THE IMPACTS OF GLOBALISTION IN HOTEL

INDUSTRY AND ITS NEGATIVE

EFFECTS

In the 21st century, with the increasing levels of globalization

in hotel industry, hotel companies will need to learn different

management approaches to survive and develop in

environmental circumstances with high levels of uncertainty as

well as understand the implication of future impacts, both

positive and negative, of the changing environment in which

they operate. As international trade and business expand, there

is no question that international linkage will become more

important for the hotel industry. This project focuses on

globalization in the hotel industry and explains how the

increasing levels of globalization, in this particular industry may

affect the internal operating environment (e.g. organizational

culture, structure, management styles etc.) of hotel companies.

ABSTRACT

INTRODUCTION

Globalization has become part of everyday vocabulary.

Every day we hear the term globalization on the news, read it in the papers, and overhear people talking about it. What is globalization?

We have tried to focus on the effects of globalization in the hotel industry and find how the increasing levels of globalization has effected the industry.

Globalization refers to the shift toward a more integrated and interdependent world economy

INCREASING LEVELS OFGLOBALISATION IN HOTEL

INDUSTRYAs international trade and business expanding, so there is no question that international linkage will become more important for the hotel industry.

In the early stages, most hotels have received foreign guests at one time or another. Then, as the industry evolved, and with the development of technology and transportation systems, the industry's structure has become increasingly more complex with respect to scope, ownership, management and affiliation. There are many models including:

TYPES OF HOTELS

ACCORDING TO MANAGEMENT

Chain-owned and –

operated properties

Independently owned

properties

Chain-operated

properties

Franchised properties

Referral group

properties

•However, in terms of the number of rooms, chain hotels are the dominant sector. •There were two main reasons why hotel chains began looking for opportunities to enter into the global marketplace. •They are comparative advantages, especially in developing countries, and the overcapacity or saturation in their home markets. •Unfortunately, hotel investment outside one’s home country incurs high risks with a wide range of environmental influences affecting organisational strategies and performance. •Those environmental factors include

Political factors

1)Foreign trade regulations

2)Taxation policy

Economic factors

1)Business cycles

2)Inflation

Socio-cultural factors

1)Social mobility and lifestyle

2)Lifestyle

Environme-ntal factors

1)Environmental protection laws and legal

Technological factors

1) New discoveries

Other factors

1)Employment law

2)Monopolies 3)Legislation

4) Cultural

.

IMPACTS ON ORGANIZATIONALCULTURES

There is an often-told story of a person, new to a company,asking an experienced worker what an employee shoulddo when a customer calls. The old-timer responds:

In most organizations, the “Company Way” is derived from the CORPORATION’S CULTURE.Corporate culture is the collection of beliefs, expectations, and values learned and shared by a corporation’s members and transmitted from one generation of employees to another ,A strong culture can create the basis for a superior competitive position. When a hotel company makes a decision to invest outside its home country, it has to adjust more or less of its company’s culture to adapt to the cultural diversity in the new work environment. This new work environment thus becomes enriched by the multiple cultures.

“There are three ways to do any job—the right way, the wrong way, and the company way. Around here, we always do things the COMPANY WAY

However such cultural diversity can also bring some negative

effects, which can generally be attributed to individuals, and

how they relate to difficulties arising from departmental

concentration of minority ethnic groups, especially from

language and cultural differences.

But this kind of adjustment is not an easy task to fulfilL. Even

for a domestic hotel, when businesspeople are all from the

same culture and speak the same language, the actual

construction of the facility can be difficult.

The many interdependent players sometimes have conflicting

objectives and a number of timetables to coordinate. An

international hotel is even more complex because the

developers and employees come from different cultures with

different business.

Good communication between the regional office and the individual hotel’s

sales department helps produce more business for the individual property.

The policy of Equality Of Opportunity is also an essential part of its

organization’s culture.

This policy ensures that there shall be no unfair discrimination, in respect of

gender, marital status, sexual orientation, colour, religion, race, nationality,

ethnic origins, disability or age, and that equal opportunity shall be given to

all employees.

IMPACTS ON MANAGEMENT STYLE

An organization’s culture is translated into practice largely as a result of actions taken by managers. Thus, the quality and style of managerial leadership is crucialin shaping perceptions that will support cultural values and hence, the organization’s strategy. Managers have been classified by their decision-making style:Authoritarian Democratic ( the leader actively involves subordinates in the decision-making process)Sharing problems (soliciting input and sharing authority) and laissez-faire.

Managers have been classified by

1) Authoritarian Democratic ( the leader actively involves subordinates in the decision-making process

2) Sharing problems (soliciting input and sharing authority)

Sometimes, a hotel company operating around the whole world may focus on democratic management style rather than an authoritarian style since it has to relate to different employees from different cultures or social backgrounds. For example, Six-Continents PLC, the second largest hotel group by the number of rooms, has a “Disclosure Procedure” to ensure such a democratic management environment. If in doubt, in this organization, employees areencouraged to discuss the matter with the person to whom they report or to the company’s secretary. The other issues can be as such 1)They also all have a responsibility to draw attention to issues

1)They also all have a responsibility to draw attention to issues that come to their attentions or that comes to their knowledge. 2)They are also responsible for helping to maintain a safe and healthy workplace for their employees. Thus employees can enjoy the work in a pleasant and comfortable environment.

Moreover, despite the increasing levels of globalization, the management style in the hotel industry tends to be localization, which can meet the specific needs of local employees. While labour supply is not a problem in most developing countries, skilledpersonnel are sometimes difficult to find, due to a shortage of training facilities and trainers.

However, local labors usually have quite different needs from those of imported laborers or immigrants. Facing such an issue, a multinational hotel company has to set up some new management approaches or adjust its management style. For example, the reward system will be different in China and in Australia. IN AUSTRALIAAustralian employees have been required to reduce their working hours each week, although most of them have been promised overtime payments. IN CHINA:Two of the greatest ways to show appreciation to a Chinese employees is through 1)Giving higher salaries 2)Promotions instead of giving them vacations or leave to spend with their families.

At the same time, training and education has become more important for transnational’s hotel companies.

Such training is provided from within their own organizations . With good communication sense, multilingual staff will become increasingly satisfied. Communications and cultural sensitivity may become an escalating problem, especially where there is a large no. of immigrant labour or a large numbers of foreign guests.

Solutions to the labour problems are as varied as the causes, for the various and different locations around the world. Ultimately, it will be up to the hotels to make themselves more attractive employers and to improve in the recruitment, retention, training and rewarding of staff.

IMPACTS ON ORGANISATIONALSTRUCTURE

Organizational structure means

three things:

The formal division of the organization into subunits

The location of the

decision-making

responsibilities within that

structure.

The establishmnt of integrating mechanism.

What is an organizational structure ?

Every organization depends on its environment to some degree. The evidence demonstrates that a dynamic environment has more influence on a structure thandoes a static environment.

In the volatile world of Transnational corporations (TNC) there is no such thing as a "universal" global manager. Rather,there are three groups of specialists:

a)Business managers.

b)Country managers .

c)Functional managers.

There are also top executives at corporate headquarters who manage the complex interactions between these three specialists.

specialists and can also identify and develop the talented executives a successful transnational requires.

This kind of organizational structure characterizes a Transnational rather than an old-line multinational, international or global company. A multidivisional structure is built up of separate divisions on the basis of products, services or geographical areas.

•for example, Six Continents PLC is the leading hotel group in the world with over 3,300 hotels across nearly 100 countries and territories. Its organizational structure is described as follows. •In the board, Chairman is backed by a finance executive and a CEO.

The business of Six Continents PLC is divided into three main regions:•America•Asia and pacific•Europe•Middle East •Africa.

In each area, there is a head office, which is supported by two management teams: 1) a management committee and 2) senior managers who manage different brands of the group in specific areas.

This kind of organizational structure has its disadvantages.

The two main disadvantages are that it is costly and the divisions grow too large. The Six Continents PLC, established itself in a similar structure with head offices.

DISSCUSSING THE IMPACTS OF GLOBALISATION ON HOTEL INDUSTRY

Globalization is a very debatable topic as it has goods and the bads to the people. It depends upon the person whether the Globalization is good or bad or it has :

• Positive Effects

• Negative effects

POSITIVE EFFECTS

1.Exposure to different cultures: Due to Globalization the managers of the hospitality industry are able to learn about different cultures – as they get to mingle with people from various walks of life – and thus, increase their knowledge. 2.Larger Market: Due to Globalization the customer base has increased greatly. People travel not only for holidays, but business, health and various other purposes too. Thus, this has increased the market for the hospitality industry, which gets its major income is from international visitors.3.Boosts the economy: Visitors come in and spend money – multiplier effect – and foreign exchange increases. Thus it is of great value to the economy as Globalization helps to pump in money into the country.

4.Technology Advancement: Since one wants to attract as many tourists as possible, hospitality organizations constantly need to upgrade and improve their products and services Example: Singapore Flyer, using faster and newer technology in hotels to so that the customer is satisfied.

5.Promotes Creativity: Organizations are constantly thinking of new and creative ideas to attract more tourists

6.More Job Opportunities: Due to Globalization, more visitors come into our country and thus more people are needed to serve and cater to their needs. So, with the advent of globalization, there are a lot of more jobs available for people within the hospitality industry

7.Boosts the Travel Industry: Due to globalization more people move around, to facilitate this, the travel industry needs to grow as well. People who come into our country – by air, or ship, or land – use the transport services offered as well.

8.Variety of International Services/Cuisines: Since there are a lot of different visitors with various cultures, customs, cuisines, and languages, the hospitality industry includes recipes and various other services to cater to them. These services are available to the locals too, which makes it even better.

NEGATIVE EEFECTS

1.Language Barriers: Due to Globalization in the hospitality Industry we can employ people from different countries – as it is usually cheaper – they may sometimes have problems in communicating with the customers. Many customers get quite irritate as a result of this.

2.Cultural Barriers: As there are people from various cultures, one needs to be careful not to offend them. For Example, a Muslim will not eat pork – one needs to make sure not serve food which contains pork.(unless specifically asked). Whats acceptable by one culture may be frowned upon by another.

3.Events/Disasters in other Countries: A disaster or event taking place in one country may affect our country (the home country) also. For example, the financial crisis makes less people want to spend money or travel; due to increase in terrorism some visitors get are not ready to travel to certain countries.4.Seasonal Employment: During peak periods, a lot of jobs are available but as soon as the tourists go back the jobs disappear as well. For example: Goa – India; the locals in Goa get their income only during the peak season, (Dec- Feb and April – July) after which they have no jobs and no income.5.Increasing use of technology to communicate: Due to international barriers, there has been a steady increase in the use of technology for communication (through the internet, voice recordings). This removes the human touch.

6.Developing Countries: Countries that are unable to keep up with the advancement in technology tend to lose out. Example: Africa does not have the infrastructure or technology as yet to welcome a large amount of foreign visitors, though it does have a lot of natural attractions. To increase the flow, it would have to improve conditions; otherwise tourists have a vast sea of areas to choose from.

7.Increase in Crime Rate: With the increase in tourists, crimes increase too. Example: pick-pocketing, hustling, rape, smuggling.

8.Bad Habits: People from other countries sometimes influence the local youth in a bad way. Increase in drugs and promiscuous behaviour, etc.

9.Effects on SMALL HOTELS... There are many hotels which are not having more lavish and has high luxurious facility. Big hotel groups coming to India creates a huge mess for the small hotels owners. There is always a problem for employees as big hotels owners will take away the employees giving higher salary and opportunities. Now-a-days small hotels are being extinct and there is a huge increase in hotels coming from outside of India.

Rectifying Negative Points:1) Language barrier : As people are employed from all

over the world, they should be trained efficiently, such that we can solve language problem.

2) Cultural barrier : Any hotel starting its business in any new country or location they should first have deep research about that place like, religion, type of cuisine ,and standard of living.

3) Events/disaster in other country : if there is any events or disaster taken place in any country, neighboring countries should try to help in all events. For example : Recently, a huge destruction took place in Japan due to earthquake and tsunami India helped them by sending food packages.

Rectifying Negative Points:

5) increasing use of technology/communication: As world is changing fast every type of industry should be modernize/or should be updated other wise there can be threat to face heavy loss and be out of market.

6) Developing countries: These countries attracts foreign business in them .developed countries help these countries in getting modern technology and making them successful.

7) Increase in bad habits: it is in individual to have bad habits or not.

8) Effects on small hotels : If small hotels try to merge with big or brand hotel group they can increase there business and compete in market.

Do you think globalization is having a positive or negative effect on your hotel?

Regardless of their social back ground do you believe all people in your hotel have same opportunity to fulfill their potential?

Does globalization has encouraged hotel company to invest and explore opportunity world wide?

Hotel that do not modernize or do have top notch would likely to fail, do you think so?

Do you feel optimistic or discouraged ,to see globalization spreading in hotel industry?

RESULTS BASED ON QESTIONAIRE

Category 1

Category 2

Category 3

Category 4

category 5

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

POSITIVENEGATIVENOT SURE

CONCLUSION

In the 21st century, with the increasing levels of globalisation in hotel industry, hotel companies will need to learn different management approaches tosurvive and develop in environmental circumstances with high levels of uncertainty as well as understand the implication of future impacts, both positive andnegative, of the changing environment in which they operate. The only certainty about today’s hotel industry is that only those who plan for uncertainty and change,and who are able and willing to respond to global events with speed and decisiveness, will reap the full rewards of success. Successful hoteliers will be those who areable to anticipate, determine and solve problems of a varied nature in the context of their organization’s goals and in the environment of an increasingly globalizedand complex society.