AN ASSESMENT OF COMPETITIVE STRATEGIES ON PERFORMANCE OF HOTEL BUSINESSES IN NAKURU TOWN, KENYA

Abstract

The hotel and tourism industry contributes a significant proportion of country employment and earnings in developing economies. In Kenya the hotel and Tourism sector contributes 14% of the Gross Domestic Product. Nakuru Town is one of the major tourist destinations in Kenya, however, security threats and decline in the number of tourists visiting the country, increased options, new innovations, and presence of substitute products has changed the competitive landscape. However, there is little evidence that Porter’s generic strategies have been applied as strategic responses by hotels in Nakuru Town. This study sought to assess the competitive strategic responses on performance of the hotel industry in Nakuru Town. The study objectives were: to assess cost leadership strategies, differentiation and focus strategies on performance of hotels in Nakuru Town. The study was guided by Porter's generic strategies theory and adopted a descriptive survey research design. The study was carried out in Nakuru Town, among hotels operating in the area. The target population comprised of 74 hotels managers in Nakuru Town from which a sample of 42 determined using Nassiuma’s formula and selected using purposive sampling technique. Primary data was collected using questionnaires administered using drop and pick later method. In analyzing the data, first a summary of responses was done using descriptive statistics which included the frequencies, percentages and Chi Square analysis. The relationship between variables was established between application of competitive strategies and hotel performance using Pearson correlation analysis and multiple regression analysis. The study found out a significant correlation between the use of cost leadership strategies and hotel performance (r = 0.696, p < 0.01), there was also a strong and positive correlation between the application of differentiation strategies and hotel performance (r = 0.747, p < 0.01) as well as focus strategies and hotel performance (r = 0.682, p < 0.01). The study therefore concluded that cost leadership strategies played a significant role in enhancing competitiveness and performance of hotels in Nakuru Town through enhancing efficiency in operations. However independently cost leadership could not work alone without the reinforcement of other strategies. Differentiation strategies applied by hotels had the highest impact on hotels performance independently and when applied alongside other strategies. Focus strategies were found to contribute to enhancing performance of Hotels in Nakuru. However, independently they had the least contribution. The study therefore recommended that hotel managers and strategists should strive to understand the correct choice and mix of strategies that work best and complement each other in their hotels to optimize their performance. The study was limited to hotels in Nakuru Town focusing on porters generic strategies.