Starting a Hotel in Austria

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Starting a Hotel in Austria


Austria is a German-speaking country in Europe. A visit to this country will be characterized by mountain villages, rocky alpine terrains, rich history, and customs. Austria is a country described by many as a hotbed of culture, history, beautiful attraction sites, breathtaking traditions, and activities. Therefore, stationing a hotel here will not only prove to be profitable but also sustainable. Tourism in this country is not seasonal, and thus the hotel will remain occupied during the year. Moreover, Austria is truly a sports center in the region during the winter season. Summer tourists are more interested in visiting the historic cities of the country and the villages. Also and perhaps more importantly, tourists love the magnificent scenery of the Alps. Therefore, considering its central location in Europe and the many tourist attractions sites, Austria will offer a favorable environment for an establishment of a hotel.

Political Environment

Austria has enjoyed political steadiness and economic growth since 1945 (Nations Encyclopedia, 2015). Significant changes have taken place, one being its diplomacy in the post-war period. The Austrian government has continued to adhere to its commitment of permanent neutrality meaning that the government is not going to join any military alliance. The implication of this stand (neutrality) means the country will not be torn by world politics and thus no possibilities of turmoil in the future. Besides, the country has an established democracy and constitution. The possibilities of the country becoming a terrorist target are slim as it does not support or associate with any frontline in world politics. According to the statistics provided by the World Bank, the mean of Austria political stability assessed from 1996-2013 was 1.16 -2.5 is weak and 2.5 strong (The Global Economy, 2015). Some government legislation enhancing investment is the tax relief for businesses promoting the social and environmental status of the country.

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Legal Environment

Just like many other countries around the world, there is no legally established hotel classification order in Austria. Hotels in Austria are classified according to services, facilities and amenities offered. However, hotel classification is based on the existing research results and in most cases it is a reflection of what guests anticipate. As a result, the dynamism of hotel industry is compiled with that of the guests. The star classification of hotels is done by an independent committee on the application of the hotel. Star assignment ranges from one star to five stars, where five stars denote a luxurious hotel (WKO, 2015).

Austria has a comprehensive legal structure regulating the labor industry. As a result, labor-market policies have been quite successful. The scope of employment, as stipulated in the law, affirms in the absence of an express choice of law concerning employment contract; then the Austria employment becomes binding to a foreigner working in the country. The labor law recognizes three categories of workers; employees, freelancers, and contractors. Only employees are fully protected by the labor law regulation. Freelancers are only covered by part of the labor laws while contractors are regarded as fully independent entities requiring no protection from the Austrian labor laws. Other important labor laws encompass minimum wages, restrictions on working time, discrimination and harassment and illness. Restraint of trade agreements and consequences of business transfers are also important elements in the labor regulation law (US Practical Law, 2015).

Any citizen of the European Union can move freely in the territories of the member-states. The European Union has a membership of over 26 members, meaning movement into Austria for tourists is not a nightmare. However, citizens from oversea territories, except Barthelemy and Faroe Islands, will need a valid visa to enter Austria. Traveling to Austria is impressively improved by an established airline and rail transport. Within its convenient location in Europe, Austria can be accessed by six airports. An airport like Graz is best known for its ability to serve European leisure and other major metropolitan destinations. Although the airport has in the last few years struggled with a reducing number of customers, the airline was able to serve approximately 881, 740 passengers in the year 2014 (Euro Monitor, 2015). Apart from the airline industry, Austria is well served by road traffic and also railway traffic. The presence of a wide range of transportation enhances tourist connections to major towns and cities in the country. In addition, the government has embarked on a project to enhance the current railway and road traffic to fulfill modern-day requirements. The development of Vienna Central Railway Station and the Expansion of Vienna International Airport is expected to enhance Austria position by making it a favorite holiday destination for international tourists.

Economic Environment

Following the 2009 global economic crisis, Austria was also not spared because the country recorded a 3.7% decrease in the economic growth rate. However, the economy has steadily grown recording a 1.9% economic growth in 2011. An economic survey by Lucintel, (2013) forecasted an economic growth of 1.8% in 2015 and estimates for 2016 are +2.6%. As a result of its strategic location in the region, Austria has served as an investment hub for many businesses. The service industry accounts for approximately two-thirds of its annual GDP. In addition, the tourism sector has been named as the fastest growing sector of the economy.

Despite, the potential of the economy, a high level of economic risk exists. In the last few years, Austria has faced a sovereign debt situation. The country has witnessed an increasing external debt reaching more than 50% of its GDP. This phenomenon is not healthy for the economy because a further increase in external debt will most likely initiate a crisis in the economy (Lucintel, 2013). Although the government implemented an ambitious project in 2010 to reduce the external debt (extension of tax applied to profits made on share and fund transaction), it has not been very successful. The national debt in 2014 was 80.3% of GDP and expected to fall to 79.2% in 2015(GOV.UK, 2015)

Austria uses the euro as its official currency. One euro equals to 1.10 United States dollar. In 2014, the Austria Gross domestic product was $436.34 billion. The gross domestic product growth rate was 1.6% in 2014. The gross domestic product per capita in 2014 was $ 41,367.56. The Gross Domestic Product of Austria represents 0.7% of the world economy (Trading Economics, 2015). Austria has been ranked as the wealthiest and the most stable economy in the European Union because of adopting a free market economy. The industry, tourism/service, and agriculture remain the main sectors of its economy (Nations Encyclopedia, 2015)

Austrian government subjects businesses to several forms of taxes. Companies operating in the country are subjected to the corporate income tax on their total earning at a flat rate of 25%. However, people are subjected to the income tax to a progressive tax rate of zero up to 50% (Trading Economics, 2015).

From the early 90s, tourism has been a key service sector in the Austrian economy. The Alps continue to be the leading tourist attraction as tourists come to skiing during winter and hiking during summer. The mountainous provinces of Carinthia, Tirol and Vorarlberg continue to produce the highest revenues (Photius, 2015). In the year 2013, the tourism sector was attractive because inbound and outbound tourism flows accelerated the demand for tourist attractions, transportation, car rental and travel accommodations (Euro Monitor, 2015). Austria has 12, 5000 hotels with an average occupancy rate of 69.5% and 132 overstay tourists. The country’s supply sums up to approximately 292,000 rooms. However, the growth rate of 5 and 4-star hotels has flattened the segment gains market share over other categories of hotels. In the same year (2013), tourism contributed to EUR15.3 billion, which is equivalent to 4.5% of the GDP (Horwath HTL, 2014).

Cultural Analysis

As a multinational state, Austria does not enjoy a homogenous culture. However, German remains to be the dominant language spoken by approximately 98% of the population. Other languages spoken in the state include Hochdeutsch, Slovene in the Southern Province of Carinthia, Croatian and Hungarian, which represent approximately 0.5% and 0.1% respectively. Austria power distance score is 11, and it denotes that Austrian culture encourages independence among the people, and power is decentralized. Austria is an individualist society meaning that there is no cohesive society. People are concerned with immediate family members. The Austrian culture is highly masculine with a score of 79 meaning that the society is driven by competition; there is order in the society and emphasis on equality. Arising differences are solved by fighting them out. Uncertainty avoidance is high, meaning that Austrian people avoid uncertainty. Thus, there is a great desire for rules, and unorthodox behavior and ideas do not have a place in the society (Itim International, 2015).

In 2013, Austria had a population of 8.474 million. The age bracket of 24-54 forms the majority because it represents 41.8% of the total population, followed by the age structure of 0-14 years, which represent 18% of the population. The country has a population growth rate of 1.09, according to the estimates made in 2014. The government has made a significant measure to ensure sanitation facilities are modern. Health issues such as obesity prevalence were estimated to be 26.8% in 2008. Education, health and infrastructure development is something that the Austrian government has given priority because these sectors receive a significant share of the national budget (Index Mundi, 2014). Doing business is Austria especially for foreigners requires several procedures that involve acquiring the appropriate papers and authorization as set in by the laws. In addition, business is highly characterized by business customs.

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Challenges and Opportunities

Austria has a lot of utilized potential. The hotel business relies on tourists; however, for Austria, it is not exclusively the case because the country is centrally located in Europe and thus becomes a business hub in the area. As globalization continues to dominate the business world, American firms intending to move to the European region will find it convenient to set up their regional headquarters in Austria. Through regular conventions, a hotel business will prove to be rewarding as conferences and business meeting may be hosted by the hotel. As the country continues to be a regional summer and winter choice for many tourists, the hotel business in the county is expected to continue thriving. In addition, the government has embarked on different projects to enhance the image of the country through upgrading the transportation network in the country and thus opening up the country for business and tourism activities expected to enhance the hotel business. Nevertheless, intercultural communication problems remain a challenge in the hotel business. Bureaucratic barriers also remain a challenge for establishing any business in the region.