Snapshot Of The Tourism Industry In Malta Tourism Essay

Snapshot Of The touristry pains In Malta touristry strainThe Tourism Industry runs mavin of the refer pillars of the Maltese rescue contri excepting 23.7% of the labour mart. Over the past forty geezerhood the around-the-clock growth of the Industry has been a indorsery factor in encourage topical anaesthetic anesthetic line of descent men to augment the subjugate of hotels on the island consequently creating healthy competition, peculiarly in the Five Star segment. However, disdain the structural differences, each hotel faces the same environmental forces. indeed, the key to option lies with the st valuegies implemented to clear competitive value.This report examines how each of the various Forces has shaped Corinthia palace Hotel watering devotes transaction decisions. In this assignment, The Director of pay Claire Mifsud, and The Director of Sales Karl Schranz, give their views on the macro and micro environmental forces that relate to Porters Five Forces Model.Section 2 Comp whatever HistoryAt the tender age of twenty three, Mr Alfred Pisani aphorism a window of opportunity to enable him to enter the hotel industry. Three long time after purchasing a 1920 private residence then called Villa Refalo, the Pisani family began to crop this proportion as the Villa Corinthia Restaurant (IL-Haddiem, 1968). His dreams of becoming a hotelier twin with crinkle acumen led him to seek ways to expand the family business. When he became aw be of an opportunity to receive a soft government loan, he engaged the wait ons of architect Dom Mintoff, who drew up the sees for a 152 bedchamber hotel which was to be amongst i of the first 5 star hotels having full conclave facilities. Mr. Pisanis sheer determination and vision, drove him to present a business plan which convinced The British Collonial Government to show him a loan of 1.2 one million million US dollars. The hotel construction project commenced under the supervision of arc hitect Dom Mintoff and four days later, in June of 1968, Mr Pisani held the official opening ceremony in the social movement of, prominent society figures much(prenominal) as the then Minister of Education, stopping point and Tourism, Doctor George Borg Olivier, His Excellency Duke of Edinburgh and renowned actor Roger Moore (IL-Haddiem, 1968).This grand Boutique mode hotel is located near the official residence of the Official Residence of the professorship of the Republic of Malta and the San Anton Botanical Gardens. This hotel has since gained an excellent reputation and has been disposed more prestigious awards in the Global Travel and Tourism Industry with the most novel macrocosm that of Maltas Leading Hotel1in the 2010 World Travel Awards. The current superior general Manager, Mr. Rota, acclaims the hotels success to its Trademark Maltese Hospitality. This hospitality is also the Unique selling Point (USP) of the Corinthia blade.2.1 Company Mission StatementO ur Mission is to provide our guests with the foxiness of c ar2.2 Research MethodologyThe in markation to meet the objectives of this assignment was self-contained from the following sources -I loted a series of interrogates with Key c be members who are instrumental in formulating business strategies for the Company, namely, Ms. Claire Mifsud, Director of Finance at The Corinthia Hotel and Spa and Mr. Karl Schranz, Director of Sales at Corinthia Central Sales Office who were also given questionnaires to complete.The second way of life was in terms of Desk Research done with(predicate) various media sources.Section 3 Definition of an IndustryThe Oxford English vocabulary succinct description of an Industry is -a particular form or branch of economical or commercial activitySnapshot of the Tourism Industry in Malta3.1 World Tourism Benchmarking in that respect is a riches of information available to assist the Business Sector to assess the viability of the Tourism Industry . One medium used by the Corinthia castling Hotel is the report published by The World Travel and Tourism Council. The report uses sight Indices which whitethorn be valuable to ascertain an Industrys draw offiveness and future economic say-so. However, as Malta is a Small Island Destination, competition must also be measurable from a global perspective of touristry.3.2 Tourisms Economic Performance on the Island accord to the World Travel and Tourism Council 2010 report2, Travel and Tourism contributes towards 19.4% of the Maltese Islands GDP (EUR1,151.4 million) with a forecasted summation of a barely 3.6 % by 2020. exportation Earnings from International Visitors is expected to reap in the region of 777 million, with a forecasted growth to 1443.4 million by 2020. Currently, 23.7% of the Labour Market is employed in Industry Related Occupations and it is anticipated that this allow for rise to 28.9 % by 2020. These statistics defend the theory that Travel and Tourism w illing remain one of the key engines for growth in the Maltese Economy.3.3 Tourist PerformanceAt the eon of preparing this assignment, the National Statistics Office had not yet issued the official statistics for 2010. However, in a press conference held in January 2011, the Parliamentary Secretary for Tourism, Mr. Mario De Marco, estimated that the total number of Tourists was estimated to be in the region of 1.3 million3. This equates to a 0.1 million increase on 2009 figures4.During the first 11 months of the 2010, Cruise Liner Traffic reached a total of 467,142 passengers5, however wholly 3 % of passengers (14,441) landed in Malta. Therefore disrespect the fact that nearly half a million journey passengers visited the island, very few stayed in hotels overnight. According to the Domestic Market, the topical anaesthetic gustatory perception is to reside in Four Star Hotels and statistics show that during the month of November, the 5 Star segment produced a total of 9,638 be d nights.3.4 Collective registration Establishments on the Maltese Islands There are a total of 158 appointment establishments on the Maltese Islands6, fifteen of which are classified with a 5 Star Rating. Renowned International Hotel Brands such as Hilton, InterContinental, Kempinski Resorts, Radisson and Starwood Hotels currently grapple for the same market. The two longest effected 5 Star Hotels on the island are The Phoenicia and The Corinthia rook Hotel and Spa. During the month of October, the 5 Star Hotel accommodation form yielded an average occupancy of 73 %.Section 4 -The use of cast to s faeces the Broad Environment for drivers of change.There are numerous characteristics or strategic elements that may catch the life cycle of the topical anesthetic anaesthetic touristry industry.One organisation, acting independently, may slang very little influence on the broad environment however, the forces in this environment can have a tremendous impact on the organisatio n (Enz, C.A, 2010).p167.Consequentially, in todays local business scenario, if one was to conduct this statement it confirms the school of thought that organisations inwardly the tourism industry, will face difficulties when trying to manipulate the broad environment.However, check to The principle of Enactmentorganisations do not have to submit to the vivacious forces in the environment. (St.John, Harrison ,2010)8.A proud parcel of local hoteliers have opted for Management Agreements with Internationally Renowned Brands. Such strategy allows local operators to capitalise on the Brand Marketing and Existing Customer Base to attract business, however, Corinthia rook Hotel has evolved its own Brand. This strategic decision was taken as a means to differentiate from other hotels by religious offering authentic Maltese Hospitality. This in itself is believed to create a competitive edge over the International Brand Names which currently operate on the island, namely, Hilton, Int er Continental, Marriot and Starwood Hotels. These days travellers are far more(prenominal) discerning and more seek new-made penetrations into the local culture, as apposed to a reproduction of International Hospitality.Through successful transposed Integration the Corinthia Brand has eliminated potent contributions to Third Party Management Companies by forming its own unique Brand Identity. Furthermore, in contrast to most local operators, the ships company has been able to penetrate the International Tourism Industry by offering Management Contracts to overseas operators in the Industry.The task of measuring competitiveness is full of complexities as there are numerous forces at play. Therefore, it is of dominant importance to have a thorough understanding of twain the potential nemesiss and the opportunities available. This will then provide the basis for which a company responds to Trends and Influences by integrating its resources to achieve a strategic benefit on its competitors.Invariably, local firms competing in spite of appearance the Tourism Industry, have similar resources available to them and each one is challenged by similar forces. Therefore, it is safe to assume that most will lock similar strategies. Making the company that topper acclimatises itself to the broad environment more apt(predicate) to be successful. Under the current scenario, the come up coined phrase The survival of the fittest could not be more appropriate for hotels competing inwardly the same industry. despite being one of the older Five Star Hotels on the island, The Corinthia Palace Hotel still competes well with the newer properties. It appears that customers tend to opt for older properties where Customer dish out is at the optimum. The Corinthia Palace Hotel has achieved worldwide acclaim for its mettlesome level of service and currently holds the World Travel Award Maltas Leading Hotel. This prestigious award is a great accolade to the Industry a s it is believed to be the akin of the Oscars. Such recognition is an excellent marketing tool as given the choice, most potential customers would prefer to stay in a redoubtable hotel.4.1 PESTLE Analysis Views of the Financial ControllerAn interview was conducted with the Financial Controller, Ms. Claire Mifsud who provided an insight as to how the company conducts a Situational Analysis of the Broad Environment. According to her Corinthia uses a PESTLE Analysis Template which define the following sextuplet plains that form the context of its operation -Political ForcesEconomical ForcesSocio-cultural ForcesTechnological ForcesLegal Forcesenvironmental ForcesThe forces listed above importantly influence both the industry and the organisations that operate within it.She perceives that the Maltese Government recognises the fact that Tourism is a key contributor to the Maltese Economy and therefore continues to invest and work closely with stakeholders within the industry. This ye ar the government has awarded The Malta Tourism power a total of 35 million Euro for 20119. The main vision for 2015 is to promote the Maltese Islands as a Unique Mediterranean Destination10, hence the reasoning behind the substantial investment to amend the product.Through the European Social Fund, the Malta Tourism Authority is investing in a three million Euro syllabus to improve the skills of those currently working within the Industry. The Advance Training Tourism leadership Program11is being offered free of charge, to both employers and managers in the industry. The aim of this program is to enhance the Current Skill Set and to create a acculturation of Innovation. As the Group Training Manager, I can disclose that 7 managers working at the Corinthia Palace Hotel are currently taking this diploma Course.When asked what perceived barriers had been identified by the hotel, Ms. Mifsud referred to the governments stronger stance to align with European Regulations, particula rly in areas such as Health Safety and Environmental Issues. be an older property, substantial investment is required to conform with some of the regulations. The forecasted economic recovery is more sub receivabled than that of other small economies12. Ms Mifsud then expressed her concern on escalating operational be and stated that the 2% increase of VAT on accommodation and the budgeted cost of living increase bear a great influence on profitability. She also remarked that nowadays, business customers require their rooms to be an extension of their offices when travelling, therefore, adequate technology has bugger off a norm rather than an ancillary service. Hence, in separate to remain competitive and meet the customers of necessity additional investment in this area is required.Section 5 The Broad Environment.Forces within both the Broad and proletariat Environment are critical determinants for Strategy Formulation for any organisation. However, the magnetic core of a Fi rms Task Environment is formed by its interaction betwixt the following three key stakeholders and their impact on the market place -CustomersSuppliersCompetitorsAll contemporary organisations, irrespective of type of Industry, face forces that can significantly allude profitability.If a firm understands these forces, then it can develop a business level strategy that allows the business to either take advantage or protect itself from these forces, which in turn allows the firm to be consistently profitable. (Ahlstrom.D, 2009)13.5.1 Swot AnalysisAn internal audit provides an opportunity for a company to have a greater understanding of the capabilities and limitations of its resources. Such information will provide a platform from which Operational Strategy will be focused.The identified strengths and weaknesses of the hotel are as follows -5.2 StrengthsLocationThe location of this hotel has the potential to attract the following niche markets.The close proximity to the Presidentia l Palace makes it the prototype location for Diplomatic Delegations.Its remote location and proximity to the National area is also key selling point to attract Foreign football Teams who come to Malta for Training Camps and Official Matches.Being close to the Malta Fairs and Convention union offers potential for business in accommodating delegates who are participating in large scale forums.Global Reputation for Excellent ServiceThis property enjoys 20% Repeat Business which is amongst the nobleest on the island. This reputation is also achieved on a local level as there is a high percentage of locals who frequent the Food and Beverage outlets.AccommodationHotel rooms are much more spacious than the newer five star properties on the island. In 2009 all rooms were refurbished to optimum condition. The hotel offers great value for money when one considers the level of service offered. The customers comments posted on Travel Review sites such as Trip Advisor are very positive.SpaTh e athenaeum Spa by Algotherm has now established itself as one of the best Medical Spas on the island.MarketUn bid many of the other hotels, the Corinthia Palace is not dependant on one Nationality or Market incision and therefore a drastic drop in one of these areas will not cause catastrophic con epochs.5.3 WeaknessesMeeting get onsThe main clashing rooms are small in severe need of restoration as they are inferior to what the competition is offering. This may be a contributory factor why some Destination Management Companies coach Group Business elsewhere, which causes opportunity cost situation for the hotel when having to refuse business that exceeds the capacity required.Loyalty ProgramUnlike all the competitors there is not Loyalty Program in place to reward customers for their loyalty to the company.works EnvironmentInvestment is required to totally refurbish the main kitchen as the current structure not adequate for the volume of work being produced nowadays.Executive Lounge FacilitiesUnlike all the five star hotels within the same agonistic Set this hotel does not have an Executive Lounge. closely corporate clients seek this facility as it provides an additional area, where they can conduct their business and entertain their clients.In order to measure the potential of an Industry most companies use the framework of Environmental Understanding as established by the Economist Michael Porter.Section 6 Porters Five Forces ModelIn March-April 1979, Professor Michael. E. Porter, published an article in the Harvard Business Review, titled How Competitive Forces Shape Strategy.14. In this article he wrote emulation in an industry is rooted in its underlying economics, and competitive forces exist that go well beyond the established combatants in a particular industry. Customers, suppliers, potential entrants, and modify products are all competitors that may be more or little prominent or active depending on the industry. The state of competition in an industry depends on five basic forces. The collective strength of these forces determines the last profit potential of an industry.This article formed the basis of Porters Five Forces Model. This user friendly model is now widely employed by many organisations to formulate the firms business level strategy. Corinthia Palace Hotel is no exception. Key strategic decision makers within the company use this model during their business homework process to represent their analysis of the dynamics of the competitive structure and how the feature strength of these forces influence the Maltese Tourist Industry. Strong forces will insinuate lower prices and higher costs, whereas weak forces suggest the contrary.6.1 Bargaining Power of Customers and Suppliers cognizant customers become empowered customers15(Dubrin,2008) .Trends show that a high percentage of travellers rule book their travel arrangements directly through the internet. Budget airline sites such as Ryan Air and Easyj et, provide a one stop shop that is reachable around the clock. Nowadays, middlemen such as travel agents are gradually being eliminated. The internet has accelerated the power of this competitive force. Customers now have an advantage over the organisations, as they are able to conduct frugal searches of the nett from the comfort of their own home. This provides them with ample opportunity to compare rates and later purchase the best deals.Since opening, the hotel has witnessed changes in booking channels. Customers are more likely to book directly through the internet. Price wars with competitors are prevalent, however despite this, Corinthias pricing strategy is based on past performance and forecasted engage. often focus is placed on safeguarding Gross Operating Profit and as the company is apposed to reducing rates ,added value is offered instead. During my interview with Mr. Schranz I asked who has the strongest supplement when negotiating rates with suppliers. His reply indicated that the key to successful negotiation is to create a win win situation giving them equal leverage.6.2 Threat of rude(a) EntrantsAccording to Slocum et al16the phrase New Entrants refers to the relative ease with which new firms can compete with established firms.Over the past forty years the number of companies run 5 Star Hotels has risen substantially. Empirical entropy issued by the National Statistics Office of Malta indicates that in 1996 there were only six Five Star Hotels operating on the Maltese Islands. Today, some fifteen years later, the amount of five star hotels has almost tripled increasing to fifteen. The high concentration of upscale hotels on the market, has made it essential to create barriers. late(a) Government Regulations, Capital Requirements and Rising Operating Costs are forecasted to affect profitability. Such contributory factors may defer new entrants in the future.During my interview with Director of Sales and Marketing, Mr Karl Schranz, h e revealed that he does not envisage any other Five Star Hotels entering the market this year. He further elaborated that in his opinion the industry does not require more 5 star properties.The industry has seen an explosion of Five Star Room Stock on the market in the last 5 years. There is a surplus of Hotel Rooms in low season due to the seasonality of our business. On the other hand, all five star properties run at very high occupancies from May till October. In my opinion, it all boils overmaster to market forces. When market conditions permitted and when it was highly feasible for other hotels to join, most local and foreign business men invested heavily in the Hotel Sector.6.3 The Threat of deputise Products or ServicesOrganisations that provide services that adequately substitute those offered by competitors within the same industry are considered as a threat to those competing within the same industry. In the local context, substitutes to Five Star hotels can be identifie d as either the Chartering of Yachts or Opting for a Cruise. However, with high level of accessibility offered by budget airlines, emerging tourist lasts hover a bigger threat to the industry. Central and Eastern European destinations are offering similar products at more competitive rates. However, if one was to consider the high concentration of natural disasters or adverse weather conditions many countries have recently experienced many travelers may be influenced by Maltas more agreeable climate. Furthermore, political instability in emerging destinations like Tunisa may also defer travellers to choose alternate destinations.6.4 Existing CompetitionThe level of competition is a key determinant of how other hotels in the industry are likely to behave. Hotels within the same Competitive Set strive for market share. From the fifteen 5 Star Hotels on the island, the only four categorised in the same Competitive Set as the Corinthia Palace and Spa are Phoenicia, Excelsior, Interco ntinental and the Meridien. However, both the Director of Finance and the Director of Sales consider the Phoenicia as their main competitor. This is attributed to the fact that both hotels have been in competition for the past forty years and that both properties appeal to the same markets. According to the information provided by Mr. Shranz, the hotels average market share is approximately 10.5 %.Karl Schranz commented as follows Price Wars are tremendous in all Hotel Categories in Malta. We had managed to reduce price wars significantly before 2008 when demand was in line with supply. Since more Five Star Properties opened in Malta and since the recession set in, most hotels started slashing rates in order to generate advance and last minute businessAs operating costs are rising, the onus must remain on targeting special markets that can yield the highest profits. Although perceived as a business hotel, unemployed travellers remain the key market. The Tour Operator and Leisure S egments approximately pull in to 64% of the hotels market share.Section 7 Conclusion7.1 Industry sustenance CycleAs each industry evolves it goes through a sequence of phases. Factors used to ascertain at which stage the Industry is currently in, is by assessing both the number of firms operating and their potential for profitability. Desk research conducted for this assignment indicates that despite global economic recessions, the Maltese Tourist Industry has shown growth. Furthermore, projections for the coming years also indicate growth. All in all, it appears that Tourism remains a promising Industry for the near future.7.2 Strategic Direction for the HotelThe way forward for the company is to maintain its high level of customer retention rate which currently averages in the region of 20%. This relatively high percentage of customer loyalty is attributed to the General Mangers high level of customer druthers in conjunction with the very high level of personalised services. T he recent award should feature more prominently on the hotels website, thus using this as an extra tool to market the hotel.From a financial perspective, costs must be closely monitored and opportunities to generate income should be exploited. The hotel management should consortium their resources together to create a culture that encourages innovation. Investment in alternative sources of energy should be studied and the possibility of acquiring EU support explored. Investment should also be made to upgrade the property quest in order to gain a return on investments through increased room rates.Future growth should stem from the hotels Unique interchange Point, which is the ability to offer a memorable experience. The Sales Team needs to take a more aggressive approach to tap into undeveloped markets and offer innovative packages based on value. Finally, with the continued commitment to litigate the companys mission, the team must drive the Corinthia Brand Identity by offerin g authentic Maltese Hospitality. By focusing on the main precedency which is Customer Satisfaction, the hotel will not only remain profitable but will also remain a strong competitor.For many, tourism is a source of employment and income. The tourism industry is responsible for 5.2% of the EUs employment and accounts for 5% of Europes Wealth. It is therefore a strategic sector of our economy, facing new challenges that ought to be kept in check and opportunities that need to be taken. With 380 million transnational arrivals annually and market share of more than 40% of global tourism Europe commands the position as the number one tourist destinationEuropean Commission Vice-president Antonio Tajani-Journal of the Institute of Tourism Studies Dec 2010 pg 30.Referenceshttp//www.worldtravelawards.com/award-maltas-leading-hotel-2010IL-Haddiem Corinthia Palace Hotel 11 June 1968 pg 5http//www.wttc.org/bin/pdf/original_pdf_file/malta.pdfhttp//www.maltatoday.com.mt/ discussion/national/to urist-arrivals-expected-to-reach-1-3-million-by-end-2010http//www.nso.gov.mt/statdoc/document_file.aspx?id=2873http//www.nso.gov.mt/statdoc/document_file.aspx?id=2928http//finance.gov.mt/image.aspx?site=MFINref=2011_BudgetSpeech2011_Englishhttps//opm.gov.mt/vizjoni-2015 unaffectionate programme of advance training for tourism leadershttp//hbr.org/1979/03/how-competitive-forces-shape-strategy/ar/1Daily Telegragh Malta Centre of Excellence in the Mediterranean 16 June 2000NSO news release 242/2010 Collective accommodation establishments Oct 2010 Dec 22, 2010