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01-May-12 10006823

MODULE LEADER: DR AHMED HASSANIEN

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Report 2
Executive summary

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Table of Contents
Executive summary ....................................................................................................................................... 2 1. Outsourcing........................................................................................................................................... 4 1.1 Introduction ........................................................................................................................................ 4 1.2 Discussion of whether to outsource or keep in-house ....................................................................... 4 1.3 Conclusion ........................................................................................................................................... 5 References ................................................................................................................................................ 6 2. Renovation ................................................................................................................................................ 7 2.1 2.2 2.3 Introduction .................................................................................................................................. 7 The Value of Renovation ............................................................................................................... 7 Conclusion ..................................................................................................................................... 8

References ................................................................................................................................................ 9 3. Technology .............................................................................................................................................. 10 3.1 3.2 3.3 Introduction ................................................................................................................................ 10 The importance of technology in hospitality .............................................................................. 10 Conclusion ................................................................................................................................... 11

References .............................................................................................................................................. 12 4. Environment............................................................................................................................................ 13 4.1 Introduction ...................................................................................................................................... 13 4.2 Effective Environmental Management ............................................................................................. 13 4.3 Conclusion ......................................................................................................................................... 14 References .............................................................................................................................................. 15 References .................................................................................................................................................. 16 Appendix 1 A summary of the benefits of contracting ............................................................................ 18 Appendix 2 Disneyland Hotel Commences Renovation in Anaheim ....................................................... 19 Appendix 3 Electricity reduction practices at three 5-star hotels. .......................................................... 20

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1. Outsourcing
1.1 Introduction
Within the context of the hospitality sector this heading discusses the key considerations when deciding whether to outsource support functions/services or retain them in-house. The chapter ends with a brief conclusion that sums up the main findings.

1.2 Discussion of whether to outsource or keep in-house

As Lamminmaki(2011) states, the factors in which a hotel decides to either outsource or retain an activity in-house can be understood better when examined separately. Bolat and Yilmaz(2009) identify three main reasons for hotels to outsource. The first one is so that the hotel could focus only on their core-competences. By allowing the noncore activities to be outsourced, the company can better manage and allocate resources effectively. Also leaner organizations are formed this way which increases staff motivation and enrichment. The second is to improve the quality of services of non-core activities which as Gilley and Rasheed (2000) observe, are the core elements of that specific contractor. Contracting out to a business which has knowledge of how to operate effectively because of working with many other clients and investing capital on new technology is one of the ways in which a hotel can improve its quality. The last reason mentioned for outsourcing is to cut costs (Bolat and Yilmaz 2009). Contractors with economies of scale in that particular field can offer the same standard of quality that could be done in-house but with a lower price. A supplier with economies of scale and an efficient way of controlling costs can offer a better deal to a hotel. By outsourcing, the hotel reduces the need for capital assets and thus the need of investment or maintenance which in turn lowers the costs of operating. However there are situations where outsourcing increases costs by increasing the internal transaction costs such as staff development and investment in infrastructure required providing a service, head office or support costs (Lamminmaki 2011). In relation to the benefits of outsourcing Domberger (1998) identifies four main points which are listed in the Appendix 1.

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In order to explain whether a hotel should outsource or keep in-house different activities Lamminmaki(2011) has used the Transaction Cost Economics (TCE), a framework which states that businesses organize themselves in order to minimize the transaction costs of their operations. The decision to outsource is identified to be based on three criteria: frequency, uncertainty and asset specificity. If high frequency is met, for example a hotel has a large number of rooms which are running at high capacity it is affordable to have an in-house laundry but if it is seasonal it may be better to outsource. Outsourcing an uncertainty activity such as housekeeping may be expensive to contract because it is hard to know the exact degree of service that is required. Some activities need to be in-house in order to protect the assets a hotel might have such as: reputation, brand, degree of service which is crucial for its survival.

1.3 Conclusion
To conclude, this report has discussed key considerations such as: frequency, uncertainty or asset specificity that need to be taken in account when a hotel decides to outsource a business activity or keep it in-house. The report also identified the reasons why a business might outsource non-core activities in order to be more efficient and add more value to their product.

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References
Bolat, T. & Yilmaz, O.(2009). The relationship between outsourcing and organizational performance: Is it myth or reality for the hotel sector?, International Journal of Contemporary Hospitality Management, Vol.21, No.1, pp. 7-23. Domberger, S. (1998). The Contracting Organization: A Strategic Guide to Outsourcing. Oxford University Press, Oxford. Gilley, K.M. & Rasheed, A.(2000). Making more by doing less: an analysis of outsourcing and its effects on firm performance, Journal of Management, Vol. 26, No.4, pp.763-790. Lamminmaki, D.(2011). An examination of factors motivating hotel outsourcing, International Journal of Hospitality Management, Vol.30, No.4, pp. 963-973.

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2. Renovation
2.1 Introduction

The aim of this paper is to discuss the importance of property renovation in the hospitality sector for its facilities.

2.2

The Value of Renovation

It has been suggested that renovation is the profitable way of constructing a new hotel because it is cheaper, saves up time and revitalizes an older building (Hassanien 2007). The hospitality sectors competes on real estate in a dynamic environment, thus the limitations on better sites lead hotel owners to renovate existing buildings than start new projects. The problem with building a new hotel is that the effectiveness of a design can be analyzed after the business has started operations, but renovation has the benefit of using the feedback it already has from previous activities so that it can improve the process. In a case study on multiple Egyptian hotels renovation Hassanien (2006) found that the marketing aims of the operators to begin such a project are different. Advantages of renovations found are: to remain or to regain the market leader status of a specific location, to upgrade to an upper class market, to change the brand image or to be able to offer the quality and customer satisfaction that they guarantee. These benefits are not only associated with that particular area but can be found in most cases of effective renovation. From this example it can be seen the importance of renovation for a hotels success and the impact it has on the marketing mix. Renovation is a tool which changes the product, for example it can be seen in Appendix 2 that the new Disneyland Hotel in Anaheim redesign of 3 bedroom apartments and the construction of a new water play area shows that the management targets families in particular and the restoration of a classic 1955 hotel image is how they differentiate between competitors. As stated by (Zmuda 2011), renovation was needed for the Holiday Inn chain in order to solve a number of brand issues the business was dealing, changing the overall product and physical evidence. Renovation can also have an effect on price, seen from Hassanien (2006) study, the

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managements reasons are to increase occupancy and the average spending per guest or to upgrade a hotel to a higher class in order to charge extra. Keeping up with the competition is an aspect with which most of the hotels have to take in consideration. The benefit of renovation is that they could either improve their unique image on the market if it is already selling or develop a brand new one in case the life cycle of the previous one is ending.

2.3

Conclusion

To conclude, this report has illustrated the benefits renovation have on the overall process of a hotel. The paper also identified that renovation has the advantage of positioning a business as the market leader or changing the image or structure of a hotel as well as being a marketing tool to reshape the product, price or physical evidence of the marketing mix.

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References
Alderton, M. (2010). Disneyland Hotel Commences Renovation in Anaheim, Meeting News, Vol.34, No.7, p. 26. Hassanien, A. (2006). Exploring hotel renovation in large hotels: a multiple case study, Structural Survey, Vol.24, No. 1, pp. 41-64. Hassanien, A. (2007). An investigation of hotel property renovation: the externals party view, Property Management, Vol. 25, No.3, pp. 209-224. Zmuda, N. (2011). InterContinental Hotels battles amenity creep; CMO Eric Pearson says defining and differentiating brands is crucial, but then you must make sure they live up to the hype, Advertising Age, Vol. 82, No. 31, p. 18.

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3. Technology
3.1 Introduction

The aim of this paper is to discuss, within the hospitality sector, the importance of technology on guest and customer satisfaction. The paper also analyses the ways in which technology influences the marketing mix.

3.2

The importance of technology in hospitality

Technology is a great force in the industry changing guest-employee interaction or the dynamics of competition (Connoly & Olsen 2000). As Watts & Ryan (2002) observe modern technology is not only helping businesses to manage on different markets but creates markets by bringing new ideas and devices. This has an impact not only on companies or competition between them but also on the customer that has to adapt to the changing business environment. Recent innovation in the hospitality sector has led to a decrease in labour costs but also an increase in customer satisfaction and choice (Muller 2010). For example, the Drive Thru Window which Dave Thomas sets up in his Wendys Burger, franchising restaurant chains in order to fund concept distribution and growth of outlets or the acceptance of Credit/Debit cards in all restaurants has offered customers a quicker and more user-friendly service whereas for the management has reduced labour and improved efficiency. Internet has also improved customer satisfaction by offering them a better knowledge of how and where to meet their needs and wants.

Figure 1: A proposed business model taken from Connolly & Olsen 2000 page 78

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As it can be seen in Figure 1, the internet plays an important in the distribution system of hotels. The management can choose to disintermediate thus distributing their offers using their own website with online booking systems and customer e-newsletter or to eintermediate. The rise of the WWW era has led travel agents and tour operators such as expedia.com, lastminute.com or tui.com to go online in order to cut costs and target a larger market (Cooper et al 2008). Hotels that use e-intermediaries can both promote their business worldwide and distribute it at the same time. Because of these issues, customers have more freedom of choice and a better understanding of what they can expect from the hotel. Another benefit is that they are able to book in advance and state any preferences in advance so that the management of the hotel can prepare and offer the right service. It may be the case that because of advancements in technology the online price may be slightly lower than the price from the reception desk (Holloway 2006).

3.3

Conclusion

To sum up, advances in technology have both increased business efficiency and customer satisfaction to a point where past business activities are soon to be forgotten. The internet nowadays is an important tool in the marketing mix affecting both the place and promotion aspects offering expert knowledge to both hotel and clients. As presented before innovation has allowed customers to have a wider choice of products and expect more from a hospitality outlet which has led to a fiercer competition between businesses. Customers are now the ones that demand more in order to be satisfied and businesses that do not react may be the first to lose.

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References
Connoly, D. & Olsen, M. (2001). An environmental assessment on how technology is reshaping the hospitality industry, Journal of Tourism and Hospitality Research, Vol.3, No.1, pp.73-93. Cooper, C. Fletcher, J. Fyall, A. Gilbert, D. and Wanhill, S. (2008). Tourism Principles and Practices. 4 edition FT Prentice Hall London. Holloway, C. (2006). The Business of Tourism. 7 edition FT Prentice Hall Harlow. Muller, C., (2010). Hospitality technology: a review and reflection. Worldwide Hospitality and Tourism Themes, 2(1): 9-19. Watts, W. & Ryan M.(2002). The Deviants Advantage: How to Use Fringe Ideas to Create Mass Markets, Three Rivers Press, New York. NY.
th th

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4. Environment
4.1 Introduction
The aim of this report is to explore the possible methods through which the operation and development of a hospitality facility such as a hotel can be made more environmentally friendly.

4.2 Effective Environmental Management

As Chan (2009) observes an environmental management system (EMS) allows the hotel to control the impacts of its activities, products and services on the natural environment. The reason why a hotel would want to have an EMS is on the one hand to improve its image and have a better relationship with the local community but on the other to improve its financial performance (Kirk 1995). The first point that needs to be addressed is the energy use in the hospitality sector. Hotels can be made more effective in their energy-savings techniques, allowing them to have a competitive advantage over the rest. Sloan et al (2010) identifies two types of design a hotel can have that integrates solar energy into the overall usage of energy consumption. Firstly, passive solar design can have both traditional (roof light wells, tall windows or courtyards) or modern techniques (light monitors or reflectors and optical fibers to transport light) and are used to maximise the use of natural daylight. Secondly, there are active solar designs which can be either solar water heating (a sustainable way of heating water) or photovoltaic solar panels that convert daylight into electricity. From Chans (2009) survey of three hotels the most effective measures to reduce electricity were solar control window film, sensors of air-conditioning system, energysaving light bulbs and key tagged control switches. The other measures taken by hotels can be found in Appendix 3. The second issue that needs to be addressed is reducing water consumption. From Chans (2009) survey the 5-star hotels have reduced water consumption between 18 to 43 per cent by installing flow regulators and keeping the kitchen clean and two of them integrated a calibre-able water control system and flow metres. Classic flush toilets account approximately 40% of total domestic water usage and thus measures such as

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low flush toilet that uses only 41% of total tank capacity or having a pressure assisted toilet that combines gravity with air compression (Sloan et al 2010). The last point is waste reduction and as Sloan et al (2010) states an effective measure is to outsource different activities of a hotel, such as dry cleaning where unproductive operations can produce hazardous waste. The use of internet in a large hotels operation (e-bookings, e-mails, online marketing, customer relationship, information analysis) can also help reduce paper waste (Ruiz-Molina et al 2010).

4.3 Conclusion

To sum up, effective management measures are split in three main categories: energy usage, water consumption and waste reduction. The need for such measures is needed by a hotel due to the rise in energy prices or to target a specific category of selfconscious customers. As it can be seen hotels can have a competitive advantage right from the start, by implementing measures in their design to produce reusable energy, reduce their carbon footprint and acquire technology that conserves water and reduces waste.

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References
Chan, W. (2009). Environmental measure for hotels environmental management system ISO 14001, International Journal of Contemporary Hospitality Management, Vol. 21, No. 5, pp. 542-560. Kirk, D.(1995). Environmental management in hotels, International Journal of Contemporary Hospitality Management, Vol. 7 No.6, pp-3-8. Ruiz-Molina, M. Gil-Saura, I. & Moliner-Velasques, B. (2010). Good environmental practises for hospitality and tourism: The role of information and communication technologies, Management of Environmental Quality: An International Journal, Vol.21, No. 4, pp. 464-476. Sloan, P., Legrand, W. & Chen, J.( 2009). Sustainability in the Hospitality Industry. Oxford: ButterworthHeinemann.

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References
Alderton, M. (2010). Disneyland Hotel Commences Renovation in Anaheim, Meeting News, Vol.34, No.7, p. 26. Bolat, T. & Yilmaz, O.(2009). The relationship between outsourcing and organizational performance: Is it myth or reality for the hotel sector?, International Journal of Contemporary Hospitality Management, Vol.21, No.1, pp. 7-23. Chan, W. (2009). Environmental measure for hotels environmental management system ISO 14001, International Journal of Contemporary Hospitality Management, Vol. 21, No. 5, pp. 542-560. Connoly, D. & Olsen, M. (2001). An environmental assessment on how technology is reshaping the hospitality industry, Journal of Tourism and Hospitality Research, Vol.3, No.1, pp.73-93. Cooper, C. Fletcher, J. Fyall, A. Gilbert, D. and Wanhill, S. (2008). Tourism Principles and Practices. 4 edition FT Prentice Hall London.
th

Domberger, S. (1998). The Contracting Organization: A Strategic Guide to Outsourcing. Oxford University Press, Oxford. Gilley, K.M. & Rasheed, A.(2000). Making more by doing less: an analysis of outsourcing and its effects on firm performance, Journal of Management, Vol. 26, No.4, pp.763-790. Hassanien, A. (2006). Exploring hotel renovation in large hotels: a multiple case study, Structural Survey, Vol.24, No. 1, pp. 41-64. Hassanien, A. (2007). An investigation of hotel property renovation: the externals party view, Property Management, Vol. 25, No.3, pp. 209-224. Holloway, C. (2006). The Business of Tourism. 7 edition FT Prentice Hall Harlow. Kirk, D.(1995). Environmental management in hotels, International Journal of Contemporary Hospitality Management, Vol. 7 No.6, pp-3-8. Lamminmaki, D.(2011). An examination of factors motivating hotel outsourcing, International Journal of Hospitality Management, Vol.30, No.4, pp. 963-973. Muller, C., (2010). Hospitality technology: a review and reflection. Worldwide Hospitality and Tourism Themes, 2(1): 9-19. Ruiz-Molina, M. Gil-Saura, I. & Moliner-Velasques, B. (2010). Good environmental practises for hospitality and tourism: The role of information and communication technologies, Management of Environmental Quality: An International Journal, Vol.21, No. 4, pp. 464-476. Sloan, P., Legrand, W. & Chen, J.( 2009). Sustainability in the Hospitality Industry. Oxford: ButterworthHeinemann. Watts, W. & Ryan M.(2002). The Deviants Advantage: How to Use Fringe Ideas to Create Mass Markets, Three Rivers Press, New York. NY.
th

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Zmuda, N. (2011). InterContinental Hotels battles amenity creep; CMO Eric Pearson says defining and differentiating brands is crucial, but then you must make sure they live up to the hype, Advertising Age, Vol. 82, No. 31, p. 18.

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Appendix 1 A summary of the benefits of contracting

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Appendix 2 Disneyland Hotel Commences Renovation in Anaheim

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Appendix 3 Electricity reduction practices at three 5-star hotels.