Chapter 1 The Hospitality Industry As an International Business * INTRODUCTIONHospitality is a very important component of the service industry in any country’s national economy. When a company decides to expand its operation into a foreign country, its overseas development is recognized as international business and its business revenues generated from overseas operations are described as a service export. * INTERNATIONAL BUSINESSInternational business is defined as business transactions taking place between two or more companies from different countries. These transactions can be in trade, manufacturing, investment, or services. * Service Exports and ImportsService exports and imports deal with the selling and buying of a business concept or format and the performance of management and services. The franchise of a quick-service restaurant concept or the management service performed by a hotel’s management contract company in a foreign country are examples of service exports. * SHIFT TOWARD SERVICE INDUSTRYEconomists have classified nations as postindustrial if 50 percent or more of their gross domestic product (GDP) is accounted for by the service sector of the national economy.The service sectors in the developed countries have experienced dramatic increases in the past three decades.A large proportion of the workforce in these countries is engaged in providing services in such areas as transportation, tourism and hospitality, banking, insurance, advertising, education, retailing, wholesaling, mass communication, and government. * THE HOSPITALITY INDUSTRY AS A SERVICE EXPORTThe international hospitality industry is often described as an invisible export because it does not normally involve the tangible shipment of goods from the place of production to the place of consumption. On the contrary, tourists travel a distance from their home to the destination to receive these services in person. Since there is no tangible shipment of merchandise, only the movement of people, the hospitality industry is thus described as an invisible export. * THE HOSPITALITY INDUSTRY AS A SERVICE EXPORT (Cont’d)The hospitality industry offers guests a memorable travel experience with a clean and comfortable room and a delicious meal.When guests check out of a hotel, they have nothing tangible to show to others to prove that they once stayed at that hotel. * THE HOSPITALITY INDUSTRY AS A SERVICE EXPORT (Cont’d)Labor intensiveness is a unique characteristic associated with the hospitality industry. This industry strives to provide a home away from home to international tourists. To provide effective personalized services, the industry relies on individual employees to perform various hospitality functions and services. * SERVICE INDUSTRY EARNINGSService exports play a significant role in a nation’s balance of payments. A nation’s balance of payments summarizes all economic transactions between a country and the r ...

1. Chapter 1
The Hospitality Industry As an International Business
*
INTRODUCTIONHospitality is a very important component of
the service industry in any country’s national economy.
When a company decides to expand its operation into a foreign
country, its overseas development is recognized as international
business and its business revenues generated from overseas
operations are described as a service export.
*
INTERNATIONAL BUSINESSInternational business is defined
as business transactions taking place between two or more
companies from different countries. These transactions can be
in trade, manufacturing, investment, or services.

2. *
Service Exports and ImportsService exports and imports deal
with the selling and buying of a business concept or format and
the performance of management and services.
The franchise of a quick-service restaurant concept or the
management service performed by a hotel’s management
contract company in a foreign country are examples of service
exports.
*
SHIFT TOWARD SERVICE INDUSTRYEconomists have
classified nations as postindustrial if 50 percent or more of their
gross domestic product (GDP) is accounted for by the service
sector of the national economy.The service sectors in the
developed countries have experienced dramatic increases in the
past three decades.A large proportion of the workforce in these
countries is engaged in providing services in such areas as
transportation, tourism and hospitality, banking, insurance,
advertising, education, retailing, wholesaling, mass
communication, and government.
*

3. THE HOSPITALITY INDUSTRY AS A SERVICE EXPORTThe
international hospitality industry is often described as an
invisible export because it does not normally involve the
tangible shipment of goods from the place of production to the
place of consumption.
On the contrary, tourists travel a distance from their home to
the destination to receive these services in person. Since there
is no tangible shipment of merchandise, only the movement of
people, the hospitality industry is thus described as an invisible
export.
*
THE HOSPITALITY INDUSTRY AS A SERVICE EXPORT
(Cont’d)The hospitality industry offers guests a memorable
travel experience with a clean and comfortable room and a
delicious meal.When guests check out of a hotel, they have
nothing tangible to show to others to prove that they once
stayed at that hotel.
*
THE HOSPITALITY INDUSTRY AS A SERVICE EXPORT
(Cont’d)Labor intensiveness is a unique characteristic
associated with the hospitality industry. This industry strives to
provide a home away from home to international tourists.
To provide effective personalized services, the industry relies

4. on individual employees to perform various hospitality
functions and services.
*
SERVICE INDUSTRY EARNINGSService exports play a
significant role in a nation’s balance of payments. A nation’s
balance of payments summarizes all economic transactions
between a country and the rest of world during a given period of
time.
The United States has a very large surplus in service exports,
amounting to two-thirds of the merchandise trade deficit.
*
INTERNATIONAL TRAVEL AND HOSPITALITYThe term
“hospitality industry” is used to encompass all facets of the
businesses that cater to travelers’ needs when they are away
from home.
The international tourism and hospitality industry is defined as
the spatial movement of travelers, and the reception and
entertainment of travelers away from their home countries.
*

5. Originating MarketThe originating market refers to the
countries the international tourists come from.
International travel is normally determined by three major
factors: discretionary income, leisure time, and travel
motivation.
*
International TransportationSpeed and accessibility are two
very distinct contributions that modern transportation has made
to the rise of international travel and tourism.
The jet passenger aircraft, the automobile, the cruise ship, and
the high-speed train have redrawn the map for travel and
tourism since World War Ⅱ.
*
Receiving DestinationsReceiving destinations are the countries
that receive and entertain international tourists. To
accommodate tourists’ travel needs, receiving destinations
provide them with attractions, lodging, food service facilities,
and various other travel-related services.
*

6. MOTIVATIONS FOR GLOBAL EXPANSIONWhen a
hospitality company decides to expand its business into a
foreign country, it is influenced by various motivations,
including
(1) sales expansion,
(2) geographic diversification,
(3) resource and labor acquisition, and
(4) worldwide brand recognition.The following discussion
explains how these motivations influence hospitality companies
to develop overseas business.
*
Geographic DiversificationThe purpose of geographic
diversification is to increase business in countries of economic
upturn and hedge against economic downturns in other
countries.
For example, a hotel company develops three hotels in one
country. If this country suffers from internal political unrest,
these three hotels will all lose money, since it is dangerous to
visit this destination.
*
Worldwide Brand RecognitionBuilding worldwide brand
recognition also motivates hospitality companies to expand

7. operations overseas. Brand recognition and brand loyalty are
important marketing strategies practiced in domestic operations.
*
Worldwide Brand Recognition (Cont’d)The development of
brand-name hotels and restaurants can make the name and
service known to the local people in a foreign country. As the
local people travel to other countries, they may want to stay and
eat at hotels and restaurants they know.
*
Worldwide Brand Recognition (Cont’d)For example, many U.S.
brand-name hotels are now in Taiwan to serve both international
tourists visiting Taiwan and the local Taiwanese. The
Taiwanese now know the standards and quality of Hilton, Hyatt,
Ramada, or McDonald’s. When the Taiwanese come to visit the
United States, they may prefer to stay in the brand-name hotel
they know best in Taiwan.
*