Impact of Globalization on Hospitality Industry: A Case Study of London Hilton Hotel

Abstract

Business globalization continues to be a major trend in most business worldwide.  It does not only provide business competitive advantage but also it also gives business new and innovative ways in delivering business.  In this paper it will focus on how globalization impacts hospitality industry.  The case that will be tackled in this paper will be London’s Hilton Hotel, which is considered one of the most successful global business in UK, most especially when it comes to hospitality and tourism business.  This paper also provides some of the basic information and practices that are applied in globalization and how it helps business grow competitively.

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Impact of Globalization on Hospitality Industry: A Case Study of London Hilton Hotel

I.                   Introduction

Being competitive in business these days does not only come from effective strategies or just effective customer service.  Globalization comprises also of effective understanding of the global needs and anticipating the trends before it happens.  This is also the main reason why there are very few companies become successful in applying it.  In typical definition, globalization pertains to the international strategy applied by certain organization which most business practices and processes are applicable to most international businesses.  These may include: technologies, communication, transportation and even political strategies applied by the business.  Globalization also includes understanding the very complicated cultural standards of the global market, by not just focusing on investing cultural awareness and understanding in order to sustain business and to achieve stability in its operation.  (Globalization, 2003).  In this paper, it will focus on how globalization impacts hospitality industry, which is one of the most impacted industries due to its high priority to customer satisfaction.  In this paper, the case of London’s Hilton Hotel will also be the focus of discussion, looking at the company’s current status and service standards and how it could be more progressive in the future by looking at the globalization trends that are applied by most successful companies in the world.  This paper will also provide some of the essential information pertaining to globalization and how it can really impact businesses by applying some of its standards accurately and effectively.

II.                Globalization in the Modern World

There are always a lot of benefits that can be gain in applying globalization.  One good reason why it is important is that for most companies, it should be a common setting that customers will always be different everyday, that it may come from all walks of like with different nationalities.  One of the main drivers for companies that are falling is that they do not study their customer which includes current loyal customers and potential customers.  Most especially for hospitality industry where they cater to vast number of different customers.  Like for instance, an Asian customer is different to that of European customers as well as for American customers.  Once the company started to expand its business these are some of the basic globalization strategies that needs to be taken and should not be ignored.  In order to have a clearer understanding, the following are some of the major factors that need to be considered: (1) Rising economies, which means that there are emerging companies or countries that are keeping the competitive mood of business, like China and India, both countries are now starting to set the paced, and if your company is not keeping up with these two countries and the companies that they have started, there will be a possible loosing end for every business.  (2) Demographics, again it is always important to understand the current trend in business, like understanding the urban lifestyle and the impact of modernization and how it can affect business.  These are drivers to globalization that needs to be taken into consideration.  There are economist that thinks business only looks on the current trend and keep on strategizing on it only and not looking forward and what strategic plan needs to be setup.  (3) Commercial demand, economic expansion is also the name of the game.  There are companies that would settle for just a number of branches, which is not also a good strategy to take.  One good thing to do is to expand as much as the business can in order to gain a huge market share and more customers can experience the quality of the business.  (4) Infrastructure improvement, this is expected to be applied as well for globalization, this can be either can involved technology or re-designing the layout of business to gain a better impact on the global business.  And last, (5) Closed markets systems opening up, systematic reforms needs to be applied, this means that there are companies that are successful in opening a new name with new strategies and closing the old ones just for the purpose of re-creating its look on the business, which for most companies always a successful tactic to take for globalization.  (Myatt, M., 2006).  One good example to this one is what happened to Russia where despite a shortage to modern infrastructure, they still achieve success.  Particularly for hotel industry in Russia, big cities like Moscow and St. Petersburg, what most of their hotels did is that they expanded their market reach by providing room rates for low to mid income tourist or customers.  These has created a major turn around for the country and even become more competitive against its neighboring countries.  The tourist appreciated the strategy that were applied by most hotels in Russia and provided good income for the hotels.  This also gives way to more jobs and even improves customer service due to increasing competitiveness that needs to be taken by most hotels. With the 5 star hotels offering it for more affordable accommodations created better opportunity for all tourists all over the world since this is only their chance to grab it.  (Bukin, M. & Shemesh, A. 2005).  Global marketing also plays a major role for globalization, which is also one of the known strategy that were applied by most respected and highly successful companies like General Electric.  Understanding the global market needs and studying it closely will be a big help to succeed in the business globally.  It is important that a company needs to have a very powerful marketing team that would really focus on finding new business opportunities and also understanding the latest trend of global customers in order to be competitive and this is the main purpose of marketing for every global company.  (Mawby, C., 2007).

III.             Impact of Globalization on Hospitality Industry

One of the main importances of hospitality industry that a globalization impact on them is effective human resource management.  The people that works in these kind of organization needs to have extra attention to customer satisfaction.  They need to know how to satisfy customers.  With that, it is also the main duty of the company to satisfy their own customers and that is their employees.  Effective human resource management in a hospitality industry sector is much desirable than ever.  Teaching them the right policies and ways that applies to different and unique customers daily is essential and should have been practiced religiously.  When it comes to human resource management, one thing that is attributed to its effectiveness is providing good working condition to its employees, where it has estimated about 192.2 million jobs worldwide, which is considered to be one of the biggest labor sectors in the world.  And by 2010, it has estimated to grow up to 251.6 million worldwide.  That is why this study is very important for any global hospitality type of business to address to.  Just following the trend like in the United States, based from the National Association of Restaurant in the US, there are about 52% of workers that were women.  25% of employees between 16 to 19 years old.  19% are between 20 to 24 years old and another 25% between 25 to 34 years old, and this was studied in 1996 but Australia in 1995 was greater than that about 60 to 70% are women in these kind of business.  This only shows that age and women gender are dominantly the workforce of these kind of industry.  Another impact to present globalization in hospitality industry is technologies; there are online reservations that exist these days that also gives competitive level to this kind of business.  A technology not only gives convenience to customers but also accuracy in reports and system processes.  This continues to be a major factor for effective business processes and accurate reporting to the business which gives the business better understanding on its current business status, most especially its profitability. But there are also some basic factors that may also affect the current status of hospitality industry like when it comes to working hours.  Ireland is one of the European countries that obligate most of its employee to work more than 48 hours.  While, France, Luxembourg, Austria, Italy, Netherlands, Germany, Spain are 40 to 44 hours and Belgium, Norway, Denmark, Finland, Sweden are just less than 40 hours.  This hours allotted to workers may also be a big impact to globalization, because workers can only do work effectively if their health are also being address as well.  Organization must be careful on giving hours of work in order to be effective and efficient.  In terms of labor force, there might also be factor that can be taken into account like in the whole Europe the number of part-time and full-time workers and also its size per sector may also be considered.  (See Table1 and Table 2).

Absolute values (thousands)

Share (%)

Variations (%)

1995

1997

1997

1995-97

Full-time
Part-time
Full-time
Part-time
Full-time
Part-time
Full-time
Part-time

EU-15
4 439
1 382
4 449
1 615
73.6
26.4
1.4
16.8
EUR-11
3 505
774
3 550
927
79.3
20.7
1.3
19.7
Belgium
99
26
99
31
76.4
23.6
0
18.8
Denmark
38
26
42
37
53.1
46.9
10.3
41.9
Germany
835
218
865
300
74.2
25.8
3.7
37.4
Greece
212
11
219
11
95.3
4.7
3.3
-5.4
Spain
687
85
677
108
86.2
13.8
-1.4
27.5
France
592
144
558
169
76.8
23.2
-5.7
17.2
Ireland
52
17
54
22
71.3
28.7
4.7
28.7
Italy
753
87
781
102
88.4
11.6
3.7
17.8
Luxembourg
7
1
8
1
91.5
8.5
7.3
25.4
Netherlands
94
143
90
130
41.0
59.0
-4.8
-9.4
Austria
155
32
171
34
83.3
16.7
10.4
7.6
Portugal
194
10
206
13
94.1
5.9
6.0
24.8
Finland
38
12
42
18
69.6
30.4
10.9
51.7
Sweden
63
32
61
40
60.4
39.6
-4.3
25.0
United Kingdom
621
539
628
601
51.1
48.9
1.2
11.4

Source: Eurostat (Labour Force Survey).

Table 1.  Full-time and part-time employment in hotels and restaurants, European Union, 1995-97 (Human resources development, employment and globalization in the hotel, catering and tourism sector, 2001)

No. of
enterprises
Employment
Total
receipts
(million ECU)
Receipts
per enterprise
(thousand ECU)
No. of
persons
employed
per enterprise
Receipts
perperson
employed
(thousand ECU)

EU-15
1 412 987
6 544 710
278 706
1 977
4.6
43
EUR-11
1 146 173
4 755 060
189 903
166
4.1
40
Belgium
54 253
206 168
6 499
118
3.8
32
Denmark
11 545
79 724
3 293
285
6.9
41
Germany
270 737
1 274 830
51 625
191
4.7
40
Greece






Spain
259 594
915 519
29 334
113
3.5
32
France
191 281
811 510
38 934
204
4.2
48
Ireland






Italy
211 796
736 708
33 164
157
3.5
45
Luxembourg






Netherlands
40 197
303 429


7.5

Austria
37 688
188 102
8 450
224
5.0
45
Portugal
64 705
213 990
4 432
68
3.3
21
Finland
9 544
43 524
3 458
362
4.6
79
Sweden
10 256
70 008
4 685
457
6.8
67
United Kingdom
148 860
1 484 014
52 220
351
10.0
35

Source: Eurostat.
Table 2.  The hotel and catering sector in the European Union in 1996 – Average size of enterprises by employment and receipts (Human resources development, employment and globalization in the hotel, catering and tourism sector, 2001).

In the two tables above, at least it provides some of the major trends from the past which can be helpful in projecting the present in terms of employee category and the size per sector in each country in Europe which could affect the globalization trend for hospitality industry.  But one clear representation in the tables above is that UK is one of the most progressive countries regarding this kind of industry.  It continues to be at the forefront of the business.  This also shows that UK continues to be the major movers in the global trend for Europe for the entire world.  (Human resources development, employment and globalization in the hotel, catering and tourism sector, 2001).  Another major impact of globalization to hospitality industry is pricing strategy.  As discussed earlier one strategy that helps Russia succeed is providing affordable pricing for its hotels, which is still a major factor for globalization.  Pricing without sacrificing quality is important for most global companies.  This is always a challenge that most companies would just ignored.  One of the effective approaches in handling pricing strategy is looking at the company’s revenue management.  Most companies would always want to increase profit and that is for sure to any company in the world.  But for companies that is always asking for more this is not the right strategy, instead there should a be a well balance study on how profit should be balance with the benefit that it can bring to the customers like reducing profit and understanding that more gain and market reach can be achieved is important.  That the more customers you gain the more benefits its could bring to the business which is really very crucial to global business.  (Erol, G., Waldemarson, H. & Svensson, K., 2008).  But, hospitality can always adjust to globalization standards, which means that there should always be certain adjustment that it should take, like how many times, did we hear about cultural problems affecting industries?  But, it is still not being given much attention by some instead they continue to strengthen their process as well as implementing technological advancement, just to find some effort that could replace human service in the organization.  Take for instance manufacturing industries, where robotics and systems are primarily the one that performs in the production line.  Companies would find it more efficient and has a high quality results that having to assign humans in the process.  Like in the case of EKS&H Company, a service oriented company where its strategy mainly revolves only to its hardworking people and loyal clients.  This type of culture has made the company be known and continue to sustain good revenue results as well as satisfying both its employee and their customers.  Another key actions that was done by the company, just like most multi-national companies is that it involves itself in the community, having to participate in some meaningful programs with a cause, has made the company being well appreciated.  Its core values involves: (1) Integrity and high ethical standards, (2) Direct, open and honest communication, (3) Commitment to client, (4) Product quality and reliability, (5) Continual self-improvement / self-renewal, (6) Having fun, (7) People are the source of our strength, (8) Team orientation/Commitment to each other, (9) Creativity / Innovation / Risk-taking, and lastly, (10) Strong work ethic.  These core values have put the company in a high level of standard in its service to its clients that is somewhat unmatched to some or hard to achieve by many.  Since the company was driven by a passion for its culture, they have provided a guarantee for best service for their clients by providing the following commitment to any work that they will do for their most precious clients: Services that exceed their expectations, Timely service, Service at the highest quality standard, A team of experts who assist them by providing creative counsel, Personalized services and products built on business relationships, A networking base in the business community that serves their needs.  (Company Culture at EKS&H, n.d.).  There are some issues that needs to considered in order to have a better understanding on how hospitality needs to adjust for globalization and these are: (1) international expansion, expanded business must carefully be studied, its market research should be well developed and analyzed, (2) sales and marketing programs that fully adaptable to global standards and economies of scale.  (3) effective organizational structure, which includes hiring effective people to do the work.  (4) cross-border employees, which means that there should be establish support team that will monitor the operation if its is running effectively and accordingly, and lastly (5) use of the world capital markets as source of funding, this is important because this could give stability and assurance for the global business to grow more and be able to be assured that the business will grow effectively.  (Cline, R., n.d.).  It is definitely true that globalization provides a positive impact on any type of industry.  It does not only gives business or organization a good leverage on how it can perform business globally but it also gives an organization a clear look at the future developments that need to take in order to be stable in the business.  One of the positive impact that it brings is the insertion of Information technology, it lessens that inaccuracy in the process of business and secondly the existence of outsourcing where management can have a way on how to manage its resource.  IT and outsourcing are two of the biggest positive impact of globalization and this definitely includes hospitality industry as well.  With IT, it provides an easy way of managing global transaction and do not anymore do tedious processes which has become a major hindrance to global development before.  Outsourcing on the other hand becomes a positive impact, for the reason that many companies can now decide of short time labor and maintenance based workforce to handle jobs for the company and not anymore settled for employees that works long time for the company even without any importance in the process of the business.  (Rediff News, 2008)

IV.             London Hilton Hotel Case

In this paper, the main focus is London’s Hilton Hotel, which is considered to be one of the most known global companies in the UK.  Actually, the company has more than 3,000 hotels worldwide and with about 50 airline partners, which gives an easy way of setting up accommodations as well as reservations.  The company’s years of experience with its high standards and high priority for customer service have given them the respect and appreciation from both its customers and the industry they belong.  (Hilton Website, 2009).  Just the same as the company’s success was also the success where it began when among all European countries, London bags the top European Hotel.  This is brought about by its class and excellence in service to its customers as well as quality in its manner of delivery and accurate business transaction.  (See Table 3 and Table 4).

Rank
City
RevPAR 2005
RevPAR 2006
Change
1
London
139.22
166.63
18.5%
2
Moscow
140.62
161.78
15.1%
3
Dubai
137.93
156.03
16.0%
4
Paris
134.23
152.36
13.5%
5
Amsterdam
91.48
104.27
14.0%
Table 3.  Top 5 Europe & Middle East Markets – Absolute RevPAR (EUR) (London tops European Hotel Survey, 2007).

Rank
City
RevPAR 2005
RevPAR 2006
Change
1
London
139.22
166.63
18.5%
2
Edinburgh
94.81
101.32
6.9%
3
Bath
87.65
96.13
9.7%
4
Dublin
89.17
95.20
6.8%
5
Manchester
86.22
90.15
4.6%
Table 4.  Top 5 UK Markets – Absolute RevPAR (EUR) (London tops European Hotel Survey, 2007).

In the tables that were presented above, it only shows that London has clearly dominated the competition with its high desire of excellence and high attention to customer satisfaction.  It also shows that for any global company like that of Hilton Hotel, it takes a lot of effort in focusing on how to deliver business based from effective study and analysis of customer desires and liking which would definitely resulted to positive outcome.  For Hilton Hotel, there are again other factors that link to its success and not just its own attention to improving its business processes and service and these may only be attributed to these factors.  But, first there are sectors that are included and these are: restaurants, pubs and bars, hotels, catering services and other hospitality services which can includes those in the hospitals and from these information, we can come up with the hotel and catering industry profile which Hilton Hotel contributed.  (See Table 5).

 Share of UK output
2.4%
Total employment
1,860,000
Share of total employment
6.2%
Gender split (male: female)
41:59
Part-time share
54%
Self-employment share
7%
Table 5.  Hotel and Catering Industry Profile (Hospitality, n.d.).

While these are somehow the future skills that are needed for hospitality industry.  (See Table 6).

Table 6.  Current and future skills needs in the hospitality sector and sub-sectors, 2002 (Hospitality, n.d.).

In the current skills posted in table 6, it shows that there are certain degrees of attention that are desirable for hospitality industry to take in order to achieve high standard in the global business.  This means that knowledge towards work is not just a major concern and requirement for the person to work in these kind of industry instead it is more of the attitude and character as well as the person’s values counts the most.  This is the growing balance of globalization with any industry in the world; it should strike the balance between technical and attitude of the person for a company to achieve and not just the employee or the staff.  Another figure that it can attribute to the success not only for Hilton Hotel but for the entire hotel industry in London is its branches and number of hotels is very accessible to tourists.  Most of them are either near the busy markets as well as shopping malls.  (See Table 7).

Table 7.  London and Entire UK Daily Hotel Room Occupancy.  (London Hotel Market Reflects Capital’s Top Status, 2007).

Another important aspect of its success for London and its hotel industry in particular is how they handle its political issues; instead they focus on how business should evolve.  The country always look at the positive side of thing and always let its people work better for themselves as well for the business and their country.  This is another factor that helps London, particularly Hilton Hotel to succeed globally and efficiently applied globalization in its international business, where it resulted to quality and efficiency in its way of doing the process.  (Trends in the UK hotel Industry ,1996).

V.                Recommendations

Just like other global companies, one of the best ways to succeed globally understands how successful companies in the world do it.  This is the first recommendation that needs to be followed.  Just like looking at some of the best companies in the US, it could be used as a pattern, most especially if you will be embarking business in these countries where more than 50 states needed to be studied.  Brotherton, B. (2000).  Secondly, there are main factors that can be summed up in order to address impact of globalization to hospitality industry and this includes: economic, social, political and lastly technological.  (See Table 8).

Table 8.  An Indications of Influences on Markets for Hotel Consumption in a given location.  (Brotherton, B., 2003).

In table 8, it shows that these factors greatly influenced global business for them to perform effectively and efficiently.  Like in social, there should be a careful understanding on the current customer trends and their preferences and cultures in order to address their needs and satisfaction towards the business.  (Brotherton, 2003).  Third and last recommendation in this paper is to look closely on how to manage human resource effectively.  In an industry like these, again it takes more sensitiveness in managing its people more than its customer, the more the employees are satisfied the better the service they give to the customer.  (See Table 9).

  Table 9.  Overview of Hospitality Industry.  (Hayes, D. & Ninemeier, J., 2008).

In table 9, it only shows that there are different types of people that needs to be managed and d with different needs and priorities.  Managers and executives to this kind of industry must establish a different way or approach on how to handle its people in order to address important issues in the business.

VI.             Conclusion

In this paper it only shows that quality service, attention to effective human resource management and effective pricing strategy are just some of the major actions that needs to be taken by hospitality industry in order to achieve globalization.  Its impact is highly beneficial and even provides stability to any business if applied accurately and effectively.  In this paper, Hilton Hotel does not only focus on improving customer service, but also expanding it as to where its customer can be reached has made its business works well for them.  In this paper also provides a clear understanding that no business can exist without proper marketing study which is an essential tool to used to be successful.  But more importantly, it is more important to address the many issues of its own employees in order for them to perform effectively for the customers since hospitality type of business works more for customer service and satisfying them is highly desirable.

Bibliography

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