Proceedings of the 5th WSEAS International Conference on Economy and Management Transformation (Volume II) International hotel chain strategies used into the world compared with Romania SMARANDA COSMA, FLEŞERIU CRISTINA, CLAUDIU MORGOVAN, MARIUS BOTA Business Department, Faculty of Business Babes-Bolyai University 7 Horea str., 400174 Cluj-Napoca ROMANIA [email protected], http://www.tbs.ubbcluj.ro Abstract: - The study investigates the strategies used by international hotel chains to enter into Romanian market compared with their main strategy for penetrate a foreign market. At this moment, there are 46 hotels in Romania that belong to 16 international hotel chains which have penetrated our tourist market. The methods that the international hotel chains are using to penetrate the Romanian tourist market are based on the top four forms that are used to penetrate a foreign market: franchise, management contract, the leased contract and the private property. These methods have been chosen and used in Romania by international hotel chains depending on the overall hotel chain strategy and the benefits they offer. It’s easy to see that a big part from the international hotel chains that are on the Romanian market are using the principal strategy also on this market, but there are also hotel chains that are using another strategy. Key-Words: - international hotel chain, franchise, management contract, leased contract, private property. Bucureşti 1 Introduction 4. Best Western Hotel According to the statistical data [1], there were a Topaz Cluj-Napoca total of 1316 hotels and motels, of which 1170 5. Best Western Savoy Hotel ConstanŃa hotels and 146 motels, in the year 2009. Among 6. Best Western Bucovina these, there are currently 46 hotels belonging to – Club de Munte Gura Humorului international hotel chains. At the moment, there are 7. Best Westen Hotel 16 international hotel chains on the Romanian Ruşca Hunedoara market, namely: Golden Tulip Hotel, Best Western, 8. Best Western Rogge Hotel ReşiŃa Danubius Hotels, Hunguest Hotels, Ramada, Sofitel, 9. Best Western Hotel Novotel, Ibis, Howard Johnson, Radisson SAS, FântâniŃa Haiducului K+K Hotels, Hilton, Marriott, Crowne Plaza, Sibiu 10. Best Western Intercontinental and NH Hoteles (Table 1). In turn, Ambassador Hotel these hotel chains belong to other larger Timişoara 11. Best Western Meseş international chains of hotels. Hotel Zalău 12. Best Western Hotel Table 1: International hotel chains present in Rapsodia Botosani 13. Best Western Hotel Romania Astoria Iasi Hotel chain Hotel The hotel chain 1. Danubius Health Spa Danubius Danubius Hotels belongs to a Resort Sovata group Hotels 2. Hotel Brădet Group 1. Hotel Golden Tulip 3. Hotel Făget Bucharest Victoria Hunguest 2. Hotel Golden Tulip Times 1. Hunguest Hotel Fenyı Hunguest Hotels 3. Hotel Golden Tulip Hotels Miercurea Ciuc Hungary Mamaia Golden Tulip Golden Tulip 1. Ramada Sibiu 4. Hotel Golden Tulip Ana Hotels, Inns, 2. Ramada Bucharest Tower Sibiu Resorts Majestic Hotel 5. Hotel Tulip Inn Sunny 3. Ramada Hotel & Suites Hill Cluj-Napoca Bucharest North 6. Hotel Golden Tulip Ana Ramada 4. Ramada Bucharest Parc Wyndham Dome Cluj-Napoca 5. Ramada Plaza Bucharest 1. Best Western Central Convention Center Worldwide Hotel Arad Best Western 6. Ramada Iaşi City Centre Best Western 2. Best Western Hotel International 7. Ramada Braşov Eurohotel Baia Mare Howard 1. Howard Johnson Grand 3. Best Western Stil Hotel Plaza Hotel Bucureşti ISSN: 1792-5983 726 ISBN: 978-960-474-241-7 Proceedings of the 5th WSEAS International Conference on Economy and Management Transformation (Volume II) Johnson 2006, page 324) Pullman 1. Hotel Pullman Bucharest Word Trade Center Each international hotel chain that has come to Novotel 1. Hotel Novotel Bucharest City Centre Romania relies on a strategy for internationalization. 1. Hotel Ibis ConstanŃa ACCOR Hotels But the most common forms to penetrate a foreign 2. Hotel Ibis Bucureşti market, which have been used in Romania, are the Ibis Gara de Nord 3. Hotel Ibis Bucureşti management contract and franchising. Palatul Parlamentului 4. Hotel Ibis Sibiu What does the franchise entail? Radisson SAS 1. Radisson Blu Hotel Radisson SAS Bucureşti Hotels & Resorts • Benefits: Maintains the independence of the 1. Athenee Palace Hilton The Hilton hotel, including the centralized reservation Hilton Bucharest Hotel Family 2. Hilton Sibiu system, joint participation in international fairs, JW Marriott 1. JW Marriott Bucharest Marriott catalogs joint presentation, joint marketing Grand Hotel strategies, communication providers. This means, 1. Crowne Plaza Hotel Crowne Plaza IHG Bucharest automatically, lower costs for the hotels. In (InterContinental 1. Hotel Intercontinental Intercontinental Hotels Group) addition, membership fees are low compared to Bucharest charges of a management contract. In a franchise NH Hoteles 1. NH Bucharest NH Hoteles 2. NH Timişoara contract, the owner chooses the hotel K+K Hotels 1. K+K Hotel Elisabeta K+K Hotels management. Charges relate only to income Bucharest Group derived from the rooms. Source: the hotel sites [4 - 14] • Disadvantages: marketing and advertising strategies can be sometimes inappropriate for the 2 Results and discussions Romanian market. Access to the global booking INTERNALIZATION STRATEGIES OF of the chain may be substituted by inclusion in HOTEL CHAINS independent reservation system. Although, at this moment, there are four main possible methods (export, license, strategic alliances What does the management contract entail? and foreign direct investment) [2], that can be used • Advantages: inclusion in the central reservation, by a company to enter a foreign market, the hotel shared catalogs, many foreign staff receiving industry does not apply them all, because a part of training in large hotel chains which may lead to these methods are not compatible with this area. preference of certain foreign companies for Thus, there are several methods that hotel chains use certain hotels. In a management contract, to enter a new market (a new country). These bringing the hotel operator and other staff (the methods are: direct foreign investment penetrating a hotel manager, marketing manager, sales void (greenfield investment) or the assumption of a director, director of the restaurant), the owner hotel or a hotel company on the foreign market, joint cannot interfere with anything in the policy of the venture, franchise, management contract, strategic operator. alliances (cooperative agreements), consortia • Disadvantages: high costs, both related to (voluntary chains = voluntary groups) [3]. contract fees, and especially those related to Because there are several ways of wages of foreign personnel, salaries are usually internationalization, the hotels have more options four to five times higher than those of the available that can be used depending on how they Romanian employees and represent very plan to have operational control over the new hotel, significant expenditures. Charges are reported in how much they want to be financially involved and the first case to the whole turnover. how big the potential risk is [3] (Table 2). THE PRESENCE OF INTERNATIONAL Table 2: Internationalization methods HOTEL CHAINS ON THE ROMANIAN Operational Financial Potential risk control involvement HOSPITALITY MARKET Individual ownership High High High In 2009 were 1170 hotels in over country. This year Franchise Average Average Average (2010) there are more, form them 46 belong to Joint venture High Low Low Management contract High Low Low international hotel chains, and that means that just Strategic Alliance Low Low Low 3,93% form all hotels that are present on the Consortia Low Low Low Romanian market are hotels that belong to (Source: Cristureanu, C., Strategies and transactions international brands. The rest, 96,07% are Romanian into the international tourism, C.H.Beck, Bucharest, ISSN: 1792-5983 727 ISBN: 978-960-474-241-7 Proceedings of the 5th WSEAS International Conference on Economy and Management Transformation (Volume II) hotels (Figure 1). on this market also with other brands that are into the group. This brands will aim other consumers and the hotels will have a lower number of stars (hotels with 2 or 3 stars). INTERNALIZATION STRATEGIES USED BY INTERNATIONAL HOTEL CHAINS IN ROMANIA Each one, form these 16 international hotel chains, that are present in Romania, has a predominant strategy, which the chain in using for almost all Figure 1: The presence of international hotel chains hotels. But, even the hotel chains have a on the Romanian hospitality market predominant strategy, are using also other strategies, regarding the countries and the markets were they Even, at this moment, the presence of international want to get. hotel chains on the Romanian market is very low, If we are watching in detail and more carefully, is almost all international hotel chains realized the easy to see that, 37,5% from the international hotel potential that has this market and that is way they chains that are present in Romania, that means 6 have the following strategy: they will increase the from 16, are using as a basic strategy the franchise; number of hotels that are in this country by opening followed by the leased contract with 25%, used by hotels also in the province, or to penetrate the four chains, as the dominant strategy; the Romanian market with other brands, that belong to management contract means 20% and is used by the same hotel group and aren’t already present