Strategic planning by the local hotel industry during the off-season

Abstract

The most important factors to consider in the tourism sector are the impact of fixed capacity and its responsiveness to demand, and the fact that services offered by hotels are perishable: a hotel room which is unsold on one day cannot be 'stored' until a later date. Therefore management is unable to take advantage of access demand in peak periods by using previously stored inventoried surpluses as is possible in a manufacturing situation. These factors, together with the seasonal pattern of demand in the hotel industry, call for a distinct strategic plan for the off-season. Hotels in which interviews were conducted make use of three main strategies to minimise the impacts of seasonality: 1. Reducing supply by lowering the hotel's capacity. 2. Redistributing supply through a new market approach. 3. Increasing demand through enhanced advertising and price differentials. These strategies are dealt with in the first part of this dissertation. Seasonality in the hotel industry does not only cause profit fluctuations but also has a negative impact on the liquidity of hotels. The extent to which hotel profitability and liquidity are affected by seasonality is considered at a later stage in the dissertation.