Budget Hotels In Malaysia

calculate Hotels In Malaysia uprise The parcel of touristry sphere to the stinting training is pretty evidentiary in Malaysia. And work out hotels play of import role in touristry manufacturing. Bud work over hotel is defined as a base hotel that is financed by unmatch play off individual or a pocket-sizeder group of individuals, and it is mangers argon the equivalent time its protester. by and large the traits of those work out hotels ar that the managers do non break done a formalized trouble structure. At present compute hotels ar comparatively hardly a(prenominal) in Malaysia. This study tries to catch the debate why at that place atomic mo 18 so few calculate hotels in Malaysia. We reckon that the shortage of figure hotels in Malaysia is cod to the reason able-bodiedness that optimistic externalities of cypher hotels have not been effectively internalized. Externalities of reckon hotels mean that the maturement of compute hotels pull u p stakes attract to a greater extent than tourists and those tourists will toy more c atomic number 18 for to former(a) heavenss. When a decreed outwardness exists in a grocery, the private marginal put on curve is slight than the callers marginal earn curve. With positive externalities, the achievement and consumption atomic summate 18 little than the optimal production to the society. Because the positive externalities of figure hotels have not been effectively internalized, the stimulation for bud reduce hotel owners to put up more cypher hotel service is not high up bountiful. by heart of endorseary research, we find that the hotel labor has master(prenominal) act upon on the substantial touristry manufacture and the externalities of hotel diligence overly have signifi foundationt impacts on the touristry attention. This takingss mover that in that respect is possibleness that the reckon hotel or separate hotels cooperates with fasts f rom former(a) industries and produce more value for customers and for themselves. Furthermore we dispute the involve and wants of budget hotel customers establish on Maslows speculation of valet needs, which he named the power structure of Needs. We classify the needs of budget hotel customers into three levels. The first level is rubber eraser, the second level is necessary facilities and the third level is the pursuit of happiness. whence we treat how budget hotels should put to death gibe to the three levels of needs. At last we discuss how a budget hotel is able to control its service fictional character so as to attract customers and establish customer loyalty. We designate that maven device characteristic of hotel fabrication is that the monitoring constitute is precise high and m whatsoever behaviors of the servants cannot be easily observed. It indicates that stimulation may be much more beta than penalty. Under much(prenominal) a situation, the sense of re sponsibility is of great vastness in the cordial reception industry. We argue that the sense of responsibility may eject from mature communication betwixt employees.Keywords Budget Hotel Externality Tourism manufacturing Co featContents 21. Introduction 32. Objectives of this newspaper publisher 53. publications Review 63.1 harm supposition 63.2 Determinants of tourism involve 83.3 Externalities of cordial reception industry 94. Theoretical Framework 104.1 Classical Price Theory and Hotel Price 104.2 Externalities of Hotel Price and Cooperation surrounded by Industries 115. Research Methodology 131. IntroductionTourism is serious for the economic knowledge of many countries including Malaysia. The contribution of this sector to the economic development of Malaysia was 37% of GDP in 1970, and increased to 43% in 1980, 47% in 1990 and 53% in 2007 (Abdullah et al. 2011). In addition, the growth rate of this sector has been pretty fast. The average annual growth rate was 9% during the 1970s, closely to 7% in the 1980s, and 8.5% during the almost recently. Figure 1.1 provides this trend with concrete information of arrivals and receipts of tourism industry in Malaysia. The significant importance and the rapid growth rate of tourism industry regard a much great contribution of tourism to the economic growth of Malaysia. It is conceptualiseed that the contribution of the go sector to GDP will increase up to 60% by 2020. The Malaysian g overnment activity has recognized the importance of tourism industry and has placed the development of tourism industry at a very(prenominal) important place. At present, tourism has been designated as a priority sector in the Ninth Malaysia Plan.Figure 1.1 the Arrivals and Receipts of Malaysian TourismThe Malaysia government tries to promote the development of this industry. except how could we improve the development of tourism industry? The first attention may be foc utilise on the development of hotels or cordial reception industry. The reason is that accommodation fee takes a very important weight in the outlay of tourists, which implies that the development of hotels will jell great captivate of tourism industry. The second consideration is that hospitality industry is related with many other(a) industries. Hospitality industry is a long industry, including not only hotels but also transportation, restaurants and so on. Without any hesitation, the hospitality industry is related to every aspects of batchs daily life. The correlation in the midst of hotels and other tourism sectors indicates that the whole tourism may benefit more if the hospitality industry could cooperate well with other related sectors. Therefore we truss the opinion that to promote the development of hotels and to consider innovation in strategies of hospitality industry is fairly important to promoting the development of tourism in Malaysia.In this study, we focus on issues related to budget hotels, because budget hotels play important role in tourism industry and the budget hotel industry has not developed very well in Malaysia1. According to the existing research, sm on the whole and mediate enterprises, including budget hotels, ar very important in tourism industry and all the business industries. For spokesperson, Abdullah (2011) find that unfluctuatings with less than fifteen employees measure for around 79% of all Irish tourism businesses, which is a characteristic of the tourism sector in many other countries recently. Sheldon (1993) find that over 90% of tourist accommodation establishments atomic number 18 represented by small firms in the world. And a similar dominance is reflected within Malaysia where owner operators rate for the majority of all hotels. Morrison (1996) argues that the tourism industry has been dominated by the small business traditionally and this is still the fact in 1990s. There argon several reasons leading to the popularity of small hotels . The first reason is the low benchmark of entering into the budget hotel sector. It is not difficult to start up a small hotel business and the professional requirements related to this sector are relatively low in with regard to other industries (Lerner Haber, 2001 Szivas, 2001). The second reason is that exact for small accommodation is high, which enables small hotel providers to offer a wide musical note range of products, facilities and circumscribed services to the market. The third reason is the flexibility of budget hotels. Budget hotels are small and the small size allows an owner-manager to respond pronto to pack shift and market change. In addition, the appeals of budget hotels are relatively low because of the advantage of using family labor (Getz Carlsen, 2000 Lowe, 1988). Because budge hotels are very important in hospitality industry and hospitality industry is pretty significant for tourism industry, it is necessary for us to make enlighten the influence o f budget hotel on tourism.Before analyzing the influence of budget hotels on truism industry and discussing the management of budget hotels, we need to make clean-cut the definitions of hotel and budget hotel. A hotel is an establishment providing accommodations and usually meals and other services for travelers2. largely there are several categories classifying hotels. close to oftentimes we may fraction hotels into devil subgroups, including star hotels and budget hotels. According to the view of Kim and Mauborgne (1997), there are two market segments in the budget hotel industry and the star hotel industry. jumper cable hotels are everydayly more expensive than budget hotels epoch providing more services. Most star hotels have roughly comforts under plastered star grade system, which usually includes private bathroom, color TV, telephone, air conditioner, refrigerator, base hit deposit box, daily maid service, 24 hours front desk. The lowest level of star hotels i s the one-star hotels, which are the most elementary hotels providing all the basic amenities for all star hotels. But the rooms of one star hotel are relatively small. Some one-star hotels even do not provide refrigerators and safety deposit boxes. Budget hotels cannot be classified into those standard star rating systems and they are characterized with low terms while providing less facilities. Generally these hotels do not offer ancillary facilities on top of the standard basic accommodation facilities. Maybe they are not clean enough, safe enough and do not supply some matter that you consider as essential for your stay. But many of the budget hotels have their own characteristics which depend on the operation of its managers.But the definition shown above is generally used in other countries than Malaysia. In Malaysia, budget hotels may provide better services than one-star hotels. For case, Malaysia Budget Hotel Dot Com (MBHDC), is an organization uniting some budge hotels, and it specializes in providing high quality and lowest impairment budget hotels in Malaysia (3 Stars and below)3. In the cause of this organization, cheap hotels, youth hostels, low cost resorts, motels, guesthouses and rest houses are all in the category of budget hotels. Based on the definition of Morrison (1996) on a small tourism business, we may define a budget hotel as a small hotel that is financed by one individual or a small group of individuals, and it is mangers are the same time its owner. Generally the characteristics of those budget hotels are that the managers do not operate through a formalized management structure. It is not affiliated to an external agency on a continual basis for at least one management function. In addition, it is small in terms of physical facilities, service capa urban center, and number of employees.The main pur tick of this paper is to label the influence of hotel industry on the whole tourism industry, and to seek the possibility of mak ing innovations in budget hotel industry, which may improve the development of tourism industry of Malaysia. This study tries to find the reason why there are so few budget hotels in Malaysia. We interpret this phenomenon with theories of footing and externalities. It is found that the reason for the lack of budget hotels is that the positive externalities of budget hotels have not been effectively internalized. Externalities of budget hotels means that the development of budget hotels will attract more tourists and those tourists will diddle forth more value to other sectors. Because the positive externalities of budget hotels have not been effectively internalized, the stimulation for budget hotel owners to supply more budget hotel services is not high enough. Through secondary research, we find that the hotel industry has important influence on the whole tourism industry and the externalities of hotel industry also have significant impacts on the tourism industry. This result s means that there is possibility that the budget hotel or other hotels cooperates with firms from other industries and produce more value for customers and for themselves. Furthermore we discuss the needs and wants of budget hotel customers based on the hypothesis Maslows levels of human needs, which he named the Hierarchy of Needs. Then we discuss how budget hotels should perform according to the three levels of needs. At last we discuss how a budget hotel is able to control its service quality, attract customers and establish customer loyalty.2. Objectives of this paperDefining budget hotel and compare unlike concepts.Analyzing the influence of budget hotel charge on tourismUnderstanding customers wants and needs in relation to budget hotel accommodationInvestigating quality and regularitys to retain customer in budget hotelsAnalyzing principles establishing brand loyalty for budget hotels.3. Literature Review3.1 Price TheoryThis study tries to find reasons why there are so fe w budget hotels in Malaysia. Because the supply of budget hotels is ad in effect(p)ed by wrong in a market economy, we need to use a meet determine surmisal to relieve this economic phenomenon. Therefore we need to pick out a beat out equipment casualty theory that is able to help us to gain deep dateing nigh the shortage of budget hotels in Malaysia. Economists have for a long time been aware of the importance of value and try unalike ways explaining the mechanism of outlay formation. The existing economic thoughts on equipment casualty are so rich and colorful that we often feel confused when evaluating different kinds of legal injury theories. The evolution of price theory can be classified roughly as three classes, including Marxs theory of value, economic price theory and accounting theories of pricing.In order to understand the evolution of price theory, we need to start thinking from the transmute behavior. The reason of choosing exchange behavior as the start ing point is that exchange is the creation of the market economy. Exchange behavior is the most common phenomenon in a market economy. In fact there is no price if there was no exchange. But why do we exchange with others? Intuitively, we can get more utilities through exchange. In the process of exchange we can get something useful from others, at the same time we must be able to provide something useful for others. Otherwise the deal cannot be done. The great unstained economists like turn Smith and Karl Marx had paid much attention to exchange behavior. In his famous book An Inquiry into the Nature and Causes of the Wealth of Nations Adam Smith (1776) wrote down the following words, which have been quoted by numerous economists. adult male has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their almsgiving only. He will be more likely to take to the woods if he can interest their self-love in his favor, and show them that i t is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me what I want, and you shall have this which you want, is the meaning of every such offer and it is the manner that we obtain from one another the far greater part of those good offers which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We shroud ourselves, not to their humanity but to their self-love.Smith saw the pretty positive aspect of the market economy of compelling people to cooperate with apiece other through exchange. Smith recognized that to propose an exchange is intending to show other people that your goods or service is useful to them. When you finished exchange, it means the other person recognizes that your goods or service is of value. Exchange can be considered as the fundamental factor of the market ec onomy.Karl Marx does provide a special way explaining value and price although Marxism is generally considered a way of loving and transforming social reality (Tinker, 1999). Marxs theory of value is based on the analytic thinking of exchange behavior. Karl Marx started his epitome on capitalism from the definition of commodity which was obtained from his analysis of exchange behavior. According to Marx commodities are the fundamental units of capitalism and capitalism can be viewed as a form of economy based on the intense accumulation of such objects (Bourguignon, 2005). He also pointed out A commodity is, in the first place, an object outside of us, a thing that by its properties satisfies human wants of some sort or another (Karl Marx, 1887). subsequently noting that commodity exchange, Marx turned his attention to the question why we are able to exchange two different products? His rejoinder is that there must be comparable thing between the two different products. Therefo re people are able to decide the exchange ratio based on the amount of the comparable thing in the two different products. If this is true, thus what is the comparable thing? Marx thought it is labor4. Although different products have different uses, they are all made through labor. The labor contained in a product is the value of this product. If one product cost more labor, therefore this product is more valuable. This is a perspective from cost. This analysis is reasonable at that time, but when the productivity becomes so advanced that a quite a little of different factors besides labor, such as technology and management skill, begin to make greater contribution to production, Marxs theory of value is hardly able to interpret various complex economic phenomenon.Then another class of price theory was developed and become more attractive. That is the price theory based on the concept of usefulness. The framework of utility-price theory became well established when economics w ent into the 20th century with the development of mathematical analysis (Sandmo, 2010). A lot of economists moved their interest from cost perspective to sense of sense of balance perspective when analyzing the price formation mechanism. In this framework the price of a commodity is resolved by the equilibrium of contract and supply. beseech of a product reflects the utility of a certain product to some consumers, while supply reflects the cost of producing this product. If supply superiors ingest, so price will go down. The result is a pooh-pooh supply and more demand, which may lead to equilibrium between supply and demand. If demand superiors supply, then price will go up, which results in more supply and less demand. Equilibrium between supply and demand is also possibly to be realized (Mankiw, 2004). The price at the equilibrium is the equilibrium price. This price theory is widely accepted and applied to explain different kinds of price fluctuations.The neoclassic equi librium theory of price is primarily static, which is hard to explain some modern price formation process, for example pecuniary asset pricing. As the development of productivity, mainly the development of financial techniques, some new price theory taking time and future(a) into account is necessary. Therefore a new class of theory, the core of which is the reckoning of present value, has been developed to meet this demand. The theory argues that the value of an asset is decided by the future cash flow that this asset is able to bring (Jones, 2006 Thomas and Ward, 2009). And this theory has been applied widely to the pricing of financial or other kinds of asset.Because the entering benchmark of budget hotels is very low, the supply of budget hotel is mainly decided by demand. And this problem is not a projectile pricing issue. Therefore, the neoclassical price theory is the shell to be used to explain the shortage of budget hotels.3.2 Determinants of tourism demandBecause the supply of budget hotel is mainly decided by demand, we need to know more about determinants of tourism demand and know how to forecast the demand. It has been widely recognized that sinless forecasts of tourism demand is pretty helpful for managerial decision making. genus Sagittarius (1987) argues that in the tourism industry the need to forecast accurately is peculiarly acute because of the perishable nature of the product. Unfilled airline seats and smart hotel rooms cannot be stockpiled. Some scholars, such as Edwards (1985), publish some predictions for certain countries. There are also some organizations in the tourism industry that publish confidential predictions on tourism demand. There are a lot of review articles on tourism demand up to now, including Crouch (1994),Witt and Witt (1995), Lim (1999), Li et al. (2005), and Li and Song (2008). According to the reviews, the methods applicable to analyzing the influence of the determinants of tourism demand are relatively limited. Multiple regression method is the main methodology in this analysis (Witt and Witt, 1995). Tourist visits may relegate for several reasons, including holidays, business travel, visiting friends or something else.The majority of existing studies of tourism demand analyze each total tourist trips or just holiday travel, with only a few concerning on business travel. In the empirical writings, tourism demand is generally measured by the number of tourist visits from an origin pastoral to a foreign name and address country (for example, Turner Witt, 2001 Kulendran Wong, 2005 Coshall, 2005 Rossello, 2001). An alternative measure is the tourist nights spent in the destination country. The third measurement is the expenditure of tourists in the destination country (such as Li, Song, Witt, 2004, 2006 Li, Wong, Song, Witt, 2006). But up to now there has not been a beat method for tourism demand analysis (Li and Song, 2008). With regard to the researched countries, USA, UK, and France are the most popular researched countries while the research on Malaysia is very limited.The quantitative literature on tourism demand can be divided into two classes, including non-causal time-series models and the causal econometric methods, the difference between which is whether the model identifies any causal blood between the tourism demand and its influencing variables (Li and Song, 2008). The causal econometric methods are useful for the present study. In the review of Li and Song (2008), there are 121 empirical papers on tourism demand in total. Among those literature, 72 used the time-series techniques to model the demand for tourism, while the others employ econometric techniques analyzing the causal relationship between tourism demands and explaining factors.3.3 Externalities of hospitality industry whiz major hypothesis of this paper is that the shortage of budget hotels in Malaysia is due to the reason that the externalities of budget hotel have not been well internalized. An externality is a cost or benefit that is not transmitted through prices or is incurred by a party who was not involved as either a buyer or seller of the goods or services make the cost or benefit (Bishop, 2012). We can understand externality as a consequence of an economic activity that is experienced by uncorrelated third parties. We can classify externalities into two categories including positive externalities and blackball externalities. An example of the negative externality is pollution. A negative externality happens when an individual or firm does not need to pay the full cost of its production. If a good or service has a negative externality, it implies that the cost to society is larger than the cost paid by consumers. Because consumers make consumption decisions according to their own conditions, meaning they try to make their marginal cost equal to their marginal benefit, without considering the cost of the negative externality, negative externa lities will cause market inefficiencies where too many goods or too much service are produced. A positive externality occurs under the situation that an individual/firm makes a decision without receiving the full benefit of production. The benefit to the individual/ firm is less than the total benefit to the society. Therefore when a positive externality exists in a market, the private marginal benefit curve is less than the societys marginal benefit curve. With positive externalities, the production and consumption are less than the optimal production to the society (Mankiw, 2011).There has been a lot of literature discussing the impacts of externalities on different industries or economic activities. For example, Katz and Shapiro (1985) provide an analysis on the influence of externalities on the competition in several important markets. They find that if there are externalities, then consumers expectations can influence the structure of the market equilibrium in their model. Azar iadis and Drazen (1990) find that externalities can influence the accumulation of human capital. Henderson (1997) employs panel data for five capital goods industries and estimates dynamic externalities. He concludes that externalities pose significant influence on capital goods industries. Warziniack et al. (2009) develop a general equilibrium model measuring public assistance effects of taxes for correcting environmental externalities and evaluate the impacts of externalities arising through exports. They find that externalities from exports are resulted in a number of sources. They argue that taxes on the sector imposing the environmental externality often presents more negative effects than positive effects. There are many other literature studying the influence of externalities on other aspects of an economy, such as Devereux et al. (2007), Acharya and Volpin (2010) and Foster (2012). But there have been few papers on the externalities of hospitality industry on the developmen t of the whole tourism industry.Most of the researches on externalities in tourism industry are related to city planning, location setting or taxes. For example, Chang et al. (2011) analyze the congestion externalities caused by tourism expansion and the wealth effect generated by the revenues from overseas tourism taxation. Schubert (2010) studies optimal taxation (subvention) when tourism is associated with multiple externalities. Chao et al. (2004) examine the welfare effect of tourism on the host economy. They identify three channels influencing domestic welfare by tourism, the most important one of which is the social externality come with with tourists. Calveras and Vera-Hernndez (2005) place great emphasis on the presence of quality externalities among hotel establishments when they explore the role played by the tour operator in quality investments. These existing researches are helpful for my analysis of the externality effect of hospitality effects on the whole tourism i ndustry and the welfare of topical anesthetic residents in Malaysia.4. Theoretical Framework4.1 Classical Price Theory and Hotel PricePricing is an art. How to set the price of a good at the best level and achieve the most meshing is a hard gainsay for any manager in any business field including the hospitality industry. According to the classical price theory of Economics, price is related to two aspects of goods and services supply and demand. Price has a positive relationship with the supply of goods and services. The reason is that profits would be thick if price if high. As a result of the thick profit, more and more firms will enter this industry and supply more goods and services. At the same time, price has a negative supply with demand of goods and services, because a high price means a high cost of consuming the goods or service for the consumers. The positive relationship between price and supply and the negative relationship between price and demand implies that an eq uilibrium market state will finally be realized. Market equilibrium means that supply and demand of goods and services are equal to each other. The price at the equilibrium state is named equilibrium price. When price is higher than the equilibrium price, it means that demand is larger than supply. At this time, firms will provide more goods or services and price will go down. Similarly, when price is lower than equilibrium price, supply is larger than demand. Then firms will supply less because of the low profits, as a result of which price will go up. This theory fits the normal goods market the best, while remains limited exploratory power for luxury goods market and some other markets. Since hotel is a normal goods instead of luxury goods, the classical price theory in Economics is useful in the studying the price of budget hotel.In this paper one our main objectives is to analyze the influence of hotel pricing on the whole tourism industry. In order to answer this question we m ainly analyze from the demand perspective, which means that hotel price influences the demand of hotels and the demand of tourism. The reason is that accommodation fee is the majority of tourism expenditure for most of the tourists. If hotel price is too high, fewer tourists will come and the demand for hotels becomes lower. And there is a second perspective that hotel price also influences the welfare of topical anesthetic residents. If the hotel price is set to be very low, then the profits of the hotel and the wage of local anesthetic workers must be low, which implies that the welfare of local residents is low. As a result, there must be a best prime(prenominal) of price which is able to maximizing the welfare of local residents, and a best price that maximizes the profits of hotels.Price measuringSupply CurveDemand CurveFigure 4.1 Classical Price Theory4.2 Externalities of Hotel Price and Cooperation between IndustriesBut there is a difference between the best price for local residents and the best price for hotels. The best price for hotels should be the one that is able to maximize the profits of hotels. This price is not necessarily the price maximizing the welfare of local residents. The price maximizing the welfare of local residents is the one that maximizing the gross income instead of profits of hotels.The difference between hotels best price and local residents best price exists because of the externalities of hotels. An externality (or operation spillover) is a cost or benefit that is not transmitted through prices or is incurred by a party who was not involved as either a buyer or seller of the goods or services causing the cost or benefit. The externalities of hotels can be understood as the influence of hotel price on other sectors or industries. For example, if the hotel price decreases, then more tourists will come to Malaysia for sightseeing because of the cost becomes lower. More tourists imply more demand for local restaurants, entert ainment industries and some other sectors. Similarly, if hotel price increases, fewer tourists will choose to spend their holiday in Malaysia and the local restaurants and entertainment or other industries would benefit less from tourism.PriceQuantitySupply of HotelDemand of HotelDemand of TourismFigure 4.2 Externalities of Hotel PriceThe system of logic of externality indicates that if the hotels and other sectors could cooperate well, the whole tourism industry would benefit more from the increase of tourists. Imagine that if the hotel price is set to be lower than the present level, which will attract more tourists and those more tourists may bring more spending on local goods and services. Those incurred spending may punish the tone ending of hotel revenue. It means that the total benefits of local tourism increases although at the cost of hotel revenue decrease. A good cooperation between the hotel industry and other industries means that other industries are able to transmi t part of the incurred revenue to hotel industry and share the increased revenue with hotel industry.There are some examples illustrating this good cooperation in tourism industry. In some states of Malaysia, the scenic spots are free and tourists do not need to pay gate tickets. The loss of tickets income leads to higher income of ot