Concept of Vertical Integration within the Hospitality and Tourism Industries
Horizontal integration is the process where two industries conglomerate, the process involves one business offering a similar product taking over the operations of the other business offering a similar product or service. In the current era of globalization, tourism and hospitality have strived to incorporate concentration. The component of the sectors such as transport, entertainment, beverage, food, and accommodation are closely getting integrated via consumption patterns of people traveling in order to build a single unit of operation in hospitality and tourism (Lafferty & van Fossen, 2001). However, the integration of hospitality and tourism has posed some advantages and disadvantages to the industry.
Horizontal integration in the hospitality and tourism industry will increase the economies of scale. Large companies always enjoy economies of scale since they are able to cut on costs while increasing production. As a result, integrations offer companies an advantage of their sizes which the industry will enjoy if they merge. Companies that are integrated usually eradicate overhead by consolidating its management but at the same time streamlining its process of operations. Vertically integrated tourism and hospitality will give the industry chance to control and manage problems emanating from supply disruption. Integrating of hospitality and tourism sector will give the industry more competitive advantage since it will be operating as a single unit.
The biggest challenge of integrating the hospitality and tourism sector is the expenses. Before one of the companies takes over the other it must set and invest huge capital to keep the sector running and maintain its operations (Lafferty & van Fossen, 2001). Vertical integration will also reduce the company’s level of flexibility by forcing them to follow the selected integrated segment. Maintenance of efficiency and profit margin is also a challenge that integrating the hospitality and tourism sector may face.
Reference
Lafferty, G., & van Fossen, A. (2001). Integrating the tourism industry: problems and strategies. Tourism Management, 22(1), 11-19.