Political
Zanoni (2011) defines the political environment as one that is affected by government policy. In this regard, the hospitality industry is influenced heavily by government intervention. The realization of the contribution of the sector to the national economy prompted the government to provide a conducive environment in order to facilitate growth in the industry. In this regard, the government, through the Chamber of Commerce has introduced supportive legislation policies that have branded the city as the ideal location that appeals to high net worth (HNW) individuals. In this case, the Chamber of Commerce has consistently worked with local business owners on the tastes and preferences of foreign tourists, in order to provide quality service as part of their Parisian experience.
Paris has been recognized as the ideal travel location by affluent Chinese tourists. In this respect, the essence of France being part of the Schengen states in Europe has eased travel restrictions as this block of countries has a single visa. As a result, this lowers barriers to entry in the country thereby encouraging increased travel. This aspect translates to increased occupancy in luxury hotels in different parts of the country, including Paris. In addition, in order to attract investments particularly interests shown by the Far East, the French government has collaborated with the Joint office in Beijing and has worked with German authorities in order to facilitate more Chinese visitors to obtain visas to France.
Europe, particularly France, had enjoyed a relatively peaceful period. As such, this situation led to the increase in tourist numbers. According to the Organization for Economic Co-operation Organization (2005), Paris has been recognized as the most traveled city in the world. As such, this accreditation provides the ideal investment location for the progression of the hotel industry. However, recent events have compromised this environment.
The recent wave of terrorist attacks has not spared France. The terrorist organization, Islamic State of Iraq and Syria (ISIS) attacked the French capital leading to deaths and injuries. As such, this disrupted the environment as a result of the tension from such activities (Carvajal, 2015).
Economic
This environment is affected by factors such as interest rates, economic growth, and exchange and taxation rates. The success of the luxury hotel industry has encouraged the establishment of a number of hotels in the recent past thereby triggering increased competition among the industry players. According to Harper (2004), the city has witnessed various hotel buyouts over the recent past and which are keen to take advantage of the city's reputation. This is driven by the consideration of Paris being one of the best locations associated with tourism and high fashion. This trend is clearly visible from the number of acquisitions made in this respect. For instance, the start of such ventures such as the Le Royal Monceau-Raffles which was reopened by the Raffles Group based in Singapore presents a positive outlook of this environment as investors move in to make gains from the market potential of the industry as well as its reputation. The luxurious and classic aspect of Paris hotels follows the consideration of this destination by HNW individuals who opt for quality goods and services in life. This market is identical with high-class hospitality service owing to the level of detailed and customized service offered to clients in response to their dynamic needs. The Paris hotels sell experiences, that is, those lifetime events that will provide the ultimate customer satisfaction at a fairly high price.
Prior to the terrorist attacks, the French economy had grown substantially over the recent past. However, the ripple effect created by the political environment influenced the economic environment. In this case, this situation created fear from foreign visitors as they chose to avoid the country. This led to hotels recording canceled occupancies.
Social
Grünig and Kühn (2015) define this environment as one which takes into consideration social trends which have the ability to influence the demand for products and services. In this respect, the luxury hotel industry in France is affected by the demographic trend in this sector. Owing to the increased diversification of the HNW individual population, luxury hotels in Paris have responded to take into consideration their needs and preferences.
The change in the composition of the HNW individuals, as a result, of new tourists from countries such as China, India, and Latin America has also played a role in changing the outlook of the traditional luxury hotels in Paris. The previous one-size fits all model has been replaced with customized service meant to create tastes that associate with different cultures, thereby making this industry cosmopolitan and responsive to needs of high social class individuals.
France is recognized as being cosmopolitan in nature. More specifically, owing to the country's reputation as being the fashion and fine living capital of the world, Paris has received increased visitor numbers, mostly from affluent foreign nationals. The government and industry players have banked on this premise and as such have adopted various campaigns that aim to encourage growth in the industry. For this reason, the French Chamber of Commerce implemented a campaign dubbed ‘Do You Know Your Tourist?' This was driven by the need to understand visitor's needs by local businesses and as such tailor products in relation to their preferences in order to create the element of client satisfaction.
Technological
Technology has disrupted many industries, including the luxury hotel sector. In this case, luxury hotels have embraced technology in a bid to remain relevant and also satisfy all their client's needs. One technology that has been adopted is that of mobile technology. A majority of the hotels have dedicated websites, which market the hotel's products and services. In this case, such strategies are meant to keep up with changing dynamics of consumer behavior. For instance, through these sites, one can make their reservations online without the need for their physical presence. This element provides convenience to the consumer and also creates the image of being responsive to clients' needs. In addition, the aspect of social media has also featured greatly in the luxury hotels scene in Paris. The consumer behavior trend that indicates the prevalence of social media and its benefits has led to the establishment of active profiles on different social media platforms in an effort to discover the needs, interests, tastes, and preferences of their target population. As such, they can tailor their services to the satisfaction of needs of their audience.
Environmental
As mentioned above, Paris is identified as the ideal tourist and fashion destination. As such, the city has been associated with expensive living, hence explaining the availability of many luxury hotels in the city as well as justifying the construction and renovation of other high-end hotels. This trend can be explained by the tremendous successes of luxury hotel businesses that can be accounted for the high number of HNW foreign nationals who frequent the city owing to the high standard and class associated with it. As a result, this situation has led to increased competition in the industry as the entry of new or refurbished hotels has led to the introduction of innovative and new standards and levels of personalized service.
The presence of a stable weather conditions in Paris encourages more tourist to visit the city. The prevailing cool weather conditions surrounding the city makes it a favorable tourist destination. Proper waste management is also significant in ensuring the hotel environment remain clean and free from pollution. Therefore, the management of the hotel industry has ensure their operation is not affected by environmental factors.
Legal
According to Zanoni (2011), legal factors are associated with regulations that govern a certain industry and which have a capability of affecting the business. In this case, owing to the role played by the tourism sector as a result of increased foreign exchange earnings, increased revenues, job creation, and increased Foreign Direct Investment (FDI), the French government has put in place measures to encourage competition through the elimination of barriers to entry by foreign investment firms. This trend can be seen through a large number of acquisitions of French luxury hotels by foreign companies. For instance, the Qatar Investment Authority purchased four landmark French luxury hotels in 2003 in a multi-million Euro deal.
Threats and Opportunities
The luxury hotel industry, as in the case of other sectors is also affected by various threats and opportunities that either enhance or compromise the success of industry players. In spite of the threats exhibited in the political situation in the global community, massive opportunities exist in the luxury hotel industry in France. Terrorism is a major threat to the hotel industry since tourists prefer to visit safer places. Competition from other luxurious hotels across the global is also a threat to the French tourist industry. This observation can be ascertained by the rapid growth of the industry, as well as the relevant investments made by foreign firms in the industry. In addition, the support by government and other regulatory bodies has improved the performance of the industry leading to increased competition and consequently, improved service to consumers. High standard services have increased the demand for French hotels making them the number one tourism destination, thus, increasing job opportunities in the process.
References
Carvajal, D. (2015). Economic fallout of Paris attacks hits hotels hard. New York Times. Retrieved from http://www.nytimes.com/2015/11/20/business/international/paris-attacks-hit-luxury-hotels-particularly-hard.html
Grünig, R., & Kühn, R. (2015). The strategy planning process: Analyses, options, projects. New York: Springer Publishers.
Harper, D. (2004). Valuation of hotels for investors. New York: Taylor and Francis.
OECD (2005). International Investment Perspectives 2005. Paris: Organization for Economic Co-operation and Development.
Zanoni, A. (2011). Strategic analysis: Processes and tools. New York: Routledge.
