Forces Driving Change in the Hospitality Industry in India

Michael D. Olsen

Prakash Chathoth

Amit Sharma

Competing in todays global market place is daunting. The global flow of capital is forcing countries to open their doors to free trade if they expect to maintain economic growth within their borders. This imposes many new challenges for executives who now must rely upon their ability to understand what changes will result from this and how they will impact their organizations if they hope to compete successfully in this environment. This translates into the need to think strategically by developing foresight into those forces that will drive this change. This is not a competency that has been achieved by many management professionals who have competed in the free markets of the world and it is even less so in those nations where protectionism was the underpinning of government and business policy. However, in order to succeed in todays global environment, it is now an essential capability.

he purpose of this article is to introduce to the reader the forces that have been identified as driving change in the global hospitality industry through research conducted by the International Hotel and Restaurant Association (IHRA). It is also the goal to share with readers how 49 professionals from the Indian hospitality industry reacted to these forces in the context of the industry in April of 1999 when they attended two workshops Visioning the Future, sponsored by the IHRA and the Federation of Hotel and Restaurant Associations of India. One was held in Delhi and the second one in Mumbai. The task facing participants in each workshop was to further clarify and enhance their understanding of the forces driving change that had been identified by industry professionals in over 20 such workshops across the world since 1995. Once the forces had been analyzed, the next goal was to estimate the timing of the evolution of each force in the context of the hospitality industry in India and then to try to assess the impact these forces will have on individual firms. This activity is most often referred to as scanning the business environment.

Journal of Services Research, Volume1, Number 1 (April-September, 2001) 2001 by Institue for International Management and Technology. All Rights Reserved.

4 Forces Driving Change in the Hospitality Industry in India This process of formally scanning the business environment in order to identify threats and opportunities should lead to investments in competitive methods that will assist firms in competing effectively in the market place and sustain that competitiveness over time. In order to compete, managers must develop the ability to continually scan the environment. This paper attempts to provide an insight into the forces driving change in the hospitality industry and how monitoring systems could be set up in order to develop pre-emptive competitive methods and enable them to achieve competitive advantage. LITERATURE REVIEW The concept of the business environment and its impact on the firm has been well documented in the management and hospitality literature. Research work done in the area of the environment in the management field can be traced back to the sixties with significant contributions from Thompson (1967), Lawrence and Lorch (1967), and Emery & Trist (1965) in developing the concept of the environment. For instance, the concept of environmental uncertainty was explored by Emery & Trist (1965), who proposed a typology of the environment consisting of four types, i.e. placidrandom, placid-clustered, disturbed-reactive, and turbulent. Thompson (1967) classified the environment as either homogeneous or heterogeneous or more simply stable or shifting. Lawrence and Lorch (1967) noted that there is a lack of clarity of information about the environment and there is general uncertainty regarding the causal relationships that exist between the environment and the organization. Also the time span of the feedback in managing the environment is often lengthy. As researchers began to explore the concept of the environment, the factors/dimensions that make up the environment construct began to unfold. For instance, Child (1972) introduced the concepts of environmental variability and complexity, while Duncan (1972) described the environment as being complex and dynamic. He further suggested that managements reaction to these dimensions is based upon the level of information regarding the environmental factors associated with the given decision, lack of knowledge about the outcomes of a decision, and the inability to assign probabilities to various decisions to predict their success or failure. The development of the environmental concept in the management
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5 Olsen, Chathoth, Sharma field had a significant effect on hospitality research. For instance, West and Olsen (1988) studied the effects of environmental scanning on the firm and proposed that environmental scanning is highly correlated with firm performance in the food service industry and suggested further exploration of the concept. Olsen (1980) stated that, every organization exists in an environment that imposes constraints upon the organization and creates uncertainty for it (p.35). Therefore, managers of the industry must possess knowledge of the environmental forces that influence change, the need for which is aptly described by March & Simon (1958), who stated that, if one does not understand the situation with which he is confronted, he can expect to have problems in handling it (p. 140). Olsen (1980) pointed out the reasons why managers should engage in environmental scanning while suggesting that the environment is perceptual. Being perceptual, it will be defined differently by each individual. Those definitions will vary as a result of past experience and training, and they will be continually shaped by events in the future. The concern of todays professional manager should be to learn more of the environment and how it is conceptualized, so that she will be capable of perceiving it correctly (p. 36). In order to address the issues of the environment and the uncertainty and complexity issues in the context of hospitality industry, Olsen and Cassee (1995) developed the concept of the forces driving change in the hospitality industry. This study was part of the White Paper published by the International Hotel Association (IHA1 ) in 1995. To address the issues, the IHA held a series of Visioning the Future workshops around the world. The findings that emerged from these workshops suggest that; five major forces will drive change in the lodging industry in the next decade (p.53). These five forces shaping the future of the lodging industry were deemed to be capacity control, safety and security, assets and capital, technology, and new management. They are described briefly in the following section. FIVE FORCES DRIVING CHANGE Capacity Control With the advent of state-of-the-art technology, the hospitality organization is experiencing the loss of control over its inventory. The sale of hospitality products such as rooms, airline seats, car rentals, attractions and amusement
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6 Forces Driving Change in the Hospitality Industry in India park tickets, and seats in restaurants are no longer controlled exclusively by the owners of these products. Instead those proprietors who own and manage global reservation systems increasingly manipulate these assets. The challenge will be for firms to win back control. Olsen and Cassee (1995) identified several factors that influence capacity control. The most predominant among these factors is the technological advancement made in the telecommunications industry, which will be the most significant force that will influence the outcome of how the process of controlling capacity will play out in the future. Technological advances that have resulted in the development of wireless and cable operated communication devices have enabled the business and leisure traveller to establish direct links with the provider of hospitality products and services which offers greater opportunity to take back control. Because of the scale and scope of the hospitality industry, there is a need for systems and processes to be in place that can integrate the needs and wants of the service consumer. Software developers who will be able to handle the reservation process on a large-scale basis through the development of effective and efficient software will have the opportunity to control the sale and distribution of hospitality products in the future. For instance, Expedia.com has been a major player that has developed the software to integrate the needs of travellers across the globe. The ability of their system to handle the volume of transactions as well as interface the customer needs with that of the provider has made them a leader in the electronic sale and distribution of hospitality products and services. The role of government and the way they set regulations will influence the control of the sale and distribution of products and services in the e-commerce environment. And since the scale and scope of the hospitality industry is global, the role of the government to regulate transaction processes will determine the integrity of the system. Moreover, the transnational nature of the information highway will further influence the actions of the regulators since they will try to protect their national interests in the face of no regulatory control over the free flow of global commerce. The limited availability of resources to invest in methods that sustain competitive advantage for hospitality firms has put pressure on these firms on how they allocate these resources (Olsen et al., 1998), especially in this area of capacity control. Owing to this, firms are now seeking to outsource
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7 Olsen, Chathoth, Sharma those services they do not specialize in. Hospitality firms are rethinking their strategy as the economies associated with using a global distribution system may outweigh the benefits associated with owning and operating their own reservation system. Yet another influence technology will have on the control of inventory in the hospitality industry is on the structure of the travel distribution network. The role of travel agents, tour operators, and corporate travel offices is slowly diminishing with the advent of technology that links the customer directly to the service provider. The outcome of this infrastructural change in providing services to the customer will result in transaction cost efficiencies. Although this change is occurring presently, the time to incorporate such a change will depend on how the software and infrastructure evolves. Safety and Security A major force that influences the consumption of travel-related products and services is safety and security. According to Olsen and Cassee (1998) both macro and micro forces have an influence on the hospitality industry. Whereas macro forces influence the society as a whole, micro forces emanate from the level of the society that affects the individual and the firm. For instance, terrorism is a macro force that has been a major concern for tourism and related products over the past decade. Terrorism plagued cities like Paris and Cairo in 1995-96 and had a negative impact on the economy of these countries. The increase in terrorism can be attributed to factors such as nationalism and the growing wealth gap between countries and people within countries. In this context it becomes an important responsibility of hospitality managers to provide a safe and secure environment for its customers. One way of addressing this challenge is to make necessary investments in resources that help address the issue of terrorism at the national, state, and the local level. However, because of the short supply of funds available to governments to invest in such resources, private businesses are beginning to take measures at the local level in order to make their establishments more secure. Although the investments by private businesses to alleviate the threats of terrorism have been significant, the need to address this issue at the national and international level has become mandatory. International and national tourism will not only depend on the measures
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8 Forces Driving Change in the Hospitality Industry in India taken by governments to address terrorism, but also how governments will be able to influence private businesses to contribute to the efforts made at the macro level. While it is important to combat terrorism, another major force (micro) that influences the consumption of hospitality products and services is the personal health and safety issue. There has been growing concern over the spread of AIDS, Hepatitis B, tuberculosis, and new viruses that have a major impact on the decision of international business and leisure travellers to travel to those destinations. The effect safety issues have on the choice of destination, especially for leisure travel, has become the concern of both private and public sector officials. Water and air pollution especially in emerging nations has influenced international tourism arrivals to those nations. Although international bodies like the World Health Organization have deployed resources to these nations to address health related issues, governments with the help of private entrepreneurs will have to make concerted efforts to ensure that the situation is well within their control. Assets and Capital The element central to the discussion of the forces driving change is the ability to allocate resources to those investments that help to mute the challenges pertaining to the negative impact of the forces driving change and take advantage of opportunities presented by them. In this context, the issue that confronts hospitality managers is the very availability of capital to fund those investments. As a result of the global shift towards the market economy, the availability of funds to invest is getting scarce unless the investment offers exciting and significant returns. Moreover, the role of technology in the deployment of these funds has been a driving force that has influenced the investor. Technology has made it easier for the investor to mobilize funds swiftly and efficiently across the globe, and as a result there is increased pressure on businesses to invest these funds in value adding assets. An additional influence on capital availability is the capital rationing of the public and private funds needed to develop infrastructures across the world especially in developing nations. This will ultimately impact tourism opportunities in these countries if infrastructure development cannot take place.

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9 Olsen, Chathoth, Sharma The impact of the forces driving investment in tourism and related industries is significant. Fewer funds get deployed to tourism development as a result of the cyclical nature of the industry and its associated risks. Moreover, since private capital investments take place via capital markets through personal transactions involving brokerage firms and investment bankers, the influence of these money managers on hospitality managers has been increasing. As a result, hospitality managers have had to sharpen their skills to manage the assets so that they provide significant returns. Because of capital rationing, privately held hospitality firms too will face challenges in attracting new capital for investments. Consequently, these firms will need to increase their retained earnings to fund new investments, and hence, the productivity of their assets. Technology The impact of technology on hospitality firms is considered to be one that will change the design, structure, systems, and procedures of hospitality operations globally. The rate of growth of technology has been significant, as a result of which new products and services have emerged that have not only increased customer satisfaction but also improved the efficiency and productivity of hospitality operations. Technology-based systems such as property management systems, yield and revenue management systems, database marketing, and management accounting systems have increased the efficiency and effectiveness of hospitality operations. State-of-the-art technology has also enabled the firm to address issues regarding the higher costs of labor and capital. Technology has been put to use to improve the level of services to customers. Technology-based services such as concierge services, 24-hour check-in and checkout services, room and property security systems, and room climate controls are competitive methods that have resulted in increased customer satisfaction. Technology will also change the infrastructure of the hospitality firm with respect to administration. Not only have the number of employees required to take care of corporate and administrative functions decreased as a result of technological advances but also no longer are these employees required to work from offices. Outsourcing has become prevalent as a result of technology development and the impact of these developments on the cost structure of the firm has been significant.
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10 Forces Driving Change in the Hospitality Industry in India Technology will help the firm develop systems that provide a safe and secure environment to its customers and employees. For instance, modern technology has helped in improving water quality, provide better waste disposal systems, and save energy through the use of state-of-the-art systems. Hospitality firms will need to invest in technology based methods to remain competitive in the future. New Management The four forces driving change discussed above will influence the fifth force, that is; the management of hospitality organizations. The competence and capability of the hospitality manager to manage the changes in the environment will be called into question. To be able to manage in a complex and volatile environment, hospitality managers will be required to scan the environment and anticipate the forces that will impact their organizations and incorporate this into their decision making framework on a consistent basis. By doing so, hospitality managers will be fulfilling the role of boundary spanners, the accomplishment of which will call for not only operational skills but also strategic management skills. In order to manage the firm better and to cope with the needs of the investors, hospitality managers should be knowledgeable of the business environment they compete in and at the same time be competent about the functional areas of management, i.e. marketing management, human resources management, financial management, and operations management. This will help managers during the process of scanning the environment and assessing the impact of the environmental changes on the firm. The role of the hospitality manager is not complete without emphasizing the leadership skills required to manage the team. As the teams that managers lead are becoming more independent and diverse, and as organizational hierarchies are getting flatter, managers will have to use new leadership skills in managing their employees. Human resource management skills will be of the essence while identifying the right approach to centralizing/decentralizing authority and responsibility. The needed conceptual skills of managers will help them analyze the hospitality environment better while human resource skills will help them become competent leaders in managing those changes.

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11 Olsen, Chathoth, Sharma THE INDIAN CONTEXT Assessment of the importance of forces driving change for the Indian hospitality industry could not be more timely given the scale and scope of macro as well as micro level changes that are gearing up to impact the operations of this sector. With the recent economic policy changes, the growing importance of the technological environment, the employment challenges with respect to availability of skilled labor, socio-cultural issues and the growing scarcity of natural resources and real estate, the time could not be more appropriate to assess the response of the industry to the identified forces driving change. By far the greatest stimulus to changes in the business and operating environment of the industry are being sourced from the increasingly open economic policy posture of the government. The recent actions of the government to open the airlines industry is likely to bring wide sweeping changes to the travel and tourism sector which would impact the hospitality industry and therefore the corporate players in a significant manner. (Financial Times, 2000 C). With the increased pressure on operating efficiency and connectivity for the consumer, the price of travel would be significantly affected thereby providing further stimulation to the hotel and leisure sector. The international hotel and restaurant chains are already sitting on the fence waiting for the burner to get hot so that there are likely to be more rather than fewer players to share that demand pie. Such critical changes from the macro environment are likely to provide a stimulus to the rest of the economy as well as the travel and tourism sector, which would essentially challenge the current structure of the task and operating environment of all hospitality businesses. Even without the entry of any additional competition, existing players are using innovative ways to deal with the day-to-day challenges related to infrastructure problems and real estate availabilities (Financial Times, 2000a, 2000b). The Taj group recently decided to acquire their second aircraft for transporting customers and Oberoi Hotels is offering office space solutions to companies hit by the real estate scarcity and generally rising prices. The question however must be logically asked whether the rest of the industry is ready for this challenge and if so what is it that they consider to be the set of most important issues within these changes?
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12 Forces Driving Change in the Hospitality Industry in India With the growing opportunities for the private sector, the government is also not losing sight of the inherent slacks in the regulatory system that is the very source of these corporate trends. Some of the recent steps taken by the government are being welcomed, like the deregulation of property rights. However much needs to be achieved at the government decisionmaking level to ensure the competitiveness of the industry. The growing shortage of skilled labor is an issue that would well qualify to support the previous statement. With a handful of technical and management institutions to support the industry, the private sector is left to their own resources to provide for labor needs. Other issues that the industry continues to face are safety and security (Safety & Health, 1997), contemporary challenges of sustainable development (Hotels, 2000) and technological changes that are bound to have sweeping impact across the board for all travel and hospitality businesses (DM News International 2000). Given the ever growing element of uncertainty in the above mentioned issues and other critical factors from the remote and task environment of the hospitality industry, it becomes essential to evaluate the current understanding of the industry and acquire a snap-shot of their perspectives on the five major forces driving change. METHODOLOGY The empirical evidence upon which the current research is being based are the survey responses from the participants of two Visioning the Future workshops organized by the IH&RA together with the Federation of Hotel & Restaurant Associations of India. These workshops were held in both Delhi and Mumbai. After two days of intense exploration into the forces driving change internationally, participants were provided with questionnaires and requested to respond with respect to the importance they would assign to each of the forces driving change as they planned their organizations strategy for the future. An overview of the five forces driving change was provided and the factors making up each one were identified and described. These are provided in Table 1. Table 2 shows the ordinal scale that was provided for each of the factors making up each force. A value of 1 to 10 represents the diminishing importance of scale with 10 being least important.
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13 Olsen, Chathoth, Sharma A total of 49 valid questionnaires were received. The respondents were representative of both individual / affiliate hotels as well as hotel chains. Both the Delhi as well as the Mumbai sample of respondents were from various parts of the country representing A and B grade cities. The average age of experiences of the respondents (excluding invalid responses) was approximately over 25 years. And the level of management representation was higher than for Corporate Managers / senior managers from the respective organizations. This shows not only the diversity of the respondent groups but also the level of their perspectives, one that is most certainly from a set of key decision-makers of these organizations. These two factors together could emphasize the reliability and importance of these responses. Each of these responses was tabulated to conduct an overall analysis of the respondents opinions. In research methodology, the type of scale presented in table 2, is known as an ordinal scale. While this method of gaining empirical evidence is a perfectly valid method, it does restrict the type of analysis that can be conducted using such response data. The most popular method of presenting this data is in the form of descriptive analysis, using modal tendency, median and other graphical techniques. For the purpose of this study, modal tendency was used. The modal tendency essentially shows the factors that were selected the most number of times by the respondents. Therefore, from Table 1, the modal value of 1 for Making assets more productive under Assets and Capital implies that most respondents felt that the productivity of assets was an important issue. Similarly the responses for all the other forces and their respective elements are presented in table 1.

Table 1 : Five Forces driving change and their elements Forces driving change Assets and Capital: Making assets more productive Improving returns on investment Financing up grading Financing new concepts Allocating resources to competitive methods 1 1 2 2 3 Modal tendencies

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14 Forces Driving Change in the Hospitality Industry in India Investing in new products Investing in new services Safety and Security: Protecting the guest from health related problems Protecting the guest from crime related problems Protecting the guest from terrorist related problems Protecting the guest from infrastructure related problems Providing health and safety related information to the guest Providing smart technology to provide guests feedback on their health Providing smart technology to provide guests feedback on their safety Investing in more security equipment Alerting the guest to safety, health and security problems Providing added security personnel Seeking more information on the local safety and security situation Capacity Management: Alliances with other members of the travel community Managing transaction costs throughout the distribution system Alliances with more distribution systems Reduction of alliances with distribution systems Enhancing loyalty programs Direct to consumer marketing Internet activity increase
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2 2

1 1 1 2 3 3 3 2 2 4 3

1 2 2 6 1 1 2

15 Olsen, Chathoth, Sharma Incentive to providers (travel agents, tour operators) Role of corporate travel manager Buyer gaining more control of the purchase decision Pricing is becoming more challenging Strengthening role of brand in purchase decision Technology: Security Management Management information systems Communication systems for the guest Communication systems for employees and management Environmental control systems Marketing my firm Decision support systems Smart card Electronic commerce Artificial intelligence systems Expert systems Data warehousing New Management: Ability to handle speed of change Ability to receive and analyze information regarding the customer and competition Improve multifunctional skills Improve behavioral skills Improve diversity skills Improve level of service delivery Improve thinking skills Improve strategic skills 1 1 1 2 1 2 1 1 2 1 1 2 1 2 2 2 3 3 2 2

2 2 1 1 1

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16 Forces Driving Change in the Hospitality Industry in India Improve communication skills Improve technology skills Improve business management skills Improve productivity Improve retention Improve training at all levels 1 1 1 1 1 1

Table 2 : Questionnaire measurement scale Extremely Important 1 2 3 4 5 6 7 Not at all important 8 9 10

ANALYSIS OF RESULTS Assets and Capital The results obtained through the descriptive statistics indicate that most managers considered making assets more productive and improving return on investments as the most important factors within this force. This relates to what Olsen and Cassee (1995) proposed in the White Paper. According to the authors, hospitality firms need to prioritize their investments in such a way so as to increase the return on investments by making their assets more productive. Most managers that were surveyed rated investing in new products and services, financing upgrading, and financing new concepts as very important but not as important as making assets more productive and improving return on investments. Furthermore, most managers considered allocating resources to competitive methods not as important as other factors that influence assets and capital. The above results indicate clearly that respondents focused on resultoriented measures more than proactive measures. For instance, allocating resources to competitive methods, although important was not the most important to most managers. Allocating resources to competitive methods is an essential component of managing strategic change and thus addressing the forces driving change (Olsen et. al., 1998). Moreover, this process will enable firms to enhance returns in the future. The inability of the managers
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17 Olsen, Chathoth, Sharma to see the link between the two factors suggests that hospitality managers are more inclined towards result-oriented measures as compared to planning/ process-oriented measures. Emphasis needs to placed upon the fact that making assets more productive and increasing the rate of return on investments can be made possible only if firms can identify the trends in the environment and invest in future oriented competitive methods that will result in value addition to the firm. Safety and Security The analysis of the factors that drive change pertaining to safety and security issues suggests that most managers considered protecting the guest from health related problems, from crime related problems, and from terrorist related problems as the most important. This is in tandem with what Olsen and Cassee (1995) pointed out as the most important factors that influence safety and security issues around the world. Managers also considered protecting the guest from infrastructure related problems, alerting the guest to safety, health, and security problems, and investing in more security equipment as very important. Issues pertaining to providing health and safety related information to the guest, smart technology to provide guest feed back on their health and safety, seeking more information on the local safety and security situation were considered as less important than the issues mentioned in the above paragraph. Capacity Management The respondents felt that the greatest importance within capacity management was related to alliances with other members of the travel community. They felt similarly about enhancing loyalty programs for the customers as well as direct to consumer marketing. The other issues that were given a similar level of importance were the growing control of the buyer in making purchase decisions, pricing decisions, and finally the role of strong brands in the purchase decision. A relatively less important ranking was given to issues like management of transaction costs, alliances with distribution systems, increase in Internet connectivity, incentives to providers and the role of corporate travel managers.
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18 Forces Driving Change in the Hospitality Industry in India Technology The technological factors ranked as most important were the management information systems, communication systems for guests and environmental control systems. The importance given to communication and management control systems do not come as a surprise due to the growing importance of those two factors in the operations of hospitality businesses. However the increasing importance being attributed to environmental control systems is indeed an interesting and obviously a critical issue, which seemingly is gaining the attention of the sector. A relatively lower ranking was given to the factors of security management systems, communication systems for employees and management, firm marketing, decision support systems and smart cards. Expert systems and data warehousing were also ranked similarly. A lower level of importance within this force was also attributed to electronic commerce and artificial intelligence systems. It is interesting to note the low level of interest in e-commerce given the advances being made and introduced in this field locally as well as nationally. One critical factor to support these systems is the minimum level of developed infrastructure. And because that level of development has not been reached in the national infrastructure, it is understandable that respondents would have awarded this level of importance to these systems. New Management The factors of the new management force that would probably stand out as ranking low compared to others are the improvement of behavioral and thinking skills. For rest of the factors within this force, the respondents rated them as very important. While the statistical significance of these rankings was not conducted, we propose certain issues that may have motivated such responses. These two elements, that is, behavior and thinking, put together, could easily be categorized as relating specifically to the individual. That is, such issues must be dealt with on a one-to-one basis, as compared to training or even management skill development. There could be many reasons why thinking and behavior skills were not considered as important. One reason could have its roots in the general perception of the society that hospitality jobs require little or no intellectual skills. This may
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19 Olsen, Chathoth, Sharma be a strong influence on the perception of these respondents. The low importance given to behavior may indeed be due to the fact that the issue is an enormous challenge and that its understanding in the industry has a long way to go to be fully developed. IMPLICATIONS AND CONCLUSION The analysis of the data suggests that the surveyed hospitality managers are in agreement with the importance of the forces driving change in terms of their perceived impact. Moreover, most of the managers rated all the elements of the forces driving change to range between very important to important. This finding suggests that these managers rate the forces as important in terms of their impact on the formulation of organizational strategy, which is in agreement with what management and hospitality researchers have proposed over the past three decades. Given the above findings, managers will need to address the challenges the forces driving change will impose on the organization. To be proactive, hospitality managers first of all need to address what should be done to scan the environment on a consistent basis. Organizations will need to have systems in place that will consistently scan the environment to provide information on the forces driving change. Once this is accomplished, managers will then need to incorporate the forces driving change into the organizational decision making framework. This will call for not only improving the organizational systems but also human resource development as emphasized by Olsen and Cassee (1995). New management will be required to guide the organization in the face of such environmental changes. The knowledge and skills of the hospitality manager will provide them with the know-how to assess the impact of the forces driving change on firm performance through formulation and implementation of appropriate corporate and business level strategies. Hospitality managers can use the co-alignment model proposed by Olsen et al. (1998) as the framework to guide their organization into the future. The co-alignment model as illustrated in figure 1, entails the following process: (a) Environmental scanning requires the manager to: (i) be able to comprehensively understand the environment by establishing a formal
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20 Forces Driving Change in the Hospitality Industry in India environmental scanning system; (ii) objectively evaluate the forming trends in the environment that are most likely to impact the performance of the firm; (iii) objectively evaluate these impacts, their probability of occurrence and their timing so as to act upon this information while formulating appropriate strategies. (b) Strategy choice includes: (i) choosing among various competitive methods based upon an effective scanning process; (ii) competitive methods that should be chosen that result in the highest cash flow per share.

Figure 1.1 (Co-Alignment Principle)

Source : Strategic Management in the Hospitality Industry (1998) : Olsen, Michael D., Joseph West & Eliza Ching-Yick Tse

(c) Structure, entails those issues that enable the effective implementation of the competitive methods, that is: (i) development of core competencies; and (ii) having the appropriate firm structure in place in order to implement the competitive method. (d) Firm performance, which results from the alignment of the constructs, i.e. environmental scanning, strategy choice, and structure. Firms that are able to align the above constructs effectively will be able to perform better than those firms that are unable to do so.

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21 Olsen, Chathoth, Sharma The process utilized to implement the co-alignment model into the organisations day to day functioning will be critical to the success of the model. And that is probably the next crucial challenge for the strategic managers of the industry. Following the theory proposed in the co-alignment model, the forces driving change as identified globally and within India should serve as important determinants to the strategy development process within hospitality firms throughout the country. The challenge will be for managers to carefully evaluate each force and then invest in competitive methods that will enable them to achieve and sustain competitive advantage. This requires a continuous approach to strategy and its role in management decision making. REFERENCES
Child, J. (1972) Organizational Structure, Environment and Performance: the Role of Strategic Choice,6, Sociology, 2-21. Duncan, R. B. (1972) Characteristics of Organizational Environment and Perceived Environmental Uncertainty, 17, Administrative Science Quarterly, 313-327. DM News International (2000) US Firm Ads Indian Clients, Looks at E-Commerce, DM News International, March 13, 2000. Emery, F. E. and E.L. Trist (1965) The Casual Texture of Organizational Environments, Human Relations, 18, 21-32. Financial Times (2000). Oberoi Hotel in Bombay is Temporary Solution to Citys Property Shortage, Financial Times London Edition, October 06, 2000. -- (2000)a. Taj gets Second Business Jet, Financial Times London Edition, October 31, 2000 -- (2000)b. Last-Minute Bid for Air-India, Financial Times London Edition, November 13, 2000. Hotels (2000) Hoteliers Lauded for Commitment to Sustainable Development, Hotels, April 2000. March, J. G and H.A. Simon, (1958) Organizations, London: Wiley. Lawrence, P. R. and J.W.Lorsch (1967) Organization and Environment, Boston: Harvard Business School. Olsen, M. D. (1980) The Importance of the Environment to the Food Service and the Lodging Manager, The Journal of Hospitality Education, 4(2), 35-45. Olsen, M. D. and E. Cassee, (1995) The International Hotel Industry in the New Millennium: Visioning the Future, into the New millennium, a White Paper on the Global Hospitality Industry, Paris: International Hotel Association. Olsen, M. D., J.J. West, and E.C.Tse (1998) Strategic Management in the Hospitality Industry, Massachusetts: Wiley.

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22 Forces Driving Change in the Hospitality Industry in India

Safety & Health (1997) Safety & Health, 55(5), 27. Spanos, A. (1999) Probability Theory and Statistical Inference Econometric Modeling and Empirical Data. Thompson, J. D. (1967) Organizations in Action, London: McGraw-Hill West, J. J. and M.D. Olsen, (1988) Environmental Scanning and its Effect upon Firm Performance: an Exploratory Study of the Foodservice Industry,12(2), Hospitality Education and Research Journal, 127-136.

Michael D. Olsen, Ph.D., Professor of Hospitality Strategic Management, Department of Hospitality and Tourism Management, Virginia Polytechnic Institute and State University, Blacksburg, Virginia USAand Director of Research, International Hotel and Restaurant Association, Paris, France. He is also the Chairman of Olsen Group Inc. Dr. Olsen was the founding head of Department of Hotel, Restaurant and Institutional Management at Virginia Tech and founder president of the International Academy of Hospitality Research. In over 30 years of industry and academic experience he has authored, co-authored and edited 8 books and manuals as well as over 220 articles in both trade and professional journals. He has served for ten years (1988-97) as the Associate Editor of the International Journal of Hospitality Management, published in Oxford England. During this period he has given over 250 presentations to academic and industry audiences in over 40 countries across the world. Dr. Olsen has served as a visiting professor at Hospitality programs in Australia, China, England, Holland, Hong Kong, Japan, Finland, France, Singapore and Switzerland.

Prakash Chathoth and Amit Sharma are currently in the Department of Hospitality and Tourism Management, Virginia Polytechnic Institute and State University, Blacksburg, Virginia USA.

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