Hotel Market Structure

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Market Structure Firms may operate in different types of market structures with varying degrees of competition. At one extreme lies perfect competition which is a market with the highest level of competition. It is also used as a yardstick to assess other market structures. At the other extreme stands monopoly which represents the absence of competition and the existence of barriers to entry. In between these two extremes lies imperfect competition; these are markets where there is some degree of competition. It includes monopolistic competition and oligopoly. When comparing these market structures, we can see that the hotel industryis best suited to be a monopolistically competitive one. Monopolistic Competition for the hotel Characteristics…show more content…
At the same time, entry or exit can take place. Suppose that initially the hotel is making abnormal profit, that is, TR>TC and AR>ATC. In the long run, new hotels come in. As a result, the market is shared among a larger amount of hotels. The share of the market enjoyed by each existing hotel is lowered, implying that the hotel faces a lower demand for its services. As long as there is abnormal profit, entry continues, and the demand faced by each hotel keeps falling. The process of entry comes to an end when the abnormal profit is competed away and the hotels break-even. On the contrary, if there is a situation of loss, some hotels close down and leave the market. The market share that faces the remaining hotels is greater and there is higher demand for their services. As long as there is loss, exit continues and the demand faced by the hotel keeps rising. The process of exit comes to an end when the loss is eliminated and the hotels then break-even. The following diagram shows the long run equilibrium of the hotel under monopolistic…show more content…
It is measured as percentage change in quantity of a product demanded divided by percentage change in the price of the product. Price elasticity may help me as a manager to understand how changes in price of a product will impact the total sales of the product. This insight helps us, managers, to determine the prices of different products that will yield maximum profit for the business.In the case of the hotel, if demand is inelastic then increasing the price can lead to an increase in revenue. However, if demand is elastic, we would be unlikely to increase revenue as this could lead to a fall in revenue. Instead we could try advertising to increase brand loyalty and make demand more inelastic. Price elasticity of demand can also be used for design of other marketing policies and strategies. For example, levels of price elasticity of demand can be used as a basis of market segment and then devising marketing mix for each segment according

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