Cost Structure
The cost structure of H&T firms influences their managerial and resource allocation decisions. For example, luxury H&T organizations are capital, labor, and energy intensive. Typically, they have high property costs and also employ large numbers of full-time employees. It can be difficult for them to reduce such cost items even if the demand is low. In addition, they may need to renovate their facilities every five to ten years to stay competitive in their field. Another issue is that given the vast amount of investment made in these organizations, investors and owners often look very carefully at their return on investment. Therefore, these companies need to maintain a steady flow of customers to maintain the profitability of their businesses. This often leads to creative marketing and product development strategies as well as pricing strategies.