The Hotel Industry in all major cities is not threatened by substitute products except that in times of
recession domestic travel might replace international oroverseas travel and certain destinations replace
more expensive ones on cost grounds. In theory, substitute products perform same function, reduce costs,
and/or provide higher quality performance with better service due to technological advancement (Porter,
1980). In the “lower” strategic groups for tourist traffic, hostels, motels and staying with relatives might
replace cheaper hotels. This market is either low-income or cost-conscious, but in any event, it is quite
price-sensitive.
A hotel operator in anywhere can compete on a low cost basis in a niche segment. It can also
compete on the basis of a modern, comfortable but not luxurious hotel situated in a popular and
convenient location appearing to offer good value to the cost-conscious visitors. Whether this strategy is
sustainable in the long term is uncertain, given that in an area with good communications and costconscious travelers may be prepared to suffer slightinconvenience for cost savings. The importance of
location to the target market may be over-rated. The hotel operator may not be able to rely solely on
location to retain its market share in a situation of oversupply and consequently intense rivalry.
There is no major threat of substitute products specific to a hotel’s product and service. A hotel will
be subject to powerful buyers only if its marketing strategy concentrates onattracting tour groups,
provided no oversupply for the hotel’s target market develops. A hotel may not appear to be particularly
vulnerable to intense rivalry because of the fragmented nature of the competition inits strategic group and
the potential growth rate of its target market. In the “upper” strategic groups, for example, those
particularly catering for business traveler, or the upper middle aged and old aged bracket, there is little
opportunity for substitute products. Substitute products are not a major present or likely threat to Hotel
Industry as a whole.
The Hotel Industry in all major cities is not threatened by substitute products except that in times of recession domestic travel might replace international oroverseas travel and certain destinations replace more expensive ones on cost grounds. In theory, substitute products perform same function, reduce costs, and/or provide higher quality performance with better service due to technological advancement (Porter, 1980). In the “lower” strategic groups for tourist traffic, hostels, motels and staying with relatives might replace cheaper hotels. This market is either low-income or cost-conscious, but in any event, it is quite price-sensitive. A hotel operator in anywhere can compete on a low cost basis in a niche segment. It can also compete on the basis of a modern, comfortable but not luxurious hotel situated in a popular and convenient location appearing to offer good value to the cost-conscious visitors. Whether this strategy is sustainable in the long term is uncertain, given that in an area with good communications and costconscious travelers may be prepared to suffer slightinconvenience for cost savings. The importance of location to the target market may be over-rated. The hotel operator may not be able to rely solely on location to retain its market share in a situation of oversupply and consequently intense rivalry. There is no major threat of substitute products specific to a hotel’s product and service. A hotel will be subject to powerful buyers only if its marketing strategy concentrates onattracting tour groups, provided no oversupply for the hotel’s target market develops. A hotel may not appear to be particularly vulnerable to intense rivalry because of the fragmented nature of the competition inits strategic group and the potential growth rate of its target market. In the “upper” strategic groups, for example, those particularly catering for business traveler, or the upper middle aged and old aged bracket, there is little opportunity for substitute products. Substitute products are not a major present or likely threat to Hotel Industry as a whole.
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