Economics of Hotel Industry

Economics of Hotel Industry
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Introduction
The hotel industry is not immune to the global economy problems, because the resort town of Leysin in Switzerland depends on both locals and foreign tourists to flourish. Since the global recession started in 2008/ 2009, there has been slow down in the hospitality industry. Recession is associated with contraction of the economy and the business cycle phase and the recovery has been slow. The global recession was also accompanied by slowdown in investment, and consumer spending with the two having a direct effect on Hotel “Glorious” because of a fall in the demand of the hotel’s services. The appreciation of the Swiss Franc has mostly occurred because of the Euro crisis, and the country has been losing visitors to Austria, France and Italy (Falk 2014, p. 101).
Effects of global recession on demand
The global recession had a more long lasting effect on the global economy, being the most serious recession since the Great Depression in the 1930’s. The direct effects was that there was higher consumer debt, rising unemployment and stagnant wages and income meaning which all directly affected consumer spending in the hotel and catering sector. Similarly, the rise in the Swiss Franc led to more cautious spending from outsiders who contribute a big percentage in the growth of the hospitality industry. Overall the hotel industry is driven by GDP trends in Switzerland, and this influences the market forces of demand and supply (United Nations., & United Nations Conference on Trade and Development, 2010).
GDP=Consumption+ Investment+ Government Spending+ (exports-imports)
There is leftward shift in the demand curve following a fall in consumer spending, while an increase in the spending would have led to a rightward shift of the demand curve. In essence, the leftward shift in the demand curve shows that there is a decrease in spending which coul...