Hospitality Industry Integration Strategies

This assignment delves into the strategic use of vertical and horizontal integration within the hospitality industry. It requires students to define these concepts, analyze their advantages and disadvantages, and illustrate their application with real-world examples from prominent companies like Thomas Cook. The analysis should consider factors such as control over processes, cost efficiency, and market competitiveness.

Hospitality Provision
1

Table of Contents
INTRODUCTION ...............................................................................................................................3
TASK 1.................................................................................................................................................3
A. Analysis of scope and scale of the hospitality industry within the travel and tourism sector and
examining the role of hospitality functions in the context of Thomas Cook ..................................3
TASK 2 ................................................................................................................................................5
A. Integration in hospitality and travel and tourism business and affects of horizontal and vertical
integration on hospitality organizations ..........................................................................................5
B. Evaluation of impact of integration and ways decided by Thomas Cook to respond the
consequences of horizontal and vertical integration .......................................................................6
TASK 3 ................................................................................................................................................7
A. Producing project proposal for new hospitality organization and its designs based on a
thorough market potential analysis .................................................................................................7
B. Assessment of the financial feasibility of the proposed project on the basis of the expected
cash- flow analysis...........................................................................................................................8
CONCLUSION ...................................................................................................................................9
REFERENCES...................................................................................................................................10
2

INTRODUCTION
Hospitality provisions defines various rules and regulations with the respect of providing the
services to customers. It has also helped in understand the roles and responsibilities to the firm for
their guests so that the expectations can be meet in more effective manner (Brotherton, 2013). The
following study has related to hospitality provisions and for this, Thomas Cook has taken into the
consideration. It is public limited company and offering diversified serviced to the customers. The
major core values of company is offering unique services to target market and increase their
satisfaction level. Organization is always focusing on providing good quality services at reasonable
costs. There are various ethical considerations are taking care by Thomas Cook (Core values of
Thomas cook. 2016). This thing has created good image in customer mind and complete
responsibilities towards stakeholders. It has provided excellent working conditions to its employees
to motivate them.
TASK 1
A. Analysis of scope and scale of the hospitality industry within the travel and tourism sector and
examining the role of hospitality functions in the context of Thomas Cook
Travel and tourism sector of UK has offered diversified range of services to the travellers.
The related organizations of travel and tourism industry has arranged the different kinds of services
such as airlines, accommodation, food, adventure events etc (Slattery, 2002). In the current
scenario, the people are like to spend their holidays by visiting various places with the intention of
releasing stress and enjoying the vacations. In this regards, they are looking forwards for some
travel and tourism agents which may provide them holiday packages at reasonable prices. There are
wide number of travel and tourism organizations present in UK that are giving the facilities to the
travellers from accommodation to food etc (King McKercher and Waryszak, 2003). The people are
more attracting towards the services of tourism companies and this sector is continuously growing.
Hospitality industry is highly connecting to travel and tourism industry of UK. Therefore,
the scale and scope of growth of hotel organizations is very high (Lashley, 2008). Many of the
travel and tourism companies are making contract with the different hospitality organizations for
accommodation and other supportive services. Such type of business in UK is growing very fast and
providing the benefits to both hospitality and tourism business. During this kind of commitment
between both types of industries, it must be ensure that travellers will get the quality services and
value of their money (Lashley, 2000). It is a good opportunity for travel and tourism sector to meet
all the expectations level of the customers and gain their loyalty for long time. The supportive
3

facilities of tourism business and its collaboration with hospitality shows that there are huge scope
of growth of hospitality industry within travel and tourism sector.
Thomas Cook is a an travel and tourism organization which has own hospitality operations
across the world. It has offered the wide range of hotel services such as food, accommodation, cab
facility, guide etc to the guests (Lugosi, 2008). From the research, it has been identified that the
different hospitality functions is helping Thomas Cook to raise the customer satisfaction level. In a
general manner, it has ever known that hotels, villas, motels, guest house etc are first receive order
from the customers and than arrange then required facilities as per that. During this process, the first
priorities are giving by hotel organizations is meet the needs and expectations of visitors in
appropriate manner (Dewhurst, Dewhurst and Livesey, 2007). Along with this, some of the hotels
are also providing room services to guests as per their orders. Therefore, the hospitality industry is
playing an important role in Thomas Cook growth. With the support of different operations of
hotels, company has able to deliver good services to customers at the affordable prices and raise
their satisfaction level (Lashley and Morrison, 2013). In addition to this, hospitality industry has
increased the profitability and performance level of Thomas Cook and developed a good image in
travel and tourism industry.
B. Role of hospitality provisions in relations to operations of travel and tourism and stating the
interrelationship between the hospitality and travel and tourism
Hospitality provision has played an essential role in operation of travel and tourism. It has
delivered the different types of services and facilities to visitors. At the time of purchasing holiday
packages, the customers have looked all different facilities offered by hotels such as
accommodation, food, clubs, bars, entertainment areas, parks for children etc (Morrison, 2002).
Many of travel and tourism organizations have included these things in holiday packages and some
are charging additional prices for it. Hospitality provisions such as food and beverages during the
travelling is a major part of travel experience. It has affected operations of travel and tourism in
either positive or negative manner (Sheringham and Daruwalla, 2007). In this context, hospitality
provision has affected operations of travel and tourism sector.
On the other hand, there is a strong relationship between hospitality and travel and tourism
business. It has very well known that hospitality is an essential part of tourism because it gives the
personal touches to services to travel and encourages the visitors to increase their spending more
money at travelling (Brotherton, 2012). Both are interdependent on each other and seeking the
support for growth. It has well known that hospitality is one of the best essential element to create
success in Thomas Cook travel and tourism business. Company has the contract with many and
different kinds of hotels, villas, restaurants etc which are offering good quality of services such as
4

food, staying, beverages, transportation, organize the activities for relaxation etc. In the present
time, people are looking for those hotels that offering better accommodation and other supportive
facilities (Lashley, 2007). This thing has taken by Thomas Cook very seriously and always
considered requirements and needs of the customers at first priorities. Therefore, hospitality and
tourism both are promote each other by developed effective coordination. Both are also giving
contribution in developing UK economy as well as developed the opportunities of employment for
community.
TASK 2
A. Integration in hospitality and travel and tourism business and affects of horizontal and vertical
integration on hospitality organizations
In previous years, businesses were focusing on gaining longer benefits from lower operating
costs. For this, they were starting to produce their services in-house which were decreasing the out
source conditions (Lynch, Molz and et.al., 2011). To implement this strategy, companies were
integrate their operations with other organizations and save the money. Now, this method is helping
enterprises to increase their presence at international level as well as raise market share. The same
thing has applied on both hospitality and travel and tourism businesses. It has been found that both
are interdependent on each other and can not be separated. The benefits of integration can be
understood by an example (O'Gorman, 2009). Thomas Cook has made contract with Marriott Hotel
for accommodation, food and beverages and other facilities. This contract has provided the
significances to both companies. With the help of this, the hotel is now increasing the sales of
services and tourism organization is attracting more and more travellers by offering various holiday
packages. Beside this, both are now able to show the presence at the international level. It has raised
the market shares of both Marriott and Thomas Cook as well as increased profit level (Alexander,
2007). Therefore, the integration in hospitality and travel and tourism business has beneficial in
terms of opportunities of growth and success.
Vertical integration is a method where an organization may comes under agreements with
another company for any purpose. The intention behind this is increase profitability and decreased
operating costs. Vertical integration may be forward, lateral and backwards. Thomas Cook is
adopting backward vertical integration method and the result of this is it is operating many groups
such as Thomas Cook Tour Operations, Thomas Cook Cruises, Thomas Cook Travel Agents,
Thomas Cook Airlines etc (Kotler, Bowen and Makens, 2006). On the other side, company has also
adopted forwards vertical integration in which it has merged the business of other companies to
reduce the cost of Airlines. The impact of such activity on hospitality organizations has able to
5

made more control over the value chain. The distribution of the service became more easy. The cost
of providing different services to customers has also reduced and it has leads to increased the
effective utilization of resources. With the help of vertical integration, organization has taken
competitive advantages and got the opportunities of deliver unique services to users
(Kokemuller,2016).
On the other hand, horizontal integration is essential for firms to maximize profitability by
increased customer base, achieved economic of scales etc. Thomas Cook is also following
horizontal integration in which it has merged with My Travel and Co-op Travel with the purpose of
save costs and gain more profitability as well as developed the more opportunities for jobs.
(Lashley, Lynch and Morrison, 2007) The impact of horizontal integration on hospitality
organizations such as Thomas Cook Group are achieved economic of scale by selling similar
services in more volume, advantages of sharing of resources, increased market power and decreased
cost of international trading. But negative impact of horizontal integration over hospitality
organizations operations are lack of control, decreased productivity, less authentication to take
decisions etc (Farooq, 2014). Therefore, from above discussion, it has been identified that
horizontal and vertical integration has made both positive and negative impact on hospitality
organizations.
B. Evaluation of impact of integration and ways decided by Thomas Cook to respond the
consequences of horizontal and vertical integration
Vertical and horizontal integration, both has to made impacts on business strategies of
Thomas Cook. The affects of horizontal integration on company are increase efficiency of work,
meet economic of scale and scope and take advantages of international trade. The impact of this
integration on organization can be understood by an example. By mergers with TUI and First
Choice in 2007, the cost of travelling operations have decreased (Nickson, Warhurst and Dutton,
2005). It has leads to increase profit and the cost of operation became low. It has helped Thomas
Cook to save money and increase sales of services. On the other side, the agreements with many
other organizations have reduced other expenses and easy to reached untouched markets. Sharing of
resources between Thomas Cook and other companies has decreased the wastage of resources. But
the negative impact of horizontal integration for company is cut the benefits from existing one
profit volume and distribute it into the business partners (Joseph, 2016). Along with this, in future,
firm can face reduction in overall value of brand in the market place.
On the other hand, vertical integration has also affected the business of Thomas Cook. The
impacts of this integration both positive and negative. The positive impact of vertical integration is
6

increasing investment and developed new services of travelling. With the help of this, it can be easy
for customer to make the differentiation between services of Thomas Cook and its competitors. By
this, company is enable to increase market share as well as business profits (Advantages And
Disadvantages Of Vertical Integration. 2014). Another impact of vertical integration for enterprise
is highly certainty for quality of travel and tourism services. Thomas Cook has made tight control
over quality of services which has delivered by its business partners. For example, while working
with Marriott Hotel, Thomas Cook company can make control all the different operations. But,
negative impact of vertical integration for company is unable to balance capacity (Ball, 2005). It is
hard to make balance during high or low demand situations. It has created the dependency on other
organizations to meet business objectives. It has leads to decreased flexibility of Thomas Cook.
There are various actions have taken by Thomas Cook in the respect of minimizing the
consequences of vertical and horizontal integration. First response of company in this direction is
standardization of all services for all business partners in every nations. It has enable the firm to
faced challenges while operating business around the world (Brotherton, 2013). Second response in
direction of maintained capabilities, capacities and flexibility, Thomas Cook has opened its own
hotels, villas etc. It has reduced dependency on other firm to achieve the objectives of business. In
the same side, to maintain good brand image within the marketplace and take the advantages of
competition, Thomas Cook has taken another action (Slattery, 2002). With the help of branding tool,
firm is trying to attract more and more number of customers and gain loyalty of them. Therefore, by
such types of responses, Thomas Cook has responded towards consequences of vertical and
horizontal integration on business operations.
TASK 3
A. Producing project proposal for new hospitality organization and its designs based on a thorough
market potential analysis
Project Proposal of Summer special for new ABC hospitality organization is preparing on
the basis of market potential analysis. From the research, it has been identified that there are many
other travel and tourism organizations which are offering similar types of services to visitors (Airey
and Tribe, 2000). There market shares have showed that customers are completely satisfying from
their services and looking for same summer special offers. The other travel and tourism companies
profit margins has increased. Along with this, the research has also stated that there are various
places in UK which attracting visitors across the world (Lashley, Lynch and Morrison, 2007). On
the basis of market potential analysis, the design of Summer Special project proposal for new ABC
hospitality organization is as follows.
7

Product service concept: For Summer special offer, ABC Hotel will make all the arrangements for
customers as per their needs. In this context, hotel management will prepare food and beverages
according to weather conditions as well as taste and preferences of guests. Other supportive
facilities such has bar, gym, pool , entertainment facility, park for children, transportation, guide etc.
These will be sort as per the segment of consumers and their needs.
Target market: Target market of ABC Hotel new Summer Special offer will medium and high
income group. The segments in target market will also make so that it will easy to serve large
market area within a less time (Brotherton, 2013). Therefore, organizations will understand
individual needs of customers and make all the arrangements according to it.
Location: The select location for Summer Special offer will be East London. From the research, it
has determined that there are many places of visiting. The customers are prefer that areas for
travelling. Along with this, there are many hotels and resorts which are offering the similar services
to travellers at reasonable price (Slattery, 2002). Therefore, East London location will suitable for
ABC Hotel in meet the business objectives as well as take the advantages of high competition.
Operating model: For run the business in successful manner, it has needed for company to select a
operating model. In the context of ABC Hotel, the operation model will Business Operating Model
(King McKercher and Waryszak, 2003). The following framework will help in define business roles
and responsibilities of employees and employers within the hotel. Along with this, the process of
selecting and recruitment of staff will also decide. The various pages will create on social media and
a website will be developed where the customer will get the required information about hotel
services and new project Summer Special offer (Lashley, 2008). The pricing strategy will formulate
and develop some quality standards to make ensure that guest will get proper quality of services or
not.
Designing: The designing of rooms and other supportive accommodation facilities will good and
pleasant. It will be attractive and hygiene so that customers will attract towards it (Lashley, 2000).
The interior and exterior of hotel will be excellent so that it will give good experience to the guests
and make their trip more memorable.
B. Assessment of the financial feasibility of the proposed project on the basis of the expected cash-
flow analysis
Cash flow is a statement which includes cash inflow and outflow of a company over a
period of time. It has helped in showed liquidity and determined the rate of return of a project. For
ABC new hospitality organization, it has fictitious that revenue of new proposed project Summer
Special offers will be increase by 12% per year. The maintenance and other utilities will raise by
8

9%. The expected cash flow analysis for Summer Special offer project is as follows.
Pre-operating year Year 1 Year 2 Year 3
Cash Inflow
Owner's capital 350000 0 0 0
Bank Loan 300000 0 0 0
Revenue 0 500000 550000 556600
Total cash Inflow 650000 500000 550000 556600
Cash Outflow
Purchase of fixed assets 160000 0 0 0
Registration and legal charges 2000 0 0 0
Infrastructure & designing 70000 0 0 0
Utilities and maintenance 0 20000 21800 21962
Promotions and advertisements 50000 45000 30000 25000
Miscellaneous expenses 10000 8000 9000 9500
Total cash outflow 292000 73000 60800 56762
Net cash flow 358000 427000 489200 499838
Opening balance 0 240000 600000 1100000
Net cash flow 358000 427000 489200 499838
Closing balance 358000 667000 1089200 1599838
From the above table of expected cash flow analysis, it has been found that cash inflow of
ABC Hotel organization as compare to cash outflow has high which is positive sign for hotel. Cash
inflow of the company has increased over every period of time. It has showed that Summer Special
offer of ABC Hotel organization will be beneficial for firm to meet the business objectives and
other aim.
CONCLUSION
From the above research, it has been concluded that scope and scale of hospitality industry
has huge in travel and tourism industry. The different kinds of hospitality operations has helped in
9

meet various objectives of tourism business. There is a strong relationship between hospitality and
travel and tourism and both has provided benefits to each other. Horizontal and vertical integration
of Thomas Cook organization has delivered several advantages and disadvantages. But to resolve
the consequences of integration, company has been take many steps which has effective for firm in
future.
10

REFERENCES
Books and Journals
Airey, D. and Tribe, J., 2000. Education for hospitality. In search of hospitality: Theoretical
perspectives and debates, pp.276-291.
Alexander, M., 2007. Reflecting on changes in operational training in UK hospitality management
degree programmes. International Journal of Contemporary Hospitality
Management, 19(3), pp.211-220.
Ball, S., 2005. The importance of entrepreneurship to hospitality, leisure, sport and
tourism. Hospitality, leisure, sport and tourism network, 1, pp.1-14.
Brotherton, B., 2012. International Hospitality Industry. Routledge.
Brotherton, B., 2013. Hospitality and hospitality. In Search of Hospitality.
Dewhurst, H., Dewhurst, P. and Livesey, R., 2007. Tourism and hospitality SME training needs and
provision: A sub-regional analysis. Tourism and Hospitality Research, 7(2), pp.131-143.
King, B., McKercher, B. and Waryszak, R., 2003. A comparative study of hospitality and tourism
graduates in Australia and Hong Kong. International Journal of Tourism Research, 5(6),
pp.409-420.
Kotler, P., Bowen, J.T. and Makens, J.C., 2006. Marketing for hospitality and tourism (Vol. 893).
Upper Saddle River, NJ: Prentice hall.
Lashley, C. and Morrison, A., 2013. In search of hospitality. Routledge.
Lashley, C., 2000. In search of hospitality: towards a theoretical framework.International Journal of
Hospitality Management, 19(1), pp.3-15.
Lashley, C., 2007. Discovering hospitality: observations from recent research. International Journal
of Culture, Tourism and Hospitality Research,1(3), pp.214-226.
Lashley, C., 2008. Studying Hospitality: Insights from Social Sciences 1.Scandinavian Journal of
Hospitality and Tourism, 8(1), pp.69-84.
Lashley, C., Lynch, P. and Morrison, A., 2007. Hospitality: an introduction. Hospitality: A social
lens, pp.1-15.
Lashley, C., Lynch, P. and Morrison, A.J. 2007. Hospitality: A social lens. Elsevier.
Lugosi, P., 2008. Hospitality spaces, hospitable moments: Consumer encounters and affective
experiences in commercial settings. Journal of Foodservice, 19(2), pp.139-149.
Lynch, P., Molz, J.G. and et.al., 2011. Theorizing hospitality. Hospitality & Society, 1(1), pp.3-24.
Morrison, A., 2002. Hospitality research: a pause for reflection. International Journal of Tourism
Research, 4(3), pp.161-169.
11

Nickson, D., Warhurst, C. and Dutton, E., 2005. The importance of attitude and appearance in the
service encounter in retail and hospitality. Managing Service Quality: An International
Journal, 15(2), pp.195-208.
O'Gorman, K.D., 2009. Origins of the commercial hospitality industry: from the fanciful to
factual. International Journal of Contemporary Hospitality Management, 21(7), pp.777-790.
Sheringham, C. and Daruwalla, P., 2007. Transgressing hospitality: Polarities and disordered
relationships. Hospitality: A social lens, pp.33-45.
Slattery, P., 2002. Finding the hospitality industry. Journal of Hospitality, Leisure, Sport and
Tourism Education, 1(1), pp.19-28.
Online
Advantages And Disadvantages Of Vertical Integration. 2014. [Online]. Available through:
<http://occupytheory.org/advantages-and-disadvantages-of-vertical-integration/>. [Accessed
on: 20th January, 2016].
Core values of Thomas cook. 2016. Online. Available through:
<http://www.thomascookgroup.com/core-values/ >. [Accessed on: 20th January, 201].
Farooq, U, 2014. Horizontal integration definition, example, advantages and disadvantages.
[Online]. Available through: <http://www.studylecturenotes.com/management/horizontal-
integration-definition-example-advantages-disadvantages>. [Accessed on: 20th January,
2016].
Joseph, C., 2016. Advantages & Disadvantages of a Vertical & Horizontal Organization. [Online].
Available through: <http://smallbusiness.chron.com/advantages-disadvantages-vertical-
horizontal-organization-24212.html>. [Accessed on: 20th January, 2016].
Kokemuller, N., 2016. The Advantages of a Vertical Integration Strategy. [Online]. Available
through: <http://smallbusiness.chron.com/advantages-vertical-integration-strategy-
20987.html>. [Accessed on: 20th January, 2016].
12