please read the following case and answer this ques (fully answer for the 2 parts

1)looking at all five forces(in the hotel industry) what are the strongest and weakest in determining itsattractivness? and does it seem like a good place to invest??

The Global Mid-Range Lodging Industry

The global hotel and accommodation market grew to around $785 billion in 2022, up around 22% from 2021 after rebounding from the disastrous year of 2020 the year that the Covid pandemic brought travel to a global halt.

The hotel industry is a fundamental complementor to the airline and tourism industries. It assists business and government travellers who need to travel for meetings and conventions (although the demand for this was reduced by Covid and has been partially replaced by the more widespread use of video conferencing). The industry is, by nature, highly diversified geographically and also in terms of quality and price.

Overall, demand for lodging has been growing strongly for decades. This is driven in part by global economic growth and the emergence of a middle-class in countries like China, India and Brazil. These people often aspire to travel internationally and the lodging industry has grown accordingly.

The industry has many price and quality segments, from luxury brands (like Marriotts Bvlgari Hotels & Resorts) to simple family-run hostels. Rooms can be as large as a home and as small as a capsule. Among this diversity of products, the most common category of hotel rooms falls into what are termed the mid- range segment.

The mid-range (2 to 3 star) hotel segment consists of

short-term lodging services, and related services like

food and beverage services, recreational services,

and less commonly at the mid-range level,

conference rooms and convention services. Room

nights are generally priced around USD60-150 per

night, depending on the location and temporary

market conditions. Brand examples include Hiltons Tru hotels or Intercontinental Hotels Groups Holiday Inns. Bookings are generally done online, either through an aggregator like Booking.com or Expedia, direct to a property website or reservation call centre, or through a travel agent.

Customers

The way customers book properties has changed significantly over the last two decades. Once most hotel rooms were booked through retail travel agents, with these maintaining the key relationship to customers. Today, frequent travellers are often loyal to one of the large global chains and book through central portals (like marriott.com), or alternatively choose an offer from an aggregator (like trivago.com) or airline. Bookings are also increasingly done at the last minute and through mobile technology.

The typical customer for a mid-range hotel is a leisure traveller, or a business traveller on a tight budget. Nightly stays are often bundled with breakfast and free Wi-Fi and parking to accommodate customer requirements for a discount stay. For customers at this price point, the provision of basic amenities, like a comfortable bed, a clean room and efficient check in, are important, but luxuries are not.

Novotel Hyderabad Superior Room

An example of an innovation in the industry relates to near-field-communication (NFC) technology. Bookings can be made through apps and then room details and access can also be arranged through the app, so frequent travellers can book and enter their room without attending the check-in desk.

Buyers are diverse in important ways.

Infrequent travellers tend to be more price

conscious than business or frequent

travellers. They often switch to the lowest price room that meets their basic location and quality requirements. Frequent travellers tend to be more brand-loyal, and these travellers tend to spend more money annually than infrequent travellers. All travellers have huge amounts of information on potential options, including candid reviews and traveller photos on sites like tripadvisor.com and Instagram.

In the industry there are still many small, generally regional, chains and independent hotels, although these often struggle to compete with the larger chains that have strong brands and significant investments in booking systems and loyalty programs. These arrangements successfully keep many customers loyal to their favoured brands and make it difficult for new entrants to the industry to attract customers away from larger players. For a customer with an established account, with points and elite status, of one of the major brands (Hilton HHonors, or IHG One Rewards), the benefits of staying with their preferred brand are high, and therefore the costs to switch between brands based on price, is considerable.

How the Industry is Structured

Ownership in the industry is complex. Many of the largest global chains operate in the segment (for example, Marriott offers the Aloft brand at this price point, and Accor hotels offer the Ibis brand). Some chains (OYO hotels, for example) operate exclusively in the mid-range market. There are also many family-owned mid-range hotels in different cities and regions.

An interesting point to note about the hotel industry is that the large brand chains like Marriott, IHG, and Hilton own few actual hotel buildings. The buildings themselves are generally owned by real

Sheraton Grand Dubai

estate trusts or wealthy investors who pay chains like Hilton, Marriott or Accor to operate the hotel business (lodging operations, F&B) and to provide the booking platform and related services. In general, this reduces the risks associated with event such as the Covid pandemic for hotel chains, as the fall in revenue is borne most heavily by the building owners.

An example is the Sheraton Grand Hotel Dubai, located near the Dubai World Trade Centre. The building is owned by SRG Holding Limited, a family business based in Dubai. The building is mixed use residential, office and hotel, with the hotel managed by Sheraton, a brand of Marriott. Some buildings are at times re-branded (ie changed from a Sheraton to a Hilton brand), especially after

significant refurbishments. However, this can be expensive and time-consuming, and is generally rare.

Much of the direct employment in the industry is undertaken by the chains. Entry-level employees (room attendants, F&B waiters) are generally low paid, often at or slightly above minimum wage in the relevant location. However, some employees are well paid including senior management and those with expertise, like Head Chefs.

Other important purchases for hotels include bedding and furniture, food and beverage inputs, electricity and advertising.

Emerging and Existing Competitors

OYO is an interesting entrant into the market. It was established in India in 2013 and offers:

a global platform that empowers entrepreneurs and small businesses with hotels and homes by providing full stack technology that increases earnings and eases operations. Bringing affordable and trusted accommodation that guests can book instantly.

It noted the difficulties small, family-owned hotels

were having competing with large chains and thus

created a brand and platform that replicates many of

the benefits of larger chains for smaller hotels. An

important element of the OYO business model is that hotel owners must upgrade basic facilities like rooms and mattresses so that customers can trust the experience will be of a reasonable quality level.

Oyo Room Baker Hotel, London

Austrian lakeside Airbnb

In a sign that industry boundaries are becoming more complex, OYO also sells rooms through another popular portal, Airbnb (Airbnb became an investor in OYO in 2019). Firms like Airbnb, are also impacting the industry, especially at the mid-range price point and especially for leisure travellers. Airbnb is a platform that allows homeowners to rent rooms or entire properties. Once a fairly fringe operation, Airbnb now has more than 6 million active properties (ranging from single rooms to large homes), around 4 times as many as the leading hotel chain,

Marriott has rooms. Airbnb generally doesnt

suit most business travellers, as the experience of checking in, cleanliness, and associated facilities can be variable. However, it provides a superior

option for many travellers, especially those with families and on a budget.

Within Airbnb, some property owners are specifically targeting business travellers by buying inner- city studio or one-bedroom apartments and offering daily cleaning. This is a concerning trend for the larger hotel brands.

Among the large global brands, however, competition tends to be fairly sedate and not intense. The brands are more interested in developing niche models like Moxy, a Marriott brand targeting

younger, millennial travellers. Moxy elements include fun public spaces, modern artworks and furnishing and a generally welcoming ambience.

As the travelling public steadily increases,

the market growth has been sufficient to

meet shareholder growth aspirations so

far without the need for intense, price-

based competition between the major

brands. Each have brands in the luxury,

premium and mid-range segments

offering tailored products for business

travellers, families, long-stay and resorts.

In an industry with a potential global customer base, there is sufficient room for all to grow.

Hotel chains like Marriott, Hilton and IHG are more intent to invest in improved customer service, develop customised niche products and roll out new locations than to focus on discounting and lower prices.

The question is

1)looking at all five forces(in the hotel industry) what are the strongest and weakest in determining itsattractivness? and does it seem like a good place to invest??