In the past, the society was an extremely diverse, heterogeneous mosaic composed of isolated social units. Each of these entities had independent and self-sufficient economy, its own culture and preserved its unique identity, which did not overlap and was not commensurate with the rest. Though the cycle of globalization, according to Palmer (2009), started in ancient times, there’s an entirely different picture in the modern society.
Nowadays, there exist supranational units of various sizes: political and military alliances (e.g., NATO), imperial sphere of influence (e.g., former socialist bloc), coalition of ruling groups (e.g., “Big Seven”), continental or regional associations (e.g., European Union), global international organizations (the United Nations and its specialized units). Gupta (2008) marks that he contours of the world government are also noticeable, when a number of important functions are performed by supranational institutions (e.g., European Parliament, the International Tribunal or Interpol) as the signs of increased homogeneity in all the spheres of development. In the economic sphere, the importance of supranational coordination and integration is increased (EFTA, EU, OPEC), as well as the importance of regional and global economic agreements. Finally, uniformity becomes the dominant trend in culture. Local cultural traditions become blurred, and mass consumer culture becomes “universal”, spreading across countries and continents.
Globalization is often associated with new economic and technological processes. It eliminates barriers to the movement of capital, technology, intellectual achievements, information and skilled labor. This allows us to better focus resources in promising directions on a global scale. However, the growing interdependence increases the vulnerability of the world system from local and regional instability, terrorism, proliferation of weapons of mass destruction, disruption of information systems, etc. (Friedman, 2007; Ritzer, 2009)
But this is just a part of a complex picture. Globalization is changing, sometimes radically, the factors of successful social and economic development. We agree with Gupta (2008) that globalization implies the restriction (or even disappearance) of an opportunity for the government and whole society to develop in a special way. The essence of Friedman’s concept (2007) also lies in the application of the globalization theory to this conflict. For him, globalization means adapting educational, financial and governmental institutions of a country or region to the international market requirements for successful competition in the global economy.
As a result of international cooperation of production, international division of labor, international trade and economic relations as a whole, the strengthening of linkages and interdependence of national economies is observed, while their normal development becomes impossible without an external factor.
Globalization and Hospitality
In the second half of the 20th century, tourism rapidly became the largest sector of the global economy. By the end of the century in its turnover and profitability, it was already competing with oil extraction and refining, and automobile industry. For the past two decades, globalization, spreading of information technologies, and the development of vehicles in the world have given tourism a rapid dynamics of development, so that in the next decades it could become the world’s leading industry (Go and Pine, 1995; Wood and Brotherton, 2008). The importance of tourism in the modern world is constantly growing, and, according to experts (Bowie and Buttle, 2004), the 21st century will be the century of tourism. This is one of the main reasons for serious investments into the hospitality industry.
Today, the hospitality industry is the industry with an increasing level of competition in the market of hotel services. Globalization and concentration of the hospitality industry have manifested in the creation of large corporations and hotel chains. This approach allows hospitality companies to regroup and attract additional resources to grow their business.
A vivid example of the creation of TNCs in the hospitality business is an integrated hotel chain (Yu, 1999; Wood and Brotherton, 2008). Most of major hotel chains have headquarters in the U.S., although from year to year, the role of other countries in the management of the hotel business is increasing. Most famous hotel chains managed in the USA include Hospitality Franchise System (4400 hotels in 6 countries), Holiday Inn Worldwide (2031 hotels in 62 countries), Best Western International (the number of 3401 hotels in 60 countries), Marriott Hotel (3150 hotels in 67 countries), etc. (Bowie and Buttle, 2004; Clarke and Chen, 2007 ). Among other countries having the headquarters of hotel chains, can be noted France (Accor, Club Mediterranee), UK (Forte Hotels, Hilton International), Germany (Robinson Club GmbH), Spain (Grupo Sol Melia) (Pizam, 2005).
World practice convincingly proves that investment in the hospitality industry by its returns is comparable to investments in oil production. Economic analysis of hotel sector confirms the efficiency of investment into hotel chains, rather than in separate hotel management. In world practice there are two main types of hotel chains: the integrated chains made of uniform units, and hotel consortium that unites independent hotels.
Under franchising contract, a large firm or company (franchisor) transfers its rights to use the brand, marketing systems, marketing and central room booking, operations management systems to a franchisee, who obeys franchisor’s management criteria, maintains its standards of service and comfort, pays a fee of 3-4% of turnover for the agreement, and also makes an initial contribution of about 30% (Wood and Brotherton, 2008; Bowie and Buttle, 2004). Franchisor under franchise contract transfers its service standards along with its reputation. The company provides its technology in exchange for investments. It helps a franchisee in organizing publicity events and advices on purchasing equipment, as well as on training the staff (Bowie and Buttle, 2004).
In France, for example, franchising system develops in one- and two-star hotel sector. With this system, two-star hotel chains (“Arcadia”, “Ibis”) and one-star chains (“Balladins”, “Formule 1”) built hundreds of hotels over the last decade. This success can be related to the policy of French hotel chains, which consists in attracting franchisees by a small initial contribution of $270’000-540’000. In the U.S., franchise system is actively used by such renowned hotel chains like “Holiday Inn Worldwide” and “Radisson Hotel” (Pizam, 2005).
According to Go and Pine (1995), in order to resist competition from integrated and franchised chains, independent hotels unite in hotel consortia.
The concept of a hotel consortium in recent years has become very popular, and the number of consortia has increased significantly (Yu, 1999). The world largest hotel consortium is an American chain “Best Western International,” numbering 3,350 hotels and 270 thousand rooms. Membership fee in this international hotel consortium makes 1% of turnover after taxes. France is Europe’s largest hotel consortia owner. Twenty consortia of different sizes make up a quarter of all hotels in the country. The largest one, “Le Lodge de France,” provides 60% of the total number of proposals and unites nearly 70% of all consortium members in the country. In the UK, syndicated hotels provide 60% of the total hotel room supply, that is, the quarter of the market (Pizam, 2005).
Under the contract, chain members are expected to follow specific internal standards of the chain. Internal standards suggest centralization of a number of organizational and business functions of enterprises joining the hotel chain and may include a variety of activities (Yu, 1999; Bowie and Buttle, 2004). For example, the development and use of a common logo and brand image, the proliferation of promotional materials around the world, the inclusion of hotels into the international computer systems for travel services booking, the design of hotels, including corporate identity, design of facades and interiors of the rooms, staff training and retraining, professional development, HR management and others (Katzenbach, 2000; Boella and Goss-Turner, 2005). Payment to the hotel chain managing company is implemented through allocations of a certain part of turnover or of the total amount of profits. There are also fixed sum payments or a combined system of payment.
Thus, well-known corporations have developed rules and standards to ensure the originality of style and script of customer service of all the hotels of the chain despite their location (Pizam, 2005). Hotel enterprises are concentrated through the creation of unions or associations that do not violate their legal and economic independence, but also allow them to conduct joint marketing programs, make research, create a unified (global) system of training and retraining of human resources (Katzenbach, 2000; Boella and Goss-Turner, 2005).