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International Hospitality: Planning & Management

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  • 0:03 Benefit of…
  • 0:40 Market Entry Choices
  • 2:58 Strategic Management Methods
  • 4:46 Feasibility Study & HR…
  • 6:41 Lesson Summary
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Lesson Transcript
Instructor: Kat Kadian-Baumeyer

Kat has taught college Management and Hospitality Management and has a Master's degree in Organizational Leadership and Management

Opening a hotel in a foreign country can be challenging, but it's not impossible. In fact, with strategic management methods, planning, and an understanding of real estate development, it can be a successful undertaking.

Benefit of International Hospitality

Fun Times Hospitality Group wants to go global. The management team has been talking about opening a hotel in Nassau, Bahamas. The sunny, tropical climate would be a perfect destination for a new hotel. But the company has minimal experience in the international market. All of their hotels are located in the United States.

The management will focus its research on international hospitality. International hospitality is a term that defines hospitality in a foreign country. Opening a hotel in a foreign country is often beneficial because it expands the company's market and helps the local economy.

Market Entry Choices

Now that Fun Times Hospitality Group has chosen its destination, management must begin planning for the hotel. The first thing management will need to consider is market entry, which just means the form of ownership for the hotel. There are several choices.

Sole Proprietorship means building and opening a hotel or purchasing an existing hotel and running it independently. The benefit of a sole ownership is that management creates the plan and executes it without interference from investors. A disadvantage may be the lack of adequate capital or purchasing power to do improvements or upgrades.

Another way to own a hotel is through a joint venture. A joint venture happens, for example, when a domestic company joins forces with a foreign company to partner together to open a hotel. The advantage of a joint venture is that expenses are shared between the two parties. But, profits are split between the partners as well. There is also less control over decisions.

Franchising is also an option. Franchising means buying the rights to use the name and business model of an already branded hotel. The benefits of this type of ownership are a proven management and marketing plan, plus brand recognition; however, purchasing a franchise is pricey, and the franchisee, or the person buying the franchise, must pay royalties based on profits.

Some hotel owners choose to partner with management contract companies. Management contract company agreements work for those who buy hotels as investments but have little interest in actually running the hotel. So, the hotel owner rents the property to a management company and is paid a percentage of profits to the owner based on the hotel income. The benefit of using a management company comes in the experience it has to run a hotel; however, the owner has little control over the day-to-day operations.

A strategic alliance works for some hotel owners. A strategic partnership happens when two hotels in different countries decide to co-brand a new hotel. The benefit of this type of connection is that both hotel brands receive recognition; however, there can be issues about the strategic alliance branding decisions.

Fun Times Hospitality Group will open its hotel as a sole proprietorship because management is very interested in running the operations and does not want to share the profits with partners.

Strategic Management Methods

Opening a hotel in a foreign country is not difficult, but it does take careful planning. Employing strategic management methods is smart. Strategic management methods are nothing more than using the resources available to management to achieve goals.

To begin, Fun Times Hospitality Group will conduct a SWOT analysis, which is an analysis of the hotel's strengths, weaknesses, opportunities, and threats. Fun times strengths are in the location, expertise in running a hotel, and a strong management team. Weaknesses may be limited capital, inexperience in a foreign market, and lack of brand recognition. Setting high standards for service and employing experienced local candidates are opportunities. But there are some threats, too. Competition in the area or security issues may turn guests away.

The information gleaned from the SWOT analysis will help management develop strategic plans to improve on the weaknesses and defend against the threats. It is also important to develop the opportunities into strengths.

The strategic plans begin with setting goals and objectives for the hotel. In other words, decisions will be made about the hotel's performance regarding guest satisfaction and profits. Management will set long-term goals for five years or more and use those goals for planning short-term goals that will occur in a month, quarter, a year, or a few years. These goals become objectives, or activities that end in results over a period, such as tailoring service levels to meet customer expectations, ensuring value for the price, maintaining a safe and secure environment, and providing guests with a professional staff.

Now that the strategic plan is in place, Fun Times' management will turn its attention to real estate development.

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