International Hotel Management

Lecture 2
Environmental Analysis
• When we begin to look at the operating environment, we rapidly become aware that we are dealing with a complex
context.
• In order to deal with this complexity, traditional PESTEL analysis - Political, Economic, Social and Technological can
be used.
• The following table shows the benefits and dangers of environmental analysis.
Benefits Dangers
Increased awareness of environmental changes Limited by availability of information
Increased understanding of the context in which hospitality
Static picture in a changing world
organizations operate
Increased understanding of multinational contexts Closed to new sources of data
Increased sensitivity to changes in the environment May be disconnected from the rest of decision-making
Prioritizes factors Uses the past to inform the future but it is always reliable
Pest Analysis
Political Factors
• Tax policy,
• labor law,
• environmental law,
• trade restrictions,
• tariffs, and political stability.
• Political factors may also include merit goods and demerit goods
 Other political criteria include:
o ecological/environmental legislation,
o trading policies, grants and initiatives,
o home market pressure-groups and international pressure- groups,
o wars and conflicts.
 Example: McDonald as Americanism Icon
• The company is suffering from political threats from wars between countries .
• McDonald's has no control over these political factors which are making the company suffer greatly.
Economic Factors
• Economic growth,
• interest rates,
• exchange rates,
• inflation rate,
• home economy,
• wage rates and minimums,
• economy trends, overseas economies,
• general taxation,
• seasonality issues, customer drivers, international trade and monetary issues.
• Hospitality specific data include average occupancies, achieved room rates, visitor arrivals and visitor spend.
• The fast food sector also should take care of such factors.
• Chicken outlets have benefited from the downturn in the popularity of burgers.
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• This sector is also trying to appeal to the more health conscious consumer by offering grilled as well as fried items
options, in addition to salads.
Social Factors
 They include the cultural aspects, such as
• health consciousness,
• population growth rate, age distribution,
• career attitudes,
• emphasis on safety,
• lifestyle trends,
• demographics,
• consumer attitudes and opinions,
• media views,
• Social factors affect the demand for a company's products and how that company operates.
• For example, an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor).
• Furthermore, companies may change various management strategies to adapt to these social trends (such as
recruiting older workers).
Technological Factors
• They include technological aspects such as
• technology incentives and the rate of technological change, research funding,
• replacement technology/solutions,
• maturity of technology, manufacturing maturity and capacity, information and communications,
• Consumer buying mechanisms/technology,
• technology legislation, technology access, licensing,
• intellectual property issues, and global communications issues.
• They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions.
Furthermore, technological shifts can affect costs, quality, and lead to innovation.
• Clearly, hoteliers have an interest in promoting the Internet channel, as it is far cheaper, especially where there is
the facility for direct booking on the hotel's own website.
• For example: A WTO report on e-commerce estimated that the cost of direct reservations by traditional means could
be as much as 300% more than processing the same reservation through the global distribution systems (GDS).