Effects of Globalization in Hospitality

Effects of Globalization in Hospitality

Background

The world is witnessing increased development of international business and globalization. Such integration has caused significant changes in the hospitality industry. Globalization, therefore, has a significant influence on the hospitality industry. It does so in several ways such as effect on different cultures, impact on local economies, technological advancement, employment opportunities, world-class competition and escalating operation cost. This paper explores the aspect of employment opportunity as an integral influence factor of globalization. The paper proves the hypothesis that there are both positive and negative impacts coming from globalization, around employment opportunities for that case.

For this study, globalization will be defined as the continuous network of international connections that occur across national and regional boundaries bringing societies and economies together in a new combination of time and space (Bartelson, 2000). This definition is somehow broad; however, researchers like Anderson (2011) argue that it encapsulates the concept of globalization better than a definition that explicitly focused on economic terms. The integrations have led to the development of Multinational corporations (MNCs) in the modern tourism and hotel sector. This means hotels have been able to expand and establish satellites in different countries and economies. As a result of this, globalization in the hotel sector has created an employment opportunity for not only experts in the industry, but also local and international semi-skilled labour. This discussion, however, notes that several advantages and disadvantages surround the employment opportunity.

Globalization in the hospitality sector has also led to the standardization of hotel and restaurant chains. This means that multinational hotels are enjoying worldwide market opportunities in enhanced environments. For instance, Noe et al. (2017) looks at the East Asian hotel market and recognizes the increased hotel chains, many of which are extending tom US and Britain. Using this example, Noe et al. (2017) denote that employment in the hotel sector has also become a globalized element. As a result of standardized chains, employees in the hotel industry can work from any country.

Impact of Globalization on Hospitality

1. Pros

Many of the benefits and disadvantages associated with globalization revolve around the human factor. This is the reason why this paper discusses the impact of globalization with respect to employment opportunities, which is a human factor. Research evidence indicates that the employment opportunities created by globalization suffer economic, social and political fluctuations that make them a misery at some point (Anderson, 2011). Therefore, the discussion presents two pros and two cons associated with globalized employment.

As indicated earlier, globalization has led to the integration of world economies, which in turn has created standardized hotel chains through which multinational hotel corporations operate in the world hospitality market (Zaitseva et al., 2016). The spread of multinational corporations leads to the first advantage of globalization in the hotel sector; an increased pool of expert professionals in hotel management and operations. Hotels have been able to access the world’s pool of hotel experts through globalization. For instance, by expanding to Britain and Asian counties, Hilton Hotel has been able to enjoy and portray the world expertise in hotel management and operations (Anderson, 2011). This is evident from the way this hotel has been able to capture the British market.

Besides, diversified cultural experience is another benefit enjoyed by hotels in a global market. The world is full of different cultural beliefs and norms: tourism and the hospitality industry at large proud itself for its endurance in cultural diversities. Every hotel would feel on top of the world, making its way through world markets despite the cultural barriers. Hilton hotel has managed to continuously improve its efficiency in penetrating different cultures as a result of increased integrations and connections in the world market (Anderson, 2011). This has affected the hotel’s staffing function because success is greatly linked to international expertise from the global labour force. For instance, by using employees from the local market, Hilton has been able to integrate different cultures and reach all the customers culturally (Anderson, 2011). Aside from reaching the customers, the hotel has been able to develop a pool of workers from different cultures of the word and hence, become a centre of cultural diversity.

1. Cons

Although hotels enjoy the international exposure availed to them by globalization, the employment opportunity poses several challenges to the hotel management, which some times might prove impossible to control.

One of the most significant disadvantages of globalization with respect to the workforce is the cost of staffing as a result of communication and cultural barriers. Penetrating a new economy with and a new culture requires that the organization acquires experts on international hospitality management. Such expertise is expensive, and it adds on to the staffing cost and in return, increases operating costs. The organization might be forced to seek consultancy services to understand the new market and the culture out there. This might mean a change in the organizational structure since some strategic functions are outsourced.

Secondly, the jobs created by globalization are affected by seasonality. Different countries experience different peak times in the hospitality business based on the attraction sites they have. During the peak time, the hotels are required to bring on board many employees, especially in the low levels such as waiters, chefs and supervisors. This means the employees are employed on contract terms which could be more expensive compared to when they were on a permanent basis.  This affects the company’s profitability in the sense that it might experience long times of off-peak during which it cannot make enough revenue to run the business.

Management Strategies

Since hotels have similar resources requirements, and they provide related services, improving on personnel is a key competitive factor (Hjalager, 2007). As indicated earlier, one of the factors increasing operating costs as a result of globalization is the need for experienced professionals to facilitate penetration into a new market and culture (Go & Pine, 1995). These professionals are needed in the organization in future to ensure sustainability, a situation that has made Hotels consider outsourcing consultancy services. Based on the case of Hilton hotels, local labour is much cheaper than any other form of labour. For this reason, one of the appropriate strategies is to ensure increased training in equip workers with the necessary skills, knowledge and experience, change their attitudes and improve their abilities to communicate with customers and to corporate as a team (Go & Pine, 1995). Also, these human factors need to be dynamic to fit in the changing business environments to be able to achieve growth strategies for the organization.

According to Hjalager, A. M. (2007), training local employees will eliminate the need for expensive expertise, incorporate the local culture into the business and allow the company to follow its ordinary business structure. These aspects are crucial towards ensuring the profitability of the organization and hence keeping it high in the competition ladder. It enables the hotel to eliminates the threat of being competed out by indigenous or old multinational hotels in the new market.

Another strategy that helps hotels succeed in global markets is by acquisitions of small local entities that seem to pose a threat with time (Dev & Klein, 1993). By doing so, the hotel has the opportunity to retain the already experience employees and utilize in its operations. Although this might be costly, it is a strategic move that has long term benefits. By acquiring small entities also means the hotel will bring in the customers of the small entity and hence increase its customer (Dev & Klein, 1993). An increase in customer base translates to increased sale and therefore profitability. The increased revenue will be enough to offset operation costs as well as the cost of acquisition, hence the hotel remains financially stable.

Finally, hotel management needs to invest in research to understand the seasonal trends in the new market (Lynch et al., 2011). It then has to develop suitable products to attract business even during the low seasons. This can also be supported by the use of brand recognition and associated marketing advantages that grabs a market for products other than the primary attraction, which in many cases is a tourism attraction. This approach will make sure that the organization can sustain its operations even during the low season.

Discussion

The study finds out that globalization is a two-edged sword with advantages and disadvantages. Globalization creates an employment opportunity in both international and local markets. This employment opportunity influences individual players in the global hospitality industry. The discussion focused on hotels. Hotels enjoy international cultural diversity by engaging employees from all over the world. This diversity is essential in the hospitality industry because hotels need to understand their customers’ beliefs and norms, especially regarding foods.

On the negative impacts, hotels are affected by the seasonality the hospitality business in some counties. They are left struggling to maintain employees during the low seasons, or in other cases, they are forced to lay off the workers. In addition, many hotels have considered engaging workers on a contract basis to cater for the seasons. This kind of contracts is mostly more expensive than permanent employment. The operation cost is, therefore increased and hence, profitability affected.

To manage the human resource problems, the study found out that training of local employees to fit the expertise required in a global hotel is a good strategy. It will help in cutting costs associated with hiring experienced professionals who might be expensive. Also, the study finds out that the acquisition of small entities in the new market is a good strategy. This is so because the organization absorbs the already experienced employees of that entity as well as the customers. Such a move works better for the profitability of the hotel and hence helps uphold competitive positions in the market.

Conclusion

The study sought to understand the impact of globalization on the hospitality industry. It narrowed down to one of the significant effects which are employment opportunity. The study hypothesized that employment created by globalization has both advantages and disadvantages. It chose to focus on hotels as players in the hospitality market. The study found out that globalization gives hotels a chance to utilize global expertise in hotel management and operations. Through this, they end up improving their efficiency in operations and hence increasing profitability. Secondly, they can enjoy the diverse culture as a result of culturally diverse employees and customers.

On the negative impacts, the hospitality business is affected by seasons. There are seasons of peak and off-peak. The hotels face challenges managing their human resource during these changing seasons. They are forced to engage workers on a contract basis, which might be expensive. This affects their staffing costs, organizational structure and culture and hence influences the corporate profitability.

To manage the human resource problems, the study suggests that hotels should train local employees to fit the expertise required in a global hotel is a good strategy. This will help in cutting costs associated with hiring experienced professionals who might be expensive. Also, it suggests the acquisition of small entities in the new market is a good strategy. This is so because the organization absorbs the already experienced employees of that entity as well as the customers. Such a move works better for the profitability of the hotel and hence helps uphold competitive positions in the market.

References

Anderson Brians (2011). Impact of Globalization on Hospitality, Munich, GRIN Verlag, https://www.grin.com/document/211918

Bartelson, J. (2000). Three concepts of globalization. International Sociology, 15(2), 180-196.

Dev, C. S., & Klein, S. (1993). Strategic alliances in the hotel industry. Cornell Hotel and Restaurant Administration Quarterly, 34(1), 42-45.

Go, F. M., & Pine, R. (1995). Globalization strategy in the hotel industry. Routledge.

Hjalager, A. M. (2007). Stages in the economic globalization of tourism. Annals of tourism research, 34(2), 437-457.

Lynch, P., Molz, J. G., Mcintosh, A., Lugosi, P., & Lashley, C. (2011). Theorizing hospitality. Hospitality & Society, 1(1), 3-24.

Noe, R. A., Hollenbeck, J. R., Gerhart, B., & Wright, P. M. (2017). Human resource management: Gaining a competitive advantage. New York, NY: McGraw-Hill Education.

Zaitseva, N. A., Larionova, A. A., Yumatov, K. V., Korsunova, N. M., & Dmitrieva, N. V. (2016). Assessment of the Impact of Globalization on the Introduction of Innovative Technology Companies in the Hospitality Industry. International Journal of Environmental and Science Education, 11(14), 7176-7185.