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The Hotel and Lodging Industry’s Market Structure Analysis in Turkey

Turkey is an area that houses more cultural diversity, natural and historical charms when it

is compared to other Middle East countries. This situation makes this country an advantageous

region for tourism. Consequently, the hotel and lodging industry is a sector that has improved to

provide a more comfortable experience for tourists, as a result of the expended Turkish tourism.

So, lodging industry is clearly a rising sector in Turkey. There are many options such as hotels,

motels, houses for rent, camping areas, RV parks etc. In this article, I am going to analyses this

industry under the seven assumptions about market structure.

First, since the sector is profitable and popular, the number of the firms in this market is very

high. There are no significant limitations and barriers for entering to the market. As it is pointed

above, there are many options for providing service and place for visitors. In addition to the

largest 5-star hotels such as Hilton, Marriott, Rixos, camping areas having relatively less costs

draw visitors interest. Therefore, cost is not a barrier for entering to the market. Of course, there

are laws and regulations that firms must comply with; however, this regulations and laws are not

specifically about entering to the market, as a difference from a general structure of a

monopolistic market.

Second, gaining competitive advantage in this market is possible through differentiations.

Firms, in the hotel and lodging industry, differentiate in terms of the points such as quality, price,

location etc. That is to say, the needs and the expectations of the different market segments are

also different. As an example, a businessman may demand luxury and comfort for dealing with

the daily stress, while a traveler may prefer being in touch with nature rather than comfort and

luxury. Every firm in the sector should define their targets, position themselves in accordance

with these targets, and should set their price in accordance with their differentiations, costs and

demands. Consequently, the more differentiated services and products result in the more cost for

the firm.

As another issue, accommodation is one of the most essential need for human beings.

Therefore, number of customers in the hotel and lodging industry are high. Also, as another

assumption, there are a lot of sellers and buyers in the industry as it is mentioned above. An

individual firm in the industry has many substitutes and this mean that there are many options for

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The Hotel and Lodging Industry’s Market Structure Analysis in Turkey Turkey is an area that houses more cultural diversity, natural and historical charms when it is compared to other Middle East countries. This situation makes this country an advantageous region for tourism. Consequently, the hotel and lodging industry is a sector that has improved to provide a more comfortable experience for tourists, as a result of the expended Turkish tourism. So, lodging industry is clearly a rising sector in Turkey. There are many options such as hotels, motels, houses for rent, camping areas, RV parks etc. In this article, I am going to analyses this industry under the seven assumptions about market structure. First, since the sector is profitable and popular, the number of the firms in this market is very high. There are no significant limitations and barriers for entering to the market. As it is pointed above, there are many options for providing service and place for visitors. In addition to the largest 5 - star hotels such as Hilton, Marriott, Rixos, camping areas having relatively less costs draw visitors interest. Therefore, cost is not a barrier for entering to the market. Of course, there are laws and regulations that firms must comply with; however, this regulations and laws are not specifically about entering to the market, as a difference from a general structure of a monopolistic market. Second, gaining competitive advantage in this market is possible through differentiations. Firms, in the hotel and lodging industry, differentiate in terms of the points such as quality, price, location etc. That is to say, the needs and the expectations of the different market segments are also different. As an example, a businessman may demand luxury and comfort for dealing with the daily stress, while a traveler may prefer being in touch with nature rather than comfort and luxury. Every firm in the sector should define their targets, position themselves in accordance with these targets, and should set their price in accordance with their differentiations, costs and demands. Consequently, the more differentiated services and products result in the more cost for the firm. As another issue, accommodation is one of the most essential need for human beings. Therefore, number of customers in the hotel and lodging industry are high. Also, as another assumption, there are a lot of sellers and buyers in the industry as it is mentioned above. An individual firm in the industry has many substitutes and this mean that there are many options for

the buyers. At this point, Kenton (Investopedia, 2019) states that “demand conditions refer to the size and nature of the customer base for products, which also drives innovation and product improvement”^1. Regardless of the differentiation level of the firms, there will always be a very similar substitute. The demand curves of the hotel businesses are downward-sloping and the demand is elastic. This means that price changes affect the demand inversely proportional. The following quotation of Jarman (Business.org, 2019) may help to explain very similar substitution with a comparison between the big hotel chains Hilton and Marriott: Marriott offers the guest loyalty program Marriott Rewards. Marriott Rewards provides members with basic features such as redeeming points for free nights and free flights, no blackout dates and priority check-in. There are four membership status levels: entry level, Silver, Gold and Platinum Elite. Hilton also has a well-developed loyalty program. It’s named HHonors, and like the Marriott program it offers four membership levels: Blue (entry level), Silver, Gold and Diamond. To achieve and retain Silver status, a guest must either have 4 stays in a calendar year or stay 10 nights in a calendar year^2. So far, we have examined four structural features for hotels and lodging industry: Number of sellers, Cost conditions, Number of buyers and Demand condition. Now, we can analyze behavioral assumptions about the hotels and lodging industry. At this point, for-profit organizations’ objective is to maximize their profits. Under the cost conditions, firms set their profit maximizing price in accordance with the marginal cost and the marginal revenue equilibrium point. If the hotel and the lodging industry is examined in the short run, it is seen that they make more than normal profit, and this high profit causes new firms to enter to the market. Entrance of the new firms reduce the demands of incumbent firms, and this reduction of the demand pulls down the profit to the zero profit. As it is explained above, this industry has many buyers and sellers; and, the firms differentiate themselves from the other firms and set their prices according to cost- include promotional effort, product design, distribution channels etc. Figure 1 represents a basic example graph Figure 1 : Monopolistic Competition (Opentextbc.ca)^4

Additional Research:

Dwyer, L. (2006). Trends underpinning tourism to 2020: implications for tourism management. In Türk-Kazakh International Tourism Conference.
Ladhari, R. (2009). Service quality, emotional satisfaction, and behavioural intentions: A study in the hotel industry. Managing Service Quality: An International Journal , 19 (3), 308 - 331.
Karadeniz, E., Kandır, S. Y., Iskenderoglu, O., & Onal, Y. B. (2011). Firm size and capital structure decisions: Evidence from Turkish lodging companies. International Journal of Economics and Financial Issues , 1 (1), 1-11.
Your Article Library. (2019). 7 Most Important Features of Monopolistic Competition. [online] Available at: http://www.yourarticlelibrary.com/economics/7-most-important- features-of-monopolistic-competition/9154 [Accessed 11 Jan. 2019].
Resource, H. (2019). The Lodging Industry Market Structure - by Manmohan Shetty. [online] Hotelnewsresource.com. Available at: https://www.hotelnewsresource.com/article32324.html [Accessed 11 Jan. 2019].

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