Those people will look at how hotels are generally led to establishment and what are the key factors that one should consider. It will take a look at how to identify good business opportunities for the business and how to harness all the resources possible. It will also take a look at how efficient ones managers should be and how they should make their decisions. It will advise on how best to chose these managers to bring about maximum satisfaction of the client (Branstetter, 2000).
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Tourism is the travelling of people for fun and leisure. It could be groups of people or individuals or families. Most of the time is organized and the people tend to have planned in advance that during a particular period they will travel from their home region to another region, either in the same country or in a different country. Tourism to different countries is what is referred to us international tourism. For the people who want to travel they need to have some definite plans laid down for them (Branstetter, 2000). They cannot just travel without any idea by what means they will travel or where they will stay. Hence this is why it is important to have hotel where they can stay during their visit in that region. Hotels are generally described as an establishment that provides paid lodging to travelers for a short term. Hotels defer in appearance, quality standard and expenses. Hotels in different regions are built with the surrounding neighborhood in mind not to destroy the scenario and to depend on how much money that the investor is willing to pour into the project. The hotel rates will depend on the quality and standard of the hotel. What services are offered by the hotel and the hotel's ranking internationally? The location of the hotel also influences how the hotel will manage to stand with no problems. The hotel's location will have direct effect on how to charge customers, what staff will be hired and what activities it offers the customers (Bouvard, 2002). In setting up a hotel one will require to find competent staff that will carry out all the services required in the hotel to the maximum and best of the hotel. It may take extra expenses if one wants to train his staff individually but will be reflected in the quality of the services.
Prior to establishment of any hotel in any region there needs to be extensive research done. As an investor one will require to first identify the area in which they want to set up the hotel. Finding this area has to be done through a process. If the investor is to start the hotel from scratch in a region he will have to investigate the different conditions that are available unto him. To start him off he will need to find an area which is suitable for the establishment of his hotel, geographically and economically sound. The location of the hotel will greatly influence the level and amount of business that the hotel will receive. If the hotel is situated in a region where there are many tourist sights to visit the will be a very positive chance of being the preferred lodging base for tourist. Location of any hotel is a very major key factor. To receive maximum returns on investments in the hotel one has to ensure that its location provides a feeling of relaxation and fun so that customers may look forward to going to the hotel (Bouvard, 2002).
The investor will be required to carry out an evaluation his Strengths, Weaknesses, Opportunities and Threats. Strengths; Natural and cultural diversity; the region where one is to set up their hotel should have a great and different cultural diversity. The diversity will attract more tourist to the region and the tourists will require a place to stay and hence will book rooms in the hotel available. Also the diversity in culture will give one the opportunity to make the hotel with different fonts to attract more people making it an attraction in it itself. The natural diversity will come from the geographical region surrounding the hotel. For example there can be the snow capped Himalayas Mountains in the background if it is in India or maybe a volcanic mountain if the hotel is in Africa, or sunny beaches or coastlines. It could also be magnificent buildings like Palaces of Persepolis, or the pyramids of Egypt in the background (Baumert, 2001).
The demand supply gap; this is to mean does the region receive a large number of people seasonally? If so this would be a great region to set up the hotel because it would entail high occupancy levels causing the rates per stay in the hotel to climb drastically which would be reflected in a greater profit margin for the hotel. This is because there will be greater demand for the rooms. Another factor would be the government support. If the government in the region you want to setup the hotel has not recognized the importance of tourism they will place very low value, budget and interest in that particular industry(Baumert, 2001). This will in turn discourage tourist from visiting this areas as the charges levied against them will be high and too expensive for most of them to maintain. It will not matter how many tourist destinations that the region could have as it has not been promoted or advertized out there the individuals will not see the region as a place to visit. This will be reflected by the losses that the hotel will undergo as it will still have to pay taxes to the government and its workers.
Increases in the market share. This basically means that the investors should use forecasting to see if the regions or country they want to invest their hotel in is becoming more and more recognized as a tourist center. If this is the case it will mean that the hotel will be able to get a higher market share of the tourist world wide. For example, currently India is being recognized as a tourist destination and thus their market share has increased and more and more tourists are heading towards those regions daily. Due to this investors are rushing to put up more hotels in India that will support the influx of people.
Weaknesses; This may be indentified in different ways and in many types. First and foremost there may be poor support infrastructure. This is to mean that one can have built his hotel having taken into account all the customers needs and preferences, but have failed to realize that in infrastructure in that region does not support them. They could be probably due to lack of proper transport means. This may not necessarily mean that there is no transport leading to the hotel, as it could be there and probably be more than one means but there could not be transport to other areas in the nation. This would mean that the customers would be stuck entirely in the hotel and not be able to see other places in the area. The poor infrastructure could also be lack of proper communication channels and methods. As much as people travel from their home regions to see other areas they do not want to be completely cut off from the rest of the world. They still want to maintain in touch with their families, friend and even businesses (Bouvard, 2002)
Another major weakness that a hotel investor should look out for would be false promises or slow implementations of promised upgrades. The investor should look at past records and consult existing large business to see how the quickly change is brought about in such regions and the delay process. If the nation is good at giving promises to ensure that the expected added revenue from your investment does not go elsewhere but failing to deliver it may be better for you to take your investment somewhere else. This problem is mainly brought about by the lack of adequate recognition of the tourism industry. Another weakness to observe is whether or not the country is susceptible to political events. Is the region politically stable? How quickly can it succumb to political instability? If the region can quickly be thrown into upheavals it would not be a good decision to invest there as any political scares would result in lower tourist arrivals. Internal security of the region should never be a concern that the tourists have to bear.
Opportunities; before investing in any region one should observe the opportunities that are available to make more money. For example hotels are considered as leisure activity and thus to build a hotel in regions that experience very little economic growth would be a bad investment idea. One would be advised to build the hotel in regions where there is increased or rising income. In such regions sine the residents have higher incomes they will find it possible to tour at the very least their countries and this will be added income to the hotel from domestic tourism giving the hotel a chance to grow. Matters such as open sky benefits have also brought about a great deal of opportunities for hotels. The open sky policy which allows for aircrafts to fly anywhere and are not prevented from any air space as led to great benefits being recognized in the hotel industry.
Threats can be defined as matters or issues which will be harmful to a person or to a business. In business this can cause the people to suffer great financial losses or a serious cut back in profits. In this case for a hotel industry an investor may have threats in the way of fluctuations in the arrival of international tourists. During a particular time the tourist arriving may be many and in large numbers but in a similar period the next year, the number may be greatly reduced. Hence total dependency on the international tourists may lead to serious losses in some periods. Another threat that the business may face will be increasing competition. Once other investors recognize that the business you are investing in is viable they will also tend to invest in the same and this will mean that where previously you enjoyed the profits all by yourself, now the profits will have to be shared amongst all your competitors who may enter the business with even lower prices. Competition may also arise in way of already established chains of hotels having the controlling power of the business leaving new comers in badly off positions (Baumert, 2001).
Management of the hotel is also a vey key factor. The management of a hotel will involve very may different areas but the most crucial would be the financial management. Financial management can be defined as the management of the finances of a business. This is done in order to achieve all the financial objectives that had been outlined at the start of the business. The key objectives of financial management in the hotel industry would be to create wealth for the business at all possible opportunities; it will also strive to generate cash for the business so that it may be possible for them to expand at will and also to cater for any unforeseen expenses in the future (Branstetter, 2000).
Financial management will involve three key processes. These processes have to be undertaken by an individual or a team that is very well educated and read so as to ensure no errors occur as any errors in this section would lead to serious undercutting in all other departments of the hotel. First off in financial management there should be financial planning. This is where the management needs to ensure that there is enough funding for the project and the funding is realized at the opportune time. The funding must also be used for the particular purpose it was requested for and not for other unbudgeted needs that crop up. The funds available may be used in short term to invest in equipment, stock, pay employees and to fund services offered on credit. The medium and long term finances can be used for investment to expand the business, to upgrade the business and to make more acquisitions (Bouvard, 2002)
Another key process of financial management will be financial control. It will address the fact that the business has to meet its objectives. It can also address questions like are the assets in the business being used most efficiently , are the assets of the business secure, this is to mean that they do not have unpaid debts associated with them or are their leases held by persons who are not the owners, or are they being held by our creditors? Another issue that is addressed by the financial control is whether or not the management has the best interest of the shareholders? If not the management can be discarded and new management formed who will look out for the interests of the shareholders. Last but not least there is financial decision making. This will in key be involved with financing, dividends and financing. The investments that are to be made must be financed in one way or the other. The different sources of finance will be considered here, should the business acquire its extra money, through loans from banks, selling new shares or taking credit from suppliers. Here the financial team will have to decide which option is best and advise the business to follow that path. Also they will have to decide whether the profits that have been earned by the hotel should be retained by the hotel or should be distributed via dividends to shareholders (Baumert, 2001).
Generally the economics involved in running and maintaining a business are quite simple to understand and devise. Most hotels will offer very high fixed costs, no matter what percentage of occupancy they are running at, it could be 45% or 95% occupancy but the rates will not change. Other costs like front desk, taxes and maintenance do not change and thus the rates fail to change. For one to be operating a successful hotel business you require a net of about 10-15% after tax return on the equity. For this to be realized one has to be very careful with the minute details of the business.
In conclusion for investment into the hotel international industry one has to be well informed of all opportunities and choices that can come his way and also of the entire drawbacks related to this industry. It is extremely important that the SWOT analysis carried out reflects the true and actual findings and not what is hopeful of discovering with time as it goes on. Also the financial sector of this business must be handled by people who are well experienced and who have demonstrated very sound judgment in previous matters. This is because finances are a very delicate sector of any one business and unprofessional or unqualified people may have very disastrous effects in the business. However these is a very profitable business if one can afford to start and continue well or if one can buy a hotel and revolutionize it to better results(Branstetter, 2000).
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