DEPARTMENT OF HOSPITALITY MANAGEMENT AN ESSAY ON Steps to Establish Environmental Scanning System For a Hotel Identify the steps you would take to establish an environmental scanning system for a Hotel business and critically evaluate the process as an aid to effective strategic management Present business scenario across the world is very complex and unpredictable. The globalisation, changes in demographics and technological advancements and political changes influence the business a great deal (Kanter 1991 as cited by Chun Wei Choo, 1995).
Hotel industry is one of the fast changing industries and needs to attune to the external changes for the greater viability. Therefore a hotel industry needs to have a strategic plan for a sustainable competitive advantage and for a better future. Strategic plan is a practical and flexible business plan that envisions the vision, mission and goals of the organisation, environmental scanning, strategy development, implementation and performance monitoring that every hotel industry needs to have.
Environmental scan is an important component of Strategic plan that enables the managements to identify, monitor and forecast the external trends and impacts. And in combination with internal analysis it enables the management to formulate strategic directions and strategic plans. The steps in Environmental scanning include the examination of Vision, Mission and Goals of the organisation, Environmental scanning process, Strategy formulation, and Strategy implementation, Forecasting and Monitoring and Evaluation The mission statement of the hotel portrays the business vision that defines the measurable financial and strategic objectives.
The objectives are the areas of emphasis within the organization with a specific goal to do quality work in a specified area. After finalising the main goals and objectives the Action Plan should be prepared for implementation, so that the success can be measured. Environmental scanning refers to collection, analysis and using the information about happenings of the field, trends, and interactions in an organisation's external environment for designing the future plans (Aguilar, 1967, Choo & Auster, 1993 as cited by Chun Wei Choo, 1995).
Environmental Scan includes four types of scanning according to Aguilar, 1967 (as cited by Chun Wei Choo, 1995), Undirected viewing, Conditioned viewing, Informal searching and Formal searching. The active and suitable search for a hotel is Formal search. Morrison, Renfro, and Boucher (1984) identify only two types of scanning. Passive scanning is a casual reading without any specific purpose, while Active scanning concentrates on specific relevant information. Fahey, King, and Narayanan, 1981 (as cited by James. L. Morrison) described three types of scanning irregular, periodic, and continuous.
Continuous scan is a continuous collection of data in a systematic way for the strategic planning of the organization. For hotel industry an active, formal information search is needed continuously. Only selected possible changes or shifts in macroenvironment likely to have an impact on industry can be given a focus (Renfro & Morrison, 1983). Each potential issue or trend is then analysed and ranked. For a hotel industry the scanning can take place at three levels, external macroenvironment level, industry environment level and internal level of the hotel (Fahey and Narayanan 1986 as cited by James. L. Morrison).
External Environment is at the macroenvironment level the factors like social, technological, economic, and political (STEP) affect organisations directly and indirectly, and is called STEP (PEST) analysis. Social factors including demographic changes, cultural issues, career attitudes of employees, health consciousness of customers, changes in customer lifestyle, brand choice, location choice, food safety and employee safety in an organisation affect the customer needs and the size of the potential market. Quick adoption of new technological advancements and integration into the industry imparts competitive advantage.
Reservations of accommodation using CRS, GDS technologies and employing several bluetooth based and web based potential technologies such as Semantic web, SWWS, SWAP WiMAX and Wi-Fi offer a great potentiality to a hotel industry. The overall economic situation including GDP growth rate, inflation and exchange rates will have bearing on the hotel business. UK recorded an impressive economic performance of 2. 75%growth during 2007; however it slowed down to 1. 75-2. 25% during 2008-09. The Bank of England raised rates to 5. 25% in January 2007 and the inflation is high at 3%. The public borrowing has risen to ? 3bn and additional taxes have been proposed amounting to a ? 1. 8bn on alcohol, tobacco, petrol and vehicle excise. Hence the expectations of businesses would be slightly negative. However UK hotel industry experienced a double-digit revPAR growth during 2006 and is further expected to go beyond ? 50. Political stability and continuity of policies would boost the economy. The tax structure, environmental laws, employment regulations influence the hotel industry. The UK government introduced the Real Estate Investment Trust (REIT) during 2007, which brings hotel ownership to the individuals.
Recently UK government introduced bed tax of 5-10% tax on room nights, which may reduce international tourism revenues to the UK by about ? 220m as 1% rise in prices relative to other countries leads to 1% decrease in international tourism (Nottingham University). Smoking ban introduced in UK in all enclosed public places reduces the room maintenance cost Industry Environment is understood through Michael Porter’s five forces model, which explains the factors that decide attractiveness and sustainable profitability of the industry.
Threat of new entrants into hotel industry causes concern, the entry is easy as the investment cost is low and the permissions needed to start the business are also easy to obtain.. The new brand hotels Malmaison, Hotel Du Vin. Rezidor SAS and YOTEL are likely to revolutionise the hotel sector of UK. Threat of Substitutes is due to the introduction of some substitute into the market with low sale price, which decrease the industry attractiveness and profitability. If the suppliers have a high bargaining over the hotel management the industry’s attractiveness will be undermined.
In hotel industry managements purchase a range of consumable items from vegetables to milk and meat and refurbishments from suppliers. The bargaining power of buyers is greater when there are many hotels in the same area and offering many competitive packages. Buyers are the customers of a hotel who create demand. If the industry is not able to the exact requirements of the customers obviously customers will have a say, reducing the attractiveness of the industry. Intensity of Rivalry between existing competitors is high if similar and several enterprises exist in the same operational area offering similar packages.
Internal Factors of a hotel can be analysed using different methods like SWOT analysis, Bench Marking and Gap Analysis. The analysis of internal factors like Strengths, Weaknesses, Opportunities and Threats refer to SWOT analysis of an industry that provides quality feed back on the resources and capabilities of the organisation. The strengths include brand names and unique packages, innovative products, reputation among customers, while the high cost, poor quality of products and services, lack of credibility among customers are likely weaknesses.
Availability of new technologies, scope for developing products for a new range of customers and meeting needs of unfulfilled customer needs form part of opportunities. Shift in customer options and taste, new trade barriers, new government regulations, new tax structure and new substitute products may be threats to the industry. Bench Marking is the process of measuring, evaluating various aspects of business performance of a hotel and comparing against others, which is useful for identifying "best" practices.
Benchmarking process facilitates to set own goals and targets. The process includes Identification of problem areas and comparing with other industries that have similar processes, implementing new and improved business practices and identifying the leaders in these areas Gap Analysis enables an organisation to compare its actual performance with its potential performance to find the desired future. This helps the organisation with new insights for further improvement. Gap analysis is a follow up of benchmarking.
Gap analysis can be used to find the need for new products, Usage gap (gap between the market potential and the actual current usage) and competitive gap (difference of business achieved among similar organisations and for similar products in the similar market environment). In the Strategy formulation and implementation stage the organisation determines its strategic issues, which are in consistence with its vision and mission after environmental scan and other analyses. Apt strategies are designed to address these strategic issues for achieving their mission by setting strategic goals and action plans.
The strategy is implemented with programs, budgets and procedures by involving and motivating the staff. Monitoring and Evaluation is a continuous process including the definition of the parameters to be monitored, comparison of results and incorporating necessary changes. The signals of change identified in scanning having potential impact on the organisation have to be monitored to differentiate the past and future direction of trends. The data collected should contain forecasts and speculation about the implications of the trends.
Forecasting ascertains the future trends or the probability that potential events will occur within a timeline. Forecasting focuses on developing an understanding of the expected future for the most important issues and trends. Once the forecasts are made, each issue and trend is then monitored to track its continued relevance and to detect any major departures from the forecasts made earlier. Thus successful management of a Hotel depends upon the ability of the senior leaders to adapt to rapidly changing external environment in relation to their internal factors in the process of strategic planning for a better future. (WORDS--1502)