Key Trends and Drivers in Macro Environment that are Having an Impact on Luxury Hotels in Hong Kong

Introduction 

In a business environment, there are various external forces which tend to positively or negatively influence business growth. A firm is usually situated within an environment which has an impact on its stakeholders and customers. The macro-environment consists of some important forces, such as political, economic, socio-cultural, technological and ecological forces. It is definitely important to closely scrutinise macro-environmental forces due to its long-term impact on the hospitality industry. For instance, the growth of political tensions can be considered to have a significant impact on the hospitality sector in the global context. The other most vital external force is the rapid pace of terrorist activities.  Political terrorism has become an important area of concern for all travellers. Economic fluctuations can have an adverse impact on the growth potential of firms. For instance, in case of Hong Kong market, the economic growth rate had slowed down to approximately 2.3% during the third quarter of the financial year 2015 (HKMA, 2016). In the nearby future, it has been anticipated that the market will witness a further slowdown in its overall economic growth rate. On the other hand, the hotels in Hong Kong are also suffering because of a sudden shift within the travelling sector. Within the continuum of tourism to retail services, Mainland travellers have been found to shift to other geographical locations, such as Japan and European countries.  The chosen topic on analysing the key drivers and trends within the macro-environment and its probable impact on the hospitality sector of Hong Kong are necessary in order to understand the future growth potential. It is evident that this study shall enable firms operating in the Hong Kong’s hospitality industry to adopt effective business strategies. Political unrest in Hong Kong forms a major alarming issue for the hospitality industry. Arguably varying ecological conditions have also restricted growth of tourism activities in this location. The report shall provide an overview of the extent to which external forces can have an impact on business operations. In this study, the main aim will be to outline key external drivers and trends, along with suggesting solutions for hotels in the Hong Kong market. 

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Main Body 

Political

Hong Kong can manage their political systems quite well. Moreover, the government of Hong Kong exercises the executive power. When the hotels in Hong Kong implement strategies, then the political scenario plays an important part and even impacts the rules and regulations of business to a large extent. On the contrary, in the recent years, it has been observed that there has been some sort of political disturbance which is taking place in Hong Kong. It is also the reason that the profit margins have also decreased for the luxurious hotels operating there. On the other hand, it has been also observed that the government of Hong Kong is playing a vital role in the marketing ethics, and also have a huge involvement in the trading agreements. The political situation has a direct effect on the economic setting of a country. The change in government policy recently has also affected the hotels in Hong Kong.  Not only in the hospitality industry but a change in the government policies also affects other industries in a country to a large extent. The government of Hong Kong has also lowered their duties on beer and wine, it can be viewed as the strong initiative taken towards improving the public health. The policies which are recently implemented by the government should strongly meet the needs of the ordinary citizens and also foreign visitors. The tourists who come from all over the world always prefer to stay in the economic and budget hotels (Chan, 2013).  Moreover, the Hong Kong government should also try to attract tourists who belong from other countries. It has been reported by the Economic Times that Hong Kong has been behind with regards to their neighbouring countries in terms of the hotel industry. 

Economic

There are many economic factors that are largely affecting the hotel business of Hong Kong. These factors include employment and GDP, changes in taxes, exchange rates, economic growth, interest rates, etc. It is always best to know that the key economic changes will have an impact on the behaviour of the hotel industry in the long-run. On the other hand, Hong Kong is also regarded as one of the best financial centres in the whole world. It has been witnessed that the GDP of Hong Kong from the past few years has grown at an alarming rate from the last few years. The economy of Hong Kong is regarded as free and it is highly dependent on the finance and trade. Everyone across the globe is always talking about the hospitality industry in Hong Kong as one of the key drivers for their economic growth since the last few years. It has been observed that the hospitality industry in this year has contributed approximately profit of 7% in the economy. Moreover, it has been also critically viewed that hospitality industry delivers a lot of benefits to the economy. The economic impacts are also viewed as important factors in the management and marketing decisions with regards to the hotels in Hong Kong. The hospitality industry provides ample of opportunities for the regional development in Hong Kong (Song et al., 2011).  On the contrary, if the right amount of motivation is given to the hotel industries in Hong Kong then they can always try to develop training and employment opportunities for the individual’s who want to work for the hospitality industry in future. Furthermore, economic conditions can be never controlled by the hospitality industry. When the economies are not so good then the hotels in Hong Kong can suffer a lot because there will be a drop in spending.

Socio-cultural

Hong Kong is always considered to be one of the socially rich countries worldwide. On the other hand, the social factors also impact the demand for the services offered by the hotel industry. There are a large number of services that are provided by the luxurious hotels in Hong Kong. For example, the Ritz-Carlton hotel in Hong Kong is one of the best 5-star hotels. They provide hotel rooms and suites, according to the various cultures, taste, and preferences of their consumers. They have designed their services in a manner that tourist from all across the globe can enjoy their stay. Moreover, the tourists always appreciate the hospitality in Hong Kong. It is quite evident that why most of the people from other countries are always drawn to the hotels in Hong Kong. Other luxurious hotels in Hong Kong, such as Intercontinental hotel, etc., are considered to be one of the finest hotels across the globe. It is wonderfully located beside the Kowloon’s business, shopping malls, and other famous entertainment zones for attracting target customers. They cater needs of the young, adult and child segment separately. The social factors for Hong Kong’s luxurious hotels look quite good because a large number of people who are planning to travel internationally increased by 15% during the time-span 2012 to 2015. Moreover, there are also a lot of travellers from across the globe willing to spend more money on the luxurious hotels. On the other hand, the cultural changes which are also taking place could have a huge impact on the hotels in Hong Kong (Chan, 2013).  It includes an increased number of Asian and Chinese travellers. The population of the Europe and U.S. is also growing older which indicates that there will be an increase in demand for the luxury hotels in Hong Kong.

Technology

‘Technology’ is also an important driver which can influence hospitality operations in the Hong Kong market. It can be stated that technological advancements have been a blessing in disguise for travellers. However, luxury hotels in Hong Kong have not been able to benefit immensely from such technology-based advancements. There are two dimensions of integrating technology within hospitality operations. Firstly, technical integration can facilitate the adoption of innovative technologies by customers as well as hotel staff. On the other hand, technical integration might also lead to delayed service delivery, simply because the existing staffs in these hotels have not been provided required computer-based training.  In the current scenario, innovative technologies would be essential, since more individuals are now dependent on digital services. Seamless connectivity and use of mobile devices to check-in have certainly become a top-most priority. Connectivity is definitely an important parameter where information is communicated through virtual networks. In the current scenario, Hong Kong’s hospitality industry does not promote any form of computer-based training for organisational staff. It can be stated that failure to adopt blended-learning mechanism shall further restrict luxury hotels operating in Hong Kong to acquire desirable market share. The key driver will negatively influence hospitality business in terms of the increased level of customer dissatisfaction and degraded service quality (HKMA, 2016).  Arguably, a certain group of luxury hotels in Hong Kong have shifted towards using digital technologies. Peninsula hotels operating in Hong Kong is one of the luxury hotels which utilises advanced in-room technology. For instance, in these luxury hotels, guests are able to check-in by using a smartphone or even switch on the AC using an app downloaded on some in-room iPad. It can be argued that degrading economic conditions form a barrier in the path of investing the lump-sum amount in in-room technology, but such technology-based infrastructure is accompanied with desirable ROI. 

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Environment

Ecological conditions can also have an adverse impact on business operations. The environmental impact is not only confined to the policies or regulations framed by the government. There are a couple of environmental hazards which can have an adverse impact on business operations. Hong Kong is basically a location which has been subjected to a lot of environmental hazards. Hospitality businesses are able to communicate the intangible aspect of their service through designing quality infrastructures. However, unstable environmental conditions can have a direct impact on the service delivery by a luxury group of hotels. It is important to study this factor since the chosen market has been encountering varying environmental problems. For instance, the Hong Kong market is undergoing the problem of air pollution. The government is planning to set forth strict policies in order to effectively regulate air pollution standards. It can be claimed that studying this key driver would help in recommending luxury hotels on how to deal with environmental damages. The Pearl River Delta (PRD) is Hong Kong’s hinterland, where population growth, economic development and industrialisation have supposedly led to environmental deterioration. In this context, water and air quality have been witnessed to primarily deteriorate. The stated external force is important because there are some luxury hotels operating in the Hong Kong market which has been subjected to similar environmental threats. For example, Typhoon Hato a recent environmental disaster in this region had resulted in closing down of many such hotels. Galaxy Hotel, Mandarin Oriental Macau, etc. are some renowned brands which were not able to successfully deal with the threat of rising floodwaters within this location (Carvalho et al., 2017). Arguably, the highlighted environmental disaster certainly does not have any such remedy. From a broader perspective, such environmental hazards can be efficiently handled through maintaining some buffer cash. 

Conclusions and Recommendations 

From the above study, it can be derived that external forces play a vital role in business growth and development. There are different dimensions of macro-environment and each of these dimensions can positively or negatively impact profit margins. The entire analysis has been conducted in regards to the hospitality industry of Hong Kong. It has been already witnessed in the entire study that there are a large number of forces which can influence business growth both negatively as well as positively. The macroeconomic environment contains some of the major forces that affect the business to a large extent. The above-mentioned forces are namely economic, political, technological, social and cultural forces. It has been already said that Hong Kong is culturally quite rich and there are a lot of foreign tourists who visit the country every year. There are some of the major political factors from which the business of the luxurious hotels can be affected to a large extent. It includes international relations, terrorism, political turmoil’s, etc.  One of the biggest threats that can be pointed out is the military conflict or the terrorist attack that can act as a barrier for the people who are willing to travel internationally. However, it has been also observed that hotels are targeted by the terrorists mostly, specifically the luxury ones in the recent times. Such attacks are also an indication that people will be scared so they won’t be arriving at the luxury hotels in Hong Kong. It can be recommended that the hotels must try to increase their security measures so that no such incidents might take place in the future.  Secondly, the economic conditions also play a vital role in boosting up a country. If the exchange rates are high in Hong Kong then it will also discourage the foreign travellers from travelling there. It has been also witnessed that if there is even a slight fluctuation in the economy then it will force the people spent more or less in the hospitality industry. Throwing light on the above-mentioned statement, it can be said that the government must try to implement some new policies that will maintain economic stability in Hong Kong. Thirdly, Hong Kong’s luxurious hotels should also take some interesting initiatives so that people from different cultures are tempted to stay there for a reasonable time. Fourthly, it can be argued that there are some of the luxury hotels in Hong Kong who are using the digital technologies so that the consumers can have an exclusive experience. Arguably, the hotels should also try some of the recent technological innovations for attracting the customers. Lastly, luxury hotels in Hong Kong should also take some measures for making their environment pollution free. The hotels can take the carbon measurement initiative.