1.0 Introduction Hospitality as an industry is very broad and ranges from multi-national corporations to single-person enterprises. The hospitality industry in Australia is responsible for over 80 different types of jobs. The various sectors in Australia’s hospitality sector include tourist services, events, travel services, visitor attractions, bars pubs and night clubs, membership clubs, holiday parks and gambling. The country’s hospitality industry has over 13,000 different firms providing more than 400,000 job opportunities to the country’s citizens. The hospitality industry in Australia contributed a total of 2.8% of the country’s GDP in 2013, and the sector employs 3.5% of the total workforce in the country. Tourism, a major sub-sector in Australia’s hospitality industry is made up of both foreign and domestic tourists. Foreign tourists account for 30% of the country’s tourists while the remaining 70% is usually covered by local tourists.
2.0 Market structure Australia’s hospitality industry operates under a monopolistic type of competition. Under monopolistic competition, there are usually many firms offering the same products to consumers. The services and products from firms in a monopolistic competition are usually differentiated to create a competitive edge (CHON & MAIER, 2010, p. 14). Monopolistic competition is different from perfect competition because, goods and services from firms in a monopolistic competition are not usually the same, a case that is the opposite of perfect competition. According to JAMES (2005, p.32), differentiation of products and services in Australia’s hospitality industry is usually along social lines. The country has executive hotels that cater for the wealthy in the society in addition to the middle-class hotels that target the average individual. In line with monopolistic competition, the country’s hospitality industry has many firms offering the same but differentiated products, and entry of new firms into the industry is without any form of restriction (BRAKMAN & HEIJDRA, 2004, p. 7).
2.1 Short-run equilibrium for firms in Australia’s hospitality industry In the short-run, firms in the industry will enjoy abnormal profits. The high-profit levels will be because the businesses are enjoying a good and relatively new brand name. In the short-run, the costs of operations for companies in the industry will be significantly lower than the revenue from sales of products and services hence the abnormal profits. Because of the curious nature of customers who are always willing to try out new brands, and services, firms in the industry will enjoy abnormal profits in the short run (BRAKMAN & HEIJDRA, 2004, p. 9). The huge profits are also because of the favorable business environments that the firms find themselves in the short run. There are usually purchase discounts, tax incentives and other attractive packages for new firms in the industry that make the cost of operation lower, and, therefore, increase profitability (BRAKMAN & HEIJDRA, 2004, p. 9).
2.2 Long-run equilibrium for firms in Australia’s hospitality industry Abnormal profits are only present in the industry in the short-run. In the long-run, profitability will return to normal levels in the industry. Return of profitability to normalcy in the industry will attract new investors into the industry resulting in the introduction of new firms. The new firms will cause defection of customers from existing firms to the new ones with the aim of trying out the new brand (BRAKMAN & HEIJDRA, 2004, p. 11). In a bid to remain competitive and still make profits, the older firms in the industry will invest more into product differentiation and advertisements. The added expenditure will in return cause the average total cost curve for firms in the industry to shift upwards (KIERZKOWSKI, 1989, p. 54).
2.2.1 Figure 1: Long-run equilibrium The additional spending from older firms in a bid to stay relevant in the industry will cause the average cost curve to shift upwards until profitability in the industry returns to normalcy. The new demand curve because of the additional spending will be represented by a curve that is tangent to the AVC curve (MCEACHERN, 2012, p. 17). Profitability under monopolistic competition like in Australia’s hospitality industry can only take place in the short-run. In the long-run, there are no economic profits in the industry (KIERZKOWSKI, 1989, p.12).
3.0 Current trends in the industry There are several trends in the hospitality industry which include corporate social responsibility, technology and globalization. The different trends in the industry have had varying effects in the way the industry is judged, and the way operations are carried out within the sector.
3.1 Corporate social responsibility Corporate social responsibility is a requirement for organizations to carry out operations in a manner that is beneficial to both the organization and the community. Social responsibility has become a popular phenomenon in many organizations today. CSR has become more popular than ever because organizational success today is not judged on financial performance alone. Organizational success is also based on the firm’s contribution to society (ANDREWS, 2011, p. 32). Because the success is pegged on the organization's contribution to society, many organizations are diverting significant amounts of resources towards the benefit of the community. Studies have shown that a good corporate social responsibility rating results in good financial performance for the organization (ENZ, 2010, p. 14). Relatively small companies do not benefit significantly from a good CSR rating, but implementation of the initiative is usually favorable for small businesses as opposed to large firms. It is less costly to carry out CSR initiatives for small firms than it is for large firms in the same industry (REID & BOJANIC, 2010, p. 9). Although positive CSR ratings are directly related to strong financial performance in organizations, especially in the hospitality industry, there are no definite ways of measuring the relationship between CSR and organizational success. In the long-run organizations practicing CSR usually benefit from the initiative but in the short the practice achieves very minimal results. For instance educating the society as a CSR initiative for an organization can have minimal impacts in the short-run because education is a long term investment. In the long-run as the community becomes financially empowered because of the relatively free education, the organization will benefit because the financially stable and educated will provide a sufficient market for the organization's products.
3.1.1 Price elasticity of demand for the hospitality industry Price elasticity of demand refers to the responsiveness changes in prices of services or products will have on the quantity of the service or product demanded (HIRSHLEIFER, 2011, p. 72). The price elasticity of demand for services and products in the hospitality industry is inelastic in the short-run. But in the long-run, the price elasticity of products and services in the industry is elastic. In the short-run, changes in prices of services and commodities in the industry will have no impact on the number of customers willing to take advantage of the changes. In the short-run, financial capabilities of potential customers in the industry is relatively fixed. In the long-run price changes in prices of commodities and services in the hospitality industry will have a significantly equal but opposite effect on the quantity of services and products purchased or consumed by customers. For example CSR initiatives like re-educating the community usually pays off in the long run, and, as a result, the financial abilities of customers in the industry will have improved as time goes by (HIRSHLEIFER, 2011, p. 73).
3.1.2 Figure 2: price elasticity of demand for products and services in the hospitality industry.

From the above illustration, the short-run price elasticity of demand is inelastic indicating a significantly minute change in the quantity of services and goods demanded as a result of changes in price. In the long-run changes in prices in the hospitality industry results in a proportionate change in the quantity of services and products consumed in the industry.

3.2 Globalization Globalization is a phenomenon that has had a significant effect in the way Australia’s hospitality industry operates. The time taken to travel from one corner of the world to another has been cut down to almost half because of new inventions like electric trains and planes that travel at very high speeds (ATHERTON, & ATHERTON, 2010, p. 41). The move towards a global village has had a positive impact on Australia’s hospitality industry. Because of globalization, Australia’s hospitality industry is experiencing a much wider market base because customers find it easy to travel from one country to another regardless of physical barriers such as distance, oceans and seas (SHANAHAN, 2003, p. 27 ). Although globalization has had a positive impact on Australia’s hospitality industry, the rate at which the industry is expanding is slower than the rate at which it is receiving customers from around the globe. Demand for services in Australia’s hospitality industry far exceeds supply for services and products in the sector. The excess demand has resulted in an increase in the price of products and services in the sectors translating to increased revenues for the industry as a whole (SHANAHAN, 2003, p. 32).
3.2.1 Figure 3: effect of globalization on the demand curve of Australia’s hospitality industry As a result of globalization, the industry’s demand curve shifted to the right to D’ from D. shifting of the demand curve to the right created a temporary shortage for services and commodities for the industry. The temporary shortage led to an increase in the prices of services in the sector as a means of compensating for the shortage in supply. The prices in the industry shot up from P to P1 as illustrated in figure 3 above. The increase in prices resulted in increased revenues for firms in the industry. The high revenues in the industry as a result of globalization will attract new firms into the industry that join in order to share in the high revenues (FORGANG & EINOLF, 2007, p. 16). Globalization is, therefore, beneficial to Australia’s hospitality industry in two ways. Globalization leads to increased revenues in the sector because of the large market base it avails for the sector. As a result, of the huge, market base the sector is also expanding, and this is an indirect attribute of globalization (BUCK & CONRADY, 2011, p. 51).
3.3 Technology Technology is changing as time goes by and this has had a significant impact on Australia’s hospitality industry (PANNELL, 2011, p. 61). Operations in the hospitality industry are shaped by current technologies. Online booking of hotels and online payments of various bills in the hospitality industry is as a result of changes in technology. Social media has also changed the way advertisements and interactions between customers and businesses interact (PANNELL, 2011, p. 63). Connectivity to the internet has become a basic need nowadays as almost every gadget on sale is internet enabled. Smartphones, tablets watches and other gadgets are internet enabled and organizations have decided to take advantage of this internet craze by advertising on various online platforms such as Twitter and facebook (NYHEIM & CONNOLLY, 2012, p. 31). Business in the hospitality industry is booming because of technology. Technology has availed a relatively cheap platform for advertisements and exchange of information between firms and clients in the hospitality industry. Information on services and products offered by various hotels and restaurants is nowadays accessible on the internet as opposed to the old days when one had to go through pamphlets (NYHEIM & CONNOLLY, 2012, p.24). The ease with which information is accessed and advertised has led to a reduction in the costs of operation in the hospitality industry (NYHEIM & CONNOLLY, 2012, p. 26). Technology is responsible for the improved efficiency present in the hospitality industry. Many transactions in the hospitality sector are done online for instance payments are made online leading to improved accountability and security since cash transactions are very limited (NYHEIM & CONNOLLY, 2012, p. 30).
4.0 Macro-economic forces There are several external forces that affect the way business is conducted in the hospitality industry of Australia. Some of these macro-economic forces include the state of the economy, legal forces and changes and technology.
4.1 Legal changes The legal system in Australia has several regulations that impact the hospitality industry both positively and negatively. For instance, the country’s smoke-free laws have had a negative impact on revenues in the hospitality sector (JAMES, 2005, p. 12). The smoke-free laws limit smoking in the country to designated zones. Public smoking in Australia can result in jail time or fines for the smoker (JAMES, 2005, p. 17). Although the laws are aimed at regulating secondary smoking in the country, they have limited freedom for smoking clients in the hotel and restaurant business, who in some cases opt to stay away and, as a result limiting revenue collected by such establishments (JAMES, 2005, p. 18).
Studies indicate that the prohibition of public smoking leads to an approximate 30% loss of revenues in the hospitality sector (JAMES, 2005, p. 16). Australia’s liquor Act is another law that has a negative impact on the sector. The Liquor Act is one of the reasons for the relatively slow growth of the hospitality industry in the country (BABOR, 2010). According to the Liquor Act, there are dry zones in the country where public consumption of alcohol is against the law. Such restrictions harm firms in the hospitality industry that rely on the sale of liquor for revenue