Hotels and restaurants fall into the category of the hospitality service industry. It’s one of the most successful businesses across the world, and it contributes billions of dollars to the global economy. Hundreds of thousands of people are employed and dependent on this industry.
The tourism industry wouldn’t have become successful if it wasn’t for the hotels. In the ear of the online world and internet, tourists book hotel rooms at different locations depending on their routes and schedules.
When we look at the business aspect of this multi-million dollar industry, then you would need clear and sound business strategies to make it to this level. There are some chains of hotels that are running their operations across the world.
If you’re an entrepreneur and you want to step into this industry, then SWOT analysis would help you to see things better. However, in the swot analysis of the hotel industry, we will discuss the strengths, weaknesses, opportunities, and threats of hotels and restaurants. How we can use the strengths and opportunities to overcome weaknesses and threats.
Here it follows;
Table of Contents
Strengths of the Hotel Industry
Following are the key strengths that can affect the hotel industry.
Safe & Comfortable Atmosphere like Home
Hotels and restaurants offer rooms with all the necessary facilities like bed, washroom, blanket, electricity, etc. If you’re renting a room of some good hotel, then it would make you make feel like home.
There are different categories of hotels varying from luxury to ordinary hotels, and they offer different rooms depending on the category of hotel. Luxury and five-star hotels provide luxury rooms with extravagant services. Ordinary hotels provide ordinary rooms with basic life facilities. Now, it depends on the budget of customer what kind of services he/she wants. Luxury rooms would cost more, and ordinary rooms would cost less.
Cushion the Local Economy
If a country has hotels and restaurants, then it would attract tourists to come, visit and stay in the country. When foreigners visit any country, then they don’t spend their entire time staying in the hotel. They visit bazaars, markets, stores, shopping malls, parks, and other places. When they visit such places, then they spend money. That’s how hotels in any country generate revenue, and many other local businesses grow and profit because of the hotels and restaurants.
If there aren’t hotels, then tourists would come. Less sales in the local market and that means less profit.
An ordinary hotel requires 5 to 20 people of staff to perform various functions. Bigger luxury and five-star hotels require 100s of people to run various operations because such hotels and restaurants are so big that they have many departments. They hire a variety of people ranging from security guards, cook, waiter, and call operator to HR managers, executives, and CEOs. That’s hotels and restaurants create employment opportunities for many people depending on their qualifications and capabilities.
It’s undoubtedly a very profitable business, but establishing any hotel requires a huge investment to start. If you want to achieve the level of 5 stars hotels, then you have to invest more to maintain certain professional standards.
However, hotels and restaurants in the Asian and African countries have the advantage of cheap labor. It means less cost and more profit. But Europeans, Canadians, Australians, and American hotels and restaurants don’t have the cheap labor advantage. They have to pay more wages to their employees because of the country’s strict minimum wage laws.
Weaknesses of the Hotel Industry
Here are the weaknesses of the hotels and resorts industry.
Sometimes per night staying rates of hotels are out of the reach of ordinary household families. Only business executives and rich people could afford thousands of dollars per night. If you compare such rates, then it is the monthly income of any ordinary worker.
Usually, these rates vary from the category of hotels, luxury hotels cost more and cheap hotels would cost less. But overall, renting rates of hotels are very costly and expensive.
On the other hand, if you compare the services they offer with the price they charge. Then you would see a huge gap in it. I won’t say that the services hotels provide are bad, they are good but the prices they charge are very high.
Tax rates on hotels vary from country to country. But governments usually impose a very high tax rates on hotels and restaurants. That’s why they have no other choice, but to charge more from their customers.
Opportunities for the Hotel Industry
Following are the major opportunities for the hospitality industry.
As we know that it is a very competitive industry. If any hotel provides some unique experience to its customers, then it’s highly probable that it would attract more customers. It could be in the form of view, comfort level, or any other unique thing that differentiates you from the competitors. Then you can cash out this unique experience.
Dynamic prices mean charging different prices for the same service. For instance, all the rooms of the hotel are the same and they have the same facilities. But the upper rooms have a better view. If any customer wants a better view, then they have to pay more. If managers apply dynamic prices well, then they can profit from it very well. It means you have to grab the opportunity and find a way to profit from it.
Local & International Tourists
Your hotel and restaurant should have the capacity to accommodate both local and foreign tourists at the same time. Sometimes, vacations of local and foreign tourists are matched. Such places become overcrowded; therefore, you should know how to tackle such situation.
Your hotel should have a website and a page on different social media platforms. Tourists shouldn’t have any difficulties to reach out to you. If you’re available online, then you can ask them for booking and payment.
Threats to the Hotel Industry
The following are the main three threats to the hospitality industry.
Airbnb is the world’s largest chain of hotels; it has restaurants across the world. Customers can book the hotels anytime at any place, you don’t need to visit around in the new city and book a hotel. It is good for the customers, but it has posed a major threat to the local hotels and restaurants worldwide that rely on the random tourists.
If there is any boycott, roadblock or some political protest in the country, then such political unrest isn’t good for the hospitality industry. Such events discourage tourists to visit any country, because why any tourist would like to visit a country where all the shops, markets, roads are blocked. There’s no place to go, no transport to travel, and everything is locked down. Such issues affect the hotels and restaurants the most.
Currently, the pandemic of coronavirus (COVID-19) has caused the locked down worldwide. All the shops, markets, public and tourist places are locked down everywhere, people have no other choice but to stay at home. Only grocery stores are open for the public to buy edible things. Such pandemic has affected the hospitality industry like hotels and restaurants the most. The longer it lasts, the more it will affect the businesses.
Most importantly, people aren’t working and they are spending their savings. Once the locked down ends, then things won’t go to normal the first day. People have to work the whole year again to make enough savings for tourism. It means the hotel industry is going to be in recession for the next few years.
After completing the swot analysis of the hotel industry, we have concluded that hotels and restaurants are a very successful business. But the current wave of pandemic has put this industry into recession. It won’t be profitable under the current circumstances, but if you plan to establish it in the next 5 years. Then choose the market carefully, and start working on it slowly. When things get settle down, launch your hotel.
Image by Engin Akyurt