Global Expansion In The Hotel Industry: Us Hotels In Emerging Markets

The growth and change of the global hotel industry shows how companies in industrialized countries enter and succeed in emerging markets. We examine hotels in the United States because the U.S. chains dominate the industry and have a great influence in the global arena. U.S. hotel chains have followed a classic three-step process in developing a worldwide strategy; 1) develop the core strategy, the basis of competitive advantage, in the home country first. 2) internationalize the core strategy through expansion of activities and adaptation. 3) globalize the international strategy by integrating the strategy across countries. The paper begins with an overview of the industryís historic development of core strategy. We see how organization and structure develop and change over time in response to the business environment. In general, the expansion into international markets is an extension of the strategy and tactics developed for the domestic markets. However, in an important instance, experience gained from entering emerging markets in the 1940s influenced industry tactics in domestic and international markets. This emerging market experience allowed the industry to globalize an international strategy across countries. After the overview, the paper focuses on the important success factors. An examination of the hotel industryís organization and structure, human resources, and strategic behavior shows that the hotel firmís success is a function of the location, the market segment/brand, the management, and the ownership structure. The fixed location is important for two reasons ó the market demand and the government economic policy at the site. The market segment/brands are next in importance. They determine the hotel clients and source of business. Management is important because hotels are one of the most labor-intensive service businesses. Finally, the ownership structure determines the capital structure of the investment, which determines the investment returns and risks. The paper ends with a case study illustrating hotel development in an emerging market market.