CHAPTER 2
STRATEGIC MANAGEMENT IN HOSPITALITY AND TOURISM
Learning Objectives
After reading this chapter, you should be able to:
Define the hospitality and tourism (H&T) context.
Evaluate characteristics and types of H&T organizations.
Discuss how characteristics of H&T organizations may influence the application of strategic management
practices in H&T organizations.
Evaluate the current level of strategy research in the H&T field.
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Opening Case
Do you think Mark should accept this offer? Explain why or why not.
If he accepts this position, what type of skills will Mark need in managing a restaurant compared to being a
manager in a candy factory?
If he accepts this positon, how will it influence his work-life balance?
In your view, what are the differences in managing a restaurant compared to managing a candy factory?
The Hospitality and Tourism Context
#1 in the services sector (income and employment)
Increasing demand worldwide
10% world’s GDP and 11% employment
International arrivals over 1 billion
Continued growth for the last two decades globally
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Challenges to the H&T Industry
Political conflicts
Terrorism
Natural disasters
Health scares
Fluctuations in exchange rates
Uncertain economic and political arenas
Hospitality and Tourism
A composite of distinct industries
It is interrelated and interdependent
Travel
Accommodation
Food Service
Clubs and Gaming
Theme Parks
Attractions
Entertainment
Recreation
Convention
National Tourism Offices
Destination Management and Marketing Offices
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Categorizing H&T Organizations
Functional area
Size
Motive
Geographical coverage
Profit or nonprofit
Types of H&T Organizations
Travel and Transport
Accommodation (Lodging)
Food and Beverage
Entertainment and Recreation
Tourism Offices or Destination Management Organizations
Nongovernmental Tourism Organizations
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Small and Medium Sized Enterprises (SMEs)
Independent and flexible
Dominate the tourism market worldwide
Usually owner managed, run by an individual or small group with a workforce less than 250 employees
More than 80% of hospitality and tourism organizations are SMEs
Differences Among H&T Organizations
Internal and external environment
Competition and substitutes
Organizational culture and structure
Cost structure
Resource levels
Competitive strategies
Entry and exit barriers
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Discussion
Can we make generalizations about the hospitality and tourism industry?
Why or why not?
Characteristics of H&T Organizations
Inseparability
Simultaneity
Perishability
Intangibility
Heterogeneity
Cost structure
Labor intensive
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Inseparability
Customers are present and participate in the service delivery process.
The separation of production and marketing is not possible.
In service delivery for H&T, frontline employees communicate with their customers.
Organizations must motivate customers to participate in service delivery process.
Simultaneity
Services are created and consumed simultaneously.
Monitoring the service delivery process is difficult.
Need to ensure quality and consistency.
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Perishability
Services are perishable.
Services cannot be stored.
Need to achieve full capacity.
High fluctuations in demand affect:
Cost structure
Pricing
Staffing
Resource allocation
Intangibility
Services are more intangible than goods.
These include ideas, concepts, interactions, relationships, and experiences.
Intangible aspects are critical in customer satisfaction.
Rising customer demands and expectations.
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Heterogeneity
Human element causes variations in service delivery.
Customers interact with employees and other customers.
H&T firms are highly susceptible to external changes.
Standardization versus differentiation.
Cost Structure
Need to understand fixed and variable cost structure.
Influences managerial and resource allocation decisions.
Investors and owners focus: Return on investment.
Creative marketing, product development, and pricing strategies.
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Labor Intensive
H&T organizations are labor intensive.
Interactions with employees are an important part of services.
Employees are often the reason why customers have positive experiences.
Employees are often the reason why guest come back or not come back.
Discussion
Provide specific examples of each characteristic of the H&T industry.
Inseparability
Simultaneity
Perishability
Intangibility
Heterogeneity
Cost structure
Labor intensive 10
Impact of Industry Characteristics on
Managing H&T Firms
Developing mission, vision, values, goals and objectives
Analyzing the internal and external environment as an ongoing process
Making decisions in the areas of service delivery, pricing, and marketing
Strategic planning practices
Developing a sustainable competitive advantage
Achieving and evaluating intended outcomes
Impact of Industry Characteristics on
Managing H&T Firms
Managing capacity to maximize revenue
Managing the cost structure of the company
Allocating available financial and human resources for future strategies
Evaluating and improving the service delivery process
Interacting and satisfying customers
Training, developing, and motivating employees and managers (our internal guests)
Designing and decorating facilities
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Impact of these Unique Characteristics on
Managing H&T Organizations
Differences in H&T organizations in size, service type, profit motive, and customer segment result in
differences in the level and importance of these characteristics.
Leaders of H&T organizations should be aware of the unique characteristics of their business.
Areas Where Strategic Management Can Help
H&T Organizations
Provide a holistic view for the entire organization
Provide a sharper focus on what is strategically important
Provide a link between the external and the internal environments
Analyze a complex and rapidly changing external environment
Analyze an organization’s strategic resources
Give a clear sense of strategic vision and direction
Define organizational purposes
Develop measurable goals and objectives
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Areas Where Strategic Management Can Help
H&T Organizations
Identifying key resources and investing in core competencies
Formulating decisions and making them happen
Leading and/or managing change
Coordinating organizational activities and allocating resources
Understanding the complexities of decision making
Understanding organizational structure and culture
Reducing and managing uncertainty inside the organization
Measuring intended and unintended outcomes of the strategy process
Helping to prioritize strategic commitments
Applying Strategic Management to the
H&T Context
We must know generic strategic management theories and models
However, the industry and organizational context is also critical
H&T organizations reflect the typical characteristics found in the service sector
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Strategy Research in the H&T Field
Early 1980s: conceptual; focus on strategic planning
Late 1980s: empirical; environmental scanning, and strategy and structure alignments
International context
Increased attention
Descriptive
Limited amount toward theoretical development
United States: survey-based research
European: case study-based research
Emphasis on industry application but little theoretical contributions
Still evolving
Summary
Recognition of the unique characteristics can provide us with the necessary insights and understanding
of the challenges in applying strategic management in the specific context of H&T.
The characteristics and types of H&T organizations can impact on strategic management practices,
particularly in strategic analysis, decision making, resource allocation, and creating and maintaining a
competitive advantage.
Strategic management theories, models, and frameworks developed in the generic field can be used
and applied within the H&T context.
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