EG700-AU MSc International Hospitality Management
EG700-AU MSc International Hospitality Management
1. Introduction
In consideration of the tourism industry, the impact of terrorism is highly noticed. The report will analyse the impact of terrorism on the international tourism market based on Dan Hotels. Dan Hotels is an Israeli hotel chain founded in 1947. As of Jerusalem, 4 Dan Hotels are present and provide 5-star deluxe accommodation. The hotel consists of 500 decorated bedrooms and suites and consists of a spacious public area (Dan Hotels, 2023). Besides, it consists of the facilities of a pool, spa, gym and others that provide the best experience to all customers. As a result of this, factors that impact the operations of Dan Hotels within the domain of Jerusalem will be analysed. Lastly, the influence of terrorism on Dan Hotels will also be analysed in this report followed by a suitable summary of the report and recommendations to improve hotel operations.
2. Findings and analysis
2.1 Critical analysis of significant factors that impact Dan Hotels
Different factors seem to be influencing business that largely impact the operating system along with the sales and revenue system. According to Ngoc et al. (2021), a business is highly impacted by external factors mainly political, social, economic and technological factors. The stated factors highly align with the PEST analysis that evaluates the impact of external factors on a business and thus will be analysed below to evaluate the impact of significant factors on Dan Hotels.
Political Factors
Several political factors impact Dan Hotels largely within the domain of Jerusalem. Armed conflict seems to be an imminent threat to Jerusalem and Israel further leading to distraction within the business environment. This also relates to the notion of political instability along with threats of terrorism and military policies that impact business operations. However, Kerzhner (2022) argued that Jerusalem has had proper experience in handling different operations in different circumstances. Other than that, the government system and changing policies within the system also impact the operations of Dan Hotels. For instance, Dan Hotels has its headquarters in Israel and is situated in many other countries including Jerusalem, which is the capital of Israel. The country is being highly impacted by the priorities of the government further leading to predictable trends (Samman, 2021). Unlike other countries, the local government seems to be playing a crucial role within Jerusalem and Israel, which is also influencing the decision-making of Dan Hotels further impacting its operation within the market.
Economic Factors
Israel is facing download pressure in terms of consumer spending in the consumer spendings. Habanabakize (2021) mentioned that the disposable income of consumers remained stable within the country for a long time. However, it is being impacted by the growing inequality within the market further impacting negatively on the sentiments of consumers and lowering their behaviour on spending. This tends to impact Dan Hotels negatively as the company can face low values within sales and revenue margins that will create difficulty in maintaining sustainability within the environment. Nonetheless, Onifade et al. (2020) counter-argued that economic performance is likely to be stable in the current and future years due to proper expenditure of government along with stable demand due to stable disposable income and lastly increasing investment within new industries.
For instance, the GDP growth rate of Israel as mentioned in the figure above It can be noticed that the GDP growth rate as of 2022 is 6.48% which is lower as compared to 2021 indicating 8.6%, but, still good for the economic system and business stability within Jerusalem (Trading Economics, 2023). In addition to this inflation rates within the domain of Israel also seem to be declining to 3.7% as of October 2023 from the high rate of 5.3% as of December 2022 mentioned in the figure below (Trading Economics, 2023). The economic condition of Israel seems to be having a positive impact on the operations of Dan Hotels as it can be observed from the increasing revenue margin of the company. As of 2020, the revenue of the company indicated $217262 which increased to $299886 in 2021 and $435658 in 2022 (Dan Hotels, 2023). Therefore, economic factors are significantly impacting Dan Hotels to increase its revenue margin and operate successfully.
Social Factors
On the other hand, social factors also play a crucial role in terms of influencing Dan Hotels’ operations within the market. From the reports, it can be analysed that the culture of different people in different countries seems to be impacting Dan Hotels in the operating system. The power structure of Israel reflects income inequality within the nation which in turn denotes improper consumer spending and thus impacts the company’s sales margin. Despite income inequality within the market, the situation of consumer spending reflects a different picture. From the statistical overview, consumer spending within Israel is observed to be achieving the highest spending of all time with records of $208268.20 million as of 2022 stated in the figure below (Trading Economics, 2023). As a result of this, it can be stated that consumer spending seems to be highly affecting the business operations of Dan Hotels which is considered to be a significant factor for the hotel as well. Relating to high consumer spending, Dan Hotels seems to have net income growth of 83.72% in 2023 followed by $345.76 Million in sales with a growth of 49.50% and EBITDA reflecting a growth of $36.14 million in the same year (WSJ, 2023) [Refer to Appendix 1]. Henceforth, social factors are also impacting positively the business environment of Dan Hotels.
Technological Factors
Technological innovation is fast within the domain of Israel and is also observed to be disrupting the Supply chain. It is because technology seems to be providing greater access to the notion of information not only to the partners of the supply chain but also to different players within the industry. In consideration of the technological factors, Intellectual Property Rights along with patent protections play the role of influencing the business operations of Dan Hotels within the domain of Israel (Reiflaw, 2023). Apart from that, technological advancements within Israel also lower the cost of production further providing opportunities for Dan Hotels to restructure its supply chain and bring more flexibility for meeting the cost structures and needs of customers in the market. Looking at the cash flow aspects of Dan Hotels it can be observed that, the capital expenditure of the company as of 2023 reflected a negative number revealing -$15.72 million with an increased free cash flow of $38.70 million while cash flow per share has been increased by 0.48% and free cash flow per share has been increased by 0.34% (WSJ, 2023). As a result of this, it can be stated that technological factors are impacting Dan Hotels negatively alongside positively.
2.2 Critical assessment of the impact of terrorism on the international tourism market
Markets in the current scenario are becoming increasingly Global due to the high combination of political, technological, sociocultural and economic factors. According to Das et al. (2022), the world in the current scenario is changing towards a single market that further reflects a standardization of the lifestyle of consumers along with the rise in terms of global consumers within different businesses. However, tourism is considered to be one of the global activities in terms of economic development, thereby, vulnerable to different risks that tend to affect other businesses in the global scenario as well (Hitchcock, 2023). Besides, the rise of tourism, the notion of terrorism is also having a considerable effect on business. As of 2019, the total tourist arrivals were reported to be 1463.68 million which declined to a large extent in 2021 indicating 406.89 million tourist arrivals in the whole year (Statista, 2023). The decline in the tourism arrivals observed was due to the prevalence of Covid 19 disease while terrorism also played a crucial part in it. Despite the decline, the number of tourists arriving in 2021 and 2022 depicted a little bit of increase from 2020 reflecting the number of $458.39 million and $969.4 million respectively as can be observed from the figure below (Statista, 2023).
The decline in the number of tourists stated in the figure above can be analysed to be the sole responsibility of Covid 19 and increased terrorism in different countries. Apart from that, Mehmood et al. (2020) pointed out terrorism to be highly impactful towards the tourism sector in terms of increasing unemployment, deflation, homelessness and many other areas. However, tourism contributions in different countries are high with less or no repercussions. Nonetheless, terrorism has been impacting different nations differently (Beirman, 2020). For instance, Africa seems to be highly reliant on tourism to accelerate economic growth and is also been recognised as the second-largest nation in terms of the growing tourism industry. Despite the large involvement of tourism in the economy of Africa, the nation has not been spared from the increasing attacks of terrorism (Schwab and Malleret, 2020). As a result of this, the growth rate of the tourism sector within the domain of Africa is recorded to be 6.78% annually as of 2023 and reflected a revenue of $21.54 billion in the same year (Statista, 2023). However, the growth rate is predicted to be the same with no sign of increasing which in turn reflects the negative impact of terrorism on the tourism sector of Africa.
Considering this scenario, terrorism can be concluded to be impacting negatively on the tourism sector. From the figure above it can be analysed that the global tourism sector contributed 10.4% to global GDP in 2019 (Statista, 2023). However, the contribution declined to 7.6% in 2022 and as of 2023 is reflected as 9.2% of GDP contribution (Statista, 2023). Despite certain increases noticed in the figure of 2023 from 2022 the total contribution of the tourism sector to the GDP growth did not match the contribution made in 2019. Henceforth, terrorism in the global scenario is also impacting negatively the global tourism sector which further is impactful for the world’s economy.
2.3 Critical evaluation of terrorism influence on Dan Hotels
Income data of tourism within the domain of Israel indicated $5.518 billion as of 2022 which in turn indicated an increase from $2.217 billion in 2021 (CEIC Data, 2023). Despite the certain increase in 2022, the income level was not able to reach above the $7.620 billion recorded in 2019 (CEIC Data, 2023). As a result of this, it can be stated that the income of Israel’s tourism at the current rate is due to the prevalence of Covid 19 and the high attacks of terrorists in the Global scenario. However, Muhammad (2019) stated that acts of terrorists are highly effective in causing repelling effects on the economy that are mostly considered negative impacts. The common impact of terrorism reveals the economic destruction of lives of people and property. Terrorism is observed to be indirectly impacting the world’s economy through the creation of market uncertainty along with increased claims of insurance.
However, increasing terrorist activities led to high fluctuations in the rate of occupancy and daily average rate. According to Chattopadhyay and Mitra (2019), fluctuations within occupancy rate seem to be impacting a hotel largely as it indicates low customers of tourists arrival further relating to low chances of gaining profitability and sustaining in the market. As a result of this equity of Dan Hotels seems to be declining by 3.87% as of 2023 which further reflects the negative impact of terrorist activity on the hotel (Financial Times, 2023). As the hotel is suffering from low and declined equity rates, therefore, it can be stated that Dan Hotels is having high financial risk to operate in the market. This is likely to question the sustainability rate of Dan Hotels within the markets of Israel and can also impact on execution of its operation in the global scenario.
The working capital of Dan Hotels also reflects a declining rate of -3.44 % in the current year with a 0.91% increase in earnings per share and capital expenditure also increased by 0.60% (WSJ, 2023). This reveals the fact that Dan Hotels in the current scenario has a negative impact on share data while the income statement of the hotel reflects a positive growth and cash flow statement of Dan Hotels reflects a negative impact in terms of capital expenditure. Overall, both the capital expenditure and working capital have a declining rate within Dan Hotels which can impact the company in generating the required resources to operate in the market. As tourism is observed to decline due to high terrorist activities, therefore, Dan Hotels is also suffering to acquire proper working capital to execute its targeted goals.
3. Conclusion
This report concludes that factors related to politics, economy, technology and society within a nation highly impact Dan Hotels. Political factors in terms of governmental rules and regulations along with patent protection and others are impacting Dan Hotels followed by positive effects from the growing GDP rate of Israel and stable governmental expenditure. High consumer spending also seems to be positively affecting Dan Hotels in terms of its revenue and sales while technological development is providing Dan Hotels with the benefit of attracting customers and providing innovative services. Terrorism seems to be impacting International markets of tourism. It is because total tourist arrivals in the current scenario have declined from the past years reflecting the declining rate of revenue and sales of hotels operating in global markets. Other than that, the low contribution to the global GDP by the tourism sector is also revealing the negative impact of terrorism on the tourism sector. Terrorism is also influencing Dan Hotels negatively in terms of income data which is indicated to be low in the current years as compared to the previous years. Nonetheless, the occupancy rate of Dan Hotels along with the daily average rate is also decreasing due to the low arrival of tourists further revealing the negative impact of terrorism on the hotel.
4. Reference list
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