As all other countries, Lithuania experienced strong economic recession caused by a decline in both external and internal demand. It affected GDP, budget revenues, public sector and unemployment level. According to this situation, government “focused on balancing the budget and instituted overnight tax reform and drastic cuts in public sector and social benefits” (Piasecka, 2010). Value Added tax (VAT) for the hotels was reduced rate of 9%, but on the December of 2011 Parliament increased it to 21% and such a decision can affect from negative side as country can lose the level of competency in cheap price but high quality meaning, moreover it can suspend foreign direct investments as hospitality sector is not competitive as it was before and also it can reduce salaries and even number of working places in this sector.
Talking about corruption level in the country, three quarters of the population still believe that unofficial payments are effective and two thirds are ready to give bribes (Piasecka, 2011). Moreover, according to statistics and investigation in 2008, in Lithuania envelope wages are extensive (11%) and paid to employees more for their regular hours and for those who works in service sector (Williams, 2008). The Parliament is taking some actions to control corruption level in the country and in 2009 updated the national anticorruption program with clear tasks and objectives.
Economic environment
The economy of Lithuania was one of the fastest growing in the world in the period of 1998 to 2008, as the GDP was positive 9 years (Schwab, 2009). Current political and economic environment is stable and according to Mintel (2011) GDP growth rate is expected to remain high. “ As the result of cheap credits, provided by Scandinavian banks to Lithuania, the current account deficit had risen 15% of GDP in 2007- 2008, recovered to a surplus of 4% in 2009 and 3.5% in 2010” (Mintel, 2011).
According to the World Bank’s “ Doing Business in 2012” Report, Lithuania ranks 27th out of 183 countries, but country fell 12 positions down from 2011 in the starting business category of rating. It is shown in the report that Lithuania goes ahead of such big countries as Belgium, Netherlands, France and Slovenia. It shows that such a small country is a potential market for new businesses and can even compete with other European leaders.
Talking about role of Hospitality and Tourism in Lithuania’s economy, according to World Travel and Tourism Council (2011), direct contribution of Travel and Tourism to GDP is expected to be 1.5% of total GDP in 2011 and is expected to support directly 20 000 jobs in the same year. Numbers show good results, however Government decision to increase VAT rate for hotels can stop this grow in 2012.
Social and Cultural environment
According to Invest in Lithuania (2010), country has “twice as many people with higher education qualifications as the EU-15 average and the proportion is the highest”. Moreover, 90% of Lithuanians speak at least one foreign language and half of the population speak two, such as Russian, English or Polish. This statistics is really favourable to hospitality sector as the main tourists in Birstonas come from neighbouring countries as Belarus, Russia, and Poland.
Furthermore, Lithuania prepares good physical therapy specialists, doctors in such universities as Kaunas University of Medicine and Lithuanian Academy of Physical Education. Also, there are 3 higher education schools teaching Tourism Management, Hotels administration. However, customer service level, hospitability and friendliness are still not the strongest part of Lithuanian employees.
Country became one of the winners of “The Developing World’s 10 Best Ethical Destinations” in 2009/2010.This award is given to countries by focusing on three general categories like Environmental Protection, Social Welfare, and Human Rights. Rating Environmental Protection, Lithuania was scored well because of environmental health, air and water quality, and sustainable forestry practices. In social welfare ratings Lithuania had the highest rates in “Civil liberties enjoyed by citizens of their Country”. Moreover Lithuania’s got the best ranking in political rights and it was mentioned that country has a very high level of Freedom of The Press (ethicaltraveler.org).
Technological
Lithuania has the fastest Internet speed in the world and is one of the leading countries in terms of Internet service quality (Invest in Lithuania, 2009). Lithuanians are presented as inventors and innovators, as 40% of talent concentrated in science and technology (Invest in Lithuania, 2010). On the other hand, though development of technologies proceeds and Lithuania achieves in such fields as creating cheaper but effective treatment from cancer; quicker way to cut genes; lasers, however these are rare cases. According to Jarzemskis et al., (2008), Lithuania has enough resources for innovations, but the connection between universities and business is poor and not controlled. One more important thing is that country is based on small and medium enterprises and those companies cannot afford big investments in new technologies and innovations. The same situation is with hotels, as small hotels in resorts cannot afford to show themselves in foreign markets, there is not enough finance to invest in marketing and new innovative systems. On the other hand, Lithuania is able to provide high quality business services as country has well-educated, multilingual workforce and strong telecommunication infrastructure.
Country’s transport infrastructure is based on 3 commercial airports; port in Klaipeda, and Railway. Kaunas International Airport is one of the biggest in the Baltic States, and as it was mentioned before, it handled 809 732 passengers during 2010 (Kaunas Airport, 2011). This Airport is presented as the fastest growing airport in Baltic States and there some forecasts, that it will handle up to one million passengers in 2011. There is one really good point, as country presents itself as low cost tourism destination, to reach this country from other Europe cities is possible by using low-cost airline Ryanair and the journey is approximately 2.5 hours flight from other Europe countries as Lithuania is in the centre of Europe. Moreover, Birstonas resort is only half an hour journey by car from Kaunas Airport.
Railway transport in Lithuania provides long-distance passenger services and it has direct routes link Lithuania with Russia, Belarus, Latvia, Poland and Germany. As it was mentioned before, the main tourist flows are from these countries, so it is very useful to have highly developed rail network as it can attract more passengers to Lithuania.
Talking about port of Klaipeda, it is important to mention that it is a regional transport hub connecting Lithuania and west. However, country is still not so popular destination between Scandinavian countries and it does not attract huge amount of travellers through this port. On the other hand, Birstonas Tourism Information Centre is trying to co-operate with Norway, Sweden and to promote this resort as weekend destination for relaxation and SPA procedures.
Environmental analysis
The concept of sustainable tourism is still new in the country. Lithuania does not have an Eco label for tourism as Estonia or Latvia does. But looking in the country from European context, it can be seen as Lithuania has retained its landscapes, cultural history because protected areas have been established. The sustainability of the areas is maintained through restrictions and protection. Legislative acts include National Sustainable development strategy, Law on spatial planning and regulations of National and regional parks (Calypso study, 2010).
Country is promoted as briefing Europe’s cleanest air and also it is recognised as greenest among the new EU-members (Invest Lithuania, 2010). Moreover, Lithuania’s climate and nature is beneficial for recreational tourism because of natural resources – climate, lakes, rivers, parks and forests (Grundey, 2008). Birstonas resort is the oldest one in Lithuania and it is known not only for mineral water, curative mud but also for nature, forests and fresh air. Moreover, it is situated in the Nemunas Loops Regional Park which is unique for its landscape formed by a river.
Competitive analysis
Accommodation market
As it was mentioned before, Birstonas resort is popular for relaxation, rehabilitation procedures, natural and unique environment and the best place to relax and to be with a nature. The main attractions in the city are SPA procedures, skiing, sightseeing tours and traditional markets.
According to 2011 3rd quarter Birstonas Tourism information centre statistics, 73% of tourists were Lithuanians and only 27% visitors from abroad. The main tourist types are families, older people or young couples, who come for a short period as a day or weekend to enjoy relaxation procedures, sightseeing.
The main accommodation competitors in this city are 4 and 3 stars hotels, guest house, 2 sanatoriums and private sector (private flats for rent). To get deeper view of the competitors, I will describe them one by one:
- 4 stars “Royal Residence” is positioning itself as Royal Residence for seniors; they are renting and selling apartments together with SPA procedures and nursing services. Besides, the residence offers business and leisure services for companies and individuals (Restaurant, conference facilities, SPA centre and small museum of Lithuanian food heritage). Location is 3 kilometres from Birstonas centre and average price per single room is £89.00 per night.
- 4 stars “Nemuno Slenis” is boutique 37 rooms hotel providing high quality services, SPA procedures and other leisure activities as tennis, parachutes, fishing or flights with hot air balloon. It is located 18 kilometres from Birstonas centre in the forest on the bank of river Nemunas. Hotel is known more as organising luxury wedding parties or important business meetings. Average price for single room is £97.00 per night.
- “Sofijos Rezidencija” is known as luxurious 14 rooms 3 stars hotel, located in the centre of Birstonas. It is positioning itself as romantic royal place for couples to spend honeymoon or celebrate weddings. Average price is £72.00.
- 3 stars guest house “Audenis” is a budget place with 9 rooms in the centre of Birstonas. It has small café and it is popular for small companies’ conferences. Average price is £22.00 per night.
- Two Sanatoriums “Tulpe” and “Versme” are located in the centre of resort and have accommodation facilities for visitors who are coming to use relaxation or rehabilitation procedures. Rooms’ interior is standard and a bit old fashioned. Average price is £35.00 per night for single occupancy.
- Private sector – few flats, which can be rent for short or long periods. The only way of promoting themselves is Birstonas Tourist Information Centre webpage and some local webpages. This type of accommodation is popular between Lithuanian tourists, as the cheapest way to stay in Birstonas and ability to allocate all family in one flat.
As we can see from short description of the competitors, there dominates 3 and 4 stars hotels positioning themselves as royal, boutique places with expensive Restaurants and SPA facilities. First four hotels have really similar webpage design, pricelist and interior. Accommodation type is fitted for couples or business people with higher expenditure level, because all rooms are for single or double occupancy and luxurious type (with small SPAs in the room) and do not have family type rooms. Only one 3 stars hotel is located in the centre of resort, others are 5 to 20 kilometres distance from the main Sanatoriums and centre, so it can be difficult for the guest to find the place or there can be a demand of the car. Besides, as the main tourists are coming from neighbour countries as Poland, Russia, Belarus and Latvia for cheaper SPA and rehabilitation procedures it can be overpriced accommodation type for them.
The main competitor can be seen guest house “Audenis” which has affordable prices and it is located in the centre of resort. But on the other hand, it has only 9 rooms, breakfast is not included in the price and it does not promote itself in international reservation channels.
Generally, all accommodation types are privately owned businesses, with limited knowledge of personnel management or revenue management. Also there is no promotional information for such countries as United Kingdom, Norway, Spain, France or Italy, because the main concentration is on Poland, Russia and Belarus (as they are the main tourists’ countries). All information in webpages is in basic three languages – Lithuanian, English and Russian.
Moreover, there is no hotel or guest house where family could be allocated in triple or quad room or economy class hotel for affordable small price; and this can be the main reason why tourists are coming in Birstonas for one night or weekend only or as locals – do not spend night at all.
Economy class hotel “Ibis Styles” is encouraging because market is congested of expensive and royal type of accommodation in the area. In the research, which was made by Europe Institute in 2007, the average amount of money spent by tourist in Lithuania is only £52 per day. Moreover, International chain could become popular for local visitors for its reasonable price and can attract them to spend night with all family in bigger rooms as well as for foreign countries tourists – first of all because of flexible prices, well - known brand and promotion not only in neighbouring countries but also in United Kingdom, France, Spain, Norway and others. Besides, popular brand as “Ibis Styles” could be the reason to choose, because foreign visitors know the standards and know that they will find the same level of accommodation and services all over the world.
Competitive strategies
As it can be seen from the competitors’ analysis, there is no differentiation in between the competitors. Most of them in their marketing strategies use such words as “royal”, “luxurious” or “unique” and it does not highlight them from each other. The same interior, interface with royalty or webpage design can be a bit confusing for potential customer to choose. And the main point from differentiation strategy should be “something different from your competitors”. “Ibis Styles” could become different in selling rooms for families, economy class type and Brand standards known all over the world.
Secondly, Birstonas hotels are not flexible in pricing. The main strategies are used as weekly and weekend prices and discounted prices for group bookings. As crisis affected tourist flows in all country, new hotel should be flexible for potential customers and use revenue management strategies. As it was mentioned before, international chain hotel could become leaders of the area as it comes with its standards, flexibility and knowledge of hospitality industry, revenue management.
As tourism and hospitality market is still affected of crisis and as was mentioned in previous parts that Lithuania’s government increased VAT to 21%, hotel should be flexible, good valued and priced, also be sustainable and eco - friendly to unique Birstonas nature it means not only to meet customers’ needs but also to preserve the environment. Saving electricity, water or paper wastage could be the way to save not only the nature, but also company’s money.
Conclusion
Establishing new hotel during economic crisis is difficult and risky challenge even for international chain. But good and potential idea according competitors’ and environment analysis could be really successful and profitable. Birstonas is attractive health tourism destination, but suffers from a lack of affordable, budget or economy class accommodation, strong promotion in big Europe cities. These factors can be crucial for new concept and foreign tourists’ flows.
The report has shown that Lithuania is attractive for foreign investors, because of stable political situation and admirably handled crisis, moreover country is called as flexible and fast in decision making procedures because of the size and governmental decisions for new businesses. In the previous year country had attracted such international companies as “Barclay” bank, “Ryanair” to expand business, so it could be good example for “Accor group” hotel chain to think about new business in resort Birstonas.
As one of the main things for tourists is the location of accommodation and transportation facilities, Birstonas is attractive because it is located near the second largest city with airport which is known of cheap flights airlines Ryanair, also the main road it is international Via Baltica which is access to Russia, Belarus and Poland, besides country is reachable by water transport for Scandinavian countries.
Talking about labour situation it is important to mention, that Lithuania is attractive as having highly educated, multilingual specialists which is essential tool for hospitality sector. As there is a gap in customer service quality and friendliness is not the strongest part of Lithuanians’, international hotel would improve these skills by providing Brand standards trainings for the staff.
Economy class hotel could become strong leader in Birstonas hospitality sector because of well- known brand and high management level, moreover it could attract tourists from other Europe cities as Norway, United Kingdom, Spain and Italy also as neighbouring countries because of good quality accommodation for affordable price.
The only brake for new business can become VAT increase to 21% as hotels are losing competitiveness level between other tourism destinations or other countries, but with international chain experience in revenue management, strong marketing strategies and cheap labour force, business can become successful and concept can be justified.
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