Hospitality Business Development

Ahmed Hassanien, Crispin Dale

• Publisher: Routledge
• Year: 2019
• ISBN:
  9781351033688
• Edition: 2
• Topic: Business
• Subtopic: Hospitality, Travel & Tourism Industry
• Index: Business

Hospitality Business Development analyses and evaluates the different aspects of business growth routes and development processes in the international hospitality industry. It considers the essential features of the strategic business context, in which any hospitality organisation operates.

Since the first edition, the hospitality industry has evolved significantly with the emergence of new entrants, new technologies and evolved global market structures. This new edition has been updated to reflect these developments in the field and includes the following:

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• New contemporary topics such as social enterprises, business models, social capital, value proposition, co-creation and the sharing economy.

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• Examples and case studies on hospitality organisations from across the world to demonstrate the globalisation of the hospitality business.

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• A new up-to-date standard for explaining the hospitality business development concept, scope and process.

This book equips students and aspiring hospitality managers with the necessary knowledge, expertise and skills in business development. It is a must-read for anyone studying or working in the hospitality industry.

Chapter 1
Introduction to hospitality business development

Contents

Introduction

Defining business development

Why hospitality business development?

The scope of hospitality business development

Summary

Review questions

Glossary

Learning objectives

After having completed this chapter, readers should be able to:

• Understand the concept of business development within the context of the hospitality industry.
• Explore the growing importance of hospitality business development with particular emphasis on the motives behind it.
• Investigate the scope of hospitality business development.

Introduction

There is no doubt that business development represents the most important single activity of any hospitality organisation for satisfying its target markets. At any one time, almost every hospitality business has recently been developed, is under development or needs to be developed. That is because business development is the prime reason for the organisation’s survival in the market. Consequently, business development can be regarded as the criteria on which rest the effective and efficient performance of any hospitality organisation.

In theory, hospitality business development might be seen as a quite clear and straightforward process. Certainly, the process depends on identifying smart goals and objectives, allocating the required resources for its implementation and then getting it done. In reality, however, business development is not always an easy task for hospitality organisations, because it involves several interacting controllable and uncontrollable factors, such as the organisation, its stakeholders and the dynamic changing nature of its micro- and macro-environments. Until recently, little detailed consideration has been given to appraising the nature of the hospitality business and the significance of its development. As a result, the main goal of this chapter is to look at the concept, significance and scope of hospitality business development.

Defining business development

Discussing and clarifying the term ‘business development’ is important before examining its scope. However, a review of the literature fails to provide a consistent definition of the concept and its strategies. That is why we can say that despite the wealth of literature, hospitality business development is still an area that needs further research and clarification.

In this book, ‘business development’ is defined as the process by which a company can improve its performance through (a) modifying or enhancing the features and attributes of its current products or services, (b) developing new products or services, (c) entering new markets and (d) partnerships, strategic alliances or networks. In other words, hospitality business development refers to the process by which an organisation uses internal, external or joint resources to launch, improve, modify or extend its offerings in an existing or new market. Despite being a broad definition, it is essential from a management point of view because it looks at development from different angles that fully reflect the content and context of hospitality business development.

Why hospitality business development?

The success of any hospitality business depends mainly on its development plans. Business development includes a wide range of activities that create new or changed offerings, markets, organisations and processes. It enhances sales, improves customer satisfaction, augments quality, diminishes costs and achieves numerous benefits for organisations. For hospitality organisations to be successful, business development needs to be incorporated into the company’s business goals and targets. Accordingly, business development should be a strategic part of any hospitality organisation’s annual business plan. When a hospitality organisation decides to develop its business, it is usually affected by various motives. These motives can be classified as reactive/proactive or internal/external. The following discussion will explain the impact of these motives on hospitality firms in terms of their business development decisions.

Profitability

A hospitality business ultimately needs to make some kind of return on investment in the form of profitability. In attempting to achieve profitability, decisions about the products cost, production and marketing have to be considered. For instance, if the hospitality business decides to pursue a no-frills strategy of offering a basic product with a minimum level of service so as to minimise its costs and maximise its yield, it has potential to increase its profitability. This strategy is characteristic of the low-cost accommodation sector as explained in the example on the accommodation sector.

To improve market share

Market share is based on the percentage of sales that a product has within a given market or market segment relative to its competitors. The measures of market share are derived from sales revenue or volume of products sold in the market. In the hospitality industry, it is not uncommon for organisations to gain market share by acquiring other hospitality businesses. This enables the organisations to grow quickly and enter into market areas where they currently may have minimal or no presence.

Business growth goals

The objective of the hospitality organisation may be to grow its business rapidly so as to position its business as market leaders. This may initially be at the expense of immediate profitability and return on investment, but it will enable the hospitality business to develop brand leadership and gain cost advantages over time. Many of the popular fast-food outlets have based their business development decisions on rapid business growth in pursuit of these goals.

Managerial urge

Business development can be determined by the instinctive desires of the managers in the hospitality organisation. Decision-making is not always a rational and predetermined process, and in many respects, it can be intuitive and spontaneous in nature. Opportunities may arise in the marketplace that hospitality managers perceive need a reactive response. If these are capitalised on, then the hospitality business can gain an advantage relative to its competitors.

Unique product or niche

There may be opportunities in the market to develop a product that is currently not being sold by competitors or that meets the needs and wants of a specialist market segment. Themed hotels that focus on a particular theme are an example of a hospitality product that fulfils the needs of a specialist market segment.

New market opportunities

New market opportunities may arise as a consequence of trends that may occur in the marketplace. The growth of the sharing economy in hospitality, which is based on the sale of private accommodation, has emerged as a consequence of technological developments and mobile innovations.

Example: Accommodation sector

Budget hotel operations have become increasingly popular. In the United Kingdom, established providers include Travelodge and Premier Inn. They offer accommodation that is linked to food operations such as a motorway café or a branded, licensed premises where customers can obtain food and beverages. The price for the accommodation is relatively low, and costs are kept to a minimum via basic services and a limited number of personnel to manage and facilitate the premises. However, technological developments have resulted in opportunities for new players such as Airbnb to enter the market and act as direct competition.

Example: YO! Sushi

YO! Sushi is based on the concept of Japanese cuisine that is served via a conveyor belt. It was founded by entrepreneur Simon Woodroffe, who originally opened a Yo! Sushi restaurant in London. The enterprise exploited an untapped market by offering a product that was unique in its geographical location. Through a series of acquisitions and partnerships, the YO! Sushi brand has since ventured into global markets and has extended into the accommodation market with Yotel.

Source: www.yosushi.com

Economies of scale

Economies of scale are when the hospitality organisation purchases products from its suppliers, such as food and drink, in bulk. This enables a lower cost base to be achieved for the hospitality business. The business may then decide to pass these cost savings on to the customer in the form of a reduced price.

Example: JD Wetherspoon

Tim Martin opened the first JD Wetherspoon pub in London in 1979, which has since expanded to over 900 outlets. JD Wetherspoon is based on selling food and alcohol at a low cost. To achieve this strategy, it gains economies of scale by buying its food and drink product in bulk. It can negotiate discounts due to the large volume of purchases it makes from its suppliers. The savings are then passed on to customers in the form of lower prices.

Source: www.jdwetherspoon.co.uk

Customer attraction, satisfaction and retention

To ensure that the hospitality business is able to attract, satisfy and retain its customers, it has to ensure that it is satisfying their needs and wants. As substitute and complementary products enter the marketplace, the business may need to adapt its product offering to generate perceived added value for the customer. The same occurs when lifestyle trends emerge that can put the hospitality product at risk. The emergence of healthier lifestyles and eating habits meant that many of the major fast-food outlets developed products that meet the needs of these changing consumer tastes.

Example: McDonald’s healthy meals

Accusations that fast-food outlets were to blame for the rise in obesity, coupled with changing consumer tastes, led McDonald’s to introduce alternative meal options in its restaurants. This included salads, fruit juices and carrot sticks. McDonald’s also removed its supersize option, where customers could increase the portion size of their meal upon request.

Source: www.mcdonalds.com

Legal factors

Legal factors in the form of new health and safety measures can mean that hospitality businesses have to develop products that meet strict legislative standards of hygiene and production. The introduction of macro-legislative factors such as the smoking ban across all enclosed public places across many countries in Europe meant that hospitality businesses had to develop their products to meet the requirements of the legislation.

Example: Mitchells & Butlers and the smoking ban

In March 2006 a smoking ban across all enclosed public places was introduced in Scotland. This was followed by England, Wales and Northern Ireland in 2007. Premises that failed to observe the ban would face a £2500 fine. Many people thought that the ban would have a major impact on the wider hospitality industry with a downturn in sales and customer dissatisfaction. However, the smoking ban resulted in an opportunity for many pub restauran...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Dedication
• Contents
• List of figures
• List of tables
• List of case studies
• Preface
• Acknowledgements
• About the authors
• 1 Introduction to hospitality business development
• 2 Hospitality business model
• 3 Scope of the hospitality industry
• 4 The hospitality environment
• 5 Hospitality business positioning
• 6 Developing customer value in hospitality businesses
• 7 Hospitality business plan
• 8 Business development routes and directions
• 9 Business development methods
• 10 New product development
• 11 Hospitality property renovation
• 12 Conclusions
• Index