The main goal of the Sydney hospitality industry is to increase international tourism. Governmental interference in the hospitality sector can have a considerable effect on the city’s development. There do not seem to be any complications posed by the government in this sector.
The economy of Sydney relies on a high number of visitors (Preston Rowe Paterson n.d.). However, the infrastructure is relatively poor due to the shortage of upmarket accommodations (Beirman 2017). The GDP rate has increased, and inflation grew by 0.7% in 2016 (Preston Rowe Paterson n.d.).
A negative aspect is that in Sydney, there is a shortage of skilled employees in the hospitality sector (Beirman 2017). However, a positive trend is that more and more tourists are arriving in the city (Travel to Sydney 2018). Also, there is a wide range of hotels with different room capacities so that visitors can choose the ones most suitable to them (Preston Rowe Paterson n.d.).
Currently, such industry disruptors as Airbnb, Wotif, and Hotels.com are more efficient than hotels in offering accommodation options (Ferrier Hodgson n.d.). The majority of visitors prefer to book hotels via social websites instead of contacting facilities by phone. The UberEats program is undermining the profitability of hotel restaurants because it brings food directly to consumers (Ferrier Hodgson n.d.).
The environment in Sydney is tourist-friendly, and weather conditions do not deter visitors from coming most of the time. Sydney’s hotel industry is characterized by some seasonality (Preston Rowe Paterson n.d.). From February to November, the rate of visits is high, while from January to June, a drop can be observed.
The hotel business in Sydney is governed by health and safety regulations. The most recent legal issues include an alcohol lockout and a ban on smoking (Ferrier Hodgson n.d.). Prohibiting bars from selling alcohol after a certain hour may deter tourists from staying in hotels.
A Conclusion on the Operating Environment
A PESTEL analysis makes it possible to reach the conclusion that the operating environment for the hospitality industry in Sydney is favorable. There are some limitations, including social and technological factors. However, the majority of indicators suggest a state of positive dynamics.
Trends in the Hospitality Industry
The modern hospitality industry faces a number of challenges that, if successfully overcome, may increase hotels’ profits, while a failure to meet these challenges might have dramatic outcomes. Rao (2014) singles out the following emerging global trends in tourism and hospitality: international planning, service enhancement, the development of management psychology, and increasing the operational capacity of hotels. Other scholars emphasize the significance of hotels’ online representation in the modern market system (Schuckert, Liu & Law 2015). An additional approach is the application of innovation in the hotel industry (Dzhandzhugazova et al. 2016).
Among global hospitality trends, special prominence is given to sustainability issues. Jones, Hillier, and Comfort (2016) remark that attention to sustainability is growing nowadays, forcing hotels to come up with sustainable consumption solutions for their facilities. In their analysis of sustainable service innovation, Horng et al. (2016) identify several indicators of such an approach. Particularly, sustainable services are currently characterized by high customer satisfaction and service orientation, human resource development and cultural resource management, a system of incentives, and environmental thinking (Horng et al. 2016).
Customer satisfaction is viewed as another element that has a considerable effect on the image of modern hotels (Richard 2017). Radojevic, Stanisicm, and Stanic (2015) conclude that brand hotel chains and star ratings are important factors. At the same time, research indicates that millennials tend not to pay much attention to these aspects (Pentescu 2016). However, the issue of customer satisfaction remains an important factor for success. Finally, there is a global tendency towards positive employee engagement that can lead to increased customer loyalty (Kandampully, Zhang & Bilgihan 2015; Lastner et al. 2016).
The development of Australia’s hospitality industry is also governed by innovation and change (Fox 2018). According to data provided by Tourism Accommodation Australia (2018), the country’s attitude toward hotels has changed significantly. Hotels are no longer viewed simply as places to stay: they have become “lively and connected destinations for visitors and locals alike” (Tourism Accommodation Australia 2018, p. 1). In December 2018, the accommodation industry reported an impressive increase in revenue per available room and average daily rate (Hotel industry trends n.d.). Yearly growth in passenger movements to and from Australia has been stable at about 5% over the past several years (Hotel Management 2016).
Employment trends demonstrate the increasing significance of the hospitality sector in Australia. In particular, jobs such as hotel and motel manager, receptionist, and hotel service manager are growing in demand (Hospitality 2018). Among success factors in Australia’s hospitality sector, Ferrier Hodgson (n.d.) singles out effective labor and cash management, control of stock margins, and the reinvestment of capital. Zhang and Enemark (2015) argue that geographic location and human skills also play an important role in the evolution of Australia’s hospitality industry. Aspects of modernization that are currently developing in the industry include the technology and living space revolution, the movement from global to local, and the shift toward natural design (The Hotel Conversation 2018). Thus, the tendency toward innovation is bringing positive outcomes for the industry.
According to data provided in the case study, the operating statistics for Sydney hotels in 1999-2002 were rather poor. The average number of rooms decreased over the period, and revenues dropped in almost all sectors. Over the last decade, the situation has improved, but Sydney’s success indicators in the hospitality sector are still lower than in Australia overall. While such cities as Melbourne, Canberra, Perth, and Adelaide report an expansion in the hotel business, Sydney is still at the beginning of its “most dramatic expansionary phase” since 2000 (The Hotel Conversation 2018, para. 2). Data for the city as of January 2019 indicate a slight growth in supply (+2.7%) and demand (+1.4%) (Hotel News Resource 2019). However, the average daily rate declined -4.1%, and revenue per available room decreased -5.3% (Hotel News Resource 2019).
According to Sydney Tourism Statistics, although the number of visitors is increasing, tourists are not likely to stay in Sydney hotels (Travel to Sydney 2018). In 2018, as little as 4.6% of tourists stayed in the city’s hotels, compared to 29.5% staying with friends and 45.5% renting an apartment or a house (Travel to Sydney 2018). At the same time, the Sydney hotel market is reported to have been “the largest in the country” and to have had a “strong outlook” in the second half of 2018 (Sydney hotel supply: second half 2018 2018). Research by Preston Rowe Paterson (n.d.) indicates that the occupancy rate in Sydney hotels is contingent on seasonality. Therefore, although the development of the city’s hospitality industry has not reached the Australian average rate, there is potential for growth.
The Influence of Third-Party Entities (Airbnb)
Scholars note that social networking-based tourism, such as Airbnb, is disruptive, and it creates obstacles to the development of the traditional hospitality industry (French, Luo & Bose 2017; Guttentag & Smith 2017; Vargas-Hernández & Mariscal 2016). Airbnb is regarded as a promising trend for the future of the hospitality business (Oskam & Boswijk 2016). Due to approaches focused on localization and prioritization, Airbnb has earned the loyalty of numerous customers (Lalicic & Weismayer 2018; Yip 2017). To increase its competitiveness, the Sydney hospitality market needs to employ technology more intensively and modernize its methods of meeting its clients’ expectations.
- The hotel is spacious and comfortable, with many facilities situated in it or within walking distance (Case study n.d.)
- Australia’s tourism industry is constantly evolving, which makes the hotel business a highly promising sector (Ferrier Hodgson n.d.)
- Customers may choose not to return to a hotel where they experienced poor service (Case study n.d.)
- Weather conditions, which are sometimes unpredictable, may deter tourists from visiting the city during some periods (Hotel News Resource 2019)
- Increased options for employment: receptionists, hotel managers, hotel service managers
- Well-trained prospective employees due to numerous training activities and various funding sources (Hospitality 2018)
- A growing number of tourists coming to the city every year (Travel to Sydney 2018)
- Potential to build conference rooms so that hotels could be used during low-season months (Case study n.d.)
- The location is suitable: Sydney’s popular sights are within a short distance (Case study n.d.)
- Airbnb and other social media platforms represent the greatest threat due to their use by millennials, who constitute the majority of visitors (Oskam & Boswijk 2016)
- A lack of hotel management expertise may lead to poor employee performance due to the inability to evaluate and enhance performance (Case study n.d.)
Millennials’ Expectations of Hotel Services
The millennial generation is characterized by increased interest in options available through the Internet and technology. Also referred to as Generation Y, they are known for being socially oriented, multi-tasking, and conventional (Pentescu 2016). It is crucial to investigate the attitude of these individuals toward the hospitality industry since their impact on the industry’s development cannot be overstated. Pentescu (2016) states that hotels need to overcome obstacles hindering their attempts to meet the demands of millennials. The scholar emphasizes the connection between generation Y’s mastery of technology and their preferences concerning staying in hotels. In particular, Pentescu (2016) notes that millennials tend to book their hotels via online services, such as Airbnb. These people expect hotels to be comfortable and inexpensive. Additionally, they find new experiences the most important part of a journey, so they do not pay as much attention to luxury options.
At the same time, as Heyes and Aluri (2017) report, there are some aspects of luxury brands that may interest millennials. Scholars note that this target group’s perception of luxury coincides with the notion of authenticity and a personal touch (Heyes & Aluri 2017). For instance, what used to be luxurious several decades ago may no longer seem a great advantage to some customers. Millennials may value the design and architecture of a hotel and disregard some of the hotels’ classic features. However, an extravagant interior is not sufficient for this population. Instead, some of the major consumer expectations are a high-speed Wi-Fi connection and embracing innovation (Heyes & Aluri 2017).
In addition to first-rate information and communication technologies and factors relating to authenticity, millennials pay considerable attention to the environment of a hotel along with its safety and well-being options (Veiga et al. 2017). Environmental issues are also reflected in millennials’ perceptions of hotel services. Wang et al. (2018) emphasize the extreme concern of generation Y concerning green issues. Also, these authors state that millennials demonstrate more interest in protecting the environment than their predecessors. Thus, their expectations of the hospitality industry include the use of recyclable materials and reusable items along with water- and energy-saving options (Wang et al. 2018).
Scholars note that generation Y is increasing the disruption of the hotel industry. Veiga et al. (2017) mention that the 2008 global economic crisis affected millennials’ financial stability. As a result, they prefer hotel services to be not only of high quality but also affordable. Another crucial factor for millennials’ hotel preferences is the possibility to check customer feedback. They also cannot stand delays in service or communication. Thus, when they cannot find relevant information about a hotel or when they do not hear back from hotel personnel immediately, they are likely to start looking for another accommodation (Veiga et al. 2017). At the same time, though, scholars observe that millennials’ habit of overusing technology is a disadvantage when they are not customers but employees of hotels (Rosa & Hastings 2016). Because these young people tend to become distracted too often, they can cause visitor dissatisfaction. The contrast between millennials as customers and millennials as workers has negative implications.
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