Structure of the Hospitality Industry - Assignment Example

Report on Hospitality Industry a) Structure of the hospitality industry The hospitality industry has grown over years internationally in scale of operations and diversity. Intense globalisation drive pursued by various countries of the world has changed the scope of hospitality industry. The industry has expanded into a variety of other related services that include event management, leisure, health, tourism and medical tourism. This expansion beyond providing accommodation and catering services necessitated introduction of new technology and international tie-ups for efficiency in operations. The standards and classification with reference to categorisation of customers, products and services offered have undergone significant changes due to interactions of various social groups with different cultural backgrounds internationally. Therefore, the responsibilities relating to the functional areas such as marketing, customer relationship management, HRD and finance in an undertaking need to be reoriented in tune with the global changes in the industry. Organizational structure of different organizations in hospitality industry is based on the facilities available. However, the structure also varies with the star categorization of the luxury hotels, type of ownership like partnership or limited company, the number of hotels in the group and affiliation with the international hotel chains. World Hotel Rating (WHR) project labels hotels by features such as family or child friendly. Some hotels are operated on franchisee basis. The internal control systems in the case of firms with one or two hotels under the same management will be very simple. However, in the case of hotel chains or hotel groups with international operations, the systems would be very elaborate with risk management controls in place. Many small sized organizations prefer Real Estate Investment Trusts (REIT) status with a view to avail tax benefits. As against flat structure noticed in small organisations, the chain of command, delegation of responsibilities and authorities, hierarchical levels and managerial decision making process in the case of hotel chains or groups consisting of several business activities considerably vary depending upon the size and diversity. The management structure is also influenced by the environmental factors relating to the businesses, categories of services offered and technology used. The industry covers a wide range of services such as tourism, theme parks, event management and tourism related services apart from lodging and catering. The organisational structure of a company which provides various services has several divisions such as Hotel, Tourism, Theme Parks and Travel. There are various departments within each division, for example, in the case of Hotel Division the departments include Housekeeping, Health &Sports, Restaurant, Room Service, Event Management and Front Office. The departments such as Accounting, Advertisement & Media, Marketing and HRD are common to all the divisions. Night clubs with various facilities have become part of high end hotels. Some hotels have special divisions such as flight catering to provide catering and ancillary services to airlines industry. The divisions or departments mentioned may be sub-divided or new ones added depending upon the nature, size and geographical dispersion of the businesses of the organization. For example, lodging involves several types of accommodation which include hotels, resorts, motels, camps and farmhouses. Therefore, depending upon the demand, number of employees and geographical locations each facility could be either considered independent department or cost centre or attached to another bigger related department if the operational size is small. The industry has been the forerunner in adopting the accounting principles and auditing in the business. Room revenue is the primary source of income in the industry though the cost centres or profit centres in the business have increased substantially over years in line with the expansion. The guest ledger is maintained at the front desk and the room revenue and all the expenses charged to the guests are accounted here. Also, registration, recording of restaurant charges and charges for use of other facilities by the guests, checking out and settlement of bills take place here. Information system and the type of software used by a company for accounting, communication, reporting and other purposes vary depending upon the size and structure of the organisation. For example, CLS Software Property Management System Solutions can be used for properties ranging from 50 to 1,000 rooms. It is claimed “The core product is our Front Office program that includes fully integrated solutions for Reservations, Registration, Front Desk, Cashier, Night Audit, Housekeeping, Management, Multiple Property, Sales & Marketing, Telephone Operator, and City Ledger.” (E-Hospitality) b) Review of the organisations and professional bodies in the hospitality industry The organisations and professional bodies in the hospitality industry play a major role in establishing quality standards, conducting professional development programs, providing training facilities and information services and dealing with the industry related issues. For example, “The Institute of Hospitality, founded as the Institutional Management Association in 1938, is the professional body for individual managers and aspiring managers working and studying in the hospitality, leisure and tourism industry” (Institute of Hospitality). There have been significant developments in sports and leisure activities over years. Health, sports and leisure clubs are part of the hospitality industry now since they provide facilities in this respect to the guests and visitors. The Institute of Hospitality, founded as the Institutional Management Association in 1938, is the professional body for individual managers and aspiring managers working and studying in the hospitality, leisure and tourism industry. The Institute for Sport, Parks and Leisure plays a prominent role in development of the industry. Chartered Institute for the Management of Sport and Physical Activity conduct several certificate courses such as Fitness Management Certificate, Health & Safety Management Certificate and Higher Professional Diploma in Sports and Recreation Management and offers training and development facilities to the industry professionals which include CPD (Continuing Professional Development). “The new CIMSPA framework offers a model of professional behaviours and competencies and outlines a continuing learning process that complements technical training and formal education” (CIMSPA). Travel and Tourism industry is closely associated with Hospitality industry and there is close coordination existing between these industries. “The Confederation of Tourism & Hospitality was established in 1982 to provide recognised standards of management training appropriate to the needs of the hotel and travel industries, via syllabi, examinations and awards” (Access College). Hospitality awards set out the benchmarks in standards and excellence in performances based on several criteria. Villaverde (2013, p. 1) stated “They represent an independent, public acknowledgment of our efforts to produce consistent, top-level service across the board, from check-in to check-out. This is how we nurture repeat business.” c) Evaluation of the staffing structure and their responsibilities Staffing and the roles, responsibilities and qualification requirements of hospitality staff of different hospitality industries differ significantly based on the size of the organisations, facilities available, the number of hotel rooms, occupancy rate and room rate of the hotels and their star classification. Major functional areas such as food preparation, restaurant, lodging services and front office will be subdivided into several areas depending upon the size and facilities available which include bars, night clubs, health & sports club, conference halls and leisure facilities. Each area of activity needs to be managed by the right people with necessary qualification, experience, expertise and disposition. The number of employees and supervisors in different divisions, their responsibilities and hierarchy will significantly vary with the size of the hotel, type of the customers and the level of operations in the division. Service failure in hospitality industry cannot be completely eliminated. But, Service failure is turned into an opportunity to establish strong connection with the customer through proper service recovery.  “Service recovery refers to steps that are intended to identify and correct service failures or quality problems” (Simons, 2004, p. 13) Combining concern for the comfort and safety of the customers with utmost courtesy and attentions leave good impression in the minds of the customers about the reliability and dependability of the organisation. Service recovery develops a personal relationship with the customers which develop into customer loyalty. Systematic approach to identify the areas prone to service failures and maintenance of records are essential for formulating appropriate strategies to improve the level of service. It is also important to evolve a system, develop standards and establish suitable scales for measuring satisfaction levels of the customers. The luxury hotel industry is associated with status in the society. The self-concept of the individuals and their efforts to develop positive distinctiveness in the society reflects in the associations they would like to maintain and develop. Like ‘birds of the same feather flock together’, people subconsciously form natural groups with styles, favouritism and prejudices. Understanding of this social concept in public relations and business development is essential for providing expected service to the existing customers and attracting new customers. People belong to various social groups would like to maintain their perceived status. This attitude reflects in their choices and preferences of clothes, hotels where they stay, the cars they use and so on. There is also utility value attached to status since it helps in politics, business and industry. Understanding of the connections within the group and interconnections among various groups is very important in dealing with the members of various groups for sustainable development of business. There are various factors involved in social identity that includes religion, cultural background and political affiliations. The hotel industry needs to integrate social identity theory in its strategies relating to customer relationship management for business development. There are several diploma and degree courses relating to catering technology, hotel management, hospitality and tourism management and postgraduate courses in hospitality administration offered by various colleges and institutes. The trends in globalisation encourage students to specialise in various areas relating to catering technology or hotel management by pursuing studies in foreign countries. The people qualified from the institutions should be given in-house training in the hotels that is structured based on the customer profile. The employees in the industry should have broader knowledge about the customs and habits of the customers belong to various social, cultural or ethnic groups. Adverse opinions exchanged by the guests within their group can have serious impact on the business in the long run because negative sentiments have more news value in social circles. The training programs for the employees should place emphasise on these aspects since these experiences are not taught in schools or institutes. The management needs to concentrate on preventive measures rather than service recovery. In the case of service recovery, taking prompt measures without any compromise on quality or service level at the convenience of the customers are important. Availability of skilled labour is a major challenge for HRD in hospitality industry. The diversified activities involved in the business such as catering, room service, hotel management, restaurant management, leisure, health and sports call for structured HRD policies in relation to recruitment, orientation and training. Since labour turnover is a cause for a concern in the industry, retention of labour is very important through appropriate and progressive policies that envisage career progression, work-life imbalance and satisfactory working conditions. d) Image in hospitality industry The successful brand in hospitality sector stands for quality, lifestyle and social identity that enhance shareholder value as well. Intense competition and growing globalisation phenomenon noticed in the industry needs to be carefully reviewed and various options assessed for improving the facilities, brand affiliation and tie-ups with the organisations related to the business aiming for strategic synergy are very important to develop a good image in the industry and among the customers. Brand development enhances recall value among the customers. In brand affiliation will be useful in endorsement of quality of service. This lends credibility to the services in hospitality sector. The marketing strategies are required to be formulated for creating and enhancing positive image and professional behaviours. The hospitality industry has survived the financial crisis in Euro zone successfully. Kapiki (2011) stated “The hospitality and tourism sector is experiencing numerous challenges as a result of the global economic crisis. After a significant contraction in 2009, tourism rebounded strongly in 2010 and in 2011 the international tourist arrivals and receipts are projected to increase substantially. The hospitality industry is expected to show a sustained recovery in 2012.” Branding plays an important role in hospitality industry and the association of the high profile guests is also linked to promoting and developing brands through target marketing, advertisement and effective use of media and social networking for these purposes under fast changing scenario to enhance organisations’ image. Pricing and discounts need to be balanced properly to give customer satisfaction as well as to ensure their patronage during unfavourable economic conditions. HR policies should aim at securing complete cooperation of the employees in building up the image of the organisation by providing satisfactory working conditions, competitive salary package compared to the industry standards, chances for career progression and training facilities. Activities of the companies in CSR (Corporate Social Responsibility) front enhance the image of the company in the community where it operates. These activities would elicit the community’s active cooperation in running the business. Of all, superior customer service is the corner stone for building up image and reputation in the industry. The employees should be trained well in service recovery mechanisms to ensure customer satisfaction and loyalty that will enhance the image and pave way for long term business relationships. Review of recent developments a) Issues affecting the industry InterContinental Group (2013, p. 43) stated “the value of the Group’s brands is influenced by a number of other factors, some of which may be outside the Group’s control, including commoditisation (whereby price and/or quality becomes relatively more important than brand identifications due, in part, to the increased prevalence of travel comparison websites and online travel agents), consumer preference and perception, or other factors affecting consumers’ willingness to purchase goods and services provided by the Group.” Developing and managing brands call for superior managerial skills. The increased awareness among the consumers due to developments in technology that facilitates faster dissemination of information should be properly factored in. Types of talents required in the labour intensive hospitality industry are multifarious. Automation could not replace labour as in the case of other industries. The industry is also capital intensive involving heavy outlay on construction, furnishing and equipments which need long term view on payback. Availability of talent with right skills and for managing growth and change is an import issue affecting the industry. Demographic issues need to be carefully considered by HRD in view of diversity in workplace. The fortunes of the industry are closely linked to economy. Risks associated with the business are of various types such as financial stability during slowdowns in economy, information security, safety and security of the customers and the employees and regulatory compliance including environmental concerns. Number of government regulations need to be revisited consequent upon globalisation for the healthy growth of hospitality industry. For example, visa regulations prevent growth of tourism from emerging economies such as China and India. Similarly, restrictions on immigration visas hamper employment of Chefs and other skilled professionals from other countries. Present VAT structure in the UK makes the country less competitive compared to other EU nations. But, Budget 2013 was a disappointment in this front in the UK. Over regulation of hospitality industry results in red tape in respect of modifications and alterations especially in bars and pubs. Cody (2012) stated “The British Hospitality Association (BHA) is lobbying the Government to allow hotels to benefit from the Enterprise Investment Scheme (EIS), a series of tax reliefs designed to encourage and assist investments in small UK companies.” b) Analysis of future trends Convergence of technologies such as voice, data and video and social networking has increased awareness in the society that added new dimensions to the industry. The emerging trends like preference for organic food, vegetarianism and online reservations and regional delicacies make talent hunting crucial for sustainable growth and development. The customer profile has changed significantly during the recent years which include new types of customers like social clubs, various business or professional associations, health & sports clubs and musical groups whose tastes and preferences are diversified. Increase in tourism activities, participation of various nationals in the international events like Olympics and tourism clubbed with medical treatment (Medical Tourism) have in fact reflect in the increase in RevPAR (revenue per available room), higher room occupancy levels and number of hotel rooms in pipeline. Diversity at workplace is very crucial for effective service by hotels in the years to come considering the increasing mix of social, cultural and ethnic groups in customer profiles of various organisations. Diversity in workplace based on customer profile ensures ideal proportion of staff with various backgrounds to increase the comfort level of the customers. Intense competition increasing in the industry necessitate introduction of Customer Relationship Management techniques for ensuring continued patronage of the customers by enhancing the level of service through application of technology in service delivery. Colomo-Palacios et al. (2012, p. 142) stated “The hotel sector has grown rapidly in recent years. Organizations in this sector have adopted Customer Relationship Management (CRM) initiatives for establishing closer relationships with its customers.” The employees in this industry need to develop certain special attributes for a successful career and career progression. Of which understanding of the importance of Service Recovery and Social Identity Theory and its application in the day to day activities are very important. The needs of the tourists belong to higher strata in societies visiting the country from various parts of the world have to be satisfied. This involves arrangements for transportation, sightseeing and supply of food and beverages. In the case of medical tourism the responsibilities are extended as it involves making appointments with the hospitals and providing additional facilities as may be required. The job calls for patience, tact, discretion and empathy on the part of the employees. Therefore, the orientation programs and training provided to the employees should be restructured taking into account these aspects since the other aspects relating to their jobs such as quality of service and courtesy are already covered adequately. The top 10 trends according to Gollarza (2012) in 2013 are given below: 1. Hoteliers Will Invest in Reinvigorating Properties To Take Advantage of the Market. 2. There Will Be Little to No New Development Dollars on the Debt or Equity Side. 3. Online Booking Will Continue to (Modestly) Grow. 4. More Mobile Bookings and Research (Mobile channel booking has increased four-fold between 2008 and 2010 according to Forrester Research. Google is also projecting that mobile will overtake PCs as the most common web-access device by 2013). 5. Demand and Average Rate are Up In Most Markets, but Not Equally Distributed. 6. Revenue Management Will Make the Art of Managing a Hotel More of a Science. 7. Proliferation of Distribution Channel Management Will Largely Impact Pricing (hoteliers must know the costs of the variety of distribution channels and the returns expected from each). 8. Brands Will Put More Money into Deals to Expand Market Share (brands as they fight for share of the new builds). 9. Prepare for Growth 10. Social Media Will Continue to Transform Connections with Travelers (By 2016, half of the travel industry will be using social media as a way of generating revenue and bookings).  Impact Analysis of the predicted trends on the business is essential to identify the effects of these trends effectively in dealing with the unexpected situations. Systematic analysis of the impacts and their consequences keep the management in full preparedness with a planned approach through proper restructuring. Continuous renovation of the facilities is essential for sustainable growth and development (1). However, in the absence of pressures from capital front anticipated augers well for the growth (2). Increase in online booking is an ongoing phenomenon and the progressive hotel groups have already revamped the facilities to take care of these impacts (3). Increase in mobile bookings calls for introduction of CRM techniques, changes in the centralised booking system and website optimization which involves expertise of the outside consultants and installation of equipments and software since the in-house professionals’ expertise in planning and execution may not be adequate. InterContinental Hotel Group (2013, p. 40) stated “IHG is dependent on the stability of its IT infrastructure and must stay abreast of industry shifts towards mobile applications and cloud computing. Failure to maintain IT performance, resilience and technology change could impact guest experience and revenue channels.” (4) Revival of economy is very crucial for growth in demand. Therefore, forecasting should be realistic taking into account the customer profile and their demand (5). Research on travel, tourists’ arrival and the competitors’ strategies are very important in costing, pricing and revenue management. The companies have to develop facilities for this purpose for efficiency in revenue management (6). Availability of various channels and their cost effectiveness has to be reviewed on constant basis for efficient channel management (7) as well as brand management (8). The management has to explore ways to use social media for business development (10). The impacts in respect of the points mentioned under (4) relating to systems, (5) forecasting, (6) research, (7) channel management, (8) brand management and (10) social media may yield negative results unless the management takes appropriate and timely steps to reorient its strategies in line with the analysis for sustainable growth and development. Mc Kinsey 7S approach relating to organization may be applied for impact analysis taking into account the changes needed in various departments, customer categories and organizational structure. Peter and Waterman (1995, p. 10) stated that this model consists of seven criteria of success needed for achieving excellence in the organization which includes strategy and structure under hardware and style, systems, staff, skills, shared values under software. References Access College, 2013. CTH – Confederation of Tourism & Hospitality, [online] Available at: [Accessed 30 March 2013]. CIMSPA, 2013. Professional Development Framework, CIMSPA’s website. [online] Available at: [Accessed 30 March 2013]. Cody, A., 2012. BHA urges Government to include hotels in Enterprise Investment Scheme, Hotel Owner, [online] Available at: [Accessed 30 March 2013]. Colomo-Palacios, R., Varajao, J. and Soto-Acosta, P. 2012. Customer Relationship Management and the Social and Semantic Web: Enabling Cliens Conexus, IGI Global, Hershey PA. E-Hospitality.com, 2013. CLS Software Property Management System, [online] Available at: [Accessed 30 March 2013]. Institute of Hospitality, 2013. Welcome to the Institute of Hospitality, Institute’s website. [online] Available at: [Accessed 30 March 2013]. Kapiki, S. T., 2011. The Impact of Economic Crisis on Tourism and Hospitality:Results from a Study in Greece, Central European Review of Economics and Finance, vol. 1. No 2 (2011). InterContinental Hotel Group, 2013. Annual Report and Financial Statements 2012, [online] Available at: [Accessed 30 March 2013]. Peters T., Waterman R.H. Jr. (1995), In Search of excellence. Lessons from America’s Best-Run Companies, Harper Collins Publishers, London. Simon, J. V., 2004. Reliability-based analysis of service recovery, The International Journal of Quality & Reliability Management, 21(1), pp. 11-31 Villaverde, A., 2013. Do Hotel Industry Awards Really Matter?: Employee Satisfaction, Hotel Business Review, 2013, Cummins Communications. Read More