Introduction
Background to the study
The hospitality industry plays a significant role in the economic growth of Norwich UK. The guesthouse sector is one of the sectors which have greatly contributed to the country’s economic growth. This is due to the fact that the sector forms a significant proportion of the country’s Gross Domestic Product (GDP). As a part of the country’s economy, the guesthouse sector supports various economic sectors. One of the industries which have been supported by the guesthouse sector is the tourism industry. Norwich UK has witnessed rampant growth in its tourism industry over the past years. The guesthouse sector plays a significant role in the provision of accommodations to both domestic and foreign tourists. By supporting foreign tourism, the guesthouse sector contributes to an increment in the country’s volume of foreign exchange. In addition, the availability of guesthouses across various locations in Norwich UK stimulates the country’s tourism through the promotion of domestic tourism. This paper is a report on guesthouse sector in Norway.
Aim
The aim of the report is to analyze the role of the Norwich guesthouses sector as a Small and Medium Enterprise (SME’s).
Scope
The report entails a justification of the importance of the guesthouse sector to Norway’s economy. An analysis of the various ways in which the sector is contributing to the country’s economic growth is analyzed. Growth in guesthouses has enhanced the development of entrepreneurial culture. The various SME’s which have contributed to Norwich guesthouse sectors are considered. These include; microfinance institutions, advertising companies, and growth in agritourism. The extent to which guesthouses have contributed to the economy in Norwich UK is considered. The report also considers the characteristics and dynamics of the guesthouses. The extent to which SME’s in the Norwich guesthouse sector are entrepreneurial is analyzed. The individual and opportunity theory of entrepreneurship is analyzed. Finally, a conclusion and a number of recommendations are made.
Justification of the sector’s importance
The guesthouse sector has also contributed towards the establishment of entrepreneurial culture amongst the Norwegians. The ultimate result is that there has been an increment in the country’s rate of economic activity through the creation of new employment opportunities. The guesthouse sector has played a significant role in the growth of Small and Medium Enterprises (SMEs) in the country.
Stephen (2005, p. 1) asserts that SMEs form an important platform for the growth of entrepreneurship and hence the country’s economic growth. According to Stephen (2005, p. 2) development of entrepreneurial culture within this sector is a key element towards Norwich UK attaining a healthy economy. In addition, growth in this sector has culminated in the creation of new job opportunities within the country. An increase in the rate of tourism within the country has resulted in an increment in the number of guesthouses which has been established in various locations within Norway. This has resulted in a reduction in the country’s rate of unemployment. Stephen (2005, p. 2) asserts that the creation of new employment opportunities results in an increment in disposable income for the citizens. This means that their purchasing power increased thus improving the economic performance of other sectors. In addition, an increase in personal disposable income results in an improvement in the living standards of the households.
An increase in the rate of tourism in Norwich UK has greatly enhanced rural entrepreneurship through the establishment of various small and medium enterprises. For example, an increase in the number of guesthouses which are distributed in various locations in Norwich UK has greatly supported farm tourism in Norwich. Over the past few years, individuals residing in cities have incorporated touring to the countryside for their holidays and other recreation purposes. This has resulted in the bridging of the gap between the city and the rural residents. In addition, growth in farm tourism has greatly contributed to the country’s economic growth. According to places to stay in Norwich: the broads and the Norfolk countryside (Anon., para3), it is estimated that approximately 10% of all individuals working in farms in Norwich UK have integrated farm tourism. The presence of guesthouses in the rural locations is contributing to the development of entrepreneurial skills since the farms are distantly located from each other. Through domestic farm tourism, individual visitors gain diverse knowledge in relation to farming. This greatly enhances the development of agriculturally supported SME’s. On the other hand, the establishment of guesthouses in rural locations has played a significant role in ensuring a relatively equitable distribution of the country’s economic growth.
Extent of contribution by SME’s to Norwich Guesthouses
SMEs play a significant role in the development of Norwich guesthouses. For example, the Norwich guesthouse sector is greatly supported by small and medium enterprises in the tourist industry such as tours and travel companies. Of these tourists, a large percentage of the guests sought accommodation in various guesthouses. Of all the Nordic countries, UK hosted a large percentage of the guests. According to Alka and Ivana (2009, p. 190), a high percentage of job creation in Norwich guesthouses was realized amongst the women. Guesthouses greatly supported tourists’ accommodations.
Considering the fact that tourism is characterized by a high level of seasonality, the guesthouses provided an opportunity for women to work in the guesthouses and achieve a high level of work-life flexibility. In addition, the proportion of women who were working in guesthouses as fulltime employees in 2007 was relatively high at 75% compared to men who held 90% (Alka & Ivana, 2009, p. 110).
Amongst the European Union countries, UK had a relatively high level of job opportunities which were created for the women compared to other countries. For example, in 2007, 71% of the new tourist accommodation jobs which were created through establishment of guesthouses were occupied by women.
The development of agritourism in UK is supported by the fact that there are a large number of microfinance institutions which support investment in agricultural activities. These SME’s (microfinance institutions) provide ease of accessing financial capital to potential investors in agriculture. This has greatly contributed to towards the development of agricultural activities in rural areas hence increasing agritourism in UK. Increased demand for agritourism in UK has culminated in an increment in demand for guesthouses in rural areas. This has greatly contributed towards development of guesthouses.
Development in microfinance institutions has also greatly contributed towards establishment of guesthouses. This is due to the fact that potential investors in the sector can be able to access financial capital necessary for the establishment of the guesthouses. The cost of capital charged by the microfinance institutions is relatively low compared to the large financial institution.
Creating effecting market awareness is a key factor to be considered in the success of a guesthouse. Market awareness can be attained through various methods such as promotion and advertisement. The emergence of a large number of small and medium advertisement companies in UK has resulted into increased efficiency in the process of creating awareness of the Norwich guesthouse. This is due to the fact that the SMEs are cheap for the guesthouses considering the fact that their advertisement budget is lean. This has enabled both the domestic and foreign customers to be well acquainted with the nature of the services offered by the Norwich guesthouses. The ultimate result is that there has been an increment in the number of customers seeking accommodations in the guesthouses.
Characteristics of the guesthouses
Most of the guesthouses operate as social enterprises this is due to the fact that they provide guesthouse services to the public. In addition a large percentage of the guesthouses are jointly owned through incorporation of partnership type of business structure. However, some of the guesthouses operate as sole proprietorship type of businesses. In addition, a large percentage of the guesthouses are owned by women. Currently, there is an increase in the number of women entrepreneurs who are venturing into the sector due to its flexible work to work-life balance characteristic.
Extent to which the SMEs in this sector are entrepreneurial
Entrepreneurial skills are very important for the success of SME’s. According to Ronell (2008, p.4), the guesthouses sector of the economy is very challenging due to the increase in the degree of competition within the industry. Firms in Norwich guesthouse sector face intense competition from international firms such as Holiday Inn. In addition, there has been an increment in demand for guesthouse services due to growth in both domestic and foreign tourism. In addition, the tourism industry is characterized by a high rate of dynamism due to changes in tastes and preferences amongst the consumers in relation to services offered by the guesthouses. Ronell (2008, p. 5) asserts that this trend have instigated the need to develop relevant entrepreneurial skills in the operation of firms in this sector.
Guesthouses deal with the provision of personal services to the customers. Therefore, the success of guesthouses depends on certain characteristics of the owner such as his or her personality and credibility. Investors in this sector have integrated a high level of professionalism. The entrepreneurs in the guesthouse sector are committed towards delivering a personal touch to the customers. In addition, the investors are innovative in provision of guesthouse services. Efficiency of innovativeness is attained through the investors being open to environmental changes and being ready to accept new ideas. This has played a key role in ensuring that the guesthouse succeeds in the long-term. For example, considering the fact that guesthouses provide accommodation to tourist industry, integration of service innovation has enabled the services offered by the guesthouses to be in line with the market demands (Ronell, 2008, p. 6). The investors in this sector have also integrated creativity in the operation of the guesthouses. This has ensured that the services offered are unique in the market and a high level of efficiency in solving problems arising from the market. In addition, investors in this sector are faced with risks associated with the business. As a result, the investors are confident and are motivated towards invention and innovation of services to be provided to the customers. The challenging environment of the guesthouses results into development of good managerial skills by the investors. For example, the dynamic nature of the guesthouse sector demands the investor to conduct continuous market analysis. Investors in this sector have integrated the concept of comprehensive market research in their strategic management. This has contributed towards ensuring that the investors are conversant with the market trends. The result has been an increment in the level of efficiency in the decision making process. Through market analysis, the investors are able to scan, identify and exploit the opportunities which are presented in the environment.
To attain a high competitive edge, management of firms in guesthouse sector has incorporated a high level of practicality in the operation of the firm. This is due to the fact that the success of the guesthouses depends on the efficiency of operation of various systems such as the reservation and the stock keeping systems (Ronell, 2008, p. 4).
Comparison of the findings with entrepreneurial theories
Individual opportunity nexus theory
According to Per and Claus (n.d, p. 2), entrepreneurship is composed of two phenomena. These include the individual who are driven by need to enterprise and availability of feasible business opportunities. According to Shane (2003, p.23), opportunities result from various business environments. These environments relate to technological changes, political, legal, social and demographic changes. In addition, the existence of gaps and omissions by other players in a particular industry also contributes towards creation of opportunities.
Demographic and social changes have greatly increased opportunity of growth of the guesthouses. For example, increase in consumer purchasing power has resulted into a change of lifestyle amongst the domestic and foreign consumers. As a result, there has been an increase in the number of consumers who are incorporating tourism in their consumption patterns. In addition, increase in population size poses an opportunity of growth in the guesthouse sector. This is due to the fact that increase in demand results into an increment in demand for services (Shane, 2003, p. 24).Increased growth in technological innovation such as the development in electronic commerce has also contributed towards growth of the guesthouses. This is due to the fact that it has enhanced online booking of reservations in guesthouses. In addition, technological changes have resulted into creation of self employment in various locations in UK through establishment of guesthouses in rural areas. Through scanning of the environment, the individual identifies the opportunity in the environment, makes a decision to exploit the identified opportunity, acquires the necessary resources and organizes on how to exploit the opportunity.
Conclusion
Norwich guesthouse sector plays a significant role in the country’s economic development. This is due to the fact that it stimulates entrepreneurial skills amongst the citizens. This culminates into an increase in the country’s rate of economic growth due to increase in the country’s labor productivity. The success of the guesthouse sector is supported by other SME’s such as agritourism, microfinance institutions and small and medium advertisement companies. The sector has greatly contributed towards enhancement of entrepreneurial culture amongst the citizens due to the challenging nature of the sector.
Recommendation
- SME’s in guesthouse sector should conduct a comprehensive market analysis to determine the trend in the market. This will ensure that they develop strategies aimed at satisfying the customers.
- Due to the dynamic nature of the sector, managements of firms in this sector should ensure that they include a high level of personal touch in the provision of the services.
Reference
Alka, O. & Ivana M. 2009. The significance of tourism as an employment generator of female labor. Zadar: Department of Macroeconomics and Economic Development.
Norwich. 2010. Places to stay in Norwich: the broads and the Norfolk countryside.(On-line). Web.
Per, B & Claus, T. N.D. The individual opportunity nexus: an unfolding polarity. (On-line). Aarhus, Denmark: University of Aarhus. 2010. Web.
Ronell, H. 2008. Effective guesthouse management. (E-book). Cape Town, South Africa: Paarl Printers. Web.
Shane, A. 2003. A general theory of entrepreneurship: the individual-opportunity nexus (E-book). Northampton: Edward Elgar Publishing Incorporation. Web.
Stephen, B. 2005. The importance of entrepreneurship to hospitality, leisure. (On-line). Sheffield: Sheffield Hallam University. Web.