Analysis of Hospitality Industry in Mauritius

Analysis of Hospitality Industry in Mauritius 2.1 Definitions of Corporate Social Responsibility (CSR) CSR has been defined as the duty of the organization to respect individuals rights and promote human welfare in its operations (Manakkalathil and Rudolf, 1995; Oppewal et al., 2006). Businesses not only have the economic responsibility of being profitable and the legal responsibility to follow the laws or ground rules that guide their ability to achieve their economic requirements, but they also have ethical responsibilities that include a range of societal norms, or standards (Carroll, 2000). CSR has been around for more than two decades. During the later half of twentieth century there arose the idea of the corporate social contract, which today underlies the CSR concept. Given the sometimes adverse effects of business decision making on society as well as corporate reliance on society, the notion of an implied corporate social contract was conceived by social and economic theorists. This contract spells out societys expectations of business as well as (although much less discussed) businesss expectations of society (Bowie, 1983). There is no single authoritative definition of CSR (ISO COPOLCO, 2002). The CSR agenda seems to be a loosely defined umbrella embracing a vast number of concepts traditionally framed as environmental concerns, public relations, corporate philanthropy, human resource management and community relations. One of the most referred definitions is by World Business Council for Sustainable Development (WBCSD) (1999) that defines CSR as à ¢Ã¢â€š ¬Ã…“the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at largeà ¢Ã¢â€š ¬?. CSR means being a good steward of societys economic and human resources ( Journal of Consumer Marketing, 2001). In summary, CSR entails the obligation stemming from the implicit à ¢Ã¢â€š ¬Ã…“social contractà ¢Ã¢â€š ¬? between business and society for firms to be responsive to societys long-run needs and want s, optimizing the positive effects and minimizing the negative effects of its actions on society. To synchronize that organizational social responsibility concerns are treated in the same routine manner in which legal, financial, and marketing concerns are addressed, four theories of corporate social responsibility have been advanced in the literature. The four positions are the classical, stakeholder, social demandingness, and social activist theories. The classical theory is the oldest of the four, and is grounded in classical economic theory. Firstly business executives are said to be primarily responsible to the shareholders of the corporation and their primary goal is to promote efficiency and secure effective economic performance. Secondly managers are said to be responsible to respond to the shareholders demands. These views are often thought to coincide with each other, because it is usually assumed that the main demand of shareholders is to maximize economic performance. In addition, both versions agree that managers are to perform their corporate function according to the laws and, thus, to avoid such things as fraud and deception. Friedman (1970), points out à ¢Ã¢â€š ¬Ã…“Here the businessman self-selected or appointed directly or indirectly by stockholders is to be simultaneously legislator, executive, or juristà ¢Ã¢â€š ¬Ã‚ ¦He becomes in effect a public employee, a civil servant, even though he remains in name an e mployee of a private enterprise.à ¢Ã¢â€š ¬? This theory, albeit the oldest of the four theories, is still well and alive; it has many supporters and proponents among academicians and practitioners. The second theory is the stakeholder theory which integrates the main idea of classical theory, that is, corporate executives are responsible to stockholders. Nevertheless, what differs it from classical theory is that other groups are directly affected by the conduct and decision of the firm. These groups can employees, consumers, creditors, suppliers, and legal sub-systems who have a stake in the organisation and who might affect, in one way or another, the corporate decision making process. Furthermore, corporate executives have a direct responsibility to promote the interests of these groups. The main disagreement among stakeholder theorists, however, over whether stakeholder interests of these groups take precedence over the financial interests of stockholders or the stakeholder interests are the overriding ones. Social demandingness theorists argue that corporations have a responsibility to protect and promote certain interests of the general public. They agree with the stakeholder theorists that the interests of stakeholder groups are important, but they believe that these interests do not override non-stakeholdersà ¢Ã¢â€š ¬Ã¢â€ž ¢ interests or demands for such things as safety, health, freedom, and prosperity. As with the stakeholder theory, this theory repudiates the notion that there is some balanced or sensible list of tangible responsibilities that corporate executives always have toward society. The list varies as the nature and ranking of the interests or demands of the public change. The fourth and final theory is the social activist theory which is distinctively the most socially and morally demanding of the four theories. While agreeing with the stakeholders and social demandingness theories that executives have responsibilities toward stakeholders groups and the general public, social activistsà ¢Ã¢â€š ¬Ã¢â€ž ¢ theorists argue that corporate managers should sometimes strive to undertake projects that advance the interests of the public even when these undertakings are neither expected nor demanded by them. Social activists theorists contend that such projects should, for the most part, be in the area of corporate know-how, but they sometimes urge that executives deliberately take on social projects for which they have no special training or expertise 2.1 Types of CSR and Corporate Governance The notion that business has duties to society is firmly entrenched, although in the past several decades there has been a revolution in the way people view the relationship between business and society. Carroll (1979) and other researchers believe that we should judge corporations not just on their economic success, but also on non-economic criteria. Carroll (1979) proposed a popular four-part definition of CSR, suggesting that corporations have four responsibilities or à ¢Ã¢â€š ¬Ã…“four facesà ¢Ã¢â€š ¬? (Carroll, 2000b, p. 187) to fulfill to be good corporate citizens: economic, legal, ethical and philanthropic: Economic responsibility. Economic responsibility is to be profitable for principals, by delivering a good quality product, at a fair price, is due to customers. Legal responsibilities. Legal duties entail complying with the law and playing by the rules of the game Ethical responsibilities. Ethical duties overcome the limitations of legal duties. They entail being moral, doing what is right, just, and fair; respecting peoples moral rights; and avoiding harm or social injury as well as preventing harm caused by others (Smith and Quelch, 1993). Philanthropic responsibility. Interest in doing good for society, regardless of its impact on the bottom line is what is called altruistic, humanitarian or philanthropic CSR. à ¢Ã¢â€š ¬Ã…“giving backà ¢Ã¢â€š ¬? time and money in the forms of voluntary service, voluntary association and voluntary giving à ¢Ã¢â€š ¬Ã¢â‚¬Å" is where most of the controversy over the legitimacy of CSR lies. CORPORATE GOUVERNANCE (CG) Moreover, CSR is closely linked with the Corporate Governance of the organization, be it hotel organization. Any of those types of CSR should start in the hotel organizations first and then move to external environment. The key people should be taken into consideration so the CSR practices should be geared towards the internal customers who will in turn become CSR delegates to reach the external customers and environment. Companies must improve their business models by bringing CSR and sustainability into their strategy. Shleifer and Vishny (1997) define CG as the ways in which suppliers of finance to organisations assure themselves of getting a return on investment. Over the years, CG has evolved from the traditional à ¢Ã¢â€š ¬Ã…“profit-centered modelà ¢Ã¢â€š ¬?. By incorporating the community in which firms operate, the political environment, laws and regulations, and more generally the markets in which firms are involved. See Figure 1: The Business in Society which reflects a stakeholder perspective on the firm (Jensen, 2001) 2.1The Hospitality Industry à ¢Ã¢â€š ¬Ã¢â‚¬Å"Definitions Definitions of the hospitality have been approached from a number of different perspectives. Most of them combine physiological and psychological elements with security and levels of service. à ¢Ã¢â€š ¬Ã…“Hospitality is concerned with the provision of physiological and psychological comfort with defined levels of service. The satisfactions may be physiological (thirst, bed, warmth), economic (value for money), social (company, service) and psychological (self-esteem, status, security).à ¢Ã¢â€š ¬? Source: C.Cooper, R.Shepherd, J. Westlake (1994) Even if the approach to defining hospitality may shift according to the authors, there are a number of integral elements that are common to all. These are: Hospitality is a complex combination of tangible and intangible features and benefits Hospitality involves a satisfying interaction between the service provider and the customer Hospitality provides guests with security, psychological and physiological comfort by offering food, beverage and accommodation. Therefore, bearing in mind the above characteristics, a simpler definition of the hospitality industry may be: The Hospitality Industry is involved with providing accommodations, food, beverage, entertainment, comfort and recreation for travelers away from their usual residences and normal surroundings. The industry also naturally look forward to meet the customer`s needs for safety and support of their persons, property, modes of transportation, and even the varying purpose of their travel. Speaking generally, those who make use of hospitality services demand attainment of a professional level of quality consistent with world standards, although perhaps adjusted for local conditions. They anticipate the facilities will be clean, comfortable, safe and secure. They expect good food and beverage at a reasonable rate. Furthermore, they look for courtesy, friendliness, respect and identification from the host. Perhaps more importantly they demand honesty, truth and equity in their dealings with the operator and his employees. Hospitality Industry In Mauritius HISTORICAL BACKGROUND In Mauritius, the first hotel was the Park Hotel in 1952 so as to accommodate the crew members coming at that time. Then came the Mauritius Hotel, the first beach hotel, built in 1954 at Le Morne followed by Le Chaland, another beach hotel in 1961. But the real development of tourism took place soon after Mauritius got its independence from the British. In early 1970`s the creation of Trou aux Biches Hotel by the Mauritius Hotels, the setting up of the Club MeditÃÆ' ©ranÃÆ' ©e and the Saint GÃÆ' ©ran Hotel by the Southern Sun Hotels as well as the Merville Beach Hotel by the ex-British Colons who wanted to come back here during the winter months of England. The Mauritius Hotel is now the Beachcomber group and the Southern Sun Hotels is the Sun International Resorts Limited. At present there are 95 hotels in Mauritius and there are not less than 5 more under construction as per the registered list set by the Ministry of Tourism. The numbers of hotels, rooms and bed places have increased constantly from 1991. Moreover the Prime Minister has announced his vision to reach 2 million tourists in 2015. Consequently an average annual growth of 10% in tourist arrival is expected. In order to reach this target, an approximate nu mber of 18500 rooms should be made available. This will bring about the creation of around 37000 direct jobs and double the amount in terms of indirect jobs. Due to the rapid growth of tourism and hospitality industry, government has introduced incentives for the private sector to bring in a sustainable development, namely by corporate governance and corporate social responsibility. This is achievable through proper public-private sector partnership. Overview of the Hotel industry IN MAURITIUS The hospitality industry in Mauritius has developed rapidly during the past 25 years. The coastal regions as well as the interior part of the island are constantly changing with the construction of the hotels and the increasing number of vehicles being used for the tourism industry. In 2007, the tourism industry was considered the third pillar of the economy after Sugar and Textile, and currently it plays a vital role in the economic growth of the country. The undoubted fall of 35% in the price of sugar and the removal of preference agreement with the EU market, has earmarked the tourism industry as the main industry capable of boosting the Mauritian economy. In July 2008, according to the last bulletin published by the Central Statistical Office (CSO), Mauritius welcomed 81,169 tourists as compared to 77,225 in 2007, registering a 5.1% growth over the same period a year ago. Table 1: Monthly tourist arrivals, July 2007 à ¢Ã¢â€š ¬Ã¢â‚¬Å" July 2008 Source:Tourism sector performance for the month of July, AHRIM Report, August 2008, pg 2 But after two decades of impressive growth, the need for responsible corporate governance has been felt in the country as the attitudes; mentality and knowledge of those working in that industry have not evolved at the same pace in terms of social responsibility and environmental awareness. Impacts of this rapid and somehow unplanned development are being experienced in the environment at large. Still, a lot has to be done to meet the competitive edge through proper campaign and involvement of all stakeholders so as to contribute towards sustainable development of the hospitality sector. In order to support its continuous growth, the Mauritian Tourism and Hospitality industry needs well-trained staff with full knowledge of their product while respecting the socio-economic and cultural environment in which the Mauritian tourism product is evolving. It is really important to maintain a high standard of efficiency and service so as to meet the requirements of an increasingly competitive and sophisticated global market. 2.7 CSR in the hotel industry In Mauritius Within the hospitality industry it has been agreed that there are increasing environmental and societal concerns. The big question is how to manage our environmental impact as demand grows against a backdrop of increasing vulnerability. As a result of demand for more sustainable destinations and travel preferences, management policies are being felt. Hotels practicing CSR look at the following areas: Workplace (where employees are treated equally and fairly) Marketplace (stakeholders) Environment (which has to be sustained for the future generation) Community Ethics Human rights Many hotels are now aware of CSR practices and have begun to use environmental-friendly products. Hotels in Mauritius are reducing the use of hazardous or non-degradable chemicals. Big hotel chains like Oberoi Mauritius recycle oil, water and plastic bottles while all hotels with more than 50 rooms are compel to recycle water as per the legislation. Hotels tend to purchase products that have a reduced environmental impact during their life cycle, from suppliers that demonstrate environmental and social responsibility to their customers and the society. Furthermore, Association des Hoteliers et Restaurateurs de L`Ile Maurice (AHRIM), is fully supporting the CSR initiatives initiated by the Mauritian Government. Through its members, they are actively putting forward the CSR activities on a regional basis all over the island. (See Appendix 1: Recommended CSR activities by AHRIM to its Members in June 2008). Stakeholders (employees, customers, shareholders, suppliers, business partners, government) are getting more and more involved the hotelsà ¢Ã¢â€š ¬Ã¢â€ž ¢ CSR activities. Hotel employees are educated to make a conscious decision in favour of environment and social issues in their private and business lives. Hotel guests are informed about CSR activities and are asked to participate in responsible business activities within the hotels and to work together to find innovative solutions that satisfy the hotelà ¢Ã¢â€š ¬Ã¢â€ž ¢s economic, environmental and social objectives. Managers are asked to abide by local and EU legislation especially on labour laws, health and safety, human rights and the environment. A great deal can be done when developing a hotel property in order to make both the development process and the eventual operation more environmentally sustainable. One of the aims of CSR is to make the community benefit from the hotel industry. 2.8 Benefits of CSR in the hotel industry Hotels who adopt CSR into their operations and public image depend on the following factors: Size Level of diversification Research and Development Advertising Government Intervention Consumer Income Labour market conditions Stage of the industry life cycle However this differs for different hotel organization, for example, larger hotels like international hotel chains may operate a CSR program at a lower cost than a small hotel because of economies of scale. It is a method for organization to distinguish themselves from their competitors Firstly, hotels benefit from CSR as it helps to reduce operating cost such as implementing of recycling and energy saving programs. Secondly, their brand image and reputation are enhanced as consumers prefer companies with CSR programs. Another benefit derived by hotels is in terms of productivity and quality since productivity goes up whenever working conditions improve. Other beneficiaries of the CSR programs are immediate environment in which the company is evolving. It comprises of the local community, neighboring villages, employees who usually live in those areas, the hotel guests and the host country at large. Hotels are expected to have ethical and social commitments, valued connections with partners and consistency over time to build trust with the stakeholders. In doing so, the hotel organizations are also developing societal marketing concept, therefore beneficiate from it. Analysis of Hospitality Industry in Mauritius Analysis of Hospitality Industry in Mauritius 2.1 Definitions of Corporate Social Responsibility (CSR) CSR has been defined as the duty of the organization to respect individuals rights and promote human welfare in its operations (Manakkalathil and Rudolf, 1995; Oppewal et al., 2006). Businesses not only have the economic responsibility of being profitable and the legal responsibility to follow the laws or ground rules that guide their ability to achieve their economic requirements, but they also have ethical responsibilities that include a range of societal norms, or standards (Carroll, 2000). CSR has been around for more than two decades. During the later half of twentieth century there arose the idea of the corporate social contract, which today underlies the CSR concept. Given the sometimes adverse effects of business decision making on society as well as corporate reliance on society, the notion of an implied corporate social contract was conceived by social and economic theorists. This contract spells out societys expectations of business as well as (although much less discussed) businesss expectations of society (Bowie, 1983). There is no single authoritative definition of CSR (ISO COPOLCO, 2002). The CSR agenda seems to be a loosely defined umbrella embracing a vast number of concepts traditionally framed as environmental concerns, public relations, corporate philanthropy, human resource management and community relations. One of the most referred definitions is by World Business Council for Sustainable Development (WBCSD) (1999) that defines CSR as à ¢Ã¢â€š ¬Ã…“the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at largeà ¢Ã¢â€š ¬?. CSR means being a good steward of societys economic and human resources ( Journal of Consumer Marketing, 2001). In summary, CSR entails the obligation stemming from the implicit à ¢Ã¢â€š ¬Ã…“social contractà ¢Ã¢â€š ¬? between business and society for firms to be responsive to societys long-run needs and want s, optimizing the positive effects and minimizing the negative effects of its actions on society. To synchronize that organizational social responsibility concerns are treated in the same routine manner in which legal, financial, and marketing concerns are addressed, four theories of corporate social responsibility have been advanced in the literature. The four positions are the classical, stakeholder, social demandingness, and social activist theories. The classical theory is the oldest of the four, and is grounded in classical economic theory. Firstly business executives are said to be primarily responsible to the shareholders of the corporation and their primary goal is to promote efficiency and secure effective economic performance. Secondly managers are said to be responsible to respond to the shareholders demands. These views are often thought to coincide with each other, because it is usually assumed that the main demand of shareholders is to maximize economic performance. In addition, both versions agree that managers are to perform their corporate function according to the laws and, thus, to avoid such things as fraud and deception. Friedman (1970), points out à ¢Ã¢â€š ¬Ã…“Here the businessman self-selected or appointed directly or indirectly by stockholders is to be simultaneously legislator, executive, or juristà ¢Ã¢â€š ¬Ã‚ ¦He becomes in effect a public employee, a civil servant, even though he remains in name an e mployee of a private enterprise.à ¢Ã¢â€š ¬? This theory, albeit the oldest of the four theories, is still well and alive; it has many supporters and proponents among academicians and practitioners. The second theory is the stakeholder theory which integrates the main idea of classical theory, that is, corporate executives are responsible to stockholders. Nevertheless, what differs it from classical theory is that other groups are directly affected by the conduct and decision of the firm. These groups can employees, consumers, creditors, suppliers, and legal sub-systems who have a stake in the organisation and who might affect, in one way or another, the corporate decision making process. Furthermore, corporate executives have a direct responsibility to promote the interests of these groups. The main disagreement among stakeholder theorists, however, over whether stakeholder interests of these groups take precedence over the financial interests of stockholders or the stakeholder interests are the overriding ones. Social demandingness theorists argue that corporations have a responsibility to protect and promote certain interests of the general public. They agree with the stakeholder theorists that the interests of stakeholder groups are important, but they believe that these interests do not override non-stakeholdersà ¢Ã¢â€š ¬Ã¢â€ž ¢ interests or demands for such things as safety, health, freedom, and prosperity. As with the stakeholder theory, this theory repudiates the notion that there is some balanced or sensible list of tangible responsibilities that corporate executives always have toward society. The list varies as the nature and ranking of the interests or demands of the public change. The fourth and final theory is the social activist theory which is distinctively the most socially and morally demanding of the four theories. While agreeing with the stakeholders and social demandingness theories that executives have responsibilities toward stakeholders groups and the general public, social activistsà ¢Ã¢â€š ¬Ã¢â€ž ¢ theorists argue that corporate managers should sometimes strive to undertake projects that advance the interests of the public even when these undertakings are neither expected nor demanded by them. Social activists theorists contend that such projects should, for the most part, be in the area of corporate know-how, but they sometimes urge that executives deliberately take on social projects for which they have no special training or expertise 2.1 Types of CSR and Corporate Governance The notion that business has duties to society is firmly entrenched, although in the past several decades there has been a revolution in the way people view the relationship between business and society. Carroll (1979) and other researchers believe that we should judge corporations not just on their economic success, but also on non-economic criteria. Carroll (1979) proposed a popular four-part definition of CSR, suggesting that corporations have four responsibilities or à ¢Ã¢â€š ¬Ã…“four facesà ¢Ã¢â€š ¬? (Carroll, 2000b, p. 187) to fulfill to be good corporate citizens: economic, legal, ethical and philanthropic: Economic responsibility. Economic responsibility is to be profitable for principals, by delivering a good quality product, at a fair price, is due to customers. Legal responsibilities. Legal duties entail complying with the law and playing by the rules of the game Ethical responsibilities. Ethical duties overcome the limitations of legal duties. They entail being moral, doing what is right, just, and fair; respecting peoples moral rights; and avoiding harm or social injury as well as preventing harm caused by others (Smith and Quelch, 1993). Philanthropic responsibility. Interest in doing good for society, regardless of its impact on the bottom line is what is called altruistic, humanitarian or philanthropic CSR. à ¢Ã¢â€š ¬Ã…“giving backà ¢Ã¢â€š ¬? time and money in the forms of voluntary service, voluntary association and voluntary giving à ¢Ã¢â€š ¬Ã¢â‚¬Å" is where most of the controversy over the legitimacy of CSR lies. CORPORATE GOUVERNANCE (CG) Moreover, CSR is closely linked with the Corporate Governance of the organization, be it hotel organization. Any of those types of CSR should start in the hotel organizations first and then move to external environment. The key people should be taken into consideration so the CSR practices should be geared towards the internal customers who will in turn become CSR delegates to reach the external customers and environment. Companies must improve their business models by bringing CSR and sustainability into their strategy. Shleifer and Vishny (1997) define CG as the ways in which suppliers of finance to organisations assure themselves of getting a return on investment. Over the years, CG has evolved from the traditional à ¢Ã¢â€š ¬Ã…“profit-centered modelà ¢Ã¢â€š ¬?. By incorporating the community in which firms operate, the political environment, laws and regulations, and more generally the markets in which firms are involved. See Figure 1: The Business in Society which reflects a stakeholder perspective on the firm (Jensen, 2001) 2.1The Hospitality Industry à ¢Ã¢â€š ¬Ã¢â‚¬Å"Definitions Definitions of the hospitality have been approached from a number of different perspectives. Most of them combine physiological and psychological elements with security and levels of service. à ¢Ã¢â€š ¬Ã…“Hospitality is concerned with the provision of physiological and psychological comfort with defined levels of service. The satisfactions may be physiological (thirst, bed, warmth), economic (value for money), social (company, service) and psychological (self-esteem, status, security).à ¢Ã¢â€š ¬? Source: C.Cooper, R.Shepherd, J. Westlake (1994) Even if the approach to defining hospitality may shift according to the authors, there are a number of integral elements that are common to all. These are: Hospitality is a complex combination of tangible and intangible features and benefits Hospitality involves a satisfying interaction between the service provider and the customer Hospitality provides guests with security, psychological and physiological comfort by offering food, beverage and accommodation. Therefore, bearing in mind the above characteristics, a simpler definition of the hospitality industry may be: The Hospitality Industry is involved with providing accommodations, food, beverage, entertainment, comfort and recreation for travelers away from their usual residences and normal surroundings. The industry also naturally look forward to meet the customer`s needs for safety and support of their persons, property, modes of transportation, and even the varying purpose of their travel. Speaking generally, those who make use of hospitality services demand attainment of a professional level of quality consistent with world standards, although perhaps adjusted for local conditions. They anticipate the facilities will be clean, comfortable, safe and secure. They expect good food and beverage at a reasonable rate. Furthermore, they look for courtesy, friendliness, respect and identification from the host. Perhaps more importantly they demand honesty, truth and equity in their dealings with the operator and his employees. Hospitality Industry In Mauritius HISTORICAL BACKGROUND In Mauritius, the first hotel was the Park Hotel in 1952 so as to accommodate the crew members coming at that time. Then came the Mauritius Hotel, the first beach hotel, built in 1954 at Le Morne followed by Le Chaland, another beach hotel in 1961. But the real development of tourism took place soon after Mauritius got its independence from the British. In early 1970`s the creation of Trou aux Biches Hotel by the Mauritius Hotels, the setting up of the Club MeditÃÆ' ©ranÃÆ' ©e and the Saint GÃÆ' ©ran Hotel by the Southern Sun Hotels as well as the Merville Beach Hotel by the ex-British Colons who wanted to come back here during the winter months of England. The Mauritius Hotel is now the Beachcomber group and the Southern Sun Hotels is the Sun International Resorts Limited. At present there are 95 hotels in Mauritius and there are not less than 5 more under construction as per the registered list set by the Ministry of Tourism. The numbers of hotels, rooms and bed places have increased constantly from 1991. Moreover the Prime Minister has announced his vision to reach 2 million tourists in 2015. Consequently an average annual growth of 10% in tourist arrival is expected. In order to reach this target, an approximate nu mber of 18500 rooms should be made available. This will bring about the creation of around 37000 direct jobs and double the amount in terms of indirect jobs. Due to the rapid growth of tourism and hospitality industry, government has introduced incentives for the private sector to bring in a sustainable development, namely by corporate governance and corporate social responsibility. This is achievable through proper public-private sector partnership. Overview of the Hotel industry IN MAURITIUS The hospitality industry in Mauritius has developed rapidly during the past 25 years. The coastal regions as well as the interior part of the island are constantly changing with the construction of the hotels and the increasing number of vehicles being used for the tourism industry. In 2007, the tourism industry was considered the third pillar of the economy after Sugar and Textile, and currently it plays a vital role in the economic growth of the country. The undoubted fall of 35% in the price of sugar and the removal of preference agreement with the EU market, has earmarked the tourism industry as the main industry capable of boosting the Mauritian economy. In July 2008, according to the last bulletin published by the Central Statistical Office (CSO), Mauritius welcomed 81,169 tourists as compared to 77,225 in 2007, registering a 5.1% growth over the same period a year ago. Table 1: Monthly tourist arrivals, July 2007 à ¢Ã¢â€š ¬Ã¢â‚¬Å" July 2008 Source:Tourism sector performance for the month of July, AHRIM Report, August 2008, pg 2 But after two decades of impressive growth, the need for responsible corporate governance has been felt in the country as the attitudes; mentality and knowledge of those working in that industry have not evolved at the same pace in terms of social responsibility and environmental awareness. Impacts of this rapid and somehow unplanned development are being experienced in the environment at large. Still, a lot has to be done to meet the competitive edge through proper campaign and involvement of all stakeholders so as to contribute towards sustainable development of the hospitality sector. In order to support its continuous growth, the Mauritian Tourism and Hospitality industry needs well-trained staff with full knowledge of their product while respecting the socio-economic and cultural environment in which the Mauritian tourism product is evolving. It is really important to maintain a high standard of efficiency and service so as to meet the requirements of an increasingly competitive and sophisticated global market. 2.7 CSR in the hotel industry In Mauritius Within the hospitality industry it has been agreed that there are increasing environmental and societal concerns. The big question is how to manage our environmental impact as demand grows against a backdrop of increasing vulnerability. As a result of demand for more sustainable destinations and travel preferences, management policies are being felt. Hotels practicing CSR look at the following areas: Workplace (where employees are treated equally and fairly) Marketplace (stakeholders) Environment (which has to be sustained for the future generation) Community Ethics Human rights Many hotels are now aware of CSR practices and have begun to use environmental-friendly products. Hotels in Mauritius are reducing the use of hazardous or non-degradable chemicals. Big hotel chains like Oberoi Mauritius recycle oil, water and plastic bottles while all hotels with more than 50 rooms are compel to recycle water as per the legislation. Hotels tend to purchase products that have a reduced environmental impact during their life cycle, from suppliers that demonstrate environmental and social responsibility to their customers and the society. Furthermore, Association des Hoteliers et Restaurateurs de L`Ile Maurice (AHRIM), is fully supporting the CSR initiatives initiated by the Mauritian Government. Through its members, they are actively putting forward the CSR activities on a regional basis all over the island. (See Appendix 1: Recommended CSR activities by AHRIM to its Members in June 2008). Stakeholders (employees, customers, shareholders, suppliers, business partners, government) are getting more and more involved the hotelsà ¢Ã¢â€š ¬Ã¢â€ž ¢ CSR activities. Hotel employees are educated to make a conscious decision in favour of environment and social issues in their private and business lives. Hotel guests are informed about CSR activities and are asked to participate in responsible business activities within the hotels and to work together to find innovative solutions that satisfy the hotelà ¢Ã¢â€š ¬Ã¢â€ž ¢s economic, environmental and social objectives. Managers are asked to abide by local and EU legislation especially on labour laws, health and safety, human rights and the environment. A great deal can be done when developing a hotel property in order to make both the development process and the eventual operation more environmentally sustainable. One of the aims of CSR is to make the community benefit from the hotel industry. 2.8 Benefits of CSR in the hotel industry Hotels who adopt CSR into their operations and public image depend on the following factors: Size Level of diversification Research and Development Advertising Government Intervention Consumer Income Labour market conditions Stage of the industry life cycle However this differs for different hotel organization, for example, larger hotels like international hotel chains may operate a CSR program at a lower cost than a small hotel because of economies of scale. It is a method for organization to distinguish themselves from their competitors Firstly, hotels benefit from CSR as it helps to reduce operating cost such as implementing of recycling and energy saving programs. Secondly, their brand image and reputation are enhanced as consumers prefer companies with CSR programs. Another benefit derived by hotels is in terms of productivity and quality since productivity goes up whenever working conditions improve. Other beneficiaries of the CSR programs are immediate environment in which the company is evolving. It comprises of the local community, neighboring villages, employees who usually live in those areas, the hotel guests and the host country at large. Hotels are expected to have ethical and social commitments, valued connections with partners and consistency over time to build trust with the stakeholders. In doing so, the hotel organizations are also developing societal marketing concept, therefore beneficiate from it.

Competitive Landscape in Commercial Real Estate

Home  » Property Types  » Retail  » Clash of the Titans: Regional Mall REITs Fight for Limited Outlet Development Opportunities Clash of the Titans: Regional Mall REITs Fight for Limited Outlet Development Opportunities May 9, 2012 12:54 PM, By Elaine Misonzhnik, Senior Associate Editor In the fall of 2010 executives with Taubman Centers Inc. , a Bloomfield Hills, Mich. -based regional mall REIT, began talking about the REIT’s new avenue for growth: outlet centers. Article Tools ? Latest NewsMore Latest News Taubman had recently completed the conversion of its Great Lakes Crossing property in Auburn Hills, Mich. , a 1. 35-million-sq. -ft. enclosed regional mall, into Great Lakes Crossing Outlets. Taubman was able to sign up many tenants that were not present elsewhere in Michigan, including Bass Pro Shops Outdoor World, Disney Store Outlet and Rainforest Cafe. Great Lakes Crossing Outlets was attracting both local shoppers and Canadians from across the Detroit River. As a result, the center’s sales per sq. ft. umbers rose significantly, company officials said during earnings calls. The success in Auburn Hills helped convince Taubman’s management to capitalize on additional outlet center opportunities. Besides, in a market saturated with fortress malls and lifestyle centers, outlet centers represented one of the last opportunities for ground-up construction. Robert S. Taubman, the REIT’s chairman, president and CEO, laid out a goal of developing from five to 10 outlet centers in the span of a decade. Among the first such undertakings Taubman pursued was a site in Manvel, Texas, near Houston.The site seemed a good fit for Taubman’s target outlet center sales level of at least $400 per sq. ft. The median household income in Manvel is $65,864 a year, more than $15,000 higher than the median household income for the state as a whole. In addition, the town’s proximity to Houston would give Taubman access to 2 million po tential shoppers. Taubman’s Texas ambitions, however, did not pan out. Both Tanger Factory Outlet Centers, a Greensboro, N. C. -based REIT that specializes in outlet center development, and Simon PropertyGroup, the largest retail landlord in the country in both the regional mall and outlet center arenas, had laid claims to outlet center development sites in nearby Texas City, just 22 miles away. According to brokers familiar with the market, the greater Houston area could not support two, let alone three, outlet centers. In June 2011, Simon and Tanger took a decisive step to win the market by announcing that they would partner to build a 350,000-sq. -ft. joint development in Texas City under Tanger’s brand name. It marked the first joint venture development partnership in Tanger’s history.Ultimately, the two firms decided to work together on one large outlet center rather than spend money fighting each other, says Michael Rodenas, principal with Rodenas Consulti ng, a national consulting firm that specializes in shopping centers and malls. As a result, Taubman quietly retreated from the market. In July 2011, while discussing the company’s earnings for the second quarter, Robert Taubman admitted to analysts that outlets constitute â€Å"a very competitive space. It’s a very competitive world out there in development generally. † He reiterated the company’s commitment to investing in outlet centers both in U.S. and in Asia, but refused to discuss the Texas project. The Houston saga wasn’t the only time Taubman and Simon came to loggerheads in the outlet space. In early April, Simon and Taubman each issued press releases about competing outlet center projects in Chesterfield, Mo. , another market where trade area demographics seem to dictate that only one outlet development can succeed. On Apr. 3, Simon revealed that Saks Fifth Avenue OFF 5th agreed to anchor its St. Louis Premium Outlets, an outlet center sl ated to contain at least 350,000 sq. ft. of space. (St.Louis Premium Outlets is a product of a joint venture between Simon, Woodmont Outlets and EWB Development LLC, all experienced outlet center developers. ) Two days later, Taubman announced it broke ground for Taubman Prestige Outlets Chesterfield, a 450,000-sq. -ft. center. Taubman’s press release noted that it had firm commitments from a number of tenants, but did not identify any retailers by name. It is likely that only one of those two centers will get built in Chesterfield. â€Å"We’ve said publicly, I think, Simon has said publicly that there is only going to be one project built in St.Louis,† Robert Taubman said during the firm’s first quarter earnings call. â€Å"We are way ahead, on a much better site with much better access, much better visibility. †¦ So to us it’s very clear as to which project is going to be built. † Most industry sources, however, are putting their mone y on Simon because of the firm’s size, its existing network of relationships in the outlet center industry and the fact that it has already bagged a major tenant. The large regional mall players, including Simon, Taubman, Macerich Co. CBL & Associates Properties and others, have all made overtures to enter the outlet space. But with limited opportunities for development and an existing group of experienced landlords already competing there, these battles—competing press releases, wars of words and unconventional partnerships— are likely to continue to play out repeatedly throughout the country. CBL & Associates recently invested in The Outlet Shoppes in El Paso (Texas). Last spring, both Simon and Tanger announced outlet center projects in the town of Halton Hills, a suburb of Toronto.Tanger has since moved its project further away and will build it as an outlet addition to Heartland Town Centre, one of Canada’s largest power centers. Simon, meanwhile, st arted construction on its original site in Halton Hills in April. And in the Chicago area, Macerich and AWE Talisman have announced plans to build a $200 million, 528,000-sq. -ft. outlet center in Rosemont while Craig Realty Group, a privately held outlet center developer, has ambitions to develop Chicagoland Outlets at Country Club Hills, a 408,500-sq. -ft. project.Simon Property Group declined to comment for this article. Tanger, Taubman, Macerich and Craig Realty Group, meanwhile, did not respond to calls for comments. â€Å"The problem is—as we saw when developers started to roll out lifestyle centers—that everyone goes after the same markets,† says Jeff Green, president of Jeff Green Partners, a Phoenix-based consulting firm. â€Å"And many times the newer folks to the outlet industry are going to find that it’s a much harder industry to get into when there are relationships that have been in place for so many years. † In certain isolated inst ances, uch as the one near Houston, two big developers might form joint ventures because one of them holds a better site while the other wields more power with retailers. Such examples, however, will be few and far between, according to Richard Hauer, managing director of business restructuring services at BDO, a New York City-based consulting firm. â€Å"Let me put it this way: Neither Simon nor Taubman is going to build a second-rate outlet mall,† he says. â€Å"So if the first guy can get Coach and Polo and Saks and a few of those names that every outlet mall really wants, you’ll see the other guy back down. Mass appeal The reasons the outlet sector has suddenly become overcrowded are easy to trace. During the downturn, outlet center sales rose while mall sales fell or remained flat because shoppers were suddenly attracted to outlets’ value proposition. What’s more, as these centers moved closer to urban areas and proved that they can work in close pr oximity to regional malls, the number of markets that could support new projects increased. With limited opportunity for growth elsewhere, regional mall REITs began to focus on the outlet sector.Real estate owners that want to gain market share in a new property segment typically have two avenues for growth: either through acquisition of multiple assets or another operating company or though development. But when Simon bought Prime Outlets Inc. in 2010 it snapped up the last big privately-held outlet center operator in the market. Today, â€Å"no private guy controls 20 or 30 centers that could be sold,† says Gerard Mason, executive managing director with Savills LLC. What’s more, there is a wide spread on yields between development and investment.For instance, CBL & Associates, a Chattanooga, Tenn. -based REIT, recently invested more than $108 million to provide financing for two outlet centers developed by Horizon Group Properties, a Rosemont, Ill. -based outlet cent er developer. (CBL has also partnered with Horizon on groundup projects in Oklahoma City and Woodstock, Ga. ) But CBL CEO Stephen Lebovitz admits that development projects offer double-digit returns while investing in existing centers brings returns in the 8 percent range. I would expect that our growth will be mainly through new development,† he says. At the same time, Lebovitz notes that the number of markets in the U. S. that would meet CBL’s development criteria, including a trade area of approximately a million people, a sizeable tourist base and lack of existing competition, is limited. One high-ranking industry source says that for developers targeting outlet center sales on par with Simon’s levels, which average about $550 per sq. ft. , there are maybe 10 untapped markets left that fit the necessary trade area characteristics.For developers targeting Tanger’s sales levels, which currently average $371 per sq. ft. , there are about 40 untapped marke ts. â€Å"But there aren’t 100,† the anonymous source notes. By the end of the 2012, there will be 187 outlet centers containing 71 million sq. ft. , according to Value Retail News, a publication that covers the outlet industry. Linda Humphers, editor-in-chief of Value Retail News, estimates that in the long term, the country may be able to support another 250 centers, but that would include conversions.Occasionally, a developer will be able to find a site in an offbeat location that nobody else has thought about, says Gerard Mason. But for the most part, all the REITs are looking at the same markets, and in many cases, at the same piece of land. â€Å"There is clearly room for growth in the sector—every major metro area can certainly support outlet retail,† says Michael P. Glimcher, CEO of Glimcher Realty Trust, a Columbus, Ohiobased regional mall REIT that also owns outlet centers in Elizabeth, N. J. and Auburn, Wash. I just think the reality is there a re a lot of people in that category and only a small percentage of what’s being announced will actually get built,† Glimcher says. Bloodless war When it comes to handling competition on new developments the big retail REITs have acquired a reputation for being ruthless, employing tactics such as funding community opposition groups to derail each others’ projects, says Patrick Fox, president of Saint Consulting Group, a firm that specializes in zoning and land-use battles. These are mature markets, they are largely over-built and the battle for market share is tremendous,† he notes. But unlike large regional malls that tend to be located in major urban areas, outlet centers don’t normally inspire the same kind of opposition from local residents, according to James Schutter, senior managing director with Newmark Knight Frank Retail, a retail real estate services firm. In fact, many communities want to see outlet centers built because of the tremendous amount of sales tax revenue they bring in. The real battle in outlets’ case is for tenant commitments.Although the outlet industry doesn’t have anchors in the same sense that the regional mall industry does, there are certain key stores that are necessary to attract shoppers and that the rest of outlet retailers follow, notes Hauer. These include Saks Fifth Avenue OFF 5th, Coach and Polo, as well as Neiman Marcus Last Call and Nordstrom Rack. About a decade ago, Hauer tried to develop an outlet center near Syracuse, N. Y. When he started negotiating with potential tenants the answer was â€Å"if you can get Polo, we’ll sign. Otherwise, we are not interested. †When there are two developers competing to build a center in a market that can support only one project it becomes a race to be the first to announce leases with major tenants. The developers try to convince expanding retailers that their center is the one that’s going to happen by putting out announcements about land permits and ground-breakings. Ultimately, however, it’s the line-up of tenants that determines whose center gets built. â€Å"Developers announce that they will put together a mall [all the time], they don’t always make it happen,† says Schutter. If you’ve got this tenant and this tenant and this tenant coming, the other guys in the marketplace say, ‘Let’s go into this project. ’† â€Å"A ground-breaking is not as strong as being able to announce a strong anchor tenant,† Fox adds. So how do those key retailers decide who to go with when the choice is between Simon and Tanger, or Simon and Taubman or Macerich and Craig Realty Group? After Taubman converted its Great Lakes Crossing project into an outlet center, sales rose significantly.Having the best site certainly makes a difference, which is why Simon may be willing to partner with Tanger if Tanger has secured a better location, according to Mic hael Rodenas. When the projects are in the same trade area, the choice might come down to seemingly small differences like which side of the highway the center will be located on or which zip codes in a given area are missing from the retailer’s customer base. But in the outlet industry, having existing relationships with a potential landlord is also very important, according to Hauer, Green,Lebovitz and others. And in this, Simon, which controls the largest mall portfolio and the largest outlet center portfolio in the country, has a tremendous advantage. That might not come into play as much in the Simon/Tanger relationship because the two REITs specialize in slightly different projects, but it will likely loom large in any battle between Simon and other regional mall REITs. â€Å"If you [as a tenant] get Simon angry with you on the outlet side, they can be angry with you on the traditional retail side also,† says Green. Let’s just say that in that case the dev eloper has a large hammer, a larger hammer than any mall-only developer would have. † That’s why most retail industry insiders feel that while Taubman and the other regional mall REITs will eventually be able to build a handful of outlet centers, they will not be able to break into the business in the big way they had imagined. â€Å"The outlet mall industry is kind of a closed world,† says Schutter. Sidebar: Eastern Promises While U. S. retail REIT executives try to build up their outlet portfolios at home, most of them realize that growth opportunities here are limited.So in recent months they’ve been announcing outlet center projects elsewhere in the world, including Canada, Brazil, Japan, China, South Korea and Malaysia. In April, Simon signed a deal with BR Malls Participacoes S. A. to develop outlet centers in Brazil, with the first project scheduled to be built in Sao Paulo by 2013 and started construction on Phase I of Shisui Premium Outlets, a 234 ,000-sq. -ft. outlet center in Shisui, Japan. Both Simon and Tanger have been working on outlet centers in Canada, including Simon’s 500,000-sq. ft. Toronto Premium Outlets in Halton Hills and Tanger’s 312,000-sq. -ft. outlet addition to Heartland Town Centre in Mississauga. And Taubman executives have told analysts they are looking to build outlet centers in Asia, where Taubman already has offices in Hong Kong and Seoul, South Korea. â€Å"In the U. S. , you are not going to see outlet centers double in number,† says Gerard Mason, executive managing director with Savills LLC, a global real estate services firm. â€Å"That’s why Simon is in Brazil and China.In Brazil they might be able to do 15 outlet centers because their middle class is just emerging and they need shopping centers. † —E. M. Sidebar: Mini-Malls With the increase in outlet centers’ popularity, the concept has evolved to represent something different than a small colle ction of factory stores in the middle of nowhere. In the 1980s and 1990s, the rule of thumb was that an outlet center had to be located at least 70 miles away from the closest phone line, jokes one broker. Today, if a shopper goes to Central New Jersey, â€Å"you have the Freehold Raceway Mall [a 1. -million-sq. -ft. superregional center] and then 10 to 15 minutes away, there is an outlet mall,† according to Richard Hauer. Today’s outlet centers have grown larger, sometimes containing up to 450,000 sq. ft. or 500,000 sq. ft. of space, whereas the outlet centers of yesterday tended to average 150,000 sq. ft. The tenant line-up has changed from manufacturers to big retail chains, many of which, including Nordstrom, Neiman Marcus, Saks Fifth Avenue, Bloomingdales, Gap, J. Crew and Aeropostale, have established off-price and outlet divisions.Plus, outlet centers now feature mall-like amenities, such as food courts, restaurants and movie theaters, because people are staying on the properties longer than they used to, notes Michael Rodenas. And when CBL & Associates Properties and Horizon Group Properties were working on the plan for The Outlet Shoppes at Oklahoma City, a 350,000-sq. -ft. center that opened last summer, CBL marked land around the property for the addition of restaurants and hotel facilities. â€Å"We feel it adds critical mass,† says Stephen Lebovitz. —E. M.

Normative Ethical Relativism - 716 Words

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Artificial Intelligence Is The Most Important Essay

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