Accommodation and Food Services
Author
Institution
Introduction
The importance of the economic development of any country cannot be gainsaid as far as the sustainability and stability of the country is concerned. Indeed, it has a bearing on the overall wellbeing of the people of that country, as well as other sectors such as the healthcare, defense and even internal security among others, not to mention its ranking internationally among nations. Needless to say, countries are divided into different sectors and industries, all of which make varying levels of contributions to the economies of those countries. Nevertheless, the Accommodation and Food Services industry comes as one of the most fundamental in the United States.
Taking NAICS code 72, the Accommodation and Food Services sector is made up of establishments that offer customers with beverages, meals and snacks for immediate consumption, as well as lodging services (U. S. Census Bureau, 2012). It incorporates food and accommodation services establishments considering that the two activities are usually blended in the same establishment. However, this sector excludes social or civic organizations, theaters, recreation and amusement parks, as well as other entertainment or recreation facilities that offer beverage and food services (U. S. Census Bureau, 2012). Some of the key firms in this sector include Aban Offshore, Accor, Affinia Hotels, American Cruise lines, AmeriHost Inn, ARAMARK, Artisans of Leisure, Azari Hotels and Aztar.
The accommodation and food services industry has its roots in later 18th century, with fundamental changes being made as the industry faced the two World wars and the Depression among other social changes (Kalnins, 2006). Nevertheless, the current status of the industry took shape in early 1950s and 60’s resulting in the growth of the dynamic industry present today. In the medieval period, English travelers would be accommodated in Inns that were private homes while nobility stayed in monasteries. The renaissance period saw in increase in the demand for taverns and inns with the first hotel being built in 1788 (Kalnins, 2006). In the 18th century, New York had taverns, while Pennsylvania had inns, with southern colonies being left for ordinaries. The French Revolution and the New World saw a tremendous change in the culinary history. The 20th century saw the introduction of trans-Atlantic flights in 1958 with inner city lodging properties resurging in United States cities. From 1960 to-date, there has been increased growth in casual dining, increased hotel chains, as well as mergers and acquisitions (Kalnins, 2006).
Using the N-Firm ratios, it would be possible to determine the percentage of total market output that N-largest firms in a particular industry produce. This concentration ratio is primarily used to determine how much the market has been monopolized, where a market that has low N-firm concentration ratio value is deemed as more competitive than its counterparts with high values of this ratio. The 2007 data shows all firms to number around 634,361 establishment or (100%). Four of the largest firms in the same year had 2528 establishments and took up 5.8 percent, while 8 largest firms had 24,854 establishments taking up 10.1% (U.S Department of Commerce, 2007). On the same note, 20 largest firms had 36,936 establishments had 17.4%, while 50 largest firms had 49,387 establishments taking up 23.7% (U.S Department of Commerce, 2007). Ratios indicate that the market is not under the control of a few establishments, as well as the fact that the industry is highly competitive. However, the concentration of the establishments in the Accommodation and Food Services industry has always been dynamic especially considering the high level of competition among the varied players. Indeed, the top firms in the industry have to fight to maintain their positions at the top, while also ensuring that they keep in touch with their fundamental goals. Of particular note is the fact that different firms are ranked as top firms in different times depending on the time of entry and the level of innovativeness.
As much as the dominant players in the sector are regularly replaced, they use varied price discrimination strategies. This is especially first degree price discrimination or perfect price discrimination, where the establishments charge consumers the maximum price that the later would be willing and able to pay for the services. This strategy is primarily used in instances where they are providing the services to dignitaries from different countries or even business executives. On the same note, second degree price discrimination is used where the establishments use varying prices for different quantities, from which the customers would choose in line with their spending abilities. In this case, the accommodation services provided include different rooms including medium ranked, standard ranked and even executive rooms all of which have varying services offered at different costs. This means that the establishments do not need to know the customers, rather they will just provide the options available and allow the customer to make a choice.
As much as dominant players are regularly changed, they acknowledge the increased competition that comes with an increase in the number of establishments in their particular regions. In essence, they use varied barriers to entry so as to maintain their dominance and prevent other companies from getting into the industry. One of the most powerful barriers to entry in the accommodation and food services industry the brand strength of the existing establishments. The key players offer relatively similar products to their customers, in which case they are only left with the option of differentiating their products so that they can appear different from those of their competitors. This strategy breeds customer loyalty, which results in enhanced brand strength that bars potential entrants from getting into the industry. Indeed, the strength pertaining to the associated marketing power, as well as the identification of customers with the existing brand would bar new entrants (Kalnins, 2006). On the same note, major players in the industry often collude to ward off competition. Of particular note is the agglomeration and collusion of these players in particular regions, thereby giving customers more options and creating the impression that the areas within which they are located are safe and secure (Kalnins, 2006). This is the case for hotels in Texas, with scholars showing that major players in the industry exchange information pertaining to occupancy and price and may even collude to lower their costs so as to prevent new entrants in the market and continue their dominance.
In conclusion, the Accommodation and Food services industry dates back to the 18th century and has undergone fundamental changes in its growth. While it has several key players, they are regularly changed thanks to the intense competition. However, the dominant players often collude to bar the entry of new players, while exchanging information on prices and offerings.
References
Kalnins, A.(2006) “The U.S. Lodging Industry,” Journal of Economic Perspectives 20:4, 203-218.
U.S Department of Commerce (2007). Accommodation and Food Services: Subject Series – Estab and Firm Size: Summary Statistics by Concentration of Largest Firms for the United States: 2007 Economic Census . web retrieved from HYPERLINK “http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ECN_2007_US_72SSSZ6&prodType=table” http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ECN_2007_US_72SSSZ6&prodType=table
U. S. Census Bureau. (2012). Monthly Retail Trade and Food Services NAICS Codes, Titles, and Descriptions. 72 Accommodation and Food Services. Web Retrieved from HYPERLINK “http://www.census.gov/econ/census02/naics/sector72/72.htm” http://www.census.gov/econ/census02/naics/sector72/72.htm
