Many factors affect the success and growth of the hotel industry. Everything from governmental changes to high stake competitors and the uncontrollable weather impedes the hospitality and tourism industry too. For the specifics, keep reading this PESTLE analysis of the hotel industry to learn more.
If you’re curious about the strengths, weaknesses, opportunities, and threats this industry faces, read our SWOT Analysis of the Hotel Industry here to learn more.
Political factors: The government holds extensive power over the hotel industry
Travel bans can kill the hotel and tourism industry.
The government has a stronghold over the hotel industry. For instance, if the political party in power sets a travel ban, it could hurt the tourism and hotel industry immediately. All it takes is one decision and a country loses the vast majority of its economy.
Hotel owners would enjoy tax reform.
Another thing the government controls are taxes. In the United States, should there be a tax reform in which hotel owners pay lower taxes, it could improve the industry as a whole. Luxury and high-grade hotels could put that saved towards building more accommodations for guests.
Fear during presidential elections.
Since the government affects this industry so intensely, many hotel owners are on edge during election time, as a new President with new ideals can swiftly impact the hotel industry, and overthrow the previous President’s laws.
Economic factors: Weakened currencies, economic cycles, and tailored offerings
A big investment expected to grow.
Hospitality is one of the biggest investment sectors for global investors, especially within the United States. Continued growth is expected into 2020 and beyond.
The strength of currency can bolster the industry.
The strength and weakness of currency can affect the attractiveness of a vacation spot. For example, if international currencies are stronger than the American dollar, people outside of the United States will want to visit.
The importance of economic cycling.
While all businesses are affected by economic changes, the hotel industry is one of the most susceptible to its influence. It goes through economic cycles first and comes out first. Whether it comes out successfully depends on a few primary factors, including unemployment rates, job growth, and travel spent.
Tailoring to patrons in varying locations.
Hotel chains are improving profits and revenue by acquiring worldwide resorts, like how the Marriott International acquires Starwood Hotels & Resorts Worldwide. Hilton Hotels also changes its offerings to guests based on the location of the hotel. Guests will appreciate offers tailored to them, which will encourage them to come back again in the future.
Sociocultural factors: Customers want cheaper hotels and turn to Airbnb instead
Big trouble with Airbnb.
Airbnb is the hotel industry’s biggest competition. Travelers, particularly millennials, enjoy the mass selection of rooms Airbnb offers. You can quickly and conveniently book your room through an app — and it’s often less expensive than hotels in the area.
Hotels often run out of rooms during peak seasons, and when they don’t, they jack up the room prices. At one time, trying to find a different hotel would be the only option, but now you can check Airbnb and likely find something suitable and cheaper. This is a huge problem for hotels who often see a hike in profit during peak seasons when rooms are scarce.
Hotels do offer more than the standard Airbnb room. Many hotels have additional facilities, like pools, a gym, and even massage parlors. You can eat at the many restaurants built within, like Starbucks and iHop, too.
Technological factors: Social media, blogs, and scratching reviews
New technology to be wary about.
Years ago, hotels only used traditional media (print and broadcast), but now there are new media brought forth via the internet to consider. Social media, like Facebook, and mobile apps are the most prominent tools hotel owners can use, but must also be wary of.
Fast sharing news thanks to the internet.
Because of social media, the news is available and updated 24/7. Any incidents close to the hotel can be reported within minutes, shared online by thousands, and have articles written up by media outlets in seconds. It’s so quick that hotel owners can’t do much to stop it.
Reviews on blogs can make or break a hotel’s reputation.
Anyone can write a review and post it on a blog or share it on social media. People who stay at hotels will take photos and write up an honest post about their experience. This is a good and bad thing for the hotel industry. Hotel owners who are confident that their hotels are worthy will pay social media influencers to write about it. Hopefully, this will grab attention and the hotel chain will gain new customers. However, it only takes one scathing review to destroy a reputation.
Traveling websites forces hotels to remain competitive.
Travel websites have made it easier for people to price shop hotels. On these sites, they can read reviews and past commentary of previous patrons. As such, hotels must remain competitive, otherwise, patrons will book a different chain.
Legal factors: Two major laws nearly all hotels must follow
Crime rates ruin hotel profit.
Everyone wants to stay somewhere safe. If a hotel is near an area with high crime rates, it’ll struggle to survive. Choosing a spot with low crime is crucial for all hotel owners, otherwise, customers won’t stay at their locations.
Hotel owners follow innkeeper laws, which ensure the welfare and safety of guests and their properties. In some locations, the innkeeper law must be posted inside the door of every guest room of the hotel. In most cases, the innkeeper law will state how much compensation the innkeeper will pay guests if their property is stolen or damaged.
Any hotel with food or beverage establishments within must follow truth-in-menu laws, which means the food establishment must be truthful about the food and beverages served to guests. The establishment needs to be honest about the calories in the good and nutritional ingredients of the dishes.
Environmental factors: The importance of the local climate
Hotel guests stay in hotels for a variety of reasons, such as when visiting family, friends, on business, or vacationing. When vacationing, customers want to stay somewhere warm and relaxing. The weather in the local area is the deciding factor for whether someone chooses to stay at a certain hotel. This isn’t something hotel owners can control, but they must understand the seasonal differences before pricing their rooms — and adjust accordingly.
Hotel Industry’s PESTEL analysis: Bottom line
The hotel industry is experiencing major competition with corporations like Airbnb, which offer a variety of rooms for cheaper than the average hotel room. The industry is also overly reliant on the government; everything from potential tax reform to travel bans can cause the industry to crumble.
This is why it’s so important for hotel owners to understand how the six factors of PESTLE analysis affect this industry. If they don’t, they may find themselves on the receiving end of scathing reviews online, lack of customers because of environmental issues like the weather, or into legal trouble like if hotel owners were to violate innkeeper laws.
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