1. Executive Summary
The purpose of this report is to identify the fundamental characteristics of the Hospitality, Tourism and Event industries, their focus on customer service and satisfaction, how they converge and how they have relied upon each other in the twentieth and twenty-first centuries. The interdependent relationship that exists today rapidly developed in the second half of the twentieth century as Tourist movements dramatically increased, naturally drawing hospitality suppliers to these destinations. With the advent of the Events industry, HTE operators began to realise the links between these customer and service focused industries and the benefits provided in collaboration. This proven dynamic shared between the three industries requires HTE hosts sell not only their products to guests, but the relationship that can exist between them.
By focusing on the importance of the host/guest relationship through providing consistently high customer service, with special attention to monitoring the supply chain, the host will be rewarded with customers who will reciprocate with loyalty. If HTE operators conduct business in an environment that is not sustainable they are undoubtedly ensuring their demise. Consequently, to ensure their continued success HTE operators and stakeholders must continually monitor not only their customers, but their local and operating environments.
Over the twentieth and twenty-first centuries the Hospitality, Tourism and Events industries have experienced dramatic expansion thanks to revolutionary developments in transportation that has brought about affordable travel to a greater proportion of the population like never before. The mass production of the automobile and the development in commercial airliners led to an explosion in domestic and international tourism and hospitality activities.
This report looks to examine the fundamental similarities between the three industries, how they converge and the fundamental elements that they each rely on to successfully satisfy the wants and needs of their customers. Furthermore, how this relationship has developed over the 20th and 21st centuries in a highly dynamic operating environment.
3. The Hospitality, Tourism and Events Industries.
In properly identifying the commonalities and relationship shared between the three Hospitality, Tourism and Events industries, it is important that clear definitions are established to show that each sector stands up as a strong industry in its own right.
3.1 The Hospitality Industry
The commercial hospitality industry is made up of businesses whose primary function is to provide food, drink and accommodation, in exchange for payment. (MGT102 Study Guide, 2012 p6). These businesses can include Hotels, Restaurants, Bars, Pubs, Motels and an assortment of other similar businesses. In the hospitality context, the provider of these goods and services is known as the host, and the consumer of these products is known as the guest.
3.2 The Tourism Industry
In order to define the Tourism industry, one must firstly define a tourist.
According to the UNSD, EUROSTAT, OECD and UNTWO (2008), a visitor is an individual outside their normal environment for less than a year and for a reason other than employment in the place visited. A visitor then becomes categorised as a tourist, if their trip comprises an overnight stay.
The United Nations World Tourism Organization (2012) defines the Tourism industry as the collection of businesses, across multiple (different) industries, that provide goods and services demanded by Tourists. These industries are categorised into businesses operating in three distinct sectors: travel operations – Concerned with moving people about from one place to another using different forms of transportation. Visitor Services – Services provided to tourists within a destination. Hospitality – Concerned with providing tourists with food, beverages and accommodation.
Put simply, the Tourism industry is made up of businesses focused on providing leisure and holiday experiences. The Host is the provider of these experiences and the Guest is the consumer of these experiences. (MGT102 Study Guide 2012, p10)
3.3 The Events Industry
An Event can be classified as; meetings, conferences, exhibitions, conventions, sporting events, live music concerts, festivals and a myriad of other ‘one time’ events all characterised by their brevity. As an industry, the definition is more complex. It is the bringing together of many different business, such as industries, products and services that all culminate in one shared experience, that is the event itself. (MGT102 Study Guide 2012, p13) The host of an event may include the Location or Venue of the Event, Promoter, Organiser, Participants or Performer(s) at the event. As with the Hospitality and Tourism events, the guest is still considered to be the consumer of the product, service or experience on offer.
4. Hospitality, Tourism and Events – A budding relationship
4.1 Hospitality and Tourism
By 1959, the commercial jet airliner was in widespread use in both international and domestic applications. Direct correlation between these developments and an increase in tourism activities in the case of the Hawaiian Islands can be observed by examining statistical data compiled by Schmitt (1977). In his report, Schmitt found that annual tourist arrivals by air in 1957 were just over 479 thousand, with total visitor expenditure for the same year amounting to US$82.7 million. By 1976 the number of tourists arriving to Hawaii by air had risen to over 4.3 million and annual tourist expenditure had risen to over US$1.4 billion. More recent data provided by the Hawaii Tourism Authority (2010) puts total visitor arrivals by air for that year at over 6.9 million with a total annual expenditure by the same category at US$11.1 billion. These figures are not specific to Hawaii, they are representative of global tourism movements. Globally, international tourist arrivals for 1959 were 69 million (Global Policy website, 2008) and this had risen to 940 million by 2010. (UNTWO website, 2012) Destinations around the world began to realise the lucrative economic benefits of these industries and responded with increased funding to supporting infrastructure.
Similarly, Hospitality organisations also noticed the fiscal opportunities available in these locations and began rapidly expanding their operations to popular tourist destinations. The opportunities were not lost on Juan Trippe, the founder of Pan American Airways. After spearheading the accelerated growth in commercial air travel for PanAm, he realised the highly lucrative opportunities that existed in hospitality and in 1946 he founded the InterContinental Hotels corporation and opened its first InterContinental branded Hotel in Brazil. (InterContinental Hotels Group website, 2012) Today, under different ownership, the InterContinental Hotels Group is the world’s leading hotel operator. (InterContinental Hotels Group factsheet, 2012).
Prior to the 1980’s, Event management as an industry was not widely considered. Instead one time only teams would be assembled to manage individual events, and disband at the events conclusion. This is as oppose
to the contemporary industry which is made up of Event Management professionals and organisations who specialise in Event Management. Allen et. al. (2011, p8) argue that the real turning point came from the example set by the 1984 Olympic Games in Los Angeles. The event organisers demonstrated that large scale events, such as the Olympic games, could be economically worthwhile. Coupled with corporate sponsorship and a lucrative broadcasting deal, the Event organisers were able to utilise existing infrastructure within Los Angeles for the Olympic games in turn minimising their fiscal investment. By the end of the 1980’s professional Event Corporations began demonstrating that special Events could become financially viable. (Allen et. al. 2011, p9) 5. When Industries collide – The Interdependence of Hospitality, Tourism and Events. The Hospitality, Tourism and Event industries are intrinsically linked. Each element, though distinguishable on its own, relies on the other for successful existence. Accommodation venues need tourists and event participants to patronise their establishments. Tourists need somewhere to sleep, food to eat, attractions, entertainment and transport. Event attendees (may) require accommodation, food, beverages, transport to, and within, the destination. (MGT102 Study Guide 2012, p16)
5.1 Interdependence in action
This relationship can be evidenced in the Rally Australia Socio-Economic Impact Assessment by Owen (2009) into the 2009 Repco Rally which was held in the Tweed and Kyogle Shires of northern NSW. After an initial investment of $1.5 million by the organisers, the assessment estimated that out of a total estimated income generated of $31.89 million, approximately 41% of this income was generated for accommodation operators and another 51% was generated for food and beverage operators, with the majority of this income being generated from (non-local) tourists.
5.2 Ignoring interdependence.
When operators do not properly recognise and appreciate this interdependent relationship, the opportunity to capitalise can be lost. In the case of the
first Disneyland theme park which opened in Anaheim, California in 1955, the owners failed to consider the level of ancillary products and services their guests might require. Shortly after the opening of the park, it became apparent that the demand for these ancillary products and services was far greater than predicted, and the existing food, beverage and accommodation provisions operating within the park proved insufficient. Subsequently, third-party business’ began opening up outside of the park to take advantage of these highly profitable service areas. Disney was able to learn from its mistakes promptly. Within three months of the Park opening, they had built and opened the Disneyland Hotel. It currently remains the parks only accommodation facility. (Chon and Sparrow, 2000)
6. The Host and the Guest – Marketing a relationship built on reciprocity and loyalty.
In the Commercial hospitality domain, the host/guest relationship relies on a reciprocity based on financial exchange, supplying hospitality products and being paid for it. This fundamentally changes the host/guest dynamic as it naturally questions the hosts ability to provide altruistic hospitality. (MGT102 Study Guide, 2012 p25)
Indeed, providers of HTE products need to take a customer (guest) centric approach, ensure that the guest is completely satisfied and realise that the guest is the motive for their successful existence. By committing to the guest and ensuring that the guests wants and needs are consistently met, the guest will develop trust in the host, which will provide the best opportunity to obtain a loyal guest. The definition and benefits of customer loyalty are best surmised by Shoemaker and Lewis (1999 p349);
The customer feels so strongly that you can best meet his or her relevant needs that your competition is virtually excluded from the consideration set and the customer buys almost exclusively from you. …The customer focuses on your brand, offers, and messages to the exclusion of others. The price of the product or service is not a dominant consideration in the purchase decision, but only one component in the larger value proposition.
These qualities, combined with a consequent reduction in marketing costs means it is more cost effective to retain an existing customer than to attract a new one. (MGT102 Study Guide 2012, p38) 6.1 Gaps in supply means gaps in service
A poorly managed Event or Tourist destination will provide the guest with gaps in the product and service supply chain, this ultimately leads to gaps in product and service delivery. A host city of an international sporting Event that fails to consider whether or not its public transportation infrastructure can cope with the influx of visitors will severely harm the experience of the guest, and hamper its image in the eye of the guest(s). The unsatisfied guests will be less likely to consider the city as a holiday destination in the future, and through word-of-mouth may even deter others from visiting. The opposite is true for a guest who is satisfied. Satisfied guests are more likely to become loyal if their expectations are met or exceeded consistently. (MGT102 Study guide 2012, p34).
7. Supplying sustainable products and experiences.
HTE supply chains are not just about the products and services on offer. They include all of the destination – the infrastructure, services and facilities that make the destination appealing in the first place, and, more importantly sustainability of that destination.
(MGT102 Study Guide 2012, p30)
In order to secure their continued success, it is important that HTE operators and stakeholders acknowledge the importance of the local environment within which they operate. Conducting business in an environment which is not sustainable will not only ensure the operators demise, it will have a detrimental impact on the environment itself. This is of particular importance in the Tourism industry, where environmental assets are often the foundations for tourist activity. (MGT102 Study Guide,
2012 p65) If a destination fails to account for increased tourist activity, gaps in the supply chain occur. A recent example of this can be found in the looming situation in Sydney and its ability to accommodate the berthing of so called “mega-liners”. At present, the only commercial berth accessible to large ocean liners that cannot fit under the Harbour bridge is at the overseas passenger terminal. By 2015, fifty percent of visiting ocean liners will fall in to this category. (Hotelnews May 2012, p14) Carol Giuseppi, the director of Tourism Accommodation Australia(NSW) is quoted in the same article saying; “pre and post cruise shipping generates an average 2-3 nights in hotels in Sydney, with an average spend of $590 on accommodation.” The result of an unsustainable environment will see cruise ships forced to moor in the middle of the Harbour before ferrying passengers ashore, ultimately the rapidly expanding cruise shipping industry will simply choose not to visit Sydney waters, denying local hospitality operators of these fiscal opportunities.
The rapid development of the commercial Hospitality, Tourism and Events (HTE) industries has, by their very nature, forced a strong interdependent relationship that has developed significantly throughout the 20th and 21st centuries. In their current state, the Hospitality, Tourism and Events industries could not successfully exist without each other. All hosts of HTE products must maintain commitment to the guest, and seek to serve and completely satisfy their wants and needs. Allowing gaps to occur in the supply of products and services will not only impact the experience of the guest, it will in turn harm the profitability of the host. By consistently satisfying the guest, the host works towards achieving the guests’ trust and ultimately loyalty. A loyal guest is most valuable to HTE operators as they generate repeat, long-term business and drive down marketing costs.
Finally, HTE operators and stakeholders must recognise the importance in creating and ensuring a sustainable environment within which to operate in order to secure their long term viability and minimise damage to the local environment.
Though they are three separate industries in their own right, they are fundamentally linked and when combined, form just one element of the greater Tourism industry supply chain.
Chon, Kye-Sung, “Kaye” and Raymond T. Sparrow 2000 ‘Travel and tourism: partners in hospitality’. Welcome to Hospitality, An Introduction, 2nd ed. 2nd ed. Delmar Learning, London, 2000. p52.
Global Policy 2008, ‘International Tourist Arrivals’
Accessed: 6/8/12 17:50
Hawaii Tourism Authority 2010 ‘ 2010 Annual Report ‘
Accessed: 6/8/2012 15:45
Hotelnews 2012’Billion dollar cruise Industry at risk’, May 2012 Volume 26, p14.
InterContinental Hotels Group PLC 2012 : ‘Our brands’
Accessed: 29/7/2012 16:01
Intercontinental Hotels group PLC 2012: ‘fact sheet’
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Johnny Allen, William O’Toole, Ian McDonnell, Robert Harris 2011
‘ Festival and Special Event Management’ Fifth Edition published 2011, John & Wiley Sons, Milton QLD, Australia.
MGT102 – See William Blue College of Hospitality Management
Owen, William 2009 ‘Rally Australia Socio-Economic Impact Assessment’
Accessed: 5/8/2012 21:55
Schmitt, Robert C. ‘Historical Statistics of Hawaii’. Honolulu: University Press of Hawaii, 1977.
Accessed: 3/8/12 14:30
Shoemaker, Stowe, & Lewis, Robert 1999.’Customer loyalty: the future of hospitality
marketing,’. International Journal of Hospitality Management, 18(1999), p349.
Available: http://scholar.google.com.au/scholar_url?hl=en&q=http://sites.google.comsite/myselfgeorge2/tm340assignment.pdf&sa=X&scisig=AAGBfm2KBkI4DsOijl14-fvjVt0 WOr-KyA&oi=scholarr&ei=jo8fUNzON4eQiAfrnYCwCg&ved=0CGAQgAMoADAA
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UNSD, EUROSTAT, OECD and UNTWO – see United Nations Statistics Division et. al.
United Nations Statistics Division (UNSD), the Statistical Office of
the European Communities (EUROSTAT), the Organisation for Economic Co-operation and Development (OECD) and the World Tourism Organization (UNWTO) 2008,’2008 Tourism Satellite Account ‘
Available: http://epp.eurostat.ec.europa.eu /portal/page/portal/tourism/documents/BGTSA.pdf Accessed: 1/8/2012 15:35
UNTWO – See United Nations World Tourism Organisation
The United Nations World Tourism Organisation(UNTWO) 2012 ‘Tourism Highlights 2012 Edition’
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The United Nations World Tourism Organization 2012 ‘Understanding Tourism: Basic Glossary’
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William Blue College of Hospitality Management, 2012. Bachelor of Business, Flexible and Online Study Guide, MGT102 Introduction to Hospitality, Tourism and Events.