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Chapter 5

The Decision to Go Global 

International Hotels: Development and Management

Second Edition

(428TXT or 428CIN)

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Competencies for

The Decision to Go Global 1. Explain the phrase, ³think globally, act locally,´ as applied to

international hotel operations, and discuss the ³glocalization" of international brands.

2. Outline the business challenges, organizational responses, and

training program responses associated with transnational, global,and multinational organizations.

3. Identify three growth strategies for expansion-minded chains, listadvantages of and motives for international expansion, and identifytarget regions for international expansion.

4. Identify potential drawbacks of expansion, and outline importantconsiderations in making the expansion decision.

5. Summarize the distribution patterns of international hotel chains,and identify factors that explain the differing patterns.

(continued)

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Competencies for

The Decision to Go Global 

6. Explain why it is advantageous for foreign hotel chains to have properties in the United States, and describe the marketing approach

these chains often use.7. Define the terms corporate hotel chains, voluntary associations, and

conglomerates.

8. Describe affiliation options available to hotel companies, andexplain affiliation considerations, including the costs of choosing

the wrong affiliation.

9. Outline problems and concerns associated with multinationaloperations, and propose planning and control measures for suchoperations.

(continued)

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Three Growth Strategies

� Expand existing markets at home

� Create new products to appeal to

new markets

� Develop new markets abroad

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R easons for International Expansion

� Strategic growth, profits

� Increase domestic business

� Build customer loyalty� Increase real estate equity

� Diversification

�Improve company status, prestige

� Hedge against recession

� Investment incentives

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Potential Drawbacks of 

International Expansion� Profitability not immediate

� Potential for political instability, nationalism, lack 

of suppliers

� Cultural differences

� Problems with resource availability

� Potential for compromised quality and consistency

standards� Potential for runaway costs

� Political and legal hurdles

� Transaction and translation risk in foreign exchange

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Important Considerations in

Making the Decision to Expand

� Timing

� Domestic strength, strategies

� Managerial resources

� Suitable locations

� Cultural, linguistic, and political barriers

� Control issues

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Costs of Choosing the

Wrong Affiliation

� Lost revenue

�Operating losses

� Cost of terminating the agreement

� Cost of acquiring a new affiliation agreement

� Cost of purchasing new "identity items"(signs, logos, etc.)

� Start-up operating losses under new company

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Problems/Concerns Associated with

Multinational Hotel Operations� Geographic distance

� Time zone differences

� Communication system reliability� Transportation issues

� Financial issues

� Owner oversight

� Local vs. expatriate employee issues� R egulatory, legal, political, and cultural environment

� Differences in religion, mores, and work ethic

� Centralization vs. decentralization

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Planning and Control Measures for

Multinational Hotel Operations

� Identify risks

� Multidimensional performance evaluations for managers

� Flexible business goals for local properties

� Flexible planning system at corporate level

� Budgets based on a property's particular requirements

� Budgets designed to accommodate multiple andcontinually changing objectives

� Planning and control system should include both

quantitative (financial) and qualitative variables