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Virgin holidays is a tour operator company which is one of the Virgin group companies and offer holidays with destinations all over the world in all continents. It’s a private company which was founded in 1985 which has grown since then to be one of the largest tour operators company in United Kingdom. It has been able to penetrate the market quit easily because their services are in high demand because they have a world wide network and flight scheduling is done by their company. The company has 1000 employees who provide services to 300, 000 customers in a year. The company customer base is spread to different holiday destinations which includes but not limited to Caribbean, Middle East, Africa, USA, Australia, Canada, South Pacific and Indian Ocean. The industry has high level of elasticity and its pricing would affect those who shall go for their services while the global financial crises which has reduced the demand of the service will result the company to reduce on it’s pricing as special offers to entice them. The tour operator company is well positioned in the market and its growth is attributed to the parent company virgin group and its airline company. The company had worn confidence of its customers for it being a one stop travel agency which has an airline to different destinations all over the world.
Countries which do not use euro are favored in the business because they get better value of money in exchange. Problems faced by the industryThere are three economic problems facing the tourism industry. The industry is characterized by old employees who work for long hours and they are poorly remunerated, the industry is greatly challenged by the global financial recession, and lack of government support (Biblio, 2009). The old poorly paid employees in the industry is an image which needs to be eradicated by hiring young British born people who are more enlightened to spearhead the industry to be more profitable, for the industry to be economically sustainable (Taylor, 2001). The schools need to instill positive work culture for those who are being trained to work in this industry not to associate it with the aging staffs that are poorly paid (Johns, 2001). The trained labours in the hotel sector mostly join aviation and retail sectors which has better remunerations this makes the sector to retain their aged staff which gives it a negative signal to the young generations who would aspire to work in the hotels. There is also a boom in the service industry which is enticing most of the employees in the hotel to depart to the service industry (Slattery, 2002).
The industry services are termed by most as a luxury and with the global financial recession which occurred towards the end last year and this year the industry has been experiencing financial difficulties. Which could possibly proceed to next year depending on how the financial crises will be solved world over (Davies, 2009). Those who had made holiday bookings are canceling them by the day and there are few who are making early booking as it has been before. People are not able to save enough for holiday and those who have money are not willing to spend because the financial situation is unpredictable. It’s estimated that 40% of those who were willing to travel on holiday won’t have enough finances this year to go for a holiday. This shall affect the industry negatively. The government has decided to abolish the hotel building allowance which reduces in capital allowances, such drastic measures without consulting an industry which have employed more than 2 million people and is worth £100 in a year is not economic viable (Bha, 2009). This shall have negative economic effects in the industry. The industry has 100 hotels which are being built each year since 2001 with an annual turn over of £3bn. Phasing out the hotel building allowance which had been a tax relief of 4% to the hoteliers for a period of 25 years after they built a hotel encouraged investors to build more and renovate the existing ones but it’s removal at this time is punitive to the hoteliers (Gledhil l, 2007).
It is estimated that it will cost the industry further £80 Million annually each hotel is expected to part with approximately £30, 000 which the small hotels admits it’s too much and new investors are discouraged to venture in to hotel investments (Brentnall, 2009). It’s predicated by the government that Olympics which will be held at 2012 will boost the earning with £2. 1bn. There is an imbalance of holiday makers in UK which amount to £19bn, because most of them opt to travel abroad for holidays which has resulted to a reduction 10% on revenues according to British trends and statistics. The industry is in shortage of hotel rooms which has caused the cost of the few available to be very expensive. Cost of building hotels is very expensive its labour intensive and it takes time to construct so it’s a long term venture to add more rooms in the industry (Clark, 2002). In accordance to details obtained from British Hospitality Association the tourism industry costs is estimated to be £500 Million which will negatively affect future growth of the industry and employment opportunities something which the government should take care of. Business strategy to overcome problems in hospitality industry
The industry is faced by numerous problems which need to be solved for it to be economically viable. The industry is in need of skilled employees in different levels. The industry has to improve its human resource face so as to encourage most young people to pursue the career (Ritchie, 2004). There is also need to improve on human resource development. Services offered in the industry are highly personalized so they can not be automated. The industry should also improve on its payment packages so that they can retain skilled professionals (Scarrott, 2000). Most people are resulting to train on white colour Jobs which pays well, these result to the deficit, the training institutions needs to be encouraged to train more professionals on blue colour jobs who suits the industry. This could only be improved by reviewing their wages to be more competitive like other sectors which are employing people with the same qualifications as theirs (Nukrihub, 2009).
The industry should invest more on training their workforce to maintain high quality services which will make the industry more competitive in the world market especially in the hotel industry (Veal, 2002. Staff retention is very important for economic viability of the industry, exit of skilled staff cost it a lot of finance on recruitment and training. They also experience loss of labour hours due to high staff turn over and slowness by the newly recruited staff as they learn. The lost labour hours have negative financial implications in the industry (Clark, 2003).
The government will need to entice investors to build more hotels to have sufficient rooms in the industry. Despite of the annual increase of 100 hotels the rooms are not still enough to sustain the raising demand of rooms (Mort, 2001). Requirements up to date are1. 5 Million rooms and the plan which is put in place is to add 53, 000 more by 2011 which still won’t be enough so there is need for the government to entice investors to build more by subsiding on taxes or waving taxes (Stuart, 2008). The abolition of Hotel Buildings Allowance policy exposes the hotel investors to pay more in taxes which are estimated to an average of £30, 000 per hotel. This has really affected the hotels negatively and there is need to review this policy for it to be more encouraging hoteliers to build more rooms and renovate the existing ones (Brunt, 2000). The British Hospitality Association’s should stress to the government the importance of the tax relief which shall encourage the industry to grow. The government shall even earn more tax in terms of sales of services from the increased customer’s base in the industry than they would earn form taxing developers, this would form conducive, business environments which the investors shall be encouraged to build more hotels and the government will have an increase in tax collection (Mudambi & Baum, 2005). The government should protect the industry by ensuring that there is economic growth and minimize loss of jobs.
The industry is facing an intense competition from other countries like china and Middle East who are turning up to be more innovative with betters systems and improved products and services (Amadi, 2008). Customer’s expectations are growing by the day which needs the industry to be more innovative and tailor their services and products to meet the expectations of the customers. The industry needs to invest more in technology most people are appreciating use of technology to source for information needed booking online and payments being done online (Armstrong, 2004). The systems adopted should be secure and updated regularly for them to be efficient.
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