Market Structure of Hotel

Environment
Market structure of hotel industry
The market structure of hotel industry is
'Monopolistic competition'-
• Market structures in which there are many firms selling
differentiated products, there are few barriers to entry.
• Monopolistic competition is a form of competition that
characterizes a number of industries that are familiar to
consumers in their day-to-day lives. Examples include
restaurants, hair salons, clothing, and consumer electronics.
Market structure of hotel industry
A monopolistically competitive firm acts like a
monopolist which means that the firm is able to
influence the market price of its product by
altering the kind of the product being offered.
Characteristics of Hotel industry
The hotel industry being a monopolistic competitive market
has the following characteristics:

• Many sellers

• Differentiated products

• Multiple dimensions of competition

• Easy entry of new firms in the long run.

Characteristics of Hotel industry
• The characteristics are almost exactly same as in
perfect competition, with the exception of
heterogeneous products and that monopolistic
competition involves a great deal of non-price
competition (based on subtle product differentiation).
• This gives the hotel a certain amount of influence over
the market, it can raise prices without losing all the
customers, owing to brand loyalty.
Unique characteristics of Hotel Industry
• The hotel industry has also some unique
characteristics different from the manufacturing
sector that plays a role in pricing decisions.

• Unlike manufacturing facilities that can expand

production/supply when demand increases, hotels
have a set number of rooms (in the short term), and
hence supply is capped (at least in the short run).
Unique characteristics of Hotel Industry
• The second unique characteristic, lodging supply is
perishable.

• Hotel stays cannot be inventoried for future use once

an opportunity to rent a room has passed.
• Conversely tangible goods have a shelf life that is
considerably longer, and can be sold at a later date. 
Unique characteristics of Hotel Industry
The third unique feature is that hotels have a
substantial start-up capital requirement. 
Unique characteristics of Hotel Industry
 Lastly, hotel operations encompass more complex
production methods which are characterized as labour
intensive, with intangible products, inseparable
production and consumption functions, multiple
locations, and variable levels of service quality and
these service systems are less efficient than
conventional industrial production methods, and hence
has an impact on overall financial performance.
Unique concerns of Hotel Industry
• The concern of perishability of lodging supply creates a sense of
urgency regarding the execution of various marketing or yield
management functions which reflects on pricing decisions.
• Hotels typically seek to maximize revenues, profits and cash flow by
finding optimal relationship between occupancy and room rates.
• Hence if the lodging establishment remains anchored with a fixed
price it will forgo the opportunity cost of renting the rooms and will
have to subsidize the empty rooms with the revenue collected from
the rooms rented, thus reducing total profit.
Partners in the hospitality industry
Developing relationships with your business peers can
be invaluable in positioning your brand.
Your partners help define your reputation and position
It is a simple, quick, and low-cost way of aligning your
brand with other similar ones out there
Choose a non-competitive business, that has the same
values as you; that has a similar (but not identical)
target market to you, and start working together.
Partners in the hospitality industry
• Partnership Marketing is even more important than it was,
because marketing itself is becoming more and more
difficult.
•  “If a customer has a good experience they’ll tell one person,
if they have a bad experience they’ll tell ten”? 
• In todays time, you wish it were just ten!  Thanks to social
media, one simple post can reach hundreds or thousands or
people
Partners in the hospitality industry
•  Partnerships are excellent for developing your brand and building
relationships with your consumers, which are the main marketing
areas that hotels tend to neglect when there are budget
constraints. 
• For a hotel, best brand partners could be your travel operators that
your guests use to get to you, suppliers, people you supply, or
other local businesses.  
• When two parties leverage their assets, resources, expertise, client
base etc. for the mutual benefit of both, partnering results in
synergies.
Thank you