Posted at 12.12.2018
Services are becoming more and more an important part of the global economy. It is estimated that normally 70 percent of the gross local product (GDP) of the Organization for Economic Co-Operation and Development (OECD) (2007) countries come from service industries. Furthermore, it is predicted that the importance of services will continue steadily to increase worldwide not only in the developed parts of the entire world but also in producing countries.
Certainly hospitality is an important sector in services specifically in the developed countries. Beneath the services sector, the hospitality is often called as the number one industry worldwide in conditions of era of income and occupation. Over the last three ages, the hospitality is continuing to grow rapidly, and today it has become one of the very most prominent industries of the service industry. It produces over 11 percent of the world's gross home product and utilizes over 10 percent of the global workforce (UNWTO, 2003).
In 2006, international travel and leisure arrivals worldwide achieved an all-time record of 842 million visitors. Inside the same year, travel and leisure receipts, including international traveler transport, were approximated about $883 billion, which means that international tourism produced over $2. 4 billion every day in 2006 (UNWTO, 2007). As an export category, the travel and leisure industry rates fourth after fuels, chemicals, and automotive products (UNWTO, 2007). Regardless of the existence of terrorism, natural disasters, health scares, fluctuations in trade rates, and uncertainties in economical and politics arenas, the hospitality industry have observed positive growth going back 2 decades. This growth has not only been seen in developed parts of the globe but also in expanding parts of the globe such as Africa, Asia, and the center East. It is forecasted that the hospitality industry will continue growing quickly worldwide. Following economical, sociocultural fads and developments, more folks will be taking part both in domestic and international tourism. In getting together with this growing demand, many new hospitality businesses will be opened up; new tourism vacation spots will emerge, and new travel and leisure products will be presented.
Although it is one of the major establishments worldwide, providing a concise explanation for the hospitality industry is a major concern for specialists and academics. Normally acknowledged, there continues to be too little agreement concerning just what hospitality and tourism encompasses and the partnership between them. According to Nykiel (2005), definitions of the hospitality industry tend to be limited by the unique viewpoints of sectors within the industry. For example, a hotel operator may see the industry as accommodations with food and beverages. A food and beverage operator may view the industry as a eating experience with the focus on menu offerings and food service. A travel company manager might think that providing travel related services to people for business and leisure defines the industry best. An executive of a style park could see hospitality as providing a distinctive entertainment and educational experience. In order to overcome this distress, Nykiel (2005) positioned all of these viewpoints under a wider perspective called "hospitality" and additional mentioned that the hospitality industry goes by travel, accommodations, food service, clubs, gaming, sights, entertainment, and entertainment.
Kandampully (2007) records that hospitality organizations operate inside a network of service organizations. To a big extent, they can be interrelated and interdependent, you need to include the next:
Tour operators, travel companies, and travel and leisure organizations
Travel and transportation operators
Leisure, entertainment, and entertainment venue
Restaurants, bars, night clubs, and cafes
Hotels, resorts, motels, camping grounds, foundation & breakfast (B&B) organizations, and hostels.
Organizations that operate in the hospitality industry can be grouped under different categories depending on their principal activities, size, income motives, and physical coverage. In terms of their primary services, organizations can be classified as follows:
Travel and transport
Food and beverages
Entertainment and recreation
Tourism office buildings or vacation spot management organizations
Nongovernmental tourism organizations
Each of the is often recognized as a subsector under the hospitality industry. In addition, each can be further cracked into several subgroupings. For instance, under accommodations, there are hotels, motels, guest residences, hostels, villas, and time-shares. A few of these organizations can be further grouped depending on the service level, such as luxury hotels, boutique hotels, midmarket hotels, and budget hotels, or regarding to their superstar ratings, such as five-star (diamond), four-star, and three-star hotels.
A further grouping of the hospitality organizations can be produced based on their size such as small, medium, and large. Individual and adaptable small and medium-sized companies (SMEs) dominate the tourism market worldwide.
An SME is identified in employment terms as a firm with a labor force of less than 250 employees (Western Percentage, 2002; Wanhill, 2000). For example, it is reported that around more than 90 percent of tourism and hospitality organizations in European countries are SMEs (Bastakis, Buhalis, and Butler, 2004; Western Payment, 2002, Wanhill, 2000) which can be usually ownermanaged, being run either by a person or by small groups of people.
Managing SMEs is different from managing larger enterprises. For instance, Quinn, Larmour, and McQuillan (1992) state that smaller hotels are not simply smaller versions of large hotel teams. They have specific organizational buildings and civilizations that are often influenced by their owners. The business targets of smaller hotels may have a new emphasis in comparison to large hotel communities. According to Quinn and co-workers (1992), success, market talk about, and efficiency are less important to smaller businesses. In addition, they may have less want to develop and achieve high success and production ratios. Their views on the external environment, long-term strategies, generic positions, competitive advantages, and allocations of financial and human resources may not be similar to those of large organizations. We know that lots of SMEs face financial and managerial challenges (Hwang and Lockwood, 2006), and their percentage of business failures is higher in comparison to larger organizations (Wanhill, 2000).
Another classification of hospitality organizations can be made according to profit motive. A high most hospitality organizations try to make a profit and achieve some financial objectives in order to fulfill their owners and shareholders. On the other hand, nongovernmental tourism organizations, associations, travel and leisure vacation spot management, and marketing organizations can be positioned under non-profit tourism organizations. Their most important goal is often not to make profit but to achieve other nonfinancial targets, such as serving society, protecting the environment, and achieving ecological travel and leisure development in their areas over the long term.
Essentially, service sector organizations, like the hospitality organizations, have certain unique features. Disregarding the distinctions between service organizations and making organizations can result in unexpected outcomes. Listed below are some directly related, unique characteristics of hospitality organizations (Fitzsimmons and Fitzsimmons, 2004; Gronoos, 2007; Kandampully, 2007):
Inseparability-customer contribution in the service process
Intangibility (the tangible-intangible continuum)
In hospitality organizations, customers need to be present and participate in the service delivery process. This is certainly not common in developing industries. Which means that the parting of the production and marketing functions, which are important characteristics of the traditional making industry, is not possible in the service delivery process that is found in hospitality. Therefore, hospitality must communicate with and encourage their customers to actively participate in the service delivery process.
Attracting and having customers to hospitality requires careful attention with their location, brand image, and ongoing marketing and promotional activities. Furthermore, the existence of customers and the requirement for them to play a dynamic role in the service delivery process necessitates ongoing attention to action, the appearance of employees, the inside design and decoration of facilities, furnishings, layout, and noise.
This means that like Fitzsimmons and Fitzsimmons's (2004) remarks on managing service organizations, businesses, marketing and HRM functions in hospitality need to be very closely integrated. Compared to processing firms, this certainly requires that a different managerial methodology, organizational framework, and culture must be developed and managed in hospitality.
Typical manufactured goods, such as a refrigerator or a tv, can be inspected before it is delivered to retail outlets, where they are really then sold to customers. However, services in hospitality are created and consumed all together, which can prevent utilizing energetic quality control mechanisms. In addition, as just observed, customers and employees need to participate and coordinate in the service delivery process. It really is almost impossible to acquire one manager for every employee to screen the service delivery process and make sure that frontline employees are doing their jobs well, in addition to guiding the customers' involvement in the process.
Therefore, to be able to make sure that services are produced and wanted to customers at an expected quality that fulfills consistent specifications, hospitality should count on other actions such as buying recruiting, use of technology, building desired physical facilities, and design to guarantee the quality of services shipped. It has implications on decision-making practices, resource allocations, businesses, marketing, and individuals resource management methods.
As creation and consumption in hospitality are simultaneous, services become perishable if they are not sold. Eventually, their value is lost forever. For example, an airline couch or a hotel room will perish if a person does not purchase it at the time of production. Therefore, the entire utilization of service capacity is a tactical process for much hospitality.
It is specially important to emphasize that demand for a hospitality services often fluctuates noticeably, depending on the external developments and changes, such as seasonality and crises. For example, terrorist disorders (such as Sept 11, 2001 in NY), disease outbreaks (such as SARS in china and taiwan), and natural weather phenomena (such as tornadoes or hurricanes) all got a negative effect on the demand for services provided by the hospitality industry worldwide. Because hospitality cannot sell their services when such circumstances come up, they lose a considerable amount of non-recoverable income. Once the demand is low or there are unexpected fluctuations in demand, it is neither easy nor advised for hospitality to lessen their rates greatly, since it may effect their image, change their customer section, and upset their regular customers.
A further issue in terms of perishability is that consumer demand for hospitality services exhibits very cyclic habit over a short period of time. For example, restaurants are occupied during lunchtime, evenings, and weekends, but they might not be very busy at other times. Demand for most hospitality, such as restaurants and theme parks, boosts during public holidays such as Holiday, New Year's Day, and planting season break. With regards to the location, many hotels and restaurants experience great variances in summers and winters. This puts much responsibility on the management of these firms in planning for the near future and allocating their resources quickly and sufficiently to the right purposes. In short, expected and unforeseen fluctuations popular have implications on cost structure, costing, staffing, and learning resource allocation decisions.
Hospitality and tourism organizations give you a blend of tangible and intangible products (Kandampully, 2007). For example, a hotel room or meals in a restaurant has both tangible and intangible characteristics. Again, there may be major variations between a budget hotel and an extravagance hotel or between a fast-food restaurant and an upscale restaurant in terms of tangible and intangible attributes offered. However, services are often ideas, concepts, relationships, relationships, and activities that aren't often patentable. It is vital to note that the intangible aspects of services proposed by hospitality are critical in client satisfaction. It is because the primary difficulty related to the intangibility of services is the fact customers cannot often see, feel, and test these services when they order or get them (Gronroos, 2007; Kandampully, 2007). Prior to their purchase, they may try to examine services around they can by looking at the inside of your hotel or a restaurant and the appearance and habit of the employees. Generally, customers have a tendency to rely on the image or the goodwill of hospitality. In order to get over potential problems and dissatisfaction in these areas, some hospitality companies publicize their service claims and give you a completely satisfaction warrant.
Legal requirements have also been suggested for hospitality to provide satisfactory service performance for customers. However, these legal requirements change among different countries. The expectations of customers may also vary, depending on the country or physical location of the hospitality enterprise. We realize that customers' demands and expectations are constantly increasing, which puts more pressure on hospitality to improve their services and management tactics.
Services provided by hospitality could also vary considerably. One hotel product in a string hotel, one device in a restaurant string, or one vacation experience of a traveler to the same vacation spot is improbable to be indistinguishable to some other. Many factors, specially the human element, cause variations of the service delivery process. In other words, services will be heterogeneous, and modifications in service delivery from customer to customer and every once in awhile will always appear. It is difficult to standardize every employee- customer connection in the hospitality business. In addition, in many hospitality organizations, customers interact not only with employees but with some other clients. This customer-to-customer connection in certain service organizations, such as pubs, discos, nightclubs, and cruises, is definitely an essential requirement of the full total service delivery process.
Hospitality is also highly susceptible to external changes. One of these of an exterior factor is the weather. Visiting a patio theme park can be very pleasant and amusing on a good day, but it's rather a miserable experience if it is raining and wintry.
In recent years, through the intense use of information technology and dynamic training of employees and design of physical facilities, endeavors to boost and standardize the service delivery process have greatly increased. On the other hand, some customers expect a high level of service delivery, but this will not imply that they prefer standardized services. Therefore, hospitality need to achieve some extent of balance between standardization and differentiation in reaching the demands and expectations with their customers.
The cost structure of hospitality affects their managerial and source of information allocation decisions. For instance, luxury hospitality is capital, labor, and energy intensive. Typically, they have high property costs and also employ many full-time employees. It could be problematic for them to lessen such cost items even if the demand is low. In addition, they may need to renovate their facilities every five to a decade to stay competitive in their field. Another issue is the fact that given the huge amount of investment made in these organizations, buyers and owners often look very carefully at their return on investment. Therefore, these companies need to maintain a steady stream of customers to maintain the profitability of these businesses. This often contributes to creative marketing and product development strategies as well as rates strategies.
Installing machines and computers on an automobile factory's assembly range or in an ice cream stock can decrease the range of employees. However, in comparison to many organizations in other business, hospitality takes a large number of employees. To put it simply, hospitality are labor intensive. It is because personal relationships and experiences are crucial parts of services, and employees play an integral role in this technique. Despite using many machines, pcs, and technological improvements, hospitality still rely mainly on the employees to provide a memorable and positive experience. Being dished up and treated nicely by employees is a major element in getting do it again customers.
One appearing question is how we can use and apply general strategic management ideas and models in specific hospitality industry context. On this section, we will verify how such ideas and models can be applied in the particular context of hospitality and tourism. A lot of the proper management tools, models, techniques, and theories have customarily been developed mainly for the making sector in the United States and have consequently been applied to other industrial industries (Okumus and Wong, 2005). However, hospitality that is concerned with a service-based output reflects the typical characteristics found across the service sector.
These include customer involvement in the service delivery process, simultaneity, perishability, intangibility, heterogeneity, and high fixed costs of the services provided. As described previously, there will vary types of businesses with unique features in the hospitality industry.
McGahan and Porter (1997) and Porter (1980) said that the industry context does matter because it can have a primary or an indirect effect on the strategy-making process and on the production and profitability of organizations. This shows the so-called "outside-in" view that we noticed in Chapter
Conversely, Baden-Fuller and Stopford (1994) argued that it is the inner characteristics of firm-the "inside-out" views-that things most, not the industry. Matching to Baden-Fuller and Stopford (1994), successful organizations can skillfully journey the waves of industry crises, and less successful ones can vanish due to industry misfortunes besetting the industry. For example, Southwest Airlines has been profitable and successful since the early 1970s, while many other major airlines have experienced serious troubles, with some declaring personal bankruptcy. Here, the industry framework and characteristics are considered to be of supplementary importance.
Given these conflicting views as to whether the industry framework or that of the average person firm is more important when devising a strategic plan, we propose an alternative but more holistic view on this controversial issue. In support of McGahan and Porter (1997), we believe the industry composition and the initial characteristics of the hospitality sector do subject and that they can have a clear effect on the strategy-making process and on the production and success of hospitality.
Therefore, we have to have a better and deeper understanding of how the exterior environment impacts the hospitality industry. We further acknowledge that the industry framework is one of the measurements impacting the management techniques in hospitality and their performance.
In short, the context at both industry and the organizational levels is crucial if you are to effectively use and apply the tactical management theories and models in hospitality. The need for framework to strategy making means that the preceding debate keeps across all professional sectors and not only hospitality and tourism. All issues related to the strategy process and the strategy content must always be framed for the reason that specific context. Quite simply, we can not meaningfully separate strategy from its industry context or from its inner organizational context.