ABSTRACT
The study examined the economic recession and hospitality performance in Umuahia, Abia state. The objectives of the study are; to examine the influence of income rate on customer patronage of hotels in Umuahia, Abia state. to determine the influence of unemployment rate on customer patronage of hotels in Umuahia, Abia state, to examine the influence of cost of production on customer patronage of in Umuahia, Abia state, to examine the influence of income rate on sales volume of hotels in Umuahia, Abia state. To achieve the objective of the study, survey research design was adopted. The researcher adopted primary data in getting the required information through the use of structured questionnaire. The population of the study is up of staff of all the registered hotels in Umuahia, Abia State. However, there are thirty eight (38) registered hotels in Umuahia with five hundred and twenty employees (520) (Ministry of Culture and Tourism, Abia State). The sample size of the study is 226 after adopting Taro Yamane formula. In analyzing the data, simple descriptive statistics was used. The findings revealed that economic recession (income rate, cost of production, and unemployment rate) has significant influence on customer patronage of hotels in the study area. The findings also revealed that economic recession (income rate, cost of production, and unemployment rate) has significant influence on sales volume of hotels in the study area The study recommends that government of Nigeria should work towards reducing the rising rate of inflation and other economic crisis to encourage businesses including hospitality business in Nigeria. Also, Hospitality industry in the midst of recession should cut down their cost of operation such as reducing unnecessary expenses that are not very important to the business. That would help in improving their performance.
TABLE OF CONTENTS
Title Page
i
Approval page ii
Certification iii
Dedication
iv
Acknowledgements
v
Table of content
vi
Abstract x
CHAPTER 1: INTRODUCTION
1.1 Background to the
study
1.2 Statement of the
problem 4
1.3 Objectives of the study 6
1.4 Research questions 7
1.5 Research
hypotheses 7
1.6
Significance of the study 8
1.7
Scope of the study 9
1.8
Operational framework
CHAPTER 2: REVIEW OF RELATED LITERATURE
2.1 Conceptual
framework
2.1.1Concept of
Hospitality 13
2.1.2 Concept
of Hotels 14
2.1.3 Types of Hotels 16
2.1.4 Hotel Products 17
2.1.5 Classification systems of hotels 19
2.1.6The
Nigerian Hospitality Industry 21
2.1.7The
Causes of Recession 23
2.1.8 The
impact of Recession on Politics, Business, Employment and Social life. 24
2.1.9 Measures
to reduce the Economic Crisis Impact on
Hotels in South East Nigeria 26
2.1.10 Definition of Nigerian Hospitality Economy 27
2.1.11 The Channels of Economic Impact 28
2.1.12 Economic importance
of Hospitality Industry 30
2.1.13 Factors affecting
the hospitality industry 32
2.1.13.1 Economic influences 33
2.1.14 Economic Impacts of Hospitality 34
2.1.14.1 The positive economic impacts of the industry 34
2.1.14.2
The negative economic impacts of the industry 37
2.1.15
The Impact of Economic Crisis on Hospitality Worldwide 38
2.2
Theoretical framework 42
2.2.1 Theory of Constraints Credited 42
2.2.2 Valid theory 43
2.2.3 Keynesian Approach to Economic Recession
44
2.2.4
Recessions and Economic Theories 44
2.3 Empirical Review 46
CHAPTER 3: RESEARCH METHODOLOGY
3.1 Research
design 52
3.2 Area of
the study 52
3.3
Population for the study 52
3.4
Sampling and sampling technique 53
3.4.1
Sample size determination 53
3.4.2. Sampling technique 53
3.5 Instrument
for data collection 54
3.6 Validation
of the instrument 54
3.7 Reliability of the
instrument 55
3.8 Method of
data collection 55
3.9 Method of data analysis 55
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1 Data presentation 57
4.2 Data analysis 63
4.2.1 Effect of income rate,
unemployment rate and cost of production
on customer patronage in hotels 63
4.2.2 Effect of income rate,
unemployment rate and cost of production on
sales volume of hotels 65
4.3 Test of hypotheses 66
4.3.1 Hypothesis one 66
4.3.2 Hypothesis two 67
4.3.3 Hypothesis three
67
4.3.4 Hypothesis four 67
4.3.5: Hypothesis five
68
4.3.6: Hypothesis six 68
4.4 Discussion on findings 68
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 Summary 70
5.1.1 Restatement of the Problem 70
5.1.2 Major
Findings 72
5.1.3
Description of Methods Used 72
5.2
Conclusion 73
5.3 Recommendations 74
5.4
Contribution to knowledge 74
5.5 Suggestion
for Further Studies 74
REFERENCES
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
The hospitality industry provides
services for people who are away from home regardless of whether it is for long
or short periods of time. These services can vary according to the specific
needs of both the person away from home and the organization operating those
services (Baker, Bradly & Huyton, 2010). The hospitality industry is
important to the development of many parts of the world. In some regions,
income from it is one of the main sources of foreign exchange e.g. Fiji, the
Caribbean and Hong Kong (Baker et al, 2010). The industry is important because
it contributes to the growth of an economy by providing a lot of employment
opportunities for the people, funding a large percentage of a country’s Gross
Domestic Product, thereby helping to raise the national income and by earning
foreign currencies through the goods and services provided to foreign visitors,
thus improving the balance of payments (Baker et al, 2010).
There is no doubting that hospitality
industry is the livewire of tourism at all levels. The United Nations World
Tourism Organization (UNWTO) confirms that between 70% and 75% of international
tourists’ expenditure goes to hospitality services on annual basis (Akpabio,
2017). This confirms the strategic importance of the sector to tourism. It is
estimated that there are over a million hotels in the United States of America.
But in Nigeria, there are only about 12 internationally branded hotels (Amadi,
2018). Nigeria has so few internationally branded hotels due to the former
perception of the country as a high – risk destination for investments,
especially in hotel businesses, which are capital intensive and require long –
term for the investor to recoup his money.
Investors in hotels hardly look towards Nigeria due to exorbitant cost
of landed property and high lending rates in Nigerian banks. It is a lot easier
and cheaper to acquire land and build a hotel in USA than it is in Nigeria
(Amadi, 2018). Lending rate in USA is about 6 per-cent with mortgage of about
25 years in which investor has to pay back the money. But in Nigeria, the
lending rate could go as high as 25 per-cent, depending on who is borrowing and
for what purpose. Additionally, Nigerian banks will only give the investor
about three years to pay back.
The National Bureau of Economic
Research (NBER), defines recession as “a significant decline in economic
activity spread across the macro-economy, lasting more than a few months,
normally visible in real gross domestic product (RGDP), real income,
employment, industrial production and wholesale retail sales”. When a country
is in the phase of recession, the economy is far from the point of effective
use of resources, i.e. Far from the optimal production and the natural rate of
unemployment (Nikoloski and Lazarov, 2010) The recession has been challenging
for hotel operators not adequately prepared for a downturn – whether in terms
of the quality of the hotel product and service rendered, strong revenue
management strategies, or the diversification of their demand markets. But for operators and investors who truly
intend to be mid- to long-term players, a recession is simply part of the
cycle, and it creates myriad investment opportunities in the sector. Nigeria’s
recession seems to have bottomed out in 2016. An upswing in 2017 and beyond
will mean more growth opportunities to invest in. For investors who already
have existing hotels, this is a great period for strategic planning – doing the
research to study the market, discover demand trends, identify and possibly diversify
target markets, and reposition their properties, if necessary, and if feasible.
Economic slowdown can be harmful to
countries and has regional and sectorial repercussions particularly on the
tourism industry. Previous research revealed that it could make changes to
consumer behavior, reduce number of international tourist arrivals to countries
affected by crisis, increase unemployment rate and loss of income (Smeral, 2019).
The global economic recession in 2008 had a great effect on the economies and
industries of many developing and developed countries. The demand for the hospitality
industry had largely influenced as a result of the poor economic conditions
(Song and Lin, 2010). The economic and political crises have strong negative
consequences on Nigeria’s economy as the
Gross Domestic Product (GDP) has declined by 3.2%, the foreign debts were
increased and significant reductions occurred in employees’ wages across all
sectors particularly those working in the tourism and hospitality industry.
During economic challenges customers and firms reduce their
expenditures on travelling in which negatively influence the volume of business
(Henderson, 2017; Youn and Gu, 2019). During financial turbulence many hotel
operators are struggling to manage declining demand and how best they can
respond to the pressure to reduce tariffs. Almost all hotel categories have
experienced falls in occupancy, average daily rate and revenue per available
room in many parts of the world (kimes, 2009). Gehrels and Blanar (2012) added
that the recession lead hotels to re-consider their prices and the value
offered to customers.
The economic recession affects all business sectors in Nigeria.
The tourism and hospitality industry in Nigeria is suffering since 2011 as
reflected in its contribution to GDP and the laying of thousands of employees.
Tourism is considered one of the most important pillars in Nigeria’s economy.
According to the official estimates reported by the World Bank (2017) the
international tourist arrivals were reached its peak in 2010 accounted for 14
million tourists with international receipts from tourism 13.6 Billion US
dollars for the same year. However, these figures were reduced significantly in
the following years in which number of tourists reached 9.6 million tourists in
2014 with 30 percent reduction compared to 2010, in addition, international
tourism receipts accounted for 7.9 Billion US dollars in 2014. It can be
noticed that number of tourist arrivals in Nigeria had witnessed a major
declines since 2011. Nigeria lost about 5.7 Billion dollars as a result of the
political and economic turbulences.
The Nigerian hospitality industry is
faced with a lot of problems. Among them are: high hotel charges and the slow
pace on developing tourist sites that dot the various parts of the country
(Akpabio, 2017). Others are erratic power supply (Amadi, 2018), poor services
(Nwosu, 2018) and unethical behaviors by professionals in the industry
(Awoseyin, 2017).
In spite of these shortcomings, the
hospitality industry in Nigeria contributed N680.1 million to the Nigerian
economy in 1980, N492.4 million in 1984 (using 1984 constant basic prices for
both periods), N477.9 million in 1990, N591.9 million in 2000 (CBN, 2013),
N1950.0 million in 2004 and N2, 390.0 million in 2006 (using1990 constant basic
prices) (CBN, 2006).
An analysis of any industry must at some stage
take into account the context in which that industry exists. In more specific
terms, it is important to examine the relationship of that industry to the
government of the nation in which it functions. Government policies will
determine many of the directions the industry will take and will also have an
effect on the relationship of the industry to other industries in that nation
(Gale and Odgers, 2010) as well as the economy of the nation as a whole. It is
in the light of the above that the Nigerian economy over the years will be
considered.
1.2 STATEMENT OF THE PROBLEM
Recession is known as one
of the most significant exogenous events that threatens a firm’s existence and
continued profitability (Mascarenhas & Aaker, 2019). Since 1990, more than
500,000 firms have filed for bankruptcy in the Nigeria as a result of economic
recessions (Pearce & Michael, 2016). While a recession affects firms in
almost all economic sectors, the hospitality firms appear to be more
susceptible to economic downturns because they derive revenues mostly from
people’s discretionary consumptions (Youn&Gu, 2019). During the economic
crisis, the lodging industry faces significant challenges as both business and
consumers cut back on travel expenditures. The vulnerability of the lodging
industry to economic downturns is often reflected in the high business failure
rate in recessions.
The Nigerian economy has
not been stable over the years as it depended mainly on international economic
system in the early 1980s. This unfortunately, became increasingly hostile
(Koleoso, 2017). The economy had been seriously affected by massive devaluation
of the national currency, the Naira, by the Structural Adjustment Programme
introduced by the military.
Coupled with this is the instability
in the prices of crude oil in the international market, crude oil being the
major source of foreign exchange earning for the country. Corruption in high
and low places also took its toil on the national economy. Despite all these,
the GDP fell from N68, 246.2 million in 1980, to N62,474.2 million in 1984
(using 1984 constant basic prices for both periods) but rose to N92, 238.5
million in 1990, N121, 207.8 million in 2000, N527,580.0 in 2004 and N593, 570
million in 2006 (using 1990 constant basic prices).
Due to recession, the
productivity and profitability of the businesses has been reduced and some hotel
establishments have got liquidated. With respect to the analysis of the hotel
industry, it has been analyzed that the industry is widely influenced by
recession. It is due to the reason that the hotel industry has a direct
relation with the tourism industry and decrease in the tourist arrivals directly
influences the hotel revenues (Henderson, 2017). The occupancy rates of the
hotels and the average room rates got reduced, which affected the output from
the business operations. The hotel industry involves large amount of fixed cost
in the form of wages of the employees and billing of the desired utilities, so
many organizations focused on the cost cutting and layoffs. The consumer
behavior regarding the lodging facilities was changed and it affected the
operability of different divisions of the hotels. Financial market variations
reduced the credit availability to the hotels due to this; small business
operators in this industry got adversely affected. The level of competition in
the hotel industry was intensified and the hotels focused on differentiating
their services for sustaining their brand name as well as service quality (Youn
and Gu, 2019).
In order to become
successful in the adverse economic conditions, the hotels require integrating
their business strategy and the different divisions, so that the market
opportunities can be maximized and tapped effectively for gaining control over
the business operations in the adverse economic climate.
1.3 OBJECTIVES OF THE STUDY
Themain objective of the
study is to examine the economic recession and hospitality performance in Umuahia,
Abia state. The specific objectives includes:
(i) To examine the influence
of income rate on customer patronage of hotels in Umuahia, Abia state.
(ii) To determine the influence
of unemployment rate on customer patronage of hotels in Umuahia, Abia state.
(iii)
To examine the
influence of cost of production on customer patronage of in Umuahia, Abia
state.
(iv) To examine the influence of income rate on profitability
of hotels in Umuahia, Abia state.
(v) To examine the influence
of unemployment rate on profitability of hotels in Umuahia, Abia state.
(vi) To examine the influence of cost of production
on profitability in Umuahia, Abia state.
1.4
RESEARCH QUESTIONS
The following questions
addressed the study
(i)
What is the influence of income rate on customer patronage of
hotels in Umuahia, Abia state?
(ii)
What is the influence of unemployment rate on customer
patronage of hotels in Umuahia, Abia state?
(iii)
To what extent does cost of production influence customer
patronage of in Umuahia, Abia state?
(iv)
To what extent does income rate influence profitability of
hotels in Umuahia, Abia state?
(v)
To what extent does unemployment rate influence profitability
of hotels in Umuahia, Abia state?
(vi)
What is the influence of cost of production on profitability
in Umuahia, Abia state?
1.5 RESEARCH HYPOTHESES
The following null
hypotheses will be tested in the course of this study
H01: Income rate has no significant influence on customer
patronage of hotels in Umuahia, Abia State.
H02: Unemployment rate has no significant influence on customer
patronage of hotels in Umuahia, Abia State.
H03: Cost of production rate has no significant influence
on customer patronage of in Umuahia, Abia State.
H04: Income rate has no significant influence on profitability
of hotels in Umuahia, Abia State.
H05: Unemployment rate has no significant influence on profitability
of hotels in Umuahia, Abia State.
H06: Cost of production rate has no significant influence
on profitability of in Umuahia, Abia State.
1.6 SIGNIFICANCE OF THE STUDY
The study
will be significant to the following group of people; hospitality industry,
government, customers, students and researchers.
Hospitality
industry; the findings and recommendations of this work will help hospitality
industry to understand the impact of economic recession on hospitality
performance. The study will enable them to understand the measures to be taken
to protect the industry during economic recession. The findings of the study
will also reveal the influence of economic recession on customer patronage and profitability
in hospitality industry.
Government;
the findings and recommendations from this study will help government to set
out policies and regulations that help in reducing the rate of recession in the
country. The study will also help government to come up with support system(s)
that can help to protect industries during economic recession.
Students;
the findings of this study will educate students of this noble institution and
other institutions on economic recession and hospitality performance.
Researcher: this study
will be used by researchers who would want to research on a similar topic in
the future.
1.7 SCOPE OF THE STUDY
The
content scope is economic recession and hotel performance. The geographical
scope is Umuahia, Abia State. The unit scope is managers and staff of selected
hotels in Umuahia, Abia State.
1.8 Operational Framework
The operational framework showing the independent variable (economic
recession) and the dependent variable (hotel performance).
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