Porter’s Five Forces Analysis of Hotel Industry

Hotels and restaurant industry deals with a wide range of businesses in the hospitality and service sector. They provide food, drink, lodging, accommodations, and various other services to their guests and customers. Today, we’ll discuss Porter’s five forces analysis of hotel industry; bargaining power of suppliers and buyers; threat of new entrants and substitutes; and competitive rivalry as competitive forces in strategic management.

Hotels and restaurants’ main products and services are as follows;

• Food and Drink
• Lodging and accommodation
• Quality service
• Bars and clubs
• Theme parks and recreation
• Event planning and management
• Entertainment
• Casino
• Cruise and ships
• Transportation

Porter’s five forces analysis of hotel industry would analyze the bargaining power of suppliers and buyers; the threat of new entrants and substitutes; and competitive rivalry. Here’s hotels and restaurants business Porter’s five forces analysis of hospitality industry as follows;

Porter’s Five Forces Analysis of Hotel Industry 

Let’s discuss Porter’s five forces analysis of hotel industry or hospitality industry five forces analysis as competitive forces in strategic management; they’re as follows;

Bargaining Power of Suppliers in Hotel Industry

The bargaining of suppliers is Lower in the hotel and restaurant business as competitive forces in strategic management. Some of the main factors impacting the bargaining power of suppliers in the hospitality industry Porter’s five forces analysis of hotels and restaurants business are as follows;

I-Availability of Supplies

The raw materials and supplies of cooking are readily available to hotels and restaurants in various regions and countries across the world. Hotels prefer to deal with various suppliers at a time to avoid delays and risk factors. However, hotels also prefer to work with top hotel and restaurant brands because it helps them to establish long term with them.

II-Access to Expert Staff

Experienced and expert staff plays a key role in delivering quality service to the customers. Thanks to the increasing global population and unemployed job market, experienced and expert staff is available locally and globally. In case of inexperienced staff, Hotels, and restaurants conduct training programs to improve their skills and expertise.

Bargaining Power of Buyers in Hotel Industry

The bargaining of Buyers is Higher in the hotel and restaurant business as competitive forces in strategic management. Some of the main factors impacting the bargaining power of suppliers in the hotel and restaurant business Porter’s five forces analysis of hospitality industry are as follows;

I-Various Hotels & Restaurants

When it comes to having a meal or choosing a place for lodging, customers have plenty of options and choices of hotels and restaurants. They could find various hotels in every category like premium, affordable, or local depending on their budget, mood, and requirements.

II-Lower Switching Cost

Customers could easily switch from one hotel and restaurant brand to another without incurring a lot of cost. It helps them to increase their bargaining power; that’s why they offer various loyalty programs, discounts, and free services to attract the attention of customers and buyers.

Threat of New Entrants in Hotel Industry

The threat of new entrants is moderate and lower in the hotel and restaurant business as competitive forces in strategic management. Some of the main factors impacting the threat of new entrants in the hospitality industry five forces analysis of hotels and restaurants business are as follows;

I-Heavy Capital Investment

When it comes to building a hotel or restaurant, then it requires a significant amount of capital investment. It could be in the form of land cost, construction expense, rental or leasing cost, running or maintenance cost, salaries of employees, and various other running expenses. When you add up all these costs and expenses, then it becomes very difficult for new investors to sustain in the hotel industry.

II-Branding Cost

Along with building and running costs, global chain hotel brands invest a significant amount of capital resources in marketing and branding. It allows them to establish a global network of loyal customers; they would always prefer their favorite brand hotel when visiting any foreign country.

Threat of Substitutes in Hotel Industry

The threat of substitute products and brands is Higher in the hospitality industry and hotel and restaurant business as competitive forces in strategic management. Some of the main factors impacting the threat of new entrants in the hotels and restaurants business five forces analysis of hospitality industry are as follows;

I-Snacks & Readymade Food Items

There are various substitute food products available to the customers in the edible menu like snacks, confectionary items, fruits, vegetables, food trucks, and other readymade food items. It allows customers to satisfy their appetite and hunger level immediately at any time depending on their budget.                                                                                         

II-Online Rental Lodging Service

Along with top chain hotel brands, hotels and restaurant businesses have another competition of online rental lodging service providing platforms. They could be anyone; many people are renting out their residential rooms to customers in different countries across the world to earn an additional source of earning.

Competitive Rivalry in Hotel Industry

The competitive rivalry among hotel and restaurant businesses is very high in the hospitality industry as competitive forces in strategic management. Some of the main factors impacting competitive rivalry in the hotels and restaurant business five forces analysis of hospitality industry are as follows;

I-Tough Competition

The hotel and restaurants industry has become highly competitive due to easy marketing and brand options. Nowadays, hotels and restaurants have to fight off the competition both at the local and global level to increase their earning and market share.

Conclusion: Hotel Industry Five Forces Analysis | Five Forces Analysis of Hospitality Industry 

After an in-depth study of Porter’s five forces of hotel industry; we have realized that hospitality industry holds significant growth potential. If you are learning about the hotels and restaurants business’s Five forces analysis of hospitality industry; then you should keep in mind the abovementioned bargaining power of suppliers and buyers; threat of new entrants and substitutes; competitive rivalry as competitive forces in the strategic management.