 2. 153
Lesson 3. 157

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 GENERAL INSTRUCTIONS

• Use this learning material with care.

• Do not write, highlight, erase, alter or tear the pages of this learning
material
• In answering activities or exercises, use a separate of paper or refer
to
your instructor for further instructions.
• This learning material must be returned after the end of the semester.
• If lost, the holder of this learning material will pay its equivalent value.

If this module is lost and found, please return to:

EASTERN SAMAR STATE UNIVERSITY

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 Chapter 1

Fundamentals of Strategy

Introduction

Strategic management is the foundation for long-term success in the

tourism and hospitality industry. It helps organizations set direction, allocate
resources, respond to changes, and create sustainable competitive advantage in
a highly competitive and volatile sector. This chapter introduces strategic
management, outlines the steps in the strategic management process, and
discusses the integration of ethics and corporate social responsibility (CSR) in
strategy formulation. Key terms are defined first, followed by detailed discussions
with hospitality examples.

Learning Outcomes

By the end of this chapter, students will be able to:

• Define and explain key concepts in strategic management.

• Describe the steps in the strategic management process.
• Analyze the role of ethics and CSR in hospitality strategy.
• Apply strategic thinking to real-world tourism and hospitality situations.
• Discuss how strategy integrates profitability with responsible practices.

Lesson I: Introduction to Strategic Management

A. Activity

Analyze the vision, mission, and current strategy of a well-known hospitality

brand (e.g., Hilton or a local eco-resort) and identify its competitive advantage.
B. Analysis

Strategic management is the comprehensive process of setting long-term

direction through strategy development to achieve competitive advantage. In
hospitality, it involves understanding guest needs, differentiating services, and
adapting to market changes like seasonality or technological disruptions.

C. Abstraction

What is Strategic Management?

Strategic management is like being the captain of a ship. You decide where
the ship is going (vision and mission), chart the course (strategy), and make sure
the crew works together to reach the destination better than other ships
(competitive advantage). It is a continuous, disciplined process that guides an
organization from where it currently stands to where it aspires to be, while
navigating the challenges of a competitive environment.

More formally, strategic management is the ongoing process of goal

setting, formulating, implementing, and evaluating decisions and actions that
enable an organization to achieve its long-term goals. It is not a one-time plan
made during a boardroom meeting it is a living, evolving discipline that requires
leaders to constantly read their environment, make informed choices, mobilize
their people and resources, and measure whether their efforts are producing the
results they intended.

Strategic management asks and answers three fundamental questions that

every organization must confront:

• Where are we now? — An honest assessment of the organization's current

situation, strengths, weaknesses, and the competitive landscape it faces.
• Where do we want to be? — A clear, inspiring picture of the organization's
future: its vision, mission, and long-term goals.

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 • How do we get there? — The specific strategies, decisions, and actions
that will move the organization from its current state to its desired future.

In the tourism and hospitality industry, these questions carry enormous

weight. A hotel, resort, airline, travel agency, or restaurant operates in a dynamic,
people-centered, and often unpredictable environment shaped by shifting traveler
preferences, seasonal demand, global events, cultural sensitivities, and
intensifying competition. Strategic management provides the framework that
keeps an organization focused, adaptive, and purposeful amid this complexity.

Importance of Strategic Management

Strategic management is not a luxury reserved for large corporations. It is

a necessity for any organization that wants to survive and grow over the long term.
In the tourism and hospitality industry, where competition is fierce and customer
expectations are constantly evolving, the importance of strategic management
cannot be overstated. Below are its most critical contributions:

1. Provides Clear Direction and Purpose

Without strategic management, an organization is like a ship with no

compass. It may be moving, but no one is sure where it is headed. Strategic
management establishes a clear vision and mission that unite all members of an
organization around a shared purpose. Every employee, from the general manager
to the front desk agent, understands what the organization is trying to achieve and
why their role matters.

For instance, a resort that has clearly defined its purpose "to provide world-
class wellness retreats rooted in Filipino healing traditions" can use that direction
to guide every decision: the spa treatments it offers, the food it serves, the staff it
hires, and the guests it markets to. Without this clarity, each department might
pursue different and conflicting priorities.

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2. Enables Proactive Rather Than Reactive Management

Organizations without a strategic management framework are constantly in

reactive mode responding to problems after they occur, scrambling to match
competitors' moves, and making decisions under pressure. Strategic management
shifts an organization from reactive to proactive anticipating changes in the
environment, identifying opportunities before competitors do, and preparing
contingency plans before crises arise.

A fitting example is the impact of the Mayon Volcano eruption in May

2026 on hotels and resorts in Bicol and the surrounding areas. Tourism
establishments that had incorporated disaster risk management into their strategic
plans were quicker to respond coordinating with local government units,
repurposing their facilities as evacuation centers, and maintaining guest
communication protocols. More importantly, those with proactive strategies had
already established alternative revenue streams and crisis communication plans,
allowing them to resume operations faster once the ashfall subsided. In contrast,
hotels that operated without any strategic foresight suffered prolonged closures,
significant financial losses, and struggled to regain the trust of both guests and
employees. This event demonstrated that in a country as disaster-prone as the
Philippines, proactive strategic management is not merely an advantage it is a
necessity for survival in the hospitality industry.

3. Improves Decision-Making

Every organization faces countless decisions daily, which markets to enter,

which services to offer, how to price, whom to hire, where to invest. Without a
strategic framework, these decisions are often made in isolation, inconsistently, or
based on personal preference rather than organizational goals. Strategic
management provides a decision-making filter: every significant choice is
evaluated against the organization's vision, mission, and strategic priorities.

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 For instance, A boutique hotel chain receives an offer to franchise its brand
to a budget hotel operator. Without strategic management, the decision might be
made based solely on the short-term financial offer. With strategic management,
however, leaders evaluate the offer against their strategic identity "authentic,
sustainable luxury" and recognize that a budget franchise would dilute their brand
positioning and alienate their target market. Strategic management gives them the
framework to say no to a financially tempting but strategically harmful opportunity.

4. Creates and Sustains Competitive Advantage

In an industry where travelers have thousands of options, competitive

advantage, the reason a guest chooses you over every other option, is everything.
Strategic management is the process through which organizations deliberately
build, protect, and renew their competitive advantage over time.

To illustrate, Airbnb built its competitive advantage by strategically

positioning itself not as a hotel alternative, but as a way for travelers to "belong
anywhere" to experience destinations like a local rather than a tourist. This
strategic positioning, consistently reinforced through platform design, marketing,
and host community management, created an advantage that took years for
traditional hotel chains to meaningfully respond to.

5. Aligns Resources with Priorities

Organizations always have limited resources limited budgets, limited staff,

limited time. Strategic management ensures that these resources are allocated
where they will have the greatest impact on achieving organizational goals, rather
than being spread thin across too many priorities or wasted on activities that do
not contribute to the strategy.

For instance, A mid-sized travel agency with a limited marketing budget

must choose between investing in social media advertising, travel fair participation,
corporate client development, and influencer partnerships. Strategic management

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helps leaders identify which of these channels most effectively reaches their target
market say, millennial eco-travelers and concentrate resources there rather than
spreading the budget ineffectively across all options.

6. Enhances Organizational Adaptability

The tourism and hospitality industry is one of the most volatile sectors in the
global economy, vulnerable to economic downturns, political instability, natural
disasters, pandemics, and rapidly shifting traveler trends. Strategic management
builds the organizational capacity to adapt because it creates a habit of
environmental scanning, goal-setting, and performance evaluation that allows
leaders to detect changes early and respond with agility.

When the "sustainable travel" trend began gaining traction among premium
travelers, hotels with strategic management systems already in place were able to
rapidly integrate sustainability initiatives eco-certification, zero-waste operations,
local sourcing into their existing strategy. Hotels that lacked this orientation
continued offering the same experience until they found themselves losing
bookings to competitors who had moved faster.

7. Facilitates Organizational Alignment and Teamwork

Strategic management ensures that all departments and teams within an

organization are working toward the same goals, rather than operating as
disconnected silos. When marketing, operations, human resources, and finance
all understand and are committed to the same strategic direction, the organization
functions as a unified, high-performing team like a ship where every crew member
knows their role and rows in the same direction.

For instance, In a hotel pursuing a strategy of personalized luxury service,

the HR department hires for emotional intelligence and cultural knowledge; the
operations department designs check-in processes that feel warm and personal
rather than transactional; the marketing team communicates stories of real guest

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experiences; and the food and beverage team curates locally inspired menus.
Strategic management aligns all of these functions around a single compelling
promise to the guest.

Strategic Management as a Game Plan

One of the most useful ways to understand strategic management is to think

of it as an organization's game plan, a term borrowed from sports that captures
the essence of what strategic management does: it prepares an organization to
compete, win, and sustain its performance over time.

In basketball, a game plan is not just about knowing the rules of the game.
It is about understanding the opponent's strengths and weaknesses, playing to
your team's unique capabilities, anticipating how the game will unfold, making
adjustments at halftime when things are not working, and keeping every player
focused on the same goal throughout.

Strategic management works exactly the same way in business.

Why Strategic Management is Considered a Game Plan

It defines the playing field. A game plan begins with understanding the
game who the opponents are, what the rules are, and what the conditions of play
look like. In strategic management, this is the environmental scanning phase
understanding the competitive landscape, identifying rivals, and reading the
market.

For instance, a travel agency conducting a strategic review identifies that

its main competitors are online travel booking platforms (OTAs) like [Link]
and Agoda. Its game plan must account for the reality that these platforms have
massive scale, price comparison capabilities, and 24/7 digital convenience
advantages a small agency cannot match head-on.

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 It plays to your strengths. A coach designs a game plan around what their
team does best, a fast team runs; a physical team plays in the paint. Strategic
management works the same way: it identifies the organization's unique strengths
and builds a strategy that leverages them.

As an example, the travel agency recognizes that its strength lies in deep
destination knowledge, curated itinerary design, and long-standing relationships
with local guides and boutique properties, things an algorithm cannot replicate. Its
game plan: position itself as a specialist curator of immersive, off-the-beaten-
path travel experiences for discerning travelers who want more than a standard
hotel-and-flight booking.

It anticipates the opponent's moves. A great game plan does not just
focus on what you want to do. It anticipates what competitors will do and prepares
responses. In strategic management, this is competitive intelligence, monitoring
rivals' moves and building strategies that are difficult to imitate.

To illustrate, when the agency's strategic review reveals that OTAs are
beginning to offer "experience packages" a product that had previously been the
agency's differentiator the game plan adapts: developing hyper-exclusive, ultra-
personalized itineraries that are far too complex and relationship-dependent for
any digital platform to replicate.

It requires the whole team. A game plan fails if only the coach understands
it. Every player must know the strategy and their role within it. In strategic
management, this is strategy implementation communicating the strategic
direction to all levels of the organization and ensuring that every team member's
daily actions contribute to executing the plan.

For instance, the travel agency's game plan is communicated to every

consultant: they are not order-takers processing bookings they are experience
architects helping clients design the journey of a lifetime. This strategic identity

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shapes how they handle every client conversation, how they present options, and
how they follow up after a trip.

It is adjusted based on performance. A halftime adjustment is a standard

part of any game plan. If the strategy is not working, a good coach makes changes
not out of panic, but based on data and observation. Strategic management
includes the same discipline: regular evaluation of performance metrics and
willingness to refine the strategy when results demand it.

As an example, Six months into the new positioning strategy, the travel
agency reviews booking data and discovers that while inquiries for luxury
itineraries have increased, conversion rates are low, clients are researching but
not committing. The agency adjusts its game plan by introducing a complimentary
"Itinerary Consultation Session" that deepens client engagement, builds trust, and
dramatically improves conversion.

Characteristics of Strategic Management

Strategic management is not a single act or a one-time document. It is a

discipline with distinct characteristics that define how it operates and what makes
it effective.

1. It is Future-Oriented

Strategic management is fundamentally concerned with the future, where

the organization is going, not just where it has been. It requires leaders to think
beyond today's operations and today's problems to envision what the organization
should look like in three, five, or ten years, and then work backwards to determine
what must be done today to get there.

For instance, a hotel chain investing in eco-certification today may not see
a full return on that investment for two to three years but strategic management
justifies the investment because it is oriented toward the future market reality: a

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world where sustainable travel credentials are a prerequisite for premium
bookings, not merely a differentiator.

2. It is Comprehensive and Holistic

Strategic management does not manage one department or one function.

It looks at the entire organization and how all its parts interact. It considers the
relationships between marketing, operations, finance, human resources,
technology, and external stakeholders as a unified system, ensuring that all
components are aligned and working toward common goals.

As an illustration, when a resort decides to pursue a wellness tourism

strategy, strategic management ensures that this decision shapes every function:
HR recruits wellness specialists; operations redesigns spa facilities; marketing
rebrands to target health-conscious travelers; F&B develops nutritionist-approved
menus; and finance allocates capital for facility upgrades. No single department
pursues wellness independently, it is a whole-organization commitment.

3. It Involves Multiple Levels of Decision-Making

Strategic management operates across three interconnected levels:

corporate level (What businesses should we be in?), business level (How do we
compete in each business?), and functional level (How does each department
contribute to the competitive strategy?). Effective strategic management ensures
that decisions at all three levels are aligned and mutually reinforcing.

• Corporate level: A hospitality conglomerate decides to expand into

wellness tourism as a growth sector.
• Business level: Its resort division decides to compete through a
differentiation strategy, premium wellness experiences rooted in indigenous
healing traditions.

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 • Functional level: The HR department designs a training program for staff
to deliver culturally authentic wellness services; the marketing team creates
content campaigns around "ancestral healing" travel experiences.

4. It is Dynamic and Continuous

Strategic management is not a document created once and filed away. It is

a continuous, iterative process, one that requires organizations to constantly scan
the environment, review performance, and adapt their strategies in response to
changing conditions. The world does not stand still, and neither does an effective
strategic management system.

To illustrate, when a global pandemic disrupted international travel in 2020,

hotels with active strategic management systems immediately re-evaluated their
strategies, pivoting from international tourism to domestic staycation markets,
redesigning their service offerings, and renegotiating supplier contracts. This
agility was only possible because strategic management was a continuous
practice, not a static annual exercise.

5. It is Integrative

Strategic management integrates information from many different sources,

market research, financial analysis, customer feedback, employee insights,
competitive intelligence, and environmental data to form a coherent, evidence-
based strategic direction. It is not based on intuition alone, nor on data alone. It
brings both together in a disciplined analytical process.

For instance, a cruise line company combining passenger satisfaction data,

global travel trend reports, carbon emission regulations, and competitor itinerary
analysis to formulate its five-year strategy integrating quantitative data and
qualitative insight into a single, coherent strategic direction.

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6. It Requires Top Management Commitment

For strategic management to be effective, it must be led from the top. Senior
leaders must not only formulate strategy. They must champion it, model it through
their own decisions, and create the organizational culture in which strategic
thinking is valued and practiced at every level.

For Example, when the CEO of a boutique hotel chain personally

participates in sustainability audits, meets with local community partners, and
shares the hotel's annual sustainability report with guests. They are demonstrating
that the strategy is not just a document, but a lived commitment. This top
management engagement inspires employees at every level to take the strategy
seriously.

7. It is Goal-Directed

Every element of strategic management, the scanning, the formulation, the

implementation, the evaluation, is in service of specific, measurable goals.
Strategic management is not an abstract exercise in planning; it is a disciplined
effort to achieve concrete outcomes. Goals give the strategy teeth, they turn
aspiration into accountability.

For instance, rather than simply stating "we want to be more sustainable,"
a strategic hotel chain sets specific goals: reduce water consumption by 25%
within two years, achieve zero single-use plastic by the end of the fiscal year, and
source 80% of food from local suppliers within 18 months. These goals make the
sustainability strategy real, trackable, and achievable.

A Firm's Strategy: The Case of Azalea Boutique Hotel Collection

To bring all of these concepts to life, consider a fictional but realistic

example: the Azalea Boutique Hotel Collection, a group of five boutique hotels

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located in key heritage and nature destinations across the Philippines — Vigan,
Batanes, Sagada, Siargao, and Palawan.

The Strategic Situation

Azalea faces a highly competitive environment. On one end, large

international hotel chains. Marriott, Accor, and Hilton have been expanding their
"lifestyle" and "soft brand" portfolios to capture the boutique travel segment. On
the other end, budget accommodations and Airbnb hosts offer low-cost
alternatives that appeal to budget-conscious travelers. Azalea's leadership
recognizes that it cannot compete on price (too small) or on global brand
recognition (no budget for it). It must carve out a distinct, defensible position in the
market.

Azalea's Vision and Mission

• Vision: "To be the Philippines' most celebrated home for travelers who seek
depth, not distance where every stay is a journey into the soul of a place."
• Mission: "To create deeply personal, culturally rooted hospitality
experiences that honor the heritage and environment of the destinations we
call home, while uplifting the communities and people who make those
destinations extraordinary."

Azalea's Strategy

Azalea adopts a focused differentiation strategy targeting a specific

niche (culturally curious, mid-to-premium range Filipino and international travelers)
with a highly differentiated product (immersive, heritage-rooted, community-
connected boutique hospitality).

The strategy is built on four strategic pillars:

Pillar 1 —Heritage Immersion Each Azalea property is designed and operated

as a living expression of its destination's cultural identity. The Vigan property is

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housed in a restored ancestral home, staffed by local historians who lead guided
heritage walks for guests. The Batanes property is built using traditional Ivatan
stone architecture, with menus drawn entirely from the island's indigenous food
culture. Guests do not merely visit a destination, they inhabit it.

Pillar 2 — Community Partnership Azalea commits to a "community-first

sourcing" policy: a minimum of 75% of all food, beverages, handicrafts, and tour
experiences are sourced from local producers and community-based enterprises.
This creates genuine economic benefit for the destinations Azalea operates in and
creates unique offerings that no standardized hotel chain can replicate because
they are embedded in specific local relationships.

Pillar 3 — Sustainable Operations All Azalea properties operate under an

internal Green Certification Framework with three tiers, Bronze, Silver, and Gold.
Properties are evaluated annually on energy use, water consumption, waste
management, and biodiversity impact. Azalea's goal is to achieve Gold certification
across all properties within three years. This commitment attracts eco-conscious
travelers and protects the natural assets on which the entire business model
depends.

Pillar 4 — Personalized Storytelling Azalea invests in a guest relationship

management system that captures guest preferences, travel histories, and
personal interests before every stay. This data enables staff to personalize the
guest experience in meaningful ways, from arranging a private weaving session
with a local master craftsperson for a guest interested in traditional textiles, to
curating a custom hiking trail for a guest passionate about ornithology. Every guest
leaves with a story that is uniquely theirs.

Azalea's strategy is implemented through deliberate operational choices:

• Human Resources: Azalea hires locally for all frontline positions and
provides six months of training in cultural storytelling, sustainable hospitality
practices, and personalized service delivery.

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 • Marketing: Rather than traditional advertising, Azalea invests in
documentary-style content, short films featuring local artisans, farmers, and
heritage practitioners distributed through social media and travel media
partnerships.
• Finance: Azalea allocates 10% of annual net revenue to a Community
Partnership Fund, which is used to support local cultural preservation
initiatives, environmental restoration projects, and hospitality scholarship
programs for youth in its host communities.

Within three years of implementing this strategy, Azalea achieves:

• A 40% increase in direct bookings from target guest segments (reducing

dependence on OTA commissions).
• A Net Promoter Score (NPS) of 87 among the highest in the Philippine
boutique hotel segment.
• Recognition as a finalist for the ASEAN Sustainable Tourism Award.
• A 30% increase in average daily rate (ADR), reflecting the premium guests
are willing to pay for an experience they cannot find anywhere else.
• A reputation among travel media as the defining example of authentic
Filipino boutique hospitality.

Strategic management is far more than a business school concept. It is the

discipline that separates organizations that merely exist from organizations that
endure, lead, and matter. In the tourism and hospitality industry, where the product
is fundamentally experiential, where the environment is constantly shifting, and
where competition is both global and intensely local, strategic management is the
captain's compass that keeps the ship on course.

The importance of strategic management, from providing direction and

enabling proactive decision-making, to building competitive advantage and
aligning organizational resources explains why the most successful hospitality and

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tourism organizations in the world treat strategy not as an annual planning ritual,
but as a daily leadership practice.

When understood as a game plan, strategic management becomes

approachable: it is about knowing who you are, knowing the competition, playing
to your strengths, preparing for change, and keeping the whole team moving in the
same direction. When understood through its characteristics future-oriented,
comprehensive, dynamic, integrative, and goal-directed strategic management
reveals itself as both an art and a science: a disciplined framework powered by
human judgment, creativity, and courage.

The Azalea story is a reminder that the most powerful strategies are often
not the most expensive or the most complex. They are the most authentic. The
clearest competitive advantage is one that is rooted in genuine values, genuine
relationships, and genuine care for the people and places that make this industry
the remarkable one it is.

D. Application

Identification Test (Write the word or term being described beside the number)

1. The ongoing process of goal setting, formulating, implementing, and

evaluating decisions that enable an organization to achieve its long-term
goals.
2. The reason a guest chooses one hospitality business over every other
competitor.
3. The type of strategy Azalea Boutique Hotel Collection adopted, targeting a
specific niche with a highly differentiated product.
4. The strategic management characteristic that describes it as a continuous
and evolving process that requires constant environmental scanning and
adaptation.
5. The three fundamental levels of decision-making in strategic management:
corporate, business, and this third level.

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Essay Questions

1. In your own words, explain why strategic management is compared to a

game plan. Use at least one example from the hospitality industry to
support your answer.
2. Using the Azalea Boutique Hotel Collection as a reference, explain how
its four strategic pillars helped it gain a competitive advantage over larger
hotel chains and budget accommodations.
3. Among the seven importance of strategic management discussed in the
lesson, which do you think is most critical for a tourism or hospitality
business in the Philippines? Explain your choice and support it with a real
or hypothetical example.

Lesson II: Steps in the Strategic Management Process

A. Activity

Map the strategic management process for a hypothetical tour operator

entering a new market.

B. Analysis

The strategic management process includes goal setting or establishing

organizational direction, environmental scanning, strategy formulation,
implementation, and evaluation/control. It is continuous and cyclical, allowing
adaptation in the fast-changing tourism industry.

C. Abstraction

Strategic management does not happen in a single decision, it unfolds

through a series of interconnected steps: establishing organizational direction,
environmental scanning, strategy formulation, strategy implementation, and

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strategy evaluation and control. To understand each step concretely, consider
a mid-sized boutique hotel chain facing competition from both large international
brands and low-cost budget options. Through strategic management, leaders
defined a clear vision: “To be the preferred choice for authentic, sustainable luxury
experiences” and mission: “To deliver personalized service rooted in local culture
while practicing environmental responsibility”. They built competitive advantage
by focusing on unique local partnerships, personalized guest experiences, and
strong sustainability credentials. This strategy helped them attract premium
travelers who value authenticity over standardized luxury, even during economic
downturns. As a student you can relate this to planning your career path, setting
goals, identifying strengths, and standing out from others.

The Strategic Management Process

Step 1: Establishing Organizational Direction (Goal Setting)

Every strategic journey begins with a fundamental question: What are we

trying to achieve? Before an organization can scan its environment or craft a plan,
it must first establish a clear sense of purpose, direction, and intent. This step
involves defining the organization's vision (the long-term desired future state),
mission (the core reason for existing), and strategic goals (the specific,
measurable outcomes the organization commits to pursuing). Without this
foundation, all subsequent planning lacks focus and coherence.

This step is not merely about writing an inspiring statement, it is about

making a deliberate choice about the kind of organization you want to be and the
kind of value you want to create. It answers three essential questions: Who are
we? What do we stand for? Where are we going?

For the boutique hotel chain, leaders gathered to confront a real threat: the
rise of global hotel brands with massive marketing budgets and the simultaneous
growth of budget accommodations undercutting their pricing. Rather than reacting
impulsively, they began by re-anchoring to purpose. They established:

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 • Vision: "To be the preferred choice for authentic, sustainable luxury
experiences." This defined the long-term aspiration: not just a hotel, but the
top-of-mind brand for a specific kind of traveler.
• Mission: "To deliver personalized service rooted in local culture while
practicing environmental responsibility." This clarified their day-to-day
reason for existing, distinguishing them from competitors whose mission is
simply to offer rooms at a price.
• Strategic Goals: To increase bookings among premium eco-conscious
travelers by 30% within three years, to achieve eco-certification across all
properties, and to establish partnerships with at least ten local cultural
organizations per location within two years.

These goals gave every manager, department head, and frontline

employee a shared compass. Whether a housekeeper was deciding how to
welcome a guest, or a marketing manager was choosing which platform to
advertise on, the organizational direction provided a consistent frame of reference
for decision-making.

Step 2: Environmental Scanning

Before any plan can be made, leaders must first understand the world
around them. Environmental scanning involves systematically gathering and
analyzing information about the organization's internal strengths and
weaknesses, as well as the external opportunities and threats it faces
commonly known as a SWOT analysis.

For the boutique hotel chain, environmental scanning revealed the following:

• Internal Strengths: A loyal local staff with deep cultural knowledge,

uniquely designed rooms that reflect regional heritage, and an existing
network of local vendor partnerships.
• Internal Weaknesses: Limited marketing budget compared to international
chains, fewer locations, and a smaller loyalty program.

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 • External Opportunities: A growing global segment of travelers seeking
authentic, sustainable experiences; increasing environmental awareness;
and rising dissatisfaction with standardized luxury hotel brands.
• External Threats: Aggressive pricing from budget hotels and the
dominance of international chains with massive advertising spend and
widespread recognition.

This scanning step gave the hotel's leaders a realistic picture of the
competitive landscape, enabling them to make informed decisions rather than
guessing.

Step 3: Strategy Formulation

With a clear organizational direction already established and a thorough

understanding of the environment in hand, leaders can now determine how the
organization will actually achieve its goals. Strategy formulation involves
translating the vision, mission, and strategic goals into a concrete strategic plan
identifying the specific approach the organization will pursue to gain a competitive
advantage over rivals.

This is the step where choices become commitments. Leaders must decide:
Will we compete on cost, on uniqueness, or by targeting a specific niche? What
capabilities will we invest in? What will we deliberately not do?

For the boutique hotel, the environmental scan had made one thing clear:
competing on price against budget hotels was unwinnable, and competing on scale
against international brands was equally futile. The answer lay in the gap neither
competitor could fill — genuine, culture-rooted, sustainable luxury. Leaders
formulated a differentiation strategy built on three pillars:

• Local cultural immersion — Partnering with regional artisans, chefs,

historians, and community organizations to embed authentic local

20
 experiences into every aspect of the guest journey, from room design to
dining menus.
• Hyper-personalized service — Developing pre-arrival guest profiling
systems that allowed staff to customize room settings, welcome amenities,
and activity recommendations before a guest even checked in.
• Verified sustainability — Pursuing internationally recognized eco-
certifications, publishing annual sustainability reports, and committing to
measurable environmental targets that premium travelers could
independently verify.

This formulation answered the fundamental strategic question: Why would

a traveler choose us over everyone else? The answer: authenticity,
personalization, and sustainability, became the hotel's strategic identity and the
standard against which all future decisions would be measured.

Step 4: Strategy Implementation

Formulating a brilliant strategy means nothing if it is never put into action.

Strategy implementation is the process of translating strategic plans into concrete
actions, resource allocations, and operational changes across the
organization. This is often considered the most challenging step because it
requires aligning people, processes, budgets, and culture with the chosen strategy.

For the boutique hotel, implementation involved several key actions:

• Restructuring operations to embed sustainability at every touchpoint

sourcing food from local farms, eliminating single-use plastics, and installing
solar energy systems.
• Training staff to deliver culturally immersive experiences, such as teaching
guests traditional cooking methods, arranging authentic local tours, and
personalizing rooms based on guest preferences captured before arrival.

21
 • Building local partnerships with artisans, farmers, and cultural
organizations to ensure that the "authentic local experience" promise was
genuinely fulfilled, not merely marketed.
• Reallocating the marketing budget toward digital storytelling, social
media content showcasing real guest experiences, and targeting travel
publications that cater to eco-conscious luxury travelers.

The result was a cohesive guest experience that genuinely reflected the
hotel's strategic vision. Even during economic downturns, this strategy attracted
premium travelers who valued authenticity and were willing to pay for it. Travelers
who felt that large international chains could not offer the same depth of
experience.

Step 5: Strategy Evaluation and Control

The final step closes the loop. Strategy evaluation and control involves
monitoring performance, measuring results against goals, and making
adjustments when things do not go as planned. The business environment is
constantly changing, new competitors emerge, customer preferences shift, and
economic conditions fluctuate. So even well-executed strategies must be reviewed
and refined continuously.

For the boutique hotel, evaluation included:

• Tracking key performance indicators (KPIs) such as average guest

satisfaction scores, occupancy rates among target traveler segments,
revenue per available room, and repeat booking rates.
• Monitoring sustainability metrics like carbon footprint reduction,
percentage of locally sourced ingredients, and waste diversion rates both
because they reflect mission alignment and because eco-certified travelers
specifically look for verified sustainability data.

22
 • Gathering guest feedback through post-stay surveys, online reviews, and
direct conversations, using the insights to continuously refine the guest
experience.
• Adapting strategy when necessary, for example, expanding digital
marketing efforts when travel restrictions shifted more guest research and
booking behavior online, or introducing virtual cultural experience packages
when in-person travel temporarily declined.

This ongoing evaluation ensured that the hotel's competitive advantage did
not erode over time and that its strategy remained relevant in a changing market.

The strategic management process, from establishing organizational

direction to scanning the environment, formulating strategy, implementing it, and
evaluating results, is not a one-time exercise but a continuous cycle of thinking,
acting, and learning. The boutique hotel chain's story illustrates how a clear, well-
executed strategy can carve out a defensible competitive position even against far
larger and better-resourced rivals.

Strategic management is like being the captain of a ship, you decide

where the ship is going (vision and mission), chart the course (strategy), and
make sure the crew works together to reach the destination better than other ships
(competitive advantage).

A family-owned tour company in Bali wanted to grow. They started with goal
setting, environmental scanning, then formulated a strategy focused on eco-
adventure packages. Implementation involved training guides and partnering with
local communities. Evaluation through guest feedback and financial reports
showed good results, but they adjusted for new competition by adding cultural
immersion elements. This ongoing process helped the business survive the
pandemic and thrive afterward. Students can relate this to planning a group project
research, plan, do the work, check results, and improve.

23
D. Application

Identification Test (Write the word or term being described)

1. The first step in the strategic management process that involves defining
the organization's vision, mission, and strategic goals.
2. The analytical tool used in environmental scanning that examines an
organization's internal strengths and weaknesses, and external
opportunities and threats.
3. The step in the strategic management process where leaders translate their
vision and mission into a concrete plan to gain competitive advantage over
rivals.
4. Often considered the most challenging step, this involves translating
strategic plans into concrete actions, resource allocations, and operational
changes across the organization.
5. The final step in the strategic management process that involves monitoring
performance, measuring results against goals, and making adjustments
when necessary.

Essay Questions

1. In your own words, describe the five steps of the strategic management
process in order. Why is it considered a continuous cycle rather than a one-
time exercise?
2. Using the boutique hotel chain example from the lesson, explain how
environmental scanning helped the hotel identify its competitive strategy.
What would have happened if this step was skipped?
3. Of the five steps in the strategic management process, which do you think
is the most difficult to carry out in a real tourism or hospitality business?
Explain your answer using a practical example from the lesson or your own
experience.

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Lesson III: Ethics and Corporate Social Responsibility in Strategic
Management

A. Activity

Students debate an ethical dilemma in a hotel (e.g., greenwashing vs.

genuine CSR) and propose an ethical strategy.

B. Analysis

Ethics and CSR must be integrated into strategy. In hospitality, this means
honest marketing, fair labor practices, and responsible environmental actions,
which build long-term trust and competitive advantage.

C. Abstraction

Business ethics involves doing what is morally right, while CSR means
actively contributing to society and the environment. These are embedded
throughout the strategic management process.

Every business makes choices what to sell, how to treat employees, how to
interact with the community, and how to use the environment. But beyond the
question of what is profitable, there is a deeper, more enduring question: what is
right?

This is where ethics and corporate social responsibility (CSR) enter the
picture.

In the tourism and hospitality industry, one of the most people-centered and
place-dependent industries in the world, the way a business answers these
questions has profound consequences. Hotels consume enormous amounts of
water and energy. Tour operators interact directly with fragile ecosystems and local
cultures. Restaurants source food from supply chains that affect the livelihoods of

25
farmers and fishermen. Airlines contribute significantly to carbon emissions. Every
business decision in this industry carries an ethical and social dimension.

Understanding ethics and CSR is not just a moral exercise, it is a strategic

imperative. Organizations that embed ethical principles and social responsibility
into their strategic management are better positioned to build trust, attract loyal
customers, retain talented employees, and sustain long-term competitive
advantage.

Understanding Business Ethics

What is Ethics?

Ethics refers to the moral principles and values that guide human behavior
the standards of right and wrong that individuals and organizations use to make
decisions. In a business context, ethics answers the question: Are we doing what
is right, not just what is legal or profitable?

It is important to note that legal and ethical are not always the same thing.
An action can be legal but still unethical. For example, a hotel can legally pay its
housekeeping staff the minimum wage but if that wage is insufficient to meet basic
living needs in the local area, many would argue that doing so is ethically
questionable, even if it is technically within the law.

Why Ethics Matters in Tourism and Hospitality

The tourism and hospitality industry operates at the intersection of people,

place, and profit. It depends on the goodwill of local communities, the appeal of
natural and cultural environments, and the trust of guests. When ethical standards
are compromised, the entire value proposition of a tourism or hospitality business
can collapse:

• A resort that pollutes a beach it relies on for its appeal destroys its own
competitive asset.

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 • A tour operator that exploits local communities for cheap "cultural
experiences" damages the authenticity travelers are seeking.
• A hotel chain that covers up poor labor conditions risks reputational
collapse in the age of social media and online reviews.
• A restaurant that misrepresents the source or quality of its ingredients
violates the trust of its guests.

Ethics, therefore, is not just a philosophy class topic, it is a business

survival issue in tourism and hospitality.

Corporate Social Responsibility (CSR)

What is CSR?

Corporate Social Responsibility (CSR) is the commitment of a business

to operate in ways that are economically viable, legally compliant, ethically sound,
and beneficial to society and the environment going beyond the minimum required
by law.

A widely used framework for understanding CSR is Carroll's Pyramid of

CSR, which organizes a business's responsibilities into four levels:

Carroll's Pyramid of CSR Applied to Tourism and Hospitality

1. Economic Responsibility (Be Profitable) At the base of the pyramid is the

most fundamental responsibility: a business must be financially viable. Without
profit, it cannot employ people, serve guests, or contribute to anything else. For a
hotel, this means managing revenues, controlling costs, and delivering value that
guests are willing to pay for.

Example: A boutique eco-resort in Palawan that prices its rooms to cover

operational costs, staff salaries, and environmental upkeep ensuring it remains a
going concern that continues to provide local employment.

27
2. Legal Responsibility (Obey the Law) Beyond profit, a business must comply
with all relevant laws and regulations: labor laws, environmental regulations, health
and safety standards, consumer protection laws, and business licensing
requirements.

Example: A hotel in Boracay that complies with the Department of Environment

and Natural Resources (DENR) regulations on wastewater treatment, ensuring
that its operations do not contaminate the surrounding marine environment not
merely because it is required, but because compliance preserves the ecosystem
on which its entire business depends.

3. Ethical Responsibility (Be Ethical) This level goes beyond the law. It asks
businesses to do what is right and fair, even when not legally required. It involves
treating employees with dignity, being honest with customers, respecting local
cultures, and making decisions that consider the impact on all stakeholders not
just shareholders.

Example: A travel agency that refuses to offer tours to wildlife venues where
animals are exploited for tourist entertainment such as elephant riding operations
or tiger selfie farms even though such venues operate legally in some countries.
The agency makes this choice because it recognizes the ethical obligation to
oppose animal cruelty, regardless of legality.

4. Philanthropic Responsibility (Be a Good Corporate Citizen) At the top of the

pyramid is the voluntary contribution of resources to improve the community and
society at large, donations, scholarships, environmental restoration programs, and
community development initiatives that go beyond what ethics strictly requires.

Example: A five-star hotel chain that establishes a foundation to provide culinary

scholarships for underprivileged youth from nearby communities, creating a
pipeline of local talent while uplifting the community it operates in.

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The Relationship Between Ethics, CSR, and Strategic Management

Ethics and CSR are not separate from strategic management, they are
embedded within it. When an organization integrates ethical principles and CSR
commitments into its strategic management process, it moves from reactive
compliance (doing the minimum required) to proactive responsibility (making social
and environmental performance a source of competitive advantage).

This integration plays out across every step of the strategic management
process:

The vision and mission of a hospitality or tourism organization should reflect

its ethical values and social commitments. A mission statement that is purely profit-
focused signals to employees, guests, and communities that the organization's
values stop at the balance sheet. By contrast, a mission that articulates
responsibility to people, place, and planet creates an organizational identity that
attracts like-minded employees and customers.

Example: The vision of the boutique hotel chain "To be the preferred choice for
authentic, sustainable luxury experiences" is inherently ethical. It commits the
organization to sustainability (environmental responsibility), authenticity (respect
for local culture), and premium quality (honest delivery of value). These
commitments are not marketing slogans; they are ethical obligations the
organization makes to its stakeholders from the very start of its strategic journey.

The SWOT analysis in a socially responsible tourism or hospitality

organization includes not just market data, but also ethical and social risk
assessment. Leaders ask: Are our suppliers treating workers fairly? Are our
operations harming the environment in ways that could generate backlash? Are
there communities that feel excluded from the economic benefits of our presence?

Example: During environmental scanning, the hotel chain discovered that several
of its local suppliers used non-sustainable fishing practices. This was an ethical

29
threat not only because it was wrong, but because eco-conscious travelers were
increasingly researching the supply chain practices of hotels before booking.
Identifying this early allowed the hotel to transition to certified sustainable seafood
suppliers before it became a reputational crisis.

When formulating strategy, ethical organizations ask not just What will make
us money? but What will create value for our guests, our employees, our
community, and our environment while also making us financially sustainable?
CSR becomes a strategic differentiator, not merely a charitable add-on.

Example: The hotel chain's differentiation strategy built on local cultural

partnerships, personalized service, and sustainability credentials is a CSR strategy
and a competitive strategy simultaneously. By formalizing commitments to
environmental certification and community partnerships, the hotel transformed its
ethical values into a market positioning that no large international chain could
easily replicate. CSR became the moat around its competitive advantage.

Ethical and CSR commitments must be operationalized otherwise they

remain aspirational words on paper. Implementation involves embedding
responsible practices into day-to-day operations, HR policies, supply chain
management, and guest experiences.

Example: The hotel implemented its ethical commitments by:

• Fair wage policies — Paying housekeeping and service staff above the
minimum wage and providing housing allowances for those commuting
from distant communities.
• Sustainable procurement — Sourcing 80% of food and beverage
products from local farmers and cooperatives, ensuring that tourism
revenue circulated within the local economy rather than leaving it.
• Cultural sensitivity training — Educating staff on how to present local
traditions respectfully, avoiding the commodification of sacred cultural
practices into shallow tourist performances.

30
 • Environmental operations — Installing solar panels, rainwater harvesting
systems, and compostable packaging across all food service operations,
reducing the hotel's carbon footprint in measurable ways.

These were not optional CSR projects, they were built into the hotel's
operational DNA, reviewed by management quarterly, and reported to guests and
the public through an annual sustainability report.

Measuring ethical and CSR performance is just as important as measuring

financial performance. Organizations that are serious about CSR track social and
environmental metrics with the same rigor as revenue and profit.

Example: The hotel monitored its CSR performance using indicators such as:

• Employee turnover rate — A low turnover rate indicated that staff felt
valued and fairly treated.
• Local sourcing percentage — Tracking how much of its procurement
came from local suppliers, with a target of 80%.
• Guest feedback on ethical practices — Surveys that specifically asked
guests whether they felt the hotel's sustainability claims were genuine and
visible during their stay.
• Community impact reports — Annual assessments of how many local
jobs were created, how many local suppliers were supported, and how
many community scholarship beneficiaries had completed their education.

When the hotel discovered through guest surveys that some guests were
skeptical about whether sustainability claims were "greenwashing," it responded
by inviting guests to participate in behind-the-scenes sustainability tours of the
property, a corrective action that turned a CSR concern into a new premium guest
experience.

31
Key Ethical Issues in Tourism and Hospitality

Beyond the strategic framework, there are several recurring ethical issues
that professionals in tourism and hospitality must be prepared to navigate:

1. Labor and Fair Employment The industry is known for low wages, long hours,
seasonal employment, and high turnover particularly among frontline workers like
housekeepers, servers, and kitchen staff. Ethical organizations go beyond legal
minimums to ensure living wages, reasonable working hours, safe conditions, and
opportunities for career advancement.

2. Environmental Stewardship Mass tourism has contributed to the degradation

of coral reefs, deforestation, beach erosion, and water scarcity in popular
destinations. Ethical tourism businesses adopt environmental management
systems, minimize waste, reduce energy and water consumption, and actively
participate in habitat restoration.

3. Cultural Respect and Authenticity Tourism can be a vehicle for cultural

exchange or cultural exploitation. Ethical operators ensure that local traditions are
presented with the consent and involvement of community members, that sacred
sites are treated with respect, and that the economic benefits of cultural tourism
reach the communities whose heritage is being shared.

4. Child Protection and Human Trafficking The tourism industry, particularly in

developing countries, can inadvertently facilitate child exploitation and human
trafficking. Ethical organizations implement staff training on recognizing and
reporting trafficking, adopt child protection policies, and support initiatives like the
ECPAT Code a global standard for protecting children in travel and tourism.

5. Overtourism and Community Impact Popular destinations like Boracay, Bali,

and Venice have experienced overtourism where the volume of tourists exceeds
the carrying capacity of the destination, damaging the environment and disrupting

32
local life. Ethical tourism management involves capacity planning, visitor
dispersion strategies, and meaningful community consultation.

The Business Case for Ethics and CSR

Some business leaders view ethics and CSR as costly obligations that
reduce profit. The evidence, however, suggests the opposite. In the tourism and
hospitality industry:

• Guest loyalty increases when travelers trust that a business genuinely

lives its stated values. Authentic sustainability attracts the fast-growing
segment of purpose-driven travelers who are willing to pay premium prices
and return repeatedly.
• Employee engagement and retention improve when staff feel proud of
the organization they work for and believe they are treated with fairness and
dignity. In an industry with notoriously high turnover, ethical employment
practices translate directly into cost savings.
• Regulatory and reputational risk decreases when organizations
proactively manage their social and environmental impact, avoiding the
crises that befall those who cut ethical corners.
• Community goodwill and operating licenses are preserved particularly
important in tourism, where businesses depend on the cooperation of local
governments and communities. Organizations with strong CSR track
records are more likely to receive permits, avoid protest, and gain
community support for expansion.

Ethics and CSR, in short, are not just the right thing to do, they are good
strategy.

Ethics and corporate social responsibility are not optional extras in the
tourism and hospitality industry, they are foundational to long-term strategic
success. In an industry built on the appeal of places, the warmth of people, and
the trust of guests, organizations that behave with integrity and act responsibly

33
toward their employees, communities, and the environment do not merely survive,
they thrive.

The boutique hotel chain's story demonstrates this clearly. Its competitive
advantage was not built on the biggest budget or the most locations. It was built
on the authenticity of its values, the consistency of its ethical practices, and the
genuine social and environmental contributions it made to the places it called
home. This is the power of ethics and CSR when they are integrated into the heart
of strategic management: they transform a business from a mere profit-seeking
entity into a purposeful organization that creates value for everyone it touches.

The lesson is simple but important: the most successful leaders in this
industry will not only be those who know how to manage operations and grow
revenue, they will be those who know how to lead with integrity, serve with
responsibility, and build organizations that make the world a better place, one
guest experience at a time.

D. Application

Identification Test (Write the word or term being described)

1. The moral principles and values that guide human behavior and help
individuals and organizations determine what is right and wrong in making
decisions.
2. The four-level framework that organizes a business's responsibilities into
economic, legal, ethical, and philanthropic levels.
3. The highest level of Carroll's Pyramid where businesses voluntarily
contribute resources such as donations, scholarships, and community
development programs to society.
4. The deceptive practice of falsely claiming environmental responsibility
without genuinely implementing sustainable practices.
5. A global standard and initiative specifically designed to protect children from
exploitation in travel and tourism.

34
Essay Questions

1. Explain the four levels of Carroll's Pyramid of CSR and give one practical
example from the tourism or hospitality industry for each level.
2. How are ethics and CSR integrated into the strategic management
process? Using the boutique hotel chain as an example, explain how
ethical values shaped its vision, strategy, and day-to-day operations.
3. Do you believe that ethics and CSR are good business strategy, or are
they simply moral obligations that reduce profit? Support your answer using
at least two specific examples from the lesson.

References

1. Evans, N. G. (2024). Strategic Management for Tourism, Hospitality and

Events (4th ed.). Routledge.
2. Okumus, F., Altinay, L., Chathoth, P., & Koseoglu, M. A. (2022). Strategic
Management for Hospitality and Tourism (2nd ed.). Routledge.
3. Sabourin, V. (2022). Strategic Management for the Hospitality and Tourism
Industry: Developing a Competitive Advantage. Apple Academic Press.
4. Enz, C. A. (2023). Hospitality Strategic Management: Concepts and Cases
(3rd ed.). Wiley.
5. Raga, J. (2022). Strategic Management for Hospitality & Tourism Sector.
Society Publishing.
6. Marcelo, J. S., Muller, J. A., & D. (2026). Strategic Management in Tourism
and Hospitality Management.
7. Cruz, R. G. (2022 updated). Principles of Tourism: A Philippine Perspective
(Revised ed.). Rex Bookstore.

35
 Chapter 2

Environmental Analysis

Introduction

Environmental analysis is a critical component of strategic management in

the tourism and hospitality industry. It involves systematically examining internal
and external factors that influence an organization’s performance and ability to
achieve competitive advantage. This chapter defines key terms first, then
explores how hospitality and tourism organizations build and sustain competitive
advantage, followed by detailed analysis of the macro and micro environments.
Real-world situational examples from hotels, resorts, and tour operators illustrate
how effective environmental analysis supports better decision-making in a volatile,
seasonal, and competitive industry.

Learning Outcomes By the end of this chapter, students will be able to:

• Define and explain key concepts in environmental analysis.

• Analyze how hospitality and tourism organizations achieve and sustain
competitive advantage.
• Conduct macro-environment (PESTEL) and micro-environment (Porter’s
Five Forces) analyses.
• Apply SWOT and value chain tools to real hospitality scenarios.
• Discuss the role of environmental analysis in strategic decision-making.
• Evaluate the impact of external forces on tourism and hospitality
performance.
Lesson I: Hospitality and Tourism Organizations Competitive Advantage

A. Activity

Students select a hospitality organization (e.g., a local resort or international

chain) and identify its sources of competitive advantage using publicly available
information or a case study.

B. Analysis

Competitive advantage in hospitality and tourism comes from unique

resources, superior service, cost leadership, differentiation, or niche focus. It is
sustained through continuous environmental analysis, innovation, and adaptation
to guest expectations in a highly competitive, experience-driven industry.

C. Abstraction

Competitive advantage is what makes one hotel, resort, or tour company

stand out and perform better than others. It can come from lower costs, unique
experiences, better locations, stronger brands, or superior service. Organizations
achieve and sustain it by carefully analyzing their environment and using their
strengths effectively.

Consider a boutique eco-resort in Costa Rica competing with large

international chains. Through environmental analysis, the owners identified their
competitive advantage in authentic rainforest experiences, personalized service,
and strong sustainability credentials. They invested in local community
partnerships, trained staff as expert naturalist guides, and used technology for
personalized guest apps while keeping operations low-impact. This differentiation
attracted eco-conscious travelers willing to pay premium rates, even during
economic downturns or low seasons. Guests return because of the genuine
connection to nature and community, not just luxury amenities. The resort
maintains its edge by continuously monitoring guest feedback and environmental

37
trends. Students can relate this to how some restaurants in their city become more
popular through unique menus or exceptional service rather than just low prices.

Imagine two hotels standing side by side on the same beach, charging
similar prices, offering similar amenities pools, restaurants, air-conditioned rooms,
and free Wi-Fi. Why would a traveler consistently choose one over the other? Why
would guests return to one, recommend one to their friends, and write glowing
reviews about one while the other struggles to fill its rooms?

The answer lies in competitive advantage.

In the tourism and hospitality industry, where choices are abundant and
travelers are discerning, competitive advantage is the difference between a
business that merely exists and one that genuinely thrives. It is the specific quality,
capability, or combination of factors that makes one organization more attractive,
more effective, or more valuable than its rivals in the eyes of its target customers.

Strategic management, at its core, is largely the pursuit of competitive

advantage understanding what makes an organization unique, building on those
strengths, and positioning itself in the market in a way that is both compelling to
customers and difficult for competitors to replicate. Environmental analysis — the
systematic study of the forces and conditions surrounding an organization — is the
critical first step in this pursuit. Before an organization can build competitive
advantage, it must first understand the environment in which that competition takes
place.

What is Competitive Advantage?

Competitive advantage is the condition that allows an organization to

outperform its rivals by delivering superior value to its customers in a way that is
sustainable over time. It is not simply about being different it is about being different
in ways that matter to customers and in ways that are difficult for competitors to
copy.

38
 A competitive advantage must satisfy three essential conditions to be
meaningful:

1. It must create value for the customer. If the thing that makes you different
does not matter to your target customer, it is not a competitive advantage, it is
merely a quirk. A hotel that boasts the world's largest collection of antique clocks
has something unique, but unless it is specifically marketing to antique clock
enthusiasts, that uniqueness creates no customer value and therefore no
competitive advantage.

2. It must be superior relative to competitors. It is not enough to be good at

something, you must be measurably better than your rivals at something your
customers care about. A restaurant with "good food" in a city full of restaurants
with good food has no competitive advantage. A restaurant with an award-winning
chef, a distinctive regional cuisine, and an unforgettable dining atmosphere in a
city where no other restaurant offers the same.

3. It must be sustainable. A competitive advantage that can be easily and quickly

copied by competitors is temporary at best. True competitive advantage endures
because it is rooted in capabilities, relationships, culture, or resources that take
time and effort to build and are therefore difficult for rivals to imitate.

In strategic management terms, the goal is not just to achieve competitive

advantage today, but to build and sustain it over time continuously renewing and
strengthening the organization's unique position as the competitive environment
evolves.

Environmental Analysis and Competitive Advantage

Before a tourism or hospitality organization can identify or build its

competitive advantage, it must conduct a thorough environmental analysis a
systematic examination of the forces and conditions, both inside and outside the
organization, that affect its ability to compete successfully.

39
 Environmental analysis is the foundation of the strategic management
process. It is impossible to chart a winning course without first understanding the
terrain. In hospitality and tourism, this terrain is shaped by a complex combination
of market forces, customer trends, competitor behavior, regulatory requirements,
technological change, and natural and cultural conditions.

Environmental analysis is typically divided into two dimensions:

• External Environment Analysis — The forces outside the organization

that create opportunities and threats. This includes the macro-environment
(economic conditions, political and regulatory factors, social and cultural
trends, technological developments, environmental factors) and the
competitive environment (industry rivalry, new entrants, substitute products,
buyer power, and supplier power).
• Internal Environment Analysis — The forces within the organization its
resources, capabilities, culture, processes, and performance that represent
strengths to be leveraged or weaknesses to be addressed.

The connection between environmental analysis and competitive

advantage is direct: by understanding the external environment, an organization
identifies where opportunities exist and where threats must be managed. By
understanding the internal environment, it identifies the unique strengths it can
deploy to seize those opportunities. Competitive advantage is built at the
intersection of these two where the organization's distinctive strengths align with
genuine market opportunities that competitors are not fully serving.

Sources of Competitive Advantage in Hospitality and Tourism

Competitive advantage in the tourism and hospitality industry can arise from
many different sources. Understanding these sources helps leaders identify where
their organization's unique strengths lie and how to develop them strategically.

40
1. Location Advantage

In hospitality and tourism, location is often the most powerful and most
defensible competitive advantage available. A hotel on the rim of the Chocolate
Hills in Bohol, a resort with direct beachfront access on a pristine stretch of
Palawan, or a restaurant with a panoramic rooftop view of a city's skyline. These
location advantages are essentially impossible for competitors to replicate. No
competitor can move a mountain, recreate a coastline, or rebuild a rooftop view.

However, location advantage alone is rarely sufficient in today's market. An

exceptional location can attract a first visit but only exceptional service, experience,
and value will earn a return visit and a recommendation.

Example: El Nido Resorts in Palawan leverages its extraordinary location

limestone karst cliffs, crystal-clear lagoons, and rich marine biodiversity as the
foundation of its competitive advantage. But it builds on this foundation with
carefully managed visitor capacity limits, nature-guide expertise, and eco-resort
operational standards that transform a beautiful location into an irreplaceable
experience. Competitors cannot replicate the lagoons, but El Nido's competitive
advantage is also protected by the operational depth that has been layered on top
of the location.

2. Service Quality and the Guest Experience

In an industry where the product is fundamentally a human experience not

a physical object the quality of service is one of the most powerful sources of
competitive advantage. Organizations that consistently deliver service that
exceeds guest expectations build a competitive advantage that is deeply
emotional: guests who feel genuinely cared for, recognized, and valued become
loyal advocates who return repeatedly and recommend enthusiastically.

Service quality as a competitive advantage is built through the recruitment,

training, and empowerment of people and therefore requires sustained investment

41
in human capital. It is also built through service design the thoughtful engineering
of every guest touchpoint to create a seamless, memorable, and emotionally
resonant experience.

Example: The Ritz-Carlton Hotel Company has built a globally recognized

competitive advantage almost entirely on the foundation of exceptional service. Its
famous "Gold Standards" a set of service values, a credo, and a commitment that
every employee is empowered to spend up to $2,000 per guest per day to resolve
a problem or create a memorable moment without management approval
represent a deeply embedded service culture that rivals have consistently failed to
replicate despite trying. The Ritz-Carlton's competitive advantage is not its
buildings or its amenities it is the human commitment to legendary service that
runs through every level of the organization.

3. Brand Reputation and Trust

A strong, well-recognized brand is a significant competitive advantage in

tourism and hospitality because it reduces the perceived risk of a booking decision.
When a traveler is choosing between a recognized brand and an unknown property
especially for a high-value vacation or an important business trip the brand they
trust will almost always win, even if the unknown property offers a slightly lower
price or a slightly better amenity set.

Brand reputation is built over time through consistent delivery of promises

not through advertising alone. It is the accumulated result of thousands of positive
guest experiences, responsively handled complaints, and an organizational culture
that lives its stated values authentically.

Example: In the budget accommodation segment, RedDoorz, a technology-

enabled budget hotel network that operates across Southeast Asia, including the
Philippines built its competitive advantage through brand standardization. By
guaranteeing a consistent set of quality standards (clean rooms, reliable Wi-Fi,
secure facilities) across hundreds of independently owned partner properties,

42
RedDoorz gave budget travelers the confidence of knowing exactly what they
would get reducing the uncertainty that plagues independent budget hotel
bookings. This brand trust became the core competitive advantage that fueled
rapid expansion.

4. Innovation and Technology

Organizations that adopt and leverage technology more effectively than

their competitors can build significant competitive advantage through superior
operational efficiency, enhanced guest experience, richer data insights, and faster
responsiveness to market changes.

In today's hospitality landscape, technology-driven competitive advantage

manifests in areas such as dynamic pricing systems that optimize revenue, mobile
check-in and digital room key applications that reduce wait times, data analytics
platforms that enable hyper-personalized marketing, and artificial intelligence tools
that power chatbot concierge services available 24 hours a day.

Example: Marriott International's competitive advantage in technology is anchored

by its Bonvoy loyalty platform one of the largest and most sophisticated in the
hospitality industry. The platform collects rich data on member preferences and
behaviors, enabling Marriott to deliver personalized offers, room upgrades, and
experience recommendations at scale. When a Bonvoy member books a stay,
Marriott already knows their preferred room temperature, their typical check-in
time, whether they prefer a high floor, and how they like their welcome amenity.
This data-powered personalization creates a loyalty loop that is extremely difficult
for independent properties or smaller chains to replicate.

5. Cost Efficiency and Value Leadership

While premium brands compete on experience and quality, many

successful tourism and hospitality organizations build their competitive advantage
on the ability to deliver acceptable quality at significantly lower prices than

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competitors. This cost leadership strategy requires deep operational discipline
streamlining processes, eliminating waste, leveraging economies of scale, and
making targeted technology investments that reduce per-unit costs without
compromising the guest experience.

Cost efficiency as a competitive advantage is particularly powerful in price-

sensitive market segments budget travelers, economy business travelers, and
domestic leisure travelers who prioritize value over luxury.

Example: Tune Hotels (now operating under various brands) built its competitive
advantage in Southeast Asia's budget hotel segment by pioneering the "pay for
what you use" model charging low base rates and offering amenities like towels,
air conditioning, and breakfast as paid add-ons. This model dramatically reduced
costs relative to standard budget hotels while still delivering clean, modern, and
well-located accommodations. The result was a price point so competitive that it
attracted large volumes of price-sensitive travelers who previously could not afford
hotel accommodations a new market segment created by cost-driven innovation.

6. Unique Product Offerings and Specialization

Organizations that offer a product or experience that no competitor can or

does offer hold a powerful form of competitive advantage. In tourism and
hospitality, specialization developing deep expertise in a particular type of
experience, destination, or traveler segment enables organizations to command
premium pricing and attract highly loyal, self-selected customer groups who
specifically seek what only that organization can provide.

Example: Atmosphere Kanifushi in the Maldives competes in an extraordinarily

crowded luxury resort market but maintains a distinct competitive advantage
through its Platinum All-Inclusive Plan the most comprehensive all-inclusive
offering in the Maldives, covering not only meals and beverages but also water
sports, excursions, spa treatments, and even minibar replenishment. In a
destination where most resorts charge à la carte for every additional experience

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creating a culture of constant upselling Kanifushi's genuine all-inclusive model
eliminates anxiety and allows guests to fully relax and enjoy without watching a bill
accumulate. This specialized product design attracts a specific segment of luxury
travelers who actively seek this model, and no other Maldivian resort has
successfully replicated it at the same scale and comprehensiveness.

7. Sustainable Practices and Social Responsibility

As environmental consciousness grows among travelers particularly among

millennial and Gen Z travelers who are now the dominant booking demographic
sustainability credentials are rapidly becoming a genuine source of competitive
advantage rather than merely a marketing add-on.

Organizations that authentically embed sustainability into their operations

through energy efficiency, waste reduction, local community investment, wildlife
conservation, and environmental certification attract a growing segment of
travelers who actively seek, and are willing to pay a premium for, responsibly
operated tourism experiences.

Example: Misool Eco Resort in Raja Ampat, Indonesia, has built one of the most
powerful sustainability-based competitive advantages in Southeast Asian tourism.
Its competitive position is built on operating within a privately funded Marine
Protected Area (MPA) that the resort itself established and funds protecting over
1,200 square kilometers of one of the world's richest marine biodiversity zones.
Guests who stay at Misool are directly funding the patrol boats that protect the
MPA from illegal fishing. This is not a sustainability story that can be replicated by
any competitor it is a deeply embedded, irreversible organizational commitment
that creates enormous guest loyalty, international media attention, and a waiting
list of guests eager to participate in conservation tourism.

Porter's Generic Strategies: Frameworks for Competitive Advantage

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 Harvard Business School professor Michael Porter identified three
fundamental generic strategies that organizations can use to achieve competitive
advantage. These remain among the most widely applied frameworks in strategic
management and are particularly relevant in the tourism and hospitality industry.

Strategy 1: Cost Leadership

A cost leadership strategy seeks to achieve competitive advantage by

becoming the lowest-cost producer in the industry while maintaining acceptable
quality. The cost leader can either charge lower prices than competitors to attract
price-sensitive customers, or charge similar prices while enjoying higher profit
margins.

Cost leadership requires relentless operational efficiency, disciplined cost

control, economies of scale, and technology investment that reduces per-unit
costs. It works best in highly price-sensitive market segments where customers
make decisions primarily on price.

Tourism and Hospitality Example: AirAsia built one of the most successful cost
leadership strategies in the aviation industry by stripping out every non-essential
cost assigned seating, in-flight meals, airport lounges, ticket offices, printed tickets
and passing the savings to customers in the form of dramatically lower fares. By
making air travel affordable for millions of Southeast Asians who had previously
relied on buses and ferries, AirAsia did not just compete with existing airlines it
created an entirely new market. Its cost leadership competitive advantage is built
into the DNA of its operations: every process, every policy, and every technology
investment is evaluated against the question, "Does this make us more cost-
efficient?"

Strategy 2: Differentiation

A differentiation strategy seeks competitive advantage by offering

products or services that are perceived as unique, superior, or significantly more

46
valuable than those of competitors in ways that justify a price premium. The
differentiator does not aim to be the cheapest it aims to be the best at something
that a specific group of customers deeply values.

Differentiation can be built on product design, service quality, brand image,

technology, convenience, customization, sustainability credentials, or any other
dimension that creates meaningful value for the target customer. It requires a deep
understanding of what customers truly value and consistent delivery of that value
across every touchpoint.

Example: Aman Resorts has built a globally recognized differentiation

strategy in the ultra-luxury hospitality segment. Aman does not compete on
amenities it does not need a waterslide, a casino, or a celebrity chef restaurant. Its
differentiation is built on three things: extraordinary locations (often remote, off-
the-beaten-path, and inaccessible to mass tourism), intimate scale (most Aman
properties have fewer than 50 suites), and an almost fanatical commitment to
privacy and personalized service. The result is a guest loyalty so intense that Aman
fans call themselves "Amanjunkies" travelers who plan their entire travel calendar
around visiting Aman properties across the world. This level of brand devotion is
the ultimate expression of a differentiation strategy executed to perfection.

Strategy 3: Focus (Niche Strategy)

A focus strategy seeks competitive advantage by concentrating on a

specific, narrow market segment a particular type of traveler, a specific geographic
area, a specialized activity, or a defined price band and serving that segment better
than any competitor that tries to serve the broader market.

The focus strategy can be further divided into cost focus (serving a niche
at the lowest cost) and differentiation focus (serving a niche with a uniquely
differentiated offer). In tourism and hospitality, focus strategies are particularly
effective because traveler preferences are highly diverse. There are niche
segments for adventure travelers, wellness seekers, culinary tourists, heritage

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enthusiasts, LGBTQ+ travelers, solo female travelers, religious pilgrims, and
countless others and organizations that deeply understand and serve one of these
niches can build fierce loyalty.

Example: The Firefly Experience (a fictional but representative example) is a

boutique tour operator in the Bicol region of the Philippines that has built its entire
business around a single niche: cultural food tourism. It offers immersive multi-
day experiences where guests cook alongside Bicolano home cooks, visit wet
markets at dawn with local chefs, trace the agricultural history of the region's most
iconic ingredients (coconut, chili, and taro), and eat in private homes rather than
restaurants. By focusing intensely on this niche culinary curious travelers who want
depth, not a food tour that visits three restaurants. The Firefly Experience has built
a waiting list, a community of returning guests, and a reputation that no general
tour operator in the region can match, despite their greater size and resources.

Porter's Five Forces: Understanding the Competitive Environment

Understanding competitive advantage requires understanding the

competitive environment in which that advantage must be built and defended.
Michael Porter's Five Forces Framework is one of the most powerful tools in
strategic management for analyzing the competitive structure of an industry. It
identifies five forces that collectively determine how attractive an industry is and
how much competitive pressure an organization faces.

Force 1: Rivalry Among Existing Competitors

This refers to the intensity of competition among organizations already

operating in the industry. High rivalry many competitors, slow industry growth,
undifferentiated products, and high fixed costs makes it harder to achieve and
sustain competitive advantage because rivals are constantly fighting for the same
customers.

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Example: The mid-range hotel segment in Metro Manila is characterized by intense
rivalry dozens of similarly positioned properties compete for the same corporate
and leisure travelers, leading to price wars, heavy promotional spending, and thin
margins. For hotels in this segment, strategic management must focus on
identifying the specific differentiation that protects them from being drawn into a
race to the bottom on price.

Force 2: Threat of New Entrants

This refers to how easily new competitors can enter the industry. When
barriers to entry are low, low capital requirements, no licensing hurdles, and easy
access to distribution channels the threat of new entrants is high, and established
players must work harder to protect their competitive position.

Example: The rise of Airbnb dramatically lowered the barriers to entry in the
accommodation sector. Suddenly, anyone with a spare room or an apartment
could compete with hotels for leisure travelers. This new entrant threat
fundamentally disrupted the hospitality industry's competitive dynamics and forced
hotels to rethink their value proposition why would a traveler book a hotel room
when they could book an entire apartment at the same or lower price?

Force 3: Threat of Substitute Products or Services

Substitutes are products or services from outside the industry that fulfill the
same need. A high threat of substitutes limits an organization's ability to charge
premium prices because customers can always switch to the alternative.

Example: Video conferencing technology (Zoom, Microsoft Teams) has become a

powerful substitute for business travel fulfilling the need for face-to-face business
communication without the cost and time of travel. The COVID-19 pandemic
accelerated the adoption of virtual meetings to such an extent that many
businesses discovered they could maintain productivity without the volume of
business travel they previously relied on. This substitute threat has permanently

49
altered the business travel segment and forced airlines, hotels, and convention
centers to rethink their strategies.

Force 4: Bargaining Power of Buyers

When buyers have high bargaining power because there are many
alternatives, switching costs are low, or buyers are large and concentrated, they
can demand lower prices or higher quality, reducing the profitability of sellers.

Example: Online travel agencies (OTAs) like [Link] and Agoda have
dramatically increased the bargaining power of individual travelers. Before OTAs,
a traveler had to call hotels directly or use a travel agent with limited ability to
compare prices across properties. Today, a traveler can compare prices, read
thousands of reviews, and book instantly across hundreds of properties in
seconds. This transparency gives travelers enormous power, and hotels that rely
heavily on OTAs for bookings often find their margins eroded by OTA commissions
of 15–25%.

Force 5: Bargaining Power of Suppliers

When suppliers have high bargaining power because there are few
alternatives, their product is critical, or switching suppliers is costly, they can
demand higher prices or impose unfavorable terms, reducing the profitability of
their buyers.

Example: Airlines face significant supplier power from aircraft manufacturers

(essentially a duopoly of Boeing and Airbus), jet fuel suppliers (subject to global
commodity market dynamics), and airport authorities (often monopolies at specific
locations). For hotels, key suppliers include food and beverage distributors, linen
and amenity suppliers, and technology platform providers. Understanding supplier
power helps hospitality organizations develop sourcing strategies such as local
procurement, multi-supplier diversification, or vertical integration that reduce
dependence on powerful suppliers.

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Building and Sustaining Competitive Advantage: A Strategic Management
Perspective

Understanding sources of competitive advantage and the competitive

forces at work in the environment is only the beginning. The more important
challenge and the central challenge of strategic management in tourism and
hospitality is building and sustaining competitive advantage over time.

Competitive advantage erodes. Competitors copy successful strategies.

Customer preferences change. New technologies disrupt established business
models. A hotel that was the best in its city ten years ago may find itself average
today if it has not continuously reinvested in its competitive position.

Sustaining competitive advantage requires organizations to do four things

consistently:

1. Continuously Invest in Capabilities

The capabilities that create competitive advantage service culture,

technological systems, supplier relationships, local knowledge, brand equity must
be continuously developed and strengthened. Organizations that stop investing in
their capabilities find that their competitive advantage gradually erodes as rivals
catch up.

Example: A boutique hotel that built its competitive advantage on outstanding

personalized service must continuously invest in staff training, service design
refinement, and guest experience innovation because a service culture is
maintained through active leadership and investment, not preserved by inertia.

2. Protect What Cannot Be Copied

The most durable sources of competitive advantage are those that are
hardest to replicate location, culture, community relationships, proprietary data,

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and deeply embedded organizational practices. Organizations should identify
these irreplicable advantages and build their strategy around them.

For instance, A tour operator whose competitive advantage rests on a

twenty-year relationship with indigenous community guides in a remote destination
has built a form of competitive advantage that no newcomer can replicate in a year
or even five years. That relationship is the most important asset in the business
and should be recognized, protected, and celebrated as such.

3. Innovate Ahead of the Market

Organizations that wait for market changes to force adaptation are always
playing catch-up. Those that anticipate changes in traveler preferences,
technology, regulation, and competitive dynamics and innovate proactively can
extend their competitive advantage rather than merely defend it.

As an example, Hotels that began developing their own direct booking

mobile applications, loyalty programs, and digital concierge services before OTA
dominance peaked were able to build direct relationships with guests and reduce
OTA commission dependence before it became a crisis. Those that waited until
OTA power was entrenched found it far more difficult and costly to reclaim direct
booking share.

4. Align the Entire Organization Around the Strategy

Competitive advantage is not built by any single department, it is the product

of an entire organization working coherently toward a shared strategic direction.
Human resources, marketing, operations, finance, and technology must all
understand and actively contribute to the competitive strategy. When any one of
these functions works against or in isolation from the strategy, the competitive
advantage it was meant to support weakens.

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 For instance, A resort whose strategy is built on sustainability and local
community connection undermines its own competitive advantage if its
procurement team continues to buy imported food from multinational distributors
to save a few pesos per kilogram, while the marketing team is telling guests that
80% of food is sourced locally. The disconnect between strategy and execution
destroys the authenticity that was the competitive advantage in the first place.

Comprehensive Example: Huni Wellness Resort

To integrate all of the concepts discussed in this lesson, consider Huni

Wellness Resort — a fictional boutique wellness resort located in a mountainous
province in the Cordillera region of the Philippines.

The Philippine wellness tourism market is growing rapidly, fueled by urban

professionals seeking recovery from burnout, international travelers seeking
alternatives to Bali and Chiang Mai, and a post-pandemic wave of health-
conscious travel. However, competition is also intensifying new wellness resorts
are opening across the Philippines, and many are copying the surface features of
wellness tourism (yoga decks, healthy menus, meditation sessions) without
genuine depth.

Huni's Competitive Advantage: Huni's leadership team conducted a thorough

environmental analysis scanning the macro-environment, analyzing Porter's Five
Forces, and assessing the resort's internal capabilities. Their analysis revealed:

• Opportunity: A growing segment of high-income Filipino and international

travelers specifically seeking Indigenous healing traditions as opposed to
the generic "yoga and smoothie bowls" wellness format flooding the market.
• Threat: Multiple new wellness resorts opening within a two-hour radius, all
offering similar surface-level wellness programs.
• Internal Strength: The founding team's deep relationships with Cordilleran
indigenous healers, knowledge keepers, and farming communities

53
 relationships built over fifteen years of community development work in the
region before the resort was ever conceived.
• Internal Weakness: Limited brand recognition and a small marketing budget
relative to well-funded competitors.

Based on this analysis, Huni adopted a differentiation focus strategy

targeting high-value wellness travelers who specifically seek authentic indigenous
healing experiences, and differentiating through a product that is deeply, genuinely
rooted in Cordilleran healing traditions in a way that no competitor can replicate
without the same fifteen years of community relationships.

The Strategy in Practice:

• Huni offers multi-day Manaog Healing Programs immersive experiences

designed in collaboration with indigenous mambunong (spiritual healers)
that include traditional plant medicine treatments, community rituals, guided
forest immersion, and healing cuisine drawn entirely from traditional
Cordilleran ingredients.
• All staff are hired from within a 15-kilometer radius of the resort, trained in
both hospitality service standards and the cultural protocols of the healing
programs they support.
• 30% of all revenue is directed into a Cordilleran Cultural Preservation
Fund that supports indigenous language documentation, traditional textile
arts, and seed sovereignty programs for traditional crop varieties.
• Huni limits total guest capacity to 18 guests at any one time small enough
to allow genuine personalization, large enough to be financially sustainable.
• Marketing is almost entirely through earned media documentary features,
travel journalism, and word-of-mouth from an intensely loyal guest
community.

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The Competitive Advantage:

Huni's competitive advantage is essentially unassailable for any new

competitor because it rests on three things that cannot be bought or quickly built:
community trust, cultural knowledge, and fifteen years of authentic relationships
with indigenous healers who will not partner with any other resort. No competitor
entering the Philippine wellness tourism market tomorrow can replicate these
assets. Location can be bought, yoga decks can be built, healthy menus can be
designed but the Manaog Healing Program belongs exclusively to Huni, and that
exclusivity is the ultimate competitive advantage.

Competitive advantage is the central purpose of strategic management in

the tourism and hospitality industry. It is the answer to the question that every
guest, consciously or unconsciously, asks before every booking decision: Why
should I choose you?

Competitive advantage in hospitality and tourism can arise from many

sources location, service quality, brand reputation, innovation, cost efficiency,
specialization, and sustainability. It can be pursued through cost leadership,
differentiation, or focus strategies. It must be understood within the context of the
competitive environment, the Five Forces that shape the intensity and nature of
competition in every hospitality and tourism market.

Most importantly, competitive advantage is not a destination it is a

discipline. It must be built deliberately through strategic management, protected
through continuous investment in the capabilities that make it possible, and
renewed through innovation as the competitive environment evolves.

The most successful hospitality and tourism organizations in the world from
Aman Resorts to AirAsia, from El Nido Resorts to Marriott Bonvoy share one thing
in common: they have made a clear, deliberate strategic choice about who they
are, who they serve, and why they are the best choice for that customer and they

55
have organized every dimension of their business to deliver on that choice,
consistently, every single day.

That is what competitive advantage looks like in practice. And that is why it
remains the most important concept in the strategic management of hospitality and
tourism organizations.

D. Application

Multiple Choice (Write the letter of the correct answer)

1. What is the primary reason a traveler would consistently choose one hotel
over another with similar amenities and prices?

 a. Lower room rates

 b. Competitive advantage
 c. Bigger swimming pool
 d. More staff members

2. Which of Porter's Generic Strategies focuses on becoming the lowest-cost

producer while maintaining acceptable quality?

 a. Differentiation
 b. Focus Strategy
 c. Niche Strategy
 d. Cost Leadership

3. El Nido Resorts in Palawan is a strong example of which source of competitive

advantage?

 a. Brand Reputation
 b. Cost Efficiency
 c. Location Advantage
 d. Innovation and Technology

4. Which of Porter's Five Forces refers to the intensity of competition among

organizations already operating in the same industry?

 a. Threat of New Entrants

 b. Bargaining Power of Buyers
 c. Threat of Substitute Products
 d. Rivalry Among Existing Competitors

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5. Marriott's Bonvoy loyalty platform is a prime example of competitive advantage
through which source?

 a. Sustainable Practices
 b. Innovation and Technology
 c. Cost Efficiency
 d. Location Advantage

Essay Questions

1. Explain the three essential conditions a competitive advantage must

satisfy to be meaningful. Give one practical example from the tourism or
hospitality industry for each condition.
2. Choose any three of Porter's Five Forces and explain how each one
affects a hotel or resort's ability to build and sustain competitive advantage.
Support your answer with examples from the lesson.
3. Using Huni Wellness Resort as your reference, explain how conducting
an environmental analysis helped the resort identify its competitive
advantage. Why is this advantage considered difficult for competitors to
replicate?

Lesson II: The Macro Environment for Tourism and Hospitality Organizations

A. Activity

Perform a PESTEL analysis for a tourism destination or hotel facing current

challenges (e.g., climate change, economic shifts, or technological disruption).

Apply Porter’s Five Forces and SWOT to analyze a specific hospitality

business (e.g., a city hotel or tour operator) and recommend strategic responses.

B. Analysis

The macro environment includes broad forces analyzed via PESTEL

(Political, Economic, Social, Technological, Environmental, Legal). These
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uncontrollable factors significantly affect demand, operations, and strategy in
tourism and hospitality, such as government policies, economic cycles, or climate
change.

The micro environment covers the immediate competitive landscape,

including customers, competitors, suppliers, and substitutes. Tools like Porter’s
Five Forces, SWOT, and Value Chain Analysis help identify opportunities and
threats within the industry.

C. Abstraction

The Macro and Micro Environment for Tourism and Hospitality Organizations

Every tourism and hospitality organization whether a five-star resort in

Palawan, a neighborhood café in Quezon City, a budget airline operating out of
Clark, or a travel agency in Makati does not operate in a vacuum. It exists within,
and is constantly shaped by, a complex web of forces and conditions that surround
it from every direction.

Some of these forces are enormous and far-reaching global economic

shifts, government policies, climate change, technological revolutions and affect
virtually every business in every industry. Others are closer to home the
competitors on the same street, the guests walking through the door, the suppliers
delivering ingredients every morning, the community living next to the resort.
Together, these forces form what strategic management calls the business
environment.

Understanding the business environment is not an academic exercise it is

one of the most practical and consequential tasks a hospitality or tourism leader
can perform. The environment is where threats are born and where opportunities
are waiting to be discovered. An organization that understands its environment can
anticipate change, position itself to seize opportunities, and build defenses against

58
threats before they become crises. An organization that ignores its environment is
always surprised, always reacting, and always catching up.

Environmental analysis the systematic study of the forces and conditions

surrounding an organization is the first and most fundamental step in the strategic
management process. Before you can decide where your organization is going
and how it will get there, you must first understand the world it is operating in.

In strategic management, the business environment is divided into two

distinct but interconnected layers:

• The Macro Environment — the broad, large-scale forces that affect all
organizations across all industries, which no single business can control but
every business must monitor and respond to.
• The Micro Environment — the more immediate, industry-specific forces
that directly affect the day-to-day operations and competitive performance
of a specific organization, some of which the organization can influence
through its strategic choices.

Together, these two layers form the complete picture of the environment
within which a tourism or hospitality organization must build and sustain its
competitive advantage.

The Macro Environment

The macro environment consists of the broad external forces that shape the
overall context in which all businesses operate. These forces are sometimes called
PESTEL factors an acronym that stands for Political, Economic, Social,
Technological, Environmental, and Legal forces. No single organization can
control these forces but every organization is affected by them, and the most
strategically sophisticated organizations monitor them continuously, adapt
proactively, and sometimes even find ways to turn macro-environmental
challenges into competitive opportunities.

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1. Political Factors

Political factors refer to the influence of government decisions, policies,

political stability, and international relations on the business environment. For the
tourism and hospitality industry, which is one of the most government-sensitive
industries in the world, political factors can be among the most significant drivers
of opportunity and risk.

Governments regulate tourism through visa policies, tourism promotion

budgets, infrastructure investment decisions, safety and health standards for
hospitality establishments, environmental zoning, and land use regulations.
Political stability or instability directly determines whether tourists feel safe visiting
a destination. International diplomatic relations shape visa reciprocity
arrangements that either open or restrict the flow of travelers between countries.

How it affects Tourism and Hospitality:

• Visa policies can dramatically increase or decrease inbound tourist

arrivals. When the Philippine government introduced visa-free or visa-on-
arrival arrangements for additional nationalities, inbound arrivals from those
countries increased almost immediately, benefiting hotels, airlines, tour
operators, and restaurants across the country.
• Tourism promotion funding when the government invests in a "Visit
Philippines" campaign or participates in international travel fairs, it
generates demand that benefits the entire industry, often at no direct cost
to individual businesses.
• Political instability and travel advisories from foreign governments such
as those issued during periods of civil unrest, terrorism threats, or armed
conflict can devastate tourism arrivals almost overnight, as international
travelers cancel bookings and avoid destinations flagged as unsafe.

Example: When Boracay was closed by the Philippine government for six
months in 2018 for environmental rehabilitation, businesses on the island hotels,

60
restaurants, dive shops, souvenir stores lost 100% of their revenue during the
closure period. This was a direct and immediate impact of a government political
decision on the entire tourism ecosystem of a destination. Hotels that had invested
in strong direct booking relationships and guest loyalty programs were better
positioned to manage the closure and rebuild quickly upon reopening
demonstrating how strategic management helps organizations weather politically
driven disruptions.

Politically aware organizations monitor legislative developments, engage

with tourism industry associations (like PHILTOA or TPTA) that advocate for
favorable policies, diversify their guest source markets so that no single country's
visa restrictions can cripple their bookings, and develop contingency plans for
political disruptions.

2. Economic Factors

Economic factors refer to the broader economic conditions that influence

consumer spending power, business costs, investment climate, and the overall
demand for tourism and hospitality services. The tourism and hospitality industry
is particularly sensitive to economic conditions because travel and leisure are, for
most people, discretionary expenditures among the first things cut when household
budgets are under pressure and among the first things restored when economic
conditions improve.

Key economic factors include GDP growth rates, inflation, exchange rates,
interest rates, employment levels, and income distribution. These factors affect
both the demand side (how much consumers can and will spend on travel) and the
supply side (how much it costs to operate a hospitality business).

How it affects Tourism and Hospitality:

• Exchange rates are critically important for international tourism. When the
Philippine peso weakens against the US dollar, the Philippines becomes

61
 relatively more affordable for American tourists stimulating inbound arrivals
but more expensive for Filipino outbound travelers. Hotels and resorts
targeting international guests benefit; travel agencies focused on outbound
tours face headwinds.
• Inflation raises the cost of food, energy, labor, and supplies for hospitality
operations, compressing profit margins. Hotels that locked in long-term
supplier contracts during periods of low inflation are protected; those
operating with fully variable cost structures bear the full brunt of inflationary
pressure.
• Economic recessions reduce discretionary spending on travel. During
economic downturns, luxury and mid-range properties typically see steep
declines in bookings, while budget accommodations and "staycation"
options sometimes see increased demand as travelers trade down rather
than stop traveling entirely.
• Rising middle-class income in emerging markets creates entirely new
tourist markets. The growth of the Chinese, Indian, and Southeast Asian
middle classes over the past two decades has transformed global tourism
demand patterns, creating enormous opportunities for destinations and
hospitality businesses positioned to serve these travelers.

Example: During the global financial crisis of 2008–2009, international tourist

arrivals declined significantly as consumers in key source markets the United
States, Europe, and Japan cut discretionary spending. Hotels that had diversified
their guest mix to include both international and domestic travelers, and both
corporate and leisure segments, were far more resilient than those dependent on
a single market segment. This economic shock taught the industry an enduring
strategic lesson: economic diversification across guest segments and source
markets is a fundamental risk management strategy.

Economically aware organizations track macroeconomic indicators, adjust

pricing strategies dynamically in response to exchange rate movements, diversify

62
their revenue streams across market segments, and maintain financial reserves to
withstand demand contractions during economic downturns.

3. Social and Cultural Factors

Social and cultural factors refer to the changing values, attitudes,

demographics, lifestyles, and cultural trends in the society that an organization
serves. These factors shape what travelers want from their experiences, how they
make booking decisions, what they eat, how they expect to be treated, and what
they consider acceptable behavior from the businesses they patronize.

In the tourism and hospitality industry, social and cultural factors are among
the most dynamic forces in the environment they shift continuously as generations
change, as global connectivity exposes people to new ideas, and as significant
events (like a pandemic) permanently alter attitudes and behaviors.

How it affects Tourism and Hospitality:

• Demographic shifts change the profile of the traveling public. The rise of
millennial and Gen Z travelers who prioritize experiences over possessions,
value authenticity and local culture over standardized luxury, and make
decisions based on social media content, online reviews, and peer
recommendations rather than traditional advertising has fundamentally
reshaped what hospitality and tourism products need to deliver.
• Health and wellness consciousness has driven explosive growth in
wellness tourism spa resorts, yoga retreats, health-focused dining, nature
immersion experiences, and mental health travel packages. Hotels and
resorts that recognized this trend early and adapted their offerings captured
a rapidly growing and high-value market segment.
• Solo travel, particularly among solo female travelers, has grown
significantly creating demand for safety-focused accommodations, solo-
friendly tour experiences, and community-oriented travel products like
group travel programs and social dining experiences.

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 • Cultural sensitivity has become increasingly important. Travelers from
different cultural backgrounds have different expectations around food,
privacy, gender interactions, religious observance, and communication
styles. Hotels and tour operators that invest in cultural competency among
their staff create service experiences that feel genuinely respectful and
welcoming to diverse guest populations.

Example: The rise of "purposeful travel" travel designed not just for leisure but
to contribute positively to a destination's community and environment is a social
trend that has created new market opportunities for community-based tourism
operators, eco-resorts, and volunteer travel programs. Organizations like Bohol
Bee Farm in the Philippines successfully positioned themselves to capture this
trend by combining a resort experience with organic farming, local community
employment, and environmental education appealing directly to socially conscious
travelers who want their travel choices to reflect their values.

Socially aware organizations track demographic trends, monitor social

media conversations about shifting traveler preferences, engage in ongoing guest
research to understand evolving needs, and design products and services that
authentically respond to the cultural values and lifestyle aspirations of their target
markets.

4. Technological Factors

Technological factors refer to the pace and direction of technological

change innovations and digital developments that create new possibilities for how
products are designed, delivered, marketed, and consumed. In the tourism and
hospitality industry, technology has been a more disruptive force over the past
twenty years than perhaps any other macro-environmental factor, reshaping
distribution channels, guest communication, operational efficiency, and the very
nature of the hospitality experience.

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 How it affects Tourism and Hospitality:

• Online Travel Agencies (OTAs) like [Link], Agoda, and Expedia

fundamentally shifted the balance of power between hotels and travelers by
creating price-transparent, easy-to-compare booking platforms. Hotels that
were slow to adapt found themselves increasingly dependent on OTAs
paying commissions of 15–25% of room revenue while losing direct
relationships with their guests.
• Social media and user-generated content transformed how travelers
research and choose destinations and properties. A single viral Instagram
post can put an obscure destination on the global tourism map overnight. A
series of negative TripAdvisor reviews can devastate a restaurant's
bookings within weeks. This radical transparency rewarded organizations
with genuine quality and punished those relying on marketing spin.
• Artificial intelligence and data analytics enable hospitality organizations
to personalize guest experiences at scale anticipating preferences,
optimizing pricing dynamically, and tailoring marketing messages to
individual behavioral profiles.
• Mobile technology has transformed every stage of the traveler journey
from research and booking through mobile apps, to real-time navigation and
translation during the trip, to digital check-in and room key access, to post-
trip review and rebooking. Properties that have invested in mobile-first guest
engagement have a measurable advantage in guest satisfaction and repeat
booking rates.
• Property management systems (PMS) and channel management
software allow hotels to manage room inventory, pricing, and distribution
across dozens of booking channels simultaneously a technical capability
that was impossibly complex and expensive twenty years ago and is now
essential for competitive operation.

Example: Airbnb's entry into the accommodation market was entirely a product of
technological enablement the platform used mobile technology, social trust

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mechanisms (reviews and verified profiles), digital payment systems, and a two-
sided marketplace algorithm to create a multi-billion-dollar business that did not
require owning a single room. Traditional hotels that dismissed Airbnb as a fringe
technology experiment in 2008 found themselves competing with millions of Airbnb
listings by 2015 a macro-environmental technological shift that permanently
altered the competitive landscape of global hospitality.

Technologically aware organizations invest continuously in digital

capabilities, build strong direct booking channels to reduce OTA dependence,
leverage data analytics for personalization and revenue optimization, and monitor
emerging technologies (virtual reality travel previews, blockchain-based loyalty
programs, AI-powered concierge services) for competitive applications.

5. Environmental (Ecological) Factors

Environmental factors refer to the natural environment and ecological

conditions that affect tourism and hospitality operations including climate change,
natural disasters, resource availability (water, energy, food), biodiversity, and
environmental regulations. For the tourism and hospitality industry, the natural
environment is not just a regulatory concern it is often the very product being sold.
Beaches, mountains, forests, coral reefs, wildlife, and scenic landscapes are the
raw material of tourism, and their degradation directly threatens the industry's most
fundamental asset.

How it affects Tourism and Hospitality:

• Climate change is altering travel patterns, threatening destinations, and

creating new operational challenges for hospitality businesses. Rising sea
levels threaten beachfront resorts. More frequent and more intense
typhoons disrupt tourism seasons and damage infrastructure. Coral reef
bleaching driven by rising ocean temperatures destroys the underwater
landscapes that draw divers and snorkelers to destinations like Tubbataha
Reef and Apo Island.

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 • Water scarcity is a critical operational challenge for hotels and resorts,
which are intensive consumers of water. Destinations facing freshwater
stress from Bali to Barcelona to the Maldives are increasingly regulating
hotel water consumption, and properties that fail to manage water efficiency
face both regulatory penalties and reputational damage among
environmentally conscious travelers.
• Natural disasters typhoons, earthquakes, volcanic eruptions are realities
of the Philippine tourism environment. Super Typhoon Yolanda (Haiyan) in
2013 devastated the tourism infrastructure of Eastern Visayas, destroying
hotels, resorts, and cultural heritage sites. Organizations with business
continuity plans, adequate insurance, and diversified operations were better
positioned to recover.
• Overtourism when visitor volumes exceed the ecological carrying capacity
of a destination degrades the very natural assets that attract tourists,
creating a self-defeating cycle that ultimately destroys the competitive
advantage of the destination.

Example: The temporary closure of Boracay in 2018 and of El Nido's most

crowded beaches in subsequent years for controlled rehabilitation are direct
responses to ecological deterioration driven by tourism development that had
outpaced environmental management capacity. Both closures were painful for
businesses in the short term but ultimately necessary to preserve the ecological
assets that make both destinations competitive globally. Organizations that had
already adopted sustainable operations before the closures were better positioned
to meet the new environmental standards required to reopen and received
favorable treatment from regulators compared to those that had ignored
environmental responsibility.

Ecologically aware organizations conduct environmental impact

assessments before development, implement energy and water efficiency
programs, seek environmental certifications (Green Globe, EarthCheck, ASEAN
Green Hotel Standard), monitor climate risk in their long-term planning, and

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actively support destination conservation as a strategic investment in their own
competitive future.

6. Legal Factors

Legal factors refer to the specific laws, regulations, and legal frameworks
that govern how tourism and hospitality businesses operate. These include labor
laws, consumer protection legislation, food safety regulations, zoning and land use
laws, intellectual property laws, data privacy regulations, and the full range of
industry-specific licensing and compliance requirements.

Legal factors differ from political factors in that politics is about government
intentions and policies broadly, while legal factors are specifically about the
enforceable rules and compliance obligations that directly constrain or shape
business operations.

How it affects Tourism and Hospitality:

• Labor laws governing minimum wage, overtime pay, employee benefits,

and working conditions significantly affect the cost structure and HR
practices of hospitality businesses one of the most labor-intensive
industries in any economy.
• Data privacy regulations such as the Philippines' Data Privacy Act of 2012
and Europe's General Data Protection Regulation (GDPR) — require
hotels, airlines, and travel companies to manage guest data with strict
safeguards, creating compliance obligations that affect everything from
booking systems to loyalty program management.
• Health and safety regulations particularly post-COVID health protocols,
food safety standards, fire safety requirements, and building codes
determine the operational standards that all hospitality establishments must
meet to remain licensed to operate.
• Intellectual property laws protect brand names, logos, marketing content,
and proprietary service concepts from unauthorized copying providing legal

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 protection for the brand assets that are often a hospitality organization's
most valuable competitive resource.
• Environmental compliance laws pollution standards, waste management
regulations, and protected area management rules impose legal obligations
on resorts and hotels in ecologically sensitive areas, with significant
penalties for violations.

Example: The implementation of the Philippine Data Privacy Act required all
hotels, travel agencies, and tour operators that collect, store, and use guest
personal data to register their data processing systems with the National Privacy
Commission, appoint a Data Protection Officer, and implement specific data
security protocols. Hotels that had invested in modern, cloud-based property
management systems with built-in data security features were compliant
immediately; those operating on outdated systems faced significant investment
requirements to achieve compliance — a legal factor with direct operational and
financial consequences.

Legally aware organizations work with legal counsel to maintain compliance

awareness, build regulatory compliance into operational processes rather than
treating it as an afterthought, engage with industry associations to participate in
shaping favorable regulatory frameworks, and monitor legal developments in key
source markets (particularly regarding data privacy and consumer protection) that
affect how they manage guest relationships.

The Micro Environment

While the macro environment represents the broad forces that affect all
organizations across all industries, the micro environment consists of the more
immediate forces that directly and specifically shape the competitive performance
and operational realities of a particular organization and the industry it operates in.
These forces are closer to the organization, more specific to its particular

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competitive context, and unlike macro-environmental forces can sometimes be
influenced through the organization's own strategic choices.

The micro environment of a tourism or hospitality organization typically

consists of six key elements: customers, competitors, suppliers,
intermediaries, employees, and the local community.

1. Customers (Guests)

Customers or guests, as they are more commonly called in hospitality are

the most important element of the micro environment. They are the reason the
organization exists. Understanding who your customers are, what they need and
value, how they make decisions, what influences their loyalty, and how their
expectations are evolving is the most critical intelligence any hospitality or tourism
organization can possess.

In tourism and hospitality, guests are not a homogeneous group they

encompass diverse segments: leisure travelers and business travelers, domestic
and international tourists, budget-conscious backpackers and ultra-high-net-worth
luxury travelers, solo adventurers and family vacationers, wellness seekers and
culinary tourists, and countless other profiles. Each segment has distinct needs,
expectations, price sensitivities, and decision-making processes.

Understanding customer segments allows organizations to design tailored

products and services, target marketing communications precisely, develop
appropriate pricing strategies, and allocate resources to the service dimensions
that matter most to the specific guests they serve.

Example: A business hotel in Makati's central business district serves two primary
guest segments: corporate travelers on weekday business visits, and leisure
"staycation" guests over weekends. These segments have entirely different needs
corporate travelers prioritize reliable Wi-Fi, express check-in, early breakfast
service, and proximity to business addresses; staycation guests prioritize pool

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access, food and beverage experiences, and recreational activities. Strategic
management of the micro environment requires the hotel to design service
offerings, staffing models, and promotional strategies that effectively serve both
segments without compromising the experience of either.

2. Competitors

Competitors are the other organizations offering products or services that

target the same customers and fulfill the same or similar needs. In the tourism and
hospitality industry, competition is multi-layered organizations compete not only
with direct rivals offering similar products (hotel vs. hotel, airline vs. airline) but also
with indirect competitors offering substitute experiences, and with emerging
competitors enabled by new business models and technologies.

Understanding the competitive landscape who the competitors are, what

their strengths and weaknesses are, how they are positioning themselves, what
strategies they are pursuing, and where gaps or vulnerabilities exist is essential
for building and maintaining competitive advantage.

Three Types of Competition in Hospitality and Tourism:

• Direct competition: Hotels competing against other hotels in the same

category and location; airlines competing on the same routes; tour
operators offering similar itineraries to the same destinations.
• Indirect competition: Hotels competing with Airbnb listings for the same
leisure traveler; travel agencies competing with DIY online booking for the
same customer; resorts competing with "staycation at home" for a traveler's
discretionary leisure budget.
• Future competition: New entrants, emerging business models, and
disruptive technologies that do not yet exist as competitors but may become
significant competitive threats in the near future.

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Example: A mid-range hotel in Cebu City faces direct competition from other mid-
range hotels in the same area, indirect competition from Airbnb apartments offering
more space at comparable prices, and future competitive pressure from capsule
hotel concepts entering the Philippine market that offer ultra-budget
accommodation with stylish design — a product that was previously unavailable
and may attract guests who would previously have chosen a mid-range hotel over
a cheap but unpleasant budget option.

Competitor-aware organizations conduct regular competitive intelligence

reviews monitoring rivals' pricing, promotions, product innovations, and market
positioning and use this intelligence to inform strategic decisions about
differentiation, pricing, and market positioning.

3. Suppliers

Suppliers provide the inputs — goods, services, and resources — that a

hospitality or tourism organization needs to create and deliver its product. For a
hotel, key suppliers include food and beverage vendors, linen and amenity
suppliers, technology systems providers, maintenance contractors, and utility
providers. For a tour operator, key suppliers include accommodation partners,
transport providers, guide services, and activity operators. For an airline, key
suppliers include aircraft manufacturers, fuel companies, airport authorities, and
catering services.

The quality, reliability, pricing, and terms offered by suppliers directly affect
the quality, cost, and consistency of what the organization can deliver to its guests.
Supplier relationships are therefore a critical element of the micro environment —
and a potential source of both competitive advantage and operational vulnerability.

Organizations that build strong, reliable supplier relationships particularly

with unique local suppliers that competitors cannot access create a form of
competitive advantage embedded in their supply chain. Organizations that are

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over-dependent on a single supplier for a critical input are exposed to significant
operational risk.

Example: A farm-to-table restaurant at an eco-resort in Benguet builds its entire

culinary concept around sourcing directly from small-scale organic farmers in the
Cordillera highlands. These supplier relationships built over years, based on fair
pricing, mutual trust, and shared commitment to organic farming practices give the
restaurant access to heirloom vegetables, heritage breed meats, and indigenous
herbs that no competitor can easily source. The supplier relationships are
themselves a competitive advantage. At the same time, the restaurant's
dependence on small-scale suppliers makes it vulnerable to supply disruptions
during bad harvests or extreme weather a risk it manages by maintaining
relationships with multiple farmers across different elevations and microclimates.

4. Intermediaries (Distribution Channels)

Intermediaries are the businesses and platforms that connect a hospitality

or tourism organization with its customers the channels through which a product is
made available and sold. In tourism and hospitality, intermediaries include travel
agencies (both traditional and online), tour operators, online travel agencies
(OTAs) like [Link] and Agoda, global distribution systems (GDS), corporate
travel management companies, and destination marketing organizations.

Intermediaries play a critical role in the micro environment because they

control access to large volumes of potential customers but they also take a share
of revenue in the form of commissions, and they create a layer between the
organization and its guests that can limit direct relationship development.

Managing the distribution channel mix the combination of direct and indirect
channels through which a product is sold is one of the most important strategic
decisions in hospitality and tourism management. Organizations that rely too
heavily on any single intermediary, particularly OTAs, become vulnerable to

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commission cost increases and algorithm changes that can dramatically affect
their booking volumes and profitability.

Example: A boutique resort in Siargao initially listed exclusively on Airbnb and

[Link], which generated strong booking volumes but at a combined
commission cost of 18–22% of revenue. Strategic management of the intermediary
relationship led the resort to invest in a direct booking website with a best-rate
guarantee, an Instagram content strategy that drove traffic to the direct site, and a
post-stay email program that encouraged returning guests to book directly. Within
two years, direct bookings grew from 10% to 45% of total revenue significantly
improving profitability without reducing occupancy.

5. Employees (Human Resources)

In the tourism and hospitality industry, the product is a human experience

and the people who deliver that experience are, in a very real sense, the product
itself. Employees from frontline service staff to back-of-house operations teams to
management are a critical element of the micro environment because their
knowledge, skill, attitude, and commitment directly determine the quality of what
the organization delivers to its guests.

The hospitality industry is notoriously challenged by high employee turnover

driven by physically demanding work, irregular hours, seasonality, and wage levels
that often lag behind other service industries. Organizations that successfully
attract, develop, and retain talented employees build a human capital advantage
that is one of the most durable and defensible forms of competitive advantage
available because a service culture built by great people is extraordinarily difficult
for competitors to replicate.

Human resource management is a strategic function in hospitality and

tourism. Decisions about hiring criteria, training investment, compensation
philosophy, career development, work culture, and employee wellbeing are not just

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HR administrative matters they are strategic decisions that directly determine
whether the organization can deliver on its competitive promise.

To illustrate, The Peninsula Hotels group is globally recognized for the

extraordinary quality of its service staff a competitive advantage built through
selective hiring (the Manila Peninsula reportedly receives thousands of
applications for every frontline opening), intensive training programs (new
employees undergo months of structured training before serving guests
independently), and one of the most comprehensive employee benefit and career
development programs in the Philippine hospitality industry. The result is a staff
retention rate significantly above the industry average and a level of service
consistency that defines the Peninsula's competitive position in the luxury
segment.

6. Local Community

The local community the people, organizations, institutions, and

environment of the place where a tourism or hospitality business operates is an
increasingly recognized and strategically important element of the micro
environment. In tourism particularly, the local community is not merely a backdrop
it is often the very content of the tourism experience: the culture, the cuisine, the
crafts, the natural environment, and the human warmth that travelers come to
experience.

When a tourism or hospitality organization operates in a way that benefits

the local community through employment, local procurement, cultural
preservation, and environmental stewardship it builds goodwill, social license, and
authentic local content that enrich the guest experience. When it operates in ways
that displace, exploit, or damage the local community, it generates opposition,
erodes the authenticity of the destination, and ultimately undermines its own long-
term viability.

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 Community relations are a strategic asset in tourism and hospitality.
Organizations that invest in community partnerships not only fulfill their social
responsibility — they create unique, locally embedded product offerings that no
competitor without the same community relationships can replicate.

To illustrate, Atmosphere Resort & Spa in Dumaguete, Negros Oriental,

has built community partnership into its operational DNA hiring exclusively from
surrounding villages, sourcing food from local farmers and fishermen, funding a
marine conservation program that employs local community members as reef
monitors, and providing regular free dive safety training to local fishing
communities. These community investments have created an extraordinarily loyal
local workforce, a supply chain rooted in the local economy, and a marine
environment healthy enough to support the world-class diving that is the resort's
primary competitive draw. The community is not a CSR footnote it is the foundation
of the competitive advantage.

D. Application

True or False (Write TRUE if the statement is correct, FALSE if it is incorrect)

1. The macro environment consists of broad external forces such as political,

economic, social, technological, environmental, and legal factors that no
single organization can control.
2. Online Travel Agencies (OTAs) like [Link] and Agoda reduced the
bargaining power of travelers by limiting their ability to compare hotel
prices online.
3. The closure of Boracay in 2018 is an example of how political factors can
directly and immediately affect the entire tourism ecosystem of a
destination.
4. Employees are considered part of the macro environment because their
performance broadly affects all industries equally.
5. A farm-to-table restaurant that sources directly from local organic farmers
can turn its supplier relationships into a form of competitive advantage.

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Essay Questions

1. Choose any three PESTEL factors and explain how each one creates
either an opportunity or a threat for a specific tourism or hospitality business
in the Philippines. Support your answer with examples from the lesson.
2. Among the six elements of the micro environment: customers,
competitors, suppliers, intermediaries, employees, and local community
which do you think has the greatest impact on a hotel or resort's success?
Explain your answer using at least one example from the lesson.
3. The lesson states that "the environment is where threats are born and
where opportunities are waiting to be discovered." Do you agree with
this statement? Using both the macro and micro environment concepts
discussed in the lesson, explain how a tourism or hospitality organization
can turn environmental challenges into strategic advantages.

Lesson III: The Relationship between Macro and Micro Environment for
Tourism and Hospitality Organizations

A. Activity

Using the a hospitality business in your area, create a simple two-column

table listing at least four macro-environmental (PESTEL) factors on the left
column and their direct impact on a specific micro-environment element
(customers, competitors, suppliers, intermediaries, employees, or community) on
the right column. After completing the table, write 3–5 sentences explaining what
strategic actions your chosen business should take based on the connections you
identified.

B. Analysis

Analyze how the macro environment (PESTEL factors) and the micro
environment (customers, competitors, suppliers, intermediaries, employees, and

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community) interact and affect tourism and hospitality organizations. Using real or
hypothetical examples, explain how changes in the macro environment directly
ripple into the micro environment and discuss how hospitality businesses can
respond strategically to these interconnected forces.

C. Abstraction

The Relationship Between the Macro and Micro Environments

The macro and micro environments do not operate independently they are
deeply interconnected, and changes in the macro environment ripple directly into
the micro environment, reshaping competitive dynamics, customer behavior,
supplier relationships, and community conditions.

Understanding how these two layers of the environment interact is one of

the most sophisticated capabilities in strategic management. Consider several
examples of how macro forces cascade into micro-level impacts in tourism and
hospitality:

Political → Competitive Environment: When the government designates

a new tourism zone such as the development of tourism corridors in Mindanao it
creates new competitive opportunities and attracts new entrants into previously
underdeveloped markets. Established operators in adjacent areas must adjust
their competitive strategies in response to this politically driven change in the micro
competitive environment.

Economic → Customer Behavior: When a prolonged economic downturn

reduces middle-class consumer spending, customers in the mid-range hotel and
restaurant segment trade down to budget options changing the competitive
dynamics of the budget segment and creating pressure on mid-range operators
who must decide whether to match price reductions or find other ways to justify
their value premium.

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 Social → Supplier Relationships: The growing social trend toward plant-
based and locally sourced food has driven many hospitality organizations to seek
new supplier relationships with small-scale organic farmers and plant-based
ingredient producers changing the supplier landscape and creating new forms of
supplier-based competitive differentiation.

Technological → Intermediary Power: The rise of OTA technology

platforms a macro technological force fundamentally strengthened the bargaining
power of booking intermediaries in the hospitality micro environment, shifting
revenue from hotels to platforms and forcing hotels to rethink their direct booking
and guest relationship strategies.

Environmental → Community Relations: Climate-driven events like

typhoons, flooding, and coral bleaching affect local communities whose livelihoods
depend on natural resources fishing communities, farming communities, and
tourism-dependent communities. Hotels and resorts that have invested in
community resilience programs find themselves operating within communities
better able to recover from environmental disruptions, which in turn protects the
continuity of the resort's own operations.

PESTEL and Micro Environment Analysis: A Strategic Management Tool

In strategic management practice, the analysis of the macro and micro

environments is formalized through two complementary analytical tools:

PESTEL Analysis systematically examines each of the six macro-

environmental factors Political, Economic, Social, Technological, Environmental,
and Legal to identify the specific trends, events, and forces in each category that
create opportunities or threats for the organization.

Micro Environment Analysis (sometimes structured using Porter's Five

Forces for the competitive micro environment, supplemented by stakeholder
analysis for customers, employees, suppliers, intermediaries, and the community)

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examines the specific forces immediately surrounding the organization that directly
shape its competitive performance.

Together, these two analyses form the external component of the SWOT
analysis identifying the Opportunities and Threats in the environment that the
organization must account for in its strategic planning.

Sampaguita Beach Resort

To bring the full framework of macro and micro environmental analysis to

life, consider Sampaguita Beach Resort a mid-scale beachfront resort in a
coastal municipality in Eastern Samar, Philippines, in the process of developing a
five-year strategic plan.

Macro Environment (PESTEL) Analysis

Factor Key Finding Strategic Implication

Political DOT designating Eastern Samar as an emerging adventure Opportunity to attract adventure travelers;
tourism corridor; local government offering tax incentives for potential to access tourism development grants
tourism investments
Political (Risk) History of typhoon disruptions leading to periodic travel Need for business continuity planning and
advisories insurance strategy
Economic Rising domestic middle class with increasing propensity to travel Expand domestic marketing; develop competitive
domestically; peso weakening against USD attracting more pricing for international budget travelers
budget international travelers
Economic Fuel price volatility increasing airline ticket prices to the region Risk of reduced airlift; develop partnership with
(Risk) regional airlines and road transport options
Social Growth of "adventure and surf tourism" as a social trend among Direct alignment with the resort's location —
25–35 urban professionals; increasing preference for authentic, Eastern Samar's surf breaks and natural
off-the-beaten-path destinations over crowded mainstream spots landscapes are exactly what this demographic
seeks
Social (Risk) Post-pandemic sensitivity about hygiene and health safety Must maintain and communicate visible health
remains elevated and safety standards to reassure guests
Technological Social media (Instagram, TikTok) driving discovery of new surf Invest in social media content strategy featuring
and adventure destinations; online booking growing rapidly even the resort's unique waves, landscapes, and
for smaller regional properties experiences; build a direct booking website
Technological OTA commission costs eroding profitability for small properties Develop direct booking channel and guest loyalty
(Risk) program to reduce OTA dependence
Environmental Eastern Samar coastline remains relatively pristine a major Invest in sustainable operations to protect coastal
competitive asset; climate change increasing typhoon intensity environment; develop typhoon-resilient
infrastructure
Legal DENR coastal zone management regulations; DOLE labor Ensure full environmental compliance to maintain
regulations for seasonal hospitality workers operating permits; develop compliant seasonal
employment contracts

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Micro Environment Analysis

Customers: Primary target segment adventure and surf travelers aged

2538, predominantly Filipino urban professionals from Metro Manila, Cebu, and
Davao, supplemented by budget international surfers from Australia, Europe, and
South Korea. Secondary segment corporate team-building groups seeking off-grid
outdoor experiences. Guest research indicates high value placed on authentic
local food, surf coaching quality, and natural environment integrity.

Competitors: Three competing surf camps within a 30-kilometer radius all

smaller, more rustic, and lower-priced; one larger resort in the next municipality
with superior facilities but no surf access; and Airbnb listings in nearby fishing
villages. Competitive gap identified: no competitor currently offers surf instruction
combined with mid-scale comfort accommodation and authentic local food
experience a product gap Sampaguita can own.

Suppliers: Local fishing community provides fresh seafood daily

relationship established and strong; local vegetable farmers within 15 kilometers
supply available but not yet formalized; surf equipment supplier based in Cebu
reliable but freight costs significant; construction and maintenance contractors
currently sourced from Manila, creating cost inefficiency; opportunity to develop
local contractor capability.

Intermediaries: Currently 80% of bookings through [Link] and

Agoda at 18% commission. Direct booking website exists but drives only 12% of
reservations. Social media presence minimal. Strategic priority: grow direct
bookings to 40% within two years through Instagram content strategy, direct
booking incentives, and post-stay email marketing.

Employees: Current team of 22 full-time and 8 seasonal staff, 90% hired

from the local municipality. Surf instructors three certified staff, key competitive
asset. Turnover in food service roles is high due to competitive wages offered by
resorts in Boracay and Siargao. Strategic priority: implement housing allowance

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and career development program to improve retention of trained kitchen and
service staff.

Local Community: The resort operates within a fishing village of

approximately 800 households. Community relations are generally positive but
underdeveloped the resort buys seafood locally but has no formal community
partnership programs. The barangay government has expressed interest in
developing a community-based tourism program that could expand the resort's
activity offerings while generating additional community income. Strategic
opportunity: formalize community partnership as a competitive differentiator.

Strategic Implications:

Sampaguita's environmental analysis reveals a genuinely exciting strategic

position: a largely undiscovered destination, a growing market of exactly the right
type of travelers, minimal direct competition for the specific product combination
the resort can offer, strong local community and supplier foundations to build on,
and a macro environment that is politically and socially favorable to adventure and
authentic tourism development.

The key strategic priorities that emerge from the analysis: own the
"authentic surf and adventure experience" position in Eastern Samar before
competitors recognize the opportunity; build direct booking capability to reduce
OTA dependence; formalize community and supplier partnerships to deepen the
product's authenticity and defensibility; and invest in sustainable infrastructure to
protect the natural assets that are the entire foundation of the competitive
advantage.

The macro and micro environments are the waters in which every tourism
and hospitality organization swims. Understanding these environments through
the PESTEL framework for macro forces and through the analysis of customers,
competitors, suppliers, intermediaries, employees, and community for micro forces

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is not optional for organizations that want to compete strategically and succeed
over the long term.

The most important insight from this lesson is that the environment is not
simply a set of constraints to be navigated it is a landscape full of opportunities
waiting to be discovered by organizations with the analytical discipline to look
carefully, the strategic imagination to see possibilities where others see only
obstacles, and the leadership commitment to act on what they find.

To students who develop develop the habit of environmental analysis, the

practice of systematically reading and interpreting the world around your
organization, is one of the most valuable professional capabilities you can build.
The organizations that lead the tourism and hospitality industry in the next decade
will be those whose leaders understood their environment most clearly, responded
to it most creatively, and built their strategies on the most honest and
comprehensive reading of both the forces shaping the world and the forces
shaping their own competitive neighborhood.

That is the power of macro and micro environmental analysis and that is
why it is the essential foundation of strategic management in tourism and
hospitality.

D. Application

Identification Test (Write the word, term, or phrase being described)

1. The strategic management framework that systematically examines

Political, Economic, Social, Technological, Environmental, and Legal
factors in the macro environment.
2. The macro-level force that directly strengthened the bargaining power of
booking intermediaries like [Link] and Agoda, shifting revenue away
from hotels to online platforms.

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 3. The micro-environment element that was directly affected when the growing
social trend toward plant-based and locally sourced food pushed hospitality
organizations to seek new partnerships with organic farmers.
4. The fictional mid-scale beachfront resort in Eastern Samar used in the
lesson to illustrate the application of PESTEL and micro environment
analysis in developing a five-year strategic plan.
5. The micro-environment element referring to the people, organizations, and
natural surroundings of the place where a tourism business operates,
whose resilience directly protects the continuity of resort operations.
6. The two complementary analytical tools that together form the external
component of the SWOT analysis, identifying opportunities and threats in
both the macro and micro environments.
7. The primary target market segment of Sampaguita Beach Resort,
consisting of adventure and surf travelers aged 25–38 who are
predominantly Filipino urban professionals.
8. The macro-environmental factor that, when the government designated
new tourism zones in Mindanao, attracted new entrants and forced
established operators to adjust their competitive strategies.
9. The strategic priority identified for Sampaguita Beach Resort to reduce its
heavy dependence on OTAs, which currently account for 80% of bookings
at an 18% commission rate.
10. The term used to describe the process of systematically reading and
interpreting the forces and conditions surrounding an organization,
considered one of the most valuable professional capabilities in strategic
management.

Essay Questions

1. The lesson demonstrates five specific examples of how macro forces

cascade into micro-level impacts such as Political → Competitive
Environment and Technological → Intermediary Power. Choose any
three of these macro-to-micro connections, explain each one in your

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 own words, and provide a real or hypothetical example from Philippine
tourism or hospitality for each.
2. Using the Sampaguita Beach Resort as your reference, discuss how its
PESTEL analysis and micro environment analysis work together to reveal
the resort's strategic position. What are its most significant opportunities,
and what strategic priorities should it focus on to build a sustainable
competitive advantage?
3. The lesson states that "the environment is not simply a set of
constraints to be navigated — it is a landscape full of opportunities
waiting to be discovered." Do you agree with this statement? Using both
the macro and micro environment concepts from the lesson, explain how a
tourism or hospitality organization can transform environmental challenges
into strategic opportunities, and what qualities a leader must have to do this
effectively.

References
1. Sabourin, V. (2022). Strategic Management for the Hospitality and Tourism
Industry: Developing a Competitive Advantage. Apple Academic Press.
2. Okumus, F. et al. (2022). Strategic Management for Hospitality and
Tourism. Routledge.
3. Evans, N. G. (2024). Strategic Management for Tourism, Hospitality and
Events (4th ed.). Routledge.
4. Enz, C. A. (2023). Hospitality Strategic Management: Concepts and Cases.
Wiley.
5. Rivera, J. P. R. (2025). Philippine Tourism Sectoral Review (2000 to 2025):
From Promise to Power. Philippine Institute for Development Studies
(PIDS).
6. Kumari, M. (2021). Chapter on Sustainable Strategic Planning in
Hospitality. In Industry 5.0: Pioneering Business and Management
Transformations. Emerald Publishing.

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7. Bansal, S. (2023). Strategic Management in Tourism and Hospitality.
Paradise Press.

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 Chapter 3

Strategic Direction

Introduction

Establishing clear strategic direction is essential for success in the tourism

and hospitality industry. It provides a roadmap that guides decision-making, aligns
resources, and helps organizations navigate seasonality, competition, and
changing guest expectations. This chapter defines key terms first, then explores
the establishment of strategic direction, business definition, the development of
vision, mission, objectives, goals, and tactics, and how organizational structure
supports strategy implementation. Practical situational examples from hotels,
resorts, and tour companies are used throughout.

Learning Outcomes By the end of this chapter, students will be able to:

• Define and explain key terms related to strategic direction.

• Describe how organizations establish strategic direction and define their
business.
• Formulate effective vision, mission, objectives, goals, and tactics for
hospitality businesses.
• Analyze how organizational structure supports strategic direction.
• Apply these concepts to real-world tourism and hospitality scenarios.
• Discuss the importance of clear strategic direction for industry success.
Lesson I: Establishment of Strategic Direction and Business Definition

A. Activity

Students analyze the strategic direction and business definition of two

different hospitality organizations (e.g., a luxury chain and a community-based
eco-lodge) and compare how clearly they are stated.

B. Analysis

Establishment of strategic direction involves leaders deciding the long-

term path for the organization. It starts with a clear business definition that
answers: What business are we in? Who do we serve? How do we create value?
In hospitality, this provides focus amid diverse opportunities like hotels,
restaurants, tours, or events.

C. Abstraction

Every tourism and hospitality organization whether a luxury resort in El

Nido, a family-run homestay in Sagada, a boutique café in Vigan, or a growing tour
operator in Cebu must answer two fundamental questions:

“Where are we going?” and “What business are we really in?”

The answers to these questions form the strategic direction of the

organization. Without a clear strategic direction, even the best environmental
analysis, brilliant strategies, and dedicated teams will lack focus and coherence.
The business will drift, reacting to daily pressures instead of moving purposefully
toward long-term success.

Establishment of Strategic Direction is the conscious process by which

leaders define the long-term path the organization intends to follow. It sets the
overall course and provides a guiding star for all future decisions. It is like deciding
the destination and route for a long journey.

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 Business Definition, on the other hand, clearly articulates the fundamental
nature of the organization what it does, who it serves, and how it creates unique
value. Together, these two elements create the foundation upon which vision,
mission, objectives, goals, tactics, and organizational structure are built.

In the highly competitive, seasonal, and fast-changing tourism and

hospitality industry, a well-established strategic direction and a sharp business
definition are not optional they are essential for survival and sustainable growth.

Consider a family that owns a small resort on an island. Previously, they

operated like a typical beach hotel. Through strategic direction workshops, they
redefined their business: “We are not just a hotel we are a sustainable island
experience provider for eco-conscious families and couples seeking authentic
local culture.” This new business definition guided them to focus on marine
conservation tours, organic farm-to-table dining, and community homestays
instead of competing only on room rates. The clear direction helped them attract
loyal guests, partner with conservation groups, and survive low seasons better
than competitors. Students can relate this to choosing a career path — deciding
what kind of professional they want to be and what unique value they offer.

Why Strategic Direction and Business Definition Matter in Tourism and

Hospitality

The tourism and hospitality industry is characterized by intense competition,

perishable inventory (rooms and seats that cannot be stored), high fixed costs, and
strong dependence on external factors. Organizations that fail to define their
direction clearly often fall into the trap of trying to be “everything to everyone,”
resulting in mediocre service, confused branding, inefficient resource use, and
weak competitive positioning.

A clear strategic direction:

• Provides focus amid countless opportunities and distractions.

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 • Aligns all departments and employees toward common goals.
• Helps the organization say “no” to opportunities that do not fit.
• Guides resource allocation, investment decisions, and daily operations.
• Creates a basis for measuring success and making corrections.

Business Definition – The Foundation

A strong business definition answers three critical dimensions (based on

Derek Abell’s framework):

1. Customer Groups – Who do we serve? (e.g., luxury travelers, budget

backpackers, corporate groups, domestic families)
2. Customer Needs – What benefits or experiences are we fulfilling? (e.g.,
relaxation, adventure, cultural immersion, wellness, convenience)
3. Technologies/Ways of Delivering Value – How do we create and deliver
these benefits? (e.g., eco-friendly resorts, personalized guided tours, farm-
to-table dining, digital booking platforms)

Real-World Situational Example: “Palawan Heritage Eco-Lodges”

Initial Vague Business Definition (before strategic work): “We operate

beach resorts and offer rooms and tours to tourists in Palawan.”

This broad definition led the company to compete head-on with large
international chains on price and facilities. They struggled with low occupancy
during off-peak months and thin profit margins.

Revised Business Definition (after careful environmental analysis and strategic

reflection):

“We are a sustainable heritage-focused eco-lodge provider serving

environmentally conscious travelers and culturally curious families who seek
authentic Palawan experiences, responsible marine and forest conservation
activities, and meaningful connections with local indigenous communities.”

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 This sharper definition dramatically changed their strategic direction:

• They stopped competing on room rates and focused on premium,

experience-based pricing.
• They redesigned properties using native materials and traditional
architectural elements.
• They developed signature activities such as guided bioluminescence
kayaking tours with local fishers, cultural storytelling sessions with
indigenous Tagbanua guides, and coral reef restoration volunteer
programs.
• They shifted marketing from generic “beautiful beach” photos to stories of
conservation impact and authentic cultural immersion.

Results:

• Average daily rate increased by 48% within 18 months.

• Guest loyalty and repeat visits improved significantly.
• The company built strong partnerships with local communities and received
national awards for sustainable tourism.
• During the pandemic recovery period, their focused identity helped them
rebound faster than competitors because they had a very clear and loyal
target market.

The Process of Establishing Strategic Direction

Establishing strategic direction is not a one-time event but a thoughtful,

iterative process that usually includes the following steps:

1. Conduct Thorough Environmental Analysis (Macro and Micro – Chapter

2) Understand political, economic, social, technological, environmental, and
legal forces, as well as customers, competitors, and community realities.
2. Define the Business Clearly Answer the three key questions about
customers, needs, and delivery methods.

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 3. Set the Long-Term Strategic Direction Decide the overall path — for
example:
o Become the leading sustainable tourism provider in the region.
o Expand from domestic to international markets through franchising.
o Transition from mass tourism to high-value niche experiences.
4. Ensure Alignment and Communication Translate the direction into
understandable language so every employee, from general manager to
housekeeping staff, understands how their daily work contributes to the
bigger picture.
5. Review and Refine Periodically Strategic direction should be revisited
whenever major environmental changes occur (e.g., post-pandemic shifts,
new government policies, or technological disruptions).

Strategic Management Implications

In tourism and hospitality, a clear strategic direction and business definition

serve as the compass for all other strategic decisions:

• Marketing – Messages become consistent and authentic.

• Operations – Service standards and product design align with the defined
direction.
• Human Resources – Hiring and training focus on people who fit the desired
culture and service philosophy.
• Finance – Investment decisions prioritize projects that support the strategic
direction.
• Sustainability – Environmental and community initiatives become
integrated into the core business rather than add-on CSR activities.

Example: A small family-owned restaurant in Intramuros, Manila, redefined its

business from “a typical Filipino restaurant” to “a living heritage dining experience
that revives 19th-century Spanish-Filipino cuisine using traditional cooking
methods and locally sourced heirloom ingredients.” This new direction led them to

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create historical storytelling dinners, partner with cultural agencies, and attract both
local food enthusiasts and international cultural tourists transforming the business
from surviving to thriving.

The establishment of strategic direction and a clear business definition

is the critical bridge between environmental analysis and actual strategy
formulation. It transforms raw insights about the external world into a focused,
purposeful path for the organization.

For future leaders in tourism and hospitality, developing the ability to craft
sharp business definitions and coherent strategic directions is one of the most
valuable skills you can acquire. Organizations that master this step rarely get lost
in the complexity of the industry. They know who they are, where they are going,
and why they exist and this clarity becomes one of their strongest competitive
advantages.

In the next lessons, we will build upon this foundation by developing vision
and mission statements, setting objectives and goals, creating tactics, and
designing organizational structures that support the chosen strategic direction.

D. Application

True or False (Write TRUE if the statement is correct, FALSE if it is incorrect)

1. Strategic direction is a one-time event that only needs to be established

once and never revisited regardless of environmental changes.
2. A clear business definition answers three critical dimensions: who we serve,
what benefits we fulfill, and how we create and deliver value.
3. Organizations that fail to define their strategic direction clearly often fall into
the trap of trying to be "everything to everyone," resulting in weak
competitive positioning.
4. Derek Abell's framework for business definition includes Customer Groups,
Customer Needs, and Technologies or Ways of Delivering Value.

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 5. Palawan Heritage Eco-Lodges increased its average daily rate by 48%
within 18 months after revising its business definition and sharpening its
strategic direction.
6. A vague business definition that focuses only on competing on room rates
and facilities is an effective long-term strategy for boutique eco-lodges in
the Philippines.
7. Strategic direction provides focus, aligns all departments toward common
goals, and guides resource allocation and investment decisions.
8. Business definition and strategic direction are only relevant for large
international hotel chains and are unnecessary for small family-owned
hospitality businesses.
9. The family-owned restaurant in Intramuros successfully transformed its
business by redefining itself as a living heritage dining experience reviving
19th-century Spanish-Filipino cuisine.
10. A sharp business definition helps an organization say "no" to opportunities
that do not fit its chosen strategic direction, which is an important aspect of
focused strategic management.

Essay Questions

1. Explain the three critical dimensions of Derek Abell's Business

Definition Framework — Customer Groups, Customer Needs, and
Technologies or Ways of Delivering Value. Using the Palawan Heritage
Eco-Lodges as your example, show how applying this framework
transformed the organization's competitive position and overall business
performance.
2. The lesson compares establishing strategic direction to "deciding the
destination and route for a long journey." In your own words, explain
why a clear strategic direction is essential for tourism and hospitality
organizations, and describe the five-step process of establishing strategic
direction discussed in the lesson.

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 3. Think of a hospitality business in your area — a hotel, restaurant, resort,
or tour operator. Based on the concepts learned in this lesson, write a
revised business definition for that business using Derek Abell's three-
dimensional framework, and explain how this new definition would change
the organization's marketing, operations, human resources, and financial
decisions.

Lesson II: Organizational Vision, Mission, Objectives, Goals, and Tactics

A. Activity

Students draft a vision, mission, objectives, goals, and tactics for a new
hospitality venture (e.g., a glamping site or urban boutique hotel).

B. Analysis

Vision and mission provide inspiration and purpose. Objectives are broad
outcomes, goals are specific and measurable targets, and tactics are the detailed
actions needed to achieve them. Together, they translate strategic direction into
practical steps in the seasonal and guest-focused hospitality industry.

C. Abstraction

Once a tourism or hospitality organization has established its strategic

direction and clearly defined its business, the next important step is to translate
that direction into inspiring statements and practical plans that everyone in the
organization can understand and follow.

This is where Vision, Mission, Objectives, Goals, and Tactics come in.
These five elements form a clear hierarchy that connects big dreams to everyday
actions. They turn abstract ideas into concrete guidance that shapes decisions,
motivates employees, and delivers consistent guest experiences.

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 In the tourism and hospitality industry where service quality depends heavily
on people, seasons change demand rapidly, and competition is fierce having well-
crafted vision, mission, objectives, goals, and tactics is what separates successful
organizations from those that merely survive.

Strategic Direction Component

1. Organizational Vision An inspiring, long-term picture of what the

organization wants to become in the future. It is aspirational and emotional
the “dream.”
2. Organizational Mission A clear statement of the organization’s current
purpose — what it does, who it serves, and how it creates value. It answers
“Why do we exist?”
3. Objectives Broad, long-term desired outcomes that support the mission
(usually 3–5 years).
4. Goals Specific, measurable targets that help achieve the objectives. They
are usually SMART (Specific, Measurable, Achievable, Relevant, Time-
bound).
5. Tactics Short-term, detailed actions and methods used to achieve the
goals. These are the “how” the day-to-day steps and activities.

These elements work together like a pyramid: Vision at the top (the dream),
Mission as the foundation, Objectives and Goals in the middle, and Tactics at the
base (daily execution).

Why Vision, Mission, Objectives, Goals, and Tactics Matter in Tourism and
Hospitality

The industry is highly people-dependent. Guests expect consistent, high-

quality experiences every single time. Employees work in different departments
(front office, housekeeping, F&B, tours) and shifts. Without clear direction from top
to bottom, confusion, inconsistency, and poor service can easily occur.

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 A strong set of these statements:

• Motivates and aligns employees.

• Guides decision-making during busy or difficult periods.
• Helps maintain service standards across seasons.
• Provides a basis for measuring success.
• Supports branding and marketing consistency.

Industry Examples

1. Vision Simple Definition: The future dream. Example: “To be the most loved
sustainable island destination in the Philippines by 2035, where every guest leaves
with unforgettable memories and a deeper connection to nature and local culture.”

2. Mission Simple Definition: What we do today and why. Example: “We provide
authentic, low-impact eco-luxury experiences in Palawan that celebrate local
culture, protect marine environments, and create meaningful benefits for host
communities.”

3. Objectives Broad outcomes:

• Become the preferred eco-luxury destination in Palawan.

• Achieve leadership in sustainable tourism practices.
• Increase community economic benefits.

4. Goals (SMART)

• Increase annual guest satisfaction score to 4.8/5.0 by end of 2027.

• Achieve 70% occupancy rate year-round by 2026.
• Source 80% of food and beverages from local suppliers by 2025.

5. Tactics (Action Plans)

• Launch monthly “Community Story Nights” with local residents.

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 • Install solar panels on all villas within 18 months.
• Train all staff on sustainable service standards.
• Run targeted social media campaigns featuring real guest stories.

Real-World Example: “Lush Palawan Eco-Resort”

Before (Unclear Direction): The resort had a vague mission: “We offer beautiful
beach accommodation.”

• No clear vision.
• Objectives were generic (“increase sales”).
• Goals were missing.
• Tactics were reactive (discounts whenever occupancy was low).

Result: Average performance, high staff turnover, and difficulty standing out from
competitors.

After (Clear Strategic Direction):

Vision: “To become the benchmark for regenerative luxury tourism in Palawan,
where luxury and environmental restoration go hand in hand.”

Mission: “We create transformative eco-luxury experiences that connect guests

with Palawan’s pristine nature and vibrant culture while actively restoring marine
ecosystems and empowering local communities.”

Objectives (3–5 years):

• Lead sustainable tourism practices in the region.

• Achieve top-tier guest loyalty and satisfaction.
• Generate measurable positive impact on local biodiversity and economy.

Goals (SMART):

• Attain Green Globe Certification by end of (Year).

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 • Reach 85% average annual occupancy with 4.9/5.0 guest rating by (Year).
• Plant and protect 10,000 corals annually and employ at least 70% local
staff.

Tactics:

• Partner with local fishers for coral reef restoration program.

• Develop “Regenerative Travel Packages” with guest participation in
conservation.
• Implement monthly sustainability training for all 85 staff members.
• Launch a direct booking website with storytelling content.
• Introduce a loyalty program that rewards guests who return and participate
in conservation activities.

Within two years, the resort increased its average room rate by 42%, improved
guest satisfaction scores, reduced staff turnover, gained international recognition,
and built strong community support. The clear vision, mission, objectives, goals,
and tactics gave every department a shared purpose.

The Hierarchy and Alignment

Vision → inspires Mission → defines purpose Objectives → set direction

Goals → make it measurable Tactics → turn everything into daily action

When these elements are aligned, the entire organization moves in the
same direction — from the general manager to the housekeeping team.

In tourism and hospitality, these statements are not just documents for the
website. They should be:

• Communicated regularly to all staff.

• Used in training programs.
• Reflected in performance evaluations.
• Reviewed every year during strategic planning.

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 Organizational Vision, Mission, Objectives, Goals, and Tactics are the
bridge between strategic direction and actual strategy implementation. They turn
big ideas into clear guidance that shapes daily operations and long-term success.

For future leaders in the tourism and hospitality industry, the ability to craft
inspiring yet practical vision and mission statements and to break them down into
achievable goals and tactics is a powerful skill. Organizations that master this
lesson create stronger brands, happier guests, more motivated employees, and
more sustainable businesses.

In the next lesson, we will discuss how Organizational Structure must be

designed to support and deliver this strategic direction effectively.

D. Application

Matching Type (Match Column A with the correct answer in Column B. Write the
letter of your answer.)

Column A Column B
1. The inspiring, long-term picture of what the organization A. Tactics
wants to become in the future
2. A clear statement of the organization's current purpose B. Goals
— what it does, who it serves, and how it creates value
3. Broad, long-term desired outcomes that support the C. SMART
mission, usually spanning 3–5 years
4. Specific, measurable targets that help achieve the D. Vision
objectives
5. Short-term, detailed actions and methods used to E. Mission
achieve the goals
6. The acronym that describes well-written goals — F. Objectives
Specific, Measurable, Achievable, Relevant, and Time-
bound

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 7. The element at the very top of the strategic direction G. Alignment
hierarchy representing the organization's dream
8. The condition achieved when all departments and H. Regenerative
employees move toward the same strategic direction Travel Packages
9. A specific tactic introduced by Lush Palawan Eco- I. Lush Palawan
Resort that allowed guests to participate in conservation Eco-Resort
activities
10. The real-world example used in the lesson that J. Business
increased its average room rate by 42% after establishing Definition
a clear vision, mission, objectives, goals, and tactics

Answer Key: 1-D, 2-E, 3-F, 4-B, 5-A, 6-C, 7-D, 8-G, 9-H, 10-I

Essay Questions

1. Explain the five elements of the strategic direction hierarchy — Vision,

Mission, Objectives, Goals, and Tactics — in your own words. Using the
Lush Palawan Eco-Resort as your example, show how each element
contributed to transforming the resort from average performance to
international recognition and a 42% increase in average room rate.
2. The lesson states that in tourism and hospitality, vision, mission, objectives,
goals, and tactics "should not just be documents for the website" but
must be actively communicated and used across the organization. Do you
agree with this statement? Explain why these elements matter specifically
in the tourism and hospitality industry, and discuss what happens to an
organization when these elements are vague or missing.
3. Imagine you are opening a new hospitality venture — a glamping site,
urban boutique hotel, surf camp, or any hospitality business of your choice.
Using the concepts from this lesson, write a complete set of strategic
direction statements including a Vision, Mission, at least two Objectives,
two SMART Goals, and three Tactics for your chosen venture. Explain
how each element connects to and supports the others.

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Lesson III: Organizational Structure

A. Activity

Students draw and critique the organizational structure of a hotel or tour

company and suggest changes to better support its strategic direction.

B. Analysis

Organizational structure defines hierarchy, reporting relationships,

departments, and coordination mechanisms. It must support the chosen strategic
direction for example, a flat structure for innovation or a divisional structure for
large chains. In hospitality, structure affects service speed, flexibility, and guest
experience.

C. Abstraction

Once an organization has established its strategic direction, defined its

business clearly, and developed its vision, mission, objectives, goals, and tactics,
the next critical step is to design the right Organizational Structure. This is the
formal framework that shows how people, tasks, authority, and resources are
arranged to achieve the strategic direction.

Organizational Structure refers to the system of hierarchy (levels of

authority), reporting relationships (who reports to whom), departmental
arrangements, and coordination mechanisms that enable the organization to
implement its strategies effectively. It answers questions such as: Who makes
decisions? How do departments work together? How flat or tall should the
organization be? How centralized or decentralized should authority be?

Organizational structure is not just an internal administrative matter it

directly affects guest experience, service speed, employee motivation, operational
efficiency, and the ability to adapt to seasonal changes and unexpected
disruptions.

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 A well-designed structure supports the strategic direction. A poorly
designed one creates delays, confusion, conflicts, and inconsistent service —
problems that guests notice immediately.

Why Organizational Structure Matters in Tourism and Hospitality

The hospitality industry is highly people-oriented and time-sensitive. Guests

expect quick, personalized, and consistent service 24 hours a day. Staff work in
multiple shifts across different departments (Front Office, Housekeeping, Food &
Beverage, Sales, Maintenance, etc.). Seasons cause big fluctuations in demand.
In such an environment, the structure must balance control with flexibility,
efficiency with empowerment, and standardization with local responsiveness.

Key reasons why structure is crucial:

• It determines how fast decisions are made (important for handling guest
complaints).
• It affects coordination between departments (e.g., Housekeeping and Front
Office).
• It influences employee empowerment and motivation.
• It supports or hinders the delivery of the promised guest experience.
• It must align with the organization’s vision, mission, and strategic direction.

Main Types and Features of Organizational Structure

1. Hierarchy (Tall vs Flat)

o Tall structures have many levels of management (common in large
luxury chains for tight control).
o Flat structures have fewer levels (common in small boutique resorts
for faster decisions).
2. Centralization vs Decentralization
o Centralized: Most decisions made at the top (good for brand
consistency).

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 o Decentralized: Authority given to lower levels or individual properties
(good for local adaptation).
3. Departmentalization Common arrangements in hospitality include
functional (by department: Rooms, F&B, Marketing), divisional (by location
or brand), or matrix (cross-functional teams for projects).
4. Span of Control How many employees report to one manager. Narrow
span = more supervision; wide span = more empowerment.

The best structure depends on the organization’s size, strategy,

environment, and stage of development (contingency theory). Below are
examples:

1: Large International Chain (Centralized-Tall Structure) A major international

hotel brand operating in Manila and Cebu uses a tall, centralized structure. The
General Manager reports to a Regional Director, who reports to the Asia-Pacific
Head Office. Key decisions on pricing, menu standards, branding, and major
investments are made centrally.

Advantages: Strong brand consistency, standardized service quality, and easier

control of SOPs. Challenges: Slower response to local guest needs (e.g., requests
for regional Filipino dishes).

This structure supports a strategy of global standardization with reliable luxury.

2: Small Eco-Resort in Palawan (Flat, Decentralized Structure) “Lush Palawan

Eco-Resort” (from previous lessons) uses a flat and decentralized structure. The
owner/general manager works closely with department heads (Rooms, F&B,
Activities, Sustainability). Frontline staff are empowered to solve guest problems
on the spot (e.g., offering a complimentary tour if a guest is disappointed).

Advantages: Fast decision-making, high employee empowerment, strong local

adaptation, and authentic guest experiences. Challenges: Less standardization;
requires strong training and culture to maintain quality.

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 This structure perfectly supports the resort’s strategic direction of
sustainable, personalized, community-based luxury.

The flat structure helped the resort respond quickly during the pandemic by
creating new wellness packages and community-supported delivery services,
allowing faster recovery than more rigid competitors.

Organizational structure must always be aligned with the organization’s

strategic direction:

• Differentiation / Experience-focused strategy → Needs flatter, more

decentralized structures to empower staff and allow creativity.
• Cost leadership / Standardization strategy → Benefits from taller, more
centralized structures for tight control and efficiency.
• Growth / Expansion strategy → May require divisional or matrix structures
to manage multiple properties or new business lines.
• Sustainability / Community-focused strategy → Benefits from cross-
functional teams that include community relations and environmental roles.

Leaders must periodically review whether the current structure still supports
the vision, mission, and goals. When strategy changes (e.g., shifting from mass
tourism to niche eco-tourism), the structure often needs to change too.

Organizational Structure is the engine that turns strategic direction, vision,

mission, objectives, goals, and tactics into actual performance. In tourism and
hospitality, the right structure enables fast, consistent, and memorable guest
experiences while keeping operations efficient and employees motivated.

A mismatch between strategy and structure is one of the most common

reasons why well-formulated plans fail. The most successful organizations in the
industry regularly evaluate and adjust their structure to ensure it supports their
evolving strategic direction.

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 Mastering organizational design is therefore a vital leadership skill. Future
managers who can align people, authority, and processes with the organization’s
purpose will be better equipped to deliver exceptional guest experiences and
achieve sustainable success in the dynamic world of tourism and hospitality.

D. Application

Identification Test (Write the word, term, or phrase being described)

1. The formal framework that shows how people, tasks, authority, and
resources are arranged to achieve the strategic direction of an organization.
2. The type of organizational structure that has many levels of management,
commonly used in large luxury hotel chains for tight control and brand
consistency.
3. The type of organizational structure that has fewer levels of management,
commonly used in small boutique resorts for faster decision-making and
employee empowerment.
4. The type of decision-making structure where most decisions are made at
the top level, suitable for maintaining brand consistency across multiple
properties.
5. The type of decision-making structure where authority is given to lower
levels or individual properties, allowing better local adaptation and
personalized guest service.
6. The term that refers to how many employees report to one manager, which
can be either narrow for more supervision or wide for more empowerment.
7. The type of departmentalization that organizes departments by location or
brand, suitable for organizations managing multiple properties or business
lines.
8. The management theory that states the best organizational structure
depends on the organization's size, strategy, environment, and stage of
development.

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 9. The eco-resort used in the lesson as an example of a flat and decentralized
organizational structure that supports sustainable, personalized, and
community-based luxury.
10. The most common reason why well-formulated strategic plans fail in tourism
and hospitality organizations, occurring when the strategy and structure do
not support each other.

References

1. Sabourin, V. (2022). Strategic Management for the Hospitality and Tourism

Industry. Apple Academic Press.
2. Okumus, F. et al. (2022). Strategic Management for Hospitality and
Tourism. Routledge.
3. Evans, N. G. (2024). Strategic Management for Tourism, Hospitality and
Events. Routledge.
4. Enz, C. A. (2023). Hospitality Strategic Management. Wiley.
5. Raga, J. (2022). Strategic Management for Hospitality & Tourism Sector.
Society Publishing.
6. Marcelo et al. (2026). Strategic Management in Tourism and Hospitality
Management.
7. Amil, N. (2025). Related works on tourism administration strategies
(Cotabato/Philippine context).

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 Chapter 4

Strategy Formulation

Introduction

Strategy formulation is the core decision-making phase in strategic

management where organizations develop specific plans to achieve their vision,
mission, and competitive advantage. In the tourism and hospitality industry,
effective strategy formulation helps businesses respond to seasonality, intense
competition, evolving guest preferences, and external disruptions. This chapter
first defines key terms, then explores the definition and process of strategy
formulation, the business life cycle, and industry analysis, with practical situational
examples from hotels, resorts, tour operators, and restaurants.

Learning Outcomes By the end of this chapter, students will be able to:

• Define and explain strategy formulation and its importance in hospitality.

• Analyze how the business life cycle influences strategic choices.
• Conduct industry analysis to support strategy formulation.
• Recommend appropriate strategies for different business stages in tourism
and hospitality.
• Apply formulation tools to real-world scenarios.
• Discuss the link between strategy formulation, competitive advantage, and
long-term success.

Lesson I: Strategy Formulation Defined

A. Activity

Students review the strategy of a hospitality company (e.g., Airbnb or a local

resort) and identify the key elements of its formulation process.
B. Analysis

Strategy formulation is the deliberate process of creating strategies after

environmental analysis. It involves deciding what the organization will do to
achieve its vision and mission. In hospitality, it must consider guest experience,
seasonality, and sustainability while building competitive advantage.

C. Abstraction

Strategy Formulation. This is the decision-making stage where leaders

develop specific, concrete strategies that will help the organization achieve its
vision, mission, and [Link] is the process of creating long-term plans and
choosing the best courses of action after carefully analyzing the internal and
external environment. It answers the critical question: “How will we achieve our
goals and gain competitive advantage?”

In the tourism and hospitality industry, strategy formulation is especially

important because the sector is highly competitive, seasonal, capital-intensive,
and constantly affected by external forces such as changing travel trends,
economic conditions, technological disruption, and environmental challenges. A
well-formulated strategy turns analysis and direction into actionable plans that
guide growth, differentiation, and sustainability.

Why Strategy Formulation Matters in Tourism and Hospitality

Tourism and hospitality organizations operate in a dynamic and uncertain

environment. Guests have many choices, competition is fierce, and service
experiences are perishable if a room or tour is not sold today, the opportunity is
lost forever. Without proper strategy formulation, businesses tend to react to daily
problems rather than proactively shape their future.

Effective strategy formulation:

• Provides clear direction on how to compete and win in the market.

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 • Helps allocate limited resources (money, staff, time) wisely.
• Enables the organization to anticipate and respond to opportunities and
threats.
• Creates sustainable competitive advantage.
• Aligns all departments toward common goals.

Organizations that skip or poorly execute this stage often end up with vague
plans, inconsistent service, wasted investments, and weak market position.

The Process and Key Elements of Strategy Formulation

Strategy formulation is a deliberate, analytical, and creative process that

usually includes the following steps:

1. Review Environmental Analysis – Re-examine findings from the macro

(PESTEL) and micro environments.
2. Review Strategic Direction and Business Definition – Ensure new
strategies support the vision, mission, and business purpose.
3. Generate Strategic Alternatives – Identify possible strategies (e.g., cost
leadership, differentiation, focus, growth, or retrenchment).
4. Evaluate and Choose the Best Strategy – Assess feasibility, risks, and
potential returns.
5. Develop Supporting Plans – Create detailed objectives, goals, and tactics.

Common strategies formulated in hospitality include:

• Growth Strategies (market penetration, market development, product

development, diversification).
• Competitive Strategies (cost leadership, differentiation, focus).
• Stability or Retrenchment Strategies (during difficult periods).

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Real-World Situational Example in the Philippine Tourism and Hospitality
Industry

Case: “Blue Coral Beach Resort” in Siargao

Background: Blue Coral was a mid-sized beach resort facing declining occupancy
due to increasing competition from newer resorts and the growing popularity of
smaller boutique properties and Airbnb listings.

Environmental Analysis Recap:

• Macro: Growing surf and wellness tourism trend, improving infrastructure,

but increasing environmental regulations.
• Micro: Strong local community support, loyal repeat guests, but high
dependence on OTAs.

Strategy Formulation Process:

1. Business Definition: “We are a surf and wellness-focused eco-resort

serving adventure-seeking travelers and wellness enthusiasts who want
authentic Siargao experiences with strong environmental responsibility.”
2. Strategic Direction: Shift from general beach resort to a specialized
differentiation strategy focused on surf, wellness, and sustainability.

Formulated Strategies:

• Product Development: Create signature “Surf & Soul” wellness packages

combining surfing lessons, yoga, healthy local cuisine, and reef
conservation activities.
• Market Development: Target new segments — wellness travelers from
Europe and Australia, and corporate team-building groups from Manila.
• Marketing Strategy: Reduce heavy OTA dependence by building a strong
direct booking website and Instagram storytelling campaign.

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 • Sustainability Strategy: Invest in solar power, waste management, and
community reef protection programs.

Implementation Highlights:

• Redesigned villa experiences with wellness amenities.

• Partnered with local surfing instructors and yoga teachers.
• Launched a loyalty program rewarding guests who join conservation
activities.
• Trained all staff on the new “Surf & Soul” philosophy.

Results:

• Occupancy rate increased from 58% to 82% within 18 months.

• Average daily rate rose by 38%.
• Guest satisfaction scores improved significantly.
• The resort earned recognition as one of Siargao’s leading sustainable
properties and attracted media attention.

This successful strategy formulation turned potential threats (increasing

Strategy formulation is the bridge between analysis and action. It requires:

• Creativity to generate good alternatives.

• Analytical skills to evaluate options.
• Courage to make difficult choices (e.g., saying no to some markets or
products).
• Leadership to align the entire organization behind the chosen strategy.

In tourism and hospitality, formulated strategies must be flexible enough to

adjust to seasonal changes and unexpected events while remaining focused on
the core direction.

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 Strategy formulation is the stage where leaders decide “how we will win”
in the market. It turns the broad vision and environmental insights into concrete
plans, choosing among different strategic options.

Consider a mid-sized family-owned hotel chain in a popular tourist city that

was losing market share to international brands and short-term rental platforms.
Through strategy formulation, leaders analyzed their strengths and decided on
a differentiation strategy focused on personalized cultural experiences and
wellness programs. They chose growth strategies such as product development
(adding spa services and local food experiences) and market penetration (loyalty
programs for repeat guests). This clear formulation helped them reposition the
hotels, increase occupancy, and create a unique identity. Without proper
formulation, they might have continued competing only on price and eventually
struggled. Students can relate this to planning a school event or personal project
deciding the best approach after understanding the situation.

D. Application

True or False (Write TRUE if the statement is correct, FALSE if it is incorrect)

1. Strategy formulation is the decision-making stage where leaders develop

specific, concrete strategies to help the organization achieve its vision,
mission, and objectives.
2. In the tourism and hospitality industry, a room or tour that is not sold today
can be stored and sold the next day without any loss of revenue.
3. Organizations that skip or poorly execute strategy formulation often end up
with vague plans, inconsistent service, wasted investments, and weak
market position.
4. The first step in the strategy formulation process is to immediately generate
strategic alternatives without reviewing the environmental analysis.

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 5. Blue Coral Beach Resort in Siargao successfully increased its occupancy
rate from 58% to 82% within 18 months after formulating and implementing
a clear differentiation strategy.
6. Cost leadership, differentiation, and focus are examples of competitive
strategies that organizations can formulate to gain competitive advantage.
7. Strategy formulation only requires analytical skills and does not need any
creativity or leadership to be effective.
8. A well-formulated strategy helps organizations allocate limited resources
such as money, staff, and time more wisely toward achieving their goals.
9. Blue Coral Beach Resort reduced its dependence on OTAs by building a
strong direct booking website and Instagram storytelling campaign as part
of its formulated marketing strategy.
10. Strategy formulation is the final stage of strategic management, and once
strategies are formulated, no further evaluation or adjustment is ever
needed.

Essay Questions

1. Using the Blue Coral Beach Resort in Siargao as your reference, explain
the complete strategy formulation process the resort underwent — from
reviewing its environmental analysis to the strategies it formulated and the
results it achieved. What specific lessons can other hospitality businesses
in the Philippines learn from Blue Coral's experience?
2. The lesson states that strategy formulation requires "creativity to generate
good alternatives, analytical skills to evaluate options, courage to
make difficult choices, and leadership to align the entire
organization." Do you agree that all four qualities are equally necessary
for effective strategy formulation in tourism and hospitality? Explain your
answer using examples from the lesson and discuss what might happen if
any one of these qualities is missing in the formulation process.

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Lesson II: Business Life Cycle

A. Activity

Students map a real or hypothetical hospitality business onto the business

life cycle and suggest appropriate strategies for its current stage.

B. Analysis

The business life cycle includes introduction, growth, maturity, and

decline/renewal stages. Each stage requires different strategies. In hospitality,
understanding the life cycle helps manage seasonality, investment decisions, and
adaptation to market changes.

C. Abstraction

Every tourism and hospitality business follows a natural developmental path

known as the Business Life Cycle. Just like people go through childhood,
adulthood, and old age, businesses also move through distinct stages:
Introduction, Growth, Maturity, and Decline (or Renewal). Recognizing which stage
a business is in is crucial during strategy formulation because the strategies that
work well in one stage may be completely inappropriate in another. Understanding
the life cycle helps leaders make smarter decisions about investment, marketing,
operations, and innovation, preventing them from using the same approach year
after year regardless of changing realities.

The Business Life Cycle typically consists of four main stages:

1. Introduction (Start-up)
2. Growth
3. Maturity
4. Decline (or Renewal)

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 Each stage has distinct characteristics, opportunities, challenges, and
strategic needs. Strategy formulation must be tailored to the current life cycle stage
what works in the growth stage may be inappropriate during maturity or decline.

In the tourism and hospitality industry, the life cycle is especially relevant
because businesses are heavily affected by seasonality, changing travel trends,
infrastructure development, and external shocks such as pandemics or natural
disasters.

The Four Stages of the Business Life Cycle

1. Introduction Stage

In the Introduction Stage, the business is new, sales are low, and costs are
high as the organization builds awareness and establishes systems.
Typical Strategies are: Heavy marketing, product development,
competitive pricing, and building systems and standards.

For example, when a small glamping site opened in Batangas in 2022, the
owners focused on heavy social media marketing, introductory pricing, and
basic infrastructure development. Strategy formulation emphasized
survival, creating brand awareness, and building a loyal initial customer
base. Many new restaurants and boutique hotels in the Philippines go
through this challenging but exciting phase where the priority is to get
noticed and prove the concept works.

2. Growth Stage As the business enters the Growth Stage, demand increases
rapidly, revenue grows, and expansion becomes possible. The business
expands, hires more staff, and improves facilities. Typical Strategies:
Market expansion, capacity building, brand strengthening, and quality
improvement. This was seen in many Siargao surf resorts after 2018 when
the island gained international popularity. Resorts expanded room capacity,
added restaurants and activity centers, and hired more staff. Strategy

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 formulation during this stage focused on market penetration, product
development (adding wellness packages), and building operational systems
to handle higher volume while maintaining service quality.

3. Maturity Stage In the Maturity Stage, growth slows down and competition
becomes intense. Typical Strategies: Differentiation, efficiency
improvement, customer loyalty programs, and minor innovations. Many
established hotels in Boracay and Cebu are currently in this stage. Strategy
formulation here shifts toward differentiation, customer loyalty programs,
efficiency improvements, and minor innovations to defend market share.
Businesses focus on maintaining profitability rather than rapid expansion.

4. Decline Stage Finally, in the Decline Stage, demand drops due to market
saturation, changing trends, or external shocks. Instead of giving up, smart
organizations pursue renewal strategies. Typical Strategies:
Retrenchment, turnaround, divestment, or renewal through innovation. A
classic example is how some older Manila hotels renovated their properties,
repositioned themselves as boutique lifestyle hotels, or introduced new
concepts like co-working spaces and wellness floors to attract younger
travelers and digital nomads, successfully moving back into a growth phase.

Mastering the life cycle concept allows hospitality leaders to be proactive

rather than reactive, turning potential decline into renewal and ensuring long-term
sustainability in a dynamic industry.

By carefully analyzing its current life cycle stage, a tourism or hospitality

business can formulate the right strategies at the right time. This awareness
prevents costly mistakes and supports sustainable long-term success in a dynamic
industry.

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Case: “Wave Rider Surf Resort” in Siargao

Introduction Stage (2017–2018): The owners opened a small 12-room surf resort.
They focused on basic infrastructure, simple marketing through social media, and
attracting early surf enthusiasts. Strategy formulation emphasized survival,
building reputation, and creating a basic service system. High costs and low
occupancy were expected.

Growth Stage (2019–2022): After positive reviews and the rise of Siargao as a
surf destination, bookings surged. The resort expanded to 35 rooms, added a
restaurant and surf school, and hired more staff. Strategy formulation focused on
market development (attracting international surfers) and product development
(adding yoga and wellness packages). Revenue grew rapidly.

Maturity Stage (2023–present): Competition increased with many new surf

resorts and boutique properties. Growth slowed. The resort is now well-known but
faces pressure on pricing and occupancy. Current Strategy Formulation:

• Differentiation through superior surf coaching and eco-friendly practices.

• Loyalty programs and repeat-guest packages.
• Efficiency improvements to protect profit margins.
• Minor renovations to refresh facilities.

Decline/Renewal Decision: Recognizing early signs of saturation, the owners

formulated a renewal strategy — converting part of the property into a wellness
and digital nomad retreat with co-working spaces, targeting a new customer
segment. This move helped them avoid decline and enter a new growth phase.

Results: The resort maintained strong performance by adjusting its strategies

according to its life cycle stage instead of using the same approach year after year.

Strategic Management Implications

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 Leaders must regularly assess which life cycle stage their business is in and
formulate appropriate strategies:

• Introduction Stage → Focus on awareness and systems.

• Growth Stage → Emphasize expansion and capacity.
• Maturity Stage → Focus on efficiency, loyalty, and differentiation.
• Decline Stage → Choose between retrenchment or renewal (innovation is
often the best path in tourism).

Understanding the business life cycle prevents organizations from using

outdated strategies and helps them make timely, proactive decisions.

The Business Life Cycle provides a powerful framework for strategy

formulation in tourism and hospitality. By recognizing the current stage of their
business, managers can choose the right strategies at the right time whether
building a new venture, expanding rapidly, defending market position, or
reinventing the business for continued success.

D. Application

Identification Test (Write the word, term, or phrase being described)

1. The natural developmental path that every tourism and hospitality business
follows, consisting of four distinct stages from start-up to potential decline
or renewal.
2. The first stage of the business life cycle where the business is new, sales
are low, costs are high, and the primary focus is on building awareness and
establishing systems.
3. The stage of the business life cycle where demand increases rapidly,
revenue grows, expansion becomes possible, and the business hires more
staff and improves facilities.

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 4. The stage where growth slows down, competition becomes intense, and
strategy formulation shifts toward differentiation, customer loyalty
programs, and efficiency improvements.
5. The final stage of the business life cycle where demand drops due to market
saturation, changing trends, or external shocks, requiring retrenchment,
turnaround, or renewal strategies.
6. The strategic approach taken by smart organizations during the decline
stage to avoid permanent failure by innovating, repositioning, or targeting
new customer segments.
7. The Siargao surf resort used as the main case study in the lesson that
successfully adjusted its strategies across all four stages of the business
life cycle.
8. The renewal strategy formulated by Wave Rider Surf Resort to avoid decline
by converting part of its property to attract a new customer segment of
wellness travelers and digital nomads.
9. The stage that many established hotels in Boracay and Cebu are currently
experiencing, characterized by slowing growth, intense competition, and a
focus on maintaining profitability rather than rapid expansion.
10. The external factors specific to the tourism and hospitality industry — such
as pandemics, natural disasters, and changing travel trends — that can
dramatically accelerate or disrupt a business's movement through the life
cycle stages.

Essay Questions

1. Explain the four stages of the Business Life Cycle — Introduction,

Growth, Maturity, and Decline or Renewal — and identify the most
appropriate strategy for each stage. Using the Wave Rider Surf Resort in
Siargao as your reference, show how the resort successfully formulated
different strategies at each stage and discuss what would have happened
if it had continued using the same approach throughout all stages.

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 2. The lesson states that "the strategies that work well in one stage may
be completely inappropriate in another." Do you agree with this
statement? Using real or hypothetical examples from Philippine tourism and
hospitality, explain why strategy formulation must always consider the
current life cycle stage of the business, and describe the consequences of
using the wrong strategy at the wrong time.
3. Think of a hospitality business in your area — a hotel, resort, restaurant,
or tour operator — and identify which stage of the business life cycle it is
currently in. Based on that stage, formulate at least three specific
strategies the business should pursue, explain why those strategies are
appropriate for its current life cycle stage, and discuss what the business
should prepare for as it moves into the next stage.

Lesson III: Industry Analysis

A. Activity

In groups, students perform a Porter’s Five Forces analysis on a specific

hospitality sector (e.g., budget hotels, cruise tourism, or food delivery in tourism
areas).

B. Analysis

Industry analysis evaluates the overall attractiveness and competitive

forces within the sector. It helps identify opportunities, threats, and the best
strategies during formulation. In tourism and hospitality, high rivalry, buyer power
(online reviews), and substitutes (alternative travel options) make this analysis
essential.

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C. Abstraction

Before finalizing strategies, organizations must deeply understand the

industry they operate in. This process is called Industry Analysis. It evaluates the
overall attractiveness, competitive forces, opportunities, and threats within the
specific sector.

Industry Analysis helps answer key questions: How profitable is this

industry? How intense is the competition? What forces shape success or failure?
Which strategies are most likely to work?

In the tourism and hospitality industry, industry analysis is vital because

competition is multi-layered (hotels vs hotels, hotels vs Airbnb, traditional travel
agencies vs OTAs), barriers to entry vary, and customer power is very strong due
to online reviews and price transparency.

Main Tools for Industry Analysis

The most widely used framework is Porter’s Five Forces Model, which
examines five key competitive forces:

1. Threat of New Entrants – How easy is it for new competitors to enter the
market?
2. Bargaining Power of Suppliers – How much control do suppliers have
over prices and terms?
3. Bargaining Power of Buyers (Guests) – How much power do customers
have to demand lower prices or better service?
4. Threat of Substitute Products – Are there alternative options that can
replace your offering?
5. Rivalry among Existing Competitors – How intense is the competition
among current players?

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Case: Mid-Range Hotels in Boracay (Post-Rehabilitation)

Industry Analysis using Porter’s Five Forces:

1. Threat of New Entrants — High After Boracay’s reopening, many new

boutique hotels and resorts entered the market due to high demand and
relatively accessible capital for small properties.
2. Bargaining Power of Suppliers — Moderate Suppliers of food, linens,
and utilities have moderate power, but hotels can source from multiple
providers.
3. Bargaining Power of Buyers (Guests) — Very High Guests can easily
compare prices and read reviews on [Link], Agoda, and social
media. They have strong power to demand better value.
4. Threat of Substitutes — High Alternatives include Airbnb/villas, resorts in
other islands (Palawan, Siargao), or even “staycations” in Manila.
5. Rivalry among Existing Competitors — Very High Numerous hotels
compete on price, location, and facilities, leading to aggressive discounting
during low seasons.

Strategic Formulation Based on Analysis: A smart mid-range hotel formulated

a focus + differentiation strategy:

• Targeted niche markets (wellness and honeymoon couples).

• Invested in unique experiences (private sunset dinners, couples’ spa
packages).
• Built strong direct booking channels to reduce OTA dependence.
• Emphasized personalized service and sustainability.

Results: The hotel achieved higher occupancy and better profit margins than
competitors who continued competing only on price.

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Strategic Management Implications

Industry analysis using Porter’s Five Forces helps managers:

• Decide whether to enter, stay, or exit an industry segment.

• Choose appropriate competitive strategies (cost leadership, differentiation,
or focus).
• Identify areas where they can reduce competitive pressure (e.g., building
strong guest relationships).
• Anticipate future changes in industry attractiveness.

Industry Analysis is a critical input for effective strategy formulation. It

provides a realistic picture of the competitive landscape and helps leaders make
informed, strategic choices rather than emotional or short-sighted decisions.

In the tourism and hospitality industry, where competition is intense and

customer power is high, organizations that regularly conduct thorough industry
analysis are better positioned to formulate winning strategies, build sustainable
competitive advantage, and thrive even in challenging market conditions.

Mastering industry analysis is an essential skill for anyone aspiring to lead

in this dynamic and exciting industry.

D. Application:

True or False (Write TRUE if the statement is correct, FALSE if it is incorrect)

1. Industry analysis evaluates the overall attractiveness, competitive forces,

opportunities, and threats within a specific sector to help organizations
formulate better strategies.
2. Porter's Five Forces Model examines six competitive forces that shape the
profitability and attractiveness of an industry.

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 3. In Boracay's mid-range hotel sector, the bargaining power of buyers is
considered very high because guests can easily compare prices and read
reviews on OTAs and social media platforms.
4. The threat of new entrants in Boracay after its rehabilitation was considered
low because high capital requirements prevented new boutique hotels and
resorts from entering the market.
5. The threat of substitute products for mid-range hotels in Boracay is high
because alternatives such as Airbnb listings, resorts in other islands, and
staycations in Manila are readily available to travelers.
6. Industry analysis helps managers decide whether to enter, stay in, or exit
an industry segment based on a realistic picture of the competitive
landscape.
7. Organizations that skip industry analysis are better positioned to formulate
winning strategies because they can rely purely on creativity and intuition
instead of data.
8. The mid-range hotel in Boracay that formulated a focus and differentiation
strategy achieved higher occupancy and better profit margins than
competitors who continued competing only on price.
9. Rivalry among existing competitors in Boracay's mid-range hotel sector is
very high, leading to aggressive discounting particularly during low
seasons.
10. Porter's Five Forces Model is the most widely used framework for industry
analysis and is especially relevant in tourism and hospitality where
competition is multi-layered and customer power is very strong.

Essay Questions

1. Explain Porter's Five Forces Model and apply each of the five forces to
the mid-range hotel sector in Boracay as discussed in the lesson. Based
on your analysis, discuss why a focus and differentiation strategy was the
most appropriate strategic response for hotels in this competitive
environment.

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 2. The lesson states that "industry analysis provides a realistic picture of
the competitive landscape and helps leaders make informed, strategic
choices rather than emotional or short-sighted decisions." Do you
agree with this statement? Using examples from the tourism and hospitality
industry in the Philippines, explain what can happen to a business that
formulates strategies without conducting a thorough industry analysis first.
3. Choose a specific sector within the Philippine tourism and hospitality
industry — such as budget airlines, cruise tourism, food delivery in tourist
areas, or tour operators — and perform your own Porter's Five Forces
analysis. For each force, identify whether it is low, moderate, or high,
explain why, and recommend at least two strategies the organization should
formulate based on your analysis.

References

1. Sabourin, V. (2022). Strategic Management for the Hospitality and Tourism

Industry. Apple Academic Press.
2. Okumus, F. et al. (2022). Strategic Management for Hospitality and
Tourism. Routledge.
3. Evans, N. G. (2024). Strategic Management for Tourism, Hospitality and
Events. Routledge.
4. Enz, C. A. (2023). Hospitality Strategic Management. Wiley.
5. Raga, J. (2022). Strategic Management for Hospitality & Tourism Sector.
Society Publishing.
6. Bansal, S. (2023). Strategic Management in Tourism and Hospitality.
Paradise Press.
7. Lapuz, M. C. M. (2023 context). Works on digital transformation and
strategy in Philippine rural tourism.

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 Chapter 5

Strategy Implementation

Introduction

Strategy implementation is the action phase of strategic management

where formulated plans are turned into reality. In the tourism and hospitality
industry, successful implementation requires effective coordination, resource
allocation, leadership, and adaptation to dynamic conditions such as seasonality,
cultural differences, and global competition. This chapter defines key terms first,
then examines strategic implementation in tourism and hospitality, international
strategies, and the critical role of stakeholders.

Learning Outcomes By the end of this chapter, students will be able to:

• Explain the process and challenges of strategy implementation in tourism

and hospitality.
• Analyze different international strategies and entry modes used in the
industry.
• Evaluate the significance of stakeholders in successful strategy execution.
• Apply implementation concepts to real-world hospitality scenarios.
• Discuss how effective implementation leads to competitive advantage and
sustainability.

Lesson I: Strategic Implementation for Tourism and Hospitality

A. Activity

Students develop an implementation plan for a chosen strategy (e.g.,

sustainability initiative or digital transformation) for a hotel or resort, including
timelines, responsibilities, and potential obstacles.
B. Analysis

Strategy implementation involves translating plans into action through

structure, resources, leadership, communication, and control. In hospitality, it is
challenging due to high employee turnover, seasonal demand, and the need for
consistent guest experiences across locations.

C. Abstraction

Formulating a good strategy is important, but it is not enough. The real test
of strategic management is Strategy Implementation — the phase where plans
are turned into actual results. In the tourism and hospitality industry,
implementation is especially challenging and critical because the product is a
service that is created and consumed at the same time, in front of the guest. Every
staff interaction, every room cleaning, every meal served, and every tour
conducted becomes part of the guest experience.

Strategic Implementation is the process of executing formulated

strategies through people, processes, resources, leadership, communication,
training, and control systems. It involves translating vision, mission, objectives, and
strategies into daily operations while managing change, motivating employees,
and maintaining consistent service quality.

In an industry known for high staff turnover, strong seasonality, cultural

diversity, and sensitivity to external shocks, successful implementation separates
thriving businesses from those that merely survive. This lesson explores the
nature, key elements, challenges, and best practices of strategy implementation in
tourism and hospitality.

The Nature and Importance of Strategy Implementation

Strategy implementation is often called the “action phase” of strategic

management. While formulation is about deciding what to do, implementation is

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about how to do it. It requires coordination across departments, alignment of
resources, clear communication, employee engagement, and continuous
monitoring.

Why is implementation especially important in tourism and hospitality?

• Services cannot be stored if a room is empty tonight, that revenue is lost

forever.
• Guests judge the entire organization based on individual staff interactions.
• The industry is highly labor-intensive and people-dependent.
• Seasonality creates big fluctuations in demand and staffing needs.
• Guests expect consistent quality whether visiting during peak or low
season.

Poor implementation leads to confused staff, inconsistent service, wasted

resources, and disappointed guests. Excellent implementation creates memorable
experiences, loyal customers, motivated employees, and sustainable profitability.

Key Elements of Effective Strategy Implementation

Successful strategy implementation in hospitality rests on several

interconnected elements:

1. Organizational Structure The structure must support the strategy. A luxury

differentiation strategy needs empowered frontline staff, while a cost-
leadership strategy may require tighter centralized controls.
2. Resource Allocation Money, people, time, and technology must be
directed toward strategic priorities. For example, shifting to sustainable
tourism requires investment in staff training, eco-friendly equipment, and
green technologies.
3. Leadership and Communication Leaders must clearly explain the
strategy, inspire commitment, and lead by example. Regular town hall

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 meetings, department briefings, and visual strategy boards help keep
everyone aligned.
4. Training and Development Employees need the knowledge and skills to
deliver the new strategy. Training programs must be practical and ongoing.
5. Change Management People naturally resist change. Effective leaders
address fears, involve employees in the process, and celebrate early wins.
6. Control and Feedback Systems Regular monitoring through guest
feedback, financial reports, and performance dashboards allows timely
corrective action.

Real-World Situational Examples in the Philippine Tourism and Hospitality

Industry

1: Sustainable Strategy Implementation at a Boracay Resort A mid-sized

resort formulated a strategy to become a leader in eco-friendly tourism.
Implementation included:

• Installing solar panels and water recycling systems.

• Retraining all staff on waste segregation, energy conservation, and eco-
service standards.
• Redesigning menus to feature local organic ingredients.
• Launching a guest coral reef adoption program.

The resort assigned clear responsibilities, conducted monthly sustainability

audits, and recognized outstanding “Green Champions” among staff. Guests
responded positively, occupancy and average room rates increased, and the resort
earned national awards for sustainable practices.

2: Digital Transformation at a City Hotel in Makati A business hotel

implemented a strategy to become a leader in contactless, technology-driven
service. Implementation involved:

• Installing mobile check-in and digital room keys.

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 • Training staff to use AI-powered chatbots and personalized guest apps.
• Redesigning the lobby for seamless digital guest flow.
• Creating a dedicated digital concierge team.

Clear communication, pilot testing in one floor, and continuous feedback from
guests and staff made the transition smooth. The hotel improved operational
efficiency and guest satisfaction while standing out from traditional competitors.

Challenges in Strategy Implementation

Common challenges in the hospitality industry include:

• High employee turnover making training investments difficult.

• Resistance to change from long-time staff.
• Seasonality causing resource shortages during peak periods.
• Difficulty maintaining consistency across multiple properties.
• Balancing cost control with quality delivery.

Successful organizations overcome these challenges through strong

leadership, employee involvement, continuous training, and flexible systems.

Example: “Emerald Shores Hospitality Group”

Emerald Shores, a growing Philippine chain, formulated a strategy to

become the preferred wellness and eco-luxury destination. During implementation,
they:

• Adopted a decentralized structure giving property managers more decision-

making power for local wellness programs.
• Allocated budget for staff wellness training and facility upgrades.
• Communicated the new direction through regular leadership meetings and
staff workshops.
• Partnered with local communities for organic produce supply and cultural
experiences.

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 • Monitored progress using guest feedback scores and sustainability KPIs.

The careful implementation resulted in higher guest loyalty, premium pricing

power, stronger community relationships, and impressive business growth even
during challenging periods.

Strategic Implementation for Tourism and Hospitality is the bridge

between great ideas and outstanding performance. It demands coordination,
leadership, training, communication, and adaptability. Organizations that
implement strategies effectively deliver consistent, memorable guest experiences,
motivate their teams, and achieve sustainable competitive advantage.

D. Application

Matching Type

(Match Column A with the correct answer in Column B. Write the letter of your
answer.)

Column A Column B
1. The phase of strategic management where A. Change
formulated plans are turned into actual results through Management
people, processes, and resources
2. The key implementation element that involves B. Control and
directing money, people, time, and technology toward Feedback Systems
strategic priorities
3. The key implementation element where leaders C. Strategy
clearly explain the strategy, inspire commitment, and Implementation
lead by example
4. The process of addressing employee fears, involving D. Resource
staff in the process, and celebrating early wins to Allocation
overcome resistance

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5. The key implementation element that involves E. Leadership and
regular monitoring through guest feedback, financial Communication
reports, and performance dashboards
6. The growing Philippine hotel chain used in the lesson F. Training and
that implemented a wellness and eco-luxury strategy Development
through decentralized structure and community
partnerships
7. The key implementation element that ensures G. Organizational
employees have the knowledge and skills needed to Structure
deliver the new strategy through practical and ongoing
programs
8. The Makati city hotel's digital transformation strategy H. Emerald Shores
that included mobile check-in, digital room keys, and AI- Hospitality Group
powered chatbots
9. The key implementation element that must support I. Contactless
the strategy — for example, a luxury differentiation Technology-Driven
strategy needs empowered frontline staff Service
10. The reason why strategy implementation is J. Perishable Service
especially critical in hospitality — because this cannot or Unsold Room
be stored and once lost, the revenue opportunity is
gone forever

Essay Questions

1. Explain the six key elements of effective strategy implementation in

tourism and hospitality — organizational structure, resource allocation,
leadership and communication, training and development, change
management, and control and feedback systems. Using either the Boracay
eco-resort or the Makati city hotel example from the lesson, show how
these elements worked together to successfully execute the chosen
strategy.

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 2. The lesson states that "formulating a good strategy is important, but it
is not enough — the real test of strategic management is strategy
implementation." Do you agree with this statement? Discuss the most
common challenges of strategy implementation in the Philippine tourism
and hospitality industry and explain how successful organizations like
Emerald Shores Hospitality Group overcome these challenges.
3. Imagine you are the General Manager of a resort that has just formulated
a new sustainability strategy. Using the concepts from this lesson, develop
a detailed implementation plan that includes the organizational structure
needed, how you will allocate resources, how you will communicate the
strategy to your staff, what training programs you will introduce, how you
will manage resistance to change, and what control systems you will use to
monitor progress and results.

Lesson II: International Strategies for Tourism, Hospitality and Events

A. Activity

Students research how a major chain (e.g., Marriott, Accor, or IHG) entered
a new country and evaluate the success of its international strategy.

B. Analysis

International strategies help hospitality organizations expand beyond

domestic markets. Common approaches include global standardization (same
brand everywhere), multi-domestic (local adaptation), transnational (balance of
both), and entry modes such as franchising, management contracts, joint ventures,
or wholly-owned subsidiaries.

C. Abstraction

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 As tourism becomes increasingly global, many hospitality and tourism
organizations look beyond their home country to grow their business.
International Strategies are the plans companies use to enter and compete
successfully in foreign markets. These strategies determine how a business
expands, adapts (or standardizes) its offerings, and manages operations across
different countries and cultures.

International strategies are a major part of strategy implementation because

expanding abroad requires careful execution of structure, resources, staffing,
marketing, and stakeholder management. Choosing the right international strategy
and entry mode can accelerate growth, spread risk, and strengthen the brand,
while a poor choice can lead to financial losses, cultural mismatches, and
reputational damage.

Main Types of International Strategies

There are four primary international strategies used in tourism and hospitality:

1. Global Standardization Strategy The company offers the same products,

services, and brand experience in every country. The focus is on
consistency, efficiency, and strong global branding.
2. Multi-Domestic (Localization) Strategy The company heavily adapts its
offerings to suit the culture, preferences, and regulations of each local
market.
3. Transnational Strategy The company seeks the best of both worlds —
maintaining global standards and efficiency while allowing meaningful local
adaptation. This is the most commonly used and successful approach
today.
4. International Strategy The company exports its core offering with minimal
changes, usually from its home country.

Common Entry Modes include:

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 • Franchising
• Management Contracts
• Joint Ventures
• Wholly-owned Subsidiaries

Why International Strategies Matter in Tourism and Hospitality

The tourism industry is one of the most globalized sectors in the world.
Travelers cross borders easily, and competition is no longer limited to local players.
International strategies allow companies to:

• Access new customer markets and reduce dependence on domestic

demand.
• Spread business risk across different countries.
• Leverage strong global brands while benefiting from local insights.
• Achieve economies of scale in purchasing, technology, and marketing.

In the Philippines, international strategies have enabled both foreign chains

and local groups to expand successfully.

Real-World Situational Examples

1: Accor Hotels (Transnational Strategy) Accor, a French multinational,

operates Sofitel, Novotel, Mercure, and ibis hotels across the Philippines. They
use a transnational strategy:

• Maintain global standards in service quality, cleanliness, and loyalty

programs (ALL – Accor Live Limitless).
• Adapt locally by featuring Filipino dishes, hiring and training local staff, and
incorporating Philippine design elements and cultural experiences.
• Enter markets mainly through management contracts and franchising.

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 This balanced approach has allowed Accor to grow steadily in Manila,
Cebu, Boracay, and Palawan while delivering both international reliability and local
warmth.

2: Airbnb (Multi-Domestic Approach) Airbnb uses a strong localization

strategy in the Philippines. The platform adjusted its payment systems, host
guidelines, community standards, and marketing messages to fit local culture,
banking habits, and tourism regulations. This flexibility helped Airbnb expand
rapidly into provinces like Siargao, Bohol, and Palawan, while building trust with
local hosts and communities.

3: Shangri-La Hotels Shangri-La entered the Philippine market through

management contracts. They kept their signature luxury standards and “Shangri-
La hospitality” while incorporating warm Filipino service touches (such as
personalized greetings and local cultural performances). This strategy helped
them become one of the most respected luxury hotel brands in the country.

Strategic Management Implications

Choosing and implementing the right international strategy requires:

• Thorough environmental analysis of the target country (political, economic,

cultural, legal factors).
• Strong cross-cultural management and local talent development.
• Clear decision on the balance between global consistency and local
adaptation.
• Effective stakeholder engagement with governments, local communities,
and business partners.

Companies that succeed internationally treat implementation as seriously

as strategy formulation. They invest in training, technology, and relationship-
building in every new market.

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Example: “Emerald Bay Hospitality Group”

Emerald Bay, a growing Philippine-based resort group, wanted to expand

into Indonesia and Thailand. After careful analysis, they chose a transnational
strategy and used management contracts as the main entry mode.

Implementation steps included:

• Maintaining core brand standards in service excellence and sustainability.

• Adapting menus, spa treatments, and activities to local culture and
ingredients.
• Hiring and training local managers and staff.
• Building strong relationships with local government tourism offices and
communities.

Within three years, their new properties achieved high occupancy rates,
positive reviews, and strong financial performance. The transnational approach
allowed them to leverage their Philippine success while respecting and benefiting
from local characteristics.

D. Application

Identification Test (Write the word, term, or phrase being described)

1. The plans companies use to enter and compete successfully in foreign

markets by determining how a business expands, adapts or standardizes
its offerings across different countries.
2. The international strategy where a company offers the same products,
services, and brand experience in every country, focusing on consistency,
efficiency, and strong global branding.
3. The international strategy where a company heavily adapts its offerings to
suit the culture, preferences, and regulations of each specific local market.

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 4. The international strategy considered the most commonly used and
successful approach today, seeking the best of both worlds by maintaining
global standards while allowing meaningful local adaptation.
5. The entry mode used by Accor Hotels and Shangri-La to enter the Philippine
market, allowing them to manage properties without full ownership.
6. The French multinational hotel company that operates Sofitel, Novotel,
Mercure, and ibis hotels across the Philippines using a transnational
strategy.
7. The global home-sharing platform that used a multi-domestic approach in
the Philippines by adapting its payment systems, host guidelines, and
marketing messages to fit local culture and tourism regulations.
8. The growing Philippine-based resort group used in the lesson that
successfully expanded into Indonesia and Thailand using a transnational
strategy and management contracts.
9. The four common entry modes used by hospitality companies to expand
internationally, which include franchising, management contracts, joint
ventures, and this fourth option involving full ownership.
10. The Accor loyalty program mentioned in the lesson that represents the
global standard maintained across all its international properties including
those in the Philippines.

Essay Questions

1. Compare and contrast the four main types of international strategies —

Global Standardization, Multi-Domestic, Transnational, and International
Strategy. Using the real-world examples of Accor Hotels, Airbnb, and
Shangri-La from the lesson, explain which strategy each company uses,
why it was the most appropriate choice for their expansion in the
Philippines, and what the consequences might have been if they had
chosen a different approach.
2. Using the Emerald Bay Hospitality Group as your reference, explain the
complete process of implementing an international strategy — from

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 choosing the right entry mode to managing cross-cultural operations. What
specific lessons can Philippine hospitality businesses learn from Emerald
Bay's expansion into Indonesia and Thailand, and what key factors must
any hospitality organization consider before expanding into a foreign
market?

Lesson III: Significance of Stakeholders in Strategic Management

A. Activity

Students map stakeholders for a tourism project (e.g., new resort

development) and propose engagement strategies for successful implementation.

B. Analysis

Stakeholders play a vital role in strategy implementation. Their support or

opposition can determine success. Effective stakeholder management builds
trust, reduces conflicts, and ensures long-term sustainability in tourism and
hospitality.

C. Abstraction

In strategic management, especially in the tourism and hospitality industry,

success does not depend only on good strategies and strong implementation. It
also depends heavily on how well an organization manages its Stakeholders —
all the individuals and groups who can affect or are affected by its decisions and
actions.

Stakeholders include guests, employees, local communities, government

agencies, suppliers, investors, environmental groups, business partners, and even
competitors. Stakeholder Management is the process of identifying these groups,

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understanding their interests and power, engaging them effectively, and balancing
their needs with the organization’s goals.

In tourism and hospitality, stakeholders are particularly important because

the industry operates in close contact with communities, relies on government
support, and delivers experiences that directly impact people’s lives and
environments. Ignoring stakeholders can lead to protests, regulatory problems,
reputational damage, and business failure. Engaging them well builds trust,
creates support, and often leads to stronger, more sustainable competitive
advantage.

Why Stakeholders Matter in Tourism and Hospitality

Tourism and hospitality businesses do not operate in isolation. They

function within communities, depend on government approvals, employ local
people, and serve guests who are increasingly conscious of social and
environmental issues. Stakeholders can support or block projects, influence guest
choices through word-of-mouth and reviews, and shape the regulatory
environment.

Effective stakeholder management helps organizations:

• Gain social license to operate.

• Reduce risks and avoid conflicts.
• Create authentic experiences that guests value.
• Build long-term partnerships and loyalty.
• Enhance reputation and brand strength.

In today’s world, where travelers care about sustainability and community

impact, stakeholder management has become a strategic necessity rather than
just a moral responsibility.

Key Stakeholders in Tourism and Hospitality

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 The main stakeholders include:

• Guests/Customers — Expect quality service, value, and responsible

practices.
• Employees — The heart of service delivery; need fair treatment, training,
and motivation.
• Local Communities — Provide labor, cultural content, and social
acceptance; can support or oppose developments.
• Government Agencies — Regulate licensing, tourism promotion,
environmental compliance, and safety.
• Suppliers — Provide food, supplies, and services that affect cost and
quality.
• Investors and Owners — Expect financial returns and responsible growth.
• Environmental Groups and NGOs — Focus on sustainability and
conservation.

Real-World Situational Examples

1: Boracay Island Rehabilitation When the Philippine government closed

Boracay in 2018 for environmental cleanup, many resorts faced severe challenges.
Hotels that had built strong relationships with local communities and government
agencies recovered faster. They were given priority in the reopening process and
received support for sustainable redevelopment. Resorts that ignored community
and environmental stakeholders faced longer delays and public criticism.

2: Community-Based Tourism in Bohol The Bohol Bee Farm and several eco-
resorts in Panglao have succeeded by treating local communities as key
stakeholders. They provide employment, source ingredients locally, support
education programs, and involve residents in tourism activities. This approach
created authentic guest experiences, strong community support, and positive
word-of-mouth, turning potential challenges into competitive advantages.

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3: Employee Stakeholders at The Peninsula Manila The Peninsula is
consistently rated as one of the best employers in Philippine hospitality. By treating
employees as important stakeholders offering excellent benefits, career
development, and a respectful work culture the hotel maintains very low turnover
and exceptionally high service standards. Guests repeatedly mention the warmth
and professionalism of the staff as the main reason for their loyalty.

Strategic Management Implications

Stakeholder management should not be treated as a separate CSR activity.

It must be integrated into strategy formulation and implementation. Organizations
should:

• Map stakeholders and analyze their power, interest, and influence.

• Engage them early and continuously through dialogue and partnerships.
• Balance stakeholder needs with business objectives.
• Monitor stakeholder satisfaction as a key performance indicator.

Proactive stakeholder management reduces risks, creates opportunities,

and strengthens the organization’s social license to operate all of which support
successful strategy implementation.

Scenario: “Emerald Shores Hospitality Group”

Emerald Shores, a Philippine resort group, wanted to develop a new

property in a sensitive coastal area. Instead of rushing construction, they
conducted a thorough stakeholder analysis and engagement program:

• Held regular consultations with local fishing communities.

• Partnered with the DENR for environmental protection programs.
• Offered priority employment and skills training to residents.
• Involved guests in reef restoration activities.
• Maintained open communication with local government units.

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 This stakeholder-focused approach turned potential opposition into strong
support. The resort opened successfully, became a model for responsible tourism,
attracted environmentally conscious travelers, and generated sustainable income
for the community.

D. Application

Identification Test (Write the word, term, or phrase being described)

1. All the individuals and groups who can affect or are affected by an
organization's decisions and actions in the tourism and hospitality industry.
2. The process of identifying stakeholder groups, understanding their interests
and power, engaging them effectively, and balancing their needs with the
organization's goals.
3. The term used to describe the social acceptance and approval that an
organization needs from its community and stakeholders in order to operate
without opposition or conflict.
4. The stakeholder group considered the heart of service delivery who need
fair treatment, training, and motivation to consistently deliver quality guest
experiences.
5. The stakeholder group that regulates licensing, tourism promotion,
environmental compliance, and safety for hospitality and tourism
organizations.
6. The Philippine island whose 2018 government-mandated closure
demonstrated how hotels with strong community and government
stakeholder relationships recovered faster during the reopening process.
7. The Bohol eco-resort mentioned in the lesson that successfully treated local
communities as key stakeholders by providing employment, sourcing
ingredients locally, and supporting education programs.
8. The luxury Manila hotel praised in the lesson for treating employees as
important stakeholders, resulting in very low turnover and exceptionally high

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 service standards that guests consistently highlight as their reason for
loyalty.
9. The Philippine resort group used as the main scenario in the lesson that
conducted thorough stakeholder consultations before developing a new
property in a sensitive coastal area, turning potential opposition into strong
community support.
10. The strategic management tool used to analyze stakeholders by examining
their level of power, interest, and influence over an organization's decisions
and projects.

Essay Questions

1. The lesson states that "ignoring stakeholders can lead to protests,

regulatory problems, reputational damage, and business failure, while
engaging them well builds trust, creates support, and often leads to
stronger, more sustainable competitive advantage." Using the real-
world examples of Boracay Island Rehabilitation, Bohol Bee Farm, and
The Peninsula Manila, explain how each organization managed its key
stakeholders differently and what specific outcomes resulted from their
stakeholder engagement approach.
2. Using the Emerald Shores Hospitality Group scenario as your reference,
explain how proactive stakeholder management can transform potential
opposition into strong community support during the development of a new
tourism or hospitality property. Identify the key stakeholders involved,
describe the engagement strategies used, and discuss why stakeholder
management must be integrated into both strategy formulation and
implementation rather than treated as a separate CSR activity.

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References

1. Sabourin, V. (2022). Strategic Management for the Hospitality and Tourism

Industry. Apple Academic Press.
2. Okumus, F. et al. (2022). Strategic Management for Hospitality and
Tourism. Routledge.
3. Evans, N. G. (2024). Strategic Management for Tourism, Hospitality and
Events. Routledge.
4. Enz, C. A. (2023). Hospitality Strategic Management. Wiley.
5. Raga, J. (2022). Strategic Management for Hospitality & Tourism Sector.
Society Publishing.
6. Marcelo, J. S. et al. (2026). Strategic Management in Tourism and
Hospitality Management.
7. Department of Tourism (Philippines) & ASEAN contributors (2026). ASEAN
Tourism Sectoral Plan 2026–2030 (implementation-focused).

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 Chapter 6

Strategy Evaluation

Introduction

Strategy evaluation is the final, ongoing phase of the strategic management

process. It involves assessing whether implemented strategies are achieving
desired results and making necessary adjustments. In the tourism and hospitality
industry, effective evaluation is crucial due to rapid changes in guest preferences,
seasonality, economic volatility, and global events. This chapter defines key terms
first, then explores strategic evaluation, the role of structure and control, the Boston
Consulting Group (BCG) Matrix, and the characteristics of a good evaluation
system, with practical examples from hotels, resorts, and tour operators.

Learning Outcomes By the end of this chapter, students will be able to:

• Explain the purpose and process of strategic evaluation in tourism and

hospitality.
• Analyze how organizational structure and control systems support strategy
evaluation.
• Apply the BCG Matrix to evaluate business portfolios in hospitality.
• Identify and apply the characteristics of effective evaluation systems.
• Recommend improvements when strategies underperform.
• Discuss the importance of continuous evaluation for long-term success.

Lesson I: Strategic Evaluation

A. Activity

Students review the annual report or performance data of a hospitality

company and evaluate the success of one of its major strategies.
B. Analysis

Strategic evaluation is the process of measuring actual performance

against planned objectives, identifying deviations, and deciding on corrective
actions. In hospitality, it includes both financial results and non-financial metrics
such as guest satisfaction and employee engagement.

C. Abstraction

Strategic Evaluation is the ongoing process of assessing whether the

strategies an organization has formulated and implemented are actually producing
the desired results. It involves measuring performance, comparing results with set
objectives, identifying gaps or successes, and taking corrective actions when
necessary. This phase completes the strategic management cycle and ensures
continuous improvement.

In the tourism and hospitality industry, strategic evaluation is especially

critical because the business environment changes rapidly guest preferences
evolve, seasons cause demand fluctuations, new competitors appear, and
external events (pandemics, typhoons, economic shifts) can disrupt operations
overnight. Without regular and systematic evaluation, even excellent strategies
can quietly fail while resources are wasted.

The Importance of Strategic Evaluation in Tourism and Hospitality

Strategic evaluation helps organizations stay relevant and competitive. It

allows leaders to:

• Detect problems early before they become costly crises.

• Confirm what is working well so successful practices can be expanded.
• Ensure efficient use of limited resources (money, staff, time).
• Support data-driven decision making for future strategies.
• Maintain consistent service quality despite seasonality and staff turnover.

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 • Build a culture of accountability and continuous learning.

In hospitality, where guest satisfaction can be affected by a single poor

interaction, evaluation ensures the promised experience is actually delivered.

The Strategic Evaluation Process

The evaluation process typically follows these clear steps:

1. Establish Performance Standards Setting clear, measurable targets such

as 85% occupancy rate, 4.8/5.0 guest satisfaction score, RevPAR growth
of 15%, or employee engagement score of 80%.
2. Measure Actual Performance Collecting data through guest surveys,
online reviews (TripAdvisor, Google), financial reports, occupancy data,
RevPAR, employee feedback, and sustainability metrics.
3. Compare Results with Standards Identifying variances — areas where
performance is above or below expectations.
4. Analyze the Causes of Gaps Understanding why deviations occurred
(e.g., insufficient staff training, weak marketing, or external factors like bad
weather).
5. Take Corrective Action Adjusting strategies, operations, training
programs, pricing, or resource allocation.
6. Review and Learn Documenting lessons learned to improve future
planning.

Many organizations use the Balanced Scorecard to evaluate performance

across four perspectives: Financial, Customer, Internal Processes, and Learning
& Growth.

Real-World Situational Examples

1: Beach Resort in Palawan A resort implemented a strategy to grow its eco-

tourism packages. Strategic evaluation after six months showed good overall

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occupancy but guest satisfaction with sustainability activities was only 3.9/5.0.
Investigation revealed that staff were not confident explaining conservation efforts.
Corrective actions included targeted training, redesigned guest activities, and
better storytelling. Satisfaction scores rose to 4.7/5.0 within three months, and eco-
packages became highly profitable.

2: Business Hotel in Makati During post-pandemic recovery, the hotel pursued a

“staycation” strategy. Evaluation revealed strong corporate recovery but weak
leisure performance. Further analysis showed marketing was still too corporate-
oriented. The hotel quickly launched attractive wellness staycation packages and
targeted social media campaigns. Leisure revenue improved significantly, creating
a more balanced business.

3: Tour Operator in Cebu A cultural tour company set a goal to increase group
bookings by 30%. After one year, growth was only 9%. Evaluation showed their
packages were too rigid for younger travelers. They reformulated offerings with
customizable private tours and Instagram-friendly experiences. Bookings
recovered strongly the following year.

Challenges in Strategic Evaluation

Common challenges in the hospitality industry include:

• Difficulty measuring intangible aspects like guest experience quality.

• High staff turnover affecting consistent data collection.
• Seasonality making year-to-year comparisons tricky.
• Over-reliance on financial metrics while ignoring customer and employee
feedback.

Successful organizations overcome these by using multiple evaluation tools

and involving different departments in the process.

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Comprehensive Example: “Azure Shores Resort Group”

Azure Shores operates resorts in Boracay, Palawan, and Cebu. They set a
strategy to lead in sustainable mid-luxury tourism. Through strategic evaluation
using the Balanced Scorecard:

• Financial targets were met.

• Guest satisfaction with sustainability features was lower than expected.
• Staff surveys showed gaps in knowledge about eco-programs.

Corrective Actions:

• Conducted intensive sustainability training for all employees.

• Redesigned guest activities based on feedback.
• Improved digital storytelling about their green initiatives.
• Strengthened partnerships with local communities.

Results: Guest satisfaction increased by 22%, repeat bookings rose, costs

decreased through better resource management, and the group gained
recognition as a responsible tourism leader.

D. Application

Identification Test (Write the word, term, or phrase being described)

1. The final and ongoing phase of the strategic management process that
involves assessing whether implemented strategies are achieving desired
results and making necessary adjustments.
2. The first step in the strategic evaluation process that involves setting clear
and measurable targets such as occupancy rates, guest satisfaction scores,
and RevPAR growth.
3. The performance management tool used by many hospitality organizations
to evaluate performance across four perspectives — Financial, Customer,
Internal Processes, and Learning and Growth.

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 4. The step in the strategic evaluation process where leaders identify
variances by comparing actual performance data against the established
standards and targets.
5. The step in the strategic evaluation process that involves adjusting
strategies, operations, training programs, pricing, or resource allocation
when performance falls below expectations.
6. The Philippine resort group used as the comprehensive example in the
lesson that operates properties in Boracay, Palawan, and Cebu and used
the Balanced Scorecard to evaluate its sustainable mid-luxury tourism
strategy.
7. The Palawan beach resort's specific problem identified during strategic
evaluation, where guest satisfaction with sustainability activities scored only
3.9 out of 5.0 due to staff not being confident in explaining conservation
efforts.
8. The strategy pursued by the Makati business hotel during post-pandemic
recovery that showed strong corporate performance but weak leisure
results, prompting a shift toward wellness packages and targeted social
media campaigns.
9. The Cebu-based cultural tour company's original goal of increasing group
bookings by 30%, which fell short at only 9% growth due to packages being
too rigid for younger travelers.
10. The common challenge in strategic evaluation where organizations focus
too heavily on financial data while failing to consider equally important
customer satisfaction and employee feedback metrics.

Essay Questions

1. Explain the six-step strategic evaluation process — establishing

performance standards, measuring actual performance, comparing results
with standards, analyzing causes of gaps, taking corrective action, and
reviewing and learning. Using any two of the three real-world examples
from the lesson (Palawan beach resort, Makati business hotel, or Cebu tour

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 operator), show how each organization moved through these steps and
what specific corrective actions they took to improve their performance.
2. The lesson states that "without regular and systematic evaluation, even
excellent strategies can quietly fail while resources are wasted." Do
you agree with this statement? Discuss the importance of strategic
evaluation in the tourism and hospitality industry, explain the most common
challenges organizations face when evaluating their strategies, and
describe how successful organizations like Azure Shores Resort Group
overcome these challenges to achieve continuous improvement.
3. Using the Azure Shores Resort Group as your main reference, explain
how the Balanced Scorecard was used to evaluate the resort group's
sustainable mid-luxury tourism strategy across its four perspectives —
Financial, Customer, Internal Processes, and Learning and Growth. Based
on the gaps identified during evaluation, assess whether the corrective
actions taken were appropriate and recommend at least two additional
strategies Azure Shores should consider to further strengthen its position
as a responsible tourism leader in the Philippines.

Lesson II: Structure and Control Strategy

A. Activity

Students examine the organizational structure and control mechanisms of

a hotel chain and suggest how they support or hinder strategy evaluation.

B. Analysis

Structure and control strategy ensures that the organization’s hierarchy,

reporting lines, and control systems (financial budgets, operational SOPs, and
behavioral controls) enable effective monitoring and adjustment of strategies.

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C. Abstraction

Once strategies are formulated and implemented, organizations need

reliable mechanisms to monitor progress and ensure everything stays on track.
Control Strategy refers to the systems, processes, and tools used to measure
performance, compare results with planned objectives, detect deviations, and take
corrective actions.

In the tourism and hospitality industry, effective control strategy is essential

because operations are complex, fast-paced, and highly visible to guests. A single
lapse in service can damage reputation instantly. Control strategy helps leaders
maintain quality standards, manage costs, respond to seasonal changes, and keep
the organization aligned with its strategic goals.

Why Control Strategy Matters in Tourism and Hospitality

The hospitality industry is characterized by perishable inventory (rooms and

seats), high fixed costs, and direct guest interaction. Without strong controls,
problems can go unnoticed until guests complain or financial losses accumulate.
A good control strategy:

• Provides timely and accurate performance information.

• Ensures consistency in service quality across shifts and properties.
• Helps identify inefficiencies and waste quickly.
• Supports fast corrective action to protect guest satisfaction.
• Maintains financial health and operational standards.
• Builds accountability and a culture of continuous improvement.

Main Types of Control Strategy

1. Financial Controls Focus on monitoring revenue, costs, and profitability.

Key tools include budgets, daily revenue reports, RevPAR analysis, cost
variance reports, and cash flow monitoring.

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 2. Operational Controls Ensure day-to-day service delivery meets
standards. These include Standard Operating Procedures (SOPs), quality
checklists, occupancy reports, inventory management, and service timing
measurements.
3. Behavioral Controls Guide employee attitudes and performance. These
include performance appraisals, recognition programs, training evaluations,
guest feedback systems, and organizational culture reinforcement.
4. Strategic Controls Focus on long-term direction using tools like the
Balanced Scorecard, which evaluates performance from financial,
customer, internal process, and learning & growth perspectives.

Real-World Situational Examples

1: Beach Resort in Boracay The resort implemented strong operational and

financial controls. Daily dashboards tracked occupancy, RevPAR, and guest
satisfaction scores. When evaluation showed declining food & beverage revenue,
controls quickly revealed that portion sizes were too large and menu pricing was
not competitive. Corrective action — menu revision and staff retraining — was
taken within two weeks, restoring profitability.

2: City Hotel in Makati The hotel used behavioral and strategic controls through
real-time guest feedback apps and monthly Balanced Scorecard reviews. When
post-pandemic evaluation showed low leisure guest satisfaction, the control
system highlighted weak wellness facilities. Management responded by adding
spa services and targeted staycation packages, significantly improving leisure
segment performance.

3: Tour Operator in Cebu The company strengthened operational controls with a

real-time booking and monitoring system. During peak season, this helped prevent
overbooking and last-minute cancellations, leading to higher customer satisfaction
and fewer negative reviews.

Strategic Management Implications

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 Control strategy must be aligned with the organization’s overall strategy:

• Cost leadership requires tight financial and operational controls.

• Differentiation benefits from strong behavioral and guest feedback
controls.
• Sustainability-focused strategy needs specific environmental
performance controls.

Controls should be timely, objective, flexible, and focused on both short-

term results and long-term strategic goals. Over-control can stifle creativity, while
weak controls lead to chaos.

Scenario: “Azure Shores Resort Group”

Azure Shores operates multiple properties with a strategy centered on

sustainable mid-luxury tourism. They implemented a robust control strategy that
includes:

• Daily financial and occupancy dashboards.

• Real-time guest feedback tools.
• Monthly Balanced Scorecard reviews covering financial, customer,
operational, and sustainability metrics.
• Quarterly strategy alignment meetings.

When controls showed lower-than-expected guest engagement with

sustainability programs, the team quickly identified insufficient staff knowledge as
the cause. Corrective actions included targeted training and redesigned guest
activities. This rapid response improved satisfaction scores, reduced costs through
better resource management, and strengthened the group’s reputation as a
responsible tourism leader.

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Lesson III: Boston Consulting Group Matrix and Characteristics of a Good
Evaluation

A. Activity

Students apply the BCG Matrix to a hotel chain’s portfolio of properties or

brands and recommend strategies for each category.

B. Analysis

The Boston Consulting Group (BCG) Matrix is a visual portfolio analysis

tool. A good evaluation system must be timely, objective, comprehensive, flexible,
and balanced between short- and long-term perspectives.

C. Abstraction

Strategic evaluation becomes more powerful when supported by practical

tools that help leaders analyze their portfolio of businesses or products. One of the
most widely used tools is the Boston Consulting Group (BCG) Matrix. This
lesson covers the BCG Matrix as a key evaluation tool and discusses the
Characteristics of a Good Evaluation System that makes strategic assessment
effective and useful.

The BCG Matrix helps managers decide how to allocate resources across
different parts of the business, while good evaluation characteristics ensure the
entire evaluation process is reliable, timely, and actionable.

The Boston Consulting Group (BCG) Matrix

The BCG Matrix is a simple but powerful portfolio analysis tool developed
by the Boston Consulting Group. It classifies a company’s business units,
properties, or products into four categories based on two factors:

• Market Growth Rate (vertical axis) – How fast the market is growing.

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 • Relative Market Share (horizontal axis) – How strong the business is
compared to its competitors.

The Four Quadrants:

1. Stars (High Growth + High Market Share) Promising businesses that

require heavy investment to maintain leadership. Strategy: Invest to grow
and protect their position.
2. Cash Cows (Low Growth + High Market Share) Mature, stable businesses
that generate strong cash flow with little investment needed. Strategy:
“Milk” them to generate cash for other units.
3. Question Marks (High Growth + Low Market Share) Uncertain businesses
in fast-growing markets but with weak position. Strategy: Decide whether
to invest heavily to turn them into Stars or divest.
4. Dogs (Low Growth + Low Market Share) Weak businesses in slow-growing
markets. Strategy: Harvest remaining cash or divest/sell them.

Characteristics of a Good Evaluation System

For evaluation to be truly useful, it should have these important

characteristics:

• Timely — Information must be available when needed for decision-making.

• Objective and Accurate — Based on reliable data, not personal opinions.
• Comprehensive — Covers financial, customer, operational, and learning
aspects.
• Flexible — Can adapt to changing conditions.
• Economical — Cost-effective to operate.
• Action-Oriented — Leads to clear corrective actions.
• Balanced — Considers both short-term results and long-term strategic
goals.

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Real-World Situational Examples

1: A Hotel Chain’s Portfolio A Philippine hotel group used the BCG Matrix for its
properties:

• Stars: Their Boracay resort (high growth, strong market position) –

continued heavy investment in facilities.
• Cash Cows: Manila business hotel (stable, high share) – generated cash
to fund new projects.
• Question Marks: New eco-resort in Palawan – decided to invest more to
build market share.
• Dogs: Old mountain property – renovated or considered selling.

This analysis helped them allocate resources wisely and improve overall
group performance.

2: A Tour Operator in Cebu The company applied the BCG Matrix to its tour
packages:

• Cultural heritage tours = Cash Cows.

• Adventure packages = Stars.
• New wellness retreats = Question Marks (they decided to invest).
• Traditional bus tours = Dogs (they phased them out).

This clear evaluation guided better product decisions and improved

profitability.

Strategic Management Implications

The BCG Matrix helps leaders make tough resource allocation decisions. It
prevents the common mistake of treating all businesses equally. Meanwhile, good
evaluation characteristics ensure the whole evaluation process is practical and
leads to real improvements.

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Together, they support better strategy formulation in the next cycle and help
organizations remain competitive in a fast-changing industry.

Example: “Azure Shores Resort Group”

Azure Shores operates resorts in Boracay, Palawan, and Cebu. Using the BCG
Matrix:

• Boracay Property → Star → Continued investment in premium facilities.

• Cebu Business Hotel → Cash Cow → Generated cash for expansion.
• New Palawan Eco-Resort → Question Mark → Received additional
funding to build market share.
• Old Mountain Lodge → Dog → Renovated with wellness focus or
considered divestment.

They also ensured their evaluation system was timely (monthly reviews),
comprehensive (Balanced Scorecard), objective (data-driven), and action-
oriented. This combination helped the group optimize resources, improve
profitability, and strengthen its sustainable tourism position.

The Boston Consulting Group (BCG) Matrix is a practical tool that helps
managers evaluate their portfolio and make smart resource allocation decisions.
When combined with the Characteristics of a Good Evaluation System —
timely, objective, comprehensive, flexible, and action-oriented — it becomes a
powerful driver of strategic improvement.

In the tourism and hospitality industry, where resources are limited and
competition is intense, mastering these evaluation tools enables organizations to
focus on what works, fix what doesn’t, and build sustainable competitive
advantage.

In simple terms, the Boston Consulting Group (BCG) Matrix helps

managers decide which parts of the business to invest in, maintain, or divest. It

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classifies business units based on two factors: market growth rate (vertical axis)
and relative market share (horizontal axis.

Explanation of the BCG Matrix quadrants:

• Stars (High growth, High share): Invest to maintain leadership.

• Cash Cows (Low growth, High share): Milk for cash to fund other areas.
• Question Marks (High growth, Low share): Decide whether to invest
heavily or divest.
• Dogs (Low growth, Low share): Harvest or divest.

A large hospitality group with city hotels, beach resorts, and adventure tour
operations used the BCG Matrix. Their city hotels were Cash Cows (stable profits)
cash was used to invest in Question Marks (new eco-lodges in emerging
destinations). Beach resorts were Stars (high growth), so they continued heavy
investment. One outdated mountain property was a Dog they decided to renovate
or sell it. The group also ensured their evaluation system had the characteristics

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of a good evaluation: timely (quarterly reviews), objective (data-driven with
external benchmarks), comprehensive (financial + guest + sustainability metrics),
and flexible (quick adjustments during the pandemic). This helped them allocate
resources wisely and improve overall performance. Students can relate this to
deciding which subjects or activities to focus more time and money on in their own
lives.

The BCG Matrix supports resource allocation decisions. Characteristics of

effective control systems emphasize that good evaluation must be economical,
understandable, and lead to action.

D. Application

True or False (Write TRUE if the statement is correct, FALSE if it is incorrect)

1. Control strategy refers to the systems, processes, and tools used to

measure performance, compare results with planned objectives, detect
deviations, and take corrective actions.
2. Financial controls in hospitality focus on guiding employee attitudes and
performance through appraisals, recognition programs, and guest feedback
systems.
3. The BCG Matrix classifies a company's business units or products into four
categories based on market growth rate and relative market share.
4. A "Cash Cow" in the BCG Matrix refers to a business unit with high market
growth and high market share that requires heavy investment to maintain
its leadership position.
5. The Boracay resort of the Philippine hotel group in the lesson was classified
as a Star, leading to continued heavy investment in its facilities and market
position.
6. A good evaluation system must be timely, objective, comprehensive,
flexible, economical, action-oriented, and balanced between short-term
results and long-term strategic goals.

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 7. Business units classified as "Dogs" in the BCG Matrix operate in high-
growth markets but hold a weak competitive position, requiring a decision
to invest heavily or divest.
8. Azure Shores Resort Group classified its new Palawan eco-resort as a
Question Mark and provided additional funding to help it build market share
and potentially become a Star.
9. Over-control in a hospitality organization can stifle creativity, while weak
controls lead to chaos, meaning organizations must find the right balance
in their control strategy.
10. The Cebu tour operator in the lesson classified its adventure packages as
Cash Cows and its cultural heritage tours as Stars based on the BCG Matrix
analysis of its product portfolio.

Essay Questions

1. Explain the four main types of control strategy — Financial, Operational,

Behavioral, and Strategic Controls — and provide one practical example
from the tourism or hospitality industry for each type. Using the Azure
Shores Resort Group scenario from the lesson, explain how combining
multiple types of controls helped the group quickly identify problems, take
corrective action, and strengthen its position as a responsible tourism
leader.
2. Apply the BCG Matrix to a real or hypothetical Philippine hospitality
group operating multiple properties or products such as a city hotel, beach
resort, eco-lodge, and adventure tour packages. Classify each business
unit into the appropriate quadrant — Star, Cash Cow, Question Mark, or
Dog — explain your reasoning for each classification, and recommend the
most appropriate resource allocation strategy for each unit based on the
BCG framework.
3. The lesson states that "good evaluation characteristics ensure the
entire evaluation process is reliable, timely, and actionable." Using the
seven characteristics of a good evaluation system — timely, objective,

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 accurate, comprehensive, flexible, economical, and action-oriented —
evaluate the control and assessment practices of either the Azure Shores
Resort Group or the Boracay beach resort from the lesson. Identify which
characteristics were most evident in their evaluation approach, which were
missing or weak, and recommend specific improvements to make their
evaluation system more effective.

References

1. Evans, N. G. (2024). Strategic Management for Tourism, Hospitality and

Events (4th ed.). Routledge.
2. Okumus, F. et al. (2022). Strategic Management for Hospitality and
Tourism. Routledge.
3. Sabourin, V. (2022). Strategic Management for the Hospitality and Tourism
Industry. Apple Academic Press.
4. Enz, C. A. (2023). Hospitality Strategic Management. Wiley.
5. Raga, J. (2022). Strategic Management for Hospitality & Tourism Sector.
Society Publishing.
6. Rivera, J. P. R. (2025). Philippine Tourism Sectoral Review. PIDS.
(Evaluation and sustainability metrics).
7. Kumari, M. (2021/updated). Sustainable Strategic Planning in Hospitality.
Emerald Publishing.

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