Hospitality And Restaurant Research

Hospitality And Restaurant Research

Hospitality And Restaurant Research

Economic Systems

DIFFERENT ECONOMIC SYSTEMS
  • Economic activities comprise the production of goods, performance of services, and interaction among participants in the consumption of goods and services. A key aspect of the economic system is that it must have all the laws, rules, regular procedures, and customs constraining and sanctioning economic decisions.

 

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Capitalist Market Economy

  • Capitalist market economies are commonly found in the democratic countries.
  • The basic characteristics of a capitalist market economy are:

(1) dependence on markets and prices to allocate resources and distribute income;

(2) private ownership of the means of production;

(3) the predominance of economic gain as the guiding force in decisions about investment, production, and sales;

(4) less government intervention in business operations.

 

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Capitalist Market Economy (Cont’d)
    • Consumers are regarded as the “kings” or “queens” in the capitalist market economy. Their needs and wants are thoroughly studied by hospitality market researchers, and are met with a wide range of products and services.

 

  • A capitalist market economy allows private ownership of resources and assets.

 

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Capitalist Market Economy (Cont’d)

    • Capitalism is dynamic because competition among capitalists forces them to spend money in research and development (R&D) and to apply new inventions as soon as they are available.

 

  • For instance, hotel and restaurant corporations in the United States spend millions of dollars to study travel behaviors and diet preferences of customers.

 

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Socialist Economy
    • A socialist economy is one wherein all the means of production are owned and run by the government or cooperative groups.

 

  • Consumers have little choice of products and services and they have to take what the hotels and restaurants have to offer.

 

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Mixed Economy

    • Many countries integrate various aspects of both capitalist and socialist economic systems to develop systems that suit their own economic development. Such systems are described as mixed economies.

 

  • Many former communist countries are in a transition from the socialist system to the capitalist system.

 

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LEVEL OF ECONOMIC DEVELOPMENT
  • A nation’s level of economic development affects all aspects of hospitality development and operations: the type of property, the level of service, the marketing strategies, and so on.

 

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LEVEL OF ECONOMIC DEVELOPMENT (Cont’d)

  • The widely used indicator of economic development levels of different countries is per capita gross national product (GNP).

 

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LEVEL OF ECONOMIC DEVELOPMENT (Cont’d)

    • GNP is the market value of all the final goods and services produced by a national economy over a period of time, usually a year.

 

  • Per capita GNP is thus used to compare countries with respect to the well-being of their citizens and to analyze market and investment potential for the hospitality industry.

 

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Personal Consumption
    • To the hospitality industry, the manner in which consumers allocate their discretionary income is very important for making global expansion decisions.

 

  • Discretionary income is the amount of income left after paying taxes and making essential purchases.

 

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Labor Costs

    • Labor resources are the physical and mental talents that people can make available for production.

 

    • In making international expansion decisions, hospitality companies have to take unit labor costs into consideration.

 

  • This can be measured in the hospitality industry as the number of guests served, the number of rooms cleaned, the number of hours worked, or the dollar amount of sales per employee.

 

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Labor Costs (Cont’d)
  • Labor costs are relatively low in countries with slower-rising unit labor costs. International hotels in some major cities of the developing countries charge room rates comparable to those in the major cities of the developed countries, but operations in the developing countries can be more profitable, since the hotel operators can pay lower wages.

 

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Inflation

    • Inflation occurs when the average price level of goods and services rises. It is a very important aspect of the economic environment, within which an international hotel operates.

 

  • Inflation can cause two major losses for hospitality operations: real-income costs and social costs.

 

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Inflation (Cont’d)

    • Because of inflation, the real income of a hospitality company will be reduced by increased transaction costs and the unnecessary shifting of resources into repricing goods and services.

 

  • For instance, restaurant menus have to be reprinted regularly during an inflationary period. The constant reprinting cost chips away the real income of the restaurant operations.

 

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Inflation (Cont’d)
    • Inflation can also have a social cost for the hospitality company and its guests: bad feeling can develop between the guests, who want low prices maintained, and the hotel, which has to raise prices to reflect rising operation costs. This may reduce the trust the guest and hotel have in each other.

 

  • It is important to know how to operate in some highly inflationary Asian and Latin American countries.

 

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ASSESSING ECONOMIC RISK

  • It is thus important to assess the economic risk of a country before making global expansion decisions. A country’s economic risk can be assessed by:

(1) the quantitative method

 

(2) the qualitative method

 

(3) the checklist method

 

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ECONOMIC DIMENSION OF TOURISM AND HOSPITALITY
    • Tourism and hospitality development is accepted by most countries in the world as a major economic activity, regardless of the differences in economic systems.

 

  • It is described as an invisible export, “clean,” or “smokeless” industry.

 

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Land, Labor, and Capital

  • The development of hotels and restaurants requires the three basic factors of production: land, labor, and capital.

 

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Land, Labor, and Capital (Cont’d)

    • Land availability and the cost of developing new properties vary from country to country.

 

    • Labor is a major issue for international hospitality operations, since the industry is characterized as labor intensive. The availability of skilled service workers is crucial to successful hotel operations.

 

  • International hospitality companies from the developed countries often bring capital investment to the developing countries.

 

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The Economic Impact and the Multiplier Effect

  • Hospitality development has a considerable economic impact on a particular destination. It can create more employment opportunities for the local population, generate more income for the local people and more tax revenues for the government, and improve destination infrastructure.
Hospitality And Restaurant

Hospitality And Restaurant

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