Decline Of Hotel Industry

The Decline of Hotel Industry in Pakistan

The hotel industry with its charming and lively environment is apparently flourishing but the reality
negates the fact and depicts the other side of the story .Pakistan hotels association and the govt. keeps
trading accusation.

Identification of problem:
The industry in Pakistan is not very large to begin with. While the hotel industry appears to be
flourishing and healthy in Pakistan, that is not really the case.The hotel business of Pakistan is
declining because of growing terrorism , tourism,changes in technology,Lack of Tourism and most
important government instability etc.

Exploratory Research:

Exploratory research is conducted to clarify various problems. What

customers want from hotel management, and how hotel managements can
improve the hotel industry?

Literature Survey

The problem was surveyed using various web sites of hotels and associated organizations and by
conducting surveys from different hotels. Following facts could be gleaned:

“Sheraton hotel and Aviary towers regarded as the only five star hotel in Karachi indicated that
its revenue from food and beverage was over 632000 covers last year. The ban on feasts on
marriages is creating difficulties for hotels. International fast food restaurants named as “ KFC “,
“McDonalds” and “Pizza Hut” are hotel’s main competitors in the past. These are also creating
problems for hotel industry. The hotel industry is also killed by tour operators who offer inflated
prices ,Growing terrorism,Government Instability and most important Lack of Tourism.These
operators are seriously damaging the hotel industry.
People from all over the world usually come to meet their relatives; they do not contribute much
to either the tourism industry or the hotel industry, because of increasing fear of Sucide
Bombing. While the players in the industry complain that the Government policies are not
encouraging. Holiday Inn,Marriot, Sheraton hotel and Towers, the only five star hotels in
Pakistan had planned for an investment for over three Million Dollars only.”
The service industry is the worlds largest growing industry faster then the manufacturing and
agriculture. The Govt. is not serious about developing this as an industry.
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The Problem Statement:

“TO WHAT EXTENT TERRORISM, LACK OF

TOURISM, CHAIN AFFILIATION,GOVERNMENT
INSTABILITY(LAW&ORDER) AND POOR TECNOLOGY
CAN AFFECT THE DECLINE IN HOTEL INDUSTRY OF
PAKISTAN?”

Research Design
• We have used primary source of data i.e. questionnaires and interviews for our respondents

Types of Variables.:
• We have two types of variables Dependent Variable (Hotel Declining),and Independent
Variables(Chain affiliation, law and order, Lack of Tourism, Poor technology and terrorism) in our
report.

• We have identified these variables through observation and through Literature Review
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Recommendations for hotel management & Government:

After collection of data and analysis thereof we make our recommendations as under:

• The hotels should be technologically updated.

• The security of the hotels should improved
• There must be proper marketing and sales promotion of hotel industry.
• The Government should reduce rate of taxes for the betterment of customers as well
as for the hotel management. This way, hotels may be able to attract more customers and generate
additional revenues for themselves and for the government.
• There should be effective marketing strategy for the promotion of tourism and hotel
industry inside the country as well as outside country.
.

REPORT: The Decline of

Hotel Industry in Pakistan
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Introduction:

“The Hotel industry is among the top three constituents of the world economy after oil and
autos and is growing faster than the petroleum and arms. It is larger than automobile
industry in Japan, agriculture in the U.S.A. and banking in Switzerland.
It is unfortunate to know that instead of growing with world trend, the tourism
industry in Pakistan has rather taken a back seat in the revenue generated services. It is the
only industry that earns the FOREIGN EXCHANGE without exporting any thing.
The hotel industry with its charming and lively environment is apparently flourishing but
the reality negates the fact and depicts the other side of the story .Pakistan hotels
association and the govt. keeps trading accusations.
Most of the hotels and motels here, particularly in the far flung areas, hill stations
and the tourists spots and even in the three major cities; Islamabad, Lahore and Karachi, are
dependent upon tourism, international business trips.
The industry in Pakistan is not very large to begin with. The major players are, of
course, the Pearl Continental, Sheraton, Marriott and Holiday Inn chains and then
there is a Serina hotel chain which is basically at the more prominent tourist spots. Actually
the greatest growth in the hotel industry was seen in the late 80s and then some in early 90s
but it was clear by this time that the industry had already entered in a recession and the
trend has visibly been reversed. .
As far as the five and four-star hotels are concerned, there has been no growth as
regard to fresh investment. Apart from the fact that the Holiday Inn was taken by the
Marriott and the hotel Taj mahal by Holiday inn crowne plaza, though sources indicates
the later has since broken its chain with the Holiday Inn on account of various reasons.
There has been no investment activity worth mentioning.
Secondly recent attacks on the Marriot hotel(Islamabad)and on TajMahal(Mumbai)
seriously damage this industry.Recent research have revealed that two hotels popular with
foreigners “Islamabad Marriot Hotel in Pakistan and Taj Mahal in Mumbai were recently
attacked by terrorists.
Thirdly Pakistani Hotels Are very much affected by the changes in technology.And the
most important is the Government Instability had affected this business in such a way that
each Government has its own rules and regulations regarding to the hotel industry.
The number of hotels in the country has increased from 845 in 1991 to 1150 in
1996, showing a growth of more than 26% with the fastest growth in the number of hotels
seen in 1993 which tapered off to 2.4% in 1995 before picking up again in 1996. However,
in August 2008, hotel occupancy rates fell, an alarming sign given to Pakistani Hotels. By
the beginning of fourth quarter 2008, the Pakistan THL sector(Tourism, Hospitality and
leisure)was starting to see measurable fallout from the economic crisis in the form of
negative indicators in the hotel industry, a slowdown in the gaming sector and increased
“trading down” from casual dining restaurants to quick-serve restaurants. The economic
crisis isn’t confined to the Pakistan, either. It is a global issue whose future impact might
possibly spread to the Hotel industry in the form of decreased tourist activity from overseas.
This indicates that the industry is far from healthy state and needs
improvement.
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Literature Review:

Our Research topic as mutually decided by our six group

members is

“DECLINE OF HOTEL INDUSTRY IN PAKISTAN”

To further explore and clarify the research on this topic, we conducted a literature review.
The literature review included six peer reviewed research articles, as well as other journals and
popular literature sources. In order to develop an understanding of the topic, underlined variables
were explored by reviewing the relevant studies. Brief individual reviews of our topic related
literature is as follows:-
 Manav Thandani (2008) in his article “Terror Strikes: The Indian Hotel
Industry’s 9/11” has discussed the impact of Bombing on Taj Hotels Mumbai on
the overall hospitality industry of India. This industry has always been at the
forefront of bearing the brunt acts of terror around the globe, here specifically
naming the bombing of Marriott Hotel in Islamabad and the Bali bombings. The
global economic crisis of the past few years has been difficult enough for hotel
sector and the bombing at Taj has compounded the situation further. Here
Mr.Manav Thandani, who works for HVS, hospitality service firms, came out
with his exploration by interviewing and personally interacting with their
colleagues at Taj and Oberoi.

 Paul Ingram & Joel A.C.Baum (1997) in their study named “Chain Affiliation
and The Failure of Manhattan Hotels1898-1980” examine the set back of
Manhattan Hotels due to chain affiliation. They explored that standardization of
strategies, rules & regulations in chain affiliation of hotels caused some hotels to
decline, who demanded unconventional and operations. In addition increasing
number of hotels in the chain increased the probability of failures. The local
market experience of anti-strategic policies also compounded its set back. Other
factors identified for this decline were competitive dynamics and inter-hotel
linkages. Respected authors collected their data for this study mostly from
secondary sources of hotel directories and travel indexes.
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 Wind, Green, Shifflet & Scarbrough (1989) presented their research study in
“Courtyard by Marriott: Designing a hotel facility with Consumer Based
Marketing Model”. In this they have examined Marriott Hotel that was very
popular among non-business consumers but the segment of business travelers was
not satisfied with current hotel offerings. Reasons as identified by authors for this
were that some hotels cost too much and offer features not valued by the travelers
while others that cost less offer too few of the desirable features. Both types of
hotels also tend to lack the personalization of features that travelers seek.
Cannibalization of other hotel offerings was also a problem causing diminishing
popularity of Marriott Hotels. Respected authors have used data collected through
primary sources (interviews & surveys on consumers) as well as secondary
sources of company data and indexes.

 Ann Goodman (2000) in his study “Implementing Sustainability in Service

Operations at Scandic Hotels” explored that the factors that caused the just
collapse of Scandic Hotels were the recession in Scotland and Gulf War that had
put a damper on travel industry worldwide. The organization has no crisis
awareness and its rapid growth created inefficiency in its operations. Messed
management was also the result of its swelling staff. Further the unfocused
strategy also did worsen the situation of Scandic hotels. Another important
variable identified in this study was increasing awareness of people regarding
sustainability practices. Ann Goodman used data only from primary sources i.e.
interviews with all level of managers and employees. Sustainability strategy
improved the financial performance of Scandic Hotels in this case.

 In “2009 Industry Outlook: Tourism hospitality and Leisure” discusses that

U.S hospitality industry suffered a great set back due to Economic Crisis in 2008.
It resulted in decreased tourist activities that subsequently caused falling hotel
occupancy rates. Big Projects that were started in boom days were left unfinished
especially in 2008 & 2009. USA hotel industry and hospitality sector suffered the
most from this. But in 2008 Olympics proved to be a big revival for hotel industry
in China and USA. Data in this journal was collected from secondary sources of
National Tourism Indexes, Hotels’ red books, classified directories and other
national surveys on economy & growth.
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 Paul Ingram & Joel A.C.Baum (1998) in their research study “Survival-
enhancing learning in The Manhattan Hotel Industry 1898-1980” examine
how experience at the level of organization, experience gained by population,
related and unrelated organizations affect the failure of Manhattan Hotel industry.
They found out that organizations enjoy reduced failure with increased survival-
enhancing learning from population experience before their founding; but not
after. Related organizations provide experience that lowers failure, but it matters
whether their experience is local or non-local, and if it was acquired before or
after the relationship was established. Respected authors have used data collected
from secondary sources of hotel red books, yellow pages and annual directory of
The Hotel association Of New York with Hotel & travel indexes.

 Robert Kiener in his article “Crisis in Pakistan” examines the critical situation of
Pakistan concerning law & order, terrorism and government instability. And how
these factors participate in deteriating the economy of Pakistan particularly its
hospitality industry

 Smith Barney in his article “Global hotel industries” explores the aftermath of
9/11 that further recessed hotel’s economy. It was the enormous lay offs and
lessened development of hotels’ human resource.

 Wilder, Gates and Wolfe in their work “Hotel Investment Activity in Canada
Witnesses Significant Decline” discusses that the global credit crunch and the
recession that followed have hit the Canadian hotel real estate sector, which
experienced a 77% decline in investment activity

 Paul Slattery in his article “Hospitality industry” defines the true services of any
hospitality industry. He argues that nowadays hotels are foregoing these services
in the best interest of their hotels as a source of business to them.
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Sources:

1) Manav Thandani (2008).”TERROR STRIKES: THE INDIAN

HOTEL INDUSTRY’S 9/11”.HBS,2

2) Paul Ingram & Joel A.C.Baum(1997).” CHAIN AFFILIATION AND

THE FAILURE OF MANHATTAN HOTELS “.Johnson
Graduate School Of Management, Cornell University Administrative Science
quarterly, 42(1), 68-102

3) Wind, Paul E.Green, Douglas Shifflet & Marsha Scarborough.(1989).

” COURTYARD BY MARRIOTT: DESIGNING A HOTEL
FACILITY WITH CONSUMER BASED MARKETING MODEL”.
INFORMS, 19(1), 25-47.

4) Ann Goodman(2000).”IMPLEMENTING SUSTAINABILITY IN

SERVICE OPERATIONS SCANDIC HOTELS”, INFORMS,
30(3), 202-214

5) Anonymous(2009).”2009 INDUSTRY OUTLOOK: TOURISM

HOSPITALITY AND LEISURE”,DELOITTE .

6). Paul Ingram & Joel A.C.Baum(1998).” SURVIVAL-ENHANCING

LEARNING IN THE MANHATTAN HOTEL INDUSTRY
1898-1980”, INFORMS. 44(7), 996-1016

The Problem Statement:

“TO WHAT EXTENT TERRORISM,LACK OF
TOURISM,CHAIN AFFILIATION,GOVERNMENT
INSTABILITY(LAW&ORDER) AND POOR TECNOLOGY CAN
AFFECT THE DECLINE IN HOTEL INDUSTRY OF PAKISTAN?”

Objectives of the study

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The study we have undertaken is the Exploratory study, as we are

exploring the topic. Exploratory studies have been undertaken to better
comprehend the nature of the problem. These studies have helped us to
better develop a theoretical framework

Theoretical Frame Work

A theoretical framework is a conceptual home work which discusses the
interrelationship among the variables that are assumed to be integral to the
dynamics of the situation being investigated. In our theoretical framework
we have following variables.

Technological

Changes

Lack of tourists

Government Hotel
Instability Industry

Terrorism

Chain
Affiliation

Independent Variable DependentVariable

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Unit of Analysis

The unit of analysis is Individual,since we are measuring responses of

individual for our research.

DATA & METHODOLOGY:

Sample Size

We have a sample size of 100. The sample was taken from Multan. It
includes;
• Customers
• Hotel Management
• General Public

Sources of Variable:
In our research we have used primary source of
data i.e. Interviews,Surveys in which we used Questionnaires and
secondary source i.e. Literature Review..

Types of variable:

We have used two types of variables dependent and

independent.

Medium of communication:

Our medium of communication was personal interviews by which we get the

questionnaire filled. This method facilitates us to give them brief description
about our research and more over what the questionnaire contains and how
it has to be filled. Certain respondent needed further help in filling the
questionnaire.
The main disadvantage of this method is only time. It takes more time as
compare to telephonic survey.

Data collection Method:

The data was collected through questionnaires .Work force and field force is
comprised of six students. We met the respondents personally and get the
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questionnaire filled.They really like the questions included in the

questionnaire and appreciate our effort.
The only problem was the time constraint. The data was then given in form
of worksheet by using SPSS software. Question numbers were taken
vertically and the questionnaire choice numbers were taken horizontally on
the table.

METHODOLOGY:

In this report we have use Descriptive and Empirical statistics.

DESCRIPTIVE STATISTICS:
In descriptive statistics we have use frequency distribution in which we have
calculated mean, median, variance, standard deviation. Graphically we have present data
in the form of pie charts. Some of them are given below:

Frequencies:

Statistics
technology terrorism
declining affiliation & order lack of tourist chang affect
N Valid 100 100 100 100 100 100
Missing 0 0 0 0 0 0
Mean 2.92 2.27 2.30 1.77 1.27 1.76
Std. Error of Mean .113 .066 .096 .072 .045 .099
Median 3.00 2.00 2.00 2.00 1.00 2.00
Mode 2 2 2 2 1 1
Std. Deviation 1.125 .664 .959 .723 .446 .986
Variance 1.266 .442 .919 .522 .199 .972
Minimum 1 1 1 1 1 1
Maximum 5 3 5 4 2 5

Frequency Tables:

business of hotel is declining

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Cumulative
Frequency Percent Valid Percent Percent
Valid strongly agree 8 8.0 8.0 8.0
agree 35 35.0 35.0 43.0
dont know 22 22.0 22.0 65.0
disagree 27 27.0 27.0 92.0
strongly disagree 8 8.0 8.0 100.0
Total 100 100.0 100.0

law and order

Cumulative
Frequency Percent Valid Percent Percent
Valid S agree 19 19.0 19.0 19.0
agree 47 47.0 47.0 66.0
dont know 20 20.0 20.0 86.0
disagree 13 13.0 13.0 99.0
S disagree 1 1.0 1.0 100.0
Total 100 100.0 100.0

Chain Affiliation
Cumulative
Frequency Percent Valid Percent Percent
Valid very much 12 12.0 12.0 12.0
some what 49 49.0 49.0 61.0
dont know 39 39.0 39.0 100.0
Total 100 100.0 100.0

lack of tourism
f
Cumulative
Frequency Percent Valid Percent Percent
Valid S AGREE 36 36.0 36.0 36.0
agree 55 55.0 55.0 91.0
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dont know 5 5.0 5.0 96.0

Disagree
4 4.0 4.0 100.0
Strongly
0 0.0 0.0 100.0
Disagree
Total 100 100.0 100.0

technology changes

Cumulative
Frequency Percent Valid Percent Percent
Valid yes 73 73.0 73.0 73.0
no 27 27.0 27.0 100.0
Total 100 100.0 100.0

terrorism affect
Cumulative
Frequency Percent Valid Percent Percent
Valid strongly agree 48 48.0 48.0 48.0
agree 40 40.0 40.0 88.0
dont know 3 3.0 3.0 91.0
disagree 6 6.0 6.0 97.0
strongly disagree 3 3.0 3.0 100.0
Total 100 100.0 100.0

Pie Charts
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declining

strongly agree
agree
dont know
disagree
strongly disagree
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declining

strongly agree
agree
dont know
disagree
strongly disagree

Law and Order

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& order

S agree
agree
dont know
disagree
S disagree

Chain Affiliation
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affiliation

very much
some what
dont know

Lack of tourist
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lack of tourist

S AGREE
agree
dont know
disagree

Technological Changes
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technology chang

yes
no

Terrorism Affect
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terrorism affect

strongly agree
agree
dont know
disagree
strongly disagree

Empirical Statistics :
In empirical statistics we have done hypothesis testing.The result of
hypothesis testing will be discussed later.

Estimation and Results:

In this we will going to formulate certain hypothesis and then test them.The
variables which we have identify in Theoritical framework will be tested and their
relationship will also be identified.We will going to test the relationship between
the variables one by one.Following are the hypothesis:
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1)Relationship between Hotel Declining and Law and Order of a country.

Recommendation & Limitations

In the light of these findings we are able to recommend some suggestions to hotel managements

and Government authorities.

Recommendations for Hotel Managements

1. The quality of food must be improved in hotels.

2. Prices of food must be reason able according to their food standard and services.

3. The hotels should follow new technological trends..

4. There must be proper marketing and sales promotion for hotel industry.

5. Hotel should be constructed at beautiful locations.

6. There should be proper security system to secure the hotel from any terror

attack.

7. They must raise their voice and negotiate with government for chalking out sound

policies for the improvement in hotel and tourism industry.

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8. Parking facilities must have ample space.

9. Room services should be according to needs of customers.

10. Attendants must be adequately trained, educated, well behaved and efficient.

Recommendations for Government Authority

1. The Government should reduce / rationalize the number of taxes and their rate for

the betterment of customers / guests, as well as, for the hotel management. If the government

lower the taxes the hotels will be able to provide better facilities at lower rates having no strain

on their margins. This way they may be able to improve their occupancy rates and consequently

sales. The government may have little or positive bearing on tax revenue due to increase in sales

and hence tax amount. On adoption of such a strategy Government may be able to assist in

development of Hotel industry.

2. There should be effective marketing strategy for the promotion of tourism and

hotel industry inside the country, as well as, outside country for which tourism department must

be mobilized.

3. Airport facility must be brought up to acceptable level and in addition to

availability of regular flights from remote locations.

4. There is total lack of basic utilities in remote areas such as Hunza valley, Kaghan

valley. The same should be provided at lower rates .

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5. Government should provide long term and short term loans on reasonable mark

up for the growth of industry .

6. Government should review the policy of ban on serving meals in marriages.

Limitations:

• Limitation of Questionnaire

• Limitation Of Personal Interview

Limitation of Questionnaire

• Non serious respondents

• Time constraints on the part of respondents to fill the questionnaire.

• Incomplete filling of questionnaire

• Dual answer of a single question

Limitation of Personal Interview

It was very difficult to get time for interview because being the executive of hotels they have

their own business and responsibilities .