What are some recent consumer behavior trends that are influencing the industry?

This article says globalization and technology is the new trend. Companies need to work to appeal to their international consumer. As the article stated a consumer from China is going to search for a hotel differently and have different needs than a consumer from Russia. This forces companies to work twice as hard. Not only do they have to appeal to different demographics but they also have to maintain a consistent brand image no matter where the location.  “The notion of brand integrity is crucial: hotels will need to supply consistent service in a global environment, while adapting to support customers with new cultural background and sensitivities in local markets.”

The article also mentions social media as a way of communicating with consumers. Consumers are using the web for research whether it is from a reliable source or not. Companies now have to work harder to combat any negative comments found on the Internet. Social media is taking company accountability to a new level.

The industry is also expecting the use of mobile hotel booking to increase. This opens new doors for any company to expand. Do you think that this could take businesses like hotels.com out of the market? Think about it, if the hotel company comes out with an app for your phone that makes booking rooms on the go easier, would you still go to hotels.com?

http://www.hotelmarketing.com/index.php/content/article/three_significant_trends_driving_the_hotel_industry

“Consumers at all income levels have been splurging on indulgences while paring many humdrum household expenses, according to industry data for the last year.” This is a trend seen across all industries but why could this be? It seems the reason for this could be because consumers what to feel better. The economy has been in a slump and consumers want to brighten their day whether it is a new bag or a small treat. Unfortunately, this does not mean consumers have faith in the economy and it does not mean that consumer spending will increase anytime soon. It is important to notes that while consumers are purchasing wants rather than needs they are buying inexpensive goods. For companies this means imports will increase however domestic jobs remain stagnate.

http://www.nytimes.com/2011/09/24/business/consumers-cut-back-on-staples-but-splurge-on-indulgences.html?_r=1&ref=consumerbehavior

~Nia McCarthy

The Competitive Landscape of the Hospitality Industry

Depending on what sector of the hospitality industry a company is involved in, like food and beverage or hotels and motels, will affect its competitive landscape. In order to successfully market a product, a company must understand its competitors, what advantages and disadvantages they have compared to them, and how they can utilize this information to project the most appealing and effective image of their product. In addition, companies must understand critical social issues that might be related to their product, such as “going green” initiatives. Acting on these social concerns and making consumers aware of it, could give a company and advantage over competitors. 

Consider the food and beverage sector of the hospitality industry; one of the major concerns, especially in the United States, is obesity and unhealthy eating habits. This is probably why, “McDonald’s will use its coming sponsorship of the 2012 Summer Olympics to bolster efforts to present itself as a nutritionally responsible marketer, particularly when it comes to children.” Any restaurant, in order to effectively market their product, it going to hone in on where there food comes from, how it is cooked, and the overall nutritional value of the meals they provide. Also probably why, “McDonald’s has been aggressive in fighting back against efforts by activists to limit or ban Happy Meals on the grounds that they provide children with too many calories and too much fat, salt and sugar.” McDonald’s and other fast food chains and restaurants can use a variety of marketing strategies to make consumers aware of the “health conscious” options offered to them. One of the main ways is through endorsements by celebrities. “Dara Torres, the United States Olympic swimming champion, is being hired to serve as a “global ambassador” for the McDonald’s efforts for the 2012 Games.” Think about the Subway commercials that feature Michael Phelps, these big name celebrities help companies market the big changes being made in response to health concerns. Furthermore, think of the calorie count many restaurants now offer. 

http://mediadecoder.blogs.nytimes.com/2011/07/20/mcdonalds-uses-olympics-for-its-own-balancing-act/?ref=mcdonaldscorporation

                                    

Acting on social concerns is not just something restaurants in the hospitality industry use for marketing purposes, hotel and motel companies also focus on these aspects. The recent recession coupled with high gasoline prices has caused a decrease in traveling among households. Companies, like Hilton Worldwide and Marriot International, understand this. “The consumer mindset is very value-focused,” said Carla Raynor, vice president for global marketing for two chains owned by Hilton Worldwide. As a result, companies will have to focus on maximizing how much consumers get compared to how much they pay; this will likely prompt a focus on accommodations. For example, a new program launched by Renaissance Hotels, part of Marriot International, “is intended to help guests get more from their stays by providing more useful information about distinctive local attractions like sights, restaurants, bars and stores.” Companies will probably flood television will commercials promoting these new initiatives, offer coupons and special offers, drown customers with e-mails, and snag advertisements in areas with high traffic- if your not traveling often when you do, you want to get the most for your money and companies want you to know they are the answer. 

http://www.nytimes.com/2011/03/11/business/media/11adco.html?ref=marriottinternationalinc

Regardless of whether they are Marriot International or Subway,  companies must also compare their product to competitors  to market it effectively . Continuing with the example of McDonald’s, many fast food chains would absolutely consider McDonald’s to be a competitor. Wendy’s certainly did, and that is why they recently “[announced] the details of a national marketing plan for its new recipe for French fries.” Chief marketing director at Wendy’s, Ken Calwell, said fries “is something we hadn’t been a leader in, in the past” and something they hope will become a satisfying alternative to McDonald’s fries. Here is a clear example of how a company identified an area of improvement when it analyzed the market and acted upon it; however, the next step is making consumers aware of this effort. Therefore, Wendy’s launched a campaign, which “includes two television spots that will run on cable and network stations like TBS, VH1 and Bravo and during shows like “Conan” and “Lopez Tonight.” 

http://www.nytimes.com/2010/11/22/business/media/22wendys.html?ref=wendysinternational

Top Socially Responsible Firms

Profit making businesses have a set of aim and strategies which they always try to achieve, this is done through different tactics and implementing them in a way that seems ethical. Most of these aims would be to maximize profit, increase market share, expansion and growth and building customer base. However, the increase of competition in recent markets and the trend of globalization and free trade policies in most of the countries resulted in the introduction of the idea of corporate social responsibility. It then became one of the main aims for most well-known firms to incorporate social responsibility and ethics to its main operation, allowing firms to earn a better reputation and an improved customer base.

One of the top ranked companies known for social responsibility in the hospitality sector is Starbucks which had expanded oversees opening branches and gaining profits, at the same time it has a social responsibility mission in many areas. Benefiting the society and giving back to the community seems an essential part of its operation. Starbucks engages in several projects to improve the social well-being of the society the most recent being a support system for high school students and ensuring a high quality education. Other projects include donations to developing countries as well as supporting countries with shortage of water and providing donations to ensure their safety as well as offering community service to improve health and education. Following this conduct of ethical stand has brought more customers who became loyal to this brand and even though it is costly in the short term, it would bring a lot of profits in the long run term.

Another firm with a strong corporate social responsibility value is a business in the leisure part of hospitality. Walt Disney has been a leading firm for many years, and uses its profits to establish a better image for its stakeholders further increasing its market share in the market. One of its new innovations in this area is an amount of $2 million distributes and donations to several organizations to preserve the animal species and their habitats and also for the conservation of the wildlife. All of these ethical engagements result in better reputation and higher demand for this leisure industry and also higher profits as well as avoiding pressure group and bad media.

 -http://corporate.disney.go.com/citizenship/20110921-dwcf-distributes-2million.html

-http://www.starbucks.com/responsibility/community/starbucks-foundation

Current Events: A New Consumer Trend in the Hospitality Industry

According to Technomic, a leading consulting and research firm for the food industry, sales of Mediterranean food items have been rising steadily over the last year. These sales have increased across various market segments as consumers interest have been shifting. Based on Technomic's market research, 60% of consumers say they would order "menu item featuring flavors and ingredients typically associated with Mediterranean cuisine." In addition, sales at Greek, Spanish, and other Mediterranean food chains have grown 1.7% to $362 million in 2010.

These trends in the market have been associated with a change in consumer interest over the past year. There has been an increase in interest for healthier foods, ethnic cuisines, and vegetarian options. In terms of healthier food options, Technomic explains that "Mediterranean cuisine heavily incorporates fish, herbs, vegetables and olive oil—all ingredients that a majority of consumers consider to be healthy. Consumers seeking better-for-you fare also appreciate the cuisine’s simple preparations, use of fresh ingredients and cooking methods that instill flavor without adding fats." People who maintain a vegetarian diet are ordering more Mediterranean foods using hummus, chickpeas, and Greek yogurt.

Restaurants are beginning to take notice of this growing trend, and are starting to change their menus accordingly. Consumers around the country will begin to see more Mediterranean options in restaurants, cafes, and even places here on campus. For the reasons listed above, this is just the start of this new shift towards healthy ethnic foods. In addition, the increase in revenue that comes from taking advantage of this specific market trend will encourage businesses in the food industry to keep their eyes out for the next trend. These businesses know what more and more customers are interested in, and it will not be hard to find the next big thing, whether it be food from another similar region of the world or new preparation techniques that allow for food to be made in a healthier way.

Ethic Issues in the Hospitality Industry

What are key ethical issues this industry faces?

As in any industry, the hospitality industry is confronted with numerous issues regarding ethics. We know that in business ethics is that examination of a company’s moral and social responsibility in regards to their practices and overall decision-making. It would be impossible to list all of the ethical decisions this industry faces because new problems arise everyday. However, one decision every business in the hospitality industry has had to face was where their business would be located. This problem of location is not as simple as it seems. From the point of view of the business owner he just wants to build his restaurant or hotel in an area where there is demand of this service. From the perspective of a local resident the business may be disturbing the natural wildlife in the area or it may result in too much traffic in the area.

In this is particular article the plans to build a restaurant in Union Square Park have been put on hold. The answer in unclear as to why however, this issue does raise the ethical dilemma of whether or not this is the proper location from this restaurant.

http://cityroom.blogs.nytimes.com/2011/09/07/setback-for-plans-for-restaurant-in-union-square-park/?scp=3&sq=hospitality%20ethics&st=cse

Running a restaurant in New York City is not cheap and running one in the middle of a park would be even more expensive. Scott Stringer, Manhattan borough president, makes a valid point when he says: “The city’s precious public park space should be used for recreational purposes that benefit all New Yorkers, not for private enterprise that benefits only a few”. Given the country’s current economic standing it is very difficult for most people to eat. Is it a good idea to build any restaurant, anywhere in this economy?

The article also mentions that the submission to build this restaurant is still in review along with other proposals for the space. Some argue that having a nice restaurant there would bring a  “positive life to the park, especially after dark…” Personally, I can only imagine people with more disposable income can afford to eat out and anything that is put in this space would attract a more affluent crowd. Building this restaurant would certainly exclude people with less income.

What would be the result if this restaurant could be build? Who is this restaurant targeting and what happens to those people that do not fit the target audience?

~Nia McCarthy 

Current Ethical Problems

In an industry so diverse as hospitality, it is hard to pin one single ethical problem that fits the industry as a whole.  However, when we dissect the industry and look at an individual aspect of it, in this case fast food, we can pick out some ethical problems that not only the companies are dealing with, but that the public has taken to acknowledging exists and label them as big issues.

Perhaps the most striking example of this is in the form of McDonald's Happy Meals.  These meals seem to be good and make sense when you first look at them, cheaper prices and smaller portions for children, but when you look into the advertisement of these meals, you notice something jumps out.  What could that one thing be?  A toy.

What could be so wrong with having a toy in the meal though?  It is simple, kids will do anything for a toy.  They will scream, cry, beg and yell to have that small playful item that in reality costs 5 cents to make, but will make kids want to buy a 3 dollar meal.  What is interesting to note however, people are fighting back.  Silicon Valley banned the use of toys in fast food meals to try to stop any kind of ethical dilemma since it encourages children to eat much more unhealthy foods.

It will be interesting to see what come next though.  Since the case in 2005 which required the food chain to pay the medical bills of two children due to childhood obesity, McDonald's has come under attack from all sorts of groups.  They claim to be innocent since people choose to eat their food, but then the question of who is ultimately responsible for an individual's health is asked.

This is just one of many ethical dilemmas currently facing the fast food industry, and it will be interesting to see what else is brought in the the future and how the companies will handle the negative press that is always brought with these types of situations.

http://www.healthkey.com/sns-health-mcdonalds-happy-meal-lawsuits,0,5733170.story

The Mission of the Hospitality Industry

The hospitality industry has a unique situation in terms of their customer base; at any moment anyone in the world could be a customer. It sounds obvious, but for hospitality companies, like McDonald’s or Marriot Inc., at any moment a person could want a meal or need a room. These are not goods that can be stored in one placed and then shipped to any where in the world; these are services that need to be located anywhere and everywhere in the world where people are in order for a company to maximize its profit (please its stakeholders). In addition, the hospitality industry relies heavily on the instant and constant satisfaction of their customers. Yes, this is true for every business; however, in the hospitality industry fulfilling and pleasant service is one of the main “products” its offers, and therefore relies on it to succeed. A company’s ability to realize these distinctive aspect of the hospitality industry, and adopt their business practices to meet these demands, will most likely succeed. 

To prove this lets look at some of the mission statements from the leading companies in the hospitality industry... 

McDonald’s mission statement reveals the following: "be our customers' favorite place and way to eat” by implementing their “Plan to Win centering on the five basics of an exceptional customer experience – People, Products, Place, Price and Promotion.” 

I found this to be the most interesting mission statement because it directly mentions the marketing mix (4P’s) we learned about. Interestingly, they added the “people” factor because they realize that the people- employees- that their customers are in contact with greatly impact the brand name and brand loyalty- customers view of the company and willingness to patronize it. 

MGM Resorts International, which owns 12 hotels in Las Vegas, claims their mission is to, “deliver our winning combination of quality entertainment, luxurious facilities and exceptional customer service to every corner of the world in order to enhance shareholder value and to sustain employee, customer and community relationships” Notice how they mention “every corner of the world”, perhaps because they realize that in order to maximize profit, and keep shareholders happy, they must serve as many people as possible. Furthermore, they also acknowledge the relationship between their employees and customers- realizing that their success rides on the fact that this relationship is a pleasant one. 

http://www.mgmresorts.com/company/mission-statement.aspx

Marriot International Inc. mentions that part of their mission is “Pride in the knowledge that our guests can count on Marriott's unique blend of quality, consistency, personalized service, and recognition almost anywhere they travel in the world or whichever Marriott brand they choose.”  Again, they mention how they want to be a    brant name identified and revered around the world. Additionally, they also emphasize the importance of maintaining a reputation through outstanding customer service and dedication to customers’ needs. 

http://www.marriott.com/corporateinfo/culture/coreValues.mi

A hospitality company’s success is directly related to how satisfied their customers are. Whether this is achieved through global access to their service, attention to superior customer service, or focusing on providing their customers the greatest amount of high quality products, or all of the above, can be found in their mission statement. 

What Motivates Revenue in the Hospitality Industry

According to the  Macmillan Dictionary the definition of hospitality is: “friendly and generous behaviour towards visitors and guests, intended to make them feel welcome.”  Consequently, any company in the hospitality industry has a consumer base that exist of almost anyone on this planet. At any given moment a person can be a traveler or stranger in need of food or shelter, and at that moment a hospitality based company wants to be the company that comes to mind. As a result, a happy and constantly expanding consumer base is the main force that motivates companies, like McDonald’s and Holiday Inn, to  continually find ways to increase their revenue. 

The larger your consumer base the greater your opportunity to increase revenue. The owners of Mint Hotel Group, a U.K. hotel chain, understand this; “Blackstone, which owns the Hilton Worldwide chain of hotels, will take over Mint's eight four-star hotels” in a deal that is said to cost $950 million. As a result, Mint will now join a international company and expand their customer base. Mr. Orr, one of the owners and founders of Mint Hotels, said. "In Blackstone, the business now has a global investor with a strong and expansive track record in the hospitality sector.” The next time Mr.Orr looks at his company’s spread sheet, he will most likely smile at the increased revenue he sees all do to the benefits of going global and increasing his consumer base. 

However, greater revenue is not just about getting more customers, it’s also about keeping those customers. In order to do that a company must make their product as affordable and ‘hospitable’ to the masses as possible- this ever so important in the hospitality industry. To do this a company must find a fairly low cost way to manufacture a satisfactory good/service. Take H. J. Heinz Co as an example, they are ditching their out dated  and difficult to manage, small ketchup packages for their new and improved “Dip and Squeeze” packets. It took them three years to arrive at their finished product. Their prior attempts, “could [not] be made cheaply or solve customers' main complaints”, this goes to prove how important it is to please customers while also keeping costs to a minimum. One must also realize the risk Heinz took; their opportunity cost of three years and countless amount of dollars for a product that is not guaranteed to work. 

When your success depends on consumers’ tastes and happiness its hard to be100% sure you will succeed.  As Science Daily reports, “Global population is expected to hit 7 billion later this year”; when all of these people are potential customers, pleasing them all is not an easy task. 

Laura Iaffaldano 

http://online.wsj.com/article/SB10001424053111904194604576578691502178606.html

http://online.wsj.com/article/SB10001424053111904060604576574700706452710.html

http://www.sciencedaily.com/releases/2011/07/110728144933.htm

Taxing for tourism / Are price and quality directly related?

I was not able to find much on the economics of the hospitality industry however, I did read that taxing hotel guest could create a fair amount of revenue. One man, Al Samuels, in favor of the tax wants to put the money generated toward tourism in the County. I found this article especially interesting because it relates to where most of us grew up. 

http://www.lohud.com/article/20110825/NEWS03/108250389/Vanderhoef-puts-hotel-tax-mortgage-tax-hike-table-cut-Rockland-deficit

I also found this smaller bit of information. This small piece briefly talked about hotel discounts. The research is questioning whether discounts are a successful source on revenue. This small bit of information sates that hotels are not marking money by offering lowing rates to their guest. Hotels need to charge rates that match or even exceed that of their competitors. 

That is very interesting to be. It seems as though in other industries the way to bet your competitors is to undercut their prices but that is not the case in the hospitality industry. I wonder if this is because of the type of service the customers is buying. If a hotel is too inexpensive then the customer may thing it is a cheap hotel and not want to stay there. 

http://www.hotelschool.cornell.edu/about/pubs/news/newsdetails.html?id=345

~Nia McCarthy

*RevPAR: revenue per available room- refers to the revenue generating effectiveness of a hotel property. It is calculated by multiplying the average daily room rate (ADR) by the occupancy rate. (www.hotelsforsalenyc.com)

*ADR: Average Daily Rate- metric measuring the average amount paid per room over the total rooms occupied over that period. (www.wikiinvest.com) 

Supply and Demand

The hospitality industry is one made up of mostly food services and hotel accommodations.  Within each of these two categories falls hundreds of companies that stretch from Hilton, Marriott and Best Western for the hotel category, to McDonald's, Burger King and Kentucky Fried Chicken for the food services.  Each of these encompass their own set of demand groups and have their own set of supply structures in place.

In the case of food services, we have actually seen a rise in some instances due to the bad economy.  However, for the most part, this industry is hurting.  For example, over the past two years, McDonald's has gone from having it's stock shares at the low $50 range, to being priced at $88.29 as of September 18th.  But in the case of the general market as a whole, it has been in a decline since 2008.  This shows that although the businesses that are based on cheap and easy to get meals are doing well, the industry as a whole, which include the fine dinning and more expensive restaurants, is hurting due to the current economic stances.

When it comes to hotels, it is almost incredible that the industry is still around.  With high travel rates, extensive regulation over employees and policies, and an increasing need to rely on tight profit margins, the industry is not posting any major profits as a whole.  The demand recently has been for cheaper and easier to access hotels.  This means that people are looking to find places that will cost less to stay at due to the cost of getting to the places.  The ability to supply cheap hotels however, is becoming increasingly hard to come by due to the rise in use of internet groups that scout out for cheap deals and bundle them together.

As a whole, the percentage spread for the industry as a whole is significantly more then it has during past economic hard ships.  In the 1991-1992 recession, the spread between supply growth and demand decrease was at 0.9%.  During the 2001-2002 recession, the spread was 3.5%.  Right now the ratio is at 5.5%.  This means that there is a much higher supply of goods in the market then there is for a demand, thus causing the markets to push lower since the industry is so easily accessible.

http://www.hospitalityworldnetwork.com/trends-and-stats/supply-and-demand-gap-widens-greatly-during-recession
http://finance.yahoo.com/q?s=MCD&ql=0

Revenue Growth for Hyatt Hotel Chain

Hospitality industry is broad and has numerous sources of revenue; one extensive part of this sector is hotels. One of the top rated hotel chains worldwide is Hyatt Hotel, which had encountered a recent increase of revenue due to booming demand to leisure and travel sector. As reported by this chain and others, the main factor for the noticeable increase in profits and revenues had been due to the revenue gained per available room in U.S and also abroad.

Hyatt had been considering and implementing a growth strategy of internal growth opening more branches abroad and minimizing the risk of expanding externally. However, this organic growth would take more time than acquisitions. In the case of Hyatt’s expansion, it is opening 15 hotels most of which will be in North America. In addition, in the quarter of this year the hotel chain in Chicago mentioned a net income increase and a share increase from 14 cents a share to 22 cents a share, meaning that more shareholders will be encouraged to invest their money in the chain considering the increase in earnings and expansion which satisfy costumers.

Another contributor to the increased revenue is the company’s purchase of 3 hotels in California and selling 8 hotels to a joint venture in which it holds 40% share. This acquisition would allow Hyatt to benefit by spreading the risks of failure, also an increase in revenue would follow as it is eliminating a competitor and would also be raising awareness to the company.Hyatt would be working on the basis of synergy where the benefits of the acquisition would be far more profitable than the benefits gained by each firm on its own. The CEO states: “The acquisition will help the company expand its select service presence and heighten awareness about the brand.”

Hyatt experienced a huge inflow of money improving its financial position and attracting shareholders due to increased demand and the strategy of expanding internally and externally. 

http://www.foxbusiness.com/industries/2011/08/02/hyatt-hotels-2q-profit-grows-on-revpar/

Current Events in the Hospitality Industry

David Scowsill, President & CEO of the World Travel & Tourism Council (WTTC), spoke on Friday about the need to abolish the Air Passenger Duty to boost the Caribbean economy. The Air Passenger Duty (APD) is a British tariff that charges companies transporting passengers from the United Kingdom. This tax has drawn criticism, mainly over the fact that rich nations are making profits while poorer nations who rely heavily on their tourism industry are losing significantly more. For example, the Netherlands have recently repealed a similar tax that brought in $412 million because it was costing the Caribbean industry more than $1.6 billion.

If this tariff is repealed, the immediate effects will greatly benefit the Caribbean tourism industry, making it more affordable for everyday people to take that vacation they have always been thinking about. Air travel and vacations in general are getting more and more expensive, but if the companies in this region can stop paying this tax, it will give them much more room to offer incentives and deals in order to attract more customers.

http://www.hospitalitynet.org/news/154000320/4052990.html