Learning Objectives

1. Explain how the changing demographics of the North American population impact the demand for hospitality services, and give examples of demographics that affect both food service and lodging operations.
2. Describe the current and expected future impact of baby boomers on the demand for hospitality services.
3. Give examples of the opportunities and challenges inherent in the North American population's increasing diversity.
4. Explain how changes in the female work force and alterations in family structure affect consumer behavior and the markets for hospitality.
5. Identify and describe the key supply factors that are important to hospitality organizations.
6. Identify and describe the trends that are changing the relative cost of supplies.
7. Give examples of ways in which hospitality service companies are responding to changes in the labor force.

Chapter Overview

The basic framework of this chapter is supply and demand, the two most basic forces driving any industry. Supply and demand, demographics, work force participation rates- all of this can look pretty dull to students. That is why so much effort in the chapter is devoted to relating these factors to hospitality businesses and their customers. Supply and demand is, to repeat, what makes things go.

The chapter begins with a discussion of the changing composition of our population with respect to age. It identifies the principle groupings, the baby boomers (born between 1946 and 1964), the birth-dearth group or "generation X" group (born between 1965 and 1975), and the echo boomers (or Generation Y, born between 1976 and 1994). In each case, the chapter uses the group under discussion to illustrate the impact of changing age distribution on the hospitality marketplace.

Next we look at four other demographic factors: population diversity, working women, changing family composition, and changing income distribution and their impact on demand, that is, on hospitality's customer base.

The last major sections of the chapter consider two of the three classical "factors of production," land and labor, deferring discussion of the third factor, capital, to later chapters. Land includes such topics as land for hospitality operation locations as well as the products of the land of interest to food service, that is, food. The discussion of labor focuses on two trends: a labor shortage that, while less critical than in the recent past, still presents problems to operators; and, diversity in the work force. In both cases, industry's (i.e., operators') reactions to these trends are important.

Key Concepts

1. Define and discuss demand and demographics.
• Demand translates into customers.
• Demographics is the study of objectively measurable factors in the population, such as age, income, etc.
2. Review the changing age composition of the U.S. population.
• Baby boomers, men and women born between 1946 and 1964, constituted over one-fourth of the U.S. population in 2003.
• Generation Xers, born between 1965 and 1975, have modest incomes and reputations as worldly wise, independent, pragmatic, computer savvy, ad-intelligent consumers.
• Echo boomers are the children of baby boomers, and were born between 1976 and 1994.
• The number of teenagers and young adults (aged 20 to 29) will increase through 2010; the number of people aged 30 to 39 and 40 to 49 will decline.
• The number of people aged 50 to 59 and 60 to 64 will grow substantially.
• The growth in the over-65 age group will result in increasing demand for services of all kinds for retirees.
3. Explore the growing diversity of the U.S. population.
• The population of Hispanics and African Americans is about equal.
• African Americans continue to be the slightly largest U.S. minority group after 2003. Most of them live in the south.
• Most U.S. Hispanics (about 60 percent) are of Mexican origin.
• The number of Asian Americans is expected to increase over 100 percent from 1990 to 2001.
• The popularity of ethnic food is a reflection of America's diversity.
• The aging of the baby boomers will result in a population with a large number of seniors.
4. Examine the impact of working women on the demand for hospitality services.
• The participation rates of women in the workforce is expected to continue to rise in the short-term and long-term. The share of women in the workforce will increase as well.
• In 1999, women represented 46 percent of all managers in the food service and lodging segments.
5. Review the effect of changing family composition on the hospitality industry.
• The number of households without children is the largest segment. These households spend more than any other.
• The significant growth in single-person households is a result of, in part, people delaying marriage until much later in life.
• Single parents have relatively low incomes.
6. Discuss the changing income distribution.
• In 2000, the middle class decreased in proportion to the entire population.
• The higher a household's income, the more frequently its members are likely to dine out.
• Psychographics (different patterns of activities, interests, and opinions) affect demand for food service.
7. List the key factors of supply.
• Supply factors that concern the hospitality industry are land and its produce (food), as well as labor.
• Another factor is capital.
8. Explore the importance of land and its produce (food).
• Good locations for hospitality-industry establishments are high-traffic areas, those near major destinations, or those associated with scenic beauty.
• Good locations are becoming scarce because most are already occupied.
• Environmental pressures are also contributing to the scarcity.
• Food-supply conditions do not suggest significant price changes in the future, but major climatic changes pose a longer-term threat to world food supplies.
9. Discuss future labor trends in the hospitality industry.
• Demand for labor for the years 2000 through 2010 is expected to increase 15.2 percent. The greatest growth will be in jobs requiring advanced education.
• Employment prospects for some of the primary hospitality management positions appear to be about average (or a little less).
• The hospitality industry suffers from relatively high turnover and faces intense competition for workers.
• Potential employees include seniors, women, immigrants, and part-time workers.
10. Examine workforce diversity in hospitality.
• Workforce diversity is a fact of life in North America.
• The components of diversity include ethnic background, place of birth, education and skill level, income levels, gender, age, differing abilities, and sexual orientation.
• Hospitality managers must see people for the contribution they can make rather than their surface differences.
11. Review the impact of labor scarcity.
• Food service will experience the tightest pressure in the industry as it tries to keep up with the demand for workers.
• To attract and keep employees, many operators have raised wages, enhanced benefit programs, and instituted support services.

Study Questions

1. What is the most important force which drives change in the hospitality industry?
2. Who are the "baby boomers"?
3. Who are the "Generation Xers"?
4. Who is the "echo generation"?
5. Between now and 2010, how will marketing focus on appealing to families with children under five?
6. How will teenagers and young adults impact on the restaurant industry between now and 2010?
7. In demographics, what is a dependency ratio?
8. What characterizes women in the hospitality work force?
9. How does family composition affect hospitality industry demand?
10. What is the word used to describe differing activities, interests, and opinions?
11. Why are land resources an important supply factor in the hospitality industry?
12. Why do restaurant chains purchase other restaurant chains?
13. What sector of the hospitality industry has the highest turnover?
14. Is the female work force expected to increase, decrease, or stay the same in the future?
15. Is growth in the food service labor force expected to increase, decrease or stay the same in the near future?
16. What is work force diversity?
17. How will labor problems in the future affect the hospitality industry?
18. How have changing lifestyles affected the food service industry?
19. Is the minority population in the US increasing, decreasing, staying about the same? How fast or slow?