Detailed PESTEL Analysis of Hotel Industry
In EdrawMax’s PESTLE Analysis of the Hotel Industry, we analyze PESTEL factors to understand the hospitality & hotel industry performance in the external environment.
1. Lead-in
The Hotel Industry is undergoing no more the same. Thanks to the ever-changing customer requirements and technological advances. They are growing at a rapid rate while experiencing some occasional bumps. PESTEL analysis of the Hotel Industry can give an insight into how different macro factors impact the hotel business. It will show the opportunities that hotels have for expanding their business. The hoteliers can plan projects after understanding the potential and business environment.
2. About Hotel Industry
2.1 Introduction of Hotel Industry
The hotel industry is a part of the hospitality sector that deals with travelers and provides them with long-term or temporary accommodation. Various things like pricing, location, service, and amenities attract the guests. The hotel owners need to understand the demand and do the pricing accordingly to bring more customers. The hotel industry has the potential to grow, depending on the growth of the global economy.
The hotel business can be classified into some more sectors based on the service provided by them. There are food service, lodging, and customer assistance, which contribute to the popularity of a hotel. However, the growth of the hotel industry is also dependent on the choice, age group, and nature of the guests. The basic information about the Hotel industry can help to have a thorough PESTEL analysis of the Hotel Industry.
2.2 Overview of Hotel Industry
| Industry Name | Hotel Industry |
| Number of Employees | 173 million |
| Annual Revenue | $206 billion (2019) |
| Area Served | Worldwide |
| Operating Income | Operating Income |
3. Hotel Industry Pestel Analysis
PESTEL analysis is a highly used management tool that helps to identify the effect of multiple macro factors on their growth. PESTEL analysis allows you to consider the influence of six factors; political, economic, social, technological, environmental, and legal. A detailed PESTEL analysis of the Hotel Industry can show how these factors support the expansion of the hotel industry or hinder its growth.
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Political Factors:
The hospitality and tourism industry is vastly affected by the decisions of the local government. The political stability of a country is helpful for the growth of the hotel industry, while any turmoil can harm its growth. Here are some ways the political factors can affect the hotel industry -
- In case of political unrest or any other emergency, the government can impose a travel ban. This decision can directly harm the hotel industry because they depend heavily on tourists visiting from varied areas and looking for temporary accommodations.
- Elections or similar changes in government can be proven either favorable or harmful for the hotel industry. A political party may make some decisions favoring the hospitality sector as the hotel industry is supportive of the nation's economy. At the same time, another political party may remove them, considering their opinion about the hotel industry.
- Taxation in the hotel business plays a crucial role, and it impacts the overall profit of the hotel. The government can make some tax reforms which can be helpful for the hotel industry of the country. The hotels can save money from taxes and invest in security systems or infrastructure development.
Economic Factors:
The hospitality sector is experiencing some growth because many investors are investing in its profitability. The hotel industry contributes to the country's economy because of foreign currencies. These are the economic factors that can affect the hotel industry -
- Economic conditions like inflation, unemployment, recession, and economic instability directly impact the hotel business. When the economy is on the rise, people prefer luxury hotels bringing more profit to them. If there is less money in people's pockets, they try to limit their expenses on travels. As a result, their preference changes to budget hotels.
- The foreign currency and conversion rates contribute to the hostel industry if the economy is stable. More people will be interested in visiting other countries when the economy is stable and on the rise. It will increase the foreign currency reserve of a country, strengthening its economy.
- The hotel industry is a massive contributor to the global economy. There are more than 700 thousand hotels, which account for the employment of about 173 million people. Besides keeping the circulation of money intact, the hotel industry hugely impacts the global economy.
Socio-cultural factors:
People's preferences and spending habits shape the society and the culture they belong to, thus, making it a crucial external factor for the hotel industry. The age group of the travelers also plays a significant role in these selections and choices. Several socio-cultural factors impact the hotel industry.
- Travelers are from different classes and age groups. Millennials prefer to compare the price of the hotels and the amenities before checking into a hotel. Many travelers choose hotels based on the available facilities like bars and swimming pools, heating, valet, etcetera. The location with its scenic view from the hotels is also why many travelers choose them.
- Hotels often take the initiative to allow the guests to encounter the local culture and food. Traveling is not only a mode to enjoy the gorgeous location but experience their cultural beauty as well. Therefore, hotels make packages with events to let the guest get a glimpse of the local culture.
- The present-day hotel industry is highly competitive, and many new players are coming now and then. A massive section of the guests books a hotel after reading reviews. Or because of family, friends, or peers' recommendations. Thus, making the hotel industry depends on people's opinion and their general impressions.
Technological factors:
Technological advances have brought a new era to the hospitality sector, and the hotel industry is enjoying its benefits. The hotels are aided by technology, from providing a smooth service to offering the best amenities.
- A large number of hotels use their website for booking and secure payment. The AI-based customer support system and secured application offer the customers a smooth and satisfactory experience. The guests can book a hotel anywhere and anytime in a few clicks. It is helpful for the hotels because foreign travelers can book them directly.
- Technology has made guests stay comfortable and safe. Hotels use technologies like lifts, heaters, and intercoms to offer the best service to their guests. Systems like CCTV and security alarms keep them safe and secured. The guests tend to choose hotels with better facilities and security.
- Social media has given hotels a hotel to reach more customers through advertisements. It can impact the hotel's reputation either positively or negatively. The travel websites allow the tourists to write their reviews which keeps the hotels competitive.
Environmental factors:
Environmental factors can influence the hotel industry directly. Hoteliers have adopted sustainable practices to keep their service environment-friendly in recent years.
- The hotels can take measures to decrease food, water, and energy wastage. They may switch to renewable energy sources for power to reduce pollution. They can also increase the use of recyclable products to stop plastic pollution.
- The chemical cleaning agents have negative impacts on the environment. Many hotels have already stopped using any chemicals that are harmful to nature. It is better to use eco-friendly cleaning agents for a greener earth.
- The environmental conditions of an area directly influence the growth of a hotel. If the air and water are polluted, and the hotel does not follow the cleanliness standards and environmental policies, the guests may feel uncomfortable checking in.
Legal factors:
The legal environment of a country is a decisive factor behind the expansion of the hotel industry. There are laws and taxation rules that have a direct impact on the business of a hotel.
- The hotel's location is a significant factor influencing customers' choices. The guests tend to choose places with low crime rates for safety. The localities with high crime rates are not suitable for hotels as guests will avoid them.
- The hotels must follow innkeeper laws to ensure the guests and their belongings. If any such issue arises, these laws decide whom to hold responsible and how much compensation they should pay.
- Many countries monitor hotels to prevent data leaking and breaching. They have laws regarding the guest's data security, which the hotels must comply with to sustain in the market. For example, the EU has General Data Protection Regulation which the hotels need to follow. It keeps the personal data of the guests safe from being leaked.
4. How to Do a PESTEL Analysis in EdrawMax
Step - 1: Preparation
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If you are using the offline version of EdrawMax, open the tool in your system. If you wish to access remote files, head to https://www.edrawmax.com/online/ and log in using your registered email address. If this is your first time using the tool, you can register with your personal or professional email address. Go to 'Marketing' diagrams under Business diagram type and click on 'PEST Analysis.'
Step - 2: Template Selection
EdrawMax has thousands of free templates. Head to the Template section on the left and type 'PESTEL Analysis' to see all the pre-built PESTEL Analysis templates like Netflix PESTEL Analysis, Amazon PESTEL Analysis, IKEA PESTEL Analysis, and more. Check the template that resonates closely with your business model. Click on 'Use Immediately' to import the template's contents to the EdrawMax canvas. You can start customizing the PESTEL analysis diagram as per your requirements. If you want to draw the PESTEL analysis diagram from scratch, you can click '+.' It will open up the user-friendly canvas of EdrawMax that has several features that ease your efforts in making PESTEL analysis diagrams.
Step - 3: Add Textual Information
PESTEL Analysis diagram requires you to add Political, Economic, Sociological, Technological, Legal, and Environmental content so that the reader will understand what influences an organization. Use the PEST symbols from the left side and add the content to your PESTEL analysis diagram.
Step - 4: Customize
EdrawMax gives you ample options to customize your PESTEL Analysis diagram. From changing the background to adding content, you can customize the diagram in any way you desire. In addition to this, you can go ahead and change the background color, modify the text, add hyperlinks, add multiple pages, add images, and even add vector-enabled texts to your PESTEL analysis diagram.
Step - 5: Export & Share
Once satisfied with your PESTEL Analysis diagram, you can export it into multiple formats, including Microsoft, JPEG, PNG, Visio, HTML, and more. EdrawMax lets you share your PESTEL Analysis diagram on social media platforms, like Facebook, Twitter, Line, etc.
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5. Key Takeaways
PESTEL analysis of the Hotel Industry can show how multiple external factors can affect the hotel business, thus, hinting at their future growth. The hoteliers can consider these macro factors while they make strategies and goals for their business. Though recently, a pandemic has slowed down the growth of the overall hospitality sector and the hotels, they have the potential to grow while creating more jobs in the future. The global economy is also gaining stability which can favor the hotel industry. Though the demand for luxurious hotel rooms and budget hotels will vary, the industry will gain from it. The travel bans in some countries may negatively impact the hotel industry. The business owner needs to strategize their expansion while considering the PESTEL analysis of the Hotel Industry.
EdrawMax is considered the best PESTEL Analysis diagram maker in 2022 for various reasons. As you saw in this article, if we create a diagram to represent the Hotel industry's PESTEL analysis, the readers will be able to retain the information for a long time. With the built-in templates, symbols, and export options, a student or a professional can study the PESTEL Analysis diagram of different companies and industries. With EdrawMax, you will understand more about the hotel industry, how it operates, how it functions, and what influences it just by working on PESTEL analysis. So, what are you waiting for today? Download this PESTEL analysis software today and see the magic!
Reference
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Condor Ferries. 2022. 65+ Hotel Industry Statistics & Trends (2020-2021). , [online] Available at: https://www.condorferries.co.uk/hotel-industry-statistics (Accessed 22 August 2022).
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Team, M., 2022. Hilton PESTLE Analysis | MBA Skool., [online] Hilton PESTLE Analysis | MBA Skool. https://www.mbaskool.com/pestle-analysis/companies/18162-hilton.html (Accessed 22 August 2022).
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