Financial Issues Assignment PDF

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Final year assignment for the subject of 'Financial Issues in International Hospitality', a class delivered by Dr. Mifsud. This assignment concerns the issue of globalisation and its impacts on the hospitality industry....

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UG6034 - FINANCIAL ISSUES IN INTERNATIONAL HOSPITALITY

Ema-Sinead Zammit

[email protected]

Ema-Sinéad Zammit (B.IHM 3rd Yr)

Financial Issues in International Hospitality

Contents Introduction .......................................................................................................................................... 2 Interlocking Fragility of the Global Economy ........................................................................................ 2 The Effects of Globalisation on: ............................................................................................................ 3 Business Practices ............................................................................................................................. 3 Human Resource ............................................................................................................................... 5 Technological Advancements & Communication Systems ................................................................ 6 Conclusions & Recommendations ........................................................................................................ 6 References ............................................................................................................................................ 8

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Ema-Sinéad Zammit (B.IHM 3rd Yr)

Financial Issues in International Hospitality

Introduction

This assignment concerns the issue of globalisation and its impact on the hospitality industry and tourism sector. ‘Globalisation’ is defined as a phenomenon that integrates culture and media worldwide and intensifies social relations for economic interests, with the help of communication and technology systems. It is essentially the realisation that nation economies are interlocked and that the world is a ‘global village’ with unified differing social contexts over geographical regions. [(McLuhan, 1960), (Giddens, 1991), (Clark & Arbel, 1993), (Bell, 2013)] The aim of this assignment is to elaborate on ways that globalisation impacts the hospitality and tourism sector, particularly from the finance and economic perspective. Globalisation in the hospitality industry and tourism sector has accelerated thanks to advancements in technology, communication, transportation, deregulation and reformation, elimination of political barriers, sociocultural changes, global economic development and the increasing competitive global markets, among others. (Zhao & Merna, 1996) Since there are countless perspectives to approach this topic and, as mentioned previously, countless other areas in the business context that are affected by- and affect globalisation, this paper will focus on four areas of a hospitality business that are directly impacted by the situation. The elaboration will be made around a central research question, namely: What are the issues emanating from globalisation and what are the challenges they bring to the hospitality industry and tourism sector? This is a conceptual paper, meaning that the theoretical insights will be obtained from literature, drawing upon the research scholars have already conducted. Furthermore, although the research obtained, compiled and analysed comes from seemingly reliable literary sources, the authenticity and credibility are still to be assumed.

Interlocking Fragility of the Global Economy

The outbursts of global crises are as widespread and destructive as they are due to a vulnerability, or fragility, in the system. Two factors that have greatly exposed and enlarged the weak points of economies all over the world are those which interlock nations with each other: globalisation and technology.

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Ema-Sinéad Zammit (B.IHM 3rd Yr)

Financial Issues in International Hospitality

Over the past few decades, researchers began to realise that economies and markets are highly and intricately interconnected and dependent on each other and this interconnectedness is only increasing, thus bearing testimony to the sweeping wave of globalisation across the world. (Bharwani & Butt, 2012) Globalisation, in relation to business, means that manufacturers all over the world are importing resources as materials for the products that they export; thus, making producers and consumers interdependent for their own survival and growth. Furthermore, the method of acquiring and managing the resources of a business plays a significant role in creating and sustaining the competitive advantage. (Moingoen, et.al, 1998) This importation and acquisition of resources is also relevant in the service industry which uses ‘props’ (e.g. skilled and friendly employees, tasty food, a heated indoor pool, a comfortable bed in a cosy room etc.) to stage a scene and deliver a memorable guest experience. Delivering a memorable experience is a demand of the contemporary traveller and thus, a priority in the tourism sector in this day and age. Highly interdependent systems are commonly described as ‘tightly coupled’; the more tightly coupled the components in a system are, the more likely failures and delays will affect other parts of the system. (Kaufman, 2012) In fact, globalisation has caused a ‘butterfly effect’ for every action made in the business world. This means, that when an ill decision is made in one nation, the effects are amplified and cause chaos in multiple others. Technology has created a portal (the internet) for information to travel around the world at lightning speed, creating an informed audience, but also a chaotic one when sensitive information is leaked. For example, if a company is facing difficulties in making business, causing stock values to drop, shareholders will find out immediately and might ‘panic sell’ to avoid losing all their capital. This causes havoc in the stock market, the finances of the company and also surprises the competitors. In the next part of this assignment, the effects of globalisation on four different areas of a hospitality entity will be discussed and analysed.

The Effects of Globalisation on: Business Practices

It is not an unknown fact that globalisation has changed the dynamics of business practice.

Various researchers have noted its implications on capital flows, competition, economic 3

Ema-Sinéad Zammit (B.IHM 3rd Yr)

Financial Issues in International Hospitality

interdependencies, international labour utilization and even outsourced catering in hospitality and events. [(Greenberg & Baron, 1997), (Choi, et al., 2000), (Wilson, et al., 2000)] In his research paper, "Executive insights on globalisation: Implications for hospitality managers in emerging locations", Munoz (2005) succeeds to offer a better understanding of the implications of globalisation on the hospitality industry to managers. He explains that globalisation has boosted market integration for hospitality entities. This means that prices of a particular good or service increase or decrease until their value is equalized throughout the region. (Encyclopedia.com, 2020) Furthermore, the trend of declining tariffs, freight and transaction costs has not only aided the stimulation of market integration but has also made managers consider a more global perspective of their business. Low tariffs make it easier for business owners to expand beyond borders, and thus contributing to a global economy while adding a new revenue stream and targeting a new demographic for their market share. (Sufi, 2010) It has also been noted that although product variants have increased due to new needs, demands and tastes from infiltration of cultures and traditions, product lifecycles have become shorter, this is likely due to the culture of ‘disposables’, mass- production and consumption. (Boegemann, 2018) This phenomenon may also be projected upon the hotel sector, which, although a service rather than a product is delivered, trends show a contemporary traveller with demands for experiences and memorable events. Experiences have emerged as the next step in the progression of economic value and it is necessary that hospitality entities design engaging experiences that are inherently personal and that is derived from the interaction between the staged event (e.g. a hotel lobby, a fine dining restaurant etc.) to the individual’s state of mind. (Pine & Gilmore, 1998) From a socio-economical point of view, it is probable that the increase in global wealth has led a paradigm shift in what the ever-growing middle class accept to be part of their identity; being selective to maintain a certain status of cultural capital 1. One might comment that this is a transition to an ‘experience economy’, similar to one described by Pine and Gilmore (1998).

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(noun) The distinctions that develop between individuals and groups due to differences in access to

education, family background, occupation, and wealth, giving them advantages and serving as a signifier of an individual’s status within a group or society. (https://sociologydictionary.org/)

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