Business Research report-declining hotel industry in pakistan

Decline Of Hotel Industry 1

The Decline of Hotel Industry in Pakistan

The hotel industry with its charming and lively environment is apparently flourishing but the reality negates the fact and depicts the other side of the story .Pakistan hotels association and the govt. keeps trading accusation.

Identification of problem:The industry in Pakistan is not very large to begin with. While the hotel industry appears to be flourishing and healthy in Pakistan, that is not really the case.The hotel business of Pakistan is declining because of growing terrorism , tourism,changes in technology,Lack of Tourism and most important government instability etc.

Exploratory Research:

Exploratory research is conducted to clarify various problems. What customers want from hotel management, and how hotel managements can improve the hotel industry?

Literature Survey

The problem was surveyed using various web sites of hotels and associated organizations and by conducting surveys from different hotels. Following facts could be gleaned:

“Sheraton hotel and Aviary towers regarded as the only five star hotel in Karachi indicated that its revenue from food and beverage was over 632000 covers last year. The ban on feasts on marriages is creating difficulties for hotels. International fast food restaurants named as “ KFC “, “McDonalds” and “Pizza Hut” are hotel’s main competitors in the past. These are also creating problems for hotel industry. The hotel industry is also killed by tour operators who offer inflated prices ,Growing terrorism,Government Instability and most important Lack of Tourism.These operators are seriously damaging the hotel industry.People from all over the world usually come to meet their relatives; they do not contribute much to either the tourism industry or the hotel industry, because of increasing fear of Sucide Bombing. While the players in the industry complain that the Government policies are not encouraging. Holiday Inn,Marriot, Sheraton hotel and Towers, the only five star hotels in Pakistan had planned for an investment for over three Million Dollars only.”

The service industry is the worlds largest growing industry faster then the manufacturing and agriculture. The Govt. is not serious about developing this as an industry.


The Problem Statement:

“TO WHAT EXTENT TERRORISM, LACK OF

TOURISM, CHAIN AFFILIATION,GOVERNMENT

INSTABILITY(LAW&ORDER) AND POOR TECNOLOGY

CAN AFFECT THE DECLINE IN HOTEL INDUSTRY OF

PAKISTAN?”

Research Design

We have used primary source of data i.e. questionnaires and interviews for our respondents

Types of Variables.:

We have two types of variables Dependent Variable (Hotel Declining),and Independent Variables(Chain affiliation, law and order, Lack of Tourism, Poor technology and terrorism) in our report.

We have identified these variables through observation and through Literature Review


Recommendations for hotel management & Government : After collection of data and analysis thereof we make our recommendations as under:

The hotels should be technologically updated. The security of the hotels should improved There must be proper marketing and sales promotion of hotel industry. The Government should reduce rate of taxes for the betterment of customers as well as for the

hotel management. This way, hotels may be able to attract more customers and generate additional revenues for themselves and for the government.

There should be effective marketing strategy for the promotion of tourism and hotel industry inside the country as well as outside country..

REPORT: The Decline of

Hotel Industry in Pakistan


Introduction:

“The Hotel industry is among the top three constituents of the world economy after oil and autos and is growing faster than the petroleum and arms. It is larger than automobile industry in Japan, agriculture in the U.S.A. and banking in Switzerland. It is unfortunate to know that instead of growing with world trend, the tourism industry in Pakistan has rather taken a back seat in the revenue generated services. It is the only industry that earns the FOREIGN EXCHANGE without exporting any thing.The hotel industry with its charming and lively environment is apparently flourishing but the reality negates the fact and depicts the other side of the story .Pakistan hotels association and the govt. keeps trading accusations. Most of the hotels and motels here, particularly in the far flung areas, hill stations and the tourists spots and even in the three major cities; Islamabad, Lahore and Karachi, are dependent upon tourism, international business trips.

The industry in Pakistan is not very large to begin with. The major players are, of course, the Pearl Continental, Sheraton, Marriott and Holiday Inn chains and then there is a Serina hotel chain which is basically at the more prominent tourist spots. Actually the greatest growth in the hotel industry was seen in the late 80s and then some in early 90s but it was clear by this time that the industry had already entered in a recession and the trend has visibly been reversed. . As far as the five and four-star hotels are concerned, there has been no growth as regard to fresh investment. Apart from the fact that the Holiday Inn was taken by the Marriott and the hotel Taj mahal by Holiday inn crowne plaza, though sources indicates the later has since broken its chain with the Holiday Inn on account of various reasons. There has been no investment activity worth mentioning. Secondly recent attacks on the Marriot hotel(Islamabad)and on TajMahal(Mumbai) seriously damage this industry.Recent research have revealed that two hotels popular with foreigners “Islamabad Marriot Hotel in Pakistan and Taj Mahal in Mumbai were recently attacked by terrorists. Thirdly Pakistani Hotels Are very much affected by the changes in technology.And the most important is the Government Instability had affected this business in such a way that each Government has its own rules and regulations regarding to the hotel industry.

The number of hotels in the country has increased from 845 in 1991 to 1150 in 1996, showing a growth of more than 26% with the fastest growth in the number of hotels seen in 1993 which tapered off to 2.4% in 1995 before picking up again in 1996. However, in August 2008, hotel occupancy rates fell, an alarming sign given to Pakistani Hotels. By the beginning of fourth quarter 2008, the Pakistan THL sector(Tourism, Hospitality and leisure)was starting to see measurable fallout from the economic crisis in the form of negative indicators in the hotel industry, a slowdown in the gaming sector and increased “trading down” from casual dining restaurants to quick-serve restaurants. The economic crisis isn’t confined to the Pakistan, either. It is a global issue whose future impact might possibly spread to the Hotel industry in the form of decreased tourist activity from overseas.This indicates that the industry is far from healthy state and needs improvement.


Literature Review:

Our Research topic as mutually decided by our six group

members is

“DECLINE OF HOTEL INDUSTRY IN PAKISTAN” To further explore and clarify the research on this topic, we conducted a literature review.

The literature review included six peer reviewed research articles, as well as other journals and

popular literature sources. In order to develop an understanding of the topic, underlined variables

were explored by reviewing the relevant studies. Brief individual reviews of our topic related

literature is as follows:-

Manav Thandani (2008) in his article “Terror Strikes: The Indian Hotel Industry’s 9/11 ” h as discussed the impact of Bombing on Taj Hotels Mumbai on the overall hospitality industry of India. This industry has always been at the forefront of bearing the brunt acts of terror around the globe, here specifically naming the bombing of Marriott Hotel in Islamabad and the Bali bombings. The global economic crisis of the past few years has been difficult enough for hotel sector and the bombing at Taj has compounded the situation further. Here Mr.Manav Thandani, who works for HVS, hospitality service firms, came out with his exploration by interviewing and personally interacting with their colleagues at Taj and Oberoi.

Paul Ingram & Joel A.C.Baum (1997) in their study named “Chain Affiliation and The Failure of Manhattan Hotels1898-1980” examine the set back of Manhattan Hotels due to chain affiliation. They explored that standardization of strategies, rules & regulations in chain affiliation of hotels caused some hotels to decline, who demanded unconventional and operations. In addition increasing number of hotels in the chain increased the probability of failures. The local market experience of anti-strategic policies also compounded its set back. Other factors identified for this decline were competitive dynamics and inter-hotel linkages. Respected authors collected their data for this study mostly from secondary sources of hotel directories and travel indexes.


Wind, Green, Shifflet & Scarbrough (1989) presented their research study in “Courtyard by Marriott: Designing a hotel facility with Consumer Based Marketing Model ”. In this they have examined Marriott Hotel that was very popular among non-business consumers but the segment of business travelers was not satisfied with current hotel offerings. Reasons as identified by authors for this were that some hotels cost too much and offer features not valued by the travelers while others that cost less offer too few of the desirable features. Both types of hotels also tend to lack the personalization of features that travelers seek. Cannibalization of other hotel offerings was also a problem causing diminishing popularity of Marriott Hotels. Respected authors have used data collected through primary sources (interviews & surveys on consumers) as well as secondary sources of company data and indexes.

Ann Goodman (2000) in his study “Implementing Sustainability in Service Operations at Scandic Hotels” explored that the factors that caused the just collapse of Scandic Hotels were the recession in Scotland and Gulf War that had put a damper on travel industry worldwide. The organization has no crisis awareness and its rapid growth created inefficiency in its operations. Messed management was also the result of its swelling staff. Further the unfocused strategy also did worsen the situation of Scandic hotels. Another important variable identified in this study was increasing awareness of people regarding sustainability practices. Ann Goodman used data only from primary sources i.e. interviews with all level of managers and employees. Sustainability strategy improved the financial performance of Scandic Hotels in this case.

In “2009 Industry Outlook: Tourism hospitality and Leisure” discusses that U.S hospitality industry suffered a great set back due to Economic Crisis in 2008. It resulted in decreased tourist activities that subsequently caused falling hotel occupancy rates. Big Projects that were started in boom days were left unfinished especially in 2008 & 2009. USA hotel industry and hospitality sector suffered the most from this. But in 2008 Olympics proved to be a big revival for hotel industry in China and USA. Data in this journal was collected from secondary sources of National Tourism Indexes, Hotels’ red books, classified directories and other national surveys on economy & growth.


Paul Ingram & Joel A.C.Baum (1998) in their research study “Survival-enhancing learning in The Manhattan Hotel Industry 1898-1980” examine how experience at the level of organization, experience gained by population, related and unrelated organizations affect the failure of Manhattan Hotel industry. They found out that organizations enjoy reduced failure with increased survival-enhancing learning from population experience before their founding; but not after. Related organizations provide experience that lowers failure, but it matters whether their experience is local or non-local, and if it was acquired before or after the relationship was established. Respected authors have used data collected from secondary sources of hotel red books, yellow pages and annual directory of The Hotel association Of New York with Hotel & travel indexes.

Robert Kiener in his article “Crisis in Pakistan” examines the critical situation of Pakistan concerning law & order, terrorism and government instability. And how these factors participate in deteriating the economy of Pakistan particularly its hospitality industry

Smith Barney in his article “Global hotel industries” explores the aftermath of 9/11 that further recessed hotel’s economy. It was the enormous lay offs and lessened development of hotels’ human resource.

Wilder, Gates and Wolfe in their work “Hotel Investment Activity in Canada Witnesses Significant Decline” discusses that the global credit crunch and the recession that followed have hit the Canadian hotel real estate sector, which experienced a 77% decline in investment activity

Paul Slattery in his article “Hospitality industry” defines the true services of any hospitality industry. He argues that nowadays hotels are foregoing these services in the best interest of their hotels as a source of business to them.


Sources:

1) Manav Thandani (2008).”TERROR STRIKES: THE INDIAN HOTEL INDUSTRY’S 9/11”.HBS,2

2) Paul Ingram & Joel A.C.Baum(1997).” CHAIN AFFILIATION AND THE FAILURE OF MANHATTAN HOTELS “.Johnson Graduate School Of Management, Cornell University Administrative Science quarterly, 42(1), 68-102

3) Wind, Paul E.Green, Douglas Shifflet & Marsha Scarborough.(1989). ” COURTYARD BY MARRIOTT: DESIGNING A HOTEL FACILITY WITH CONSUMER BASED MARKETING MODEL”. INFORMS, 19(1), 25-47.

4) Ann Goodman(2000).”IMPLEMENTING SUSTAINABILITY IN SERVICE OPERATIONS SCANDIC HOTELS”, INFORMS,

30(3), 202-214 5) Anonymous(2009).”2009 INDUSTRY OUTLOOK: TOURISM HOSPITALITY AND LEISURE”,DELOITTE .

6). Paul Ingram & Joel A.C.Baum(1998).” SURVIVAL-ENHANCING LEARNING IN THE MANHATTAN HOTEL INDUSTRY 1898-1980”, INFORMS. 44(7), 996-1016

The Problem Statement:

“TO WHAT EXTENT TERRORISM,LACK OF

TOURISM,CHAIN AFFILIATION,GOVERNMENT

INSTABILITY(LAW&ORDER) AND POOR TECNOLOGY CAN

AFFECT THE DECLINE IN HOTEL INDUSTRY OF PAKISTAN?”

Objectives of the study


The study we have undertaken is the Exploratory study, as we are exploring the topic. Exploratory studies have been undertaken to better comprehend the nature of the problem. These studies have helped us to better develop a theoretical framework

Theoretical Frame Work

A theoretical framework is a conceptual home work which discusses the interrelationship among the variables that are assumed to be integral to the dynamics of the situation being investigated. In our theoretical framework we have following variables.

Independent Variable DependentVariable

Hotel IndustryGovernment

Instability

Technological

Changes

Terrorism

Lack of tourists

Chain Affiliation


Unit of Analysis

The unit of analysis is Individual,since we are measuring responses of individual for our research.

DATA & METHODOLOGY:

Sample Size

We have a sample size of 100. The sample was taken from Multan. It includes; Customers Hotel Management General Public

Sources of Variable: In our research we have used primary source of data i.e. Interviews,Surveys in which we used Questionnaires and secondary source i.e. Literature Review..

Types of variable:

We have used two types of variables dependent and independent.

Medium of communication:

Our medium of communication was personal interviews by which we get the questionnaire filled. This method facilitates us to give them brief description about our research and more over what the questionnaire contains and how it has to be filled. Certain respondent needed further help in filling the questionnaire.The main disadvantage of this method is only time. It takes more time as compare to telephonic survey.

Data collection Method:

The data was collected through questionnaires .Work force and field force is comprised of six students. We met the respondents personally and get the


questionnaire filled.They really like the questions included in the questionnaire and appreciate our effort. The only problem was the time constraint. The data was then given in form of worksheet by using SPSS software. Question numbers were taken vertically and the questionnaire choice numbers were taken horizontally on the table.

METHODOLOGY:

In this report we have use Descriptive and Empirical statistics.

DESCRIPTIVE STATISTICS: In descriptive statistics we have use frequency distribution in which we have calculated mean, median, variance, standard deviation. Graphically we have present data in the form of pie charts. Some of them are given below:

Frequencies:

Statistics

declining affiliation & order lack of touristtechnology

changterrorism

affectN Valid 100 100 100 100 100 100

Missing 0 0 0 0 0 0Mean 2.92 2.27 2.30 1.77 1.27 1.76Std. Error of Mean .113 .066 .096 .072 .045 .099Median 3.00 2.00 2.00 2.00 1.00 2.00Mode 2 2 2 2 1 1Std. Deviation 1.125 .664 .959 .723 .446 .986Variance 1.266 .442 .919 .522 .199 .972Minimum 1 1 1 1 1 1Maximum 5 3 5 4 2 5

Frequency Tables:

business of hotel is declining


Frequency Percent Valid PercentCumulative

PercentValid strongly agree 8 8.0 8.0 8.0

agree 35 35.0 35.0 43.0

dont know 22 22.0 22.0 65.0

disagree 27 27.0 27.0 92.0

strongly disagree 8 8.0 8.0 100.0

Total 100 100.0 100.0

law and order


PercentValid S agree 19 19.0 19.0 19.0

agree 47 47.0 47.0 66.0

dont know 20 20.0 20.0 86.0

disagree 13 13.0 13.0 99.0

S disagree 1 1.0 1.0 100.0

Total 100 100.0 100.0

Chain Affiliation


PercentValid very much 12 12.0 12.0 12.0

some what 49 49.0 49.0 61.0

dont know 39 39.0 39.0 100.0

Total 100 100.0 100.0

lack of tourismf


PercentValid S AGREE 36 36.0 36.0 36.0 agree 55 55.0 55.0 91.0


dont know 5 5.0 5.0 96.0 Disagree

Strongly Disagree

40

4.00.0

4.00.0

100.0100.0

Total 100 100.0 100.0

technology changes


PercentValid yes 73 73.0 73.0 73.0

no 27 27.0 27.0 100.0

Total 100 100.0 100.0

terrorism affect


PercentValid strongly agree 48 48.0 48.0 48.0

agree 40 40.0 40.0 88.0

dont know 3 3.0 3.0 91.0

disagree 6 6.0 6.0 97.0

strongly disagree 3 3.0 3.0 100.0

Total 100 100.0 100.0

Pie Charts


strongly disagree

disagree

dont know

agree

strongly agree

declining


strongly disagree

disagree

dont know

agree

strongly agree

declining

Law and Order


S disagree

disagree

dont know

agree

S agree

& order

Chain Affiliation


dont know

some what

very much

affiliation

Lack of tourist


disagree

dont know

agree

S AGREE

lack of tourist

Technological Changes


no

yes

technology chang

Terrorism Affect


strongly disagree

disagree

dont know

agree

strongly agree

terrorism affect

Empirical Statistics : In empirical statistics we have done hypothesis testing.The result of hypothesis testing will be discussed later.

Estimation and Results:

In this we will going to formulate certain hypothesis and then test them.The variables which we have identify in Theoritical framework will be tested and their relationship will also be identified.We will going to test the relationship between the variables one by one.Following are the hypothesis:


1)Relationship between Hotel Declining and Law and Order of a country.

Recommendation & Limitations

In the light of these findings we are able to recommend some suggestions to hotel managements

and Government authorities.

Recommendations for Hotel Managements

1. The quality of food must be improved in hotels.

2. Prices of food must be reason able according to their food standard and services.

3. The hotels should follow new technological trends..

4. There must be proper marketing and sales promotion for hotel industry.

5. Hotel should be constructed at beautiful locations.

6. There should be proper security system to secure the hotel from any terror attack.

7. They must raise their voice and negotiate with government for chalking out sound policies

for the improvement in hotel and tourism industry.

8. Parking facilities must have ample space.

9. Room services should be according to needs of customers.

10. Attendants must be adequately trained, educated, well behaved and efficient.


Recommendations for Government Authority

1. The Government should reduce / rationalize the number of taxes and their rate for the

betterment of customers / guests, as well as, for the hotel management. If the government

lower the taxes the hotels will be able to provide better facilities at lower rates having no

strain on their margins. This way they may be able to improve their occupancy rates and

consequently sales. The government may have little or positive bearing on tax revenue due to

increase in sales and hence tax amount. On adoption of such a strategy Government may be

able to assist in development of Hotel industry.

2. There should be effective marketing strategy for the promotion of tourism and hotel

industry inside the country, as well as, outside country for which tourism department must be

mobilized.

3. Airport facility must be brought up to acceptable level and in addition to availability of

regular flights from remote locations.

4. There is total lack of basic utilities in remote areas such as Hunza valley, Kaghan valley. The

same should be provided at lower rates .

5. Government should provide long term and short term loans on reasonable mark up for the

growth of industry .

6. Government should review the policy of ban on serving meals in marriages.


Limitations:

Limitation of Questionnaire

Limitation Of Personal Interview

Limitation of Questionnaire

Non serious respondents

Time constraints on the part of respondents to fill the questionnaire.

Incomplete filling of questionnaire

Dual answer of a single question

Limitation of Personal Interview

It was very difficult to get time for interview because being the executive of hotels they have

their own business and responsibilities .

Business Research report-declining hotel industry in pakistan

Documents

Transcript of Business Research report-declining hotel industry in pakistan