Study on Art and Science of Opening a Hotel

Description
If you ever have the chance to be involved with opening a hotel, jump at the opportunity. Opening a hotel is one of the most rewarding jobs in the hospitality industry despite its frustrating and exhausting aspects.

H O T E L MA N A G E ME N T
A N D O P E R AT I O N S
f o u r t h e d i t i o n
Edited by
Denney G. Rutherford, Ph.D.
Endowed Chair Emeritus
School of Hospitality Business Management
Washington State University
Michael J. O’Fallon, Ph.D.
Hospitality and Tourism Management
College of Business
James Madison University
JOHN WILEY & SONS, INC.
1327.chfm 12/19/05 12:28 PM Page i
1327.chfm 12/19/05 12:28 PM Page iv
H O T E L MA N A G E ME N T
A N D O P E R AT I O N S
f o u r t h e d i t i o n
Edited by
Denney G. Rutherford, Ph.D.
Endowed Chair Emeritus
School of Hospitality Business Management
Washington State University
Michael J. O’Fallon, Ph.D.
Hospitality and Tourism Management
College of Business
James Madison University
JOHN WILEY & SONS, INC.
1327.chfm 12/19/05 12:28 PM Page i
This book is printed on acid-free paper. ?
Copyright © 2007 by John Wiley & Sons, Inc. All rights reserved
Published by John Wiley & Sons, Inc., Hoboken, New Jersey
Published simultaneously in Canada
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form
or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as per-
mitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior writ-
ten permission of the Publisher, or authorization through payment of the appropriate per-copy fee to
the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax
(978) 750-4470, or on the web at www.copyright.com. Requests to the Publisher for permission should
be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ
07030, (201) 748-6011, fax (201) 748-6008, e-mail: [email protected].
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts
in preparing this book, they make no representations or warranties with respect to the accuracy or
completeness of the contents of this book and specifically disclaim any implied warranties of mer-
chantability or fitness for a particular purpose. No warranty may be created or extended by sales repre-
sentatives or written sales materials. The advice and strategies contained herein may not be suitable for
your situation. You should consult with a professional where appropriate. Neither the publisher nor au-
thor shall be liable for any loss of profit or any other commercial damages, including but not limited to
special, incidental, consequential, or other damages.
For general information on our other products and services or for technical support, please contact our
Customer Care Department within the United States at (800) 762-2974, outside the United States at
(317) 572-3993 or fax (317) 572-4002.
Wiley also publishes its books in a variety of electronic formats. Some content that appears in print
may not be available in electronic books. For more information about Wiley products, visit our web site
at www.wiley.com.
Library of Congress Cataloging-in-Publication Data:
Hotel management and operations / edited by Denney G. Rutherford, Ivar Haglund, and
Michael J. O’Fallon. — 4th ed.
p. cm.
Includes bibliographical references and index.
ISBN-13: 978-0471-47065-6
ISBN-10: 0-471-47065-1 (pbk.)
1. Hotel management. I. Rutherford, Denney G., 1942– II. Haglund, Ivar.
TX911.3.M27H663 2007
647.94?068—dc22 2005011811
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
?
1327.chfm 12/19/05 12:28 PM Page ii
D E D I C A T I O N
The fourth edition of Hotel Management
and Operations is hereby dedicated to all of
those hospitality students who have enriched
the lives of their guests by continuing to
learn beyond their formal education. It is
these professionals who constantly strive
to find even better ways to give the gift of
friendship. All the best to you.
D.G.R. and M.J.O’F 2005
1327.chfm 12/19/05 12:28 PM Page iii
1327.chfm 12/19/05 12:28 PM Page iv
Contributors xiii
Acknowledgments xv
chapter 1 OVERVI EW I
v
C O N T E N T S
1.1 Introduction 1
1.2 The Hotel Development Process 5
John Dew
1.3 How Well Does the Branded Distribution
Company Allow Independent Hotels to
Compete with the Chains? 14
Peter Cass
1.4 The Art and Science of Opening
a Hotel 21
Tom Dupar
1.5 On-line Pricing: An Analysis of
Hotel-Company Practices 26
Peter O’Connor
1.6 Customer Relationship Management—A
Driver for Change in the Structure of the
U.S. Lodging Industry 36
Gabriele Piccoli, Peter O’Connor,
Claudio Capaccioli, and Roy Alvarez
1.7 Spas and the Lodging Industry 50
Peter C. Anderson
References 67
Suggested Readings 68
Source Notes 68
Preface xi
1327.chfm 12/19/05 12:28 PM Page v
chapter 2 ORGANI ZATI ON 69
vi Contents
References 88
Suggested Readings 88
Source Notes 88
2.1 Introduction 69
2.2 Organizational Design 73
Eddystone C. Nebel III
2.3 As I See It: Hotel Organization
Structure 86
Mark Conklin
chapter 3 GENERAL MANAGERS: A VI EW
AT THE TOP 89
3.1 Introduction 89
3.2 A Conceptual Framework of the Hotel
General Manager’s Job 91
Eddystone C. Nebel III and Ajay Ghei
3.3 Grooming Future Hospitality Leaders:
A Competencies Model 101
Beth G. Chung-Herrera, Cathy A. Enz,
and Melenie J. Lankau
3.4 As I See It: What I Do 111
Emilio Fabico
3.5 A Day in the Life of a Hilton Hotel
General Manager 113
Robert O. Balmer, CHA
3.6 A Day in the General Manager’s Life 115
Bob Peckenpaugh
3.7 Mini Case: Sunset Hotels and Suites 118
References 118
Suggested Readings 120
Source Notes 120
chapter 4 OPERATI ONS: ROOMS 121
4.1 Introduction 121
4.2 The Electrifying Job of the Front Office
Manager 124
James A. Bardi
4.3 A Day in the Life of the Front Office
Manager 127
Garry Dickover
4.4 Yield Management: Choosing the Most
Profitable Reservations 131
William J. Quain and Stephen M. LeBruto
4.5 Concierge (cone-see-air-j) 143
Mario Arnaldo
4.6 As I See It: Management of the
Front Office 149
Oliver Meinzer
4.7 Mini Case: The New FOM 161
4.8 To Change or Not to Change:
A Case Study at the Front Desk 162
Nancy Swanger
References 163
Suggested Readings 164
Source Notes 164
1327.chfm 12/19/05 12:28 PM Page vi
chapter 5 OPERATI ONS: HOUSEKEEPI NG,
ENGI NEERI NG, AND SECURI TY 167
Contents vii
5.6 The Engineering Department and
Financial Information 199
Agnes Lee DeFranco and
Susan B. Sheridan
5.7 The Legal Environment of Lodging
Operations 205
Melissa Dallas
5.8 Asphalt Jungle 217
Je’anna Abbott and Gil B. Fried
5.9 Workplace Violence in Hotels 227
Mark Beattie and Jacinta Gau
5.10 Case Study: Housekeeping,
Engineering, and Security 230
References 231
Suggested Readings 233
Source Notes 234
5.1 Introduction 167
5.2 A Day in the Life of a Director
of Rooms 173
Kurt Englund
5.3 Housekeeping Organizations: Their
History, Purpose, Structures, and
Personnel 175
Thomas Jones
5.4 On Being an Executive Housekeeper 188
John Lagazo
5.5 The Hotel Engineering Function:
Organization, People, and Issues in the
Modern Era 191
Denney G. Rutherford
chapter 6 FOOD AND BEVERAGE DI VI SI ON 235
6.1 Introduction 235
6.2 Managing Food and Beverage
Operations in Lodging Organizations 239
Robert H. Bosselman
6.3 As I See It: Hotel Director of Food and
Beverage 251
Dominic Provenzano
6.4 Best Practices in Food and Beverage
Management 253
Judy A. Siguaw and Cathy A. Enz
6.5 Strategic Alliances Between Hotels and
Restaurants 265
Robert W. Strate and Clinton L. Rappole
6.6 Contemporary Hotel Catering 282
Patti J. Shock and John M. Stefanelli
6.7 A Day in the Life of an Executive
Director of Catering Sales and
Convention Services 287
Rich Benninger
6.8 The Organization and Management of
Hotel Beverage Operations 291
Valentino Luciani
6.9 Case Study: Crisis in the Food Court 298
Nancy Swanger
6.10 Case Study: Outside the Box in the Food
and Beverage Division 299
References 300
Suggested Readings 301
Source Notes 302
1327.chfm 12/19/05 12:28 PM Page vii
chapter 7 MARKETI NG AND ASSOCI ATED
ACTI VI TI ES 303
viii Contents
7.6 Hotel Sales Organization and
Operations 348
Margaret Shaw and Susan V. Morris
7.7 Putting the Public in Public Relations:
The Case of the Seattle Sheraton Hotel
and Towers 353
Louis B. Richmond
7.8 Mini Case: Revamping the Marketing Re-
search Department 360
References 361
Suggested Readings 362
Source Notes 362
7.1 Introduction 303
7.2 Building Market Leadership: Marketing
as Process 305
Fletch Waller
7.3 Consumer Decision Rules and Implica-
tions for Hotel Choice 321
Bianca Grohmann and Eric Spangenberg
7.4 Hotel Pricing 334
Marta Sinclair and Carl R. Sinclair
7.5 A Day in the Life of a Regional Revenue
Manager 345
Paul Chappelle
chapter 8 FI NANCI AL CONTROL AND
I NFORMATI ON MANAGEMENT 365
8.1 Introduction 365
8.2 The Lodging Chief Financial
Executive 368
Raymond S. Schmidgall
8.3 Budgeting and Forecasting: Current
Practice in the Lodging Industry 377
Raymond S. Schmidgall and
Agnes Lee DeFranco
8.4 As I See It: The Hotel Controller 387
Michael J. Draeger
8.5 The Hotel Purchasing Function 391
C. Lee Evans
8.6 Data Mining for Hotel Firms: Use and
Limitations 399
Vincent P. Magnini, Earl D. Honeycutt Jr.,
and Sharon K. Hodge
References 412
Suggested Readings 414
Source Notes 414
1327.chfm 12/19/05 12:28 PM Page viii
Contents ix
chapter 9 HUMAN RESOURCES POL I CY
MANAGEMENT 415
9.1 Introduction 415
9.2 Driving Hospitality Into the Future 417
Christian Hardigree, Ellis Norman, Gail
Sammons, Vince Eade, William Werner,
Robert H. Woods, and Cheri Young
9.3 The Causes and Consequences of
Turnover in the Hospitality Industry 429
Carl D. Riegel
9.4 Current Issues in Hospitality
Employment Law 436
Suzanne K. Murrmann and Cherylynn
Becker
9.5 The Strategic and Operational Roles
of Human Resources—An Emerging
Model 446
J. Bruce Tracey and Arthur E. Nathan
References 457
I NDEX 461
1327.chfm 12/19/05 12:28 PM Page ix
1327.chfm 12/19/05 12:28 PM Page x
As Denney would tell you, the first edition of
this textbook project was originally born out
of a range of frustrations. While there are
many outstanding textbooks in the hotel man-
agement field that dealt with significant por-
tions of operations, particularly housekeeping,
front office, and food and beverage, there are
very few that try to treat, in a balanced and in-
depth way, each department in the hotel. One
frustration was that some texts that dealt with
these departments spent an inordinate
amount of time focused on one aspect of the
hotel operations—usually either front of the
house, food and beverage or marketing. Other
departments, for better or worse, were treated
as minor players. Consequently, students and
readers of such texts were given only a cursory
introduction to the intricacies of these “mi-
nor” departments, their management, their
people, and their interactive functions in the
overall hotel organization.
Another frustration he encountered was
using then currently available material to pro-
mote the idea of critical thinking among stu-
dents of hotel administration. Critical think-
ing refers to that process whereby the student
is exposed to a number of different view-
points within a theoretical structure, and from
analysis of those viewpoints, becomes better
able to synthesize a viewpoint about hotel op-
erations that will enable them to intelligently
approach whatever practical situations they
may find themselves confronted with in the
“real world.”
There is a conventional wisdom that goes,
“something may be okay in theory but it
doesn’t work in practice.” Like economist
Milton Friedman, we reject that statement. If
theory doesn’t work in practice, it is lousy the-
ory. What professors need to guide students in
understanding is that theory, (in the word of
Friedman) explains, predicts, or controls, and
does this in different ways given different
variables in different organizations. This is an-
other issue or frustration that subsequent edi-
tions have been designed to further address.
P R E F A C E
xi
1327.chfm 12/19/05 12:28 PM Page xi
As we went about planning and designing
the fourth edition of Hotel Management and
Operations (HMO IV), we felt the need to
continue to remind ourselves of the lessons of
the frustrations listed above. We wanted to
make sure the original idea behind this book
did not get lost. By helping the reader gain an
appreciation of what a variety of observers,
thinkers, researchers, and commentators
xii Preface
think about a topic, in this case, a hotel de-
partment, a student or hotel professional can
feel better prepared to find ways to apply the-
ory in a practical setting or situation. In the fi-
nal analysis, it is up to you to make the best
use of HMO IV, because like we state above,
none of us knows it all. Good luck, it is our
pleasure to do this work for you.
1327.chfm 12/19/05 12:28 PM Page xii
Je’anna Abbott, University of Houston
Roy Alvarez, Senior Lecturer, Cornell Uni-
versity School of Hotel Administration
Peter C. Anderson, Anderson and Associates
Mario Arnaldo, Instructor, Travel Industry
Management, Hawaii Pacific University,
Honolulu, HI
Robert O. Balmer, General Manager, Dou-
bletree Hotel, Bakersfield, California
James A. Bardi, Penn State Berks–Lehigh
Valley College
Mark Beattie, Doctoral Student, Gonzaga
University, Liberty Lake, WA
Cherylynn Becker, Richmond, Virginia
Rich Benninger, CMP, Executive Director of
Catering of Catering and Convention
Services, Caesar’s Palace
Robert H. Bosselman, Dedman Chair of Hos-
pitality Administration, Florida State
University, Dedman Department of Hos-
pitality Administration
Claudio Capaccioli, Deloitte and Touche
Business Consulting Manager, Milan, Italy
Peter Cass, Crystal River, Florida
Paul Chappelle, Brand Revenue Manager,
Red Lion Hotel and Inns, Vancouver,
Washington
Beth G. Chung-Herrera, Associate Professor,
College of Business, San Diego State Uni-
versity
Mark Conklin, Area Vice President, Western
Europe, Marriott Hotels, Resorts, and
Suites, Frankfort, Germany
Melissa Dallas, Florida Atlantic University,
College of Business
Agnes Lee DeFranco, University of Houston,
Conrad N. Hilton College
John Dew, Executive Consultant, Bellevue,
Washington
Garry Dickover, General Manager, Conven-
tion Center Courtyard by Marriott, Las
Vegas, Nevada
Michael J. Draeger, Controller, Dayton De-
pot Casino, Dayton, Nevada
Tom Dupar, Dupar Dynamics, Bellevue,
Washington
C O N T R I B U T O R S
xiii
1327.chfm 12/19/05 12:28 PM Page xiii
Vince Eade, University of Nevada, Las Vegas
Harrah School of Hotel Administration,
Las Vegas, NV
Kurt Englund, Resort Manager, Four Seasons
Resort Costa Rica at Peninsula Papagayo
Cathy A. Enz, Louis G. Shaeneman Professor
of Innovation and Dynamic Management,
Cornell University School of Hotel Ad-
ministration
C. Lee Evans, Director of Purchasing, The
Oasis Resort; Casa Blanca Spa and Golf
and Virgin River Hotel and Casino
Emilio Fabico, Walt Disney World, Orlando,
Florida
Gil B. Fried, Gil B. Fried and Associates,
Risk Management Consultants, New
Haven, CT
Jacinta Gau, Doctoral Student in Criminal
Justice, Washington State University, Pull-
man, WA
Ajay Ghei, The World Bank Group
Bianca Grohmann, Assistant Professor of
Marketing, Concordia University
Christian Hardigree, University of Nevada,
Las Vegas Harrah School of Hotel Ad-
ministration, Las Vegas, NV
Sharon K. Hodge, Assistant Professor, Love
School of Business, Elon University
Earl D. Honeycutt Jr., Professor, Love School
of Business, Elon University
Thomas Jones, University of Nevada, Las
Vegas
John Lagazo, Director of Operations, The
Madison Hotel, Rockville, MD
Melenie J. Lankau, Assistant Professor, Terry
College of Business, University of Geor-
gia
Stephen M. LeBruto, University of Central
Florida
Valentino Luciani, Instructor, University of
Nevada, Las Vegas
xiv Contributors
Vincent P. Magnini, Ph.D. candidate, Old Do-
minion University
Oliver Meinzer, Director of Operations, New-
port Beach Marriott Suites, Newport
Beach, CA
Susan V. Morris, Vice President, HQ Global
Workplaces, Dallas, Texas
Suzanne K. Murrmann, Virginia Polytechnic
Institute and State University, Department
of Hospitality and Tourism Management
Arthur E. Nathan, New Product Thought
Leader, Mellon HR Solutions
Eddystone C. Nebel III, Purdue University,
Emeritus
Ellis Norman, University of Nevada, Las Ve-
gas Harrah School of Hotel Administra-
tion, Las Vegas, NV
Peter O’Connor, Associate Professor,
France’s Institute de Management Hote-
lier International, Essec Business School,
France
Bob Peckenpaugh, Hotel Manager, Rancho
Bernardo Inn, San Diego, California
Gabriele Piccoli, Assistant Professor, Cornell
University School of Hotel Adminstra-
tion
Dominic Provenzano, Director of Opera-
tions, Cleveland Marriott Downtown at
Key Center, Cleveland, Ohio
William J. Quain, Florida International Uni-
versity, School of Hospitality Manage-
ment
Clinton L. Rappole, University of Houston,
Conrad N. Hilton College
Louis B. Richmond, President, Richmond
Public Relations
Carl D. Riegel, Florida Atlantic University,
Graduate School of Business
Gail Sammons, University of Nevada, Las Ve-
gas Harrah School of Hotel Administra-
tion, Las Vegas, NV
1327.chfm 12/19/05 12:28 PM Page xiv
Raymond S. Schmidgall, Michigan State Uni-
versity, School of Hospitality Business
Margaret Shaw, University of Guelph, School
of Hotel & Food Admin., Guelph, ON
N1G 2W1 CANADA
Susan B. Sheridan, Owner, Taughannock
Farms Inn, Trumansburg, New York
Patti J. Shock, University of Nevada, Las
Vegas
Judy A. Siguaw, Cornell University, School of
Hotel Administration
Marta Sinclair and Carl R. Sinclair, Griffin
University, Toowong, QLD 4066 Australia
Eric Spangenberg, Associate Dean, College
of Business, Washington State University
John M. Stefanelli, University of Nevada, Las
Vegas
Contributors xv
Robert W. Strate, National Aeronautics and
Space Administration
Nancy Swanger, Washington State University
J. Bruce Tracey, Associate Professor of Man-
agement, Cornell University School of
Hotel Administration
Fletch Waller, Principal, FCW Consulting,
Seattle, Washington
William Werner, University of Nevada, Las
Vegas Harrah School of Hotel Adminis-
tration, Las Vegas, NV
Robert H. Woods, University of Nevada, Las
Vegas
Cheri Young, University of Nevada, Las Ve-
gas Harrah School of Hotel Administra-
tion, Las Vegas, NV
1327.chfm 12/19/05 12:28 PM Page xv
1327.chfm 12/19/05 12:28 PM Page xvi
I sort of thought that by the time I reached
the fourth edition, the project would have be-
come easier. Well, it hasn’t. The challenges of
continual improvement—finding challenging
and interesting material, presenting it in in-
teresting ways, and trying to choose material
that will transcend unanticipated events—get
harder, not easier. While making the book
was a team effort involving a wide range of
professionals, all of its flaws, and there proba-
bly are more than a few, are solely my
responsibility.
First of all, the authors of the various
pieces included here who knowingly or un-
knowingly have contributed their thoughts,
research, ideas, opinions, and expertise to this
exercise in critical thinking about hotel de-
partmental operations deserve recognition.
Without the rich mixture of interest and tal-
ent extant in the hospitality profession and its
educational establishment today, this collec-
tion of readings would not have been possi-
ble. It is my great good fortune that my
friends, colleagues, and former students could
devote the time they did to contribute to this
project. My badgering, cajoling, begging, and
bribing aside, I think we’re all still friends.
I want to particularly salute those who
crafted custom pieces for this edition and
those professionals who contributed “Day in
the Life” and “As I See It” pieces. They have
made this edition a richer and more user-
friendly book. They also add a view of the real
world that has been missing.
The support and encouragement of my
colleagues at Washington State University
was critical. Terry Umbreit, Director of the
School of Hospitality Business Management,
and a whole bunch of students all contributed
to the success of this project with advice,
counsel, and suggestions.
My good friend, colleague, and production
assistant, Lillian Sugahara Jesse, helped me
tremendously. Her magic with the computer
literally saved this project by translating many
files created in Adobe PDF or PageMaker for
xvii
A C K N O WL E D G ME N T S
1327.chfm 12/19/05 12:28 PM Page xvii
Macintosh to something I could edit in Word.
Because she kept accurate files of the manu-
script of previous editions, we were able to
overcome the problems attendant to the
transfer of the project from Van Nostrand
Rinehold to John Wiley & Sons. Lillian, you
are the greatest.
Melissa Oliver, my editor at Wiley, pro-
vided needed support regarding material pre-
viously published by Wiley, and her
willingness to discuss some of my off-the-wall
ideas have truly made this a better project.
Thanks, Melissa.
My wife and best friend, Sandy Sweeney,
continues to provide the encouragement, sup-
port, and understanding she always does on
big writing projects. Her understanding is par-
ticularly important when I disappear to work
on “the book” when we could be doing other,
more fun things. As with past editions, she
does understand the rhythms of an author’s
life and endures losing me to “the book” with
style and grace. The last two times I did this,
we were moving—and surprise—it is happen-
ing again. I retired from Washington State
xviii Acknowledgments
University after 26 years in May 2004. We are
in the process of building our retirement
home in Port Townsend, Washington, and will
be moving in July 2005, shortly after the book
is due at the publisher. Building a house long
distance has its own challenges, and with “the
book,” we have had to rely on Sandy for a lot
of decisions. I love you, Sandy.
I also want to acknowledge the capable
assistance of my colleague and former stu-
dent, Michael O’Fallon. He is the author of
the instructor’s manual. Michael will co-au-
thor this and the next edition, after which the
project will be all his.
Denney G. Rutherford
Spokane/Port Townsend, Washington
2005
1327.chfm 12/19/05 12:28 PM Page xviii
c h a p t e r o n e
O V E R V I E W
among the country’s living patterns. People
and industry have moved from the so-called
rust belt to the sun belt. The hotel business
has been active in reborn and reconstructed
central cities. The explosion of technology
and information-based companies has con-
centrated human endeavor in technological
corridors in California, Massachusetts, Wash-
ington, Texas, and North Carolina, to name a
few such places. It can be safely said that
where jobs are and major concentrations of
economic activity occur, hotels will follow.
Among other current and ongoing influ-
encers of hotel design, construction, market-
ing, and operation are the following. Note:
This list is neither exhaustive nor exclusive.
• Demographics play a major role and will
continue to be influential in the foresee-
able future. As the baby boom generation
1.1 I NTRODUCTI ON
The vast majority of research articles and es-
says in this book deal with one or more as-
pects of what has been called the art and
science of modern hotel management. It
should be noted that the word modern can be
loaded with the potential of much misunder-
standing. Hotels are changing and will con-
tinue to change. As a result, the techniques of
management of modern hotels must adapt to
changing circumstances. Subsequent sections
of this book are designed to help the student
and practitioner discover information, meth-
ods, and techniques for dealing with these
changing circumstances.
?
INFLUENCES
Like many other American businesses, hotels
have been affected by shifts in emphasis
1
1327.ch01 12/19/05 9:27 AM Page 1
and its children mature, the population of
the country will for many years be older,
healthier, and better educated than previ-
ous generations. These facts will present
new challenges and opportunities to all
business managers.
• Technology—in the form of computers,
communication, personal devices, and
laborsaving mechanical equipment—has
had and will have a major effect on the
way in which hotels are managed and op-
erated. The speed with which information
is accumulated, stored, manipulated, and
transferred is such that today most travel-
ers expect that the hotel rooms they rent
will allow them to be as productive as
they are in the office or at home. Increas-
ingly, with portable computing, personal
data assistants (PDAs), wireless commu-
nication, and virtually everything some-
how connected to the Internet, hotels
must provide services and access that al-
low guests seamless transition from the
business, travel, or home environment to
that of the hotel. Increasingly, entertain-
ment must be fused with communication
and productive processes.
• The concept of market segmentation, or
ever-increasingly finely tuned market def-
initions, will dictate hotel structures and
organizations, and management tactics
designed to address those market seg-
ments have become even more important
to the management of hospitality service
businesses. With the increased power in
the information and data manipulation
realm, hotels have available to them ever-
expanding databases about guests and are
creating new products to attract those
markets.
• One of the effects of the aging demo-
graphic is the emergence of vacation re-
2 Chapter 1 ? Overview
sorts—a modern incarnation of the time-
share properties of several decades ago.
Because these are being developed and
operated by name hotel companies and
are marketed to the affluent, healthy,
well-educated population segment, resort
managers have had to absorb new mana-
gerial realities.
• The well-documented change in the com-
plexion of the national economy from one
that emphasizes goods and, to a lesser ex-
tent, natural resources to one that empha-
sizes services has kindled new ideas about
the way in which we manage the design
and delivery of these services. Hotels,
restaurants, and travel services are now
seen as unique entities that dictate special
kinds of managerial techniques and
strategies.
• Changes in people’s travel patterns have
altered the way we manage our hotel
properties. Deregulation of the airlines
has driven a change in the way millions of
people travel each year, given the hub-
and-spoke design of airline services.
Many hotel companies are now locating
major hotel properties adjacent to hub air
transport facilities, taking advantage of
the fact that business travelers may not
need to travel to a central business district
(CBD) to accomplish their purpose in a
given area. Meetings and conferences can
now be scheduled within a five-minute
limousine ride from the air terminal, and
the business traveler can be headed for
his or her next destination before the day
is over without having to stay overnight in
a CBD hotel.
• New patterns of investment in hotel facili-
ties have emerged in the last two decades,
and more attention is now paid to achiev-
ing optimum return on investment. Be-
1327.ch01 12/19/05 9:27 AM Page 2
cause people from outside the hotel in-
dustry are now participating in its finan-
cial structuring, hotel operations are no
longer dependent on the vision of a single
entrepreneur. Managers now must design
tactics and strategies to achieve hereto-
fore unanticipated financial goals. The
same trend has also altered the complex-
ion of management and organization of
the modern hotel. This is especially true
of publicly owned hotel firms, where Wall
Street stock analysts heavily influence
stock prices through expectations of
quarterly revenues and profits. This puts
pressure on hotel companies and their
operations managers to perform, on a
quarterly basis, in a way contrary to many
managers’ instincts.
Most of the foregoing issues and influ-
ences still operate (to a greater or lesser ex-
tent) on the organizational structures and
strategies of the modern hotel. Since the last
edition of this book, however, other phenom-
ena of an economic, cultural, and social na-
ture have come to the fore, complicating our
view of hotel management. This furthers the
argument that the hotel industry is a part of
the greater economy and at the mercy of ele-
ments often completely out of its control.
The cyclical nature of the U.S. and inter-
national economies has recently affected
significantly hotels’ ability to respond to
changing circumstances. In early 1993, for in-
stance, employment growth was stagnant; cor-
porate profits were low; the expansion of the
gross national product (GNP) was only a mar-
ginal percentage above previous years; and
travel in most segments was down due to cor-
porate restructuring, downsizing, or reorgan-
izing. Vast layoffs in the hundreds of
thousands had been announced every month.
While fuel prices continued to be relatively
Section 1.1 ? Introduction 3
stable, consumer spending patterns and high
employment growth had not materialized,
particularly in light of corporate layoffs and
the ongoing nervousness of consumers about
whether or not their financial wherewithal
was safe.
Now consider late 2000, when the third
edition of this book was being written. Unem-
ployment was at an all-time low; the Dow
Jones Industrial Average was between 10,000
and 11,000; hotel occupancies had stabilized
nationally in excess of 70 percent; and the fed-
eral government was running a surplus for the
first time in the memory of most.
Then what happened? The terrorist at-
tacks in New York and Washington, D.C., in
2001 changed the face of all business and
travel, immediately and probably for the fore-
seeable future as well. Major airlines are in
bankruptcy; hotels are struggling to achieve
profitable occupancies; business travel is
down; the high-tech stock market bubble
burst; the country is at war in a number of lo-
cations; security has made travel more diffi-
cult, if not actually annoying; and people are
nervous. Join this with an imbalance of trade,
the outsourcing of jobs, and the largest federal
deficits in history, and the face of the economy
is challenging. This translates directly not only
to business travel but personal and recre-
ational travel as well. Finding ways to operate
profitably in such an environment is the job of
the next generation of hotel operators.
Among the predictions I made in the pre-
ceding edition was that cultural diversity will
play a role in the management and organiza-
tional structure of the modern hotel in the
United States. As surely as living patterns,
economic cycles, and market segmentation
have influenced the hotel industry, so will the
change in ethnicity of the workforce. The cul-
tural backgrounds that an increasingly diver-
sified workforce will bring to hotel operations
1327.ch01 12/19/05 9:27 AM Page 3
may be seen as a problem or a challenge—or
both. To most operators, it will be seen as an
opportunity to demonstrate to an increasingly
diverse clientele that hotel companies are
committed to hiring and training a workforce
structure that mirrors society. I see no reason
to change that prediction now; if anything, ac-
culturation of the hospitality business will
accelerate.
The legal and regulatory environments
are increasingly important to all business
managers, and hotel operators are no excep-
tion. Increasingly, operators must be aware of
and alert to realms of risk that can engender
lawsuits against them. Several articles and es-
says in this edition highlight these threats to
hotels and their guests. It should be noted that
present-day security concerns also have sig-
nificantly affected the ways in which hotels
are operated. Awareness of the risk environ-
ment and the regulatory realm are factors
that affect a hotel’s ability to compete in the
early part of the twenty-first century. Essays
and articles in the security section and the hu-
man resources section address this issue.
?
INTRODUCTORY
READINGS
I have attempted in this edition to present
new and (sometimes) different takes on the
hotel business. This section is also used to ex-
plore ideas that are new to the management
process, and that—who knows?—may never
completely catch on. Rather than focus exclu-
sively on the operations of the major chains,
the readings here are from the perspectives of
operators, leaders, and experts such as re-
gional operators, major industry consultants,
and independent branded hotels.
4 Chapter 1 ? Overview
John Dew, formerly president of Inn Ven-
tures, a regional hotel management and de-
velopment company that has built and
operated many Marriott products, in addition
to a proprietary hotel product, provides an in-
sider’s view of the steps needed to bring a ho-
tel from conception to construction and
operation. This unique view of hotel opera-
tions connects the concept of hotel develop-
ment with the realities of day-to-day
operation. It should help aspiring managers
understand how the intricacies of the devel-
opment process may influence the marketing
and management of the hotel.
Peter Cass offers the reader insights,
heretofore unavailable in books of this nature,
into independently branded hotels that associ-
ate to provide market strength. He makes the
case that the future success of independent
hotels is linked to their ability to find ways to
maintain their independence while sustaining
competitive advantage in the luxury segment.
Because new construction of hotels di-
minished greatly after 9/11 but firms still
needed to grow, rebranding existing proper-
ties generated a lot of growth activity. Re-
branding is a complicated process that must
be accomplished within critical time frames to
coincide with marketing, financial, and opera-
tional variables. Tom Dupar is a seasoned vet-
eran at this fascinating and important activity
and has participated in rebranding operations
around the world. His essay on the intricacies
of rebranding was a mainstay in the previous
edition of this book. Today’s economic cir-
cumstances are different, and Dupar’s busi-
ness has changed its focus to opening new
major projects. His piece serves as a useful
companion to that of John Dew, and the two
should be read together, with an eye toward
comparing Dew’s smaller project focus and
Dupar’s large projects.
1327.ch01 12/19/05 9:27 AM Page 4
Perhaps proving the axiom that “every-
thing old is new again,” the concept of health
and wellness spas as a hotel and resort prod-
uct has enjoyed a resurgence. Once the
province of high-end hotels and resorts, the
idea of being pampered in a spa has been
added to the service mix in many more mod-
est hotels and resorts. While the big-name
spas at five-star properties still set the stan-
dard for pampering and pricing, the comfort
of personal service in less lavish spas seems to
appeal to the modern traveler as well. Peter
Anderson’s overview of the spa industry pro-
vides insights into this fascinating service
product.
In addition to products, building, and re-
branding, I have also chosen to include in the
section two recently reviewed and studied
ideas that may or may not be adopted across
the industry.
At the end of this section are a number of
Section 1.2 ? The Hotel Development Process 5
suggested readings for the student who would
like to gain more in-depth knowledge about
the hospitality industry as a whole and spe-
cific historical antecedents. In particular, the
books by Hilton and Jarman look closely at
the intermachinations of the establishment by
two early pioneers of the industry, one of
whom, Conrad Hilton, lives on in an interna-
tional, publicly traded company operated by
one of his sons. E.M. Statler’s contributions to
the modern hotel business are legendary in
that he is generally credited with founding
and operating the first commercial hotel con-
cept that recognized the realities of the early
business traveler at the beginning of the twen-
tieth century. The suggested articles are
drawn from recently published historic
overviews of the hotel side of the hospitality
industry in the United States. They also high-
light other major forces in the development of
the modern hotel business.
1.2 THE HOTEL DEVEL OPMENT PROCESS
John Dew
?
INTRODUCTION
The bulldozers are working and a construction
crane is being erected on that vacant lot you
pass each day going to and from home. The
sign on the fence states that a new hotel is be-
ing built with a planned opening date of spring
2007. If you have ever wondered just how that
hotel was created, you may have wondered
about some or all of the following questions:
• How did someone select that particular
vacant lot?
• Who actually creates a new hotel?
• Who owns it?
• Where did they get the money to build it?
• How long does the process take from idea
to grand opening day?
• Who selects the architect, the engineers,
and the interior designer?
• Who manages the myriad details that go
into the development of a new hotel?
• Who will manage the hotel once it’s
open?
We hope to address these and other ques-
tions you may have in this chapter.
1327.ch01 12/19/05 9:27 AM Page 5
?
THE DEVELOPMENT
COMPANY
The developer is the entrepreneur, the risk
taker, who originates the idea for the hotel. De-
pending on the business structure selected, the
developer often puts his or her personal wealth
at risk when engaging in a hotel project. The
developer, along with a small staff of people,
networks with commercial real estate agents
on the lookout for a suitable hotel site. De-
pending on the type of hotel to be developed, a
site of at least two to four acres is required (for
comparison, an acre is roughly the size of a
football field). This property must be zoned by
the city for a hotel, be visible from a freeway or
major street arterial, and have city approval for
such construction activities as curb cuts, left-
hand turn lanes, and delivery truck access.
Commercial realtors offer sites for the devel-
oper’s consideration that include maps, aerial
photos, and proof of hotel zoning.
Sometimes the developer views potential
sites by driving around the neighborhood
within five miles of the site or touring multi-
ple sites by helicopter, noting where the po-
tential guests live and work and where
potential competing hotels are located.
The price per square foot of the land is
considered. The higher the cost of land, the
higher the rates the hotel will need to charge.
Is the price too high for the average daily rate
(ADR) in this particular market? Is it too
low? Or is it acceptable? This is determined
when the hotel financial pro forma budget
document is created.
?
THE FEASIBILITY STUDY
When the developer selects a site, a feasibil-
ity study is often commissioned to obtain an
6 Chapter 1 ? Overview
analysis of the site by an objective third party.
Companies offer hotel feasibility studies for a
fee and are experts in a particular market, or
developers may use the consulting group of
one of the major public accounting firms.
The company retained to do the feasibil-
ity study can spend up to several months gath-
ering detailed data to see if, in their opinion, it
makes economic sense to build the hotel.
Their conclusion offers an objective third-
party opinion as to whether the project is
feasible, hence the term feasibility study. Gen-
erally, the feasibility study considers, evalu-
ates, and makes recommendations about the
project based on the following variables:
The Site
• Proper zoning
• Size in square feet/acres
• Visibility from arterials/freeways
• Traffic counts/patterns
• Accessibility from streets, freeways, air-
ports, train stations, etc.
• Proximity to where potential guests live,
travel, or work
• Barriers that discourage competition
coming into the market, if any
• How adjacent property and businesses
are utilized
• Master area development plans
• Local permitting process and the degree
of difficulty for that particular city
• Impact fees charged by the city
The Economy of the Area
• Major employers, government agencies
• Business trends for each employer/agency
• Hotel needs and the demand for each
• Leisure travel demand in the area
1327.ch01 12/19/05 9:27 AM Page 6
• Nearby tourist attractions
• Visitor counts
• Conventions, trade shows, and meetings
history
The Hotel Market
• The competitors, both existing and
planned
• Historical occupancy of hotels in the area
• Historical average rate
• Proprietary data on area travel
Identification of Which Hotel Market
Segment to Serve
• Full service
• Limited service
• Extended stay
• Luxury
• Midprice
• Economy
• Budget
Selection of Appropriate Hotel Design
• High-rise
• Midrise
• Garden apartment style
• Hybrid design
Selection of Appropriate Hotel Brand
• Franchised (Marriott, Sheraton, Hyatt,
etc.)
• Licensed (Best Western, Guest Suites,
etc.)
• Independent
• Independent with strategic market affilia-
tion (Luxury Hotels of America, Historic
Hotels of America, etc.)
Section 1.2 ? The Hotel Development Process 7
Ten-year Projection
• Occupancy projection by year
• ADR by year
• Estimated cash generated for debt
• Estimated cash generated for distribution
to investors
• Estimated cash-on-cash return (after-tax
income divided by equity invested)
• Overall projected yield
• Projected internal rate of return
• Net present value of the project over each
of the next ten years
Once the feasibility study is completed,
the developer is prepared to move forward
with the project. Often, at this stage of the
process, the developer purchases an option on
the land to tie it up until the remaining devel-
opment steps can be completed—and to pre-
vent the competition from purchasing it.
?
CREATION OF THE
OWNERSHIP ENTITY
An ownership entity (note that this is differ-
ent than and separate from the development
company) must be created to hold title to the
land—and the hotel, once it’s built. Consider-
ing the limitation of liability to the investors,
tax consequences, estate implications for the
investors, and potential requirements of the
mortgage lender, a business structure is se-
lected, normally in one of the following forms:
• Limited liability company (LLC)
• Limited partnership (LP)
• S corporation (formerly known as a
Sub-S corporation)
• C corporation
1327.ch01 12/19/05 9:27 AM Page 7
?
THE DEVELOPMENT
AGREEMENT
The newly formed entity now enters into a
development contract with the development
company to take the project to completion.
The development company charges a fee, ap-
proximately 3 percent of the total project
cost, for this service. The agreement generally
covers such variables as:
• Selection of architect/engineers
• Selection and supervision of a general
contractor
• Processing all building and occupancy
permits
• Raising all the equity money from in-
vestors
• Securing a construction mortgage loan
• Selecting a franchise company
• Securing the franchise
• Selecting an interior designer that meets
franchise company requirements
• Purchasing all opening furniture, fixtures,
equipment
• Selecting a management company to op-
erate the hotel
• Liability for cost overruns
?
SELECTING A FRANCHISE
Depending on the type of hotel to be built
(based on the feasibility study), the developer
recommends a franchise company to the ho-
tel owner. A major consideration is the best
franchise brand for the market segment to be
served. Each franchise company has different
8 Chapter 1 ? Overview
franchise fees, royalty fees, and marketing/
miscellaneous fees as part of its agreement
structure with the operating company. Con-
sideration must also be given to the brands al-
ready represented in the target market that
may be available for franchise. The franchise
company is approached and a franchise is re-
quested, with the feasibility study offered as
backup for the request.
The next step is for the franchise com-
pany to conduct an impact study of the mar-
ket. This considers such matters as possible
negative impact on existing hotels that carry
the franchiser’s flag. If the impact is judged to
be insignificant, a franchise is usually granted
to the ownership entity for a one-time fee of
about $400 per room, depending on the fran-
chise selected, with continuing royalty and
marketing, usually based on a percentage of
hotel revenue.
?
SELECTING AN
ARCHITECT
Because the final product of this process is a
building the operator has to run as a hotel,
the architect’s experience in designing hotels,
his or her experience with the prototypical
drawings of the franchise selected, the fee,
and his or her on-time record must be con-
sidered. Architect fees can run up to 5 per-
cent of the total project cost but are often
negotiated down, if the project is big enough.
The firm’s experience and record on similar
projects are critical. The architect does not
have to operate the hotel when it is com-
pleted. The developer wants the architect to
design a hotel that will be easy to operate and
maintain.
1327.ch01 12/19/05 9:27 AM Page 8
?
SELECTING A GENERAL
CONTRACTOR
Major consideration are the quality and reli-
ability record of the general contractor and
the firm’s use of and relationships with the
many subcontractors needed for a project as
complex as a hotel. Again, experience in
building the hotel type is important. It is
hoped that the general contractor has learned
from any mistakes made in building similar
hotels. The general contractor and architect
often bid the project as a team; this helps the
developer determine the final cost. Often, up
to a 10 percent contingency cost that allows
for unforeseen circumstances is built into the
project bidding process.
?
FINANCING THE
PROJECT
The following variables must be determined
to qualify for financing:
• The cost of the land
• Design and construction cost of the
building
• The cost of furniture, fixtures, equipment,
and opening supplies
• Pre-opening marketing and labor costs
• A six-month operating capital cash
reserve
The sum of these constitutes the total
cost of the project for purposes of securing
financing.
With this information, the ten-year oper-
ating pro forma budget is updated to reflect
actual costs. It’s now time to go to the money
markets for construction financing. The terms
Section 1.2 ? The Hotel Development Process 9
and conditions of a construction loan can vary
widely depending on the individual lender.
Important terms that can affect the cost of the
loan include:
• Personal guarantees by developers and/or
equity partners/investors
• Loan origination fees
• Interest rate
• Required loan-to-value ratio
• Terms of repayment
• A requirement that interest/taxes be held
in reserve
• Required debt service coverage ratios
• Length of the construction loan; length
and costs of extensions
These are only a few of the considerations
that must be analyzed when selecting a
lender. The developer, on behalf of the own-
ing entity, then approaches a number of lend-
ing institutions. The lending institutions
analyze the deal and offer a proposed term
sheet that answers all of the borrowers’ ques-
tions. This allows the borrowers to select the
lending institution with which they wish to
work. The lender then commissions an ap-
praisal of the project by an independent
appraisal company such as Hospitality Valua-
tion Services (HVS). Based on the appraisal,
the lender issues a loan commitment for the
project that usually offers up to 60 percent of
the project cost. The balance must be raised as
equity from investors.
?
RAISING THE EQUITY
INVESTMENT FUNDS
With the bank committed to about 60 per-
cent of the cost, the remaining 40 percent
1327.ch01 12/19/05 9:27 AM Page 9
must be raised in equity commitments by in-
vestors. To pursue these, the developer pre-
pares an offering solicitation document that
meets current securities and exchange law.
The nature of this document depends on the
type of business entity that was formed. For
limited partnerships or limited liability com-
panies, a private placement offering circular
and project description is prepared. For S or
C corporations, stock offerings are prepared
for sale consistent with applicable federal and
state securities laws.
The developer now contacts money
sources that have risk capital available to in-
vest. These can include:
• Individual investors
• Private asset managers
• Opportunity fund managers
• Venture capital fund managers
These potential investment sources are
offered the opportunity to invest in the hotel.
Based on their study and evaluation of the re-
ports, documents, and studies detailed above,
they decide whether or not to offer funding to
the developer.
Once the loan is secured, the equity
raised, and the building permit issued by the
city, the land purchase option is exercised and
the purchase is completed. Then the 12–16-
month construction process begins. If the ar-
chitect’s plans work as intended, if the general
contractor has no problems with subcontrac-
tors, unions, or permits, if all the furnishings,
fixtures, and equipment arrive on time, if the
weather cooperates, and if the employment
market is such that human resources are suf-
ficient to open a hotel, then congratulations!
The hotel will open on time.
10 Chapter 1 ? Overview
?
SELECTING THE
MANAGEMENT
COMPANY
Often even before the construction activity
commences, the owning entity selects an ap-
propriate management company to manage
the pre-opening, marketing and sales, selec-
tion and training of the opening staff, prepara-
tion of the operating budget, and day-to-day
operations once the hotel is opened. Manage-
ment companies charge 3–5 percent of rev-
enue for this service. In recent years,
management companies have charged 3–4
percent of revenue and 2–3 percent of gross
operating profit so they can be measured and
evaluated on both sales and profitability.
The franchise company may offer to pro-
vide management services to franchisees.
Marriott International, Inc., for example,
manages about 50 percent of all hotels that
carry the Marriott flag under 20-year con-
tracts. Independent management companies
manage the remaining hotels under long-term
management contracts of up to ten years’ du-
ration, often with several five-year renewal
options.
?
CONCLUSION
This is a largely linear explanation of the
complicated process that a developer goes
through in order to create a hotel. It has been
described in a step-by-step process, but in re-
ality, many of the steps are carried out con-
currently to save time (and money).
Nevertheless, the hotel development process
takes about three years from original concep-
1327.ch01 12/19/05 9:27 AM Page 10
tion to first guest. It is important to remember
that during the initial stages of the process,
the developer can have as much as $1 million
(U.S.) or more at risk in the process before a
final go/no-go decision is reached. Only after
the project is approved and all financing is in
place can the developer start to recover up-
front costs and collect development fees.
Hotel development with its component
parts of hotel feasibility studies, hotel ap-
praisal, hotel real estate finance, and hotel
management are all among the career oppor-
tunities available to hotel and restaurant ad-
ministration graduates.
?
PUTTING IT ALL
TOGETHER—THE STORY
OF AN EXTENDED-STAY
HOTEL DEVELOPMENT
PROJECT
The City Development Commission in a Pa-
cific Northwest community purchased a 1.55-
acre parcel of riverfront land in the
downtown area. The land was previously con-
taminated with industrial pollutants that
made the parcel unsafe for habitation and
construction. The City Development Com-
mission used state, local, and federal grants to
have the land decontaminated, created a mas-
ter plan for the area, and then offered the par-
cel for sale and development.
The City Development Commission is-
sued a request for proposal (RFP) that out-
lined the asking price of $2,076,240 ($30/sq.
ft.) for the land and the design requirements
set down by the Commission for a building
that would fit the intended look and feel of
Section 1.2 ? The Hotel Development Process 11
the area. The RFP was sent to many major ho-
tel companies and commercial real estate
brokers, asking prospective buyers to submit
a purchase price bid along with a statement of
the buyer’s development history and ability to
develop a hotel of the type envisioned by the
Commission. It listed a closing date by which
all bids had to be submitted.
An area commercial real estate broker
contacted a hotel development and manage-
ment company with a long history of devel-
oping and managing extended-stay hotels in
the Pacific Northwest, including a property
located in a similar setting to that being of-
fered for sale. The commercial realtor offered
to represent the developer in negotiations
with the City Development Commission,
which would be paying the real estate com-
mission on the sale. An agreement was
reached with the commercial real estate bro-
ker to represent the buyer to the seller, and
the developer went to work in preparing a
proposal.
The developer conducted a feasibility
study to see all of the conditions in the mar-
ketplace that would be encouraging or dis-
couraging to this development project.
Studies were conducted to estimate how
many room-nights were being sold within a
five-mile radius, how many extended-stay
room-nights were available in the market,
how many hotel rooms existed, and how
many were being planned over the following
five years. From this, the developer was able
to estimate the number of extended-stay
room-nights available needed to produce an
82 percent occupancy with an average daily
room rate of $141 when the hotel achieved
stabilization three years after opening. That
provided the basis for a ten-year revenue
estimate.
1327.ch01 12/19/05 9:27 AM Page 11
The developer proposed a nine-floor, 258-
suite extended-stay hotel with an indoor pool,
spa, and exercise facility, a guest laundry, of-
fices, meeting facilities, and a three-floor
parking garage with parking for 193 automo-
biles, all at a total cost of $38 million, or
$147,286 per suite.
The $38 million construction budget was
broken down as follows:
Land 6.0%
Construction 66.0%
Office Equipment 1.4%
Furniture, Fixtures, Equipment 7.4%
Architecture/Engineering 2.8%
Permits/Fees/Environmental 2.8%
Appraisal/Legal/Tax/Insurance 1.3%
Pre-Opening Expenses 1.3%
Construction Loan Fee 1.1%
Developer Fee 2.8%
Construction Interest 2.8%
Working Capital 2.1%
Contingency 2.2%
Total 100%
The opening date for the hotel was pro-
jected at 27 months from the date of proposal
acceptance.
The City Development Commission
awarded the project to the developer, and
work began.
First, an ownership limited liability com-
pany (LLC) was formed as the ownership en-
tity that would hold title to the hotel.
The LLC, in turn, entered into a develop-
ment and construction management agree-
ment with the development company to
manage the arrangements for financing and
construction of the hotel.
The developer, as agent for the ownership
LLC, also entered into a hotel management
contract with a management company to
manage the pre-opening marketing, pre-
opening hiring and training, and the day-to-
12 Chapter 1 ? Overview
day operation of the hotel once it was
opened. The arrangements called for the man-
agement company to be paid 3 percent of rev-
enue and 2 percent of the net operating
income for management services.
The ownership LLC then contacted a ma-
jor hotel company and applied for a franchise
to allow the development and operation of an
extended-stay hotel. A 20-year franchise was
granted with a fee of $400 per suite or,
$102,800. This was to be followed by a 5 per-
cent royalty and a 3 percent advertising fee
once the hotel was open and operating.
The developer, acting as agent for the
owner, prepared a private placement memo-
randum document seeking investments from
accredited investors. These investors were pri-
marily defined as people with a net worth of
$1 million, or those with an income in excess
of $200,000 over the previous two years and
expecting an income in excess of $200,000 in
the current year. (Note: Additional entities
may also be defined as accredited investors by
the Securities and Exchange Commission.)
The private placement memorandum of-
fered $100,000 units of ownership to accred-
ited investors, guaranteeing a 9 percent priority
return on the investment and a combined 50
percent ownership in the hotel. A group of ini-
tial investors retained the other 50 percent in
exchange for putting the project together. This
effort was successful in raising 40 percent of
the total cost of the hotel in anticipation that a
lender would provide the remaining 60 percent
in the form of a construction loan. In addition
to the priority return, investors could expect to
participate in any future capital gain realized
should the hotel be sold.
The development company, continuing
to function as agent for the owner, then
sought a commercial bank to provide three-
year construction financing for the project.
1327.ch01 12/19/05 9:27 AM Page 12
As $22,800,000, or 60 percent, of the $38 mil-
lion development cost was to be borrowed,
only major banks were considered as
prospective lenders. The size of the construc-
tion loan was above the lending limits of
most small regional banks. After a precon-
struction appraisal by a third-party appraisal
firm chosen by the lender confirmed the
value at $38 million upon completion of con-
struction, and for an origination fee of
$400,000, a three-year construction loan was
secured. The terms allowed the developer, as
agent for the owner, to draw down the loan
every 30 days after providing proof that
funds had been properly disbursed in the
construction process. The loan documents set
an interest rate and also required that the
ownership LLC seek a permanent mortgage
prior to the three-year expiration date on
the construction loan.
The development company then negoti-
ated with and selected a general contractor
with significant hotel construction experience
who acted on behalf of the developer, as
agent for the owner. The general contractor
then selected design-build subcontractors and
an interior designer to select colors, fabrics,
furniture, fixtures, and equipment to meet the
hotel franchise design requirements.
Building permits were applied for, and
the building design was presented to the City
Development Commission for its approval,
along with other groups with a stake in the
appearance of the finished building in rela-
tion to the area and neighborhood. With all of
these approvals in place, construction com-
menced, and the hotel opened two years later.
Section 1.2 ? The Hotel Development Process 13
?
POSTSCRIPT
Three years after the hotel opened, the own-
ership LLC had the obligation to secure per-
manent financing on the hotel to replace the
construction loan. The September 11, 2001,
terrorist attacks on the World Trade Center
and the Pentagon slowed travel throughout
the United States. As a result, the hotel did
not achieve the projected occupancy or av-
erage daily rate during the three-year con-
struction loan period. An appraisal that was
primarily based on the hotel’s trailing 12-
month net operating income produced a
value about $2 million below the original
construction cost. The bank that had pro-
vided the construction loan notified the
owners that they did not wish to provide
permanent financing under these circum-
stances. The owners were forced to conduct
a search for a new mortgage bank. They
were able to find a mortgage, but only after
buying down the loan by $2 million to bring
the loan-to-value ratio back to 40 percent
equity and a loan at 60 percent of the ap-
praised. This illustrates the risk that devel-
opers face when entering into a hotel
project.
However, as hotel values historically peak
and decline on about a ten-year cycle, the
owners look forward to the option of selling
the hotel on the next peak, which will allow
them to capture the original projected return
through capital appreciation. Hotel develop-
ment and ownership is a high-risk, high-
reward enterprise.
1327.ch01 12/19/05 9:27 AM Page 13
Dramatic changes have affected the hotel in-
dustry over the past 30 years. These changes
have had a disproportionately high bearing
on the independent hotel owner, who, in the
face of increasing pressure from large, well-
funded chains, struggles to maintain inde-
pendence and to compete on the basis of
distinctive hospitality and character.
Several organizations provide indepen-
dent hotels and resorts with reservations and
sales services. As competition has evolved and
intensified, some of these organizations have
modified their structure and enhanced their
services to meet the changing needs of inde-
pendent hotels and competitive market dy-
namics. Today, independent hotels may choose
from among more than 20 such organizations
delivering varying degrees of competitive ad-
vantage and ownership independence.
?
A NEW MARKET MODEL
In the new millennium, the face of the global
hospitality market continues to change at a
rate never before seen. Four factors con-
tribute to this rapidly changing environment:
• The broadening and diversification of the
global consumer market. Both the demo-
graphic and psychographic characteristics
of the global consumer market are grow-
ing and changing radically.
14 Chapter 1 ? Overview
• The rapid advancement and availability of
technology. This includes internal hotel
operating systems, revenue management,
direct-to-consumer communications and
booking technology (Internet), marketing
technology (customer databases), and
telecommunications and automated sales
systems that enable central sales offices to
become revenue producers.
• The growth and importance of global
brands. Recognized brand names and
brand attributes are important in reach-
ing diverse customer segments and in cre-
ating customer loyalty.
• Consolidation of multiple brands under a
single global management. The manage-
ment and leveraging of multiple brands
use similar technology platforms and
shared sales and marketing infrastruc-
tures to consolidate and direct consumer
demand.
Some established ways of doing busi-
ness—long-term, high-fee management con-
tracts and franchises, a focus on traditional
distribution channels, and traditional hospital-
ity industry marketing techniques—are no
longer effective in the new consumer-focused
market. More and more hospitality marketing
budgets are being directed toward technology-
enabled customer booking and communica-
tion; this shift away from traditional hospitality
marketing techniques is expected to evolve
1.3 HOW WEL L DOES THE BRANDED
DI STRI BUTI ON COMPANY AL L OW
I NDEPENDENT HOTEL S TO COMPETE
WI TH THE CHAI NS?
Peter Cass
1327.ch01 12/19/05 9:27 AM Page 14
over several years and involve millions of U.S.
dollars in telecommunication, e-commerce,
data warehousing, and one-to-one marketing
investment. The independent hotel or resort
and many small branded management compa-
nies may not be able to fund this requirement.
However, this shift will not affect all inde-
pendent hotels and resorts simultaneously.
The first wave of change will hit the global
business and city hotel market. This is prima-
rily because of brand competition and the fact
that the business travel distribution network
is more structured and driven by multina-
tional corporations desiring lower and more
predictable costs. The second wave will affect
the leisure market, and the changes could fol-
low quickly. Leisure travel content, including
packaging on the Internet, will increase rap-
idly as the presently fragmented leisure travel
distribution network becomes more unified
and efficient through consolidation.
The emergence of e-commerce modes in
the hospitality industry is not eliminating the
intermediary and empowering the individual
property, as once thought; instead, it is creat-
ing new, more powerful intermediaries. Some
of these evolve from the hospitality industry,
while others are opportunistic e-commerce
companies.
?
MANAGEMENT
COMPANIES AND
FRANCHISES
In the 1970s, hotel chains continued to evolve
as the need for capital to invest in additional
properties restricted growth opportunities.
This pressure bolstered the proliferation of
the management contract, whereby the chain
offers the hotel owner the rights to use its
Section 1.3 ? How Well Does the Branded Distribution Company Allow Independent Hotels to Compete? 15
brand name and established facility and ser-
vice standards as well as trained operations
management and reservation and marketing
services—for a significant fee, usually a per-
centage of gross sales. The pressure to grow
also fostered the development of the fran-
chise concept and franchise system in North
America. The franchise differs from the man-
agement contract in that the owner is respon-
sible for operations, including meeting the
franchise standards.
The growth of management and franchise
contracts has been remarkable, and today, ac-
cording to a recent study, 75 percent of the
hotel rooms in North America are covered by
some form of branded franchise or profes-
sional management agreement (Travel Re-
search International, 1999).
These new business structures continued
to threaten the traditional independent owner
by accelerating the growth of the chains’ share
of the lodging market. In response, the mar-
keting/referral organizations formed in the
1960s began to offer a wider range of services.
While these additional offerings leveraged
linkages to the global distribution systems and
led to strong relationships with travel agents,
the consumer was largely ignored, and the or-
ganizations did little to generate consumer
brand awareness.
In the United States, strong consumer
branded operators are attracting increasing
amounts of capital to fund their growth at the
expense of unbranded operators (Pricewater-
houseCoopers, 2000).
?
BRAND DEVELOPMENT
As the consumer market became more
diverse and the hospitality product more
1327.ch01 12/19/05 9:27 AM Page 15
segmented, branding became increasingly im-
portant. By the late 1980s, without a recog-
nized brand affiliation or a close relationship
with the lending community, owners/develop-
ers found it difficult to obtain permanent fi-
nancing on a new hotel or resort. Lenders,
believing that an established brand provided
greater economies of scale and established in-
frastructure, opted for the lower-risk alterna-
tive. In this brand-driven environment, the
independent hotels’ distinctive style and char-
acter became a competitive advantage, but
only if they were able to meet recognized stan-
dards. As a result, the need for independent
hotels to be associated with a clearly defined,
trusted brand became more critical than ever.
In the late 1990s, independent hotels, par-
ticularly those in Europe, began to face the
daunting costs of upgrading their technologi-
cal infrastructure and facilities to accommo-
date changing consumer needs. Such upgrades
as new property management systems, high-
speed Internet access, two-line phones, in-
room faxes, and leisure and health facilities
became critical to maintaining competitive-
ness. When coupled with ever-increasing costs
of consumer marketing, these costs put un-
precedented strains on independent hotels’ fi-
nances. As a result, these hotels became
increasingly focused on leveraging greater re-
turns from their reservation affiliation.
?
RESERVATION
AFFILIATIONS—A
CHALLENGE TO
EFFECTIVENESS
The relationship of independent hotels and
resorts to reservation affiliations has been
long and generally successful. These relation-
16 Chapter 1 ? Overview
ships operated best in a market environment
that was stable, somewhat homogeneous in
terms of demographic market segmentation,
and where travel influencers played a domi-
nant role in transient business, group, and
leisure travel. Reservation affiliations are
most effective in regional hospitality markets
that do not have multiple brand competition
and when the goals and objectives of the
reservation organization are in alignment
with the goals of the independent hotel own-
ers. A contributing element to the attractive-
ness of reservation affiliations has always
been the networking and camaraderie oppor-
tunities for the professional management at
independent hotels.
Reservation affiliations focus on tradi-
tional channels of distribution. Access to the
Global Distribution Systems (GDS) is no
longer a competitive advantage; the GDS is a
universal pipeline. The new competitive play-
ing field is proprietary distribution channels
leveraged by consumer segmentation, e-com-
merce technology and partners, and innova-
tive customer management programs.
In the new technology-driven and con-
sumer-empowered global market, the strength
and effectiveness of reservation affiliations
are challenged by new market and operating
imperatives. The cost to compete against
chains will grow exponentially. As competition
intensifies, it is probable that local and re-
gional market share at independent hotels and
resorts will be drawn off by local and regional
licensees of strong global brands. Independent
hotels, therefore, need to draw more national
and international business to fill occupancy
gaps. This requirement runs counter to the es-
tablished business model and capabilities of
reservation affiliations.
The average room-night contribution of
reservations companies to affiliated inde-
1327.ch01 12/19/05 9:27 AM Page 16
pendent hotels is less than 5 percent of avail-
able rooms (Preferred Research).
At least four emerging factors are chal-
lenging the effectiveness of traditional reser-
vation organizations:
1. The growing demographic and psycho-
graphic complexity of the global con-
sumer market requires significant new
expertise and resources in the area of seg-
mentation and analysis.
2. The emergence of consumer direct-book-
ing Internet technology requires signifi-
cant new and ongoing investment.
3. The new marketplace requires innovative
global brand management together with
resources to establish and maintain a
brand in the face of intense competition.
To be competitive, a brand must attract
new development and must therefore be
strong enough to convince lenders to
commit to permanent financing. Brand
management also includes loyalty pro-
gram management and the development
of regional and global partners to
strengthen and extend the effectiveness
of the brand.
4. The corporate objectives and governance
policies of traditional reservation organi-
zations are influenced by the need to grow
and meet shareholder profit require-
ments. These goals for growth can be at
odds with the goals and expectations of in-
dependent hotel and resort members.
The traditional reservation affiliations
must change not only their focus but also
their structure if they want to succeed in this
new competitive world.
The traditional reservation organization
must be prepared to respond to competitive
challenges by expanding resources and skills
Section 1.3 ? How Well Does the Branded Distribution Company Allow Independent Hotels to Compete? 17
necessary to increase average room-night
contribution to affiliated independent hotels
to 15 percent—an average growth per mem-
ber hotel of at least 200 percent over present
performance levels (Preferred Research).
In response to this competitive environ-
ment and the need for more cooperative and
focused business relationships, a new hospi-
tality business structure is evolving for all
scales of hotels: the branded distribution
company.
?
CHARACTERISTICS OF A
BRANDED DISTRIBUTION
COMPANY
The ideal branded distribution organization is
a conventional equity company with owner-
ship shared (in some cases) by the individual
hotel owners, who have direct input into the
corporation through an elected board of di-
rectors. This ownership structure creates a
true operating partnership and a sharing of
energies toward the common goal of creating
value through increased brand awareness and
room sales. Corporate profits must be ade-
quate to maintain technical and managerial
leadership and to support the shareholders’
investment.
Unlike a reservations and representation
company, a branded distribution corporation
owns and builds a branded distribution net-
work asset that, in turn, provides services as
set out in the diagram below. The sole focus is
performance for the affiliated independent
hotels and resorts.
Joining such an organization is appropri-
ate for independently owned and managed
hotels and resorts that want to keep owner
control but require effective and low-cost
1327.ch01 12/19/05 9:27 AM Page 17
Table 1.1 Hospitality Structures and Corresponding Brands
Flagged and
Types of Representation Reservation Reservation/ Branded Franchise
Business Firms (Group Services Sales Distribution Management
Structure Meetings Only) Only Affiliations Companies Companies
General • Primarily Trade-Focused • Consumer & Trade-Focused
Attributes • Primary Reservation Technology • Performance Focused
• Disparate range of abilities in: • Brand Management
• —Management Expertise and Depth • Quality Standards and Assurance
• —Marketing, Sales, and Reservation Support • Multiple Technologies
• Integrated Marketing and
• Technology Solutions
• Customer Recognition and
• Loyalty Programs
• Full-Service Provider
• —Purchasing, Technology
• —Recruitment, Training
• —Consultative & Design Services
• Management Expertise and Depth
Examples of ALHI Utell Flag Int’l Concorde Preferred Hotels Accor brands
Organizations, David Green Lexington Golden Tulip and Resorts Bass brands
Brands, and Helms Briscoe Pegasus/ Historic Hotels Worldwide Carlson brands
Management Hinton/Grusich Rezsolutions Leading Hotels (for profit) Cendant brands
Companies Krisam Supranational of the World Best Western Choice brands
TRUST Relais and Chateaux (not for profit) Four Seasons
Small Luxury Hotels Summit Hilton brands
Sterling Hyatt
SRS Hotels Mandarin
Steigenberger Marriott brands
Starwood brands
Wyndham
Relationship Client Client Member (some Member-Owner Licensee
of Hotel are Owners)
Owner to
Structure
Owner High High High High Low
Control
Room-Night Low Low Low-Medium High High
Production
Consumer Low Low Low High High
Focus
Overall Low Low Low Low High
Fees
18
1327.ch01 12/19/05 9:27 AM Page 18
distribution, global consumer brand aware-
ness, and group purchasing benefits without
the encumbrances and costs of a traditional
hotel chain franchise or management con-
tract. Above all, it promises the independent
hotel awareness of, and access to, their target
consumer and rapidly emerging technology
through cooperative ownership.
Table 1.1 shows a summary of the key
characteristics of the various marketing busi-
ness structures and suggests examples of cor-
responding brands.
?
THE BENEFITS OF A
BRANDED DISTRIBUTION
COMPANY
This new business structure is attractive from
an owner’s or a developer’s standpoint for a
number of reasons, including:
• Costs: First, it requires less up-front cash;
second, ongoing fees and reservation
commissions are significantly lower than
with either a pure franchise or manage-
ment agreement. For example, a 9 or 10
percent franchise fee in many cases
equals 50 percent of gross profits.
• Contract terms: The terms are typically
shorter, easier to negotiate, and allow for
substantial owner control over the opera-
tion, style, and character of the hotel. As a
result, conflicts can be avoided, and the
branded distribution contract can be
completed and signed in as few as 45 days.
• Marketing: It frees hotel management
from the daunting and increasingly ex-
pensive task of acquiring profitable new
customers and allows them to focus their
attention and operating skills on the de-
Section 1.3 ? How Well Does the Branded Distribution Company Allow Independent Hotels to Compete? 19
livery of an exceptional hospitality
experience.
• Common objectives: Both the owner and
the branded distribution company enter
into the agreement with the same primary
objective: revenue. The branded distribu-
tion company receives no revenue if it
does not deliver to the hotel or resort.
This shared goal strengthens and ener-
gizes the relationship between the two
partners.
From a branded distribution company’s
standpoint, this structure allows the brand to
expand faster because capital is not used to
subsidize additional construction or to sup-
port an older business model. Instead, funds
are used to build and maintain an up-to-
date global distribution network and infra-
structure composed of telecommunications,
e-commerce functions, reservations software,
data warehousing capability, and sales and
marketing. The efficiency of the operation is
assured by a focus that is almost entirely on
the most important part of this business rela-
tionship—the generation of brand awareness
and measurable room-night revenue for each
affiliated hotel or resort.
Unlike hard flags, which focus primarily
on hotel operations and asset management
such as the Marriott or the Westin, and reser-
vation affiliations, which focus on professional
camaraderie and traditional distribution chan-
nels such as the Best Western, the branded dis-
tribution company is primarily market-
focused; its full attention is on customer and
travel influencer communication, relationship
technology, and revenue streams. (Note: Travel
influencers are the intermediaries between
consumers and the travel product and include
travel agents, etc.)
1327.ch01 12/19/05 9:27 AM Page 19
In contrast, asset management, profitabil-
ity, and operating efficiency are the major
concerns of management companies, which
tend to be public companies with stockholder
expectations that must be met. It is often the
case that strategic asset management con-
cerns conflict with day-to-day tactical operat-
ing needs. This is evident in Marriott’s recent
move to separate its ownership and operating
divisions, to the benefit of both.
The same conflict can arise between the
independent owners of a hotel property, who
are focused on real estate concerns, and the
management company they hire. Such misun-
derstandings can sour what should be a mutu-
ally supportive relationship. The fact that
management contract fees are charged and
collected, even when the cash flow is negative,
does not create owner confidence in the part-
ner. A franchise relationship can cause a sim-
ilar conflict and put a financial and operating
burden on an owner.
In contrast, participation of independent
owner/operators as shareholders in a branded
distribution company enables them to move
beyond these concerns and focus on their op-
eration and the consumer—the source of
their revenue and the basis of their success.
?
ARE THERE ANY
DRAWBACKS TO A
BRANDED DISTRIBUTION
COMPANY?
The owners of property within a branded dis-
tribution company must relinquish a minimal
amount of control and decision making,
mainly in the areas of branding and quality
assurance. In certain cases, member proper-
20 Chapter 1 ? Overview
ties may have to adopt and maintain specific
quality standards. In addition, they may also
be required to demonstrate their affiliation
with the branded distribution company
through using its logo on marketing materials
as well as participating in e-commerce and in-
ventory management initiatives.
However, these drawbacks can actually
enhance a hotel’s operations and market po-
sitioning while allowing the hotel to maintain
independent ownership and management.
?
ENSURING COMPETITIVE
ADVANTAGE
Independent hotels face significant risk in to-
day’s marketplace. Given the advances in
technology and the profitability pressures put
upon chain hotels by shareholders, competi-
tion for customers is intensifying. Keeping in
step with competitive chain hotels presents a
significant challenge to independent owners.
To address this, they currently have several
options outside of the branded distribution
company, including representation firms,
reservations services, flagged chains, and fran-
chise management companies. However,
given the economic, societal, and technologi-
cal trends that are dramatically changing the
hospitality industry, several of which are ana-
lyzed in this book, many of these old-
economy options can offer only short-term
solutions to long-term competitive pressures.
A branded distribution company has an
inherent advantage going into this new com-
petitive arena. Its sole focus is on customer
acquisition and management, achieved
through the development of new technolo-
gies. This competitive advantage extends to
the independent hotel aligned with a branded
1327.ch01 12/19/05 9:27 AM Page 20
If you ever have the chance to be involved
with opening a hotel, jump at the opportunity.
Opening a hotel is one of the most rewarding
jobs in the hospitality industry despite its frus-
trating and exhausting aspects.
Walk into any hotel, anywhere, and look
around. Everything you see, hear, and feel,
every detail, involved many people and
countless decisions. I have been an operations
project manager (OPM) since 1989 and have
opened over 40 three-, four- and five-star ho-
tels around the world. From Guam to Malta,
Berlin to St. Louis, each project has been
unique, each project has been the same, and
each has been professionally rewarding.
The OPM is the third person hired, after
the general manager and the director of mar-
keting. The role of an OPM is to pull together
the visions of the architect, interior designer,
owner, operator, and others. When these vi-
sions are successfully melded, the hotel guest is
satisfied, the owner makes money, and the ar-
chitect and interior designer can add the proj-
ect to their list of successful accomplishments.
Section 1.4 ? The Art and Science of Opening a Hotel 21
The OPM oversees the following aspects
of a project:
• Reviewing blueprints and specifications
for the entire building
• Assisting with the creation of a model
room
• Developing the pre-opening staff plan
• Developing and managing the pre-open-
ing budget
• Developing the operational supplies and
equipment budget (OS&E)
• Overseeing the purchasing, warehousing,
delivery, and installation of the OS&E
• Developing the interior graphics package
• Coordinating the installation of third-
party vendors
?
BLUEPRINTS
The OPM’s responsibilities start with the ar-
chitectural blueprints. The focus is to ensure a
good flow for guests, staff, and goods.
1.4 THE ART AND SCI ENCE OF OPENI NG
A HOTEL
Tom Dupar
distribution company. By providing the inde-
pendent owner with a global brand and the
technology and expertise to acquire prof-
itable new customers, the branded distribu-
tion company enables the hotel management
to focus its attention on the delivery of excep-
tional service and profits to the owners. This
separation of skills, expertise, resources, and
operating cultures in a cooperative business
relationship provides a model and formula
for success.
Independent hotels and resorts that align
themselves with a branded distribution com-
pany will not only continue to operate prof-
itably in the new global marketplace, but will
also flourish.
1327.ch01 12/19/05 9:27 AM Page 21
The bellperson bag storage room should
be located between the porte cochere (entry)
and the elevators and contain 1 square foot of
space for each guest room.
If valet parking is offered, ensure that a
convenient cashier’s station is located near
the porte cochere. Arrange for a key rack to
hold the keys for each valet parking stall.
Given a 10,000-square-foot ballroom, the
catering department can sell functions for
800?for dinner. This requires 80 6-foot round
tables, 800 chairs, a dais for the head table, a
dance floor, and staging for the band. If sold
for a 700-guest all-day meeting, the classroom
setup requires 1,400 linear feet of narrow ta-
bles and 700 chairs. A short theater meeting
setup for 1,000 requires 1,000 chairs, a
podium, staging, and audio visual equipment.
The same space accommodates a cocktail re-
ception for 1,400 guests; this requires cocktail
tables, portable bars, buffet stations, and so
on. This all boils down to ensuring ample
storage space for equipment not being used—
at least 1,500 square feet.
Moving goods from the back of the house
to the front requires careful planning to en-
sure that precious labor dollars are used effi-
ciently. Are the rollaway beds, cribs, and high
chairs stored near an elevator for quick deliv-
ery? The housekeeper closets should be cen-
trally located on guest room floors to cut
down on access time. A 6-foot, 2-cubic-yard
garbage cart will not work if the elevator is
only 5 feet deep.
If ice machines are offered for guest self-
service, they must produce an ample supply
(10 pounds per room per 24-hour period) for
the number of guest rooms on that floor or
floors. The ice machine room requires the
proper utilities, including electricity, plumb-
ing, lighting, and HVAC. Don’t forget the sign
22 Chapter 1 ? Overview
on the outside of the room, which must meet
ADA standards!
?
MODEL ROOM
Build a typical king and double/double guest
room close to the site so you can review every
single item in them. Are ample electrical and
telecom outlets placed exactly where the TV,
lamps, clock radio, mini-bar, coffeemaker, hair
dryer, Internet access, and telephones are lo-
cated so the cords are hidden? Are spare out-
lets offered for guest use (computer, iron,
etc.)? Is the closet rod hung so the ironing
board organizer and iron board fit in the
closet? Is the thermostat location convenient
for guest access?
Are the case goods (dresser, nightstands,
headboards, chairs, etc.), designed for com-
mercial heavy-duty use? Will they hold up to
abusive use? Do they have sharp corners that
will snag guest clothing? Does the bedskirt
hang
1
?2 inch off the floor? Do the bedside
lamps give off enough lumens so guests can
read in bed? Does the room meet or exceed
every operator brand standard?
These model rooms serve as sales tools
for the sales and marketing staff selling group
rooms up to three years before opening.
?
PRE-OPENING STAFF
PLAN
The pre-opening staffing begins with an orga-
nizational chart with all positions. Once the ti-
tles and staff counts by position are finalized,
then spreadsheets are created to include the
position titles, start dates, pay rates, bonus,
transfer allowances, and number of full-time
equivalents (FTEs) for all positions.
1327.ch01 12/19/05 9:27 AM Page 22
The pre-opening staff plan is a compre-
hensive document that states who is hired,
when they start, how much they are paid, and
whether or not they are allocated a relocation
allowance and benefit costs. Each of these
pieces is used to build the pre-opening staff
plan budget. If hiring has already begun and
the opening date changes, the budget must be
amended. Hiring a position that does not con-
form to the plan, such as bringing on a
renowned chef one month earlier than
planned, also requires the budget be modified.
?
PRE-OPENING BUDGET
The OPM develops and manages the pre-
opening budget. This budget typically consists
of three major categories; labor cost (40 per-
cent), sales and marketing efforts (40 per-
cent), and miscellaneous (20 percent).
The labor cost is taken directly from the
pre-opening staff plan.
Sales and marketing activities comprise
advertising, collateral, public relations, and
travel to see clients.
Rounding out the budget are all of the
miscellaneous items. These include office
space rental before moving into the hotel,
utilities (power, water, Internet, and tele-
phone), human resources recruitment (ads,
headhunters, drug testing, etc.), training mate-
rials, association dues, and licenses and per-
mits (business, liquor, sales tax collection,
etc.).
If the hotel opening date is delayed for
any reason, the pre-opening budget is af-
fected. Additional costs include labor, office
rent, utilities, and marketing efforts. If the
opening date changes within three weeks of
the original plan, major costs are encoun-
tered, as most of the staff is already hired.
Section 1.4 ? The Art and Science of Opening a Hotel 23
?
OPERATIONAL SUPPLIES
AND EQUIPMENT (OS&E)
The largest and most complex aspect of the
OPM’s responsibility is specifying, quantify-
ing, and budgeting for the operational sup-
plies and equipment (OS&E) list. This budget
typically pencils out to $8,000 to $10,000 per
guest room for a typical four-star property.
The list of goods typically exceeds 2,500 line
items. Add a little more for a full-service re-
sort; deduct a little for an in-city business
hotel.
The OS&E comprises all of the items that
are not nailed down, with the exception of the
furniture, fixtures, and equipment (FF&E).
The FF&E is typically specified and ordered
by the interior designer.
Typical guest room items include bedding
(frames, box springs, mattresses, mattress
pads, sheets, pillows, pillowcases, towels, etc.),
clock radios, hangers, laundry bags, laundry
tickets, iron, ironing board, ironing board or-
ganizer, luggage rack, guest amenities (soap,
shampoo, lotion, etc.), hair dryer, shower cur-
tains, and shower curtain hooks.
Housekeeping equipment includes vacu-
ums (guest room and wide-area units), carpet
shampooers, carpet extractors, housekeeper
carts, laundry bins, garbage trucks, valet deliv-
ery carts, and shelving, to name a few of many
items. Housekeeping must also keep an in-
ventory of guest request items including hu-
midifiers, dehumidifiers, cribs, high chairs,
rollaway beds, bedboards, spare pillows, tow-
els, amenities, refrigerators, laundry soap, and
so on.
Food and beverage front-of-the-house
items include flatware (knives, forks, and
spoons), hollowware (serving trays, serving
utensils, chafing dishes, sugar bowls and sauce
1327.ch01 12/19/05 9:27 AM Page 23
boats, punch bowls), glassware, table linen,
napkins, skirting, salt and pepper shakers,
china, plate covers, espresso machines, menu
covers and the list goes on and on.
Banquet items include all of the above
plus tables, chairs, staging, staging steps and
railings, dance floors, carts, carving boards, ice
carving trays, flags, podiums, portable bars, ice
bins, pianos, and tray jack stands.
The largest purchase order—typically
over 100 pages long—is for a full-service
kitchen and includes everything a chef needs
to produce the menus being sold at the hotel.
Every utensil, pot, pan, dish, and glass rack,
warewashing chemicals, mops and buckets,
specialty items (roller-docker, anyone?) must
be reviewed by the chef, purchased, and deliv-
ered the day before the chef starts burning in
the kitchen.
On the hotel administration side, the
OPM specifies the office desks, chairs, cork
and dry-erase boards, conference tables, filing
cabinets, safes, bullet-proof window for the
general cashier’s office, fax machines, copiers,
currency and coin trays, and a set of flags for
the exterior flagpoles.
One of the largest and most complicated
purchase orders is for staff uniforms. My re-
cent Kona, Hawaii, project uniform purchase
order was 68 pages long. The invoices covered
over 100 pages!
Before quantifying uniform needs, many
questions are asked. Do we need summer and
winter uniforms? Will the uniforms be laun-
dered by the hotel or the hotel associates?
How many extra servers are needed for a ca-
pacity dinner function in the ballrooms? Is
the intent to have a large percentage of part-
time staff? Which uniforms need custom em-
broidery (restaurants, culinary, engineering,
etc.)? What percentage of spare uniforms are
needed in reserve?
24 Chapter 1 ? Overview
Once these questions are answered, then
the selection process begins. Operations and
the interior designer review the look and feel
the options available. Each position (house-
keeper, bellperson, etc.) or similar position
(front desk clerk/concierge) has different re-
quirements. Housekeepers and bellpersons
require durable uniforms that breathe and
can handle lots of bending and stretching. The
uniforms of the culinary and engineering
staffs are often stained and must hold up to
numerous launderings.
The uniform order is placed 90 to 120
days before the first uniformed staff is hired.
To quantify the sizes required, a typical bell
chart sizing curve is used for the particular
country or region of the hotel. The uniforms
are delivered and sorted prior to the individ-
ual fitting process. On the line staff’s second
day on the job, each individual is measured
for uniforms. An army of seamstresses then
takes the pants, jackets, and dresses and alters
each piece for each associate. The fitted uni-
forms are issued a few days before opening
day.
?
PURCHASING,
WAREHOUSING,
DELIVERY, AND
INSTALLATION OF THE
OS&E
In an ideal process, the 500 purchase orders
are issued beginning six months prior to
opening. Each order is tracked to ensure it is
delivered to the proper location on the de-
sired date. Most goods are delivered to a local
warehouse and pulled for delivery to the site
as the general contractor completes construc-
1327.ch01 12/19/05 9:27 AM Page 24
tion and turns over areas. Some goods are
shipped directly to the site to eliminate dou-
ble handling. These large orders include bed
sets (21 40-foot shipping containers for the
Kona project), televisions (3 containers), ban-
quet chairs (2 containers), banquet tables (3
containers), and guest room safes (1 con-
tainer). The linen order for guest rooms and
F&B are shipped to an off-site laundry facil-
ity for initial washing.
Once the goods are on site, they are typi-
cally staged in the largest ballroom for un-
packing and distribution. The unpacking
process requires a plethora of workers. For
example, each clock radio must be unpacked,
the electrical twist tie removed, the 9-volt bat-
tery installed, and the time set. Then the unit
is placed in a guest room on the nightstand.
For the 525-room Kona project, this task re-
quired two people for three eight-hour days.
Once they completed this task, they spent the
next five working days installing the 7,000?
shower curtain hooks, 525 shower curtains,
and 525 shower liners. Then they unboxed
30,000 glasses and placed them in glass racks
for washing. These kinds of tasks must be car-
ried out for each of the 2,500 line items.
Once receiving and distribution begins on
site, another element comes to the forefront:
garbage. During the five-week Kona installa-
tion process, over 3 tons of packing material
were generated every day! Making friends with
the local waste-hauling service is a priority.
?
INTERIOR GRAPHICS
PACKAGE
The project manager reviews the interior
graphics package for errors and omissions.
This package includes every sign needed to
Section 1.4 ? The Art and Science of Opening a Hotel 25
direct guests and staff in front and back of the
house areas. The recent Kona project in-
cluded 1,600 signs, 98 percent of which were
one of a kind. The text must be correct, the di-
rectional arrows must point the correct way,
and most are required to include raised
Braille text, per the ADA.
The OPM works with the marketing de-
partment to develop the identity for the
unique areas within a property. These include
the restaurants, bars, pools, spa, and retail ar-
eas. These logos are incorporated into the sig-
nage package, collateral (cocktail napkins,
menus, check presenters, etc.), and uniforms.
?
THIRD-PARTY VENDORS
Many third-party vendors must have access
to the property prior to opening. The project
manager schedules and directs all of these
vendors, including the soft-drink vendor (who
installs soda guns for the bars and vending
machines for the guest floors), the coffee
company (which must install and test equip-
ment), the pay-per-view TV vendor (who
must connect every television in the building
and test the signal strength), the warewashing
chemical vendor (who must install and cali-
brate the dishwashing machines), and the of-
fice furniture installer (who must assemble all
office equipment). Among the other vendors
are those dealing in copier services, postage
machines, telephones, fitness center equip-
ment, security systems, and first aid supplies.
These vendors are constantly informed
when they can install their equipment based
on the general contractor’s completion dates.
When the construction schedule changes, ven-
dors must be updated so they show up when
the area they need access to is ready.
1327.ch01 12/19/05 9:27 AM Page 25
?
HUMAN RESOURCES
The OPM assists the human resources per-
sonnel during the last two months of pre-
opening so that they have all of the tools they
need to recruit and hire the staff. On average,
the HR department interviews at least five
applicants for every position. This works out
to over 1,000 applicants for a typical 300-
room four-star hotel. This process is referred
to as the mass hire.
The mass hire is typically conducted over
a two- or three-day period six weeks before
opening. To interview this many job seekers,
HR requires office space, reception space for
up to 200 at one time, rest rooms, and break
rooms for the interviewers. The OPM coordi-
nates all of these details so that the operations
team can focus on the recruitment.
Once the offer letters are accepted, all
line associates start work about three weeks
out. The first few days on the job are dedi-
cated to group training, operational philoso-
phies, code of conduct, and other general
policies. On day three, divisional training
takes place. In the second week of training,
the staff is broken out into departmental or
job-specific duties.
26 Chapter 1 ? Overview
Departmental training includes teaching
staff to make beds, clean a room, cook every
menu item, the most efficient route to each
guest room, and what to tell the guest en
route to the room.
?
OPENING DAY
The activity during the last 72 hours before
the opening ceremonies is chaotic. This is the
time that all hands are on deck. Sixteen-hour
days are the norm. Rooms are cleaned.
Housekeeping closets are stocked. Liquor
and food storerooms are filled. The general
contractor completes all small details such as
paint touch-ups. Artwork and furnishings are
installed in the public areas. Rehearsals are
conducted for all aspects of the operation, in-
cluding serving test meals and cocktails, guest
check-ins and check-outs, and even such easy-
to-overlook activities as valet parking and
vacuuming the pool.
As soon as the general manger cuts the
ceremonial ribbon, the OPM knows what
kind of job has been done. The next step is to
find the next project and do it all again!
1.5 ON- L I NE PRI CI NG: AN ANALYSI S OF
HOTEL COMPANY PRACTI CES
Peter O’Connor
The importance of electronic hotel-distribu-
tion routes has grown substantially in recent
years. According to statistics quoted in the
Horwath Worldwide Hotel Industry Studies,
direct reservations fell from approximately 39
percent in 1995 to 33 percent in 1999, with the
shift in sales going almost exclusively to elec-
tronic channels (O’Connor, 2001, 70–93).
While hotels continue to make extensive use
of travel-agent-oriented global distribution
systems (GDSs), consumer adoption of the
Internet as a reliable and secure commerce
1327.ch01 12/19/05 9:27 AM Page 26
medium has prompted a change in the way in
which hotel rooms are being distributed.
The Internet has dramatically changed
the way people communicate, research infor-
mation, and buy goods and services. Travel
products in particular have proven to be suit-
able for sale on line. The typical Internet
user—an affluent, frequent traveler who
spends more than the average on leisure and
entertainment—is an attractive market for
travel suppliers (NFO Plog Research, 2000).
Furthermore, from a consumer’s perspective
purchasing travel products on line has, in
many instances, become faster, easier, and
more convenient than contacting a travel
agent or telephoning a supplier directly. As a
result, on-line travel-related revenues are
forecast to grow sharply. For example, accord-
ing to a recent report by Jupiter Media
Metrix, on-line travel sales will more than
triple in the next five years—from US$18 bil-
lion in 2002 to US$64 billion in 2007 (Jupiter
Media Metrix, 2001).
Booking volumes are also forecast to
climb. The Travel Industry Association of
America (TIAA) estimated that by the end of
2002 between 6 percent and 10 percent of all
travel reservations would originate on the
web (TIAA, 1998). If Jupiter’s 2007 predic-
tion comes true, travel will be the biggest sell-
ing on-line product, with a volume nearly
double that of the current leading product,
PC hardware (Forrester Research).
Price is key to selling successfully on line.
Studies by Internet analysts Gomez and
PhoCusWright, and also a study by TIAA, all
identified price as being one of the key moti-
vating factors that encourages consumers to
purchase travel on line (Gomez.com, 2000;
PhoCuSWright, 2001; TIAA, 2001). For exam-
ple, the PhoCusWright study found that com-
petitive pricing is the best way to attract
customers (Pastore, 2001). When travelers
Section 1.5 ? On-Line Pricing: An Analysis of Hotel Company Practices 27
who haven’t bought on line were asked what
would encourage them to do so, 64 percent
said that saving money would make them
more interested. No other benefit—whether
saving time, getting bonus loyalty-club points,
more control, or obtaining better informa-
tion—came close to this level of response.
?
HOTEL PRICING ON
THE WEB
Yesawich, Pepperdine, and Brown found in a
2000 study that almost six out of ten leisure
travelers now actively seek the “lowest possi-
ble price” for travel services (Yesawich, Pep-
perdine, and Brown, 2000). Similarly, a 2001
Forrester Research study found that 66 per-
cent of all buyers had used an on-line dis-
count in the previous 12 months to buy travel
on line (Forrester Research, 2001), and a
study by the Joint Hospitality Industry Con-
gress found a real expectation among con-
sumers that Internet prices would be lower
than those available in the “bricks and mor-
tar” world (Joint Hospitality Industry Con-
gress, 2000).
Such a perception has developed for sev-
eral reasons. First, many of the best-known In-
ternet retailers (such as, for example,
Amazon.com) initially competed with tradi-
tional outlets based, to a large extent, on price.
Second, savvy consumers are aware that web-
based distribution costs are lower than those
of other channels (Nua, 1998). As Jack Ged-
des, Radisson Hotels Worldwide’s managing
director, sales and marketing Asia, has pointed
out: “Consumers now understand that suppli-
ers are cutting costs through this channel and
expect savings to be passed on to them, as well
as being rewarded for making the booking
themselves” (Muqbil, 1998). Such expectations
1327.ch01 12/19/05 9:27 AM Page 27
are being reinforced by the budget-airline sec-
tor, which offers substantial discounts for on-
line bookings. Companies such as EasyJet,
RyanAir, and Buzz estimate that by avoiding
telesales and travel agents, they can achieve
savings of up to 30 percent—which they pass
on to customers in the form of lower fares
(Cooke, 2000). Similar or even greater levels
of savings can be made by hotel companies, as
can be seen from the internal Accor figures in
Table 1.2, which show how an 80- to 90-
percent savings in transaction charges can be
achieved by selling directly to the consumer
on line. Finally, many hotels (and airlines) use
the web to sell last-minute deals—packages at
relatively low prices but with short lead times.
While such promotions can help dispose of
unsold inventory, they have also resulted in
the public’s associating rooms sold over the
Internet with lower prices.
28 Chapter 1 ? Overview
These factors have combined to make
consumers associate on-line booking with
good value, which in the consumer’s mind
translates into low prices. However, in the
case of hotel brands’ own web sites, industry
practice frequently seems to be the opposite
of theory. In a 1999 survey, for instance, a col-
league and I found that rates obtained from
the web site were usually substantially higher
than those obtained by contacting the central
reservations office (O’Connor and Horan,
1999). That study was limited, however, in
that it focused only on direct sales over hotel
chains’ own branded web sites. Electronic
distribution is rapidly evolving for hotels, and
a large number of other on-line consumer-
focused channels are now available, with
most chains using multiple routes to reach
the consumer (Castleberry et al., 1998,
19–24).
Table 1.2 Reservation Cost by Distribution Channel
Total
Route Transaction Fee Cost
Traditional
travel
Customer agent GDS Switch CRS Hotel
Traditional $5.90 $3.20 $0.20 $4.20 $13.50
route
Online
travel
Customer agent GDS Switch CRS Hotel
Online $3.00 $3.20 $0.20 $4.20 $10.50
intermediary
route
Customer Hotel company website Hotel
Direct $1.50 $1.50
online route
Source: Dresdner Kleinwort Benson/Accor, quoted in Travel and Tourism Intelligence, The
International Hotel Industry: Corporate Strategies and Global Opportunities (London: Economic
Intelligence Unit, 2001).
1327.ch01 12/19/05 9:27 AM Page 28
The availability of numerous points of
sale poses some interesting questions. Fore-
most among these is: Is there consistency be-
tween the room availability and prices being
offered over each of the channels? Unlike in
the physical world, where a potential cus-
tomer would have to telephone or visit sev-
eral suppliers, comparison shopping on the
web can generally be accomplished relatively
quickly. Research has shown that consumers
shopping for travel on line almost always
check more than one site before purchasing.
According to Jupiter Media Metrix (2001),
just 10 percent of would-be guests visit only
one site to book a hotel room, another 43 per-
cent visit two or three sites, and 22 percent
visit four or more sites. Because they check
prices in several places, on-line purchasers
have become increasingly intolerant of incon-
sistent information, and may react unfavor-
ably to a firm’s disparate rates by booking
with the company’s competitor. Two related
questions, then, are:
1. If rates are not consistent across channels,
is any one route consistently cheaper?
2. Is the company’s approach to pricing log-
ical from both the consumer’s and the ho-
tel’s perspective?
In this paper, I seek to answer those
questions.
?
METHODOLOGY AND
LIMITATIONS OF THE
STUDY
Previous studies of hotels’ Internet use have
been limited. Murphy et al. (1996, 70–82) fo-
cused on rating the content of hotel web sites,
while Van Hoof and Combrink (1998, 46–54)
attempted to measure managers’ perceptions
Section 1.5 ? On-Line Pricing: An Analysis of Hotel Company Practices 29
of and attitudes toward the Internet. Web-
reservations facilities were investigated in de-
tail in the co-authored paper that I mentioned
above (O’Connor and Horan, 1999). How-
ever, the issue of pricing over several distri-
bution channels does not appear to have been
the subject of extensive systematic research
to date. The objective of this study, therefore,
was to analyze the room rates being offered
to consumers over multiple electronic distri-
bution channels.
An exhaustive analysis of the rates being
offered by all hotels would be virtually impos-
sible. Those rates are constantly in flux, as
hoteliers project occupancy rates and open or
close rate classes accordingly (according to
yield-management principles). I believe, how-
ever, that major international hotel chains’
electronic-distribution activities are indicative
of industry patterns, because recent research
has shown that large companies are most ac-
tive on the web—perhaps because their size
often gives them an advantage in terms of
technical expertise and financial resources. As
a result, I decided to focus this study on the
behavior of the top-50 international hotel
brands. While this strategy means that the
findings are not representative of the industry
as a whole (and, therefore, not generally ap-
plicable), it does allow establishment of an ac-
curate benchmark of trends as they currently
stand. The companies were chosen based on
the ranking of the top-50 hotel brands pub-
lished in Hotels magazine in July 2000. Two of
those companies (Disney and Club Med) were
removed from the listing because they operate
resorts and distribute their rooms largely as
part of packages, which means that their prod-
ucts are not directly comparable to the rest of
the industry. Furthermore, another three com-
panies neither offered on-line reservations on
their own web site nor were they listed on any
of the other channels studied. Thus, the results
1327.ch01 12/19/05 9:27 AM Page 29
discussed below reflect the findings from the
45 hotel brands for which consistent data
could be found.
Five major types of electronic business-
to-consumer distribution channels were iden-
tified from the literature, and leading
examples of each category were selected for
inclusion in the study. In addition to a chain’s
own web site (e.g., www.marriott.com), these
comprised channels that draw their data and
reservations engine from the GDS (i.e., Expe-
dia and Travelocity); those that are based on
the databases and reservation engine of the
switch companies (namely, Travelweb); and
pure web-based channels with an inventory
and reservations database that is maintained
on line (i.e., WorldRes). While not collectively
exhaustive, these represent the majority of
hotel-reservation sites. Omitted from the
study were the auction-style web sites, such as
Priceline.com, which are not comparable to
typical booking approaches.
As another point of comparison, I incor-
porated voice channels into the study by ana-
lyzing the rates offered by the toll-free
number to the central reservations service
(CRS). Data were collected by repeatedly of-
fering to reserve a standard double room for
specified dates in a selected property from
each of the brands using each of the distribu-
tion channels discussed above. Where the
product requested was available on the sys-
tem, both the number of rates displayed and
the lowest rate available were recorded for
analysis. To help ensure consistency, I ignored
rates not available to the general public (e.g.,
corporate, military, AARP, and AAA), and
analyzed only those rates that could be
booked by a “normal” customer. After check-
ing the web sites, I telephoned the hotel com-
pany’s CRS to request the same booking. In
that case, I recorded only the first rate quoted
30 Chapter 1 ? Overview
by the agent, and I did not ask for a lower rate
(nor did I record any subsequent offers after
I demurred from making a reservation). Al-
though better rates could probably be
achieved by haggling, I decided that negotiat-
ing would leave no systematic way of consis-
tently determining the lowest rate, depending
as it does on the caller’s persistence. The
above process was repeated for five sets of al-
ternative dates to reduce the possibility of er-
ror due to system malfunctions or other
exceptional circumstances.
?
SUMMARY OF RESEARCH
FINDINGS
As can be seen from Table 1.3, each of the
major hotel brands uses multiple simultane-
ous distribution channels. The most com-
monly available channels were voice (via the
company’s CRS) and electronic (through the
company’s corporate web site). The company
that did not make a CRS number available
was in the economy sector. Offering hotel
rooms via the company web site is almost uni-
versal, all but one of the brands surveyed of-
fering on-line reservations in this manner. It is
interesting to note that this represents a con-
siderable advancement when compared to
surveys made only a few years ago, which
found that only approximately 50 percent of
the major hotel companies provided on-line
reservations (O’Connor and Horan; Hensdill,
1998).
As shown in Table 1.3, hotel companies
make less use of the other channels investi-
gated. Approximately four-fifths of the major
brands used the GDS-based intermediaries
Expedia and Travelocity, three-quarters used
Travelweb, and barely one-third used World-
1327.ch01 12/19/05 9:27 AM Page 30
Res. These findings are not in themselves sur-
prising. Both Expedia and Travelocity draw
their data from the GDSs, where the majority
of the hotel brands represented in this study
(being major hotel companies) can reason-
ably expect to be represented. Similarly, Trav-
elweb draws its data from THISCO (The
Hotel Industry Switching Company), and
thus any of the hotel brands that use this as
their switch service could be expected
to make inventory available for sale via
Travelweb.
I found the chains’ low usage of World-
Res surprising. With the exception of a com-
pany’s own web site, using WorldRes has the
lowest potential transaction cost and thus
would appear to be an attractive channel for
use by hotel companies. Examination of its
property database reveals a large percentage
of independent hotels, bed-and-breakfast
inns, and small hotel chains. An unresolved
question is why the major brands do not ex-
ploit this distribution channel.
?
RATES AVAILABLE
Each of the electronic channels offered multi-
ple rates. As can be seen from Table 1.4, each
channel presented an average of five rates in
Section 1.5 ? On-Line Pricing: An Analysis of Hotel Company Practices 31
response to the request, with more being of-
fered to the customer by Travelocity than by
the other channels surveyed.
Presenting a variety of rates to the cus-
tomer has both positive and negative implica-
tions. From a positive perspective, it offers
choices to potential customers, allowing them
to match their needs with the products being
sold. On the other hand, presenting a large
number of rates without adequate differenti-
ation between products can confuse cus-
tomers regarding what they are getting for
their money. This is best demonstrated by an
example encountered in the study, where a
property offered 17 different rates for a par-
ticular date on Travelweb, with few (if any)
discernible differences in the room descrip-
tions. Clearly such a scenario would be con-
fusing and frustrating for any customer
wishing to book that property.
Mean prices. It was difficult to make a
general observation about which of the sev-
eral channels is consistently least expensive
on average, although Expedia’s rates were
marginally lower than those offered by other
channels and WorldRes seemed to offer con-
sistently higher rates than did the others (see
Table 1.5). Indeed, all things considered,
prices across each of the channels were com-
parable—with the average price for the
Table 1.3 Channels Used by Major Hotel Brands (n ? 45)
Channel Number Percentage
Hotel company website 444 97%
Expedia 38 84%
Travelocity.com 35 78%
Travelweb 34 76%
WorldRes 14 31%
Voice (CRS) 44 97%
1327.ch01 12/19/05 9:27 AM Page 31
requested room being in the range of US$163.
It was interesting that Expedia’s mean rates
were lower, because as an on-line travel
agency, it has a high distribution cost, and it
would be logical to assume that rates offered
over this channel would reflect the higher
costs. By the same token, since WorldRes’s
transaction costs are relatively low in compar-
ison with those offered by the other channels
surveyed, hotels could potentially offer
cheaper rates over this channel. In other
words, what I found is that when selling hotel
products on line, there does not appear to be
a relationship between the cost of using the
distribution channel and the rate offered. Il-
logically, the electronic channels with the
highest transaction costs for the hotel seem to
regularly offer the best value to the customer.
32 Chapter 1 ? Overview
As will be discussed below, hoteliers need to
rethink their current practices and take action
if they are to benefit from the increasing mar-
ket for on-line hotel-room sales.
Segment breakout. The foregoing discus-
sion was based on an overall look at hotel-
room sales distribution. If the brands studied
are subdivided into classifications based on
their targeted market segment, a different
picture emerges. As can be seen from Table
1.6, hotels at the low end of the market are far
more likely to offer consistent rates across all
channels used. While it could be speculated
that the reason for this might be that econ-
omy properties are more likely to have a sin-
gle fixed price for their product irrespective
of demand, it could also be due to a more con-
sistent pricing strategy on the part of the ho-
Table 1.4 Number of Rates Offered to the Customer
Channel Mean Standard Deviation
Hotel company website 4.27 3.6
Expedia 3.66 1.4
Travelocity.com 6.07 3.3
Travelweb 5.62 3.6
WorldRes 4.58 3.8
Voice (CRS) 1.00 —
Table 1.5 Average Rates Offered to the Customer
Channel Mean Standard Deviation
Hotel company website $159 112
Expedia $152 116
Travelocity.com $166 134
Travelweb $162 115
WorldRes $181 168
Voice (CRS) $163 117
1327.ch01 12/19/05 9:27 AM Page 32
tel companies involved when addressing a rel-
atively price-sensitive market. Furthermore it
can be seen that consumers at the low ends of
the market are far more likely to obtain low
rates through direct (company-owned) chan-
nels. For economy brands, direct sales over
the company’s own web site were lowest 26
percent of the time. When coupled with the 46
percent of cases where the same rate is of-
fered irrespective of the channel used, that
means that a consumer reserving an economy
room will find the cheapest rate on the hotel
company’s web site nearly three times out of
four. With mid-price products, the chain’s web
site is even more likely to give the best rate,
offering the lowest rate nearly half of the
time.
The situation is different at the upper end
of the market. Luxury-hotel companies’ web
sites gave the cheapest rate in less than 10
percent of cases. Furthermore, Table 1.7
shows that the company’s web site quoted the
highest rate in over one-third of cases. Over-
all, the evidence seems to indicate that if you
want to stay in up-market hotels, you should
Section 1.5 ? On-Line Pricing: An Analysis of Hotel Company Practices 33
avoid booking on these hotels’ web sites if
you are searching for good value. Instead, the
on-line intermediaries (in particular, Expe-
dia) offer the highest probability of finding
the best rate available for high-end proper-
ties, with an average savings of 5 percent
available by booking through Expedia rather
than on the company’s own site.
Haggling required. It is also clear from
the data that a hotel company’s CRS is not
the place to obtain the best rates, at least if
one takes the first offer as I did for this study.
Irrespective of the market segment, there is a
higher probability of being quoted the highest
rate through this channel, and bookings
through this route were almost never the
cheapest available. This finding, however, is to
a large extent driven by my methodology. In-
deed, in many cases, as soon as I indicated
that I did not plan to make a booking at the
quoted rate, the CRS associate quoted an-
other, lower rate. This anecdotal finding sug-
gests that negotiation might have resulted in
lower prices. (This is a longstanding CRS
practice; see Lewis and Roan, 1986).
Table 1.6 Market Sector Analysis (Lowest Rates)
Percentage of cases where a channel
offered the lowest rates
Channel Economy Midprice Luxury Chi-squared
All rates equal 46% 21% 28% 0.016*
Hotel company website 26% 47% 14% 0.036*
Expedia 14% 11% 41% 0.030*
Travelocity.com 3% 5% 7% 0.750*
Travelweb 9% 5% 7% 0.900*
WorldRes 0% 0% 0% —
Voice (CRS) 3% 11% 3% 0.600*
*Indicates that the association is significant at the 95-percent confidence level.
1327.ch01 12/19/05 9:27 AM Page 33
?
DAWN OF A NEW WAY
From the above discussion, it can be seen that
both the range of channels through which ho-
tels can be booked and the complexity of such
channels have grown. This study represents a
first attempt at documenting hotel compa-
nies’ pricing practices over electronic routes.
The study revealed that the majority of hotel
brands now use simultaneous, multiple elec-
tronic channels of distribution, making their
rooms available to a relatively wide audience.
While the use of CRS-based reservations has
fallen slightly, there has been a growth in the
availability of hotel companies’ own web
sites, and a vast majority of companies that I
studied now make their rooms available for
sale in this manner. The differences between
this study’s findings and earlier published re-
search indicate a major expansion in hotel
chains’ use of the web as a direct-sales
medium, perhaps accompanied by a realiza-
tion of the web’s benefits in comparison with
other, more traditional, electronic channels of
distribution.
Most companies offer multiple rates to
34 Chapter 1 ? Overview
customers over each channel. It is interesting
to note, however, the large number of compa-
nies that now offer consistent pricing across
all channels. Previous research found less
than 10 percent of companies had consistent
pricing and cited the lack of integration
among the various inventory databases used
to manage inventory as a possible cause. Yet
over one-third of the brands I studied now of-
fer consistent pricing across multiple chan-
nels, indicating progress in the industry’s
management of electronic distribution.
Although no single channel consistently
offers the lowest prices, in-depth analysis does
reveal a link between pricing and the market
being targeted. First, the lowest prices can
rarely be obtained from the CRS (absent ne-
gotiation), irrespective of market segment. As
compared to the first-offered CRS price, a
would-be customer can save at least 5 percent
by booking over any of the electronic chan-
nels I examined. From the data it can be seen
that consumers are more likely to find the
lowest prices on the hotel chains’ own web
sites in the economy and mid-price segments
than will be found from those companies’
Table 1.7 Market Sector Analysis (Highest Rates)
Percentage of cases where a channel
offered the highest rates
Channel Economy Midprice Luxury Chi-squared
All rates equal 46% 21% 28% 0.016*
Hotel company website 14% 16% 34% 0.011*
Expedia 0% 21% 7% 0.017*
Travelocity.com 3% 5% 10% 0.450*
Travelweb 0% 0% 0% —
WorldRes 6% 0% 0% 0.240*
Voice (CRS) 31% 37% 21% 0.440*
*Indicates that the association is significant at the 95-percent confidence level.
1327.ch01 12/19/05 9:27 AM Page 34
CRS or third-party web sites. So-called up-
market hotel brands are, on the other hand,
more likely to quote higher prices on their
own web site than what they offer on other
channels. Economy brands seem to be the
only ones in the industry as a whole display-
ing a logical on-line pricing strategy (in terms
of the relationship between the cost of using a
channel and the rates offered there) and also
in terms of actively managing their channels
of distribution.
Implications. First, it is clear that for those
with a taste for upscale products, the hotel
brand’s own web site is not the place to shop,
as better value can be obtained in most cases
through other channels. More interesting,
however, is the fact that, in general, prices
have become more or less equal across many
of the channels investigated, and by implica-
tion, across many other electronic distribution
channels as well. It is well established that
time is a valuable commodity in today’s soci-
ety. Since the number and variety of ways that
a consumer can book a hotel room has be-
come undeniably manifold, the cost associ-
ated with searching through even a small
number of the many consumer-focused chan-
nels currently available in the marketplace in
an attempt to find a low price has increased.
Given that this study has found that many of
the rates being offered over alternative chan-
nels are more or less the same for many ho-
tels, customers should reconsider whether all
that time and energy searching for the lowest
rate is actually worthwhile.
The implications for the hotelier are more
pressing. My findings suggest that many hotel
chains are not actively managing the room
rates being offered in their portfolio of elec-
tronic distribution channels. Most companies
offer multiple rates on each channel, which, as
discussed earlier, can be beneficial as it gives
a choice to the customer. Displaying too
Section 1.5 ? On-Line Pricing: An Analysis of Hotel Company Practices 35
many rates, though, can be counterproduc-
tive, if the customer becomes overwhelmed.
Presenting a small number of tightly defined
rates would be the most appropriate solution.
However, most companies currently display
about five rates in response to a customer in-
quiry, with others showing significantly more,
usually with little or no apparent product dif-
ferentiation. In addition, there appears to be
inconsistency in terms of the rates being of-
fered over electronic channels. In many cases,
no clear or logical pricing strategy is appar-
ent. The lowest prices are offered on channels
with the highest transaction costs, and vice
versa. A small number of companies offer
consistent pricing irrespective of the channel
being used to make the booking. Informal fol-
low up with those companies revealed that
they follow this strategy as they believe in the
principle of one “correct” price for each cus-
tomer. In this way, they do not have to address
the issue of customer dissatisfaction as a re-
sult of a person’s being quoted a lower price
for a room on a different channel after having
already made a booking. However, such an
approach ignores the issue of the cost of pro-
cessing a booking over a particular channel.
As was discussed earlier, such costs vary
greatly depending to a large extent on the
number of intermediaries between the sup-
plier and the customer. The greater the num-
ber of intermediaries, the greater the
transaction cost and processing fees—and
therefore the greater the distribution cost.
This would seem to argue for having high
rates on the channels that have high-cost
structures and low prices on those with low-
cost structures. Coupled with this matter is
the fact that customers have become more
knowledgeable about and comfortable with
e-commerce issues in general, are more aware
that distribution costs are lower in the virtual
world than the bricks-and-mortar one, and
1327.ch01 12/19/05 9:27 AM Page 35
thus increasingly expect to find the cheapest
prices over electronic, and particularly direct
electronic, routes. Put simply, when they go to
a hotel company’s web site, they expect to
find the best value there. This study has shown
that in many cases this is simply not the case,
given that luxury hotels in particular tend to
offer their highest rates over direct chan-
nels—and (ironically) their cheapest rates
over the most expensive on-line intermedi-
aries. Informal follow up to the study revealed
that this may be due to the proactive ap-
proach of the on-line companies in contacting
hotel companies on practically a daily basis
and encouraging them to reduce their rates in
return for better positioning on their search
listings. In contrast, the rates on hotel compa-
nies’ web sites go largely unmanaged, in many
cases being set far in advance and not ad-
justed to reflect changing supply and demand.
Irrespective of its root cause, the behavior
of hotel companies is driving Internet shop-
pers into the arms of the waiting on-line
intermediaries, where in addition to consis-
tently low prices, they also find wide product
choice. Because of this, it’s likely that many
hotels are losing potential bookings to com-
petitors as a result of consumers’ migration
36 Chapter 1 ? Overview
toward the on-line travel sites that offer rela-
tively low rates from many different hotel
chains. Instead of being presented with a list
of a chain’s properties on a company’s web
site, prospective guests see a much wider vari-
ety of options from the on-line intermediary
and may be tempted to book a competitor’s
room (especially if price becomes an issue).
Once consumers conclude that they will usu-
ally find better prices on a third-party chan-
nel, they will make Expedia or Travelocity, for
example, their first port of call for future
bookings—threatening brand loyalty, driving
up transaction fees, increasing reservation
leakage, and strengthening the third parties’
power to demand “special rates” or commis-
sion overrides for a company to gain premium
positioning (or even inclusion) in their search
listings. Hotel companies need to take urgent
action if they are not to lose control over the
sale of their own product. At the very least,
this means offering consistent prices over all
channels, but more probably means providing
customers the lowest rate over their own web
site. This would decrease guests’ motivation
to book on alternative electronic channels,
would help build web-site traffic, and should
help to decrease distribution costs.
1.6 CUSTOMER REL ATI ONSHI P
MANAGEMENT—A DRI VER FOR CHANGE
I N THE STRUCTURE OF THE U. S.
L ODGI NG I NDUSTRY
Gabriele Piccoli, Peter O’Connor, Claudio Capaccioli, and Roy Alvarez
Note: Over the past two years, we have en-
gaged in significant formal and informal dis-
cussion with senior executives from top hotel
chains, management companies, and owner-
ship groups. The propositions presented here
are the fruit of these discussions as well as in-
1327.ch01 12/19/05 9:27 AM Page 36
depth case studies of two of the largest
U.S.–based hotel chains.
Customer Relationship Management
(CRM)—a managerial philosophy that en-
ables a firm to become intimately familiar
with its customers—is currently gaining wide-
spread popularity in many industries. Firms
that embrace CRM strive to provide consis-
tent and personal customer service over time
and across multiple touch points. At first
glance, the lodging sector, with its emphasis
on customer service and multiplicity of cus-
tomer touch points, seems ideally positioned
to take advantage of CRM initiatives. We be-
lieve, however, that the current structure of
the lodging industry gives rise to a “data-own-
ership dilemma,” which appears to be limiting
the adoption of a comprehensive CRM ap-
proach.
10
The three parties typically involved
in running a hotel—the owner, the manage-
ment company, and the brand (Brand refers
to the franchiser that flags a given property
(e.g., Hilton, Marriott, Six Continents)—have
partially misaligned interests and, as a result,
often resist sharing customer data, a prerequi-
site for successful CRM. (The recent slew of
lawsuits between brands and ownership
groups that allege data misuse confirms the
often conflicted relationship between the en-
tities; see Billing, 2002, for example.)
This paper highlights the data-ownership
dilemma and outlines several possible future
scenarios leading to its resolution. The first
section introduces the CRM concept and dis-
cusses the potential benefits and risks it en-
genders. The second section examines the
current structure of the U.S. lodging industry
and outlines the complementary role of the
three major industry players—owners, man-
agement companies, and brands. The follow-
ing section demonstrates why the current
structure of the lodging industry creates a
barrier to successful CRM adoption by hotel
Section 1.6 ? Customer Relationship Management—A Driver for Change 37
companies. The effect of the “data-ownership
dilemma” is discussed. The final section of the
article presents alternative scenarios as to
how the dilemma may be resolved.
?
CUSTOMER
RELATIONSHIP
MANAGEMENT
Customer Relationship Management (CRM)
is currently one of the hottest topics in the
fields of business strategy, information tech-
nology, and marketing management (Hall,
2001, 24–27). Put simply, CRM is a manage-
ment philosophy that calls for the reconfigu-
ration of the firm’s activities around the
customer. CRM differs from traditional mar-
keting initiatives (see Table 1.8) in that, while
the latter take predominately a short-term,
transaction approach, CRM focuses on maxi-
mizing revenue from each customer over the
lifetime of the relationship by getting to know
each one intimately (Wilson, Daniel, and Mc-
Donald, 2002, 193–219). CRM is also, by defi-
nition, a crossfunctional philosophy that calls
for substantial business integration (Markus,
2000). Thus, to implement CRM successfully,
a very different mindset is needed: The firm
no longer markets to customers, but it fosters
a relationship with them through programs
that span marketing, operations, information
systems, accounting, and other organizational
functions.
One of the questions most often asked
about CRM is, “why bother?” Changing an
organization’s philosophy and methods of op-
eration is troublesome; developing and main-
taining in-depth customer databases is
expensive and the benefits of the approach
are not guaranteed. Day, Dean, and Reynolds
neatly summarize the benefits of using CRM
1327.ch01 12/19/05 9:27 AM Page 37
(Day, Dean and Reynolds, 1998, 828–837)
First, by developing a closer relationship with
customers, the firm may gain a competitive
advantage and, through increased switching
costs, may be able to defend it. Over time in-
dividual customers typically educate a com-
pany about their individual needs, wants, and
preferences—a costly process that they are
reluctant to repeat with a rival (Peppers and
Rodgers, 1994, 6). Thus, getting to know cus-
tomers intimately creates a barrier to imita-
tion of the leader’s strategy.
Second, effective CRM can lead to in-
creased customer satisfaction. Properly im-
plemented, the customer-company dialogue
facilitates the tailoring of products and ser-
vices closely to individual needs, and the de-
velopment of new products and services to
meet changing needs or even anticipate fu-
ture needs (Palmer, 1994).
Third, using CRM techniques contributes
to decreasing overall marketing expenditure.
Acquiring new customers is estimated to be
more expensive than keeping existing ones
(Blattberg and Deighton, 1996, 136–144). Fig-
ures of between five and seven times as much
have been quoted (Kotler, 1997). And, last,
38 Chapter 1 ? Overview
developing a closer relationship with cus-
tomers is thought to increase customer loy-
alty, and loyal customers are thought to stay
with the firm longer, buy more from it, and
buy more often (Dowling, 2002, 87–104). An
oft-quoted statistic is that companies can im-
prove profitability by between 25 and 85 per-
cent by reducing customer defections by 5
percent (Reichheld and Sassre, 1990,
301–307). While the value of loyalty is cur-
rently being debated (Reinartz and Kumar,
2002, 4–12), for some time now lodging firms
have been fostering loyalty through frequent-
traveler programs and CRM may be seen as
the logical next step.
The above arguments offered by CRM
proponents suggest that CRM leads to higher
profitability due to increased sales, declining
customer acquisition costs, and increasing
profitability of customers willing to pay a pre-
mium for “better” service. Figure 1.1 presents
a graphical representation of how CRM is
thought to work. The top row of effects leads
to building relationships with customers and
thus establishing customer loyalty. The bot-
tom row lists well-accepted outcomes of data-
mining activities. Together those two sets of
Table 1.8 Traditional Marketing Versus CRM Approach
Traditional Customer Relationship
Marketing Management
Transaction focus ?????????? Customer focus
Short-term focus ?????????? Lifetime focus
One transaction ?????????? Multiple transactions
Broadcast approach ?????????? Sniper approach
One-way, one-time
??????????
Two-way,
communications continuous dialog
Segment of many ?????????? Segment of one
1327.ch01 12/19/05 9:27 AM Page 38
outcomes have stimulated many companies
to invest in creating a database-driven CRM
system (Dowling, 2002).
Some authors warn that substantial in-
vestments in CRM are not right for everyone
(Gronroos, 1990, 3–11). In a small or niche
business, for example, it is relatively easy to
keep in touch with customers’ preferences.
But because of the significant increase in the
amount of information that must be managed
as the firm’s scale and scope increase, success-
ful CRM requires significant investments in
technology, process redesign, and people. An
airline or a major international hotel chain
must manage substantially larger amounts of
data than does a small inn to achieve a similar
relationship with its customers. However, in-
formation technology (IT)—used appropri-
ately—can help mitigate the problem.
Between 1990 and today, the world has seen
enormous transformations in the extent to
Section 1.6 ? Customer Relationship Management—A Driver for Change 39
which organizations can deploy computer
power. IT allows customer data to be col-
lected, consolidated, manipulated, and ana-
lyzed on an unprecedented scale, and IT has
been identified by many authors as one of the
key success factors for CRM implementation
(Hall, 2001). IT allows increased reach into
new markets without high incremental entry
costs, and facilitates specifically tailored cus-
tomer marketing and increased responsive-
ness (Gamble, Stone, and Woodcock, 1999).
The role of IT in CRM efforts is so im-
portant that some writers (such as Copulshy
and Wolf, 1990, 16–20), and many practicing
managers and vendors, associate CRM with
the technology that is used to support the ap-
proach. Many use the term in the highly spe-
cific sense of database marketing, where a
range of demographic, lifestyle, and purchas-
ing activities are recorded and tracked, and
subsequently used as the basis of targeting
Loyal customers
• Increased ARPU*
•
Stronger brand attitude
• Less price sensitivity
• Reduced customer churning
• Increased ARPU*
• Cost reductions
• More-targeted communications
• New customer insights
• Early warning system
• Better responsiveness to
customer needs
• Increased customer
satisfaction
Cross-selling
Better target marketing
Market research
Relationship
CRM program
Customer
database
Data mining
*ARPU=average revenue per user
Figure 1.1 CRM Model
1327.ch01 12/19/05 9:27 AM Page 39
differentiated products to selected customer
groups. In turn, their response to each mar-
keting contact is tracked and used to further
refine the approach. However, CRM is a
broader concept than just technology. For ex-
ample, CRM has been defined as “an enter-
prise-wide commitment to identify your
named, individual customers and create a re-
lationship between your company and these
customers so long as that relationship is mu-
tually beneficial” (Gamble et al., 1999). This
definition highlights several key CRM con-
cepts—that the company will actively seek
out the right customers (and, by implication,
will not target those that will not do business
with them), will develop a long-term, mutu-
ally beneficial relationship with each cus-
tomer by starting and maintaining a two-way
dialogue, will strive to satisfy customers’
needs and solve customer problems, and will
support customers throughout the life cycle of
their interactions with the firm (Piccoli,
Spalding, and Ives, 2001, 38–45).
This approach to CRM demands more
than computer systems and information tech-
nology. The customer must become the focal
point of the organization. All members of the
organization must understand and support
the shared values required for CRM, its phi-
losophy must encompass not just marketing
but the entire organization, and it must be
used to manage all aspects of the customer re-
lationship in a coordinated way.
Although limited research about the ef-
fectiveness of CRM has been published to
date, most observers agree that successful
CRM is predicated on the ability to effec-
tively capture exhaustive data about existing
and potential customers, profile them accu-
rately, identify their individual needs and
idiosyncratic expectations, and generate ac-
tionable customer knowledge that can be dis-
40 Chapter 1 ? Overview
tributed for ad-hoc use at each point of con-
tact (Newell, 2000). The objective is to
achieve a comprehensive view of customers,
and be able to consistently anticipate and re-
act to their needs with targeted and effective
activities at every customer touch point. CRM
requires the firm to keep track of the infor-
mation produced through each interaction so
that it can “learn” on a continuous basis, get
to know each guest better, and enrich its data-
base of individual customer knowledge
(Marsan, 2000, 91–94). Godin has likened
CRM to “dating a customer,” in that it is a
long-term process that requires an investment
of time, information, and resources by both
parties (Godin, 1999). The result is an active,
participatory, and interactive relationship be-
tween customer and supplier. Lastly, CRM is
about customization, or the ability to consis-
tently treat different customers differently
(Newell, 2000). Relationships differ as they
develop. We do not treat old friends in the
same way as new friends or good friends in
the same way as casual acquaintances (Gam-
ble et al., 1999). Such consistent personalized
interaction requires integration and synchro-
nization of many organizational functions,
from marketing to accounting to operations
and information systems. Failure to under-
stand the scope, essence, and magnitude of
CRM is likely to result in problems, rather
than its promised benefits.
?
THE POTENTIAL OF CRM
IN THE LODGING
INDUSTRY
Lodging-industry participants face an increas-
ingly competitive market (Vialle, 1995). In ad-
dition, the basis of competition is changing.
1327.ch01 12/19/05 9:27 AM Page 40
Location, a key driver of business, is fixed in
the short and medium term, and attracting
and retaining customers based on facilities
and amenities is becoming increasingly diffi-
cult as they have become increasingly stan-
dardized across competing brands. Price
competition is unattractive, even more so as
consumers are able to easily find and com-
pare prices over the Internet (O’Connor,
2002, 285–293). As a consequence consumers
are increasingly displaying less brand loyalty
(Gamble et al., 1999), and CRM is becoming
increasingly attractive as a way for hotel com-
panies to differentiate themselves from their
competitors (Francese and Renaghan, 1990,
60–63).
The lodging sector is ideally suited to ap-
plying the principles of CRM. In few other in-
dustries is there such potential to build up a
comprehensive and accurate picture of the
client. In few other industries do customers
provide the significant amount of information
hotel guests divulge when making a reserva-
tion and during their hotel stay. Every inter-
action between the guest and the customer is
an opportunity to refine knowledge about her
or him and to further build a relationship. By
methodically collecting, consolidating, and
analyzing both guest preferences and transac-
tional data, hotel chains have the potential to
develop a deep understanding of each cus-
tomer’s needs and preferences, provide
substantially improved service levels, individ-
ually tailor the customer experience, and gen-
erally offer more personalized service.
Providing outstanding personal service is cer-
tainly not a new concept in the hotel sector.
Companies such as Ritz-Carlton and the
Savoy group historically maintained exten-
sive manual guest-history systems recording
guest preferences in an effort to better serve
their best customers. However, when oper-
Section 1.6 ? Customer Relationship Management—A Driver for Change 41
ated manually, such systems are expensive to
maintain, are frequently inaccurate, and can
only be used to track a limited number of
clients at individual properties (Main and
O’Connor, 1998, 7–15). Developments in in-
formation and communications technologies
have enabled automation and efficiencies in
these processes, reducing costs, increasing ac-
curacy, and allowing comprehensive knowl-
edge about each customer to be shared on a
global basis. As a result, many companies are
turning to technology to improve customer
service by implementing large-scale CRM
programs.
Analysis of the lodging sector shows that,
driven in most cases by pressure from the mar-
keting function, many of the dominant hotel
chains are in the process of deploying (or have
already deployed) the technological infra-
structure to support CRM. A recent study by
Arthur Andersen and New York University
found that over one-third of U.S. hotel chains
had a data warehouse in 2000, with another 50
percent planning to install one in the near fu-
ture (Hospitality 2000, 8). Many chains have
introduced information systems to improve
the targeting of marketing and sales efforts.
Such systems can help the firm to assess the
value of each customer as well as their
propensity to respond to various offers, and to
market to them individually.
As discussed earlier, while important,
such initiatives do not imply that the company
has adopted CRM. In most cases, such devel-
opments focus solely on marketing objectives
and lack the integration among functional ar-
eas that characterizes a CRM initiative. Only
where the company reconfigures its opera-
tions to deliver a comprehensive view of the
customer and to support consistent, highly
personalized service at every customer touch
point could it truly be regarded as CRM. Few
1327.ch01 12/19/05 9:27 AM Page 41
companies in the lodging sector appear to
have progressed to such an advanced stage.
Given the geographic dispersion of hotel
properties and the role of brands in market-
ing and distribution, large-scale CRM initia-
tives seem most justifiable at the brand level.
Implementing CRM at this level would help
to increase consistency and personal service
throughout the chain and at each customer
touch point. However, to achieve this, consis-
tent and comprehensive information must be
captured from all properties within the brand
and then consolidated, analyzed, interpreted,
and subsequently disseminated to each prop-
erty in time to influence the next customer
interaction.
Two barriers currently prevent that from
happening—a lack of standardization and IT-
system integration within each franchise, and
the fact that at any one time there may be up
to three parties holding a stake in the opera-
tions of a particular property (owner, manage-
ment company, and brand). The two issues are
largely interconnected as the industry’s gener-
ally reactive attitude toward IT has been exac-
erbated by its structural characteristics. The
technical challenge is subsiding due to recent
developments in technology, including the
emergence of the application service provider
(ASP) model. (Note: When software applica-
tions are delivered using an ASP model, they
are not installed on the computers at the prop-
erty. Rather, they are accessed by remote users
via the Web. Thus, IT resources under the ASP
model are not bought but acquired as a ser-
vice.) A discussion of these technologies is be-
yond the scope of this article. Note, however,
that, even assuming away technological chal-
lenges, we believe that the structure of the
lodging industry creates severe obstacles to
successful CRM. The remainder of the paper
focuses on these challenges.
42 Chapter 1 ? Overview
?
THE LODGING
INDUSTRY’S STRUCTURE
Lodging is an important component of the
tourism industry, providing accommodation
(and associated ancillary services) to travelers
while away from home. Lodging operations
are diverse, ranging from small bed-and-
breakfast properties in rural locations to large
hotels with several thousand rooms in major
cities. Table 1.9 provides an overview of geo-
graphical dispersion, showing that the major-
ity of the world’s hotel properties are
concentrated in Europe (55 percent) and
North America (22 percent). The exhibit also
demonstrates that the average property size
in North America is larger than that in Eu-
rope (56 versus 28 rooms), with chain-affili-
ated properties being more common in North
America. Despite controlling only a minority
of room stock (approximately 30 percent of
total room supply) hotel chains dominate the
lodging sector (Corporate 300, 1998, 51–77)
and tend to exert a disproportionate influ-
ence on industry operations and performance
(Cline and Rach, 1997, 35).
In addition to generally having higher oc-
cupancy and average daily rate (Worldwide
Hotel Industry Study, 1998), chain properties
tend to be more profitable, delivering trading
profit per room seven times more than their
independent counterparts (Slattery, 1992,
90–102). As a result, the industry is expected
to continue to consolidate, with an increasing
number of mergers and acquisitions resulting
in a small number of large companies domi-
nating the marketplace (Corporate 300,
1998).
A differentiation must be made between
hotel ownership, hotel branding, and hotel
operations. Historical developments with
1327.ch01 12/19/05 9:27 AM Page 42
Real Estate Investment Trusts (REITs) in the
United States gave rise to a situation where
many owners could not operate their own ho-
tels. Instead they must use a separate man-
agement company to oversee day-to-day
operations (The International Hotel Industry,
2001, 85), resulting in a split between hotel
ownership and hotel operations. The situation
is further complicated by the widespread use
of both franchises and marketing agreements
that provide a consumer brand and require
compliance with brand standards (Singh,
1997, 89–107).
At any one time there may be up to three
parties holding a stake in the operations of a
particular property: (1) the owner, who holds
title to the assets, is responsible for mortgage
payments and provides the capital for the
operation; (2) the brand, which brands the
Section 1.6 ? Customer Relationship Management—A Driver for Change 43
property and provides standards, distribution
services, marketing, technology, and other
services; and (3) the management company,
which provides management talent and oper-
ates the property on a day-to-day basis. Table
1.10 demonstrates how, with the exception of
Wyndham International, the major brand
companies own less than one-third of their
branded properties, with various management
companies operating the remainder on behalf
of their owners. Furthermore, as Table 1.11
shows, within each management company the
brand portfolio is quite mixed, with each com-
pany operating under a variety of competing
flags in different geographical markets. The
data lend support to our claim that in the U.S.
lodging industry there are multiple stakehold-
ers with, at times competing, interest in the op-
erations of the property. In the remainder of
Table 1.9 The International Hotel Industry
Total Percentage Total Average
Revenue Number of Total Number Size of
(10
9
) US$ of Hotels Hotels of Rooms Hotel (Rooms)
Africa 6.3 10,769 3.5* 343,347 32
Caribbean 7.9 5,290 1.7* 155,253 29
Central America 1.2 1,160 0.3* 41,221 35
North America 62.1 66,943 21.7* 3,738,977 56
South America 9.8 14,576 4.7* 487,787 33
Northeast Asia 23.7 10,192 3.3* 719,480 71
Southeast Asia 12.8 13,211 4.3* 453,657 34
South Asia 3.1 3,663 1.1* 159,417 44
Australia and Pacific Islands 6.6 10,082 3.2* 229,319 23
Middle East 9.2 4,735 1.5* 162,178 34
European Economic Area 87.5 151.945 49.4* 4,242,193 28
Other Europe 22.5 19,178 6.2* 676,631 35
Total 247.8 307,683 100* 11,333,199 37
Source: World Travel and Tourism Council 1995
*Total does not add up to 100 due to rounding.
1327.ch01 12/19/05 9:27 AM Page 43
Table 1.10 Portfolio Composition of Major U.S. Brands
1
Parent U.S. Total Company Franchised, Management
Company Brands Properties Owned Licensed Contract
Cendant Corp. Days Inns 1,943 0 1,943 0
Ramada 1,005 0 1,005 0
Super 8 1,933 0 1,933 0
Howard Johnson 425 0 425 0
Travelodge 475 0 475 0
Knights Inn 226 0 226 0
Villager Lodge 118 0 118 0
Total 6,125 0 6,125 0
Six Continents Holiday Inn Hotels 1,056 5 1,004 47
Holiday Inn Express 1,083 0 1,078 5
Crowne Plaza 77 6 51 20
Total 2,216 11 2,133 72
3% 98.6% 1.2%
Hilton Hotels Corp. Hampton Inns 1,094 1 1,081 27
Hilton Inns/Hotels 230 40 171 15
Doubletree 153 10 49 59
Embassy Suites 155 6 75 57
Homewood Suites 89 14 59 16
Total 1,721 71 1,435 174
4.4% 81.3% 9.8%
Marriott International Marriott Hotels 277 4 39 234
Courtyard 493 1 236 256
Fairfield Inn 464 0 412 52
Residence Inn 362 0 242 116
Renaissance 53 0 22 31
Total 1,649 5 951 689
.5% 60.8% 38.5%
Starwood Hotels and Sheraton 189 40 105 44
Resorts Worldwide Westin 57 22 10 25
Four Points 105 6 84 15
Total 351 68 199 84
18.9% 58.8% 16.7%
Hyatt Hotels Corp.
2
Hyatt Hotels and Resorts 120 18–36 4 80–98
Total 15–30% 3% 67–82%
Wyndham Wyndham Hotels and Resorts 114 81 13 20
International Wyndham Luxury Resorts 6 3 0 3
Summerfield Suites by Wyndham 38 27 11 0
Total 158 111 24 23
70.2% 15.2% 14.6%
1
Adapted from: The Brand Report, Lodging Hospitality, August 2000.
2
Hyatt Hotels Corp. is privately owned, and a precise classification of ownership is not available.
Range estimates were provided directly by company representatives.
44
1327.ch01 12/19/05 9:27 AM Page 44
Table 1.11 Portfolio Composition of Major U.S. Management Companies
Management Company
Meristar Hospitality Corp. and Felcor Lodging Trust
Number of
Parent U.S. Brands Properties
Six Continents Holiday Inn and 21
Crowne Plaza
Hilton Embassy Suites 6
Hilton Inns/Hotels 35
Hampton Inns 6
Doubletree 9
Homewood Suites 6
Marriott Courtyard 9
Fairfield Inn 2
Marriott Hotels 5
Residence Inn 2
Renaissance 0
Starwood Sheraton 16
Westin 3
Wyndham Wyndham 4
Others Multiple Brands 59
Total 183
Management Company
Lodgian, Inc.
Number of
Parent U.S. Brands Properties
Six Continents Holiday Inn and 62
Crowne Plaza
Hilton Hilton Inns/Hotels 4
Hampton Inns 2
Doubletree 1
Marriott Courtyard 8
Fairfield Inn 5
Marriott Hotels 1
Residence Inn 2
Starwood Four Points 3
Others Multiple Brands 21
Total 109
Management Company
Interstate Hotels Corp.
Number of
Parent U.S. Brands Properties
Six Continents Holiday Inn and 8
Crowne Plaza
Hilton Embassy Suites 1
Hilton Inns/Hotels 4
Hampton Inns 38
Doubletree 0
Homewood Suites 5
Marriott Courtyard 10
Fairfield Inn 6
Marriott Hotels 14
Residence Inn 13
Renaissance 2
Starwood Sheraton 2
Westin 1
Total 138
Management Company
Tharaldson Property Management, Inc.
Number of
Parent U.S. Brands Properties
Six Continents Holiday Inn and 16
Crowne Plaza
Hilton Hampton Inns 7
Homewood Suites 36
Marriott Courtyard 18
Fairfield Inn 113
Residence Inn 32
Others Multiple Brands 112
Total 334
Source: The Brand Report, Lodging Hospitality, August 2000, and the authors’ independent
research.
1327.ch01 12/19/05 9:27 AM Page 45
the article we demonstrate how the structure
of the industry can provide significant obsta-
cles to the success of CRM initiatives.
?
THE DATA-OWNERSHIP
DILEMMA
As was discussed earlier, CRM’s success is
predicated on the ability to collect, analyze,
and disseminate large amounts of timely and
relevant information for customer-service op-
eratives to act on to improve the experience
at each point of customer contact. Thus, a
CRM initiative cannot be successful without
commitment among a critical mass of proper-
ties. Hotel chains cannot provide a consis-
tently high level of personal service unless
customer data can be garnered from most, if
not all, of the affiliated properties, organized
and synthesized in one central location, and
subsequently redistributed to each property
on an as-needed basis. However, we propose
that (technological constraints aside) this ap-
parently simple theoretical proposition is dif-
ficult to realize in the lodging industry due to
an inherent data-ownership conflict between
the major industry stakeholders. In the fol-
lowing sections we present the main issues
facing the brand, the management company,
and the owner.
The Brand. For brands, the development
of an effective CRM initiative is deemed an
important competitive move as it would facil-
itate the development of a deep understand-
ing of customer needs and preferences,
potentially resulting in a high level of person-
alization, thus helping to improve service lev-
els across the brand as a whole. As a result
guests would have a strong incentive to re-
main loyal to the brand and patronize affili-
46 Chapter 1 ? Overview
ated properties, thus increasing the value
proposition for owners and operators through
improvements in financial performance.
For the promised benefits of CRM to ma-
terialize, standardized information systems
must be implemented throughout the fran-
chise network to allow data to be obtained
from all branded properties—a problem in
the past, becoming less important as a result
of recent technology improvements. Further-
more, the brand must be willing to share the
customer knowledge generated by the consol-
idation of customer data chain-wide with the
individuals that can take action based on it at
each point of customer contact. Such data
sharing presents the first dilemma. In some
cases, the brand may be reticent to dissemi-
nate customer knowledge back to the prop-
erty for fear that owners or operators might
use it to poach high-value customers and di-
vert them to competing brands within their
own portfolios. For example, imagine a man-
agement company that operates a hotel flying
one flag (Brand A) in a particular market, and
a competing flag (Brand B) in others. This
company might be tempted to steer high-
value customers toward its Brand B hotels in
markets where it does not operate Brand A
hotels. Thus, Brand A is faced with a deci-
sion—either share the data it collects compa-
nywide to reap the benefits of large-scale
CRM and risk the poaching of high-value cus-
tomers by some of its partner management
companies operating individual properties; or
protect its customer knowledge from the in-
terests of multi-flag owners and operators,
thus forgoing the full benefits of CRM.
The Management Company. Manage-
ment companies do not appear to have
strong incentives to develop a CRM initiative
for themselves. As was shown in Table 1.11,
such companies tend to operate a varied
1327.ch01 12/19/05 9:27 AM Page 46
portfolio of properties, each flying different
flags, on behalf of different owners. By defi-
nition a CRM initiative developed across
flags is unlikely to generate brand loyalty and
thus is of limited interest to most manage-
ment companies.
The question arises, however, as to
whether management companies should ac-
tively cooperate with the collection of opera-
tional guest data by brand-level CRM
initiatives. As most companies operate a var-
ied portfolio of flags, if the management com-
pany participates in a brand-based CRM
initiative, it will stand to gain only in those
properties that carry that particular brand.
Conversely, participation will result in a com-
petitive disadvantage in markets where it
competes against the brand. As a result, man-
agement companies have little incentive to
support brand-level CRM initiatives by con-
tributing data about customers that stay at its
properties. In fact, by doing so, they would in
effect be undermining their own operations in
markets where the brand operating the CRM
initiative is a competitor rather than an ally.
Moreover, while the management company
may not be interested in detailed customer
data for branding purposes, it certainly finds
value in customer data that allows it to create
customer-value models and better target
high-value prospects, particularly with respect
to group business. Consequently, manage-
ment companies have in effect an incentive to
limit data disclosure and not cooperate with
brand-level CRM initiatives.
The Owner. While owners, like operators,
typically have many flags in their portfolio of
properties, they have a different focus in
terms of profitability. Many primarily view
hotel ownership as a real-estate investment,
and have a marginal interest in the question,
“Who owns the data?”Where their properties
Section 1.6 ? Customer Relationship Management—A Driver for Change 47
fly the flag of a successful CRM initiative,
they may have an advantage over other com-
peting properties; where their properties fly
competing flags, they may be at a disadvan-
tage. Thus, the same dilemma facing the man-
agement company seems to affect the
owners—whether to participate in brand-
level CRM initiatives, or to refuse to cooper-
ate with the collection and consolidation of
customer data. The owners may also have in-
terests that go beyond the use of the data
strictly for operational purposes. Customer
data may be used by the other entities (the
brand and the management company) for
marketing purposes and analyses that run
counter to the owner’s own interests (e.g.,
studying the feasibility of building new prop-
erties in the same geographical area).
?
CONCLUSIONS AND
IMPLICATIONS
In this paper we have drawn attention to what
we term the “data-ownership dilemma”—the
inherent conflict that various entities in the
lodging industry face as they embrace CRM.
We propose that the data-ownership dilemma
represents a significant, yet often unrecog-
nized, challenge to the success of CRM initia-
tives. As was discussed, CRM strategies
appear most applicable at the brand level, but
their success is dependent on the active coop-
eration of both the operator and the owner of
each property. For CRM to succeed at the
brand level, operators must supply the brand
with in-depth customer data—a requirement
with which operators in particular, and own-
ers to a lesser extent, have little incentive to
comply. Brands also face challenges in terms
of maintaining control over the resulting
1327.ch01 12/19/05 9:27 AM Page 47
customer knowledge and preventing its
spread outside the brand network.
Because of this conflict, we believe that
CRM in the lodging industry may never
progress beyond its current, relatively limited,
level of sophistication. While database-mar-
keting techniques will continue to be used, we
propose that few hotel companies will suc-
cessfully implement large-scale, chain-wide,
CRM initiatives. Only if significant change
occurs in the structure or methods of opera-
tion of the sector are the full benefits of a
CRM approach likely to be realized.
In closing, we speculate as to what
changes will have to occur for successful im-
plementation of CRM initiatives. We see
three possible scenarios: there will be a fun-
damental change in the way in which hotel
brands are organized; a change in the nature
of franchise agreements and management
contracts; or there will be more cooperation
among brands to take advantage of CRM’s
promised benefits. These three scenarios are
further developed in the remainder of this
article.
The first scenario is that the need for
adoption of a CRM approach will induce
changes in the ownership and management
structure of the lodging sector. If CRM truly
provides compelling benefits, the large brands
should begin to pressure the management
companies and franchisees within their net-
work to provide the data needed for success-
ful CRM operations. Those brands that
manage a relatively large number of their
own hotels will be in a good position to take
advantage of these initiatives quickly, should
face little resistance as a result of the data-
ownership dilemma, and should be able to
easily reap the benefits of CRM. Wyndham
International’s ByRequest initiative demon-
strates that highly integrated lodging brands
48 Chapter 1 ? Overview
are moving quickly to embrace CRM (see
sidebar). If these pioneers are successful in
their effort and are able to attract and retain
high-value customers, competing brands will
have to follow suit and develop similar CRM
capabilities. Such companies would have to
resolve the data-ownership dilemma either by
“integrating down” or by restricting the num-
ber of flags that the companies operating
their hotels can fly. Integrating down implies
that brands would move aggressively to take
over the operational management of their
branded properties. Such integrated compa-
nies should be able to standardize the IT in-
frastructure needed to support CRM,
mandate the collection and consolidation of
customer data, and provide each property
with dynamic access to the central knowledge
repository. Since all operations would effec-
tively be managed by the brand, there would
be no conflicts of interest and no danger of
high-value customers being poached, freeing
the brand to take full advantage of the CRM
initiative.
Obviously, taking over operational con-
trol of their unit properties would be a dra-
matic and high-risk strategy. Thus, brands,
particularly in the short term, may instead
concentrate on restructuring their manage-
ment and franchise agreements to minimize
the barriers to success discussed earlier. Re-
development should focus on two main ar-
eas—data collection and data use. While
many franchise agreements require proper-
ties to feed its customer-folio data back to the
central level, few specifically mention any
other data collected about the guest. As CRM
is dependent on building up a holistic picture
of the guest’s needs and behavior, this over-
sight may force brands to restructure con-
tracts to force greater compliance with data
needs. Such restructured contracts could spec-
1327.ch01 12/19/05 9:27 AM Page 48
Section 1.6 ? Customer Relationship Management—A Driver for Change 49
A CRM EXEMPLAR: WYNDHAM INTERNATIONAL
As part of our research, we investigated
the CRM initiatives of large hotel chains. One
such chain, Wyndham International, has
made CRM a cornerstone of its brand strat-
egy. We briefly describe the key characteris-
tics of Wyndham’s CRM approach to aid the
reader in understanding the principal charac-
teristics of large-scale CRM initiatives.
Wyndham International is one of the
five largest U.S.–based hotel chains, with a
portfolio of over 160 branded properties. Af-
ter converting from paired-share REIT sta-
tus to a C corporation in 1999, Wyndham
revised its corporate strategy in an effort to
become a “world-class branded hotel oper-
ating company.”
1
Wyndham’s differentiation
strategy is nicely captured in the words of
Andrew Jordan, Wyndham’s senior vice
president of marketing: “We said, okay, we
are going to reinvent the Wyndham brand.
We are going to say: We are all about per-
sonalized service. We are going to say: We
are the brand who really recognizes that
guests are individuals, we know you have
specific needs, quirks—you tell us about
them one time and we are going to remem-
ber them.”
2
The cornerstone of Wyndham’s strategy
is its membership-based CRM initiative:
Wyndham ByRequest. When a guest joins
ByRequest, he or she completes a compre-
hensive profile including general and contact
information, room preferences (e.g., room lo-
cation, needed extra items, newspaper),
credit card and express check-in/check-out
preferences, airline frequent-flyer prefer-
ences, personal interests (e.g., activities, mu-
sic, readings, spectator sports), and compli-
mentary beverages and snacks (e.g.,
preferred wine, soft drinks, juice, snacks).
The above information is compiled at
Wyndham’s headquarters and a pledge is
made to the guest that, irrespective of which
property in the Wyndham chain the guest
travels to in the future, he or she can expect
a consistent level of personalized service.
This includes a room that is located where
desired and fitted with the required ameni-
ties, a welcome snack and drink that’s of the
guest’s liking, and information that suits the
traveler’s interests (e.g., reading material, in-
formation about shows or sporting events).
Key to the initiative’s success is the real-
ization that, while important, the technology
underlying Wyndham ByRequest—including
the website, the preferences databases, and
integrated operational systems (e.g., PMS)—
does not in and of itself deliver the ByRequest
promise. As a result, Wyndham has designated
staff members to support ByRequest and cre-
ated a property-level position—the Wyndham
ByRequest manager—who has responsibility
over property-level execution, and Wyndham
has developed integrated processes for deliv-
ering the ByRequest promise.
1
“Letter to Shareholders,” Wyndham Interna-
tional 2000 Annual Report, 2001.
2
For complete information about Wyndham
ByRequest, see G. Piccoli and L. Applegate,
“Wyndham International: Fostering High-
Touch with High-Tech,” Harvard Business
School Case Study, 2003; # 9-803-092.
1327.ch01 12/19/05 9:27 AM Page 49
ify that all customer data generated at the
property level be extracted and loaded to the
brand’s central data repository. Management
contracts also need to be rewritten to offer
protection to the brand as it disseminates cus-
tomer knowledge back to the property level.
Both of these measures mean that ties be-
tween brands and operators would be
strengthened, which may ultimately result in
further industry consolidation as owners and
operators feel pressure to fly a limited num-
ber of flags. In an extreme scenario, each op-
erator would effectively become aligned with
one brand and fly only one flag.
The final potential scenario we envision is
the emergence of an industry consortium that
both develops and maintains the CRM infra-
structure and standardizes customer-data col-
lection and distribution. As it has happened
historically with hotel e-commerce systems
such as THISCo (The Hotel Industry Switch-
ing Company), HDS (Hotel Distribution Sys-
tems) and Avendra (an e-procurement
marketplace), competing brands could coop-
erate to develop the standards and the infra-
structure necessary to capture, store, organize,
and distribute customer information. Such a
scenario is attractive as joint development
50 Chapter 1 ? Overview
would mean that the infrastructure could be
delivered and operated at a fraction of the
cost of proprietary initiatives. Thereafter,
rather than being used as a basis of competi-
tion, customer data would be shared and com-
panies would compete on the analysis,
interpretation, and use of such data. For ex-
ample, competing brands could use the same
data to market to their chosen customer bases.
Competitive advantage would come from how
well they could use the data to identify, target,
and build a relationship with each individual.
We believe the latter scenario to be the
least likely, even though it may optimize
industry-wide performance. The likelihood of
an industry consortium developing and man-
aging customer information for the benefit of
the industry as a whole is small, as the indus-
try’s belief in the proprietary value of cus-
tomer data, the industry’s structure, privacy
issues, as well as a culture that precludes trust
in this domain makes the cooperation neces-
sary unlikely. We see a change in contractual
agreements and in industry structure as far
more probable. In any case, given the poten-
tial proposed for lodging-industry companies,
careful consideration must be given to the
data-ownership dilemma to avoid failure.
1.7 SPAS AND THE L ODGI NG I NDUSTRY
Peter C. Anderson
?
OVERVIEW
Spas are becoming such a significant compo-
nent of the service menu for resorts and full-
service hotels that their absence, especially in
amenity-rich resort environments, is glaringly
obvious. Within the leisure industries in 2003,
revenues related to spas ranked number four
behind golf fees and dues ($19.7 million),
cruise line revenues ($14.7 million), and
health club revenues ($14.1 million). At $11.2
million, spa revenues outpaced amusement
1327.ch01 12/19/05 9:27 AM Page 50
park revenues ($10.3 million), box office re-
ceipts ($9.5 million), and vacation ownership
sales ($5.5 million) (Thacker, 2004; Audi and
Wright, 2004). In this section, we first examine
trends that support a sea change in North
Americans’ attitude toward spa use. After
evaluating spa demand demographics, we dis-
cuss the types of spas currently popular in the
industry, development and operational con-
siderations, the components of a spa experi-
ence, compensation issues, and trends in the
spa industry.
?
SPA DEMAND
According to the International SPA Associa-
tion research, between 2002 and 2003, 11 per-
cent of the national population over the age
of 16 made one or more spa visits. This statis-
tic shows that one in ten Americans visited a
spa during that period. Additionally, of these,
41 percent were visiting spas for the first time,
indicating a larger population embracing spa
usage. Age demographics show that 14 per-
cent of clients are between the ages of 16 and
24, and over 50 percent are in the 25 to 44 age
bracket.
An emerging national statistic is the num-
ber of male visits to spas. Twenty-three per-
cent of spa visits and 29 percent of spa goers
were men in 2003, trending toward special
gender-oriented treatments and male-only
spas being opened worldwide.
Spa selection criteria are determined by a
number of factors. An established and known
environment—for instance, as a part of an
established resort, club, or destination spa—
often influences the decision, as does atmo-
sphere, quality of treatment, and friendliness
of staff. Additionally, among spa goers, nine
Section 1.7 ? Spas and the Lodging Industry 51
out of ten respondents report they would re-
turn for a similar experience.
Most spa customers believe they received
good value for their spa dollar. On a 10-point
scale, services were given an average of 8 for
value, with massage generating 8.8 on the
value-for-service scale.
Spa services demonstrated the highest
and heaviest demand on weekends, followed
by appointments after work on weekdays.
Gender demographics also play a role in spa
demand, as men are more likely to go for reg-
ular weekly visits after business hours or
while traveling on business. Women, however,
often visit spas during regular business hours
(Thacker, 2004; Audi and Wright, 2004).
The International Hotel Resort Spa Asso-
ciation (IHRSA) reports that branded resort
spas such as Canyon Ranch are opening in the
day spa market, adding new competitive pres-
sure on the independents. Nontraditional
players are also adding product supply. For
example, corporations are creating in-house
spa environments, hospitals are adding well-
ness as part of their repertoire, and medi-spas,
with a primary focus on cosmetic surgery, are
adding spa business as an additional profit
center. Health clubs are also trying to capture
a piece of the pie by adding spa practices. The
rationale in this market is that time-crunched
patrons can benefit from the one-stop-shop-
ping approach to fitness and wellness, but the
health club operator also uses the spa as an
enticement to join the fitness center.
As the day and destination spa markets
become saturated, it will become imperative
for survival that each operator differentiate
from the competition. The necessity for mar-
ket segmentation to ensure clear communica-
tion with consumers will be a key to success in
the maturing spa market. Another component
of success will be a branding strategy that the
1327.ch01 12/19/05 9:27 AM Page 51
consumer can immediately identify with re-
spect to spa performance and the consumer’s
personal comfort level.
?
HEALTH ISSUES AND
SPA DEMAND
Increasingly, spa goers are looking to create
prolonged wellness that integrates and re-
news body, mind, and spirit. To that end, East-
ern and Western lifestyle issues related to
medicine, philosophy, and spirituality are be-
coming a mainstay of many spa/wellness ex-
periences. To best deliver this, the wellness
spa (located at day, destination, or resort en-
vironments) supports guest needs by creating
an experience, not just a series of treatments.
All the guest amenities, facilities, treatments,
and programs must be seamlessly integrated
into a personally tailored guest experience.
These experiences should be targeted toward
couples, parents with children, and teenagers.
In the early 1990s, spas were considered a nat-
ural outgrowth of fitness facilities and fo-
cused primarily on treatments related to body
wellness. As market sophistication evolved,
the body-mind connection attracted con-
sumer focus. In the beginning of the twenty-
first century, spas and marketers are overtly
addressing body, mind, and spirit connections
in order to respond to emerging market sensi-
bilities. Among the components one might
find in a modern spa are services related to:
• Complementary and alternative medicine
in mainstream lifestyles
• Traditional Western medical and Eastern
lifestyle/wellness practices
• A proactive approach to overall health
and the quality of one’s life
52 Chapter 1 ? Overview
Body
• Action spas are attracting a greater per-
centage of men who are looking for a way
to unwind and keep active. Because of
this trend, an aggressive array of activi-
ties—including cardio-circuit courses,
squash, racketball and tennis, free and
fixed weights, jogging, and bike paths,
hikes, and water spots—is still a basic
spa/wellness requirement.
• As part of the wellness experience, med-
ical affiliations are sometimes available to
provide information and to check blood
pressure, heart conditions, bone density,
and so on.
• Exceptional food can be tailored to virtu-
ally any dietary restriction or request.
• When examining which body treatments
to include, note that salt glows and exfo-
liant treatments are approximately four
times more popular than any other body
treatment. These items are a mainstay in
successful spa services.
• Guests must be able to upgrade their ex-
perience with add-ons such as eye-firming
therapies and mineral-enhanced hydro-
therapy soaks. Further, it is important to
sell services in several time blocks so
guests can select services that fit their
schedule and financial budget.
Body, Mind
• Educational programs at many levels in-
clude classes and clinics. These programs
personally empower the guest, expand the
wellness center’s demand base, and en-
courage repeat visits. Health and wellness
issues encompass cardiovascular health,
holistic childrearing, the integration of
Eastern and Western medical practices, in-
digenous spiritual practices, aging, inti-
1327.ch01 12/19/05 9:27 AM Page 52
macy, transition/death, vitality, strength
training, cooking programs (macrobiotic,
vegan, vegetarian, indigenous), women’s
issues, and so on. Traditionally, educa-
tional programs at spas have focused pri-
marily on personal health issues.
• Mind-body techniques may include spiri-
tual and cultural instruction. Examples in-
clude tai chi, visualization, progressive
muscle relaxation and biofeedback,
labyrinth walking, meditating and chant-
ing, sweat lodges, and storytelling.
• Extensive yoga programs should include
Hatha yoga for body control, Ashtanga
yoga for cardio workout, Iyengar yoga for
balance and alignment, and Kundalini
yoga for breath work.
Body, Mind, Spirit
• Comprehensive touch/alternative manual
therapies including chiropractic treatment
and deep tissue massage (rolfing, myofas-
cial release, nueromuscular massage, acu-
pressure/shiatsu, watsu, Trager massage,
etc.) are a necessary component of any
wellness clinic. This modality is an exten-
sion of the basic massage offered at all
spas and wellness/healing centers. Practi-
tioners who provide manual therapies
should be cross-trained in the areas of
subtle energy work such as reiki, chakra
balancing, and chi gung. Offering alterna-
tive touch/energy therapy as a component
of traditional massage has the potential to
accelerate market acceptance.
• Ayurvedic treatments are popular and
provide an additional link between the
East-meets-West philosophy showcased
in many day spas. Elements of ayurvedic
treatments can be incorporated into most
touch therapies.
Section 1.7 ? Spas and the Lodging Industry 53
As far back as 1993, a well-known study
by David Eisenberg revealed that one-third of
all patients had visited a practitioner of alter-
native health care in the past year, at a cost of
$13.7 billion. This indicated to the medical
community that the significant out-of-pocket
expenses implied not only lost revenues to tra-
ditional (allopathic) doctors but also a broad
dissatisfaction with mainstream medicine. A
great number of people were taking the issues
of health and well-being into their own con-
trol, thus setting the stage for the popularity of
proactive wellness programs.
In 1997, Eisenberg updated his study. He
estimated the total number of visits to alter-
native medical providers at 600 million, rep-
resenting an expenditure of over $27.1 billion.
The number of visits to alternative care physi-
cians in 1997 was greater than the total num-
ber of visits to traditional primary care
physicians in the same year. The increasing
popularity of alternative wellness modalities,
the aging of the population, and the strength
of the economy are all factors that support
the growth of this trend. As of this writing, it
appears to continue to grow.
The use of at least 1 of 16 (alternative)
therapies during the previous year increased
from 33.8 percent in 1990 to 42.1 percent in
1997. The fastest-growing therapies were
herbal medicine, message, megavitamins, self-
help groups, folk remedies, energy healing,
and homeopathy. The probability of users vis-
iting an alternative medicine practitioner in-
creased from 36.3 percent to 46.3 percent. In
both 1990 and 1997, alternative therapies
were used most frequently for chronic condi-
tions, especially back problems, anxiety, de-
pression, and headaches. In general, it can be
concluded that alternative medicine expendi-
ture increased substantially between 1990 and
1997, and this can be attributed primarily to
1327.ch01 12/19/05 9:27 AM Page 53
an increase in the proportion of the popula-
tion seeking alternative therapies rather than
increased visits per patient.
The most frequently reported principal
medical conditions for which alternative
therapies were sought are summarized in
Table 1.12.
?
SPA CLASSIFICATION
Spa development and its attendant popular-
ity have deep historical roots and vast poten-
tial for the hospitality industry. The term spa
was once reserved for European destination
resorts where guests went to “take the wa-
ters” and restore a healthy and balanced life.
However, the term now is used to describe
many types of facilities and amenities in the
U.S. lodging industry. At one end of the spa
54 Chapter 1 ? Overview
spectrum are dedicated destination resort
spas aimed primarily at those seeking a spe-
cialized combination regime of health, fitness,
and pampering. Modalities and treatments in-
clude massages, unique treatments, custom di-
etary plans, lectures, and adventures that can
include, but are not limited to, an array of ac-
tivities ranging from nonsurgical facelifts to
helicopter skiing.
Destination resorts, such as Miraval’s
Life-in-Balance and Canyon Ranch, with lo-
cations in the Berkshires in Massachusetts
and the Arizona desert, draw demand be-
cause of their facilities and reputation. The
primary reason for going to a destination re-
sort spa is to enjoy the spa itself and its re-
lated activities. The destination itself is a
demand generator.
Closely related to a destination resort spa
is the amenity spa. Amenity spas provide
Table 1.12 Most Frequently Reported Principal Medical Conditions
Alternative Therapy
Ailment Primary Secondary
Back problems Chiropractic Massage
Allergies Herbal Relaxation
Fatigue Relaxation Massage
Arthritis Relaxation Chiropractic
Headaches Relaxation Chiropractic
Neck problems Chiropractic Massage
High blood pressure Megavitamins Relaxation
Sprains or strains Chiropractic Relaxation
Insomnia Relaxation Herbal
Lung problems Relaxation Spiritual healing/herbal
Skin problems Imagery Energy healing
Digestive problems Relaxation Herbal
Depression Relaxation Spiritual healing
Anxiety Relaxation Spiritual healing
1327.ch01 12/19/05 9:27 AM Page 54
services to resorts and full-service hotels. The
primary difference between an amenity spa
and a destination spa is the scope and depth of
spa services. Amenity spas, while sometimes
quite extensive, support the resort environ-
ment, whereas destination spas are the focus
of the resort environment. In situations where
a full-service, high-end hotel is located in an
urban environment and has a significantly
large spa component, the spa can operate as
both an amenity spa (to the hotel) and a day
spa (to the local community). Later in this
chapter, we study the case of the Westin Los
Angeles Century City’s 35,000-square-foot
Spa Mystique. This spa supports the needs of
the hotel’s convention and individual travelers
while experiencing heavy local day spa use.
Middle-market hotel properties now feel
obliged to add a spa as an amenity; however,
due to capital and real estate restraints, often
they cannot provide a full-service location. As
a result, this sector has seen an explosion in
poorly conceived and executed spa additions
that provide the owner the opportunity to add
“. . . and spa” at the end of the business name.
These are often no more than the result of
subcontracting a massage therapist and con-
verting the guest room closest to the swim-
ming pool into an exercise room. These spas
seldom surprise and delight their guests and
often reflect poorly on the spa industry over-
all. Fortunately, the sophistication of the in-
dustry is making it harder and harder for the
“. . . and spas” to succeed.
As the spa industry matures, certain de-
velopment trends are emerging. In 2005, the
spa industry was considered the fastest-grow-
ing segment of the travel, hospitality, and
leisure market, showing 26 percent growth
from 2002 to 2004. Spas are no longer consid-
ered a niche industry but rather an entity unto
themselves.
Section 1.7 ? Spas and the Lodging Industry 55
The spa industry is made up of the fol-
lowing segments, each with its own character-
istics and operational opportunities:
• Destination spas
• Resort hotel spas
• Day spas
• Medical spas
• Mineral springs
• Club spas
?
Destination Spas
A destination spa is one whose sole purpose is
to provide programs and facilities that sup-
port lifestyle improvements and enhance
guest health. The services offered are profes-
sionally administered and include fitness, ed-
ucation, and lectures on lifestyle, nutrition,
and disease prevention. Because of their
healthful orientation, destination spas often
provide programs that support postoperative
conditions, address various addictions, and
provide tools to cope with serious, prolonged
illness.
The destination spa industry constitutes
only 1.6 percent of the total spa industry, per
the International Spa Association’s Industry
Study (Thacker, 2004). However, the growth
in the development and use of destination
spas reflects the market’s trend toward well-
ness and health as a major component in spa
menus.
?
Resort Spas/Amenity Spas
Resort spas are located on the grounds of va-
cation resorts where treatments for mind,
body, and spirit are offered to complement
1327.ch01 12/19/05 9:27 AM Page 55
other resort activities such as golf, tennis,
horseback riding, skiing, and water sports.
Healthful spa cuisine is on the menu as an op-
tion, complementing traditional offerings. In
the evenings, guests can enjoy resort pastimes
like dancing and live entertainment. Chil-
dren’s programs are also offered. According
to the ISPA Spa Industry Study (Thacker,
2004), the resort spa represents 14 percent of
spa locations in North America but accounts
for almost 41 percent of the total industry rev-
enue, 27 percent of all spa visits, and 26 per-
cent of the industry’s employees.
A luxury resort spa has the ambience of a
secluded retreat on the grounds of a first-class
resort. Set in beautiful surroundings, these re-
sorts commonly have world-class golf courses
and other excellent recreational facilities.
Gourmet dining and exceptional spa thera-
pies are not only expected but demanded.
?
Day Spas
Day spas are designed to provide a healing,
beautifying, or pampering experience in a
short period. Guests may book individual
treatments that last as little as an hour or a
package of treatments that take up to a whole
day. Found throughout North America, day
spas are freestanding or located in health
clubs, hotels, and department stores. The day
spa industry constitutes 72.2 percent of the to-
tal industry revenues, per the International
Spa Association’s 2004 Spa Industry Study.
The large percentage of day spas and their
growth pattern reflect spa goers’ time crunch.
Day spas can be owner-operated or chain-
affiliated.
Preliminary data from ISPA’s 2004 survey
show that industry growth is still robust. As of
midyear 2004, there was a total of 12,000 spas
56 Chapter 1 ? Overview
nationally, of which 8,700 were day spas.
These numbers reflect 25 percent growth in
the industry in general and 20 percent growth
exclusively in this market. The total number
of day spa visits in 2003 was 81.2 million.
However, only 13 percent of the general pop-
ulation had used a spa in the prior three-year
period, indicating that the industry still has
large growth potential.
?
Medical Spas
Medical treatments in various spa environ-
ments represent a significant trend in the
scope, depth, and inclusiveness of numerous
spas. Medical spa treatments can range from
elective, reconstructive surgery to noninva-
sive Eastern modalities incorporating ele-
ments of Eastern philosophy that draw on the
body-mind-spirit connection to create posi-
tive, measurable changes in the client/patient.
Slightly over half (51 percent) of the medical
spas in North America have a partnership
with a medical doctor, and 26 percent have a
doctor on staff. The remaining configurations
include being located in a doctor’s office or
having licensed staff members. Botox and mi-
crodermabrasion are the two most popular
treatments, followed by chemical peels and
laser hair removal.
In North America, allopathic or Western
medical procedures found in medical spas of-
ten incorporate Eastern-based treatments.
Day, destination, and resort/amenity spas are
adding medical treatments to their spa menus.
Part of this trend is directly attributed to mar-
ket demand, and part is attributed to health
insurance plans that reimburse for some pro-
cedures. According to the ISPA 2004 survey,
medical spas are the fastest-growing spa seg-
ment with respect to number of locations. The
1327.ch01 12/19/05 9:27 AM Page 56
average annual growth in medical spas by lo-
cation since 1999 is approximately 45 percent.
Cumulative growth from 1999 to 2004 is 205
percent and from 2002 to 2004, 109 percent.
Medical spas generated an estimated
1,900,000 visits in 2003, representing 1.39 per-
cent of the total spa visits. However, this per-
centage of visits accounts for approximately
2.1 percent of the total industry revenues, re-
flecting the lucrative nature of this segment of
the industry.
?
Mineral Springs Spas
Many mineral springs spas are considered to
be the original spa prototype, where guests go
to “take the waters.” Mineral springs spas, by
definition, are located at naturally occurring
mineral springs, and by number of locations
represent 2.8 percent of the total spa industry,
or 1.3 percent of the total industry revenues,
making this one of the more modest income-
producing segments of the spa industry. The
popularity of mineral springs spas is reflected
in a cumulative growth from 1999 to 2004 of
143 percent. Growth from 2002 to 2004 repre-
sents only 15 percent, implying that the num-
ber of sites available directly affects the
growth in this segment.
?
Club Spas
Club spas lack a lodging component, and their
primary objective is to facilitate daily fitness
activities. Many club spas’ services comple-
ment the primary fitness component of the
club by offering sports massage (deep tissue),
chiropractic services, physiotherapy, and re-
lated treatments that address issues of pain
management, flexibility, and mobility. By lo-
Section 1.7 ? Spas and the Lodging Industry 57
cation, club spas represent 5.8 percent of the
total spa industry in North America and ac-
count for approximately 3.7 percent of the in-
dustry’s revenues. Growth in the club spa
portion of the spa industry is the lowest of all
spa segments. Between 2002 and 2004, cumu-
lative club spa growth was only 3 percent.
?
SPA OPERATIONS
?
Spas as an Operating
Department
Historically, spa operations were treated by
management similarly to other revenue de-
partments, like catering and restaurants.
These departments were simply perceived as
an amenity needed to attract guests to the ho-
tel. As long as the department broke even, or
didn’t lose too much money, their ability to in-
crease occupancy was deemed sufficient justi-
fication for their existence. However, in the
late 1990s, hotel spas followed the path of
other operating departments and trans-
formed from support facilities to profit cen-
ters. This trend is strong and continues today.
In 1999, PKF Consulting identified only
30 hotels in the United States, thousands that
report data to the PKF, extensive spa facilities
and analyzed the financial performance of
those properties and their spa departments.
Dedicated destination spa resorts were not
included in the analysis due to an insufficient
sample.
While spas were a relatively small source
of revenues for the sample properties, spa
revenues grew at a relatively strong pace. In
1999, spa revenues for the subject sample rep-
resented just 3.3 percent of total sales. How-
ever, from 1998 to 1999, spa revenues grew
1327.ch01 12/19/05 9:27 AM Page 57
16.6 percent. This compares to revenue
growth rates of 5.2 percent for rooms, 12.2
percent for food, and 3.2 percent for telecom-
munications, and a 0.3 percent decline in rev-
enues for the beverage department.
During 1999, the spa departments in the
sample of hotels averaged a departmental
profit margin of 30.7 percent. However, spa
department profits did grow a strong 51.3
percent from 1998 to 1999.
Spas mirror and enhance trends in the
lodging industry. Drawing heavily from resi-
dential design and the use of technology, ho-
tel designers and operators create a spa
experience that:
• Complements the lodging experience
• Drives occupancy levels
• Enhances average daily rate
• Provides a distinctive marketing advan-
tage
North American spas are rapidly becom-
ing more segmented, pursuing market niches
well outside the traditional ladies-who-lunch
demographic. Adventure spas, fitness spas,
children spas, family spas, and even pet spas
are part of a new generation of spa facilities,
spa programs—and, most importantly, spa afi-
cionados. Spas now attract a much wider de-
mographic that includes men, women,
couples, children, teenagers, and families.
Since the early part of the twenty-first
century, spas have been redirecting their
menus to include stress relief and results-
oriented therapies. By focusing on the social
benefits of hanging out in a safe, relaxing
place, they not only address current market
needs but also support the development of
spa programs that can be incorporated into
virtually any leisure-oriented environment or
level of lodging. In particular, destination spas
58 Chapter 1 ? Overview
and full-service resorts provide platforms that
have both the infrastructure and the
economies of scale to support cutting-edge
spa treatments, sometimes also referred to as
spa modalities.
Spas are no longer solely about frivolous
self-indulgence and luxurious pampering.
They are being reevaluated and repackaged
with a broader emphasis on self-care, stress
relief, emotional balancing, and preventative
(as opposed to reactive) wellness modalities.
This trend is being embraced by aging baby
boomers as an adjunct to traditional health
care. Because of this trend in health care, ho-
tels and resorts have acknowledged and em-
braced the need for full-service spas as part of
their amenities and facilities. The inclusion of
a well-integrated spa can provide additional
(and lucrative) sales and marketing opportu-
nities. Conversely, the exclusion of a spa
facility may disqualify a property from con-
sideration. Ironically, many hotel guests may
dismiss a property out of hand for lacking a
spa not because they require the services of a
spa but rather because its absence may imply
other areas of the hotel are also deficient in
meeting current market expectations.
Is it logical, then, that all full-service ho-
tels and resorts without a spa should, without
hesitation, incorporate one into their prop-
erty? Clearly not. Numerous factors must be
considered in developing or repositioning a
spa, especially in chain environments where
the lodging brand is already established. Be-
cause spas are capital- and labor-intensive,
they must materially enhance the property’s
revenue stream to be considered viable. In ad-
dition to creating spa revenue, a spa facility
also must extend length of stay, drive room
rates, enhance shoulder and low-season de-
mand, augment food and beverage revenues,
and capture new market segments.
1327.ch01 12/19/05 9:27 AM Page 58
Successful spa operations start with a
standardized level of procedures and a prior-
itized sensitivity to guest needs. As it is for all
departments in a lodging environment (or
business models in the freestanding day and
medical spa world), profitability is essential.
Especially in a spa environment, a dynamic
balance is essential to meet the fiscal require-
ments of the owners and the physical needs of
the guest.
A savvy spa manager continually moni-
tors the spa and hotel operations to ensure
that everything possible is being done to en-
hance the synergy of the two entities. Con-
stant monitoring also provides an early
warning system to the spa operator if rev-
enues are falling or if expenses are not in line
with anticipated revenues or budgeted
amounts. Spotting these trends early enables
the manager to take efficient, proactive steps
to ensure that positive trends are enhanced
and negative ones controlled. Constant moni-
toring sets a standard of operations, which is
an excellent way to train and motivate em-
ployees. It also puts employees on notice that
the spa is a well-run business with extensive
attention to detail, which should discourage
any actions that might not be in the best in-
terest of the spa’s reputation and profitability.
?
Customer Service Training
A spa’s reputation is easily made or destroyed
by its level of customer service. Guests can
forgive an occasional shortcoming if the level
of service is exceptional. For this reason, it is
essential that all spas have an integrated qual-
ity management program that provides ongo-
ing training to assist its employees in
addressing customers’ expectations. Cus-
tomer service training (CST) helps ensure
Section 1.7 ? Spas and the Lodging Industry 59
that guests’ expectations are exceeded. In a
spa environment, expectations are usually
very high, and a trusting bond can be quickly
established if the spa employees are sensitive
to guest needs.
The guest’s arrival sequence, starting at
the front desk, initiates the spa ritual that
brings the spa guest to a place of trust, relax-
ation, and rejuvenation. CST is proactive and
provides employees with the tools they need
to meet or exceed guest expectations. Guest
CST is a never-ending, all-inclusive process
that bridges textbook training scenarios with
operational realities. The traditionally high
turnover of spa employees in the hospitality
industry requires that CST be introduced as a
part of the orientation process and reinforced
regularly.
Nonproductive training time (time that
does not directly produce revenue for the
spa) is actually a minor expense when com-
pared to the expenses related to employee
turnover, poor service, dissatisfied customers,
and, ultimately, loss of business and reputa-
tion. Budgets must include CST as a non-
optional employee expense. For long-term
success, CST is vital when margins are tight,
business is slow, and turnover is high. There is
a strong correlation between high employee
turnover and low CST. Employees should
know that the training program is an invest-
ment in them.
CST gives the employee the means to un-
derstand what is expected of them as a repre-
sentative of the establishment and identifies
what guests expect from their visit. Seeing the
process from the guest’s point of view helps
employees meet or exceed expectations. This
minimizes the need to provide discounts or
compensation in cases of service delivery
problems. Discounting or “comping” goods
and services is a knee-jerk response to poor
1327.ch01 12/19/05 9:27 AM Page 59
service and should be reserved for the last ef-
fort in service recovery; CST should stress
this.
An inclusive training program is the en-
gine behind stellar customer service and guest
loyalty. CST should be seamless; while it pre-
dominately addresses the needs of the guest,
the program also includes instruction on prof-
itability and yield management, thus address-
ing the needs of the owner as well. In order to
meet or exceed profitability goals, customer
service must be delivered in a fiscally respon-
sible manner. Employees must understand
customer service in the operational context of
the property in which they are employed.
Minimizing the expense of a CST pro-
gram starts with the proper selection of em-
ployees. While there is no steadfast guarantee
that a potential employee will work out over
the long haul, first impressions, prior work ex-
perience, references, and, above all, attitude
and enthusiasm are indications of whether or
not it is appropriate to hire and invest the
time and money in an applicant.
Management’s expectations of guest ser-
vice delivery should be clearly articulated and
integrated into the corporate culture and re-
inforced daily at all levels and in all depart-
ments. Employees, no matter what their
responsibility, position, or tenure, must be
treated with the same level of respect and dig-
nity that management requires for their
guests. Reinforcing the tenets of customer
service within the corporate culture provides
the employee with the tools to do the right
thing—that is, to ask, “What do I need to do
to make a spa guest happy? How do I exceed
their expectations?” Sometimes the little de-
tails reap the greatest rewards.
Employee empowerment is a key compo-
nent in CST. As an employee’s experience
and skill base develops (and as management
60 Chapter 1 ? Overview
becomes comfortable with an employee’s per-
formance), levels of empowerment should be
increased proportionately. Empowerment is a
vote of confidence in an employee and a way
to quickly resolve problems as they arise. This
situation is said by spa managers to increase
job satisfaction, and the employee’s owner-
ship of his or her position.
CST also requires a strong foundation in
the technical skills of how a department runs.
Routine procedures, appropriate lines of oral
and written communication, and what is ex-
pected of each employee in the normal course
of his or her shift help minimize problems.
When problems do occur, a strong foundation
in technical skills makes it easier for the em-
ployee to create alternative solutions for the
guest.
Training draws on employees’ EQ (emo-
tional quotient) as well as their IQ (intelli-
gence quotient). CST requires that employees
draw on their ability to empathize with the
guest. This starts by training employees to
suspend judgment of a situation, become at-
tentive listeners, and know the right questions
to ask. This allows them to understand what
the actual problem is. Training employees in
this type of customer service delivery assists
them in focusing on the salient issues and cre-
ating ways to address them.
Because CST is ongoing, employees can
benefit from their peers’ experiences. Vehicles
to exchange this type of information can be as
informal as role-playing and round-table dis-
cussions, or as structured as an employee
newsletter. Incentives, acknowledgments, and
rewards for excellent customer service deliv-
ery are an integral part of the training pro-
gram. Successful CST supports a skilled and
unified staff, which translates into profitable
operations. CST is an investment in property
that owners can’t afford not to make.
1327.ch01 12/19/05 9:27 AM Page 60
Section 1.7 ? Spas and the Lodging Industry 61
?
Provide Value, Create
Value
Spa aficionados are savvy. They are looking to
be indulged, pampered, and nurtured, not
fleeced. Setting price points with market sen-
sitivity can create tremendous customer loy-
alty. Because spas are no longer a one-time
indulgence but rather a lifestyle choice, it is
important to price services competitively and
provide incentives for customers to return
regularly.
Numerous variables are involved in the
development and operation of a spa as part of
a hotel or resort. Doing one’s homework is es-
sential to success. When a spa is developed or
repositioned correctly, it can be a lucrative
and rewarding experience. When it is not de-
veloped correctly, it can be a financial liability
that haunts the spa director and jeopardizes
the hotel’s market position.
If spas and their programming are not an
integrated part of the hotel’s future develop-
ment, the property may lose a significant
competitive opportunity. Spa-less hotels or
poorly run properties have an inherent com-
petitive market disadvantage. Not only do
they find it more difficult to penetrate the
market but they also often lose market share.
?
HOW BIG SHOULD
IT BE?
?
Resort Spas
The ratio of guest rooms to treatment rooms
is based on many factors, including the antici-
pated return on investment to the owners, the
topography of the site, the scope and theme of
the spa, and the competition. In a destination
resort, where the reason for the spa facilities
is the reason for the trip, there should be an
average of 1 treatment room for every 4 to 5
guest rooms. At the other end of the spec-
trum, such as a casino hotel, the spa is defi-
nitely an amenity, and 1 treatment room
should be built for every 50 to 100 guest
rooms.
The spas at lower-end hotel properties
normally are limited in scope and are often
between 3,000 and 6,000 square feet, whereas
luxury spas at full-service, high-end resorts
average between 10,000 and 35,000 square
feet. These ranges vary based on each hotel’s
specific circumstances, including seasonality,
accessibility, meeting space, fill patterns, and
local demand. Each market and each lodging
product must be individually evaluated to as-
sess the appropriate ratio of treatment rooms
to guest rooms.
Another matrix that measures the viabil-
ity of a resort or hotel spa is the cost to build
the facility. Once again, a number of factors
support various outcomes in this process, in-
cluding the amount of available land, the fin-
ishes of the spa, the finishes of the hotel
(these should be compatible), and the need to
develop a spa either vertically or horizontally.
Vertical spas are most often built in environ-
ments where land is scarce or the allocated
footprint for the spa is too small for one floor.
Vertical construction always raises the price
per square foot, as load distribution, drainage,
and the weight of equipment and water must
be factored into the construction design and
budget. The cost to construct a resort or des-
tination spa can range from as low as $200 per
square foot to over $450 per square foot. High
land-value areas and plumbing-rich design
schemes will send cost dramatically above
this range.
1327.ch01 12/19/05 9:27 AM Page 61
62 Chapter 1 ? Overview
most spas dictates how the space is allocated
and where the income is generated. Spas
should aim to have at least 50 percent of their
total space—their prime real estate—produce
direct revenue. Secondary real estate is the
support and public areas necessary for atmo-
sphere and supporting functions that assist in
delivering the spa services. Secondary spa real
estate includes areas where people can pre-
pare for or relax from their spa treatments.
These secondary areas are an important com-
ponent in the spa development plan, as they
allow guests to prolong their experience,
which enhances the perceived value. If guests
are hurried from their massage or facial out of
the spa and back onto the street, the magic
that is created can be abruptly snapped and
the overall spa experience is compromised.
Conversely, if a guest is allowed to soak and
relax for hours after a body wrap is com-
pleted, emotionally speaking, the cost of the
body wrap is amortized over the entire spa
experience and not just for the time the client
was enjoying the body wrap in the spa’s prime
real estate.
Combination rooms account for about 36
percent of North American spa spaces, but
because of the various treatments offered in
them, a revenue percentage generated from
these spaces is hard to predict. Combination
spaces allow the spa to address surges in de-
mand for specific treatments and at the same
time be flexible and respond to global market
changes. Massage rooms account for approxi-
mately 27 percent of the total space in North
American spas but 47 percent of the spa rev-
enue. Given these factors, an operator would
need a compelling reason to not include mas-
sage on the spa menu. Facial treatment areas
reflect 19 percent of the total spa space and
result in about 33 percent of the spa’s overall
revenue. Wet rooms, often the most underuti-
lized portions of the spa, account for 7 per-
?
Day Spas
Day spas often lack the grand infrastructure
associated with resort spas, and for this reason
the ratio of spa revenue to treatment room
space is much closer. In terms of number of
square feet, day spa revenues account for 43
percent of the total spa space and provide ap-
proximately 52 percent of the total day spa
revenues. The remaining 57 percent of the day
spa environment is allocated to guest flow,
check-in desk, retail, back-of-the-house sup-
port, and, on some occasions, food and bever-
age areas.
?
Medical Spas
Historically, medical spas have placed less
emphasis on the aesthetics of the spa experi-
ence and more on the treatment provided.
Therefore, it is not surprising that 45 percent
of the medical spa space provides 63 percent
of all medical spa revenue. Retail sales are
limited in medical spas, as outside of cosmet-
ics and prescriptions there are limited brand-
ing opportunities. While resort spa goers are
anxious to wear a sweatshirt or ball cap that
announces to the world where they last vaca-
tioned, most medical spa clients do not share
the same need or enthusiasm about their re-
cent microderm abrasion or rhinoplasty. Med-
ical spas may require the use of pharmacies to
fill patient’s prescriptions, which from a busi-
ness model could be considered part of their
treatment-related retail sales.
?
Treatment Type Versus
Revenue
To this point, we have evaluated the econom-
ics and use patterns of spa types. The focus of
1327.ch01 12/19/05 9:27 AM Page 62
cent of the space and revenue. Because many
spa modalities involve water therapies, many
spa developers and owners believe that wet
rooms are essential, even if they seem under-
utilized. Because wet rooms are one of the
most expensive components of a spa, it is es-
sential that they be utilized to their fullest ex-
tent. Packaging wet room treatments with
other spa services is one way to better utilize
the space and create value for the spa.
?
SPA TRENDS
?
On-Site Industry Trends
Anti-aging treatments and products are driv-
ing much of spa menu and retail develop-
ment. This calls for devoting a treatment
room to outpatient medical procedures. Pro-
gramming and spa menu items include sun
damage treatments, chemical peels for skin
renewal, and other rejuvenation techniques
that build on repeat procedures. Commensu-
rately, spas are developing retail product lines
that can take the spa experience home and
continue the wellness regime.
Gift card sales are driving new users to
spas. In the friends and family sector as well
as the corporate gift-giving world, day spa
certificates are creating demand that is not di-
rectly user driven. Third-party purchasing
brings to spas clients who may not normally
have chosen the location or treatment, creat-
ing a large but undefinable market demand.
Regional specialties that relate to indige-
nous and climatic influences continue to cre-
ate unique spa experiences based on
site-specific supply. This has excellent lever-
age potential for spa operators working to dif-
ferentiate their product matrices in densely
operated areas.
Section 1.7 ? Spas and the Lodging Industry 63
Increased stress management. It is impor-
tant to position services for stress relief, espe-
cially to the male business traveler. Spa
programming that requires a limited amount
of special equipment and minimal changes to
a property’s infrastructure can do this.
Impulse appointments. “Life is uncertain,
but I want a massage (reflexology appoint-
ment, yoga class, etc.) now!” This trend may
result in developing adjunct programs for on-
call staff resources. The as-needed portion of
the program limits a hotel’s payroll burden
and other related fixed costs. Of course, this
implies existing core programs and facilities
where these programs can be developed and
supported.
Shift in perspective. Self-indulgence, pam-
pering, and luxury are being reevaluated and
repackaged with a new, broader emphasis on
self-care, stress relief, and emotional balanc-
ing. This is reflected in spa programming, the
menu of services, food and beverage outlets,
and spa-related retail. The retail positioning
and spa programming components represent
huge untapped revenue opportunities.
Changes in demographic use profile. His-
torically, the greatest segment of spa goers was
women between the ages of 35 and 55. More
couples and families are expected to visit
the spa together as an alternative social/
recreational activity. This trend has the poten-
tial to extend business-related stays, fill busi-
ness hotels on the weekend, and create
demand for destinations. It is important to un-
derstand this trend when evaluating ways to in-
crease market penetration in a down market.
Medical affiliations. For some markets, an
affiliation with a medical center or group in
the area can be established to provide treat-
ments such as acupuncture, nutritional assess-
ment, laser therapies (hair removal and
wrinkle reduction), Botox injections, collagen
treatments, chemical peels, laser resurfacing,
1327.ch01 12/19/05 9:27 AM Page 63
body contouring, microderm abrasion, and
vascular procedures. When creating these
types of relationships, it is essential that spa
owners thoroughly investigate the legal dis-
closure and liability implications of being an
affiliated medical service provider.
Green environments. A spa can be ecolog-
ically sensitive by incorporating environmen-
tally friendly features into the operation. By
proactively supporting programs and prod-
ucts that are earth friendly, the spa does
something good for the environment, pro-
vides a service to the community, and creates
a competitive advantage and a unique selling
point that may provide significant returns, es-
pecially in a highly competitive market.
?
Global Industry Trends
Trends in day, destination, and amenity spas
influence each other. According to Susan El-
lis (2004), president of Spa Finder, a spa mar-
keting company, after the rise of the medical
spa and broadening spa participation by men
and teens, spa use is expected to become
more popular in 2005 and beyond. Spa
Finder’s trends to watch for are abstracted
below:
• Those personal elements that make the
spa experience special will find their way
into the design of personal living spaces in
private homes.
• Private, gated living communities will de-
velop around central spa facilities, much
like golf and fly-in communities.
• Some spas will compete on the far outer
reaches of luxury, with ever-increasing
rare and proprietary products and ser-
vices.
• Spas will make house calls. Legitimate
spas will offer out-call services where spa
64 Chapter 1 ? Overview
technicians travel with appropriate equip-
ment and personnel to a client’s home, of-
fice, or hotel room.
• Destination spas and resorts will develop
market segments focused on personal
goals—everything from spiritual aware-
ness to sexual health to detoxification.
• The spa travel segment will grow, with
more clientele booking through online
portals.
• Medical spas will continue to be popular
and will add alternative therapies and
couple traditional medical treatment with
spa luxury and innovation.
• Day spas will not grow their exotic menus
much more but rather focus on the tradi-
tional; destination/resort spas will be the
businesses that experiment with more ex-
otic services and products.
• Specialized cuisine developed for spa
guest consumption will find its way into
mainstream grocery/specialty food offer-
ings. Restaurants may also add lines of
healthy spa cuisine to their menus.
• Eco spas—those designed and operated
around green principles of manage-
ment—will become a growing segment of
the industry.
?
CONCLUSION
The foregoing discussion and explanation of
the service and amenity potential of spas of
varying types strongly suggests that they will
continue to maintain a position of importance
in the inventory of hotel services. Even the
most modest of spa offerings can enhance a
hotel guest’s lodging experience. Someday ba-
sic spa services may be arranged for at even
moderately priced lodging properties.
1327.ch01 12/19/05 9:27 AM Page 64
?
BUSINESS PROBLEM
ANALYSIS
Mitch Jucha (2004), spa director, Westin Cen-
tury Plaza, Los Angeles, California
?
PROBLEM
Spa Mystique, a 35,000-square-foot spa, is not
turning a profit. It is a newly built, state-of-
the-art spa facility located adjacent to a 728-
room full-service conference center hotel.
The property is located in an affluent com-
mercial and residential area of West Los An-
geles with direct access to major surface
arterials and freeways.
?
BACKGROUND/STATUS
QUO
The Westin Century Plaza, a Commercial
and Convention Property
• 728 rooms
• Occupancy level: 55–58 percent average
(weekends 30–40 percent average)
• Primarily business hotel catering to large
groups and transient business travelers
• The largest hotel ballroom in Los
Angeles
• Breeze Restaurant
• Where U.S. presidents stay in Los Ange-
les since President Ford began using the
hotel during his term
• Was once called the West Coast White
House due to President Reagan’s
patronage
Section 1.7 ? Spas and the Lodging Industry 65
Facilities of Spa Mystique of the Westin
Century Plaza
• 35,000 square feet
• Café Mystique, state-of-the-art fitness
center, Yamaguchi Salon, boutique
• Designed by Silvia Cipieli
• 28 treatment rooms
• 4 outdoor massage cabanas
• Separate entrance for members and local
guests with valet
• Tranquility lounge
• Separate locker rooms for men and
women
• Signature massage, facial, and body
treatments
• Spa membership available
Guest Utilization Data
• 22 percent hotel guests
• 77 percent local guests
• 6 percent group guests
• 1 percent hotel employees
• Based on the guest type distribution, mar-
keting budget was redirected to local day
spa guests.
• Additional internal marketing completed
to increase in-house usage.
The Problem
• Many of the decisions herein were based
on an analysis of the profit and loss state-
ment and the general ledger.
• Allowed comparisons to industry av-
erages.
• Examination results:
Retail sales were below average.
Cost of sales was too high.
Payroll was too high.
1327.ch01 12/19/05 9:27 AM Page 65
Breakeven was roughly $150,000.
Industry average profit would not be met
unless $330,000 in revenue was produced.
?
SOLUTIONS
After a Sales and Marketing Evaluation
• Redirected marketing efforts to local day
spa guests.
• Created departmental marketing budget.
• Placed advertisements in local papers and
magazines.
• Completed renewed efforts on in-house
guests.
• Increased hours.
Increased hours of operation of Sundays
to include two additional bookable hours
to increase revenue and meet demand.
More recently, extended treatment hours
to 8:00 each night of the week, resulting in
50 additional services per week.
The increased hours are expected to yield
$260,000 annually.
• Pursued corporate business.
Marketed to local corporate offices by
offering midweek discounts to their
employees.
Entered into a corporate membership
agreement with MGM building em-
ployees.
• Modified spa menu.
Created 25-minute services.
Filled 30-minutes gaps and maximized
utilization.
Catered to transient business travelers
and group guests of hotel.
66 Chapter 1 ? Overview
• Created treatment enhancements, which
allowed price increases without treatment
time increases.
• Added corporate spa memberships.
• Create a limited spa membership that uti-
lized spa during low demand.
Evaluation of Competitors’ Price Structure
• Performed competitive price survey.
• Survey determined that spa prices were
below competition.
• Consequently, increased all spa prices by
20–25 percent.
• Implemented discounted pricing and pro-
motions during low demand periods.
• Restructured package pricing.
Modified Staffing
• Rectified overstaffing of the locker room
attendants and fitness attendants.
• Added spa group coordinator or spa sales
coordinator position.
• Realigned technicians’ schedules to elim-
inate overlapping shifts.
Overlapping shifts created an inefficiency
in utilization of treatment rooms.
Without overlapping, treatment rooms
are able to be fully utilized.
Prior to this change, maximum utilization
topped out at 70 percent.
Performed Wage Audit
• Restructured spa technicians’ wages be-
cause paying the technicians an hourly
rate created an inverse payroll burden
during low demand.
• Removed hourly pay and created a flat-
rate commissionable salary structure.
1327.ch01 12/19/05 9:27 AM Page 66
• Brought pay structure in line with spa in-
dustry standards.
• Instituted system at the top of the com-
petitive set.
• Provided an opportunity to issue annual
wage increase based on performance.
Section 1.7 ? Spas and the Lodging Industry 67
After implementation of the above tactics
and strategies, Spa Mystique more than dou-
bled revenues from the previous reporting
period. The changes were considered a suc-
cess, and the spa is now profitable.
R E F E R E N C E S
Audi, Lisa, and Brian Wright. 2004. Compensation
Workbook for the Spa Industry. Chicago:
Compensation Consulting Consortium, pp. 9,
11, 14, 64–77, 86–89.
Billing, M. 2002. “Another Owner Takes on Mar-
riott.” Hotel Business 11(18):1, 44.
Eisenberg, David M. 1997. “Advising Patients Who
Seek Alternative Medical Therapies.” Annals
of Internal Medicine 127(1):61–69.
Eisenberg, David M., Ronald C. Kessler, Cindy
Foster, Frances E. Norlock, David R. Calkins,
and Thomas L. Delbanco. 1993. “Unconven-
tional Medicine in the United States—Preva-
lence, Costs, and Patterns of Use.” New
England Journal of Medicine 328(4):246–52.
Ellis, Susan. 2004. “Top 10 Spa Trends to Watch in
2005.” Spa Finder, December 16.
___________. 1999. Trends in the Hotel Industry.
San Francisco: PKF Consulting, Hospitality
Research Group.
Gomez.com. 2000. State of Online Travel.
Waltham, MA: Gomez.
Hensdill, C. 1998. “Electronic Distribution: Devel-
oping Paths of Least Resistance.” Hotels Feb-
ruary: 41–46.
Jucha, Mitch. 2004. Private communication. Westin
Century Plaza, Spa Mystique, Los
Angeles.
Lewis, Robert C., and Christopher Roan. 1986.
“Selling What You Promote.” Cornell Hotel
and Restaurant Administration Quarterly
27(1):13–15.
O’Connor and Horan.
PhoCusWright. 2001. Online Travel Marketplace
2001–2003. New York: PhoCusWright.
Preferred Research (proprietary).
PricewaterhouseCoopers, January 2000. “Forecasts
and Analyses for the Hospitality Industry.” In
Hospitality Directions—Europe Edition.
Thacker, Geoff. 2004. “Spa Industry Study: A Pro-
file of the Spa Industry in the United States and
Canada.” Toronto: Association Resource Cen-
tre, Inc., Research and Strategy Division, pp.
6–22, 23, 30, 34–50, 60–67.
Travel Industry Association of America. 2001.
Travelers’ Use of the Internet. Washington,
DC: TIAA.
Travel Research International. 1999. The Euro-
pean Hotel Industry. Staff Report.
1327.ch01 12/19/05 9:27 AM Page 67
Books
Gomes, Albert J. 1985. Hospitality in Transition.
Houston, TX: Pannell Kerr Forster.
Hilton, Conrad. 1957. Be My Guest. Englewood
Cliffs, NJ: Prentice Hall.
Jarman, Rufus. 1952. A Bed for the Night: The Story
of the Wheeling Bell Boy: E.M. Statler and His
Remarkable Hotels. New York: Harper and
Row.
Rushmore, Stephen, Dana Michael Ciraldo, and
John Tarras. 2000. Hotel Investment Hand-
book. New York: West Group.
Articles
Brown, Terrence E., and Michael M. Lefever. 1990.
“A 50-Year Renaissance: The Hotel Industry
from 1939 to 1989.” Cornell Hotel and Restau-
rant Administration Quarterly 31(1):18–38.
68 Chapter 1 ? Overview
Greger, Kenneth R., and Glenn Withiam. 1991.
“The View from the Helm: Hotel Execs Ex-
amine the Industry.” Cornell Hotel
and Restaurant Administration Quarterly 32(3):
18–35.
Lee, Daniel R. 1985. “How They Started: The
Growth of Four Hotel Giants.” Cornell Hotel
and Restaurant Administration Quarterly May.
Vol. 26, No. 1.
Page, Gary S. 1984. “Pioneers and Leaders of the
Hospitality Industry.” In Introduction to Hotel
and Restaurant Management, Robert A.
Brymer (ed.). Dubuque, IA: Kendall/Hung,
pp. 21–29.
Staff article. 1985. “The Evolution of the Hospital-
ity Industry.” Cornell Hotel and Restaurant
Administration Quarterly May:36–86. Vol. 26,
No. 1.
S U G G E S T E D R E A D I N G S
S O U R C E N O T E S
Chapter 1.2, “The Hotel Development Process,” by
John Dew.
Chapter 1.3, “How Well Does the Branded Distri-
bution Company Allow Independent Hotels
to Compete with the Chains?” by Peter Cass.
Chapter 1.4, “The Art and Science of Opening a
Hotel,” by Tom Dupar.
Chapter 1.5, “On-line Pricing: An Analysis of
Hotel-company Practices,” by Peter O’Con-
nor, is reprinted from the February 2003 issue
of Cornell Hotel and Restaurant Administra-
tion Quarterly. © Cornell University. Used by
permission. All rights reserved.
Chapter 1.6, “Customer Relationship Manage-
ment—A Driver for Change in the Structure
of the U.S. Lodging Industry,” by Gabriele Pic-
coli, Peter O’Connor, Claudio Capaccioli, and
Roy Alvarez, is reprinted from the August
2003 issue of Cornell Hotel and Restaurant
Administration Quarterly. © Cornell Univer-
sity. Used by permission. All rights
reserved.
Chapter 1.7, “Spas and the Lodging Industry,” by
Peter C. Anderson.
1327.ch01 12/19/05 9:27 AM Page 68
c h a p t e r t w o
O R G A N I Z AT I O N
with the hotel’s policy. Even the titles chef and
maître d’hôtel, translated from the French as
“chief” and “master of the hotel,” suggest a
strong European influence. That these terms
are still in use today attests to a continuing in-
fluence, but the roles have changed and
evolved. In several places in this book, we
consider the ways in which people, organiza-
tions, and jobs have changed in the hotel
industry.
For many of the same reasons cited in the
Introduction as to why the management of
hotels has changed, hotel organization struc-
tures have also changed. As our knowledge of
our guests and the markets they represent
grew and became more precise, specialization
within the hotel organizational structure in-
creased the effectiveness with which the or-
ganization managed and delivered its
services.
2.1 I NTRODUCTI ON
?
CLASSIC ORGANIZATION
In hotels in the United States at the beginning
of the twentieth century, the classic European
hotel organization model was predominant.
This structure was built around two major ho-
tel managerial personalities: the chef and the
maître d’hôtel. The chef was the chief or king
of the kitchen. In many ways, he represented
a feudal lord on his estate who held sway over
everything that had to do with selection and
preparation of food in the hotel. This struc-
ture recognized the importance of the role
that food and its preparation played in the ho-
tels of the time.
Similarly, the maître d’hôtel was the mas-
ter of all service in the hotel. It was his re-
sponsibility to manage the interaction of the
hotel’s staff and guests such that guests were
always served promptly, properly, and in line
69
1327.ch02 12/19/05 9:29 AM Page 69
Hotel organization structures are not im-
mune to the influences of the economy and
business cycles, so the difficulties that befall
business in general during economic down-
turns also affect hotel organizations. Down-
sizing and reengineering are terms used to
describe the changes hotel companies have
undergone.
In the early 1990s, some hotels eliminated
entire levels of management or combined
managerial responsibilities to flatten the or-
ganization. In the typical functional chart,
such as that depicted in Figure 2.1, the execu-
tive assistant manager was often eliminated,
making division heads directly responsible to
the general manager (GM). Some hotels elim-
70 Chapter 2 ? Organization
inated separate managers at the division
level, with all department managers reporting
directly to the GM.
However the restructuring looks, organi-
zations are still formed around principles
such as those outlined by Stoner and Wankel
(1986). They said that the organizing process
involves balancing a company’s need for
both stability and change. They go on to
comment on “organizing” as a multi-step
process based on that proposed by Dale
(1967):
• Organizing details all of the work that
must be done to attain the organization’s
goals.
General Manager
Executive Assistant Manager
Personnel Accounting
Marketing
& Sales
Engineering Purchasing
Rooms
Division
Reservations
Convention
Services
Food &
Beverage
Front
Office
Uniformed
Service
Housekeeping Security Telephone
Food Production
(Chef)
Restaurants Bars
Banquet &
Catering
Room
Service
Figure 2.1 Typical Hotel Organization Chart
1327.ch02 12/19/05 9:29 AM Page 70
• Organizing divides the total work to be
performed into groups of activities that
can be performed by one person or one
group of people.
• Organizing combines the work of an or-
ganization’s members in some logical and
efficient manner.
• Organizing sets up a mechanism to coor-
dinate the work of the organization mem-
bers such that it forms a unified,
harmonious whole.
• Organizing sets up a mechanism to moni-
tor the effectiveness of the organization’s
efforts to achieve its goals.
In the modern hotel organization, even a
reengineered one, a linear line and staff struc-
ture has emerged to reflect this theoretical or-
ganizing process.
Figure 2.1 depicts a typical organization
chart for a large hotel. Note that, with the ex-
ception of top managers, function rather than
title identifies the departments. This is to indi-
cate that job titles and associated duties vary
from company to company, and, as noted, may
be combined or eliminated to reflect current
conditions. Looking at an organizational chart
by function rather than by job title allows an
industrywide perspective, for the services a
hotel delivers remain the same even through
financial emergencies.
Note also that in this chart the two major
operating divisions are identified as Rooms
Division and Food and Beverage Division.
Again, on a company-by-company basis, indi-
vidual functions may find homes in various di-
visions, but basically, hotel organizations are
set up to deliver these two basic services to
their guests: rooms and food and beverage.
What may differ in a given hotel com-
pany’s organization is the placement of the
other departments. The departments on this
Section 2.1 ? Introduction 71
organization chart should be considered typi-
cal and illustrative of a generic hotel organi-
zation chart.
For purposes of illustration, the line and
staff functions are defined as follows.
?
Line Functions
Line functions are the tasks assigned to hotel
employees in organizational components
that bring them into regular or semi-regular
contact with guests. The line operations in a
hotel organization are the Rooms Division
and Food and Beverage Division. Obviously,
some departmental functions within each
line division have more or less guest contact
than others. The underlying commonalty is
that most line employees are hands-on par-
ticipants in the assembly and delivery of the
hotel’s services.
For instance, under most circumstances,
members of the hotel’s security staff do not
have regular guest contact; housekeeping
staff may have somewhat more guest contact,
and housekeepers are obviously major partic-
ipants in the production of the hotel’s ser-
vices. However, in the Rooms Division, the
front office staff has the vast majority of
highly visible face-to-face contact with the
guest.
Similarly, in the Food and Beverage Divi-
sion, the employees of the restaurants, bars,
room service, and banquet departments have
a tremendous amount of face-to-face guest
interaction. Like the housekeeping staff, how-
ever, only under special and irregular circum-
stances does the food production staff under
the hotel chef interact with guests. Because of
their importance in the service production
process, they still clearly fall under the line
rubric.
1327.ch02 12/19/05 9:29 AM Page 71
?
Staff Functions
Staff functions are generally those behind-
the-scenes activities that support the line
functions and, under most circumstances,
have little or no guest contact, although major
components of the work are to influence the
quality of a guest’s stay.
In this chart, for instance, engineering is
included as a staff function for those reasons.
The success of the engineering function heav-
ily influences the quality of the guest’s stay
and, at the same time, the engineering depart-
ment supports the activities of almost every
other department in the hotel.
For instance, the engineering department
maintains and repairs equipment that is cru-
cial to all of the hotel’s line functions, includ-
ing the food production equipment in the
kitchen. Engineering staff can be called on to
repair the tables and chairs in the dining
room, the furniture in the lobby, and the carts
the bellhops use to transport guest luggage.
The engineering department thus can be con-
sidered a true staff department that serves
and supports at any given time any or all of
the other departments in the hotel.
Other hotel organization charts place
the engineering department in the Rooms
Division. This may be because that is where
engineering works best in the hotel’s organi-
zation, or perhaps this placement is only
tradition.
This situation may also be true for other
departments traditionally thought of as
Rooms Division functions. Security is one ex-
ample. In some organizations, housekeeping
has been changed to a staff function rather
than strictly rooms, for housekeeping, by def-
inition, “keeps” the entire house.
72 Chapter 2 ? Organization
?
ORGANIZATIONS FOR
THE MODERN ERA
Organizations, of course, are more than just
boxes and charts. The most modern business
organization structures have not changed
much in form since the Roman Catholic
Church first designed the pyramidal structure
as a visual depiction of organizational rela-
tionships with which we are so familiar today.
If you think about it, the military, govern-
ment, school systems, and nearly all busi-
nesses follow the same model.
What does affect organizations—not so
much in their pictorial view but in the way
they respond to external and internal stim-
uli—can be seen by analyzing several of the
readings included here and those that are sug-
gested at the end for further study.
At the time of his untimely death, Profes-
sor Eddystone C. Nebel III was the C.B.
Smith Professor of Hotel Management at
Purdue University. He had recently spent a
sabbatical leave researching and observing 10
outstanding general managers and 53 key
subordinates. During this research, Nebel
gained critical insight into how hotel organi-
zations function. In several chapters of his
book, Managing Hotels Effectively: Lessons
from Outstanding General Managers (1991),
Nebel weaves the insights gained from the
GMs with organizational theory and then in-
corporates the increasingly important role
that committees can play in the successful
organization.
Another view of the peculiar dynamics of
hotel organizations is provided by Mark Con-
klin in his essay on how the leadership can in-
fluence a hotel’s effective organization. In his
position as vice president of market manage-
1327.ch02 12/19/05 9:29 AM Page 72
ment for Marriott Hotels and Resorts, he is
positioned to comment knowledgeably. In this
instance, he proposes a radical new view—one
neither the Catholic Church nor the military
might be comfortable with. It does, however,
appear well suited to hospitality.
While there is no lack of literature and
Section 2.2 ? Organizational Design 73
commentary on hotel organizations, the re-
search and opinion presented here highlight
current thinking about the relationship of or-
ganizational structure, interdepartmental
connections, and the organization’s people.
Additional insights can be gained from sug-
gested readings.
2.2 ORGANI ZATI ONAL DESI GN
Eddystone C. Nebel III
This section reviews general management
principles of organizational design, including
the important but often neglected topic of a
hotel’s committee and meetings structure.
?
THE ELEMENTS OF
ORGANIZATIONAL
STRUCTURE
If the efforts of people in organizations are to
be channeled toward productive ends, struc-
ture must be given to their activities. Aldag
and Stearns (1987) list five ways by which
managers give structure to organizations:
1. work specialization
2. departmentalization
3. patterns of authority
4. spans of control
5. methods of coordination
Whenever a manager decides to make an
organizational change, he or she usually must
take these five elements into account.
Specialization. If there is more than one
way to accomplish something, management
must make a conscious decision about how to
divide tasks among workers. At one extreme
is the case of little or no specialization, where
an individual worker is responsible for all of
the tasks required to complete a job. An ex-
ample is the chef in a small country restaurant
who singlehandedly prepares an entire meal
for 20 guests. It’s rewarding to have total con-
trol over a project and motivating to see the
results of one’s efforts. The problem, however,
is that as demand for products or services in-
creases, it becomes more and more difficult
for individuals or small groups to increase
their output without changing the way they
are organized.
One of management’s tasks is to deter-
mine the extent to which work and jobs
should be specialized. As a general rule, spe-
cialization holds out the possibility of greater
worker productivity and managerial control
over tasks. On the other hand, dividing com-
plete jobs into smaller subunits tends to in-
crease the need for coordinating the
activities of numerous workers, each involved
1327.ch02 12/19/05 9:29 AM Page 73
in separate, specialized tasks. Also, overspe-
cialization can result in jobs so narrow that
workers lose interest, motivation drops, error
rates increase, and quality suffers.
Departmentalization. As organizations
grow in size, managers are faced with the
need to group certain jobs in order to ensure
efficient coordination and control of activi-
ties. Most restaurants departmentalize, with
food preparation and food service as separate
functional departments. This is a logical and
practical solution. Preparing and serving food
is achieved through distinctly different kinds
of work; both the process and the function of
the two activities are different. Forming de-
partments along functional lines is the most
common method of organizing a business.
Authority. Every time managers restruc-
ture a job or group into different depart-
ments, they are faced with the question of
how much decision-making authority to grant
individual workers, managers, or depart-
ments. Organizations are never totally cen-
tralized or decentralized with regard to
decision making; rather, they tend toward one
direction or the other. A number of factors
must be taken into account when deciding
what pattern of authority is best for an orga-
nization. Managers must take into considera-
tion the experience and personality of
subordinates, the environment in which they
work (Is it stable or rapidly changing?), the
business strategy to be followed, and the man-
agement style with which they feel most
comfortable.
Line executives have responsibility for
business units that provide products or ser-
vices to customers and account for the rev-
enues of the business. In a hotel, the rooms
and food and beverage departments account
for most revenue. On the other hand, staff de-
partments are set up because the principles of
74 Chapter 2 ? Organization
work specialization and departmentalization
suggest efficiencies from such an organiza-
tional design. The personnel and engineering
departments of a hotel are examples of staff
units. Once set up, however, staff departments
sometimes cause organizational problems.
How much authority should functional
staff executives have over line executives? At
one extreme, line executives could be given
total authority. At the other extreme, staff ex-
ecutives, in their specialty areas, could be
granted authority over line executives. Two
intermediate examples: (1) Line executives
are required to consult with staff specialists
before making a decision; and (2) line and
staff executives are required to make joint de-
cisions. Whatever the situation, top executives
like GMs must arbitrate line-staff disputes
when they develop.
Span of Control. Span of control relates
to the number of subordinates reporting to a
supervisor. In the past, some management
scholars advocated an “ideal” span of control
of exactly seven subordinates. That simplistic
view is no longer held. The ideal span of con-
trol is dependent on:
• Task similarity—The more similar the
tasks of subordinates, the wider the span
of control can be.
• Training and professionalism—The more
trained and skilled a subordinate, the less
supervision required and the greater the
span of control can be.
• Task certainty—The more routine and
predictable work tasks are, the greater the
span of control can be.
• Frequency of interaction—If relationships
require frequent interaction, the span of
control must be narrow.
• Task integration—The more a supervisor
must integrate and coordinate the tasks of
1327.ch02 12/19/05 9:29 AM Page 74
subordinates, the narrower the span of
control must be.
• Physical dispersion—The more widely
dispersed subordinates are, the fewer a
manager can properly supervise.
Some of these factors may work in oppo-
site directions. For example, fast food restau-
rants are operationally quite similar to each
other, suggesting a broad span of control.
However, their physical dispersion works in
the (opposite) direction of limiting span of
control.
Coordination of Activities. Problems arise
when organizations do not properly coordi-
nate their activities. In simple organizations of
only a few people, coordination is usually not
a major concern. Problems develop, however,
as organizations grow in complexity. As previ-
ously discussed, work specialization and
departmentalization are organizational re-
sponses to the growth of a business. As duties
are subdivided, it becomes increasingly impor-
tant to coordinate the activities of individuals
and groups toward common goals. The kind of
coordination required depends on how tasks
and activities are linked. These linkages result
in different kinds of interdependence between
individuals and groups.
Pooled interdependence refers to activities
that can be performed with little interaction
between individuals or groups. Suppose a ho-
tel has three telephone operators. Each can
usually perform the required duties inde-
pendently—that is, without any interaction
with the others—as can room maids and
cashiers at food outlets. Because these work-
ers need not interact among themselves, co-
ordination of their activities is best
accomplished by prescribing standardized
rules and procedures for each to follow, by in-
tensive individual training, and by direct su-
Section 2.2 ? Organizational Design 75
pervision. The role of coordination is to en-
sure that each independently performed task
is carried out at the same level of efficiency
and quality.
Sequential interdependence occurs when
one task’s output is a second task’s input. This
is typical of production line operations where
products are progressively assembled. A hotel
example is the guest check-in process. The
output of a front desk becomes an input to
the accounting department in the form of a
guest billing record or folio. A well-planned
system linking the rooms department and the
accounting department is vital for this activity
to go smoothly. Proper coordination is en-
sured through detailed planning, scheduling,
and standardization. Coordination also re-
quires identification of the linkages that exist
between activities.
Still greater coordination is required in
cases where the output of Unit A is input for
Unit B and the output of Unit B is input for
Unit A. Whenever there is a high level of in-
teraction between work units, they are said to
exhibit reciprocal interdependence. One ex-
ample is the coordination needed to host a
major convention. Rooming decisions made
by the front desk must be coordinated with
accounting, sales, housekeeping, and reserva-
tions; function room usage requires interac-
tions among convention services, engineering,
food and beverage, and accounting. Because
any one department’s output and activity af-
fect numerous other departments, mutual ad-
justments are required. Close coordination is
only possible through direct communication
and joint decision making by the units in-
volved. While standardized plans and proce-
dures are helpful, they cannot possibly solve
all of the problems resulting from such a high
degree of departmental interaction. Direct
communication and group meetings are
1327.ch02 12/19/05 9:29 AM Page 75
needed to ensure proper coordination when
activities involve reciprocal interdependence.
?
STATIC PRINCIPLES OF
ORGANIZATIONAL
DESIGN
Experience has accumulated for centuries
about how to organize institutions such as
government bureaucracies, the military, reli-
gions, large commercial trading companies,
and, since the industrial revolution, large
manufacturing concerns. This experience is
distilled in a number of principles that have
been identified. While these principles do not
hold in all circumstances, they are important
and should be understood and applied where
appropriate.
Chain of Command. This principle holds
that everyone in an organization should have
a superior to whom he or she is responsible. A
hotel’s organizational chart depicts the chain
of command. It should be possible for any
employee to trace his or her way up the or-
ganization chart’s chain of command all the
way to the GM. The typical pyramid shape of
an organization chart is a consequence of the
chain of command and the span of control
concept discussed previously. Chain of com-
mand is a powerful concept. It provides struc-
ture in an organization by setting forth a
system of subordinate-superior accountability
for everyone.
The chain of command affects communi-
cation within organizations for both subordi-
nates and superiors. If a GM wants to make a
change in housekeeping, chain-of-command
considerations mean he or she should com-
municate with the rooms department man-
ager, who in turn will speak to the director of
76 Chapter 2 ? Organization
housekeeping. The traditional chain-of-
command structure in a hotel has the baker
responsible to the chef and the chef responsi-
ble to the food and beverage director. Ac-
cordingly, the baker should communicate
with the chef and not directly with the food
and beverage director.
Too strict an adherence to this principle,
however, can take away the spontaneity in an
organization. Experienced hotel GMs often
break this principle, but in a way that is not
harmful to the hotel. The immediacy of some
problems in hotels sometimes requires hotel
executives to issue orders directly to subordi-
nates two or more levels down in the organi-
zation. GMs may also want to maintain
personal control over some project or aspect
of the hotel and choose to bypass immediate
subordinates in order to do so. This does little
harm as long as everyone knows what is hap-
pening and the organizational climate is oth-
erwise healthy and trusting.
Unity of Command. This principle states
that each employee is responsible to one and
only one superior—that is, each person has
only one boss. Unity of command is violated
quite regularly in most organizations. A safety
officer who reports to the personnel director
might correct a food server, whose boss is the
restaurant manager, for a safety violation. The
server feels as if she has two bosses and, in ef-
fect, she does. This common problem occurs
as organizations grow in size and task special-
ization takes place. Specialists in safety (or ac-
counting, personnel, data processing, and so
on) often do have authority, in their specialty
area, over workers who do not report directly
to them through the chain of command. Prob-
lems can develop because of conflicting or-
ders from more than one boss. The solution is
not necessarily to eliminate specialization and
staff positions but rather to ensure, by closely
1327.ch02 12/19/05 9:29 AM Page 76
coordinating activities, that order rather than
confusion reigns. The GM plays a key role in
coordination throughout the hotel.
Delegation. Young managers often find
delegation a difficult task to master. A subor-
dinate’s ability to successfully carry out an as-
signment depends in part on the clarity of his
or her superior’s delegation instructions. Del-
egation can range from assigning a minor task
to a subordinate to granting complete respon-
sibility for a major undertaking. It’s important
for both superior and subordinate to under-
stand and agree on the level of responsibility,
the freedom of action, and the amount of au-
thority that accompanies a delegated task.
Each level of delegation is useful in dif-
ferent circumstances. Here are examples of
orders that result in different degrees of
delegation:
• Gather information for my decision.
• Set out two or three alternatives; I’ll then
choose.
• Make a recommendation for my ap-
proval.
• Make a decision, but inform me of it be-
fore proceeding.
• Take action, but inform me of it before
proceeding.
• Take action on your own; it’s not neces-
sary to communicate with me regarding
this matter.
The extent to which authority is delegated de-
pends in part on the experience of the subor-
dinate. Young, inexperienced subordinates
can expect only limited delegation until they
have proven themselves. The amount of au-
thority delegated usually increases as trust
between superior and subordinate is built.
It’s been said that when a person becomes
a manager, he or she gives up earning an hon-
Section 2.2 ? Organizational Design 77
est living. Hotel managers don’t usually make
beds, cook food, or provide service directly to
guests. Rather, their job is to see to it that the
organization they manage provides proper
guest services.
?
THE HOTEL FUNCTIONAL
ORGANIZATIONAL
DESIGN
Individual hotels are usually organized along
functional lines, with departments grouped
according to the particular work activity in
which they are engaged. Figure 2.2 depicts a
typical organization chart for a 500-room ho-
tel. The hotel is divided along functional lines
into five administrative departments: rooms,
food and beverage, accounting, sales, and per-
sonnel. The five department heads report di-
rectly to the GM. As Figure 2.2 shows, each
department is subdivided into smaller organi-
zational units. These subdivisions represent
refinements of the work performed and the
knowledge and skills of the people in each
subunit.
The Rooms Department. The rooms de-
partment performs the lodging function of a
hotel. Reservations must be accepted, guests
must be hospitably received and assigned
clean rooms, the status of available and occu-
pied rooms must be kept current, guests must
receive mail and phone messages promptly,
security must be maintained, public spaces
such as lobbies must be kept clean, and guest
questions must be answered. These are some
of the important functions of the rooms de-
partment. The rooms department is divided
into a number of subunits, each of which per-
forms rather specialized tasks. In many in-
stances, these subunits are also referred to as
1327.ch02 12/19/05 9:29 AM Page 77
departments. For example, the laundry de-
partment, which in a 500-room hotel is quite
large, is responsible for cleaning and pressing
all the hotel’s linens and employee uniforms
as well as guest laundry. Its function is ex-
tremely specialized. Little of the knowledge
and skills required to manage a laundry oper-
ation are transferable to other areas of hotel
operations.
78 Chapter 2 ? Organization
The front office is where guests are
greeted when they arrive at the hotel, where
they’re registered, and where they’re assigned
to a room. Telephone operators and other
guest communications functions usually fall
under the front office department. The hotel’s
bell staff is also part of this department.
Reservations takes and tracks hotel’s future
bookings. The housekeeping department is
Figure 2.2 Typical Hotel Organization Chart
General Manager
Food
Production
Food and
Beverage
Director
Sales and
Marketing
Director
Rooms
Department
Manager
Accounting Personnel
Food
Service
Room
Service
Beverage
Manager
Convention
and
Catering
Stewarding
Sales
Manager
Sales
Manager
Sales
Manager
Sales
Manager
Sales
Manager
Front
Office
Laundry
Reservations
Housekeeping
Security
Engineering
Assistant
Controller
Finance
Assistant
Controller
Operations
Purchasing
Storeroom
F&B
Controller
Credit
Systems
Benefits
Manager
Training
Employee
Recruitment
1327.ch02 12/19/05 9:29 AM Page 78
responsible for cleaning guest rooms and
public spaces. Security is responsible for guest
safety. Finally, the engineering department is
responsible for the operation and mainte-
nance of the hotel’s entire physical plant, in-
cluding electrical, mechanical, heating, air
conditioning and ventilation, structure, and
plumbing. It also performs minor repairs and
renovations.
A great deal of interdependence exists
between the subunits of the rooms depart-
ment, thus calling for close coordination of
activities. Linkages exist between the front of-
fice and the reservations department. Reser-
vations must inform the front office of the
number of presold rooms each day to ensure
that a current inventory of rentable rooms is
always available. The front office must let
reservations know whenever walk-in guests
(those without reservations) are registered.
Linkages also exist between the front office
and housekeeping. Information regarding
room status must flow both ways: When a
guest checks out, the front office must inform
housekeeping so the room may be cleaned.
Once it is cleaned, housekeeping must inform
the front office so the room may be sold.
These are both examples of reciprocal inter-
dependence in which individual units provide
each other with inputs. Other linkages within
the rooms department are illustrative of se-
quential interdependence, which occurs when
the output of one unit becomes the input of
another. An example is housekeeping’s in-
ability to properly provision a guest room if
the laundry does not supply enough clean
towels or bedsheets. A less obvious example
deals with the output of information from one
department to another. For example, engi-
neering cannot replace a defective light
switch in a guest room if housekeeping does
not report the problem. These examples illus-
Section 2.2 ? Organizational Design 79
trate the reciprocal and sequential interde-
pendence that exists between subunits of the
rooms department. Effective management
under these conditions calls for standardized
plans, procedures, schedules, and deadlines.
Coordination between units also requires
frequent direct communications between
executives.
The Food and Beverage Department. The
primary function of the food and beverage
department is, of course, to provide food and
drink to a hotel’s guests. In earlier times, when
an inn had only one dining room, this was a
much simpler task. Today, however, providing
food and drink is much more complicated.
The 500-room hotel in this discussion might
well have a coffee shop, a gourmet restaurant,
a poolside snack bar, room service, two ban-
quet halls, and ten separate function rooms
where food and beverage may be served. It
might also have a piano bar and lounge, a
nightclub, and a lobby bar. This adds up to 19
food and beverage outlets, excluding room
service! On a busy day (or night), it’s likely
that each of these outlets will be used. Often,
more than one event takes place in an outlet
during a 24-hour period.
There is great diversity in the activities
performed by a food and beverage depart-
ment and considerable variety in the skills re-
quired, so the department comprised a
number of functional subunits where tasks
are specialized. To begin with, there is the
food production, or kitchen, department. In a
500-room hotel, this unit is headed by the ex-
ecutive chef, a person of great stature and au-
thority in a first-class hotel. Under the
executive chef are a variety of culinary spe-
cialists responsible for different aspects of
food preparation. The service of food in a ho-
tel’s restaurants and food outlets is usually
the responsibility of a separate department,
1327.ch02 12/19/05 9:29 AM Page 79
which, in a large hotel, is headed by an assis-
tant food and beverage director. The food
service department contains the individual
restaurant and outlet managers, maître d’s,
waiters, waitresses, and bus help. Because of
the special problems associated with room
service, many large hotels have a separate
subunit responsible only for room service.
The high value and profit margins associated
with alcoholic beverages cause hotels to form
a separate department with responsibility for
the bars, lounges, service bars, and other alco-
holic beverage outlets. Most full-service ho-
tels do considerable convention and catering
business. A convention uses small function
rooms for separate meetings, larger rooms for
general sessions, and even larger facilities for
banquets. Catered events include local par-
ties, wedding receptions, business meetings,
and other affairs held by local groups. To pro-
vide for the unique needs of these customers,
hotels often organize separate catering and
convention departments that specialize in this
kind of business. Finally, the job of cleaning
the spaces of the food and beverage depart-
ment, dish- and warewashing, and general
food and beverage expediting is often as-
signed to a separate subunit known as the
stewarding department.
Sales and Marketing. This department is
quite small, making intradepartmental coor-
dination fairly easy. Also, the department is
removed from most day-to-day operational
problems faced by other departments. Still,
there is a division of work among sales man-
agers, usually based on the type of customers
a hotel is attempting to attract. Individual
sales managers often specialize in corporate
accounts, conventions, or tour and travel mar-
kets. Sales managers are sometimes further
subdivided along geographical lines such as
regional or national accounts. Still, the sales
80 Chapter 2 ? Organization
staff, even for a 1,000-room hotel, usually
does not exceed a dozen or so members. Sales
managers work more or less independently in
their particular market segments. Thus, prob-
lems of intradepartmental interdependence
are usually not severe (Pelletier 1988).
Personnel. A hotel’s personnel depart-
ment is a staff organization set up to handle a
specialized function. It serves no customers,
books no business, and prepares no meals, yet
it plays a vital role in a hotel’s efficient oper-
ation. In Figure 2.2, the personnel department
is subdivided into three subfunctions: em-
ployee recruitment, benefits administration,
and training. The personnel director must be
an expert on labor law and able to advise
managers in other departments. While these
three subfunctions are related, they do not
present many problems of interdependence.
Instead, the personnel department’s major
challenge occurs as it attempts to interact
with other hotel departments. Personnel may
recruit, interview, and screen prospective em-
ployees, but final hiring authority resides in
the line departments. The same is true of pro-
motion and disciplinary decisions, where the
personnel department’s input is advisory only.
As a staff department, personnel’s effective-
ness is largely dependent on its manager’s
ability to form effective working relationships
with other departments.
Accounting. The accounting department
often combines both staff and line functions.
Its traditional role is recording financial
transactions, preparing and interpreting fi-
nancial statements, and providing manage-
ment with timely reports of operating results.
Responsibilities also include payroll prepara-
tion, accounts receivable, and accounts
payable. These functions are the responsibil-
ity of the assistant controller for finance.
There is, however, another dimension to the
1327.ch02 12/19/05 9:29 AM Page 80
accounting department that connects to oper-
ations, cost accounting, and cost control
throughout the hotel. This often results in the
department being called the controllers’ de-
partment rather than the accounting depart-
ment. The two central concerns of accounting
control are rooms and food and beverage. The
accounting department’s front office cashier
tracks all charges to guest accounts. The night
auditor reconciles all guest bills with the
charges from the various hotel departments.
Although these employees work at the front
desk and sometimes have direct guest con-
tact, they are members of the accounting de-
partment and report to the assistant
controller for operations.
The food and beverage controller, and the
food and beverage cashiers, who work in the
accounting department, keep track of the rev-
enues and expenses of the food and beverage
department. Food and beverage cashiers re-
port to the assistant controller for operations,
and the food and beverage controller reports
directly to the hotel controller. The food and
beverage department may be responsible for
food preparation and service, but the ac-
counting department is responsible for col-
lecting revenues! The food and beverage
controller verifies the accuracy and reason-
ableness of all food and beverage revenues.
The accounting department is responsible for
tracking and preparing daily reports on the
costs of the food and beverage used in the ho-
tel. In many cases, the accounting department
is also responsible for purchasing and store-
room operations. Finally, the director of sys-
tems is responsible for designing the
accounting and management information
systems used throughout the hotel. This dis-
cussion demonstrates the accounting depart-
ment’s direct involvement in day-to-day
operational aspects of the hotel.
Section 2.2 ? Organizational Design 81
We make two final points about the ac-
counting department. First, accounting is re-
sponsible for collecting and reporting most of
a hotel’s operational and financial statistics. It
therefore plays an important hotelwide staff
role as data provider for decision-making and
budget preparation. Second, the accounting
department head is responsible not only to
the hotel’s GM but also to the hotel chain’s fi-
nancial vice president or to the hotel’s owner.
The reason for this dual reporting relation-
ship is to provide the hotel corporation an in-
dependent verification of the accuracy of the
financial and operating results of the hotel—
that is, independent from the GM. Thus, unity
of command is routinely violated in the case
of hotel controllers.
?
STRENGTHS AND
WEAKNESSES OF A
FUNCTIONAL
ORGANIZATION
The reason for organizing a business along
functional lines is to group employees who
perform similar tasks or have similar skills.
The strength of a hotel’s functional organiza-
tional design is the resulting efficiency within
individual departments or subunits. Perfor-
mance of common tasks allows for work
specialization, which increases overall pro-
ductivity. Because functional departments
perform similar tasks, workers rapidly de-
velop specialized skills and knowledge. Train-
ing is easier because of task similarity and the
many opportunities for inexperienced work-
ers to learn from experienced workers. This
helps new employees quickly learn the skills
and behavioral patterns that lead to success.
1327.ch02 12/19/05 9:29 AM Page 81
A functional organization is a logical way
to organize work because it fosters efficiency,
teamwork, and coordination within depart-
ments. However, the functional design’s most
important strength is also the source of its
greatest shortcoming. The success of a hotel is
measured by its overall performance, not the
performance of one department. A functional
department’s strength lies in its ability to fo-
cus on its own tasks and activities. Although
this is surely important for departmental effi-
ciency, it does not necessarily ensure the over-
all effectiveness of a hotel. Because they are
specialized, it is sometimes difficult for func-
tional departments to fully appreciate the re-
lationship between their performance and the
overall performance and goals of the hotel.
All departments must keep hotelwide goals
of customer service and profitability in mind
rather than focus narrowly on their own con-
cerns. A method must be found to coordinate
the activities of individual departments and to
set hotelwide strategies and goals. Left to
themselves, it is unlikely that individual de-
partments would be capable of doing this.
Specialization at the department and subde-
partment levels results in the need for leader-
ship at the top of an organization. Someone
above the departments must set the overall
strategic course of the hotel, set hotelwide
goals, coordinate activities between depart-
ments, and arbitrate interdepartmental dis-
putes. A hotel’s functional organization
demands strong leadership at the top.
While functional departments produce
specialists within a narrow skill category, they
do not develop executives with broad hotel
exposure. Consider the heads of a hotel’s
marketing and food and beverage depart-
ments. These two executives might only have
superficial knowledge of each other’s spe-
cialty. Their education and work experience
82 Chapter 2 ? Organization
are likely so different that either would be at
a loss if placed in the other’s department. The
director of sales might have a marketing or
general business degree and spend a career in
sales-related work. The food and beverage di-
rector, on the other hand, could have a culi-
nary diploma and a hospitality degree,
extensive food production and service experi-
ence, and little or no sales experience. One of-
ten finds accountants running the controller’s
office, engineers in charge of engineering and
maintenance, individuals with degrees in per-
sonnel administration heading the personnel
department, and a variety of educational
backgrounds among rooms managers.
Managers educated in hotel administra-
tion are capable of filling most department
head slots. The longer managers stay in one
department, the more narrowly specialized
they become. While a manager may perform
well within one department, he or she may be
unprepared to address problems that require
a hotelwide knowledge and perspective. Nar-
row specialization can result in bias, mistrust,
and friction between departments unless up-
per management takes steps to counter this.
Individual departments may pursue their own
narrow interests rather than broader overall
goals and objectives (Dann and Hornsey
1986). This is a particular problem for hotels
because of the need for close interdepartmen-
tal cooperation in providing guest services.
?
HOW MEETINGS HELP
COORDINATE THE
ACTIVITIES OF A HOTEL
There is plenty of potential for service break-
downs in hotels. A well-thought-out set of
standard operating procedures and systems
1327.ch02 12/19/05 9:29 AM Page 82
can decrease the chances of many routine
mistakes. Still, because of the amount of re-
ciprocal interdependence that exists between
departments, close cooperation is a must.
Nowhere is this more important than at the
department-head level, where differences in
functional specialties are most extreme
(Dann and Hornsey, 1986). The vehicle often
used to foster cooperation between function-
ally specialized departments is the executive
operating committee (EOC).
The Executive Operating Committee.
The EOC is made up of the GM and other
hotel senior executives. There’s no magic for-
mula for EOC membership, but usually it’s
those executives who report directly to the
GM. Thus, the EOC consists of the most sen-
ior members of a hotel’s management staff:
the heads of the functional departments who
report directly to the GM and are responsi-
ble for the hotel’s major budgetary units. A
subgroup of these executives—the GM,
rooms manager, sales and marketing direc-
tor, food and beverage director, and con-
troller—usually produce the hotel’s
occupancy, revenue, and profit forecasts for
each year. These forecasts form the basis for
the hotel’s overall annual budget, and meet-
ing annual budget goals determines execu-
tive bonuses.
The exact duties of an EOC vary from ho-
tel to hotel. The duties and responsibilities of
groups can be spelled out in detail or left am-
biguous. A hotel’s EOC can be loosely struc-
tured or highly structured. An important
question GMs must answer is the amount of
authority they wish to delegate to the EOC.
Depending on the circumstances, one EOC
might be structured to make certain group de-
cisions, a second to play a strong though con-
sultative role to the GM, and a third to have a
weak or nonexistent decision-making role.
Section 2.2 ? Organizational Design 83
Quite apart from decision making, EOCs
play an important communications role
within hotels. This occurs by virtue of the fact
that EOC members meet regularly to discuss
hotel business. Any time meetings are held,
communication takes place. Scott and
Mitchell (1976) identify four functions of
communication:
1. To provide information that helps execu-
tives in their decision making
2. To motivate by fostering a commitment
to organizational objectives
3. To control by resolving ambiguities in the
role, responsibilities, and duties of execu-
tives
4. To afford individuals the opportunity to
express their feelings and emotions
It is important to note that all four of
these functions of communication may take
place during meetings. Meeting frequency,
agenda, and the amount of decision making
delegated to an EOC depend on a variety of
factors. The more participative the GM’s
management style, the more likely the EOC is
engaged in joint decision making. Authoritar-
ian GMs find little need to foster a strong
EOC. The greater the need for change within
a hotel, the more likely it is that EOC meet-
ings are frequent. The less experienced the
hotel’s department heads, the more helpful
frequent EOC meetings are because they can
serve as a learning and training vehicle for in-
experienced managers.
Under the influence of a skilled GM, the
EOC can play an important role. Some of the
ways it may be useful are:
• To foster group problem solving and deci-
sion making
• To build a feeling of joint responsibility
for overall hotel performance
1327.ch02 12/19/05 9:29 AM Page 83
• To help instill common attitudes and be-
liefs among top executives
• To foster top-down, bottom-up, and hori-
zontal communication
• To assign duties, assess progress, and con-
trol activities
• To build interdepartmental cooperation
• To teach, coach, and build a responsive
senior executive team
• To ensure acceptance of priorities and de-
cisions by senior management
Other Hotel Committees and Meetings.
Well-managed hotels address the need for co-
ordination of activities through an elaborate
structure of committees and meetings. Just
like a hotel’s organization chart, these com-
mittees and meetings constitute a formal part
of a hotel’s organizational structure. The GM
usually prescribes a hotel’s committee and
meeting structure. Each group’s responsibili-
ties are spelled out (sometimes in great
detail), regular meeting schedules are pro-
mulgated, and minutes are often taken and
distributed to participants and to higher-level
executives, including the GM. The committee
and meeting structure of a hotel should be a
well-thought-out part of its formal organiza-
tional structure.
The purposes of the committees and
meetings in a hotel vary with the complexity
of the hotel. They address a range of concerns
including daily operations; intradepartmental
and interdepartmental issues; hotelwide con-
cerns; and financial, personnel, and marketing
issues. Table 2.1 lists the regularly scheduled
meetings of a typical large hotel. While not
the meeting schedule for an actual hotel, it
could be. It will pay dividends to review this
list carefully. The meetings a hotel holds pro-
vide clues about what it takes to manage it.
84 Chapter 2 ? Organization
One of the first things to note is the
sheer number and diversity of meetings.
Surely, one might say that if a hotel were to
hold all of these meetings, there would be
little time left over to do any work! In fact,
the effective management of hotels requires
frequent meetings. They are part of the work
of the hotel. Table 2.1 shows an average of
249 scheduled meetings each year dealing
with interdepartmental issues. Also, the GM
attends 295 regularly scheduled meetings
each year. In many hotels, this is the actual
case.
There is no denying that meetings are
time-consuming and sometimes unproduc-
tive. Still, there doesn’t seem to be a better
way to effectively manage a hotel (Conlin
1989). One often finds frustrated, dissatisfied
executives in hotels where there are too few
meetings. These executives complain about
not being kept informed of what is going on.
As elementary as it may seem, it is easy for a
hotel to fail to keep its managers and employ-
ees adequately informed. This shortcoming
can have disastrous consequences for the atti-
tude and morale of a hotel’s staff. A second
complaint relates to service breakdowns that
occur as a consequence of too few meetings.
Hotels are subject to frequent, usually daily,
changes. Meetings must be scheduled fre-
quently in such an environment, or their ef-
fectiveness is lost. Too few meetings results in
confusion over a hotel’s goals and objectives.
People need to know what is important to the
hotel. What does it value most? What does it
stand for? What constitutes good perfor-
mance? Because hotels provide many intangi-
ble services, a constant effort must be made at
all levels to provide answers to these ques-
tions. Meetings are an effective means of ac-
complishing this vital management function
(Hosansky, 1989).
1327.ch02 12/19/05 9:29 AM Page 84
Section 2.2 ? Organizational Design 85
Table 2.1 Typical Meetings Structure for a Major Hotel
Meeting
Meeting Attendance Frequency Purpose Length
Operations GM, department heads, front 1 to 5 Review upcoming day’s activities 15 to 30
office, manager on duty, times per and previous day’s results minutes
housekeeping, security, week
engineering, executive chef
Staff GM, department heads, Weekly Review last week’s performance, 1 to 2
all subdepartment managers this week’s activities, next week’s hours
reporting to department heads plans and special projects;
present performance awards
Executive GM, department heads 1 to 4 Performance review, 1 to 2
Committee times per policy, strategy hours
month formulation
Sales GM, resident manager, 1 to 4 Review room demand 1 to 2
Forecast front office, times per for upcoming 90 days, hours
and sales, reservations month devise strategies to
Marketing increase room-nights
average rates, or both
Department GM as needed, department head, 1 to 2 Review department issues 1 hour
and all subdepartment heads, times per
managers, and supervisors month
Subdepartment Department head as needed, Monthly Subdepartment, department 1 hour
subdepartment head, all members, issues
management, and staff
Credit GM, controller, sales, front Monthly Review accounts receivable 1 hour
office, reservations, catering
and credit manager
Safety Personnel, food and beverage, Monthly Review safety program and 1 hour
housekeeping, and engineering safety record
Energy Chief engineer, resident manager, Monthly Control of energy costs 1 hour
Conservation food and beverage, personnel,
rooms, and housekeeping
Supervisory All management and supervisory Semi- Review hotel performance, 1 hour
Staff personnel annually present awards, start new
Meeting programs
Annual All hotel management Annually Year-end review of 1 hour
Meeting and employees performance and awards
Employee GM and selected employees from Monthly Informal communication 1 hour
Meetings throughout the hotel and discussion
Supervisor/ GM and selected first-line Monthly Informal communication 1 hour
Junior supervisors and junion and discussion
Manager managers
1327.ch02 12/19/05 9:29 AM Page 85
Hotels are businesses that require an ex-
traordinary degree of interdepartmental co-
operation in order to provide high-quality
guest service. The functional organizational
design used in most hotels fosters efficiencies
within each department of a hotel but is weak
with respect to coordination between depart-
ments. One of the organizing strategies em-
86 Chapter 2 ? Organization
ployed to overcome this problem is a formal
meeting structure designed to foster interde-
partmental communication and cooperation.
Thus, an important part of management’s or-
ganizing function is to design an effective
meeting structure that compensates for and
complements a hotel’s functionally depart-
mentalized organization.
2.3 AS I SEE I T: HOTEL
ORGANI ZATI ON STRUCTURE
Mark Conklin
One way to represent the environment in our
hotel is a chart I use at our new-hire orienta-
tion class (see Figure 2.3). I call this a reverse
organizational chart; it is also referred to as
an organizational pyramid—and, as you can
see, the GM is on the bottom of the hierarchy.
At the top is the customer. Customers are
the reason we are here. This focus on our
guests creates alignment throughout the ho-
tel. Our mission is to ensure that every guest
leaves satisfied and wants to return, thus en-
suring customer loyalty. One of Marriott’s
fundamental beliefs is: “If you take good care
of your employees, the employees will take
good care of your customers.” This belief is at
the core of who we are and what we believe in
as a company.
I say that we have two types of customers:
external customers—our guests—and inter-
nal customers, who are the hotel’s associates.
I don’t use the term employee but have re-
placed it with the word associate. The differ-
ence is that employees work for you and
associates work with you. Associate implies
partnership and working together, which is a
subtle but powerful message. Employee sug-
gests a class structure wherein someone is al-
ways organizationally inferior to someone
else.
It is my belief that the front line associate
is the most important person in the hotel, be-
cause he or she serves the customer. The job
of the supervisors, managers, and the leader-
ship team is to:
• Support the front line and remove the
barriers to doing good work.
• Lead and help people do their jobs better.
This means managers support the front
line by:
• Demonstrating concern for associates
(and it must be sincere).
• Solving their problems quickly and fairly.
• Above all, treating associates with dignity,
kindness, and respect.
To accomplish this, leaders must develop
working relationships with associates that are
based on mutual trust. Quite simply, it is my
1327.ch02 12/19/05 9:29 AM Page 86
fundamental belief that our associates will
not treat our customers any better than we
treat them. This is the cornerstone of our cul-
ture, and the challenge is to keep this idea
alive as the company grows.
As leaders, it is our job, then, to establish
the direction and to create the environment
where people focus on our customers. We set
the tone for outstanding service, which re-
quires a lot of coaching and leadership.
Putting the GM at the bottom of the pyra-
mid shows that the leader actually works for
the people who work with the leader. I view
my role as doing whatever it takes to gain and
keep customers. To create this environment,
I’ve tried to capture the following key operat-
ing principles:
Select the Right People
• We work hard to select the right people
using predictive screening tools. We look
for people whose talents predispose them
to provide great service and who have the
highest potential to fit in with our culture.
Section 2.3 ? As I See It: Hotel Organization Structure 87
• We involve our hourly associates in the
selection process—after all, they have to
work with the new people; therefore, line
associates and managers take collective
responsibility for the success of a newly
hired associate.
Invest in Training
• Our emphasis on training is a reflection of
Marriott’s corporate culture. We invest in
building the skills and knowledge of asso-
ciates to give them the tools to succeed.
We also provide them with an operational
framework (standard operating proce-
dures) that represents the foundation for
our training.
Create Empowered Associates
• The foregoing combination of training
and standards creates empowered associ-
ates who have the authority, accountabil-
ity, and confidence to do their jobs. Years
ago, we were challenged to operate our
hotels with fewer managers. To accom-
plish this and to improve customer ser-
vice, we had to have trained, empowered,
and involved associates running the
business.
• These systems and standards and this at-
tention to detail help us deliver a consis-
tent product and reliable service, which
gives customers confidence and trust in
our brand name.
Recognize and Promote
• Recognition in our organization takes
place in many forms to create a positive
environment. One of the greatest ways to
show appreciation is by promotion. More
than 50 percent of our managers started
as hourly associates.
Figure 2.3 Reverse Organizational
Chart
Guests
Associates
Management
GM
1327.ch02 12/19/05 9:29 AM Page 87
S O U R C E N O T E S
Chapter 2.3, “As I See It: Hotel Organization
Structure,” by Mark Conklin.
• Our associates like us, they trust us, and
they act in our best interests. Recent com-
panywide associate opinion surveys indi-
cate that 95 percent of our associates
rated Marriott as an average or above-
average place to work. This is 15 points
above the service industry norm.
88 Chapter 2 ? Organization
Finally, it is my strong opinion that our
managers should be hands-on. The hands-on
manager is one who stays close to the cus-
tomer and close to the associate—and hands-
on managers never forget who is making
them successful.
R E F E R E N C E S
Aldag, Ramon J., and Timothy M. Stearns. 1987.
Management. Cincinnati: South-Western.
Conlin, Joseph. 1989. “Management Strategy: Get
Control!” Successful Meetings 38(7):37–42.
Dale, Ernest. 1967. Organization. New York:
American Management Association, p. 9.
Dann, D., and Timothy Hornsey. 1986. “Towards a
Theory of Interdepartmental Conflict in Ho-
tels.” International Journal of Hospitality Man-
agement 5:23.
Hosansky, Mel. 1989. “Meetings Give You a Leg
Up the Corporate Ladder.” Successful Meet-
ings 38(5):51–52.
Pelletier, Ray. 1988. “Overnight Success Takes
Some Time.” HSMAI Marketing Review
7(1):16–20.
Scott, W.G., and T.R. Mitchell. 1976. Organization
Theory: A Structural and Behavioral Analysis.
Homewood, IL: Richard D. Irwin.
Stoner, James A., and Charles Wankel. 1986. Man-
agement. Englewood Cliffs, NJ: Prentice-Hall,
pp. 233–234.
S U G G E S T E D R E A D I N G S
Books
Nebel, Eddystone C., III. 1991. Managing Hotels
Effectively: Lessons from Outstanding General
Managers. New York: Van Nostrand Reinhold.
Articles
Pondy, L.R. 1967. “Organizational Conflict: Con-
cepts and Models.” Administrative Science
Quarterly 12:296–320.
Schaffer, Jeffrey D. 1984. “Strategy, Organization
Structure, and Success in the Lodging Indus-
try.” International Journal of Hospitality Man-
agement 3(4):159–165.
Schaffer, Jeffrey D. 1985. “A Dynamic Model of
Organizational Performance in the Lodging
Industry: The Role of Competitive Strategy
and Organization Structure.” Proceedings.
CHRIE Conference, Seattle, WA, pp. 168–173.
Chapter 2.2, “Organizational Design,” by Eddys-
tone C. Nebel III.
1327.ch02 12/19/05 9:29 AM Page 88
c h a p t e r t h r e e
G E N E R A L MA N A G E R S : A
V I E W AT T H E T O P
ported a high degree of job satisfaction. He
also provided an analytical framework for re-
porting how these GMs allocated time and
importance to a number of classic managerial
roles. The most important of the managerial
roles ranked by the GMs were (in descending
importance): leader, entrepreneur, monitor,
and disseminator, with six others (figurehead,
liaison, spokesman, disturbance handler, re-
source allocator, and negotiator) assuming
less importance (see also Mintzberg, 1973).
Readers of Arnaldo’s article may be
struck by the similarities that echo in Nebel
and Ghei’s contribution here. Another useful
comparison can be made by reading Ar-
naldo’s work with that of David Ley (1980).
This work, based on a small sample of seven
GMs in comparable properties in one hotel
company, recorded how much time the GMs
allocated to the same managerial work roles
3.1 I NTRODUCTI ON
In most companies, someone who has at-
tained the title of general manager (GM) or
something similar heads the organization.
Most of us in the hotel field consider this job
the acme of one’s career. In many hotel com-
panies, the job serves as the springboard to
corporate jobs or larger and more prestigious
properties.
In previous editions of this book, I noted
how surprising it is that so little has been writ-
ten about hotel general managers. Little
structured attention was paid to the develop-
ment of their careers and the skills and
strengths they bring to their jobs. Strangely,
this is still the case.
A 1981 article by Arnaldo presented a
statistical profile of hotel general managers.
Arnaldo drew a demographic picture of his
sample (n ? 194) and commented that al-
though GMs changed jobs frequently, they re-
89
1327.ch03 12/19/05 9:30 AM Page 89
(Mintzberg, 1973). The difference here was
that Ley asked for a corporate office rating of
each GM’s effectiveness. He compared the ef-
fectiveness ratings (highly effective, effective,
and less effective) to the observed time allo-
cations of the GMs to leadership and entre-
preneurial activities. Ley concluded that in
this small group, the more effective managers
spent more time on entrepreneurial activities
than leadership activities. In contrast, Ar-
naldo’s much larger group of GMs devoted
much more time to leadership than entrepre-
neurship. This should suggest to the reader
some interesting questions about what sorts
of activities might best prepare future GMs
for that role.
This makes the Nebel and Ghei piece all
the more interesting, for while still a small
group, their GMs were studied intensely, and
the authors propose a structural framework
from which to view the job of GM. If you will,
it is a hotel general manager theory that can
be used to explain, predict, or control the po-
sition of GM.
A central aspect of career development
among GMs is explored by Rutherford and
Wigenstein (1985), which looked for the first
time at the role of mentoring as it could be
measured to affect the success and satisfac-
tion of a modern hotel GM’s career.
Although the demographic, salary, and
operational data in that article are out of date,
the focus of the research can still be useful to
those who aspire to the top job in a hotel or-
ganization. Also, because the literature on ho-
tel GMs is so sparse, the insights gained from
the managers studied in this case add flesh
and tone to the work of the other authors in-
cluded in this section. In the mentoring re-
search, Rutherford and Wigenstein conclude
that there is ample evidence that seeking out
90 Chapter 3 ? General Managers: A View at the Top
and developing mentoring relationships can
have a positive effect on several aspects of a
GM’s career.
Another view of the career and personal
aspects of the GM’s job is discussed by
Pavesic and Brymer (1990). In a number of
studies in recent years, they have looked at
the roles job satisfaction and stress play in
managerial careers. In a review of this techni-
cal research, the authors interpret the behav-
ioral dimensions of the GM’s career, work
values, and personal challenges. Hotel careers
are challenging, but as these researchers point
out, they do not have to be arduous.
In the research reported by Woods,
Schmidgall, Sciarini, and me, we sought an-
swers to questions regarding the importance
of various operational measures, and at the
same time asked GMs for suggestions about
the structure of a hotel-related education.
Students reading this article find solid sugges-
tions from successful GMs, as the sample for
the study was drawn from mostly upscale and
luxury hotels with more than 500 rooms.
Much of the financial data are out of date, but
many of the conclusions are still viable.
In an interesting new article, Beth Chung-
Herrera and her colleagues study the specific
skills and competencies demonstrated by suc-
cessful hotel leaders. The model they develop
can be useful to hotel organizations, schools,
and professionals crafting the structure of
successful careers.
Speaking of success, the three profession-
als who contribute their thoughts on the job
of GM have attained that level in separate ar-
eas of the country and for different types of
organizations. The employment circum-
stances of each have also changed since the
previous edition.
Previously the GM of the Rosen Centre
1327.ch03 12/19/05 9:30 AM Page 90
Hotel in Orlando, Florida, Emilio Fabico is
now in the management structure of the Dis-
ney World Resort complex, also in Orlando.
His perspectives from the standpoint of the
GM and as a member of a management team
do not necessarily change. Speaking through
his writing like he was a guest in your class,
Mr. Fabico shares his insights about manage-
ment in this fascinating industry.
In the third edition of this book, Rob
Balmer shared his experiences as the GM of a
DoubleTree Club Hotel in Las Vegas.
DoubleTree is part of the Hilton family of ho-
tel products. Since then, he has managed an-
other DoubleTree in California and was
recently promoted to GM of the Hilton Bur-
bank Airport and Convention Center Hotel,
moving up in complexity and responsibility.
His view from the top is instructional.
Another contributor from the last edition
is Bob Peckenpaugh, who when we last read
Section 3.2 ? A Conceptual Framework of the Hotel General Manager’s Job 91
about him was operations manager at the
Westin Innisbrook Resort near Tampa,
Florida. He is now GM of the Rancho
Bernardo Inn near San Diego. His observa-
tions about managing a relatively small but
top-quality resort differ from his previous ex-
perience, but both work together to con-
tribute to his success.
From an academic standpoint, the Nebel
and Ghei contribution, coupled with the piece
by Chung-Herrera et al., can be considered
the overarching theory guiding the hotel
GM’s job. Fabico, Peckenpaugh, and Balmer
provide us with the insights and views of in-
siders and with clear evidence that the theory
actually works in practice. This is my goal for
this edition of this book: to provide the reader
with the opportunity to see that there should
be a connection between the book learning of
the classroom and what happens in the real
world.
3.2 A CONCEPTUAL FRAMEWORK OF THE
HOTEL GENERAL MANAGER’ S J OB
Eddystone C. Nebel III and Ajay Ghei
Abstract. This article, based on the research of one of the authors into hotel general man-
agers’ effectiveness, presents the viewpoint that the job of a hotel general manager can be
better understood by analyzing the influences that shape it. The two major contextual el-
ements that influence the job are deemed to be job demands and relationship issues. They
differ depending on the time frame (short-run, intermediate-run, or long-run) under con-
sideration. These two elements give rise to specific job functions and concomitantly sug-
gest various managerial work roles that must be performed in each job function. Finally,
the importance of the communications requirement for being effective in the job is em-
phasized. Key Words: Job demands, relationship issues, time frame, job functions, mana-
gerial work roles, communications requirement.
1327.ch03 12/19/05 9:30 AM Page 91
Major hotels of today are diverse, multifac-
eted, and fast-paced businesses engaged in a
wide variety of operational activities. Their
organizational and operational complexity in-
creases with size. A hotel, irrespective of
whether it is an independent or part of a
chain, can be managed as a separate, inde-
pendent business entity. Thus, each individual
hotel can, in effect, be treated as a unique
profit center. While it takes more than one
person to effectively manage a hotel, the ex-
ecutive with overall operational responsibility
for this business is the general manager (GM)
of the hotel. “The general manager is the key
implementer of the business strategy for the
property and the behavioral role model for
the entire management team” (Eder and Um-
breit, 1989, 333). It can thus be argued that the
GM is the central management figure in the
hotel business. The demands and challenges
of managing hotels are reflected in the com-
plexities of the GM’s job.
This article takes a close look at the con-
text in which GMs of major hotels work and
how this context affects the nature of their job.
It is based on the research of one of the authors
(Nebel, 1991) into the managerial effectiveness
of hotel GMs. The purpose of the research was,
in part, to better understand the nature of the
GM’s job, and through this understanding de-
velop a conceptual framework of it. As Dann
(1990) has stated, “[T]here is now a need to . . .
develop a conceptual framework for the better
understanding of the actual nature of manage-
rial work in the hospitality industry.”
Ten extremely successful GMs of some of
America’s finest hotels agreed to participate
in the study. Each of the GMs studied was an
experienced, top-rated hotel executive with
an average of ten years’ experience in the po-
sition. One research goal was to study hotels
that exhibited the fullest range of operational
92 Chapter 3 ? General Managers: A View at the Top
and managerial complexity. Thus, the smallest
participating hotel was an internationally
renowned luxury property of about 400
rooms, and the largest was a great convention
hotel of nearly 2,000 rooms. The author
stayed as a guest at each hotel, observed each
GM for three days as he proceeded through
his normal workday, and recorded his every
activity. The research methodology followed
closely that employed by Kotter (1982). It em-
ployed a combination of participant observa-
tion of GMs at work, extensive personal
interviews with both the GMs and 53 of their
key division heads, background surveys, and
analysis of organizational and operational in-
formation from each hotel. The personal in-
terviews extended over a number of days and
took between four and six hours with each
GM, and about one hour with each of their di-
vision heads. In addition, informal interviews
were conducted with at least 100 other execu-
tives and employees of the ten hotels. The
field research was conducted while the author
was on sabbatical leave and resulted in over
700 pages of field notes, which were subjected
to extensive qualitative data analysis.
From this analysis and from an exhaustive
review of the literature on managerial work in
hotels (Guerrier, 1987; Guerrier and Lock-
wood, 1991; Koepper, 1988; Ley, 1978; Shortt,
1989; Umbreit, 1986) there has emerged a
view of the hotel GM’s job that is given in
Figure 3.1, which presents a model of the in-
fluences that shape the job. The model incor-
porates ideas found in the research of Kotter
(1982) and Mintzberg (1973). Kotter (1982,
10–33) showed how job demands and rela-
tionship demands affect executive behavior.
Mintzberg (1973, 55–99) described ten sepa-
rate work roles that managers perform. Fig-
ure 3.1 reflects how the hotel context
influences the various job functions and man-
1327.ch03 12/19/05 9:30 AM Page 92
agerial work roles GMs must perform in or-
der to be effective.
The two major contextual elements of the
GM’s job that affect the specific job functions
and the generic managerial work roles are job
demands and relationship issues. These, de-
pending on whether they relate to the short-
run, the intermediate-run, or the long-run
time frame, give rise to certain specific job
functions. They also suggest, in general, the
various managerial work roles GMs are re-
quired to perform. It is the symbiosis of these
specific GM job functions and the generic
managerial work roles that actually defines
the GM’s job. We now proceed to discuss each
of the elements described in Figure 3.1.
?
JOB DEMANDS AND
RELATIONSHIP ISSUES
Table 3.1 lists key GM job demands and rela-
tionship issues according to whether they re-
Section 3.2 ? A Conceptual Framework of the Hotel General Manager’s Job 93
late to a hotel’s short-run, intermediate-run,
or long-run time frame. The structure for this
table is adapted from Kotter’s study of mana-
gerial behavior (Kotter, 1982, 10–33).
?
THE SHORT RUN
The short-run demands on hotel GMs revolve
around the daily, ongoing operational issues of
providing high-quality guest service, control-
ling costs, and maximizing revenues. Hotel
GMs bear direct responsibility for their prop-
erties and thus, like operational managers in
charge of profit centers anywhere, are under
tremendous pressure to produce short-run re-
sults. They must therefore devote a substantial
amount of their time and efforts toward exer-
cising effective operational control. An impor-
tant functional characteristic of hotels is that
many of their day-to-day business problems
have extremely short lead times. That is to say,
most service-centered problems in hotels must
Figure 3.1 Influences That Shape the General
Manager’s Job
Specific
Job Functions
Generic Managerial
Work Roles
The GM’s Job
The Hotel Context:
—Job Demands
—Relationship Issues
1327.ch03 12/19/05 9:30 AM Page 93
be solved quickly or not at all. Moreover, ma-
jor hotels are both organizationally and oper-
ationally complex businesses in which
numerous, highly diverse activities take place
constantly as well as concomitantly.
To stay on top of this complicated short
lead-time business is unquestionably the sin-
gle most challenging and demanding aspect of
the GM’s job. To be able to do so effectively
and in a proactive manner so as to retain the
ability to influence events, GMs must engage
in intense verbal communication and interact
frequently with subordinates. In discharging
these responsibilities, a hotel GM can be said
to be performing the job function of opera-
94 Chapter 3 ? General Managers: A View at the Top
tional controller. However, the heavy work-
load of short-run operational demands must
not take up all the time of GMs, as they must
also concentrate on intermediate-run and
long-run demands and issues as well.
?
THE INTERMEDIATE RUN
In addition to their involvement in daily op-
erational issues, effective GMs must train and
develop subordinates as well as formulate
plans and programs that systematically im-
prove their operational control over the ho-
tel. As changes take place in the external
Table 3.1 Key Job Demands and Relationship Issues of Hotel GMs
Time Frame Key Job Demands Key Relationship Issues
Short Run Day-to-day operational Intense and frequent
control of service, costs, and downward, internal verbal
revenues. Intense pressure communication and
to earn profits and render interaction with hotel
high-quality service. subordinates.
Intermediate Run Train and develop Downward internal
subordinates. Fine-tune communication. Lateral
hotel’s service strategy to communication with the
changing external external environment.
environment. Develop and Upward communication with
refine the organization corporate superiors and staff
structure. specialists or owners.
Long Run Capital expenditure Downward internal
decisions in line with hotel’s communication to further
strategic service vision. stability and vitality. Lateral
Develop and sustain communication with the
organizational stability and external environment.
vitality. Intense upward
communication with
corporate office or owners.
1327.ch03 12/19/05 9:30 AM Page 94
environment, GMs must adapt and fine-tune
the hotel’s service strategy and organizational
structure on an ongoing basis to keep abreast
of these changes. These initiatives represent a
proactive response to the operational de-
mands of the business; they take time to im-
plement and constitute the bulk of
intermediate-run demands faced by a hotel
GM. These intermediate-run demands, then,
involve putting into place a hotel’s organiza-
tional structure, systems, and people who are
capable of quick and effective response to ex-
ternal stimuli and who can simultaneously
help the hotel meet its demanding daily oper-
ational commitments. Thus, in effect, the GM
is fine-tuning the hotel’s service strategy and
refining and realigning its operating systems
to ensure a smoothly functioning business.
All these efforts require intense, down-
ward internal communication and a high de-
gree of interaction with subordinates. In
addition, intermediate-run job demands re-
quire the GM to develop communication
channels and to nurture relationships that ex-
tend beyond the specific domain of the hotel.
These relationships include, first, a wide-rang-
ing network of hospitality industry and com-
munity contacts who can help the GM better
understand the hotel’s external environment;
and, second, the GM’s corporate superiors and
staff specialists, whose cooperation is needed
for the successful implementation of the for-
mulated specific plans and programs for the
hotel. In carrying out these responsibilities, the
job function of a hotel GM can be referred to
as that of organizational developer.
?
THE LONG RUN
Two important long-run demands of a GM’s
job relate to the capital needs and the organi-
Section 3.2 ? A Conceptual Framework of the Hotel General Manager’s Job 95
zational stability of the hotel. Capital expen-
diture decisions are required in order to en-
sure the long-run viability of the hotel, and
they therefore must be consistent with the ho-
tel’s strategic service vision. The other impor-
tant long-run demand on GMs is the need to
develop a degree of organizational stability
and vitality that is in tune with the hotel’s
carefully planned and clearly defined strate-
gic service vision.
The key relationship issues for long-run
capital expenditure decisions are communica-
tions upward with corporate executives or
owners and laterally with an assortment of in-
dustry and community contacts as sources for
intelligence concerning the hotel’s competi-
tive operating environment. Developing orga-
nizational stability depends on ongoing
programs of human resources training and
development and of sequential career pro-
gression. Many of the human resource pro-
grams that foster intermediate-run goals
ultimately benefit long-run organizational
stability and vitality.
Organizational stability enables a hotel
to consistently deliver high-quality service
and effectively control day-to-day opera-
tions. Organizational stability and vitality
also gives the hotel the maturity and experi-
ence required for it to rethink its basic mar-
keting and service strategies in the event of
altered market or environmental conditions.
Finally, stability permits the hotel to make
any required transition with minimal disrup-
tion to its regular operational practices. Key
relationship issues associated with organiza-
tional stability include continual monitoring
of the external environment and intensive
downward communication within the hotel.
In fulfilling these responsibilities, the GM’s
job function can be described as that of busi-
ness maintainer.
1327.ch03 12/19/05 9:30 AM Page 95
?
ROLES PLAYED BY A
GENERAL MANAGER
This section is organized around Mintzberg’s
study (1973), in which he suggested ten
generic work roles for managers. Mintzberg
grouped these ten work roles into three broad
categories: interpersonal, informational, and
decisional. Interpersonal work roles included
those of figurehead, leader, and liaison; infor-
mational work roles covered those of moni-
tor, disseminator, and spokesperson; and
decisional work roles were those of distur-
bance handler, entrepreneur, resource alloca-
96 Chapter 3 ? General Managers: A View at the Top
tor, and negotiator. A brief description of
these generic managerial work roles is given
in Table 3.2.
The influence of Mintzberg’s work is re-
flected in the studies of hotel GMs by Ar-
naldo (1981) and Ley (1978) and that of
restaurant managers by Ferguson and Berger
(1984). The previous section explained how
job demands and relationship issues had an
impact on the job functions of GMs. It was
from that discussion that we proposed the
three specific GM job functions of opera-
tional controller, organizational developer,
and business maintainer. Each of these three
job functions requires GMs to perform vari-
Table 3.2 General Managerial Work Roles
Work Role Description
Interpersonal
Figurehead Symbolic head of the organization. Required to perform certain legal activities
and attend to social activities.
Leader Responsible for staffing, training, direction, and motivation of subordinates.
Liaison Develops a network outside the organization to gather information.
Informational
Monitor Seeks and analyzes a wide variety of outside information (from liaison role)
and inside information (from leader role).
Disseminator Transmits information received both from outside and inside the organization
to other members of the organization.
Spokesperson Transmits information about the organization to outsiders.
Decisional
Disturbance Handler Takes corrective action whenever organization faces unexpected, nonroutine
disturbances.
Entrepreneur Looks for ways to change the organization for the better. Seeks information
externally and internally for improvement ideas. Initiates and supervises
improvement projects.
Resource Allocator Responsible for allocating all important resources of the organization, both
financial and human, including how the manager schedules own time,
programs work, and authorizes actions.
Negotiator Responsible for the organization’s major outside negotiations.
1327.ch03 12/19/05 9:30 AM Page 96
ous managerial work roles in order to be suc-
cessful. Combining the various managerial
work roles with the specific job functions
helps provide a clearer understanding of the
GM’s job. These relationships are shown in
Table 3.3.
Although the GMs studied were ob-
served performing each of Mintzberg’s ten
managerial work roles, the interpersonal roles
of leader and liaison, the informational roles
of monitor and disseminator, and the deci-
sional roles of disturbance handler, entrepre-
neur, and resource allocator were found to be
of particular significance. These roles were
performed regularly as GMs carried out their
various job functions. We now proceed to de-
scribe the managerial work roles most often
performed by GMs while discharging their
three primary job functions.
Section 3.2 ? A Conceptual Framework of the Hotel General Manager’s Job 97
?
MANAGERIAL WORK
ROLES AS OPERATIONAL
CONTROLLER
The GM’s work as operational controller is
characterized by a high degree of involve-
ment in the daily operations of the hotel. Be-
cause the activities of a hotel are both
numerous and diverse, GMs must be con-
stantly monitoring and disseminating detailed
information pertaining to daily operational
matters. Time and again throughout the
course of the working day, GMs interact with
subordinates to stay on top of the numerous
operational problems that occur. GMs must
also be available to effectively and quickly
handle disturbances that are not covered by
a hotel’s routine procedures or those that
Table 3.3 Combining Managerial Work Roles and Job Functions in Defining the
GM’s Job
Time Horizon GM Job Function GM Managerial Roles
Short Run Operational Controller • Monitor and Disseminator (of internal information)
• Disturbance Handler
• Resource Allocator (of own time)
• Leader
Intermediate Run Organizational Developer • Liaison
• Monitor and Disseminator (of both external and internal
• information)
• Entrepreneur
• Resource Allocator (of own time, programs, and funds)
• Leader
Long Run Business Maintainer • Liaison
• Monitor and Disseminator (of external and internal
• information)
• Resource Allocator (of programs and funds)
• Entrepreneur
• Leader
1327.ch03 12/19/05 9:30 AM Page 97
subordinates perceive as being beyond their
scope of authority or experience. In order to
effectively play this managerial work role of
disturbance handler, GMs must have rapid
access to reliable internal information and, in
turn, be able to quickly process and dissemi-
nate this information downward in the organ-
ization. While functioning as operational
controller, the GM’s work role as resource al-
locator revolves mostly around the allocation
of his or her own time to the numerous short-
run demands of the job. GMs can, of course,
allocate a proportion of their hotel’s financial
and human resources to help solve short-run
operational problems, but it is the manner in
which they allocate their own scarce time that
is of paramount importance when referring to
the short-run operational problems of the job.
GMs perform the leader role in every con-
tact with subordinates. Every action of a GM
is analyzed and interpreted by subordinates;
thus, every interaction with subordinates pro-
vides GMs with an opportunity to exercise
leadership (Hales and Nightingale, 1986). That
is why outstanding GMs realize they are con-
stantly in the limelight throughout the work-
ing day. GMs also exercise leadership by
deciding the operational issues on which to
concentrate. Subordinates automatically look
for clues regarding what GMs deem impor-
tant; thus, by deciding which operational issues
to focus on, GMs send an unequivocal mes-
sage downward in the organization regarding
what they consider important.
?
MANAGERIAL WORK
ROLES AS
ORGANIZATIONAL
DEVELOPER
The managerial work roles of GMs as organi-
zational developers extend beyond the imme-
98 Chapter 3 ? General Managers: A View at the Top
diate confines of the hotel. GMs must moni-
tor information about both the community
and the competitive environment, and this
requires them to become a liaison between
the hotel and the outside world. Further, the
information GMs gather from the external
environment must be analyzed and dissemi-
nated to subordinates within the hotel. GMs
must process both externally and internally
obtained information in order to effectively
play the work role of entrepreneur, the im-
portance of which has been stressed by Ley
(1978). As entrepreneurs, GMs are the devel-
opers of specific plans and programs geared
to improving the operating efficiency and
service strategy of the hotel. Any new plan or
program imposes additional time obligations
on both the GM and on subordinates. New
plans and programs often involve the alloca-
tion of financial and human resources as well.
Therefore, in the course of developing and
implementing these specific plans and pro-
grams for the hotel, GMs play the decisional
work role of resource allocator.
Finally, GMs continue in the leader work
role by virtue of, first, continuing relation-
ships with subordinates as an integral compo-
nent of the job, and, second, by choosing
specific plans and programs to implement. As
leaders, GMs must contend with the challenge
of ensuring that subordinates fully accept the
plans and programs outlined for the hotel and
are committed to working toward their suc-
cessful implementation. This requires that
GMs pay careful attention to their work roles
of monitor and disseminator of information.
?
MANAGERIAL WORK
ROLES AS BUSINESS
MAINTAINER
The final job function of business maintainer
requires the GM to see to the long-run capital
1327.ch03 12/19/05 9:30 AM Page 98
requirements and organizational stability and
vitality of the hotel. In seeking capital and
planning a strategy for organizational stabil-
ity and vitality, the GM’s work roles of liaison,
monitor, and disseminator of external and in-
ternal information upward to corporate exec-
utives or owners are critical, as is the work
role of allocator of scarce financial resources.
The resource allocator role, more often than
not, requires detailed presentation of formal
budget proposals that include careful finan-
cial justification. This is especially true if the
GM is proposing a major directional shift in
the service strategy of the hotel. As main-
tainer of organizational stability, the GM also
plays the work role of disseminator of impor-
tant information downward to subordinates.
The GM must act as entrepreneur with re-
spect to important human resource develop-
ment plans and programs, and, as with all
activities, continue as leader in the ongoing
role of nurturing and developing managerial
talent.
While GMs perform three job functions
with different time horizons, it is not neces-
sarily the case that these job functions are
performed independently of each other. That
is to say, it is altogether possible for GMs to
perform two or even all three job functions si-
multaneously. It is clear from Table 3.3 that
many of the Mintzbergian managerial work
roles are common to more than one job func-
tion. In fact, the work roles of monitor, dis-
seminator, resource allocator, and leader are
common to all three, while those of liaison
and entrepreneur are common to two of the
job functions. Thus, when GMs are engaged
with short-run operational concerns, they of-
ten do so in the context of longer-run consid-
erations. For example, while responding to a
short-run operational problem of slow guest
check-ins—that is, functioning as operational
controller—a GM may simultaneously be
Section 3.2 ? A Conceptual Framework of the Hotel General Manager’s Job 99
monitoring and evaluating the effectiveness
of a front-desk clerk training program—that
is, functioning as organizational developer.
The GM may also be formulating a long-run
plan to purchase an advanced front-office
computer system—that is, functioning as busi-
ness maintainer. The actual manner in which
effective GMs perform this delicate balancing
act is covered later in the text.
?
CONCLUSION
A hotel GM’s job can be better understood
by examining the contextual variables that in-
fluence and help shape it. A hotel’s context
presents GMs with a series of job demands
and relationship issues with which they must
deal effectively in order to be successful. As
seen, these job demands and relationship is-
sues differ depending on the time frame un-
der consideration. These considerations give
rise to specific job functions that GMs per-
form through a variety of work roles.
In the short run, the GM job function was
described as that of operational controller.
Here, GMs are involved with the day-to-day
internal operational control of their business,
requiring intense and frequent downward
verbal communication within the hotel. They
must be adept at the managerial work roles of
monitoring and disseminating a wide variety
of internal information, handling nonroutine
disturbances, and allocating their own scarce
time to important operational issues.
In the intermediate run, the GM job func-
tion was described as that of organizational
developer. Here, GMs face the challenges of
developing subordinates, formulating specific
plans and programs to improve their opera-
tional control of the hotel, and fine-tuning the
hotel’s service strategy in the context of ex-
ternal environmental conditions. In addition
1327.ch03 12/19/05 9:30 AM Page 99
to internal downward communication, these
challenges require intense lateral communi-
cation with both the hotel industry and local
community sources. This helps the GM stay
abreast of market and environmental trends.
The GM also maintains upward communica-
tion with corporate superiors and staff spe-
cialists to ensure their cooperation in the
successful implementation of operational
plans and programs. Here, GMs’ work roles
require them to monitor and disseminate ex-
ternal as well as internal information, so they
act as liaison between the hotel and the out-
side world.
They also may initiate, as entrepreneurs
would, plans and programs designed to im-
prove the hotel’s operational and organiza-
tional efficiency. This requires the allocation
of their own time, as well as the financial and
human resources of the hotel, to these plans
and programs.
In the long run, the GM’s job function
was described as that of business maintainer.
Here, GMs must ensure the long-term viabil-
ity of the hotel through capital expenditure
decisions that are consistent with the hotel’s
strategic service vision, and by developing a
degree of organizational stability that allows
the hotel to carry out its strategic plan. In-
tense upward communication to corporate
superiors, staff specialists, and owners, as well
as lateral communication with a wide variety
of industry and community contacts, highlight
the relationship issues of this job function.
GMs are required to play the work role of li-
aison between the hotel and corporate office
or owners as well as industry and community
sources. This involves monitoring the widest
variety of external and internal information
and disseminating it laterally, downward, and
upward. In addition, GMs play both the work
roles of resource allocator of capital funds
100 Chapter 3 ? General Managers: A View at the Top
and of entrepreneur when seeing to the orga-
nizational stability of the business. All three
job functions require GMs to be leaders, a
work role they play through every contact
with subordinates. Finally, these job functions
need not and often are not performed inde-
pendently of each other.
Three important conclusions about the
GM’s job can be drawn from this analysis:
1. By their nature, major hotels of today
provide GMs with a variety of challenges
that require careful attention be paid to
short-run, intermediate-run, and long-run
time frame issues. Thus, GMs must be
able to successfully carry out three sepa-
rate and different job functions. They
must be effective as operational con-
trollers, organizational developers, and
business maintainers if they are to enjoy
long-term success as effective GMs.
2. To be effective at all three job functions
requires that GMs perform a large variety
of managerial work roles. While GMs per-
form all ten of Mintzberg’s managerial
work roles, they must be particularly ef-
fective at seven of them to be successful
operational controllers, organizational
developers, and business maintainers.
They must develop the wide variety of
skills necessary to play the work roles of
leader, liaison, monitor, disseminator, dis-
turbance handler, entrepreneur, and re-
source allocator.
3. The importance of communications in the
hotel GM’s job becomes apparent from
this analysis. Every job function and every
managerial work role carries with it a
communications requirement. GMs must
be adept at gathering, analyzing, and dis-
seminating external and internal informa-
tion, and they must be able to effectively
1327.ch03 12/19/05 9:30 AM Page 100
communicate laterally, downward, and
upward. Without good communication
skills, GMs cannot possibly be effective in
any of their three job functions (Wors-
fold, 1989).
Today’s major hotels are complex busi-
nesses engaged in a wide variety of activities.
The demands of managing these businesses
are reflected in the complexities of the GM’s
job. To be effective, hotel GMs must under-
Section 3.3 ? Grooming Future Hospitality Leaders: A Competencies Model 101
stand the key job demands and relationship
issues hotels thrust upon them. They must
perform three separate job functions that re-
late to different time frames. To do this, they
must become adept at a number of manage-
rial work roles, depending on the job function
they are performing. Finally, hotel GMs must
become accomplished communicators if they
are to effectively meet the variety of chal-
lenges they face.
3.3 GROOMI NG FUTURE HOSPI TAL I TY
L EADERS: A COMPETENCI ES MODEL
Beth G. Chung-Herrera, Cathy A. Enz, and Melenie J. Lankau
The ability to identify the skills and compe-
tencies required for tomorrow’s industry lead-
ers is essential for companies that hope to
remain competitive. Some firms, such as Mar-
riott International and Choice (Enz and
Siguaw, 2000) have made identifying leader-
ship competencies a priority. Identifying ap-
propriate competencies helps senior managers
in selecting, developing, and coaching future
leaders, as well as mapping career paths and
planning management succession. In this arti-
cle we present a leadership-competency
model that is industry specific and future
based. Our goal in creating this model was to
provide the hospitality industry with a func-
tional-competency model that: 1) organiza-
tions can use to develop their own model for
leadership development, 2) employees can use
to understand the competencies they need for
advancement, 3) hospitality schools can use to
design curriculum, and 4) students can use to
craft career paths. We first describe the nature
and use of competency models and then de-
scribe our study. We examine the critical com-
petencies that we found to be important (and
those that, surprisingly, are not as important).
Last, we consider the possible uses for the in-
dustry-wide model that we have developed.
?
COMPETENCY MODELS
Acompetency model is a descriptive tool that
identifies the knowledge, skills, abilities, and
behavior needed to perform effectively in an
organization (Lucia and Lepsinger, 1999).
Designed to help an organization meet its
strategic objectives through building human-
resources capability, competency modeling
has been in existence since the 1970s, starting
with the first models created by David Mc-
Clelland (Mirabile, 1997, 73–77). Such models
gained popularity in the late 1980s and re-
main in use today.
1327.ch03 12/19/05 9:30 AM Page 101
Competency models focus on behavior
rather than on personality traits, because per-
sonality traits are usually hard to measure ac-
curately (Lucia and Lepsinger, 1999, and
ACA’s Competencies Research Team, 1996,
6–21). Expressing desirable traits in behav-
ioral terms is essential for a competency
model to be useful as a human-resources tool,
because the model must not only define the
competencies necessary for effective per-
formance but also indicate how to tell when a
particular competency is being demonstrated.
Most competency models express traits and
characteristics in behavioral terms on the
grounds that behavior is the observable man-
ifestation of personality traits and character-
istics. Competencies are deemed critical for
inclusion in a model when they distinguish su-
perior performers from poor performers.
Competency models are less specific than
is the job analysis typically performed for
specific positions, and models can encompass
a whole family of jobs. Choice Hotels Inter-
national, for example, developed competency
models for each of the top four levels of its or-
ganization (i.e., senior vice president, vice
president, senior director, and director). In so
doing, the company found that the competen-
cies for success of a senior vice president were
similar to those needed for the other three
positions.
?
USING COMPETENCY
MODELS
Competency models provide a common lan-
guage for discussing capabilities and perfor-
mance. The development of a competency
model can help provide guidance for a host of
different HR practices and ensure that those
102 Chapter 3 ? General Managers: A View at the Top
practices are consistent. Specifically, compe-
tency models can be used as a foundation
from which to establish criteria for a broad
array of HR systems (McLagan, 1996, 60–65
and Lucia and Lepsinger, 1999). For instance,
listed below are eight HR activities that can
be guided or enhanced with the use of a well-
developed competency model.
1. Recruitment and selection. Looking be-
yond skills to performance dimensions
such as teamwork, competency models
can help to establish what it takes to do
well on the job. Armed with this informa-
tion, companies can focus recruitment
dollars on finding the greatest number of
prospective employees who have the
right mix of competencies for the job in
question. The content of appropriate se-
lection instruments (e.g., structured inter-
views, role plays) can target the key
competencies—and, hence, the whole
package of needed skills and abilities. Be-
yond their usefulness in improving selec-
tion tools, competency models also
provide candidates with a clear and real-
istic picture of expected behavior.
2. Training and development. Assessing
gaps between existing employee skills
and those identified by a competency
model can be extremely useful in
devising a long-term strategic plan for
leadership training and development.
Identification of the skills needed to per-
form effectively makes it easier to ensure
that the design and delivery of training
are aligned with the organization’s objec-
tives. When a competency model is used
as the foundation for training objectives,
individual leadership gaps can be as-
sessed and a training plan devised to ad-
dress deficiencies.
1327.ch03 12/19/05 9:30 AM Page 102
3. Performance appraisals. Performance-
management systems can be enhanced by
a competency model that provides a
shared set of expectations regarding what
is important and what will be monitored
and measured. Competency models help
managers to focus performance-appraisal
discussions on critical aspects of behavior,
thus providing a strategic tool for consis-
tent and meaningful evaluation.
4. Coaching, counseling, and mentoring.
Competency models are often used as the
basis for 360-degree feedback, in which a
manager receives performance informa-
tion from all relevant sources (including
supervisor, subordinates, self, peers, and
customers, if applicable). Coaches and ad-
visers can use the information so gathered
to guide the employee in designing a de-
velopment plan and making critical-skill
improvements. The clarity and specificity
of competency models enable coaches
and mentors to reinforce desired behav-
ior and tie performance-management sys-
tems to necessary competencies.
5. Reward systems. A tremendous percent-
age of a hospitality organization’s operat-
ing expenses is devoted to employee
compensation. To attract, retain, and mo-
tivate employees, reward systems must be
equitable and linked to desired behavior.
Competency models can be extremely
useful for defining the behavior that will
be rewarded.
6. Career development. For employees who
aspire to reach the next level on a career
path, a competency model serves as a
map. Competency models make employ-
ees aware of the behavior and skills
needed to advance and achieve success,
allowing them to prepare accordingly.
Section 3.3 ? Grooming Future Hospitality Leaders: A Competencies Model 103
7. Succession planning. Competency models
can be used to identify possible successors
for critical jobs by clarifying the require-
ments for the job and providing a method
for assessing a particular candidate’s
readiness. Without a clear understanding
of the competencies needed by future
leaders, it is difficult for a firm to measure
its “bench strength”—that is, to deter-
mine whether the organization has peo-
ple with those capabilities and, if it does,
who they are.
8. Change management. Organizations can
work toward an uncertain future by creat-
ing models that are based on competen-
cies that may be necessary for future
leaders, as well as competencies needed
for current operations.
Competency models confer several ad-
vantages on a company. First, a competency
model is useful for building an integrated
framework for developing a company’s
human-resources system. Used consistently,
such a model should lead to improved and
consistent performance standards. More im-
portant, the model can be a critical guide dur-
ing periods of instability and change.
Moreover, making HR decisions on the basis
of carefully developed competency models
reduces legal challenges to those decisions.
(Note: Include specific competencies in the
job description to reduce legal liability, espe-
cially if the competencies will be used for per-
formance appraisals.) Finally, well-developed
competency models enhance a company’s
ability to communicate with its employees re-
garding the behavior connected with success,
thereby increasing the firm’s ability to
achieve its business objectives (ACA’s Com-
petencies Research Team, 1996).
1327.ch03 12/19/05 9:30 AM Page 103
?
LEADER COMPETENCIES
FOR THE LODGING
INDUSTRY
With point number eight in mind, we sought
to devise a future-oriented leadership-compe-
tency model for the lodging industry. We con-
sider this endeavor to be important given the
absence of an industry-focused model that
works across many organizations. (Our re-
search found no current models for hospital-
ity leadership.) Having an industry-wide
model is important because it can inform stu-
104 Chapter 3 ? General Managers: A View at the Top
dents and employees alike about the expec-
tations for future leaders as identified by
senior-level managers. Furthermore, an
industry-wide model helps to paint a compre-
hensive picture of the critical skills needed by
the entire industry, thereby assisting senior
managers in hotel organizations as they de-
vise and implement their recruitment, selec-
tion, and development systems.
Looking ahead. We focused our compe-
tency model on managerial behavior that in-
dustry executives anticipated would be
needed ten years from now. We wanted a
model that could be used as a prototype to
Table 3.4 Self-Management: Dimensions of a Competency Factor
Factor Self-Management
Dimensions Ethics and Time Self- Flexibility and
Integrity Management Development Adaptability
Characteristics • Acts in an ethical
manner.
• Treats people fairly.
• Treats people with
respect.
• Displays
consistency
between words and
actions.
• Considers ethical
implications prior
to taking action.
• Protects
confidential
information.
• Effectively handles
multiple demands
and competing
priorities.
• Manages time to
ensure productivity.
• Spends time on the
most important
issues, not just the
most urgent ones.
• Deals
constructively with
own failures and
setbacks.
• Seeks feedback
from others.
• Adjusts behavior in
response to
feedback and
experience.
• Pursues continual
learning and self-
development.
• Demonstrates
awareness of own
strengths and
weaknesses.
• Adapts to changing
circumstances.
• Works
constructively
under stress and
pressure.
• Works effectively
in ambiguous
situations.
• Views problems as
opportunities and
mistakes as
progress.
1327.ch03 12/19/05 9:30 AM Page 104
guide people’s aspirations in the coming
years and to create future leaders. Asking
leaders to focus on the future is a common
approach when building competency models,
although the resulting model may not iden-
tify all necessary competencies (given that
one cannot see the future). (Note: Firms in-
cluding PDI, DDI, and Hay Management
employ forecasting techniques. We used the
linkage systems method, asking participants
to forecast future important behaviors; see
Linkage, 1997.) The essential limitation in
asking current leaders to project future com-
petencies is that they may be unable or un-
willing to define the future differently from
the present. However, many thoughtful exec-
utives are able to envision and plan for a fu-
ture that is not simply a reflection of the
present, highlighting behavior that they see
as increasingly important.
Using a number of different competency
studies (Mirabile, 1985; Evarts, 1988; Zingheim,
Ledford, and Shuster, 1996; Blancero, Boroski,
and Dyer, 1996) as a starting point, we con-
structed a provisional behavioral-competency
model that captured the most important di-
mensions of leaders’ behavior across several
industries. Using this preliminary model, we re-
fined the components through hospitality
managers’ feedback, developing the compe-
tency model by means of the customized
generic model method (Dubois, 1993). We
collected managers’ comments by surveying
individuals from around the globe who partic-
ipated in senior-level executive-education pro-
grams at Cornell University. In our pilot
survey, respondents could add other compe-
tencies that they felt were becoming increas-
ingly important and eliminate those items that
they deemed inappropriate.
Based on the feedback from the pilot
Section 3.3 ? Grooming Future Hospitality Leaders: A Competencies Model 105
study, we modified the competency model to
reflect hospitality-specific behavior. In this
fashion, we arrived at a final competency
model consisting of 8 overarching factors, 28
dimensions, and 99 specific behavioral com-
petencies. The factors and dimensions were
derived from the literature on competency
models and through hospitality managers’
feedback. The eight overarching factors are
communication, critical thinking, implemen-
tation, industry knowledge, interpersonal
skills, leadership, self-management, and
strategic positioning. Each of those factors
comprised up to six dimensions that captured
various aspects of that factor. Leadership, for
example, is composed of the following six di-
mensions: developing others, embracing
change, fortitude, fostering motivation, lead-
ership versatility, and teamwork orientation.
As another example, Table 3.4 shows the be-
havioral items and dimensions for the self-
management factor.
We listed the 99 hospitality competencies
(Table 3.5) in a survey that was faxed world-
wide to 735 senior-level industry executives at
various hotel companies. Using a five-point
Likert-type scale ranging from 1 (not at all
important) to 5 (extremely important), re-
spondents were asked to rate the importance
of each of the 99 competencies or skills for a
senior-level manager ten years from now (see
the accompanying list). A total of 137 industry
leaders responded either online or via return
fax, yielding a response rate of 18.6 percent.
Participants’ positions ranged from director
to CEO or chair of international hotel chains
and corporations. Response rates for execu-
tive-level employees are notoriously low, and
our response rate for this sample was typical
for this population (Agle, Mitchell, and Son-
nenfeld, 1999).
1327.ch03 12/19/05 9:30 AM Page 105
106 Chapter 3 ? General Managers: A View at the Top
Table 3.5 99 Lodging Competencies
(1) Anticipates obstacles and develops contingency
plans.
(2) Adapts to changing circumstances.
(3) Manages time to ensure productivity.
(4) Monitors progress of others and redirects efforts
when necessary.
(5) Works effectively in ambiguous situations.
(6) Prepares people to understand changes.
(7) Seeks feedback from others.
(8) Works toward win-win solutions with others
whenever possible.
(9) Steers conflicts away from personalities and toward
issues.
(10) Provides employees access to information.
(11) Takes a stand when resolving important issues.
(12) Integrates planning efforts across work groups or
functional units.
(13) Displays consistency between words and actions.
(14) Identifies measurable action steps that support the
hotel’s strategy and mission.
(15) Works constructively under stress and pressure.
(16) Acts in an ethical manner.
(17) Presents ideas in a convincing manner.
(18) Expresses disagreement in a tactful and sensitive
manner.
(19) Treats people with respect.
(20) Considers a broad range of factors (internal,
external, and trends) when solving problems and
making decisions.
(21) Translates business strategies into clear objectives
and tactics.
(22) Brings together different perspectives and
approaches and combines them in creative
ways.
(23) Summarizes and clarifies what people say to ensure
understanding.
(24) Coaches others in skill development.
(25) Challenges others to make tough choices.
(26) Works to understand why others resist change
instead of forcing others to accept change.
(27) Accurately identifies strengths and weaknesses in
others.
(28) Stays informed about industry practices and new
developments.
(29) Examines and monitors trends in the hotel
business.
(30) Understands the agendas and perspectives of
owners, staff members, managers, and other parties.
(31) Clarifies expectations to staff members about
assignments, roles, and responsibilities.
(32) Selects leadership style most appropriate for the
situation.
(33) Provides challenging assignments to facilitate
development.
(34) Applies cross-functional knowledge to understand
and solve problems.
(35) Expresses confidence in people’s competence to do
their jobs.
(36) Addresses and works through conflict.
(37) Interacts with people in a direct and open manner.
(38) Views problems as opportunities and mistakes as
progress.
(39) Works to establish strong relationships with
owners.
(40) Understands and harnesses individual differences
to create a competitive advantage.
(41) Develops action plans to meet customer needs.
(42) Reduces redundancies in processes and
procedures.
(43) Gives specific, timely, and constructive feedback.
(44) Adjusts behavior in response to feedback and
experience.
(45) Models the changes expected of others.
(46) Considers alternatives before making decisions.
(47) Listens to people without interrupting.
(48) Protects confidential information.
(49) Encourages employees to use their initiative to
remedy problems when they first occur.
(50) Takes calculated risks when appropriate.
(51) Builds networks with people inside and outside the
hotel.
(52) Spends time on the most important issues, not just
the most urgent.
(53) Commits organizational resources for community
events.
(54) Considers pros and cons of proposed solutions to
problems.
1327.ch03 12/19/05 9:30 AM Page 106
Section 3.3 ? Grooming Future Hospitality Leaders: A Competencies Model 107
Table 3.5 (Continued)
(55) Develops new systems or processes for increased
efficiency.
(56) Encourages others to express their views, even
contrary ones.
(57) Listens carefully to input and concerns expressed
by others.
(58) Deals constructively with own failures and
mistakes.
(59) Handles multiple demands and competing
priorities.
(60) Knows the strengths and weaknesses of
competitors.
(61) Defines and sets up quality standards for
employees.
(62) Gives others the authority necessary to accomplish
their objectives.
(63) Adjusts leadership approach to fit other
individuals.
(64) Involves others in critical decisions that affect
them.
(65) Understands complex concepts and relationships.
(66) Delegates enough of own work to others.
(67) Identifies and defines problems.
(68) Determines which of many problems may become
crises.
(69) Defines priorities for the staff.
(70) Confronts problems early before they become
unmanageable.
(71) Works as a member of a team.
(72) Considers ethical implications prior to taking
action.
(73) Gets others interested and involved in the change
process.
(74) Creates needed systems and procedures to support
changes.
(75) Keeps others updated with information.
(76) Considers customer needs when making decisions.
(77) Considers the effects of decisions on community
well-being.
(78) Champions new ideas and initiatives.
(79) Focuses on important information without being
distracted by unnecessary details.
(80) Employs a team approach to solve problems when
appropriate.
(81) Understands owners’ and stakeholders’ values and
how they perceive issues.
(82) Influences and shapes owners’ and stakeholders’
decisions.
(83) Recognizes and seizes strategic opportunities in the
environment.
(84) Promotes respect and appreciation for diversity
and individual differences.
(85) Treats people fairly.
(86) Allows others to lead under the appropriate
circumstances.
(87) Pursues continual learning and self-development.
(88) Promotes quality initiatives.
(89) Deliberately allows direct reports to use their own
methods for completing tasks.
(90) Demonstrates awareness of own strengths and
weaknesses.
(91) Understands organizational strengths and
weaknesses.
(92) Writes in an effective manner.
(93) Actively and frequently listens directly to
customers.
(94) Sees how things fit in the big picture.
(95) Promotes teamwork among groups; discourages us-
versus-them thinking.
(96) Inspires and motivates others.
(97) Makes sound decisions under time pressure and
with limited resources.
(98) Speaks clearly and articulately in a variety of
situations.
(99) Builds partnerships and alliances with community
organizations.
1327.ch03 12/19/05 9:30 AM Page 107
?
KEY COMPETENCIES
IDENTIFIED
Competency in self-management is the over-
arching factor that was rated highest by our
respondents, followed by knowledge of
strategic positioning, implementation skill,
and critical thinking. (Table 3.6 summarizes
the ratings.) The self-management factor
achieved a mean importance score of 4.32 out
of 5. This factor consists of four behavioral di-
mensions, namely: (1) ethics and integrity,
(2) time management, (3) flexibility and
adaptability, and (4) self-development. Look-
ing at the behavioral dimensions within each
competency factor, we found that the behav-
ior of acting ethically or with integrity was the
most important to the responding senior lead-
ers. Post-hoc Scheffe tests from an analysis of
variance revealed that this behavioral dimen-
sion of self-management was rated signifi-
cantly higher than the other three dimensions.
The ethics-integrity dimension contains six
specific behavioral competencies, such as
“Treats people with respect,” “Displays con-
sistency between words and actions,” and
“Considers ethical implications prior to tak-
ing action” (see Table 3.4). The overriding im-
portance of ethical behavior is consistent with
previous competency models devised by man-
agers outside the lodging industry. (See com-
petency research reports by consulting firms
such as Personnel Decisions International
(www.personaldecisions.com) and Center for
Creative Leadership (www.ccl.org).) The
other specific competencies that fall under
the self-management factor are “Works con-
structively under stress and pressure,” “Seeks
feedback from others,” and “Spends time on
the most important issues, not just the most
108 Chapter 3 ? General Managers: A View at the Top
urgent.” Overall, self-management skills en-
compass actions related to the personal char-
acteristics of the leader and how she or he
handles himself or herself.
Competency in strategic positioning was
the overarching factor considered to be sec-
ond in importance for future leaders. This
factor comprises the following four dimen-
sions: (1) awareness of customer needs, (2)
commitment to quality, (3) managing stake-
holders, and (4) concern for community. Ex-
amples of behaviors that fall under these
dimensions include “Influences and shapes
owners’ and stakeholders’ decisions,” “Pro-
motes quality initiatives,” and “Considers
customer needs when making decisions.”This
factor clearly captures the hospitality indus-
try’s service orientation. The senior managers
whom we surveyed suggested that future
lodging-industry leaders need to be vigilant
in their commitment to both quality and the
needs of a variety of different stakeholders,
including owners, Wall Street, employees, and
customers.
Implementation, critical thinking, and
communication skills were also deemed “ex-
tremely important” by senior managers.
Leaders of the future will need to possess
a strategic orientation and approach to
decision-making that permits them to both
plan and redesign their organizations. In addi-
tion, communicating persuasively, listening,
and enabling others will be essential skills for
managers hoping to reach senior leadership
positions.
Industry knowledge, leadership, and in-
terpersonal skill were factors that, while im-
portant, were ranked lower than the others by
our respondents. The relatively low score for
industry knowledge seems to suggest that the
importance for leaders of industry-specific
1327.ch03 12/19/05 9:30 AM Page 108
Section 3.3 ? Grooming Future Hospitality Leaders: A Competencies Model 109
Table 3.6 Leadership Competency Model for the Lodging Industry
Factor Mean Dimension Mean
Self-management 4.32 Ethics and integrity 4.58
a
Time management 4.28
Flexibility and adaptability 4.22
Self-development 4.12
Strategic positioning 4.17 Awareness of customer needs 4.39
Commitment to quality 4.26
Managing stakeholders 4.21
Concern for community 3.67
b
Implementation 4.16 Planning 4.23
c
Directing others 4.15
Reengineering 4.02
Critical thinking 4.15 Strategic orientation 4.24
d
Decision making 4.18
Analysis 4.17
Risk taking and innovation 4.03
Communication 4.12 Speaking with impact 4.27
Facilitating open communication 4.14
Active listening 4.06
Written communication 4.06
Interpersonal 4.09 Building networks 4.20
e
Managing conflict 4.07
Embracing diversity 4.01
Leadership 4.09 Teamwork orientation 4.25
f
Fostering motivation 4.19
Fortitude 4.14
Developing others 4.02
Embracing change 3.98
Leadership versatility 3.97
Industry knowledge 4.09 Business and industry expertise 4.09
a. “Ethics and integrity” scored significantly higher than the other three dimensions in this
factor ( p ? .01).
b. “Concern for community” scored significantly lower than the other three dimensions in this
factor ( p ? .01).
c. “Planning” scored significantly higher than “Re-engineering” ( p ? .05).
d. “Strategic orientation” scored significantly higher than “Risk taking and innovation”
( p ? .05).
e. “Building networks” is significantly higher than “Embracing diversity” ( p ? .05).
f. “Teamwork orientation” scored significantly higher than did “Developing others” ( p ? .05),
“Embracing change” ( p ? .01), and “Leadership versatility” ( p ? .01).
1327.ch03 12/19/05 9:30 AM Page 109
expertise is decreasing as time goes on. One
reason for this is that industry expertise can
be acquired by an adept leader, while the ca-
pacity for flexibility in a changing business en-
vironment can be hard to learn and often is
inherent in an individual’s personality and
skill set. Interpersonal and leadership skills
also scored lower than did other factors. We
found it particularly interesting that the di-
mensions of developing others, embracing di-
versity and change, and leadership versatility
were viewed as some of the least essential
skills for the future.
Concern for community was a particu-
larly low-rated dimension of strategic posi-
tioning. Scheffe post-hoc tests revealed that
this dimension was rated significantly lower
than the other three strategic-positioning di-
mensions. Although this dimension is not typ-
ically included in competency-modeling
research, we (incorrectly) thought that it
might be important to hospitality leaders be-
cause of their extensive connections with lo-
cal community events and activities. This
dimension consisted of three items: “Commits
organizational resources for community
events,”“Considers the impact of decisions on
community well-being,” and “Builds partner-
ships and alliances with community organiza-
tions.” Contrary to our thinking, the results
revealed that those three were among the
lowest-rated of all 99 items presented on the
survey. When compared to other activities, a
concern for and relationship with the local
community in which the company operates
does not seem to be a core competency
needed for future hospitality leaders. On the
other hand, competencies that appear to be
the likely core attributes of future leaders are
ethics, awareness of customer needs, time
management, speaking with impact, commit-
ment to quality, and team orientation.
110 Chapter 3 ? General Managers: A View at the Top
?
USING INDUSTRY-WIDE
COMPETENCY MODELS
We believe that competency models can be
important in building an effective human-
resources system. They can also help in edu-
cating future generations of leaders by guiding
university faculties in designing curricula to
meet the industry’s future needs. An increas-
ing number of university programs are focus-
ing on competency building in an effort to
prepare students for a specific industry (see
Journal of Management Education 25(2)). For
example, the master of management in hospi-
tality (MMH) program at Cornell University
assesses entering students against three core
competencies that are deemed necessary for
graduation. These competencies are leader-
ship skills, teamwork and group-process skills,
and written and oral communication skills.
Students are evaluated through an assessment
center as they enter the MMH program and
are given feedback at the end of the assess-
ment center, as well as after each subsequent
semester. If they have weaknesses in any of the
three competencies, the students must make
plans to improve their skills. Students’ compe-
tency development is further supported by
special modules offered by faculty members to
enhance key skill areas. These modules contain
both lecture and experiential components.
Industry-specific competency models can
also help students seek out employment and
career tracks that will give them ample op-
portunity to develop needed skills. The model
presented here provides a comprehensive
framework to inform future managers about
what will be needed or expected to lead fu-
ture lodging firms. A good competency model
serves as both a roadmap and a prototype for
achieving success.
1327.ch03 12/19/05 9:30 AM Page 110
Employees in lodging organizations may
find this model useful as a general guide for
self-development. In the absence of an insti-
tutional program to help develop a promising
manager, a competency model can be used by
an individual to design and plan her or his
own career choices.
Last, individual lodging organizations can
use this industry-wide model to build their
own specific model. Once an organization has
tailored the model to its specific needs, that
firm can use the model in a variety of ways. For
example, Choice Hotels International now
uses its competency database to perform an-
nual readiness assessments to determine man-
agers’ leadership capability. The competencies
in Choice’s model are the basis for the com-
pany’s selection, promotion, and succession
Section 3.4 ? As I See It: What I Do 111
planning. Marriott employs a system-wide
leadership-development initiative, called the
Benchstrength Management System, which is
used by current senior managers to build lead-
ership capacity. Using the tools and measure-
ments from this system, Marriott’s senior
managers are responsible for identifying po-
tential leaders and ensuring that those individ-
uals develop the skills and competencies
needed to carry the company forward. Tar-
geted development plans are created to assist
senior managers in filling critical positions that
are “stretch” assignments for high-potential
managers. The Benchstrength Management
System provides Marriott with a consistent ap-
proach to evaluating its leadership potential
and ensures that the company focuses on core
capabilities that are key to future success.
3.4 AS I SEE I T: WHAT I DO
Emilio Fabico
In reflecting upon what it is I do as a manager
in the hospitality industry, it’s clear that there
are the tasks that I must complete, and then
there is all the other stuff. Throughout our ca-
reers, there are always plenty of duties that
we’re responsible for completing and that are
important to our business. These processes
are typically mandated by operational need,
fiduciary responsibility, or regulatory require-
ment. The manner in which virtually all of
these tasks are completed is typically inflexi-
ble and requires little or no creativity. It’s un-
likely that one’s professional success will
come from one’s ability to perform these du-
ties successfully.
?
THE OTHER STUFF
The swirled, chocolaty surface of a 3 Muske-
teers bar is not unlike that of any other candy
bar; it’s the fluffy stuff inside that makes it
unique. We’re not sure exactly what it is, but it
sure is good and differentiates it from the oth-
ers. That’s the other stuff. That’s what I spend
most of my time focusing on and constantly
working to improve. That other stuff is leader-
ship. There’s a world of people smarter than me
who have written books on this subject, so I
certainly don’t profess to have any of the an-
swers. What I can share with you is what the
zigs and zags of my career path have taught me.
1327.ch03 12/19/05 9:30 AM Page 111
?
IF IT WEREN’T HARD,
EVERYONE WOULD
DO IT
It’s called leadership, not maintainership.
Leadership is about leading. It’s being proac-
tive rather than reactive. It’s being out ahead
of challenges, as opposed to chasing them. It’s
about truly being engaged in and passionate
about your work. It’s about wanting to be and
working toward being the best. As I walk the
resort and interact with our employees and
guests, I attempt to be aware of the challenges
that each of the operations is facing. What are
they proud of that they should be recognized
for? What barriers are preventing them from
continuing to improvement? What might be
around the corner that we’re not aware of
yet? What’s important to our guests? What
can we do, for our guests and employees, to
make us better than our competition? How
can we meet our employees’ developmental
needs? Woven into all of these questions and
what should always be factored into the an-
swers are people—individuals with diverse
backgrounds, varying opinions, and different
needs. As a leader, I must be able to recognize
those differences and respond appropriately
to each of them. Being skilled at listening is
just as important as leading. How can one an-
swer without knowing the questions? In a
24/7 industry like ours, this interaction and
these questions never stop.
Early in my career, when I was a shift
manager, a clear line divided work time and
off time. After my ten-hour day, the hotel and
I went our separate ways until I was back for
my next shift. In more senior leadership roles,
this line is no longer as clear. Especially in the
age of the Blackberry, that line can com-
112 Chapter 3 ? General Managers: A View at the Top
pletely disappear. Here’s the part where I
make a pitch for balance. That, too, is a valu-
able leadership skill. Without question, it’s
possible to be a great leader and still have bal-
ance. This is important not only to the leader,
but also to those he or she leads, as they often
feel compelled to follow the leader’s example.
This should remain a priority throughout
one’s career.
?
SIX DEGREES OF
SEPARATION
I have found that many of the successes or
failures I face every day can be traced to one
source: respect. I must respect the fact that I
work for a public company and must ensure
that growth and the success of the business re-
main at the forefront of the decisions I make
and the actions I take. I must respect the tal-
ents of my direct reports. I must work to in-
spire, influence, and support them toward
their goals. I must not micromanage them. I
must also strive to identify their accomplish-
ments and celebrate their successes. I must re-
spect that people enjoyed feeling fulfilled, so
I must work to provide the tools and environ-
ment that will allow them to be successful. I
must respect that our guests have choices
when selecting their hotel. They have decided
to entrust us with their money, time, and
away-from-home experience. We have an ob-
ligation to provide them with an experience
that will leave them with a lasting positive
memory and influence them to return time af-
ter time. I must lead knowing that all of us
want to be treated fairly and respectfully.
When employees are asked why they leave
their employment, the answer generally cen-
ters on lack of respect or being valued.
1327.ch03 12/19/05 9:30 AM Page 112
?
“WHAT MAKES THE
MUSKRAT GUARD HIS
MUSK? COURAGE!”
Well said by the Wizard of Oz’s Cowardly
Lion. Although courage is not always easy to
find, my role requires me to have it. I must
have the courage to give honest, timely, and
constructive feedback to my direct reports
and my peers. I must have the courage to
speak up when what I have to say may not be
popular or may cause others pain. I must have
the courage to take risks, if the calculated out-
come will benefit our operation.
?
JUST SAY NO
On a personal level, I must be true to myself.
I can recall in school knowing exactly what
Section 3.5 ? A Day in the Life of a Hilton Hotel General Manager 113
my professional values were and never doubt-
ing that I would always remain true to them.
As the years passed, the titles got fancier and
the paychecks got bigger. I found myself sep-
arating from my beliefs. After losing a job a
few years ago (I didn’t truly lose it; I know
where it is, but someone else now has it), I
came to the realization that my paycheck was
like a drug. I was thinking in terms of what I
could do to get more of it. I had lost sight of
how fun and exciting our industry is. Don’t be
afraid of the zigzagging career path. I found
that it often leads where you never planned to
go and teaches you what you could have
never planned to learn.
And that’s as I see it: what I do.
3.5 A DAY I N THE L I FE OF A HI LTON
HOTEL GENERAL MANAGER
Robert O. Balmer, CHA
I often have heard that professionals in the
hotel business enjoy it because every day is
different. While I find this to be a huge un-
derstatement, I, too, enjoy this business for
the same reason.
My day begins with a large cup of coffee.
I like to arrive at work early so I can walk the
property and greet the early-morning team
members and check on the daily banquet
functions.
Every morning at 8:30 we have our daily
operations meeting. This meeting is attended
by our top lieutenants who run the day-to-day
operations. The directors of sales, front office,
housekeeping, and property operations are
there, along with my executive assistant. At
this meeting, we cover in detail our daily ar-
rivals. With Hilton Hotel Corporation’s ad-
vanced technology, we have the capability of
ascertaining which guests are new to the
1327.ch03 12/19/05 9:30 AM Page 113
hotel, which are returning guests and how
many times they have been here, which are
new to any Hilton brand, and which have ex-
perienced problems in the past. We also know
if guests have special preferences or requests.
Our focus is to exceed guest expectations and
increase customer loyalty.
During this morning briefing, we also dis-
cuss our banquet events, arriving VIPs, and
any and all comment cards from the night
prior. It is a great way to jump-start the morn-
ing. The team members briefly describe their
day and are sent off with their marching or-
ders. I do enjoy helping every team member
be their best.
By this time, my email box is reaching ca-
pacity. What did we ever do before email, I
wonder? I attempt to sift through and priori-
tize the messages.
The majority of my day is spent at various
times strategizing and communicating with
our director of sales and marketing and direc-
tor of revenue management. Revenue is our
lifeblood and of course cures most woes!
Between meetings with department or di-
vision heads, I can expect numerous interrup-
tions coming from any direction. The director
of finance requests assistance in reviewing a
report that must be submitted quickly to our
ownership group. The director of human re-
sources needs to brief me on a new hire or re-
calcitrant team member. The executive chef
and director of catering would like to review
the banquet event order for the upcoming
Mayor’s State of the City luncheon.
I usually have lunch with clients, local dig-
nitaries, guests, or of course team members in
our four-star team dining room! Increasingly,
the job of general manager has an outward fo-
cus, projecting the image of the hotel to the
surrounding community.
After lunch, it is time to check more
114 Chapter 3 ? General Managers: A View at the Top
emails and to catch up on daily correspon-
dence. Typically, I’ve got a corporate report
due and phone calls to make and return. I
spend a great deal of the afternoon reviewing
forecasts and working on and updating action
plans.
Running a large hotel is essentially the
same as being the CEO of a small company. It
is essential to have a strong executive com-
mittee so each department can run indepen-
dently. This is the key to success. Success
breeds success.
Funny things happen every day. One day
during a staff meeting attended by corporate
vice presidents, I was interrupted by our di-
rector of safety and security. The safety of our
team members and guests was in jeopardy.
The authorities had arrived at the hotel re-
garding a guest involved with drug trafficking.
When the authorities attempted to apprehend
the guest, he ran through the hotel waving a
weapon. I arrived at the front entrance of the
hotel to witness the guest face down on the
ground being handcuffed while the authori-
ties surrounded him with their guns drawn. I
didn’t want the VPs to be alarmed and leave
the meeting room. Before I knew it, the guest
had been arrested and business was back to
usual. As I was returning to my meeting, a
guest approached me and asked if someone
was filming a movie. I responded, “Welcome
to the media capital of the world! I’m glad
you enjoyed the show.” There are days I feel
like the ringmaster of a three-ring circus. I
think this is what keeps each day fresh and
exciting.
I often giggle at the old hotel industry
phrase, “If it weren’t for those darn guests
and team members, my day would be much
more productive!” However, if it weren’t for
them, this job would not be different every
day.
1327.ch03 12/19/05 9:30 AM Page 114
You’ve made it! It is officially your turn. This
is what you have worked for your entire ca-
reer, the golden carrot, the title of general
manager. So what is so different?
No matter what position(s) prepared you
for this goal, it is all yours now. Total respon-
sibility for the profit and loss statement and
the success of the entire operation is in your
hands. This is your opportunity to lead the
senior management team in achieving the de-
sires of the ownership, the management com-
pany, or both. You are now setting the tone
for the operation and providing the results to
the next level up.
Results are what your game plan is built
around. Whether you work for an indepen-
dent or a corporation, someone is going to
want answers. What do they expect? Is it all
about bottom-line profits, five-star services, or
a happy medium? What elements of perfor-
mance are most important to the company?
Ask these questions and you are well on your
way to developing your goals, the outline for
your future success.
Set your goals, document them, and begin
measuring your results. Obvious categories
are guest and employee satisfaction, great
communications, and positive financial re-
sults. Remember, you are now the general
manager with a supporting cast of managers
who each love specific talents and knowledge.
Utilize these skills by communicating your
goals and ask your team to outline their goals
to support what you have set forth.
Sounds simple right? Here is where your
day begins. You are now leading those who
Section 3.6 ? A Day in the General Manager’s Life 115
were your peers yesterday. How are you
going to set the tone for your team and
create an atmosphere that will support your
expectations?
Create the image. A mission statement is
a good starting point. What were the expecta-
tions given to you? How do you want the
team to function? At the Rancho Bernardo
Inn, we developed the following mission
statement: “To be the finest family-owned
destination resort, exemplifying comfortable
elegance and service of unmatched warmth
and sincerity. We will treat all of our guests
and each other as lifetime friends. The way
the world is supposed to be.”The mood is set,
the expectation is laid out, and we are all go-
ing to be friends in a world that’s the way we
want it to be, the one we are creating.
Give direction. How are you going to sup-
port the mission statement? Get the team in-
volved; you will be amazed at how easy this is.
We have developed a set of core values to
show how we want to operate and what our
roadmap looks like:
1. Anticipate and exceed guest expectations
with genuine sincerity.
2. Maintain a professional staff at the high-
est standards through continuous training
and development.
3. Treat each guest and employee as a mem-
ber of our family, with respect, honesty,
appreciation, and concern.
4. Protect and further our financial well-
being.
3.6 A DAY I N THE GENERAL
MANAGER’ S L I FE
Bob Peckenpaugh
1327.ch03 12/19/05 9:30 AM Page 115
5. Perform all duties safely, legally, and ethi-
cally.
6. Continuously strive for product improve-
ment.
7. Respect and care for the property and its
aesthetic image.
8. Communicate positively about the resort,
on and off property.
Set the stage. Now focus on the experi-
ence. How will you conduct yourself with
your staff, and how do you expect your staff
to treat the guests? Each time you come on
duty, you are stepping on stage. Describe the
performance everyone is expected to give. We
do this through a set of service expectations:
1. Anyone who receives a guest request
owns it. Accommodate all special needs in
a positive and timely fashion, and follow
up with the guest.
2. Anyone who receives a guest problem
owns it. Show genuine concern, apologize
graciously, resolve the issue, and follow up
with the guest.
3. Acknowledge every guest within 10 feet
with eye contact, good posture, and a
smile. Provide a positive and friendly
greeting within 5 feet. Always be the first
person to speak.
4. Ensure that guests are escorted to their
destination.
5. Always acknowledge guest needs first by
opening doors, offering the right of way,
and ceasing personal conversations when
a guest approaches.
6. Seek to identify the guest’s name and use
it at every opportunity, whether in person
or on the phone.
7. Answer phones within three rings, saying
“[Department name], this is [employee
116 Chapter 3 ? General Managers: A View at the Top
name].” Ask permission before putting
the caller on hold and announce transfer
calls. Always offer voicemail as an option.
8. Ensure that uniforms and personal ap-
pearance are immaculate. Nametags are
part of the uniform.
9. Take responsibility for order and cleanli-
ness of the facility. Pick up litter, reposi-
tion furniture, and prevent damage.
10. Always use appropriate professional lan-
guage. Avoid using slang and hotel jargon.
Remember, the team needs direction, and
they need it daily; you set the tone, and they
create the atmosphere you want by following
your example. Don’t underestimate the value
of each team member watching your actions.
Treat others as you want to be treated!
Now take your creation on the road. Get
the word out. It is like a campaign; infuse it
into every communication: general meetings
for all staff members, staff meetings for man-
agers, departmental meetings for more inti-
mate settings, and daily line-up meetings for
repetition. Make it known what the expecta-
tion is and hold everyone equally accountable.
In a typical day as a general manager you
will have contracts to sign, new managers to
guide, senior managers to focus, vendors to
negotiate with, forecasting to accomplish,
guests to intrigue, and controls to monitor. In-
terruptions are commonplace. The chief engi-
neer may call you to discuss the effects on
your guests of the chiller going down. The di-
rector of human resources is on the line be-
cause a manager just overstepped his bounds
with an employee. As you are comparing
notes from the individuals involved, your cell
phone rings; it’s the golf course superinten-
dent, who is on the twelfth hole in the rain
watching the river that runs through your
property flood the course and the neighbors’
1327.ch03 12/19/05 9:30 AM Page 116
houses. Now you have to find time to coordi-
nate the insurance adjusters, geologists, and
canal clearing teams to determine liabilities,
flow patterns, and potential problem solving
for the future. Now it is lunchtime. Have you
kept your head about you? Are you following
the philosophies noted above?
General management is about using your
brain, not your brawn. As you can see, your
day can consume you. Don’t let it. Surround
yourself with the best talent possible and set
the level of expectation high. You can spend
the day involving yourself with every detail
you can dig up, or you can find and nurture
talent that can help free your time. Take pride
in helping others learn to handle situations so
you have time to focus the direction you have
set.
Educate yourself. Read trade journals
and newspapers. Keep up with community is-
sues. Seek the latest trends in food and drink.
Is your room product better than the compe-
tition? Being on the front end of a trend could
mean free press for your hotel. Let your pas-
sion show through.
Get the word out. Employ a public rela-
tions company to ensure you get your fair
share of accolades in the places your target
guests will see them. Use your marketing
team to research advertising opportunities, di-
rect mail, and Internet options. Make yourself
available to the sales team. The general man-
ager’s influence during a decision-maker’s
site inspection can make a profound differ-
ence. Be available, active, and involved. The
phrase “Build it and they will come” only
works in the movies. The team must be ener-
Section 3.6 ? A Day in the General Manager’s Life 117
gized to sell. They need to believe in your di-
rection and vision as much as you do.
Special assignments can be rewarding.
You may be called on to determine the direc-
tion of the development of the property. Your
analytical skills may be tested in explaining to
the ownership how a new ballroom will make
them more money. You may be called on to
sell the idea to community planning leaders to
ensure the permitting process is successful.
Your speaking skills may be further chal-
lenged in a town hall forum, with tough ques-
tions coming directly at you with no time to
prepare an answer. You can do it; just trans-
late the skills you learned from guest interac-
tions. Remember your vision.
Community involvement can be vital.
Keep up with the economic indicators in your
region. Serve on a board for the Hotel and
Lodging Association or the Convention and
Visitor Bureau. You must be involved with
politicians when transient occupancy taxes
are a topic of city fund-raising. Will commu-
nity involvement benefit your hotel or com-
pany? The current mayoral race may set the
tone for many decisions that will affect the
hospitality business in the next four years;
your influence and support for right candi-
date may be needed. The property you run
will develop a reputation that will be your
signature. You will be setting a tone through-
out the community in everything you do at
your hotel.
Remember that you represent your hotel.
Its ultimate success will be your success, so
don’t get too distracted. Keep focused and
have fun. You have earned it!
1327.ch03 12/19/05 9:30 AM Page 117
Shortly before the end of 2001, Mr. Andre
Johnson, President of Sunset Hotels and
Suites, Inc., heard through the company
grapevine that several department and opera-
tional managers at the company’s hotels in
northern California were unhappy with their
promotion prospects. Unwilling to risk losing
these young managers, Johnson was contem-
plating how to help these men and women
manage their careers, at the same time mak-
ing staying with Sunset attractive and
challenging.
Sunset Hotels and Suites is a growing
West Coast chain with nine properties in
southern California, six in the San Francisco
Bay area (northern California), and five in
the Seattle-Portland region. The hotels in the
Bay area were the most recent acquisitions,
and although fewer in number than the south-
ern California region, boasted 20 percent
more rooms and were more recently built.
They also included the youngest management
staff, many of who were retained from the
staffs of the acquired hotels. Sunset is a
privately owned company, operated as an
S-corporation, with all of the corporate offi-
cers and hotel GMs holding shares of the
company’s stock.
Several of the unhappy managers had
118 Chapter 3 ? General Managers: A View at the Top
talked with their GMs and human resource
officers about their frustrations. These
included:
• Many of the GMs were young, in their
thirties and forties, successful, and tend-
ing to not move.
• There are no regional managers, as John-
son prefers to run a fairly flat corporate
organization.
• Several felt locked into narrow specialties
(convention services, catering sales,
housekeeping management, and front of-
fice) without clear prospects for cross-
training to add breadth to their career.
• They were not particularly unhappy with
salaries and the usual benefits, but some
grumbled about the valuable stock op-
tions the GMs get, largely based on the
performance of the operating managers’
departments.
Johnson called a meeting of the Bay area
managers at the Mark Hopkins Hotel in San
Francisco (not a Sunset property) and invited
all department managers from Sunset to be
his guests for a two-day conference. Similar
meetings were announced and planned in the
Pacific Northwest and southern California.
3.7 MI NI CASE: SUNSET HOTEL S
AND SUI TES
R E F E R E N C E S
ACA’s Competencies Research Team. 1996. “The
Role of Competencies in an Integrated HR
Strategy.” ACA Journal Summer:6–21.
Agle, B.R., R.K. Mitchell, and J.A. Sonnenfeld.
1999. “Who Matters to CEOs? An Investiga-
tion of Stakeholder Attributes and Salience,
1327.ch03 12/19/05 9:30 AM Page 118
Corporate Performance, and CEO Values.
Academy of Management Journal 42:507–525.
Arnaldo, M.J. 1981. “Hotel General Managers: A
Profile.” Cornell Hotel and Restaurant Admin-
istration Quarterly 22(3):53–56.
Blancero, D., J. Boroski, and L. Dyer. 1996. “Key
Competencies for a Transformed Human Re-
sources Organization: Results of a Field
Study.” Human Resource Management 35(3):
383–403.
Dann, D. 1990. “The Nature of Managerial Work in
the Hospitality Industry.” International Jour-
nal of Hospitality Management 9(4):319–334.
Dubois, D. 1993. Competency-based Performance
Improvement: A Strategy for Organizational
Change. Amherst, MA: HRD.
Eder, R.W., and W.T. Umbreit. 1989. “Measures of
Managerial Effectiveness in the Hotel Indus-
try.” Hospitality Research and Education Jour-
nal 13(3):333–341.
Enz, Cathy A., and Judy Siguaw. 2000. “Best Prac-
tices in Human Resources.” Cornell Hotel
and Restaurant Administration Quarterly
41(1):48–61.
Evarts, H.F. 1988. “The Competency Programme
of the American Management Association.
Journal of Management Development
7(6):48–56.
Ferguson, D.H., and F. Berger. 1984. “Restaurant
Managers: What Do They Actually Do?” Cor-
nell Hotel and Restaurant Administration
Quarterly 25(1):27–37.
Guerrier, Y. 1987. “Hotel Managers’ Careers and
Their Impact on Hotels in Britain.” Interna-
tional Journal of Hospitality Management
6(3):121–130.
Guerrier, Y., and A. Lockwood. 1991. “Managers in
Hospitality: A Review of Current Research.”
In Progress in Tourism, Recreation, and Hospi-
tality Management, C.P. Cooper (ed.),
2:151–167. London: Bellhaven.
Hales, C., and M. Nightingale. 1986. “What Are
Unit Managers Supposed to Do? A Contin-
gent Methodology for Investigating Manage-
rial Role Requirements.” International
Journal of Hospitality Management 5(1):3–11.
Section 3.7 ? Mini Case: Sunset Hotels and Suites 119
Koepper, K. 1988. “Management Effectiveness:
A Hotel Industry Appraisal.” Lodging
14(4):53–57.
Kotter, J.P. 1982. The General Managers. New
York: Free Press.
Ley, D.A. 1978. “An Empirical Examination of Se-
lected Work Activity Correlates of Managerial
Effectiveness in the Hotel Industry Using a
Structured Observation Approach.” Unpub-
lished Ph.D. dissertation, Michigan State Uni-
versity, East Lansing, Michigan.
Linkage, Inc. 1997. Introduction to Competency
Modeling. Lexington, MA: Linkage.
Lucia, A.D., and R. Lepsinger. 1999. The Art and
Science of Competency Models. San Francisco:
Jossey-Bass.
McLagan, P. 1996. “Great Ideas Revisited: Compe-
tency Models.” Training and Development
50(1):60–65.
Mintzberg, H. 1973. The Nature of Managerial
Work. New York: Harper and Row.
Mirabile, R.J. 1985. “A Model for Competency-
based Career Development.” Personnel
April:30–38.
———. 1997. “Everything You Wanted to Know
about Competency Modeling.” Training and
Development 51(8):73–77.
Nebel, E.C., III. 1991. Managing Hotels Effectively:
Lessons from Outstanding Hotel Managers.
New York: Van Nostrand Reinhold.
Shortt, G. 1989. “Work Activities of Hotel Man-
agers in Northern Ireland: A Mintzbergian
Analysis.” International Journal of Hospitality
Management 8(2):121–130.
Umbreit, W.T. 1986. “Developing Behaviorally-
anchored Scales for Evaluating Job Perfor-
mance of Hotel Managers.” International
Journal of Hospitality Management 5(2):55–61.
Worsfold, P. 1989. “A Personality Profile of the Ho-
tel Manager.” International Journal of Hospi-
tality Management 8(1):51–62.
Zingheim, P.K., G.E. Ledford, and J.R. Shuster.
1996. “Competencies and Competency Mod-
els: Does One Size Fit All?” ACA Journal
Spring:56–65.
1327.ch03 12/19/05 9:30 AM Page 119
S U G G E S T E D R E A D I N G S
120 Chapter 3 ? General Managers: A View at the Top
and Restaurant Administration Quarterly
36(3):30–35.
Nebel, Eddystone C., Ju-Soon Lee, and B. Vuda-
jivuc. 1995. “Hotel General Manager Career
Paths in the United States.” International
Journal of Hospitality Management 14(34):
252–256.
Pavesic, David V., and Robert A. Brymer. 1990.
“Why Young Managers Are Quitting.” Cornell
Hotel and Restaurant Administration Quar-
terly 30(4):90–96.
Rutherford, Denney G., and Jane Wiegenstein.
1985. “The Mentoring Process in Hotel Gen-
eral Managers’ Careers.” Cornell Hotel and
Restaurant Administration Quarterly 25(4):
16–23.
Sparrowe, Raymond T., and Pamela A. Popielarz.
1995. “Getting Ahead in the Hospitality In-
dustry: An Event Analysis of Promotions
Among Hotel and Restaurant Employees.”
Hospitality Research Journal 19(3):99–117.
Woods, Robert H., Denney G. Rutherford, Ray-
mond A. Schmidgall, and Michael Sciarini.
1998. “Hotel General Managers: Focused on
the Core Business.” Cornell Hotel and Restau-
rant Administration Quarterly 39(6).
Books
Nebel, E.C., III. 1991. Managing Hotels Effectively:
Lessons from Outstanding Hotel Managers.
New York: Van Nostrand Reinhold.
Powers, Tom. 1999. Introduction to Management in
the Hospitality Industry, 6th ed. New York:
John Wiley and Sons.
Woods, Robert H., and Judy Z. King. 1996. Quality
Leadership and Management in the Hospital-
ity Industry. East Lansing, MI: Educational In-
stitute of the American Hotel and Motel
Association.
Articles
Ley, D.A. 1978. “An Empirical Examination of Se-
lected Work Activity Correlates of Managerial
Effectiveness in the Hotel Industry Using a
Structured Observation Approach.” Unpub-
lished Ph.D. dissertation, Michigan State Uni-
versity, East Lansing, Michigan.
Ley, David. 1980. “The Effective GM: Leader or
Entrepreneur?” Cornell Hotel and Restaurant
Administration Quarterly 22(3):53–56.
Morey, Richard C., and David A. Dittman. 1995.
“Evaluating a Hotel GM’s Performance: A
Case Study in Benchmarking.” Cornell Hotel
S O U R C E N O T E S
Chapter 3.2, “A Conceptual Framework of the Ho-
tel General Manager’s Job,” by Eddystone C.
Nebel III and Ajay Ghei.
Chapter 3.3, “Grooming Future Hospitality Lead-
ers: A Competencies Model,” by Beth G.
Chung-Herrera, Cathy A. Enz, and Melenie J.
Lankau, is reprinted from the June 2003 issue
of Cornell Hotel and Restaurant Administra-
tion Quarterly. © Cornell University. Used by
permission. All rights reserved.
Chapter 3.4, “As I See It: What I Do,” by Emilio
Fabico.
Chapter 3.5, “A Day in the Life of a Hilton Hotel
General Manager,” by Robert O. Balmer,
CHA.
Chapter 3.6, “A Day in the General Manager’s
Life,” by Bob Peckenpaugh.
1327.ch03 12/19/05 9:30 AM Page 120
c h a p t e r f o u r
O P E R AT I O N S : R O O MS
us the Internet, cellular phones, electronic
mail (e-mail), telephone- and computer-
transmitted facsimiles (faxes), overnight de-
livery of letters and packages, and personal
data assistants (PDAs). These all combine to
generate an expectation of clear and nearly
instantaneous communication and, by logical
extension, fast and efficient services based on
communications. This, in turn, has increased
the complexity of the hotel’s front office and
at the same time delivered increased opportu-
nities to serve the hotel’s guests. It has, there-
fore, significantly changed the role of the
front office and the front office manager from
that described by Heldenbrand.
In 1985, Rutherford studied a national
sample of front office managers (FOMs)
and concluded that communication had
emerged as a central issue. FOMs had added to
the predictable role of department manager
4.1 I NTRODUCTI ON
The student of hospitality management will
find the hotel’s front office referred to as the
hub, the nerve center, the brain, or some other
name suggesting centrality. As H. E. Helden-
brand stated in his classic 1944 book Front
Office Psychology, “To the guest, the manager
is largely represented by the front office, and
the unseen head will be judged favorably or
otherwise by the guest treatment there” (In-
troduction). The observations, opinions, and
research presented in this section are chosen
to illustrate the centrality of the front office in
the modern hotel.
A theme that recurs throughout many of
the readings in this section is that of commu-
nications. In an increasingly communications-
oriented society and world, information—its
storage, retrieval, dissemination, and evalua-
tion—can mean a competitive edge and, to a
certain extent, power. Technology has given
121
1327.ch04 12/19/05 9:30 AM Page 121
responsibilities as facilitator and broker of
communication in its various forms among the
other hotel departments, the front office, and
the hotel guests. The model that emerged from
this analysis carries with it the powerful mes-
sage that the FOM’s job clearly revolves
around communications. A major conclusion
of this study was that hotel firms should con-
sider communication skills an important crite-
rion in considering candidates for the position
of FOM.
When communication is coupled with the
aforementioned complexity and guest expec-
tations of instant availability of information
and data, it is easy to see why the front office
and its staff operate under considerable
stress. Being the hub or nerve center of a
modern hotel has as one of its positive aspects
the fact that front office staff can be keenly
aware of what is happening at virtually every
level of the hotel’s organizational structure.
One of the negative aspects is that the front
office serves as a lightning rod for guest com-
plaints. Dealing with complaints can be one of
the most difficult tasks for the front office
staff to learn, especially given the frequency
and sometimes the intensity of guest com-
plaints and expectations.
Successful FOMs ideally possess demon-
strated competencies in both oral and written
communications to deal with these complexi-
ties and challenges. The FOM, therefore, is
not only a manager and a communicator
among the front office staff, the hotel depart-
ments, and the guests but also a communica-
tor in yet another way—that of teacher and
trainer.
This contextual theme of communications
is carried forward in the essay contributed by
James Bardi. Bardi discusses the job of FOM,
providing insights about the complexities of
122 Chapter 4 ? Operations: Rooms
the job relative not only to communication
but also to elements of an FOM job analysis,
intrahotel relations, and the emerging and
popular concept of employee empowerment.
To see how this all fits together, walk a
few miles in the shoes of FOM Garry Dick-
over. At the time this was written, Dickover
was the FOM of two hotels: Marriott’s River
Center and Riverwalk Hotels in San Antonio,
Texas. Currently general manager of the
Courtyard Convention Center in Las Vegas,
Dickover invites you to see the inside of the
FOM’s job and how he practices the theory of
managing the front office.
In 1993, Glenn Withiam researched and
wrote “American Concierges Set Service
Standards,” an essay used in the second and
third editions of Hotel Management and Op-
erations. Withiam also wrote an earlier piece,
“Keepers of the Keys: Concierges in Ameri-
can Hotels” (1983). The “keys” references the
practice in European hotels of hotel guests
leaving their room keys with the concierge
upon leaving the floor of their room. The
concierge therefore “kept the keys” for the
guest. The job today has evolved to use keys
as a metaphor for the processes of gatekeep-
ing access to hotel and community services on
behalf of the guest. Concierges have a profes-
sional society, Les Clefs d’Or, which uses
crossed keys as an identifying device. The
concierges who are members and so certified
are said to be keyed.
For this fourth-edition article on
concierges, Dr. Mario Arnaldo of Hawaii Pa-
cific University acknowledges Withiam’s
work as the heritage and underpinning of his
current research, which led to this chapter.
Herein, Arnaldo presents an overview of re-
search he did on the post–9/11 American ho-
tel concierge and guest service staff. The strict
1327.ch04 12/19/05 9:30 AM Page 122
application of the title concierge indicates
a hotel employee working at a concierge-
designated desk in a hotel property. To accu-
rately assess the contributions of these hotel
professionals, Arnaldo contacted dozens of
contemporary concierges and guest service
staff members, who generously provided ex-
amples of their concierge experiences. The au-
thor reviews in an accessible, conversational
manner the following questions: What’s up
with concierges these days? Who does the of-
fice work? What are the organizational de-
partments they work in? What kind of
interactions do they have with other hotel de-
partments? What is their greatest wish?
The theme of active communications is
carried through the piece contributed by Bill
Quain and Steve LeBruto. If hotels are going
to actively find the best pieces of business,
then there must be good communications
channels among all the organizational com-
ponents that guide the guest to a purchase de-
cision. Whether this is at the front desk,
through the reservations system, or through a
travel agent, it is important to recognize the
most attractive pieces of business and what
potential bookings may be logically refused.
Yes, refusing business is a central component
of successful yield management, but not al-
ways. In their words: “Yield management is
usually thought of in the context of turning
away undesirable business during excess de-
mand periods. However, the real art of yield
management is in learning how to turn unde-
sirable booking requests into desirable ones.”
Section 4.1 ? Introduction 123
Their article helps the reader, in an interest-
ing and entertaining way, learn to make these
management decisions.
Yield and revenue management are also
treated in the marketing section of this book
with other, in some ways contrasting, views by
Chappelle. The reader who wants additional
insights into these concepts is directed to the
contributions by that author.
The articles and essays presented here for
your consideration represent only a fraction
of the potential range of issues attendant on
any modern hotel front office. The duties, ob-
ligations, and responsibilities of front office
personnel change from hotel company to ho-
tel company based on such variables as mar-
ket segmentation, organizational structure,
corporate philosophy, and individual leader-
ship. A large amount of management litera-
ture exists that is not specific to the front
office but nonetheless pertains to the various
issues and challenges that face FOMs. The ar-
ticles chosen for inclusion in this section are
as specific as possible to functional aspects of
front office management. Other pertinent
managerial insights may be applied from
other contexts once the reader has a good
functional grasp of front office activities. In-
cluded in the suggested readings are text-
books that treat in great depth the functional
and technical aspects of front office opera-
tions. What has been attempted here is an
overview of pervasive managerial issues typi-
cal of those currently facing FOMs.
1327.ch04 12/19/05 9:30 AM Page 123
The exciting atmosphere of a hotel lobby of-
ten intrigues students of hotel management.
People from all walks of life and corners of the
world cross paths to discuss and share ideas,
greet family and friends on special occasions,
attend conferences to debate issues, or discuss
business deals. Questions concerning arrivals,
meeting times, rates, food and beverage ser-
vices, directions, transportation services, or
whereabouts of the management staff and
guests create a commotion that seems over-
whelming at times. Is someone in charge here?
The preprofessional who sets as his or her ca-
reer objective being the general manager of a
hotel and hopes the required tenure as a front
office manager (FOM) proceeds with haste
will find the role challenging. If you begin your
career in hotel management as a front desk
clerk, bellperson, or cashier, you have a vast
opportunity to explore just who is in charge.
In a 1985 study, Rutherford discussed the
important dimensions of the FOM’s job, in-
cluding communications, facilitation, and or-
ganizational interface and technical minutia.
Selected job functions reported in the re-
search findings included communications
with guests and employees; facilitating med-
ical emergencies, selling up, power failure
procedures, walking guests due to overbook-
ing, and design of computer systems for the
front office; and organizational interface with
the director of marketing, controller, food and
beverage manager, and catering manager.
These job skills and interactions require a
person to prioritize and to resolve many is-
sues, to make quick decisions based on sound
124 Chapter 4 ? Operations: Rooms
corporate management concepts, to empower
employees, and to refine exemplary commu-
nication techniques.
Bardi (1990, 345–349) stated, “[T]he front
office manager must take an active role in
gathering information of interest to guests
and in developing procedures for the front of-
fice to use in disbursing this information.”
This information is also needed by various de-
partments to assist in delivering and organiz-
ing hospitality. This is a tall order for the FOM
to fulfill, especially considering the total
realm of potential information guests may re-
quire and from what departments. Those ho-
tel departmental areas and their sources of
guest information are included below:
Interdepartmental Communication
Department Information Needed from
Front Office
Marketing and Guest history, reservations,
Sales first impressions, relay
messages, and guest
function information
Housekeeping Room status, potential
house count, security
concerns, and requests
for amenities and
supplies
Food and Relaying messages, accu-
Beverage rate voucher informa-
tion, posting of charges
to guest accounts, pre-
dicted house counts,
and paid-outs
4.2 THE EL ECTRI FYI NG J OB OF THE
FRONT OFFI CE MANAGER
James A. Bardi
1327.ch04 12/19/05 9:30 AM Page 124
Banquet Information on scheduled
events, process of pay-
ment of guest charges
for scheduled events,
preparation of daily
function board and
marquee, and a public
communication post
Controller Daily summary of financial
transactions, financial
data for billing, and
credit card ledgers
Maintenance Room status and guest
requests for mainte-
nance service
Security Fire safety, emergency com-
munication informa-
tion, and investigation
of guest security
concerns
Human Initial point of contact and
Resources screening for potential
employees
Thus the FOM must embrace the charge
of becoming a proactive communicator and
facilitator. This hotel executive must analyze
and seek the pieces of information guests will
probably need and figure out which depart-
ments must interact to fulfill these needs.
Further inquiry into the role of the FOM
can be accomplished by reviewing the ele-
ments of a job analysis of this position. Bardi
(1990, 49–50) presents a job analysis of an
FOM’s duties on a typical day.
• Reviews night audit report.
• Reviews incoming reservations for the
day.
• Communicates information to employees
on all shifts concerning reservations,
room assignments, and room inventory.
Section 4.2 ? The Electrifying Job of the Front Office Manager 125
• Communicates information to other de-
partments—housekeeping, marketing and
sales, banquets, food and beverage, plant
engineering, and security.
• Resolves guest billing discrepancies and
other complaints.
• Prepares budget with general manager
and controller.
• Prepares forecasting sheet.
• Conducts business meetings to promote
room sales.
• Assists in check-in, check-out, reservation
confirmations, updating reservation sys-
tem.
• Interviews potential front office employ-
ees.
• Communicates with night auditor.
• Maintains front office equipment.
Although this list shows only a few of the
many duties performed in any one day in the
life of an FOM, it provides the aspiring hospi-
tality professional with an idea of the range of
managerial activities. The FOM must stay in
control of all activities that affect the delivery
of hospitality to the guest—a major function
of a hotel’s financial success.
If delivering hospitality to the guest is a
major responsibility of the FOM, what are the
components of this subsystem of the hotel op-
eration? How does the front office and, sub-
sequently, the FOM fit in? An answer to this
question can be derived from reviewing the
guest service cycle in a hotel (adapted from
Albrecht and Zemke, 1985). If the FOM ana-
lyzes the various guest-departmental contacts,
he or she can move toward understanding
how the front office fits into the efficient de-
livery of the hotel’s hospitality services. The
potential departmental contacts in the cycle
are:
1327.ch04 12/19/05 9:30 AM Page 125
• Marketing—Preparing and administering
customer surveys with concern for guest
satisfaction, advertising methods, and in-
centive promotions.
• Reservations—Developing and monitor-
ing a reservation system with respect to
ease of access to toll-free numbers, fax,
national reservation system, and tele-
phone manner of personnel handling
reservations, cancellations, accommoda-
tion availability, complimentary services
and products, and general information.
• Registration—Developing and monitor-
ing a registration system with respect to
concern for managing a guest transpor-
tation shuttle system, ensuring a first-
contact greeting; providing assistance
with luggage; organizing an efficient
check-in procedure; maintaining a room
status system; processing credit cards; op-
erating a guest information system that
centralizes all communication between
the guest and the hotel about housekeep-
ing, food and beverage, maintenance, and
other hotel departments.
• Guest stay—Coordinating guest commu-
nications with all departments in the
hotel to ensure guest satisfaction in
restaurants, lounges, room service, gift
shops, housekeeping services, security,
wake-up calls, telephone system, and
guest folio availability.
• Check-out—Developing and providing
an efficient check-out system with respect
to coordinating flexible check-out times,
providing assistance with luggage, main-
taining in-room video check-out option,
monitoring guest wait-time in line, and
providing folio accuracy and printout.
This list of components in a guest service
cycle suggests the vast array of duties the FOM
126 Chapter 4 ? Operations: Rooms
encounters in managing the delivery of hospi-
tality services. However, one piece of “electri-
fying magic” is still required to make front
office hospitality relevant to modern service
delivery realities: employee empowerment.
Sternberg (1992) discusses the concept of
empowerment as a granting of authority to
employees to make everyday decisions within
guidelines. For example, many guests of a ho-
tel feel they are in the middle of a bureaucracy
when they want to have a charge adjusted on
their account folio. “Step aside and I’ll call my
supervisor” is too often the response to a
guest’s inquiry about a charge adjustment. The
cashier is only doing what he or she was
trained to do. However, the guest doesn’t care
what the training was; he just knows the
system isn’t user-friendly. As Sternberg em-
phasizes, if guidelines are established and
communicated, the cashier should know what
to do. Here is the manager’s chance to provide
that first electrifying jolt of empowerment.
Charges within a specified dollar amount
that are debated can be credited or adjusted
without the supervisor’s approval. A corre-
sponding control system can be implemented
that will reveal the extent of the credit
granted per cashier.
Another example of providing empower-
ment opportunities for front office staff is
provided by Allin and Halpine (1988) in de-
scribing quality assurance training at the
Waldorf-Astoria:
While there can be many reasons to combine
the positions of registration clerk and cashier,
and many aspects were considered at the
Waldorf-Astoria, the decision was driven by a
desire to improve guest service where its impact
is most obvious—at the front desk. Cross-
trained employees speed the check-in and
checkout process by performing both functions,
as the traffic at the desk dictates. Registration
1327.ch04 12/19/05 9:30 AM Page 126
clerks can cash checks and cashiers can issue
duplicate room keys, in many cases eliminating
the necessity of having the guest wait in two
lines.
Other opportunities to provide employee
empowerment can be identified through care-
ful analysis by the FOM of the progress of the
guest through the guest service cycle.
The potential opportunities to serve or
mis-serve the guest can be appreciated when
viewed in the context of guests times service
contacts. If 12 million guests pass through a
hotel company’s entire system in a year and
each has an average of 12 contacts with hotel
staff—guest service staff, housekeepers, front
Section 4.3 ? A Day in the Life of the Front Office Manager 127
office clerks, and others—that’s 144 million
chances for the chain to give a good or bad
impression (Bardi, 1990, 233). As the gate-
keeper of many, if not most, of these potential
contacts, the FOM is in a unique position to
help his or her staff enhance the guest experi-
ence. Empowerment is another powerful tool
in the FOM’s managerial arsenal.
The role of the FOM demands a mastery
of communication, operational details, and,
increasingly, empowerment. The challenging
and attractive nature of this role allows the
new hospitality professional to try various
ways to apply interpersonal skills that will
yield a profit for the hotel. It is a challenge
that will last a lifetime.
4.3 A DAY I N THE L I FE OF THE FRONT
OFFI CE MANAGER
Garry Dickover
It’s 6:00 on a Saturday morning. The alarm
clock is blaring its normal “beep, beep, beep,
beep.”The sun is peering through the window.
Time to start another day as front office man-
ager. It is going to be a busy day featuring 800
arrivals and 750 departures. Plus, the hotel is
50 rooms oversold. It is going to be a fun one.
It’s 7:00 A.M. The drive to work is an easy
one this Saturday morning. It gives me a
chance to think about one thing in particular
that is on tap for today. There is a 9:00 A.M.
pre-convention meeting for the group that is
arriving today. There is the regular morning
pre-shift meeting. Today I also have to review
hospitality standards with the front desk staff.
You would think that it would be easy to have
people smile and greet the guest, use a guest’s
name, add a value statement about the hotel
or city, and thank the guest for his or her busi-
ness. I don’t ask for much, but to train people
to do those four things can be a challenge.
Pre-shift meetings are an important start
to the day, but it can be a hassle getting every-
one together. There are a lot of reasons why
an associate can’t make a pre-shift meeting,
but attendance is important to the success of
my department. It is the time I have everyone
together, let them know what is going on for
the day, and get a chance to share with them
the standards we have set and how they can
apply them to the customer. At 1:00 P.M. today
I have a Safety Committee meeting, and at
1327.ch04 12/19/05 9:30 AM Page 127
4:00 I have my weekly rap session with the
telephone department. Yeah, I think to my-
self, it is going to be a full day.
As I arrive to work, I can see that the
check-outs have already started. It is nice to
see the bellmen taking care of our guests. As I
scan the grounds, I make sure there is no trash
on the ground, the bell carts are clean, and the
valet parking staff is hustling to retrieve guest
cars. I look at the windows of the entryway to
the hotel to check for cleanliness. The front
drive is the first and last thing a guest sees, so
it has to be looking good. Today, all looks
good.
It is better for me to spot-check the area
before the general manager comes by and
sees any problems. As the FOM, I learned the
GM’s route when he arrives at work, so I
make sure the area is clean. (This is some-
thing they did not teach me in college, along
with how to repair printers and copy ma-
chines—some things you gotta learn by do-
ing.) This morning, things look good.
It’s 7:50 A.M. I make my way to the back
of the front office. My desk managers are
busy getting information ready for the pre-
shift meeting. As I walk through the area, I al-
ways make it a point to greet people as I pass
and wish them a good morning. I know how
important it is to give each and every associ-
ate a cheerful good morning. It sets the stage
for the day. And you know, it really does make
people feel good. A good department head
recognizes his or her associates. The first
words that come out of your mouth should be
pleasant. The front office team takes the
brunt of all the complaints. They don’t need
me to harp on them.
The pre-shift meeting goes smoothly. The
desk managers prep the team for the day, I re-
view the hospitality standards, and we are set.
As we are about to finish, I notice some ten-
128 Chapter 4 ? Operations: Rooms
sion on the staff’s faces. They know they are in
for a tough day—remember, 50 rooms over-
sold. It is important that I don’t let the team
see any stress I may feel on my face. The team
knows how important it is to sell out the ho-
tel. They know that once a room is empty
overnight, you never get a chance to sell that
room again. They also know you have to over-
sell the hotel. This is the time I can reassure
them that the revenue department has calcu-
lated all of the slip percentages for the big
group checking in. A slip percentage is the ex-
pected variation from stated arrival and
rooms pick-up percentages the group’s meet-
ing planner promised. It is important for me
to develop a good relationship with the rev-
enue department. The FOM must be active in
the forecast meetings to ensure the hotel is
not “sold up the river,” meaning overcommit-
ted by the sales staff.
Relationship building is an important job
for the FOM. It is where trust is established—
trust between you and the other departments.
It is not me versus them; it’s us trying to max-
imize revenue and occupancy and to continue
to build loyalty. This is the time to reassure
the team that if we do our jobs as we have
been trained, all will be fine. We do a little
cheer, and out to the desk they go! Now for a
cup of coffee.
I review the plans with the desk managers
for the sold-out night. This is also the time I
check availability at other hotels, check the
stayover requests and no-show percentages,
and check for duplicated reservations. It looks
like they have it under control. I double-
check the staffing during the peak periods
and remind the managers to get everyone to
lunch. (As simple as this sounds, sometimes
we forget.) I check my watch; 30 minutes to
the pre-con. Better pull out the group resume,
which is our profile of the group that includes,
1327.ch04 12/19/05 9:30 AM Page 128
among many other things, a historical profile
of the group’s room pick-ups, occupancies,
and food and beverage revenues.
At 8:45 A.M., I’m off to the pre-con. I head
by the desk to wave to the staff, and I stop by
the telephone system, bellstand, and the
concierge desk. All seems to be going
smoothly. At the pre-con, we all do our formal
introductions and meet the group’s represen-
tatives, usually the meeting planner and mem-
bers of the group’s leadership. We each
discuss our individual departments and the
relationship we will have with the group. This
is our time to sell them on how well we will do
for their group. It is a successful pre-con; all
the parties seem happy. I spend just a couple
of minutes with the group convention man-
ager, giving an update on the oversold situa-
tion. If we have to walk guests, it is important
to let the group convention manager know
about the situation. Today I said we might, but
we should be in good shape. She thanks me
for the update.
As I make my way back to the front of-
fice, I end up walking with the resident man-
ager (RM). He asks me how things went last
night and how our hotel is for tonight. As an
FOM, it is important to know what your boss
is going to ask you. Bosses are all different,
but they always seem to ask the same ques-
tions. It is important to review the daily sales
and occupancy report from the previous day
so you know what is going on and can share
this information with the RM. I gave the RM
the information he wants, always emphasizing
the positives.
When I get back to my office, I have a
couple of associates wanting to talk to me.
They are bothered by the new schedule. They
wanted some specific days off and, because of
the business, they did not get them. This is a
delicate situation. You want to be fair to the
Section 4.3 ? A Day in the Life of the Front Office Manager 129
team, but you also have to respect why your
managers did what they did. The best thing to
do is to listen to what your associates say and
then review the situation. I have found that 80
percent of the time there is an alternative.
You want to create win-win solutions. By
spending time with your associates, you
demonstrate to them you care about their sit-
uation; this helps build loyalty. Remember that
they don’t care how much you know until they
know how much you care. Another situation
solved.
The next couple of hours I spend review-
ing the previous day’s information and getting
caught up on email, memos, and other com-
munications. Generally, this is the time I get a
couple of phone calls from upset guests. This
could be for a variety of reasons. Before
check-out, some people always want to let the
manager know how things went. It is impor-
tant to listen to customers when they com-
plain. It is a great way to find out what
deficiencies you may have in the hotel’s ser-
vice processes. Most complaints are caused by
a breakdown in the process. Sometimes peo-
ple get upset over the smallest things. Some-
times they have a right to be upset. One
example from past experience was the room
being so cold that when the guest lifted the
toilet seat, the water had a small sheet of ice
on it. Ensuring customer satisfaction is a large
part of the FOM’s job. You have to own hos-
pitality. Your team sets the stage for a guest’s
entire stay. It better be good!
By now it is 12:15 P.M. and time for lunch.
I grab the information I need for the 1:00 P.M.
safety meeting. I will go directly to that meet-
ing after lunch. As I make my way, I check on
the desk and the house count. We are now
only 29 oversold. We have had some canceled
reservations, and we also had 18 early depar-
tures. Things are looking good.
1327.ch04 12/19/05 9:30 AM Page 129
At 1:00 P.M. I walk into the safety meet-
ing. This is never an exciting meeting, but it is
always important. Accidents are costly to the
hotel. It is important to keep accident preven-
tion a priority for all associates. Today we talk
about the most current accidents, how they
could have been prevented, and the next
steps. We also discuss the implications of
safety and security interests for our guests.
This is important to avoid lawsuits and pro-
vide guests with a safe and secure environ-
ment. The meeting wraps up at 2:30 P.M.
As I come down the escalator, I see the
check-ins are starting to arrive. I head to the
bellstand to see if the bell captain is caught
up. All is well. Because lines are forming, I go
behind the front desk to handle a few check-
ins. I always like this part of the job. It also
gets a smile from the desk clerks. Before you
know it, you have helped move the line. Be-
cause the desk is staying busy, it is time for me
to move out and manage from the lobby. This
is a great way to watch what is happening.
You can view your whole front office team by
being in the lobby. (You can also ensure the
cleanliness of the area. This helps our friends
in housekeeping.) A big part of the job in the
lobby is just answering questions and giving
directions. Every guest I help means one
guest who did not have to go to the front desk
and one more guest who did not have to stand
in line. This is the fun part of the job!
At 3:50 P.M., my pager goes off. It is a re-
minder about my 4:00 P.M. rap sessions. I can’t
believe 90 minutes passed while I was in the
lobby. It is a good day.
Meeting with associates allows me to take
the pulse of their work situation. I do it in
small groups or as a one-on-one rap. It helps
build a relationship within the team and also
helps identify challenges I was unaware of. I
ask leading questions so the session does not
130 Chapter 4 ? Operations: Rooms
become a bitch session; this helps me control
the meeting. During this meeting, I discover
some equipment that is needed and that we
need more uniforms for the team. It would be
great to buy them all new uniforms, but I have
to stay within my budget. Sometimes that is
hard to do. I take notes on their comments
and will pass them on to the other managers.
It is important for all of the managers to be in
the loop. I always keep the raps to about an
hour.
By now it is 5:00 P.M., our peak check-in
time. I go back out to the lobby to see how
things are going. On a busy day like today, I
typically spend the next couple of hours help-
ing out in the lobby. At 5:30 P.M., the night
manager on duty (MOD) comes out to meet
with me. We usually work the lobby together
while I tell him about the day. He tells me
about the previous night. Of course, the first
thing he shows me is the house count: 24
rooms oversold and 352 arrivals expected. We
are in good shape. It is important to track the
number of no-shows. This helps you make
better decisions to maximize your revenue.
The MOD is a little nervous. I tell him not to
worry, we will be fine. We review the sold-out
night so we don’t miss anything. He tells me
he already has the walk letters (expressing
our regret and outlining our promises to a
guest who is walked to another hotel) out on
the desk. This brings a good laugh. We have
done this plenty of times, so I trust that the
hotel is in good hands.
It’s 7:00 P.M., and things seem to be in
good shape. Time to go home. I make one
more trip around to the departments in the
front office to see how they are doing and
wish them a good evening. Another good day!
The day described above is a typical day
as a front office manager. Some days have dif-
ferent meetings, some days have more upset
1327.ch04 12/19/05 9:30 AM Page 130
guests, some days have more upset associates,
and some days are just better than others are.
The thing I have learned over the years is that
the job of the FOM is the same. Take care of
Section 4.4 ? Yield Management: Choosing the Most Profitable Reservations 131
the associates, who take care of the customers,
who take care of the business. It’s the same
job, just different players, and I love it.
4.4 YI EL D MANAGEMENT: CHOOSI NG
THE MOST PROFI TABL E RESERVATI ONS
William J. Quain and Stephen M. LeBruto
?
INTRODUCTION
Yield management, as a term, is not very ex-
citing. However, the results of a well-run yield
management program are certainly exciting!
Properly implemented, it means that a busi-
ness can make more money. The keys are to
sell more and to sell more profitable items.
The first step in a yield management pro-
gram is to determine who is the best cus-
tomer. The best customer is the one who can
spend the most money at your property pur-
chasing profitable items. The products and
services you provide are the best fit for their
needs. The best customers for the property
are the ones who receive the greatest benefit
from your services. They are willing to pay
more, buy more frequently, and remain more
loyal because you are satisfying their needs.
Many operations do not know who the
best customers are. However, the answer is in
a property’s data collection system. Guest his-
tories, food and beverage checks, cash register
receipts, and the records of strategically allied
business partners contain most of the infor-
mation any property needs to determine the
ideal customer base. In order to properly im-
plement a yield management project, the
property must be viewed as a collection of
profit centers. A profit center is a place where
value is created and exchanged.
One of the techniques of yield manage-
ment is to let the guest in on the secrets of the
establishment. Give him or her all the infor-
mation necessary to truly enjoy the experi-
ence. As part of the yield management plan,
management must be willing to make experts
of the guests by sharing information on how
they can utilize all of the profit centers.
An important part of analyzing the po-
tential of each profit center is to identify all
the possible sources of revenue. This means
analyzing both the revenue-producing out-
lets and the people who spend the money.
Every establishment has a wide variety of
revenue outlets. They can range from the sale
of rooms to valet service, flower delivery, spe-
cialty drinks, cigars, and creative take-out
services.
Strategic alliances with car rental agen-
cies, cooperative advertising, couponing, and
packaging of all sorts will vastly change the
number of channels the guest can use to
spend money in the profit centers of the
enterprise.
Restaurants can increase revenues by
serving take-out food, catering private parties
off-premises, adjusting the menu mix, and
1327.ch04 12/19/05 9:30 AM Page 131
developing reward systems for servers. Espe-
cially during hours of peak demand, restau-
rants can design product/price combinations
that offer incentives to customers to change
their demand patterns. Why accept any reser-
vation at any time? Instead, select the most
profitable reservations and use incentives to
move the other reservations to non-peak or
shoulder times.
Profits are the only true measure of busi-
ness success. The following groups all benefit
from enhanced profits:
1. Guests—They are one of the primary
beneficiaries of increased revenues and
profits. If revenues are on the rise, it can
mean only one thing: You are serving the
guest better. Guests are happier, more
loyal, and eager to tell others about the
great experience they had.
2. Employees—In order to achieve long-
term success, employees must be involved
in the profit making and the profit taking.
Let them earn as much money as they
possibly can by making more money for
the property.
3. Management—Structured reward sys-
tems are necessary for management.
These systems reflect their need for in-
come and achievement and further the
profits of the property.
4. Shareholders and investors—Return on
investment, dependable growth, share
prices, and so on are all outcomes of in-
creased revenue. Money attracts money,
and the investors will relish the long-term
growth potential of their investments.
Managers face six major obstacles in their
efforts to implement a yield management sys-
tem. These impediments are:
1. Lack of creativity—Does your company
132 Chapter 4 ? Operations: Rooms
do things the way they have always been
done? There is a need for standardization
in recipes and operating procedures; how-
ever, this sometimes spills over into other
areas. Training sessions in most organiza-
tions do not stress the creative side of cus-
tomer satisfaction.
2. Lack of attention—It is difficult to stay in
focus all the time. The minute you stop
paying attention, things go wrong.
3. Monitoring the wrong signals—We tend
to monitor the easy things to measure,
such as food cost and inventory. We
should be looking for opportunities, not
statistics.
4. Conflict between sales and service—
When profits depend on a mutual deliv-
ery of both the sale and the service,
conflict can arise. Front-of-the-house and
back-of-the-house employees must work
together for the common cause of serving
and satisfying guests.
5. Targeting the wrong customers—The
right customers are those who will pur-
chase the most of your products and ser-
vices. Look for the customers with the
money to spend to give you a reasonable
profit. Use the marketing mix variables
of product price, promotions, and distri-
bution to attract and hold the right
customers.
6. Rewarding the wrong behavior—Many
sales management policies are designed
to encourage occupancy and average
daily rate. Restaurants, by allowing cus-
tomers to reward the waitstaff, may en-
courage promotion of higher-priced
items. In either case, the sale may not re-
flect the best interests of the property.
Yield management is designed to increase
profit, not just gross sales.
1327.ch04 12/19/05 9:30 AM Page 132
?
BASIC CONCEPTS OF
YIELD MANAGEMENT
Yield management requires knowledge of
guests’ expected behavior, plus an under-
standing of which business is most beneficial
to a hotel—but it does not necessarily require
high-power computers. Three main revenue
management concepts allow hotels to pick up
relatively easy money, or low-hanging fruit.
The three concepts are simplifying the yield
management system to make it manageable;
examining the rate controls to make certain
they allow acceptance of the business that
yields the strongest revenue return; and using
length-of-stay controls to shift demand from
sold-out periods to slack periods.
Group business, as it relates to the above
three points, is a special case. The change
needed, if any, is to think in terms of which
business is best for the property on a given
date. By implementing the concepts discussed
here, the property should see revenue gains in
the next several months.
?
AN OLD PROFESSION
One may think of yield management as a rel-
atively recent practice, but the lodging indus-
try has applied yield management principles
for many years. In one early instance, Mar-
riott Corporation used yield management
principles long before it installed its current
sophisticated system. Back when young J. W.
“Bill” Marriott was working at the family’s
first hotel, the Twin Bridges in Washington,
D.C., the property sold rooms from a drive-up
window. As Bill tells the story, the property
had a flat single rate and charged extra for
each additional person staying in the room.
Section 4.4 ? Yield Management: Choosing the Most Profitable Reservations 133
When availability got tight on some nights,
Bill recalls leaning out the drive-up window
to assess the cars waiting in line. If some of
the cars were filled with passengers, Bill
would turn away the vehicles with just a sin-
gle passenger to sell his last rooms to fuller
cars. That technique demonstrates the core
concept of yield management.
From that simple start, yield management
mechanisms have become complicated—so
complicated that some managers whom we
have met seem to think they cannot improve
revenue unless they have access to the most
sophisticated tools. Worse, the hotel manager
may have created an overly complex system
of discounts and packages. If the manager
then insists on managing every rate or pack-
age individually, the result is a sense that the
property has too many programs to track and
control, and it probably does. For this reason,
the first suggestion for a straightforward ap-
proach to yield management is to cluster rates
into a few groupings of similar programs and
then work on controlling these clusters or rate
categories.
The goal of yield management is to select
which business to accept and which business
to turn away (when demand exceeds supply),
based on the relative value of each booking.
Most properties do not need more than four
to six rate buckets for their transient book-
ings. As an example, the following gives tran-
sient rate categories that combine programs
of similar value:
Level 1 Rack (no discount)
Level 2 10 to 20 percent discount
Level 3 25 to 35 percent discount
Level 4 40 to 50 percent discount
Level 5 greater than a 50 percent discount
Each level or bucket in the above hypo-
thetical structure might comprise several
1327.ch04 12/19/05 9:30 AM Page 133
room rates. Given such a structure, a manager
need not agonize over whether to restrict
rooms offered at a rate of $150 in hopes of
getting a rate of $155. While it is given that
those $5 bills would pile up, the complexity is
not worth it, especially when one might be
working so hard on the $5 difference that one
overlooks the opportunity to earn, say, $50
more by selling at rack rate.
If a given set of discounts isn’t working,
the hotel should change the categories. For in-
stance, if a hotel’s business fell entirely in
Level 1 and Level 2, with virtually no business
in Level 3, a manager should rearrange the
rate buckets. The three rate buckets could be
discounts from rack rate of 10 to 15 percent,
20 to 40 percent, and greater than 40 per-
cent—or any other arrangement that makes a
meaningful division among rate categories.
The following principles apply to setting
up categories to manage rates at a hotel:
1. Segment programs based on clusters of
discounts representing similar values.
Yield management requires risk and re-
ward management. Rate categories are
designed to enable turning down one
booking request in favor of a higher-value
booking projected to come later. How-
ever, risking $150 in certain revenue in
hopes of achieving a $155 booking seems
to make little sense if the latter is not a
sure thing.
2. In deciding whether to accept a particular
customer’s business, take into account
both the cost of opening rooms and the
offsetting ancillary spending that occurs
when a room is sold. To take an extreme
example, the most valuable guest for a
casino-hotel—the high-stakes gambler—
might be paying the lowest room rate.
3. Limit the total number of transient rate
134 Chapter 4 ? Operations: Rooms
categories to no more than six or so, par-
ticularly if there is no automated yield
management system. The chief reason for
that limit is that yield management re-
quires forecasting demand for each rate
category. Not only is it time-consuming to
forecast numerous categories (with di-
minishing returns as the number of cate-
gories increases), but the more categories
are created, the less accurate the forecasts
are for each.
4. Each rate category should have a reason-
able volume of activity to allow monitor-
ing of traffic in that category. If it is found
that one of the categories is rarely used,
consider redistributing the rate hierarchy.
5. Group business should have a separate
hierarchy of buckets to allow the operator
to track pick-ups of room blocks. In addi-
tion, mixing group activity with individual
booking activity clouds the historical in-
formation as you trend data by which rate
categories are collected.
?
RATE CATEGORY
CONTROLS
The point of yield management is to use de-
mand forecasts to determine how much to
charge for rooms on a given day. When the
hotel sells out, the ability to determine which
reservations to accept or deny is lost, because
all requests for the sold-out date (including
those for multiple-night stays that involve the
sold-out date) must be rejected. A property’s
yield management objective should be to sell
out the hotel as close to the arrival date as
possible, because the further in advance the
hotel is sold out with discounted (or short-
stay) business, the greater is the likelihood
1327.ch04 12/19/05 9:30 AM Page 134
that high-value bookings will be turned away.
This forecasting regime requires a continual
process of comparing remaining demand for
high-rate stays (and multiple-night stays)
against remaining available inventory. Rate
category controls help ensure available inven-
tory to accommodate the projected high-rate
demand.
Table 4.1 demonstrates how rate cate-
gories are controlled to increase total room
revenue. The table assumes a 500-room hotel
(or a hotel with 500 rooms remaining to be
sold). The objective is to hold rooms open for
high-rate demand without leaving a large
number of rooms unsold. In this example, al-
though the hotel would prefer to sell all 500
rooms at rack rate, the hotel’s managers pro-
ject that they can sell 380 (or more) rooms at
rack rate. Their inventory plan is set up to
maintain room availability for this forecasted
high-rate demand. The managers would like
to sell the remaining 120 rooms in the next
rate category down (Bucket 1), but their de-
mand forecast projects they will not be able to
sell all 120 in that rate category. Based on cur-
rent trends, however, even though they have a
total of 500 rooms to sell, they won’t be sell-
ing any rooms in the deep-discount category
because there is sufficient demand at higher
rates.
Section 4.4 ? Yield Management: Choosing the Most Profitable Reservations 135
When evaluating how well a property is
managing its inventory, there are two basic in-
dicators: (1) On dates the property is selling
out, it should be observed how far in advance
that sellout occurs; (2) if the property is not
selling out, it must be determined whether the
property ever turned away business as a result
of discount controls or because the property
had committed too many rooms to groups—
that is, if a group does not pick up its room
block, did the hotel, as a result, refuse reser-
vations from transient guests?
Full-occupancy dates frequently receive
less attention from property managers than
one might expect, given the revenue potential
of a sellout. One reason is that some proper-
ties are too slow in closing out discounts to re-
strict room availability to expected high-rate
business. Hotels do close the discounts, but
not always soon enough. A common practice
is to set threshold levels at which discounts
are closed at a predetermined level (90 per-
cent occupancy, for example). While this ap-
proach is well meant, all it succeeds in doing
is preserving the last 10 percent of the hotel’s
inventory for high-value guests, when a proac-
tive approach might shut down discounts ear-
lier and gain the hotel even more high-paying
guests (and revenue).
Another reason hotels often don’t focus
Table 4.1 Hypothetical Room Rate Structure
Discount Off Available Rooms Demand
Rate Buckets Rack Rate (estimated) Forecast
Rack (General) None 500 380
Bucket 1 10%–20% 120 63
Bucket 2 25%–35% 57 75
Bucket 3 40%–50% 0 140
1327.ch04 12/19/05 9:30 AM Page 135
on sold-out dates is that the persons responsi-
ble for managing the hotel’s inventory are
also usually responsible for high-profile tasks,
including forecasting daily occupancy. Thus, a
revenue manager may spend more time de-
termining whether a particular date will run
an occupancy of 65 percent or 75 percent than
determining how to make the most out of ex-
cess demand on a projected l00 percent occu-
pancy date. The process of forecasting a date’s
occupancy is important, but so is determining
how to gain the most revenue from a sold-out
date.
For all the time spent in month-end analy-
sis of occupancy levels, average rates, and
market comparisons, rarely is conclusive evi-
dence found that properties perform as well
as they could. Moreover, the more often those
two questions are asked (i.e., did we fill too
early? and did we turn away business on days
we didn’t fill?), the more employees work to
give the desired revenue results. As occurs in
many cases, you get what you inspect, not
what you expect.
?
LENGTH-OF-STAY
CONTROLS
Implementing length-of-stay controls takes
the rate management decision a step further.
The essence of rate category control is having
one room left to sell and deciding whether to
sell it to one guest for $100 today or to wait
and sell it to another guest for $150. The
essence of length-of-stay controls, on the
other hand, is having one room left to sell at
$150 and deciding whether to sell it for one
night or to wait, with the prospect of selling it
to another guest for four nights. In the rate
136 Chapter 4 ? Operations: Rooms
category decision, the hotel can net an addi-
tional $50, while the length-of-stay decision
can generate as much as $450 in additional
revenue.
Managing stay lengths is complex, but
mastering length-of-stay patterns may be the
most rewarding of yield management func-
tions. The most sophisticated inventory man-
agement controls requests down to granular
levels of detail: by program or rate category,
by length of stay, or by day. This level of con-
trol really requires an automated system. As
is the case with managing rate discounts, how-
ever, measurable revenue improvements con-
nected to length of stay can be achieved
without sophisticated automated systems, as
long as the application of controls is kept
fairly simple.
Just as setting rate control categories re-
quires an understanding of demand by rate
category, length-of-stay management requires
an understanding of demand by various
length-of-stay intervals. To make the call in
the above example, the manager needs to
know the level of demand for four-night stays
before he or she turns away (or accepts) the
request for a one-night stay.
The most common length-of-stay statis-
tic used in the hospitality industry is average
length of stay, which describes the average
duration of a guest’s hotel stay over a range
of dates. One needs more effective statistics
than simple average length of stay to manage
stay patterns. What the revenue manager
needs to know is the total number of arrivals
on a given date for one night, two nights,
three nights, four nights, five nights, and so
forth. To illustrate the difference between
those two statistics, imagine that a manager
was determining whether to apply minimum-
stay restrictions on a peak night. The man-
1327.ch04 12/19/05 9:30 AM Page 136
ager could know that the average length of
stay is 3.6 nights, or the manager could have
specific length-of-stay information (e.g., 10
percent of the arrivals on a given date are for
one-night stays, 25 percent are for two-night
stays, and so on). Naturally, the manager
wants to know how much of the demand will
be affected if he or she were to reject all
one-, two-, and three-night stays with the ex-
pectation that the hotel can be filled with
people staying four or more nights. Table 4.2
shows an example of a chart with this type of
information.
Most central reservation and property
management systems developed in the last
few years facilitate stay pattern controls, al-
though at varying levels of sophistication. The
ideal system enables a property’s managers to
set controls for each arrival date by discrete
lengths of stay. Such a system enables the
property to close availability to one-, four-,
five-, and eight-night stays, for instance, but al-
low stays of two, three, six, seven, or nine
nights (or longer). Most new systems at least
allow minimum-stay controls by rate category.
Section 4.4 ? Yield Management: Choosing the Most Profitable Reservations 137
Caution: One aspect of yield management
systems’ stay controls can become overused.
Most systems allow managers to place a
closed-to-arrival restriction on selected dates.
This restriction enables a property to sell
through stays arriving before the given date—
that is, multiple-night stays for which the
closed date is a second or subsequent night—
but rejects all requests to arrive on that date.
The problem hotels create for themselves by
using this approach is that they end up saving
space for two- and three-night stay-throughs
while rejecting multiple-night stays by guests
proposing to arrive on the closed night.
Obviously, the hotel does not want to lose
revenue from stay-through guests to those
staying for just the closed night, but having
the system forbid a multiple-night stay that
begins on the peak night may actually be
worse than having no controls at all. In such a
case, some form of minimum or other discrete
length-of-stay controls is appropriate. Any
property still using a flat closed-to-arrival re-
striction should reconsider in light of this
problem.
Table 4.2 Hypothetical Stay-Length Forecast
Arrivals per Day
Length of Stay (Days)
Day Occupancy Arrivals 1 2 3 4 5?
Wednesday 76% 117 7 9 21 41 39
Thursday 82% 103 8 17 21 24 33
Friday 90% 118 10 24 12 26 46
Saturday 100% 138 28 23 22 28 37
Sunday 83% 111 19 13 16 22 41
Monday 78% 86 12 13 18 21 22
1327.ch04 12/19/05 9:30 AM Page 137
?
GROUPS: RATES, DATES,
AND SPACE
Yield management is usually thought of in
the context of turning away undesirable busi-
ness during excess demand periods. However,
the real art of yield management is learning
how to turn undesirable booking requests
into desirable ones. Thus, an important ele-
ment of yield management is teaching all em-
ployees the art of saying yes.
The art of saying yes is particularly im-
portant in negotiating group business, which
generally involves decisions about rates,
dates, and space. Rates are how much the
group is going to pay; dates are when the
group is going to be staying; and space is how
many rooms the group will use. Turning an
undesirable proposal into a desirable contract
involves varying these components until both
the hotel’s sales associate and the meeting
planners have what they consider a worth-
while package. Too often, hoteliers either
deny a group’s request outright or focus on
adjusting the group’s proposed room rate to
make the request appealing to the hotel. At
times, the better response is to give the group
the rate it requests but to change the dates of
the proposed business to a time when the ho-
tel’s forecast is for empty rooms. Even less ob-
vious is the option to ask the group to change
the number of rooms it proposes to block.
Committing to more rooms (and thus more
overall revenue) or fewer rooms (reducing
displacement) leaves the opportunity to sell
to a second group interested in your property.
Applying revenue management princi-
ples to group business involves more than
changing a group’s proposal from undesirable
to acceptable. Perhaps even more important
is the ability to make a proposal that is merely
138 Chapter 4 ? Operations: Rooms
acceptable into a contract that represents a
great piece of business. Working within a ho-
tel’s normal acceptable boundaries, one thing
that typically makes a proposed piece of busi-
ness undesirable is the hotel’s ability to sell
that space to others at a better profit margin.
That’s why the most common response to an
unacceptable proposal is to ask for a higher
price.
Turning a mediocre proposal into an ex-
cellent piece of business might work as in the
following example. Say that one group re-
quests 200 rooms at a 350-room hotel for $80
per room, which is a $16,000 piece of business
that was really not expected. The forecast
shows that the total revenue without the
group for that date would have been $29,000
with 290 rooms booked at an average rate of
$100. The group’s business will bring the hotel
to 100 percent occupancy and generate a total
of $31,000 in revenue (having displaced some
of the forecasted transient arrivals). The rev-
enue on the 60 extra rooms gives the hotel
more than enough incentive to accept this
group, with a $2,000 increase in total revenue.
(Assume per-room ancillary spending offsets
the variable costs on the extra rooms.)
Any good sales director is going to feel
good about the $16,000 in business he or she
helped bring to the hotel. Even if someone
points out that the business really brought
only $2,000 in additional revenue to the hotel,
there still is reason to feel good about this
arrangement. Another way to look at this
group, however, is that it represents $16,000 in
unanticipated room revenue from which the
hotel is extracting only an additional $2,000 in
revenue because the group has displaced
higher-rate business. By manipulating the
other variables and, in this case, moving this
group to a date that will displace little other
business, the hotel can extract maximum
1327.ch04 12/19/05 9:30 AM Page 138
value from this group. Even if the hotel
needed to reduce the room rate to $60 to en-
tice the group to move to other dates, the
added value would be $12,000 instead of
$2,000, because the group would be displacing
less (anticipated) higher-rate business. Note
that the calculations for this example are for
only one night, but a group would typically
stay for multiple nights, thus amplifying both
the benefit of moving the group and the
penalty for accepting the proposal as offered.
The hotel could also propose that the
group’s room block be smaller—for example,
in a situation where the group is attending a
convention for which the dates are already
fixed. This proposal is less effective from both
the hotel’s point of view and that of the
group, but it still increases the value of the
group. Because the forecast is that the group
would displace 140 rooms that would have
sold to transients at $100 each, the hotel gains
back $20 in displaced revenue for every room
sold to transients instead of to the group. Cut-
ting the group’s room block in half, for in-
stance, actually nets the hotel another $2,000
in revenue. While the group has little incen-
tive to reduce its request for rooms (unless
the market is otherwise sold out), the hotel
could insist that the group block fewer rooms
if the group’s original offer did not make up
for revenues the hotel would have obtained
from transients.
?
CONCLUSION
Whether a hotel is just getting started or is
ready to take the next logical step toward
more sophisticated inventory controls, sys-
tems are available to support its efforts.
The concept of volume discount does not
always apply in an environment where the
Section 4.4 ? Yield Management: Choosing the Most Profitable Reservations 139
supply is limited, as in the case of a hotel that
is near to selling out. Sometimes less is more.
This is a particularly important message for
meeting planners who inflate their numbers,
assuming this will make their business more
appealing to the hotel.
Unfortunately, forces may work against
taking the types of revenue-enhancing actions
discussed here. One is the tendency to accept
the first option that clears the hotel’s mini-
mum standards, or to accept the business but
negotiate on the rate. Current sales-incentive
plans are possibly another hindrance to these
opportunities. Even the more progressive in-
centive plans that reward sales activities
based on revenues rather than just room-
nights can discourage behavior that benefits
the hotel. This is done by encouraging the
salesperson to book business that may not de-
velop the highest revenue for the hotel, as in
the example of the group that proposed to
book 200 rooms.
?
CASE STUDY: THE
POWER OF
INFORMATION
This case study explains how Disney uses sim-
ple information about hotel guests’ stay pat-
terns to increase revenues at their Orlando
resort hotels (Quain et al., 1998). One of the
highest-demand weeks of the entire year in
Central Florida is the holiday week between
Christmas and New Year’s Day. Ironically, this
strong week is followed by one of the lowest-
occupancy weeks of the entire year, the first
week of January. Disney’s Orlando resorts
typically sell out the Christmas to New Year’s
dates by the end of September, if not sooner.
But the first week in January has been a
1327.ch04 12/19/05 9:30 AM Page 139
challenge for Walt Disney World’s marketers,
who have developed programs and events to
fill the void caused by the exit of the holiday
crowd. Although Florida residents can be
tempted with deep discounts to boost the oc-
cupancy for the month of January, the resorts
cannot develop enough demand to fill their
rooms one week following one of the biggest
holidays of the year.
Disney took many creative measures to
boost the resorts’ occupancy that week. For
example, the Walt Disney World Marathon,
which was originally held during the three-
day Martin Luther King Jr. holiday weekend
to help ensure the race’s success, was moved
to the first weekend of January. The move was
a win for both the race and the hotels. The
Martin Luther King holiday weekend main-
tained its strong occupancy levels without the
marathon, and the end of the first week of
January received a much-needed occupancy
boost from the marathoners and their fami-
lies. The good news for racers, moreover, was
that more of them could find a room at the
Walt Disney World resorts because they no
longer had to compete with vacationers for
limited rooms over the King holiday week-
end. Despite the marathon’s success, Walt
Disney World’s marketers knew this was not
the complete answer, and they continued to
look for ways to increase hotel occupancy im-
mediately following the holidays.
As part of the effort to increase occu-
pancy during the first week of January, the
revenue management department at Disney
began studying ways to use minimum-stay
controls in conjunction with New Year’s Eve
to preserve rooms for guests who wanted to
stay beyond New Year’s Day. This was in the
early days of yield management, when length-
of-stay controls were relatively uncommon
and a new corporate culture had to be devel-
140 Chapter 4 ? Operations: Rooms
oped. Such a seemingly extreme concept drew
skepticism and concern within the company.
Senior managers had to be reassured that this
new form of controlling inventory would not
end up causing them to carry empty rooms
during their busy season.
In another demonstration of how knowl-
edge is power, the revenue management de-
partment had recently developed a report
that summarized arrivals by length of stay (a
concept discussed by Cross, 1997). This report
demonstrated two things: First, they did in-
deed have demand for guests arriving late in
the holiday week and staying through several
days into January; second, over 35 percent of
arrivals during the holidays were guests stay-
ing three or fewer nights. Disney’s estimates
of unconstrained demand over the holidays
indicated it could easily afford to accept stays
of four nights or longer only and still sell out
its peak nights.
Taking a deep breath, Disney’s revenue
managers set a minimum-stay restriction for
arrivals during the holiday week accepting
reservations for four nights or longer only.
This calculated decision was intended to im-
prove revenue during the first week of Janu-
ary while presenting minimal risk to the
normal strong revenues during the preceding
holiday week. The experiment attracted at-
tention throughout the company. When late
September came and the resorts were not
sold out, some people were concerned the
holiday might not fill. However, the forecast
predicted the resorts would not be sold out by
the usual late September date under the four-
night minimum stay restraint. Because of the
limitation, Disney was turning away shorter-
stay requests that in previous years would
have been accepted (and sold out the holiday
week by September), with the forecasted ex-
pectation that the resorts could book longer
1327.ch04 12/19/05 9:30 AM Page 140
stays to guests calling in October, November,
and even early December. Trend reports
helped affirm the resorts were still on a pace
that would sell out the hotels, which eased
some minds in the revenue management de-
partment. (It is worth noting that guests de-
siring a short stay could be offered almost
their pick of rooms the week after New Year’s
Day.)
The final results were well worth the ef-
fort and nail-biting. The hotels filled to capac-
ity over the holidays, having sold out in late
October. Occupancy for the first week of Jan-
uary rose 10 percentage points, almost en-
tirely driven by guests arriving prior to New
Year’s Day and staying the minimum four
nights. The room revenue contribution alone
was worth over $1.5 million.
Disney’s success in this example high-
lights a simple principle that many hotels
miss. Disney was not paralyzed by the fact
that it did not have perfect information or
that it was not in a position to maximize rev-
enue with optimal inventory controls. Instead,
Disney’s revenue managers made use of the
information available to them to achieve a
measured improvement in revenue while
minimizing their risk.
?
THE REVENUE
MANAGEMENT GAME
The following game (accessible at www.
goconcierge.net/gotconcierge/gotconcierge.
pdf), developed by Dennis Quinn, has been
used by guest speakers at Cornell University’s
School of Hospitality Administration to initi-
ate discussions on the objectives of yield man-
agement. It is not an exercise in identifying
who is proficient at yield management deci-
Section 4.4 ? Yield Management: Choosing the Most Profitable Reservations 141
sions. Rather, it is intended to demonstrate
how capacity controls can affect a hotel’s rev-
enues and to develop an appreciation for the
process throughout the organization.
?
Objective
Maximize room revenue for a five-room
hotel.
?
Rules
As each reservation request is announced
(use Table 4.3), participants decide whether
they wish to accept the request at the time it
is made. Accepted reservations are recorded
on the chart with the room rate written in
each date block (Table 4.4). Once a day is sold
out, subsequent requests that include that day
must be rejected. At the end of the game, par-
ticipants add up the total revenue they gener-
ated for that week.
Hints
• Participants cannot go back and add a
prior reservation once the next call is an-
nounced. The prior guest has hung up and
booked with the competitor.
• No, overbooking is not an option.
• The host should fill in a booking grid on a
first-come, first-served basis, denying re-
quests only when days are sold out. This
will serve as the no-control method.
• You can let the audience know they will
receive a maximum of 18 calls, if you want
to help out.
• Remember, this is not a game of skill. It is
a game for demonstration and discussion.
The hotel’s next revenue manager will not
1327.ch04 12/19/05 9:30 AM Page 141
be selected based on the results of this
game!
?
Game Discussion Points
Each participant should compare the differ-
ence between optimal revenue and the actual
revenue achieved. (Optimal revenue in the
above game is $2,360.) Divide the difference
142 Chapter 4 ? Operations: Rooms
into actual revenue to show the percentage of
potential improvement. For example, if a par-
ticipant earned $2,000, the potential for im-
provement is 18 percent—that is, (2,360 ?
2,000) ? 2,000 ? 18.
How much is that percentage improve-
ment in annual room revenue worth to the
hotel? How about half that improvement?
How much revenue might management be
leaving on the table at the hotel? For exam-
Table 4.3 Reservation Requests
Call Room Arrival Stay
Number Rate Day Length Comments
1 $ 80 Thurs 3
2 $ 80 Tues 2
3 $120 Fri 2
4 $ 40 Mon 1 $40 is below your average rate goal for the week. Should you take it
anyway if Monday is going to run vacant? We’ve seen incremental
groups turned away because management warned sales to meet the
monthly average rate goal. Be careful of what you ask for.
5 $120 Tues 1
6 $ 60 Thurs 3 First, tell audience this is AAA discount (instead of telling them the
rate). Point out the value of tracking rates versus source of business
when managing inventory.
7 $120 Sat 1
8 $ 60 Tues 5
9 $ 60 Thurs 3 This is a package that includes dinner shows, meals, and recreation,
which adds $110 in value to the hotel each night. Discussion: room
revenue goals versus total profitability. Assign programs to rate
buckets based on total value, not just room rate.
10 $ 40 Tues 5
11 $ 80 Tues 5
12 $120 Sat 1
13 $100 Mon 2
14 $ 60 Fri 2
15 $100 Fri 2
16 $100 Sun 7 What does it cost for you to lose this business?
17 $ 40 Sun 3
18 $ 60 Sun 4
1327.ch04 12/19/05 9:30 AM Page 142
ple, what would be the hotel’s annual room
revenue multiplied by 118 percent? How
about by 109 percent?
What is the percentage occupancy of the
hotel in the no-control environment? How
does that make participants feel about low-
occupancy months?
Section 4.5 ? Concierge 143
Did anyone score below the no-control
level? What does this tell you about the need
to make responsible decisions when accepting
reservations?
4.5 CONCI ERGE ( CONE- SEE- AI R- J )
Mario Arnaldo
Table 4.4 Booking Grid for Five-Room Hotel
Fill in the room rate for each accepted reservation for the appropriate number of days.
Sun. Mon. Tues. Wed. Thurs. Fri. Sat. Total
Room 1
Room 2
Room 3
Room 4
Room 5
Total
I vividly remember my first and last contacts
with a concierge.
First contact. Not knowing the correct
term, I would simply have called him “the
Supe,” or building superintendent. We had
just moved to France after enjoying a year in
Somalia, East Africa. My dad used to work for
the United Nations, so we literally moved to
different countries and continents every two
or three years. This time our home was an
apartment on the seventh floor of a well-used
building in the immediate outskirts of Paris.
We have our own concierge? Wow! And his
name is Monsieur Guy de Roquefort? I was
only 14 years old, so it was easy to get im-
pressed, or disappointed. Well, Monsieur de
Roquefort’s scent certainly reminded me of
the cheese with his namesake. He was un-
shaven and less than tidy. His uniform du jour
was an undershirt, a stick of Gauloises
1327.ch04 12/19/05 9:30 AM Page 143
(French cigarettes) in one hand and a glass of
cheap beaujolais in the other. But Guy had a
good heart, engaged me in titillating conver-
sations about “cherchez les femmes” (much
more rewarding than the four-hour French
lessons I had in school), always fixed the toi-
lets that wouldn’t flush, and delighted in an-
nouncing every single piece of mail we
received. He probably would not get within
50 feet of an employment agency. However, if
I could give him a shower and a shirt, I would
hire him in a heartbeat. Monsieur Guy de
Roquefort’s soul was in the right place. I still
remember him, see? That was in 1964.
I fondly remember my most recent con-
tact with a concierge.
Last contact. This article was written in
2004. Forty years later is a long stretch of time
after my first contact with a concierge. Thanks
to my dad’s international assignments, I’ve
used up seven passports. Thanks to my two in-
ternational airline jobs, I’ve filled up my last
passport with immigration stamps from 32
cities in five continents. I have enjoyed a priv-
ileged opportunity to meet and work with a
multitude of professionals, but one, in partic-
ular, in Seattle stays in my memory.
She was punctual. Polite. Charming. En-
dearing. Never forgot the slightest detail.
Never overbearing or invasive. Made my
socks roll up and down with legendary ser-
vice. Went way beyond the call of duty in an-
swering the simplest of requests. “Where can
we get great fresh oysters? Where is . . .? How
do we . . .?” It was as if my engagement and
honeymoon to come were made in heaven.
This was in 1997. Since then, she has faithfully
written us every year during the holiday sea-
son with neat, short, handwritten, personal
notes. Her envelopes are also written by hand.
She does not use insensitive, computer-
generated labels. She always hopes we will
144 Chapter 4 ? Operations: Rooms
come back to visit her again and enjoy Seat-
tle. She has never asked questions like, “Can
we book a room for you?” We correspond
regularly about hospitality concepts to bring
reality to my hospitality students, or ideas she
can bring to her in-house training programs.
On two occasions, Mr. Robert Thurston, man-
aging general partner, enthusiastically gave us
permission to study his hotel as a class proj-
ect, long-distance from Honolulu!
That’s Annie Delucchi, former concierge
at the Inn at The Market, a great boutique ho-
tel in Seattle, literally a shout away from Pike
Place Market. Eight months prior to our ar-
rival at the IATM, my fiancée and I had never
met Annie. All our interactions were via
email. Not even a phone call. Annie has since
been promoted to executive liaison at the
IATM. Know what? If my wife and I were
given complimentary reservations at another
Seattle property, we would still go to Annie’s
property and pay for our rooms. You see, I’m
not just a reservation record on the IATM
database. I can be me, someone who has a
preference for fresh oysters! My wife is not
“the Mrs.” She, too, can be herself. She can
spend the whole day walking back and forth
to Pike Place Market to select just the right
bouquet of fresh flowers or just the right jew-
elry accessories. Annie Delucchi’s soul is in
the right place.
Wassup? During the fall 2003 semester, I
was designing interactive games for my inter-
national students to enjoy as part of our
weekly class discussions. One of these games
was the Concierge Game. This game is the ba-
sis for the research I did on concierges for this
article.
So I reviewed the Withiam concierge arti-
cles, used Google to point me to a few hun-
dred pages of articles, scoured dozens of
concierge-related websites, emailed and
1327.ch04 12/19/05 9:30 AM Page 144
talked to dozens of hospitality professionals,
and finally interviewed concierges in Hon-
olulu, Hawaii, to highlight six significant find-
ings about the modern concierge. The six
findings concern passion, titles, technology,
Les Clefs d’Or, stars, and Aloha!
Finding #1: Passion. The concierges and
guest service staff I talked to, whether they
had their keys or not, are, without exception,
passionate about what they do. They all have
what some have called gotta-wanna, an al-
most insatiable desire to exceed customer ex-
pectations with minor regard for themselves
or the time clock.
Finding #2: Titles. Got concierge? Job ti-
tles I compiled included concierge, head
concierge, chef concierge, concierge supervi-
sor, lobby concierge, guest service agent, guest
services manager or supervisor, activity agent,
and the more recent compcierge and tech-
nocierge, for those who assist road warriors
with laptops and other electronic parapherna-
lia. However, whether or not properties enjoy
a keyed concierge, management must openly
recognize and support the need to provide
concierge services. Anecdotally, seasoned
concierges, no matter what they are titled, will
tell you, as do Nargil, Kahn, and Peterson
(2003) that “one doesn’t have to be at an up-
scale property to provide the kind of service
that will keep guests coming back.” Presence
of a concierge, keyed or not, is a plus when it
comes to four-star and five-star ratings (Mo-
bil Travel Guide) or four-diamond and five-
diamond ratings (AAA). The concierges and
guest service staff I met are part of front desk
operations, with a designated area close to—
but distinct from—the check-in area. When I
visited some Honolulu hotels, the front desk
areas appeared to have lulls in operation dur-
ing midmorning hours, after check-out rush
time, and before afternoon check-in times. In
Section 4.5 ? Concierge 145
contrast, the concierge area appeared to be
continuously busy whether midmorning,
noon, afternoon, or early evening.
More and more organizations are answer-
ing “Yes!” to the question “Got concierge?”
A fall 2003 television series, Life of Lux-
ury, with Robin Leach, featured one of the
more exclusive U.K. concierge services, Quin-
tessentially. Quintessentially, a membership
organization affiliated with luxury facilities
worldwide, essentially provides the same
services the lobby-based concierge would
without the restrictions of being in a facility.
According to their website (www.quintessen-
tially.com/home.php):
Quintessentially aims to satisfy practically any
last-minute whim our members may have, from
front row seats at a fashion show and spur of
the moment chartered yachts, to impossible din-
ner reservations at some of the world’s most ex-
clusive restaurants and last-minute theatre
tickets, and with 24/7 member telephone and
email assistance our experts are always on hand
to save you time, hassle and money. Fantastic
offshoots of the Quintessentially brand include
the Quintessentially magazine and the exclu-
sive Quintessentially ‘Beyond Black’ credit
card. Quintessentially members are also contin-
uously kept up to date with what’s hot and
what’s not through our weekly newsletter, of-
fering indispensable advice on the essential art
and cultural events of the moment, as well as in-
vitations to charity affairs, gala balls, shopping
evenings, film premieres and exclusive after-
event parties.
In the middle of finalizing this article in
December 2003, my own university, Hawaii
Pacific University, advertised its latest service.
Guess what it was? Yep! A concierge desk to
help students and other stakeholders access
and utilize the services of the university.
1327.ch04 12/19/05 9:30 AM Page 145
Finding #3: Technology and the Comp-
cierge. I predict that no amount of technology
will ever replace the concierge or guest ser-
vice staff. Inger Boudouris and the other
concierges I interviewed or emailed agreed
with this prediction. However, there is room
to enjoy and take advantage of what the cur-
rent technology has to offer. You don’t have
to look far. Check out the extensive usage of
PDAs in last fall’s TV series Las Vegas and
The Threat Matrix. At one end of the technol-
ogy spectrum, the Westin Santa Clara uses
Sony’s Contact-ME for remote video confer-
encing from the concierge’s home (a three-
hour round-trip commute) directly to the
hotel lobby’s monitor, some 80 miles away.
After some weeks of emailing, I obtained per-
mission from the Westin Santa Clara general
manager and support from Clifford Planning,
LLC, a premier Hawaii-based architectural
firm, to conduct a one-hour videoconference
between Anna Morris and my hotel and re-
sort management students. We had a terrific
experience; this is a perfect example of the
application of technology to enhance a tradi-
tional service rather than replace it.
At another level of technology, interac-
tive software programs such as GoConcierge
(GC) [http://www.goconcierge.net/home/] al-
lows a user to manage and provide guests
with information and services in a consis-
tently impressive manner. Adam Isrow, who
designed and developed this interactive web-
based program, provided me a username and
password and gave me an opportunity to val-
idate and confirm for myself how user-
friendly GC was. I predict the concierge’s
uniform will include a wireless PDA, a
camera-video cell phone, a software program
similar to GoConcierge, and other electronic
gadgetry. Isrow said in an interview:
146 Chapter 4 ? Operations: Rooms
I think you appropriately summarize the com-
monality of the concierge position with passion!
These people (generally speaking) love what
they do, love people, and are therefore great
people to be around. I enjoyed your predic-
tion—video cell phone and a PDA—I don’t
think you are too far off!
And then there’s Mike Doi, a guest ser-
vices coordinator, sitting in the Outrigger
lobby on Waikiki Beach, with his uncanny
memory for names, places, phone numbers
and his reliable Rolodex. He does have a
computer monitor at his desk, but like many
concierges, prefers not to use it while inter-
acting with a guest. Mike also shifts from
speaking English to Japanese to pidgin and
back without blinking an eyelash, on the
phone and with walk-ins who step up to his
desk.
Others exemplified by Dave Nishi and
Sally Yates agree it would be wonderful for
their properties to enjoy state-of-the-art tech-
nology, more computers, more staff, and more
space. From my conversations with them, I
found that both Dave and Sally are equally
adamant about not letting the gadgetry come
between the guest and the service provider.
Know what? Dave, guest services manager at
the Ohana Maile Sky Court, can’t even spell
Les Clefs d’Or, but he has over 25 years of
customer service under his belt. Dave also has
many years of information technology (IT)
experience, but given the choice, says, “I al-
ways prefer to deal with the guests face to
face. Sometimes you just can’t trust your com-
puter or PDA.” Sally is one of only a handful
of Les Clefs d’Or concierges in Hawaii, and
she has enjoyed her position as senior
concierge at the Halekulani Hotel for over 10
years. She says, “We enjoy working with our
guests on a personal one-on-one basis at the
1327.ch04 12/19/05 9:30 AM Page 146
desk, and sometimes the computer work
takes us away from that service.” One concern
we discussed was maximizing eye contact
with the guest, or avoiding interactions that
take your eyes away from the guest.
I found these statements enjoyably re-
vealing because (a) they were self-initiated,
(b) Dave works in a three-star property and
Sally in a four-star property, and (c) Dave and
Sally have never met.
Finding #4: Les Clefs d’Or (LCD) USA.
In the original Withiam article on concierges
(1983), there were about 40 members in LCD
USA. Back then, many travelers didn’t know
whether a concierge was Mozart’s second
movement in D flat or the alternate entrée. In
1993, there were 200 U.S. concierges in the
LCD membership, and the savvy traveler
started looking for the concierge. Even in fic-
tion, 007 (James Bond) had his hotel con-
tacts—concierges! In 2003, there were 450
concierge members in LCD USA represent-
ing over 100,000 rooms in 250 four- and five-
star properties.
Over 3,400 international members from
37 countries make up the LCD worldwide.
The LCD headquarters in Paris is called the
Union International des Concierges d’Hôtels.
Although the concierge position is predomi-
nantly male in Europe and other countries, 53
percent of U.S. concierges are female.
Concierges continuously network with
one another and the communities in which
they work. Concierge associations are found
in many cities throughout the United States.
Some only admit hotel concierges as mem-
bers (LCD as well as non-LCD concierges);
others include local vendors and employees
from car rental agencies, tour companies, tour
guides, restaurants, art galleries, and so on
(maybe even university concierges! Who
knows?).
Section 4.5 ? Concierge 147
Many concierge country sections also
have community-based organizations. In the
United States, for example, Les Clefs d’Or
Foundation of the Americas (United States,
Canada, Mexico, and Brazil) provides finan-
cial support and in-kind donations of goods
and was founded to respond to the suffering
of concierges and/or their families and signif-
icant others affected by catastrophic or life-
threatening illnesses.
Charles Holzer, director of media for
LCD USA and chef concierge at the River-
Place Hotel in Portland, Oregon, explained to
me:
Each [LCD local chapter] is different in its
composition, yet each association’s purpose is
the same: to positively enhance the guest expe-
rience through knowledge, education, mentor-
ing, networking, and friendship. In general, local
meetings consist of an educational element,
whether that is speakers from local organiza-
tions, vendors, or attractions. This could also en-
tail bringing in members from the hospitality
industry to discuss strengthening the concierge
desk, enhancing revenue, or working in a more
supportive manner with management.
After I interviewed Inger Boudouris by
phone, we spoke and corresponded many
times. In one of our discussions, this is what
Inger told me about concierges:
You know, being a concierge is being a
“concierge for all seasons,” because you must
be able to turn around on a dime, multitasking
and at the same time making important deci-
sions while talking on the phone, et cetera! I
love being a concierge because of what I call the
unpredictable challenges, and it makes one’s
life very exciting—no day, no hour, no minute is
the same. There is no time for stress because
you are always in the midst of happenings.
1327.ch04 12/19/05 9:30 AM Page 147
Today, it’s snowing. We have a wedding cere-
mony in our lobby this afternoon. Afternoon
tea will be served in the pub today, wedding re-
ceptions everywhere, and in the middle of
all this, guests will be checking in and out—I
love it!
A brief but supremely informative phone
interview with Shujaat Khan, vice president
of LCD USA and chef concierge at the Capi-
tol Hilton in Washington, D.C., revealed these
weathered and tested beliefs:
• Time management of your skills is ex-
tremely important when you have only
limited resources!
• How much do you really love people?
The professional in you needs to come
out, especially when you’re being chal-
lenged with the unruly customer, the
overdemanding VIP, or the jealous signif-
icant other!
• The successful concierge operation is al-
ways a major business revenue generator.
• How do you fix the dissatisfied? The
process usually ends up being more im-
portant than the end product.
• Of paramount importance to the future
concierge: exercising the best balance of
ethics and the highest code of conduct.
Finding #5: Got stars? Not? Don Mas-
sagli (2002) wrote an article that at first
glance appears to be a straightforward com-
mentary applauding the assurance, confi-
dence, and customer relations packaged in
your hotel concierge. The reader should
know that Massagli brings an uncommon
perspective, as he is the senior vice president
of Park Ridge, Illinois-based Mobil Travel
Guide (http://www.mobiltravelguide.com/).
The Mobil Travel Guide inspects and rates
148 Chapter 4 ? Operations: Rooms
thousands of hotels and restaurants and pub-
lishes the travel guide and other travel publi-
cations. Coincidentally, I had an opportunity
to interview Massagli in person; he repeated
to me that concierges add a touch of distinc-
tion to any property, regardless of its star sta-
tus. I predict that hotel management will
pay increasingly more attention to their
concierge and concierge services, whether the
property has two stars or five. Jameson
(Withiam, 1993) sums it up best: “[G]uests
are going to ask the kind of questions that
concierges routinely answer, regardless of
whether the hotel has a concierge desk.”
Finding #6: Aloha. (In Hawaii, Aloha
means more than just “hello” or “goodbye.” It
also refers to a spirit that encompasses wel-
coming, friendly accommodation that embod-
ies giving the gift of friendship. —Editor)
Silverman (Withiam, 1993) hit the nail on
the head: “Does management create the envi-
ronment to make exceeding expectations pos-
sible?” Probably not all the time. Whatever
the number of stars the property has, man-
agement must continuously maintain a dy-
namic environment enabling all employees,
whether or not they work in guest services, to
exceed guest expectations. So what is the en-
ergy source of all the legendary stories of
Houdini-like concierges? My interaction with
concierges in Hawaii, the “Land of Aloha,”
tells me that concierges are loyal and have a
built-in desire to please and satisfy within le-
gal and moral limits. The concierge in Hawaii
makes it happen by practicing “service
through Aloha.” And when he or she doesn’t
have that particular desired resource (the din-
ner reservation, a hard-to-find gift for the sig-
nificant other), he or she knows how to
network out the solution through Aloha with
fellow concierges.
At the time of this writing, there was no
1327.ch04 12/19/05 9:30 AM Page 148
Les Clefs d’Or section in Hawaii, but there
are several Les Clefs d’Or concierges on
Oahu, Kapolei, and the other popular resort
areas of the state. According to Pam Davis,
publisher of the Oahu Concierge newsletter:
Our goal is to disseminate pertinent informa-
tion to the hospitality industry as a whole, fo-
cusing on the latest happenings, keeping them
informed on recent changes and improvements
at places they might very well recommend, as
well as including industry changes and promo-
tions. As we are the only industry publication
on Oahu located in one of the few cities without
an official [Les Clefs d’Or] organization, we
have an additional burden to try to fill that void
by holding regular gatherings where industry
professionals can mingle and share informa-
tion, but unfortunately they are not monthly,
and they rarely (due to travel complications) in-
clude those from the outer islands.
?
LAST THOUGHTS
My research revealed Holly Stiel has proba-
bly written more about concierges than any-
Section 4.6 ? As I See It: Management of the Front Office 149
one else anywhere in the English-speaking
and -writing world. I urge students, educators,
and professionals in all service industries to
browse through her website (http://www.
thankyouverymuchinc.com/index.html). Any
one topic she writes about could be a cus-
tomer service seminar or workshop. During
an interview with Holly, I was reminded of
one of the quotes from her website:
The reality is that there is no sign above the
[hotel] entrance telling customers how to be-
have, and sometimes they behave badly. So the
responsibility for appropriate behavior falls on
the service provider.
And, I would argue by extrapolation, this
responsibility falls specifically to guest ser-
vices employees such as the concierge.
The modern concierge serves as the
knowledgeable, sensitive, and efficient inter-
face between the guest and the array of hotel
and community services available to travelers.
It is this exciting profession I have attempted
to overview in this article.
4.6 AS I SEE I T: MANAGEMENT OF THE
FRONT OFFI CE
Oliver Meinzer
The following article is not based on exten-
sive research but rather on my experience
working in front office operations, either as
an associate or a manager. It looks at the op-
eration from my point of view. In this article,
I write about the setup of key areas of the
front office operation, namely the bell stand,
the front desk, and the guest relations depart-
ment. I provide some ideas about the physical
setup as well as ideas about hiring the right
associates and the training tools. I also pro-
vide insights into the daily tasks in all areas,
1327.ch04 12/19/05 9:30 AM Page 149
what I look for as a manager, and the reasons
behind certain processes and actions in the
day-to-day operation.
This article should give the reader an idea
about what the front office operation incor-
porates and what it takes to run such a de-
partment. The information can be used by the
reader to understand processes better and get
a good idea if working in this area is some-
thing he or she might be interested in. At the
end of the chapter, I provide a timetable of a
regular workday in the life of a front office
manager.
?
BELL STAND
The bell stand and its associates are impor-
tant because they are usually the first and last
encounter the guest has with the hotel and its
staff. Traditionally, the bell staff was consid-
ered concierge as well, as they usually had the
best insider knowledge about the location
and attractions, and they always had a friend
or relative working there as well to get the
guest a special deal. This is still the case in ho-
tels where the bell staff has been with the
property for many years. In newer properties,
it is primarily the concierge who has this kind
of connection. The basic duties of a bell per-
son include but are not limited to handling in-
coming and outgoing guest luggage, greeting
arriving and departing guests as they enter or
leave the hotel lobby, storage of luggage for
guests, and being present in the lobby area to
answer questions or assist the guests with any
requests they might have. Specific tasks differ
from property to property.
Depending on a property’s check-in and
check-out procedures, the bell staff may
spend a significant amount of time with the
guest, accompanying him or her to the room
150 Chapter 4 ? Operations: Rooms
and explaining the features of the hotel and
its surroundings. This is a key encounter for
the hotel, as the bell staff has a lot of influence
on the guest, enabling the staff to steer the
guest toward the hotel’s outlets and ameni-
ties. This, of course, is only possible and effec-
tive if the associates are trained properly and
have the necessary knowledge about the ho-
tel offerings. The bell staff gets a lot of infor-
mation from guests about their stay,
experience, and encounters, and about the
guests themselves. This kind of information is
invaluable for the hotel. If proper reporting
channels are in place, the hotel can be proac-
tive in addressing an incident before the guest
considers it a problem. This information also
helps the hotel recognize special occasions
like birthdays and anniversaries. The bell staff
is the hotel’s eyes and ears, the ambassadors
for the property. It is important to understand
their significance and the influence they have
on the hotel and front office operation.
The bell stand is usually located in the
main entrance area, easily accessible by both
guests and staff. It is usually close to a storage
room where luggage and other guest items
can be stored. The bell stand should have a
telephone with an outside line to enable the
staff to make reservations, inquire about
hours of operations, and so on. A computer
with access to the Internet and the property
management system (PMS) allows the bell
staff not only to provide the latest online in-
formation but also access guest information
like room numbers and contact information
or to leave messages on guest accounts. Maps
and informational material about attractions
in the surrounding area help the bell staff
point guests in the right direction after mak-
ing recommendations about leisure activities.
If no printer is attached to the computer, pre-
printed driving directions to popular destina-
1327.ch04 12/19/05 9:30 AM Page 150
tions (e.g., airport, train station, landmarks)
can be handed out to guests.
Luggage tags are used to label guest lug-
gage for storage. There are usually two parts
to the ticket, one for the bag/item and the sec-
ond for the guest to claim the stored items
later. The storage room should be big enough
to handle the storage demands for the prop-
erty. The shelving should be arranged and la-
beled to reflect the numbers or letters on the
luggage tags. This makes it easier for the bell
staff to store and retrieve items, and it keeps
the storage room organized and clean. The
bell stand should also be equipped with
plenty of luggage carts. Those carts should
match the decor and category of the hotel
(you probably do not want to use a wooden
dolly in a five-star property). The bell staff
must ensure that the carts are kept in good
condition. This includes polishing the metal or
brass parts as well as maintaining the car-
peted area and wheels to ensure proper
functionality.
Another important item for the bell stand
is a so-called trip log, a simple spreadsheet
where the staff marks the room numbers of
check-ins and check-outs they performed.
This log is a great help if you have to retrace
a luggage delivery or pickup or simply as a
tool to communicate which room is next.
Sometimes luggage gets delivered to the
wrong room, but the trip log helps the staff
rectify the situation immediately.
The bell stand is a front-of-the-house area
with direct guest contact. It is important that
this area is kept clean and organized. The bell
staff must ensure that they are wearing the
proper uniform and that the uniform is in top
condition. In order for the staff to attend to
all guest requests and questions, it is impera-
tive for them to have all the necessary knowl-
edge before they start their shift. Helpful
Section 4.6 ? As I See It: Management of the Front Office 151
tools that ensure daily information is commu-
nicated to the front-of-the-house staff include
a pre-shift meeting, where the important de-
tails for the day are being discussed, a white
board with information on it, or a daily
newsletter in everybody’s mailbox. However,
it is the front office manager’s responsibility
that the associate either attend the pre-shift
meeting or read the information provided on
the whiteboard or newsletter to get the neces-
sary information for their shift (as a front of-
fice manager, you can make this part of the
shift, and therefore the property’s attendance
policy applies).
The bell staff itself should be trained like
any other front-of-the-house staff. First of all,
it is important to hire the right candidates. As
a front office manager, you look for appli-
cants who are outgoing, comfortable with
working in public, well groomed, and articu-
late, and who have a good understanding of
service and a positive attitude. It is always
better to interview more candidates to make
sure you find the right person for the job than
to go with the first decent applicant. Never
compromise when it comes to hiring great
staff!
Once a new bell person is hired, proper
training is key. A possible training rotation
should include housekeeping (great insight
into the room setup, the different room types,
and locations), front desk (basic check-in and
check-out procedures and basic knowledge
about the property management system), the
outlets (knowledge about the restaurant
menu, spa offerings, etc.), loss prevention
(first aid, security, and emergency pro-
cedures), as well as basic training to cover
the phones—and, of course, guest contact
etiquette.
Once the staff member completes the re-
quired training and is working regular shifts,
1327.ch04 12/19/05 9:30 AM Page 151
regular performance checks should be imple-
mented to ensure knowledge stays up to date.
It is the front office manager’s responsibility
to supply the bell staff with the appropriate
tools and information to perform their duties.
Therefore, regular meetings are necessary to
communicate any changes or additions and to
collect feedback from the staff. The bell staff
is at the front of the line. Their input is in-
valuable for the front office operation. It is
important to stop everything, listen, and use
their information to adjust and improve the
front office operation and, ultimately, the
guest experience. It has proven helpful in my
workplace to cross-train other associates at
the bell stand as well. Associates in loss pre-
vention, room service, the front desk, or any
other department are then able to help out at
the bell stand if necessary. Sometimes, check-
ins come in waves, and the current bell staff
might not be able to get bags to guest rooms
in a timely manner. Having the flexibility of
calling associates from other departments to
help out ensures guest satisfaction and is a
nice change for the other associates.
Because in many cases the bell stand is lo-
cated in a high-traffic area and is the first area
the guest sees and interacts with, the hotel
must make sure that the guest’s first and last
impressions are positive.
?
FRONT DESK
The front desk or reception area is where
staff-guest interaction is probably most in-
tense. The front desk manages the room in-
ventory as well as the check-in and check-out
process and the account activities for each
guest in house. The front desk assigns rooms
to the arriving guests according to their pref-
erences and requests (many properties have a
staff person, called the rooms controller, who
152 Chapter 4 ? Operations: Rooms
is in charge of assigning rooms to incoming in-
dividual guests and groups). This is the de-
partment with the most traffic in the front
office area. The agents deal with the check-
in/check-out procedures, handle cash, resolve
conflicts, address reservation/billing inquiries,
and perform guest services. They have to be
jacks-of-all-trades because the front desk is
the most important access point for informa-
tion, complaints, and requests at the hotel.
The front desk is usually located in the
lobby area (sometimes, in high-rise proper-
ties, the front desk is located on a higher
floor), easily accessible from the main en-
trance door and the guest room elevators. In
some properties, front desks take the form of
individual islands instead of a long counter.
The advantage is that the agent can access the
lobby area much more quickly to greet or as-
sist the guest. The desk is divided into several
equally equipped workstations. The number
of workstations depends on the size of the ho-
tel. A good rule of thumb is 1 workstation per
100 guest rooms. Each workstation has (this
again varies from property to property) a
computer or PMS terminal with a credit card
swiper and printer, room key encoder, tele-
phone, reference guide with information
about room location, outlet location, currency
exchange, market codes, rate codes, technical
support information, cash, credit card and
check handling instructions, emergency pro-
cedures, and other property-related informa-
tion. It is vital that this folder—an important
front-desk tool—is in order and up to date at
all times. Other necessities for each worksta-
tion include paper and pens, area maps, key
cards, key sleeves, and scissors. As with the
bell stand, it is important to keep worksta-
tions clean and organized at all times, as they
are all in direct view for the guest and reflect
on the hotel’s operation.
The primary tasks for a front desk associ-
1327.ch04 12/19/05 9:30 AM Page 152
ate are the check-in and check-out of guests.
During the check-in process, the agent should
verify specific information related to the
guest’s reservation. The information includes
but is not limited to duration of stay, re-
quested room type or room preference, room
rate (it is important for the front desk agent
to verify the guest’s eligibility for discounted
rates by checking membership cards [e.g.,
AAA or AARP], company IDs, government
credit cards), special requests or arrange-
ments, method of payment, and any frequent-
stay membership/airline affiliation. The
verification of this information is important
to avoid discrepancies in the billing process
and adjustments during check-out, and to en-
sure accuracy in room availability.
Discrepancies in the billing process can
be time-consuming and therefore a significant
inconvenience to the guest. It is important to
verify the room rate during the check-in
process (especially if a guest’s room rate
changes during the stay); otherwise, the front
desk must adjust revenue during the check-
out process, which takes extra time and af-
fects the room revenue figures negatively.
Billing discrepancies are the most common
reason for guest complaints.
The verification of length of stay helps
the front desk manage room inventory more
accurately. Especially in a sold-out situation,
the hotel depends on all guests who are sup-
posed to check out, according to the property
management system, to actually check out, as
their rooms have been sold to other guests for
the night. If a guest’s departure date is incor-
rect and he or she needs to be extended, the
hotel may find itself in an oversold situation.
This causes a chain reaction of additional
problems and costs. If a guest’s actual length
of stay is shorter than the property manage-
ment system shows (because it was not veri-
fied during check-in) and the guest checks out
Section 4.6 ? As I See It: Management of the Front Office 153
earlier than expected, the hotel might have
lost an opportunity to sell the room. Accuracy
is thus very important to maximizing hotel
revenue. However, there will be occasions
where guests depart before the confirmed de-
parture date. It is up to the individual prop-
erty or chain if an early departure fee (usually
one night-room and tax) is charged.
The correct room type and location can
be essential to guest satisfaction. Selection is a
matter of training and experience, as there are
several aspects to consider when allocating
rooms to reservations. The order of impor-
tance of the criteria may depend on local or
corporate standard operating procedures.
• Rate: This selection criterion is pretty
much self-explanatory. If there are two
guests with the same room type request,
you may want to assign the nicer room to
the guest who pays the higher rate.
• Length of stay: A guest who checks in late
and stays only one night might not be too
concerned about the view or location of
the room as long as he or she gets a good
night’s sleep. On the other hand, a guest
staying with family or a spouse for several
days will certainly have expectations re-
garding view and room location (the con-
cept of proper segmentation applies
here).
• Loyalty to the hotel and company/
frequent-stay program membership level:
With competition fiercer than ever, loy-
alty is becoming more and more im-
portant. Almost every hotel chain has a
frequent-stay program that offers various
membership levels based in number of
room-nights spent with the company.
These membership levels have a great im-
pact on room allocation. The hotel must
ensure the most loyal customers to the
brand or chain are recognized for their
1327.ch04 12/19/05 9:30 AM Page 153
repeating business. Benefits of higher
membership level benefits (usually plat-
inum or gold level) include room type and
upgrade guarantees. Some programs even
penalize the individual property if those
guarantees are not met. This shows the
importance companies place on these fre-
quent guests and the money they spend
with the chain. In addition, many hotels
have developed local repeat guest pro-
grams to acknowledge and reward guests
who frequently stay with one specific
property. These guests are not necessarily
members of the hotel company’s reward
program.
• Reservation guarantees: Many corpora-
tions have introduced the concept of
reservation guarantees. Examples include
room type, bed type, smoking preference,
or connecting rooms, guaranteed when
the reservation is made and based on
availability. Many companies offer mone-
tary compensation to their guests (penal-
ties for the hotel, as mentioned above) if
the guarantees are not met at check-in.
• VIP levels: Hotels have individual VIP
levels indicating the importance of the
guest checking in—for example, a group
VIP, meeting planner, corporate execu-
tive, celebrity, political figure. The VIP
levels might include specific room assign-
ments and check-in procedures (such as
the manager on duty or general manager
escorting the guest to the room) or the
type of amenity for the guest.
In addition, special requests on the reser-
vation might include information about aller-
gies, rollaway and baby crib requests, high
floor/low floor, request for a universally ac-
cessible room, and so on. Property manage-
ment systems have codes that identify such
requests. This helps when printing reports and
154 Chapter 4 ? Operations: Rooms
when the front desk associate, during the
check-in process, verifies that the requests
and guarantees are met.
A method of payment must be secured ei-
ther prior to check-in (e.g., for a prepaid
reservation) or during the check-in process.
Payment can be made in cash or by valid
credit card or check; some properties also ac-
cept money orders. In most cases, a credit card
imprint is made during check-in, either elec-
tronically or manually. The total amount of
room and tax and an incidental amount (for
phone calls, movies, room service, etc.) are au-
thorized on the credit card to secure payment.
The incidental amount varies from property
to property, depending on guest room ameni-
ties and services. If a guest wishes to use cash,
an equivalent amount should be collected and
deposited on the guest account. Each prop-
erty management system checks regularly to
see if the authorized amount has been ex-
ceeded and, if so, authorizes additional funds
on the guest’s credit card. Any guest account
without sufficient authorization appears on a
credit limit exceed report, which the front
desk runs regularly. Local standard operating
procedures determine the next steps the front
desk associate takes. Usually, the front desk
tries to contact the guest via phone or text
message. However, if the guest does not re-
spond to any of the messages, the front desk
might go as far as locking the guest out of his
or her room. This requires the guest to stop by
the front desk to get a new key issued—a
good time to inquire about an alternative
method of payment or to ask for an additional
cash deposit.
It is important for the front desk associate
to know that when guests use a debit card
during check-in, the amount authorized will
not be available for the guest to withdraw
from the checking account until he or she
checks out of the hotel and the hold is re-
1327.ch04 12/19/05 9:30 AM Page 154
leased. It should be part of the check-in pro-
cedure to inform the guest about this before
taking an electronic imprint of a debit card.
However, if necessary, the front desk can re-
lease holds on credit card and checking ac-
counts immediately by contacting the
appropriate bank directly. The number for
the institution can be found on the back of
the credit/debit card. Most front desks are
equipped with a check verification system
(similar to grocery stores). If a guest decides
to pay by check, the front desk associate can
get immediate clearance to secure payment
and avoid bounced checks.
Throughout the day, the front desk associ-
ate spends a significant amount of time pro-
viding guest services including directions,
restaurant and activity recommendation,
reservations, and rate inquiries. Therefore, it is
important that all front desk associates re-
ceive detailed training in these areas. It is
helpful for all new front desk associates to
spend a few days in other departments
(housekeeping, concierge, maybe even the
restaurant) to learn about them and their
mode of operation.
Working in housekeeping gives the front
desk associate great knowledge about room
setup, location, amenities, and views, but also
an appreciation for the work the housekeep-
ing staff does. Working with the concierge
helps the front desk associate learn about the
area and its attractions and activity options
for the guests. With all this knowledge, the
front desk associate can handle the majority
of guest requests and questions, and the
check-in process is faster, as the associate
knows everything about the room type and
location. It is helpful for the associate to visit
a guest room once in a while to get refamil-
iarized with the room types and locations and
learn about any changes made to the setup or
amenity offering. Training is definitely an on-
Section 4.6 ? As I See It: Management of the Front Office 155
going process. In addition, the associate
should be familiar with the in-room technol-
ogy, like high-speed Internet access and
movie systems. This, of course, not only in-
cludes knowing how to connect to the Inter-
net and how to order a movie but also what
movies are currently showing on the hotel
channel.
Most hotels these days provide an express
check-out option. A copy of the guest’s folio
is delivered to the guest room the morning of
check-out. The guest may use this as the re-
ceipt and need not have to stop by the front
desk to check out (only if the billing is accu-
rate, of course). Many in-room entertainment
systems also feature a video check-out option,
which allows the guest to check out through
the TV screen. However, this works only if
sufficient funds are secured in advance to
cover the balance on the account. To this day,
though, many companies require their associ-
ates to present a zero balance receipt for their
expense report. Therefore, there is still signif-
icant check-out traffic at the front desk.
During this process, the front desk associ-
ate verifies that all charges are correct and
confirms the method of payment on the ac-
count. The guest still has the option of chang-
ing to a different method at this point. During
check-out, the associate should also verify
that the guest has a frequent-stay member-
ship number on file, and if not, inquire about
the guest’s membership to ensure proper
credit. At the end of the check-out process,
the front desk associate should offer assis-
tance with luggage and transportation and, of
course, thank the guest for staying at the ho-
tel. This is the last opportunity for the front
desk to get feedback from the guest. If the
guest experienced any problems during the
stay, the hotel may lose the chance to rectify
the situation and compensate the guest.
Therefore, it is useful to inquire about the
1327.ch04 12/19/05 9:30 AM Page 155
guest’s experience while processing the
check-out request.
The initial training of newly hired front
desk associates is crucial to guest and associ-
ate satisfaction. Unless the front office man-
ager provides the associates with the right
tools from the beginning, the service en-
counter can become a frustrating experience
for the associate and guest. Initial training
should include a rotation so the associate can
experience other departments, see how de-
partments interact, and become familiar with
the property, its features, and its offerings.
However, training should be ongoing. It can
be in the form of on-the-job training (new
processes and procedures, revisiting associate
actions to discuss alternative solutions for the
future), a daily 15 minutes of learning, where
a new topic is discussed every day, or specific
job-related training classes (problem resolu-
tion, service recovery models, public speak-
ing, interpersonal skills). Secret shoppers,
organized by the front office manager, can be
helpful in identifying opportunities for im-
provement. Using friends and family for this
purpose gives them a fun night out and pro-
vides the department with valuable informa-
tion about the team’s performance.
Again, success starts with a good hiring
process. You should look for certain charac-
teristics when interviewing applicants for the
front desk. Candidates should be very com-
fortable with working in the public arena.
They must be able to multitask in a fast-paced
environment and able to handle stressful con-
flict situation without losing their cool. As
with all front-of-the-house jobs, candidates
should be well polished and groomed and
should possess a service-oriented personal-
ity—the willingness to go the extra mile for
guests and fellow associates.
The front desk is the front-of-the-house
nerve center of the hotel. You want to be sure
156 Chapter 4 ? Operations: Rooms
the best associates are represented here. Se-
lecting and training these associates is one of
the main responsibilities of the front office
manager. Providing them with the right tools
to do their job well is key to success and guest
satisfaction.
?
GUEST RELATIONS
Guest relations are getting more and more
attention these days. This attention helped
many companies to develop new guest rela-
tion models focusing on the one-stop-shop
guest experience—for example, the Whatever
Whenever Department at Starwood’s W Ho-
tels, Marriott’s At Your Service, and Westin’s
Service Express. Guests can conveniently
make any request or order room service by
dialing a single extension; the associate who
answers takes care of everything. Many com-
panies have also implemented a customer re-
tention database where every request is
logged to better learn about guests’ habits,
preferences, and problems during their stay.
This is invaluable information for hotels that
want to anticipate guest needs and develop a
clear idea about trends that might lead to po-
tential problems. These data can be used in
many ways and should be shared with every
department.
?
Specific Customer
Preferences
If all requests are logged properly, the hotel
has an enormous amount of information
about each guest. With reference to this infor-
mation, the staff can place certain items the
guest usually requests in the room when he or
she returns. Most systems allow the hotel to
print repeat guest reports for each day that
1327.ch04 12/19/05 9:30 AM Page 156
show the preferences of repeat customers, as
well as incidents and requests from prior stays.
For example, the data may show that a
specific guest called for extra pillows during
her previous two stays at the hotel. If you tell
the guest at check-in that extra pillows have
already been placed in her room, you have
won a customer for life. Anticipating the
needs of the guests before they have to ask
sets the hotel apart from the competition. The
company that manages to set up a centralized
database of this data for the entire chain
has a significant advantage over competing
brands. Consistency, though, is the key to suc-
cess. Once a hotel has started this process, it
must ensure consistent delivery. Otherwise it
might lose its credibility and no longer stand
out in the mind of the guest.
?
Requests and Incidents
The other important use for such a system is
the analysis of the data logged through the
guest’s requests. It is important that all re-
quests and issues are logged in order to make
this process work. It is up to the hotel—or,
more specifically, the front office manager or
guest relations manager—to extract informa-
tion from the system and learn from it.
Requests: Reports show the requests
(e.g., towels, in-room coffee) made from
which guest rooms. This information can be
helpful in several ways. Towels and coffee are
basic room amenities and should always be
there. An increase in the number of these re-
quests should catch the manager’s eye. Re-
ports can be narrowed by floor or even by
housekeeping section to see if the perfor-
mance of a particular housekeeper is the rea-
son for those increased requests (i.e., items
are not replenished when the room is
cleaned). On the other hand, if the requests
do not show a clear pattern, one might want
Section 4.6 ? As I See It: Management of the Front Office 157
to consider other reasons. For example, dur-
ing the summer, people take towels to the
pool, so you might experience requests for
clean towels when guests get back to the
room. This finding might lead the hotel to in-
crease the number of towels in the rooms in
summer. This will reduce the number of calls
from the guests, reduce the time spent deliv-
ering towels, and thus free up time to take
care of other guest requests faster. Similarly,
an increased number of requests for mouth-
wash might cause the hotel to add mouthwash
to the basic bathroom amenity set.
Incidents: Reports show any problems
guests experience during their stay (only, of
course, if the guests report them). These data
help the hotel identify topics for retraining (in
case of service issues) as well as engineering-
related opportunities. Again, with the reports
these systems allow the hotel to produce, you
can narrow the problem to specific associates
(in cross-referencing with department sched-
ules), specific rooms, or mechanical equip-
ment such as a malfunctioning plumbing riser,
hot water pump, or electrical appliances. For
example, an increased amount of calls for a
burned-out light bulb in a specific room might
be an indicator for a broken—or dangerous—
light fixture; several calls from a room indi-
cating that the HVAC system is not working
might signal a clogged filter.
If a hotel has such a reporting and track-
ing system in place, it is essential that every
staff member is behind it and reports every is-
sue or problem so it can be entered into the
database. (The concept of “garbage in,
garbage out” is relevant here.) The support
for this initiative must start at the top: The
general manager must give full support. This
is the only way to convince everybody else to
work with the system as well. This is the only
way to make these systems produce accurate
results that could save hotels a lot of money.
1327.ch04 12/19/05 9:30 AM Page 157
To reiterate, training the associates in the
guest relations department is critical and
probably more intense than other depart-
ments. The associates must be familiar with
literally everything, as they must respond to
every request and complaint. The hiring
process should be similar to that at the front
desk, as the characteristics of a potential guest
relations associate are the same. Training
should likewise include a rotation through
every department to develop the insight and
product knowledge that will help the staff
member make the right decision. Service re-
covery and problem resolution training is key
as well and should be a constant part in the
associate development. Computer training is
important too. Working with the different sys-
tems is a big part of associates’ responsibili-
ties, and the more comfortable they are with
the systems, the faster they will be able to
work with them. The associates in the guest
relations area are the hotel’s eyes and ears,
but all staff and management must be aware
of the importance of this area.
Working in the hospitality industry, with
its crazy hours, stressful and challenging situ-
ations, weekend and holiday obligations, and
so on, requires passion. If you love what you
do, the rewards will come. I would not want to
work in any other industry. For me, it is the
greatest reward when a guest or associate
thanks me for what I do.
?
A DAY IN MY LIFE AS A
FRONT OFFICE
MANAGER
This is a typical schedule as I have experi-
enced it during my time as front office man-
ager. Of course, days are never the same in
158 Chapter 4 ? Operations: Rooms
this business. However, this timetable should
give the reader a sense of the challenging job
of a front office manager:
7:00 A.M. Arrive in the office.
7:00– I walk all my areas and wel-
8:00 A.M. come my staff. Managing
by walking around is a
powerful tool. As a de-
partment manager, you
want to be visible and ac-
cessible to your associates
while you are on property
(or even if you are off
property). Communicat-
ing with your staff helps
build team spirit and trust.
It is important the staff
sees that you are always
willing to do what you ex-
pect them to do. Talking
to your staff shows them
you are interested in their
lives and you value their
feedback. This is also a
good opportunity to get
information about prob-
lems from the previous
evening and night you
need to follow up with.
8:00– Checking emails and voice
9:00 A.M. mails and trying to return
them in a timely manner
(very challenging).
8:20 A.M. Mr. X is at the desk com-
plaining about his room
service breakfast and
wants to talk to a man-
ager. I meet with Mr. X
and take care of the issue.
After the conversation, I
follow up with the room
1327.ch04 12/19/05 9:30 AM Page 158
service staff and the food
and beverage manager to
ensure the issue has been
addressed. I double-check
that the incident is en-
tered into our guest rela-
tion database so Mr. X
does not experience it
again when he returns.
9:00– Morning meeting with all the
9:15 A.M. managers. This is the daily
meeting where we discuss
the previous day, the cur-
rent day’s events, VIPs,
special guests, repeat cus-
tomers, and any an-
nouncements pertaining
to the overall operation
(scheduled site tours, me-
dia appearances, man-
agers out of the office,
etc.).
9:15 A.M.– Work in the lobby with the
noon associates. Meet and greet
our regular guests and
help out at the bell stand.
This is what we call being
the lobby ambassador. I
also cover the breaks for
the front desk associates
to ensure proper staffing
at all times. Ensuring your
associates take breaks is
important—and the law.
10:00– Mr. Y, a repeat customer, calls
10:15 A.M. inquiring about his next
stay. His usual rate is not
available and he does not
want to pay the available
rate, which is significantly
higher. I negotiate with
Mr. Y, and we agree on
Section 4.6 ? As I See It: Management of the Front Office 159
the regular rate (impor-
tant if your company has
a best rate guarantee); in
addition I guarantee him
an upgrade for his upcom-
ing stay.
Noon– Lunch (this is not a regular
12:30 P.M. occurrence).
12:30– Catching up with emails and
2:00 P.M. voice mails (between
other things).
12:40– Associate X calls off for the
1:00 P.M. evening shift. It will be a
busy evening, so I need to
find a replacement soon.
Associate Y offers to stay
a little longer. I call the
night auditor, and he
agrees to come in early.
The shift is covered.
1:00– Meeting with Associate Z to
1:30 P.M. go over her performance
review. Regular feedback
is important. You want to
make sure your associates
are aware of their per-
formance. This helps them
identify areas of opportu-
nity and makes them
grow. It is the responsibil-
ity of the front office
manager to provide such
feedback either in official
reviews or in-the-moment
coaching.
1:30– I am paying my invoices.
2:00 P.M. Accounting and finance
knowledge is important to
department managers.
The department budget is
your responsibility, and
you have to be able to
1327.ch04 12/19/05 9:30 AM Page 159
read and interpret finan-
cial statements to control
your budget and secure
your contribution to the
bottom line.
2:00– Operations meeting. We
3:00 P.M. critique the events of the
past week and discuss de-
tails about the events for
the coming week. This is
an important way to col-
lect information regarding
check-in and check-out
times, group VIPs and
contacts, arrival patterns,
room preferences, meet-
ing schedules and loca-
tions, etc. Such
information is crucial to
scheduling as well as
preparations such as pre-
keying guest rooms, set-
ting up remote check-ins,
etc.
3:00– Interview with an applicant
3:30 P.M. for the front desk.
3:30– I walk all my areas and meet
4:00 P.M. and greet the associates of
the evening shift. I want
to make sure everybody is
okay and has the tools to
do their job right. I also
want to make sure to hear
about issues (guest or as-
sociate) early before they
become serious problems.
4:00– Mrs. Y wants to talk to a man-
4:15 P.M. ager because we do not
have an upgraded room
available for her. I talk to
Mrs. Y and explain the
sold-out situation. I com-
160 Chapter 4 ? Operations: Rooms
pensate her with access to
our VIP lounge. She is
satisfied and checks into
her room. A lot of times
guests who are complain-
ing and want to speak to a
manager just want to be
heard. Good listening
skills and demeanor are
important to show credi-
bility to the guest.
4:30– Meeting with the director of
5:00 P.M. room operations to dis-
cuss the sports team
check-in for the next day.
Proper preparation is key
to success and a smooth
operation.
5:00– I am in the lobby, helping my
6:30 P.M. staff during the peak
check-in time. Here I also
have the opportunity to
interact with our guests,
welcome our repeat cus-
tomers, and assist wher-
ever necessary. Being in
the lobby makes you ac-
cessible to your guests;
talking to them, listening
to them gives you a lot of
information and feedback.
I cannot stress enough the
importance of this feed-
back for your operation; it
is a great learning source
for everybody. It also
helps cover the front desk
while the P.M. shift takes
their breaks.
6:30– I walk all my areas one last
7:00 P.M. time before I leave to
make sure everything is
1327.ch04 12/19/05 9:30 AM Page 160
going well and everybody
is happy. I make sure all
my associates know how
to contact me if necessary.
I stop by my office to
Section 4.7 ? Mini Case: The New FOM 161
check for emails and
voice mails one last time,
and then I leave for the
day.
4.7 MI NI CASE: THE NEW FOM
After being transferred and promoted to
front office manager of a 600-room resort ho-
tel in Miami from a smaller property of the
same chain, Jennifer Waters spent the first
five or six months familiarizing herself with
the hotel’s markets, the area, and the resort’s
facilities and amenities. She also spent a sig-
nificant amount of time learning the job of
front office manager and concluded that it is
significantly different from that of assistant
front office manager in a smaller property.
The front office staff are young, mostly
students, who are in South Florida for the
weather and the social amenities. Many want
to become actors and are active in dinner the-
aters and small theater companies in the
greater Miami area. For the most part, they
are bright and attractive people, but they lack
the professionalism that comes from a solid
core of knowledge and training. Among the
things that concern Jennifer as FOM are the
following:
• Several members of a national associa-
tion board of directors complained of
rude treatment while checking out of the
hotel.
• Several times a week, after guests have
checked in, they are escorted to rooms
that are out of order, not clean, or already
occupied.
• Four times over the last six weeks, cruel
and demeaning practical jokes have been
played on the front office assistant man-
ager and the manager on duty during the
evening.
• Guest complaints, either in person or by
letter, about the hotel, its services, and its
staff have more than doubled over previ-
ous years and are outpacing complimen-
tary letters and comments by a ratio of
two to one.
Jennifer believes her relations with her
staff are pretty good. Her relationships, how-
ever, with other managers in the hotel are
strained, particularly with housekeeping and
sales.
As Jennifer seeks to understand the com-
plexities of these problems, she decides to
compile a list of their possible causes. What
items might be on this list? What form could
their potential solutions take?
Be sure to include rationales for the solu-
tions and a plan that will allow her to demon-
strate to top management that the analysis
and solutions are likely to result in resolutions
of these difficulties.
1327.ch04 12/19/05 9:30 AM Page 161
Morgan Black has been described by the cor-
porate office as the Miracle Worker because
of the troubled properties that were turned
around under Morgan’s leadership. It is
hoped the story at the Coug Inn will have the
same happy ending; however, the Coug Inn is
in a remote location, hundreds of miles from
any other corporate properties.
The Coug Inn is a 150-room full-service
property with several medium-sized confer-
ence rooms; it caters mostly to business trav-
elers and visitors affiliated with the local
university. The bulk of the revenue is gener-
ated between August and May, with periods
when classes are not in session being ex-
tremely slow. The hotel is at full occupancy
only during football weekends and com-
mencement. Occupancy has been declining
for the last year or so, with last month’s
RevPAR at a record low. Since arriving at the
Coug Inn, Morgan has made several observa-
tions about the hotel’s situation. It seems that
most of the problems involve the front desk.
After analyzing several previous months’
comment cards and informally chatting with
guests at the hotel, Morgan has sensed real
dissatisfaction with the check-in process. Sev-
eral common themes have emerged: The
process seems to take forever, the paperwork
at check-in is perceived as lengthy and hard to
fill out, the front desk clerks always appear to
be running around “like chickens with their
heads cut off,” and guests have been checked
into rooms that were not clean.
After discussing the problems with the
162 Chapter 4 ? Operations: Rooms
front desk manager, Morgan is in a quandary
about how best to move toward a solution.
The front desk manager complains that the
reservations staff does not always submit the
day’s reservations to the front desk in a timely
manner. Thus, guests arrive, and the desk
clerks have no idea what rate was quoted or
the room preference of the guest. This results
in the guest having to refurnish information
that was previously given when making the
reservation. Many times, clerks are forced to
leave the guest at the counter while they at-
tempt to retrieve missing information from
the reservations. Further, with over 65 percent
of the housekeeping staff speaking a first lan-
guage other than English, communication is
difficult at best, and room status is often mis-
taken. The front desk manager suggests that
the hotel advertise its check-in time to be
from “say around 1:00 P.M. or 2:00 P.M. to 7:00
P.M.” to reduce the crunch time and allow
front desk clerks more time to work with each
guest’s check-in needs. The front desk man-
ager further states that the new hotel in town,
the Suite to Sleep Inn, has an earlier check-in
time and “it seems to work okay for them!”
Morgan asks the front desk manager how the
staff might respond to moving to a fully auto-
mated property management system. The re-
sponse was not favorable; the front desk
manager mumbled something about “old
dogs and new tricks” and that the corporate
office had not put any money into the place in
years. What would make Morgan think they
would put out the cash now?
4.8 TO CHANGE OR NOT TO CHANGE: A
CASE STUDY AT THE FRONT DESK
Nancy Swanger
1327.ch04 12/19/05 9:30 AM Page 162
In an attempt to reach a compromise,
Morgan considers changing the check-in time
in exchange for the front desk manager’s
support of the conversion to an automated
system.
1. What must Morgan take into considera-
tion before final decisions are made to ad-
just check-in time and install a fully
automated property management system?
Section 4.8 ? To Change or Not to Change: A Case Study at the Front Desk 163
2. How should Morgan proceed in resolving
the communication issue?
3. Who needs to be involved in the final de-
cisions? Why?
4. How might Morgan present the case to
the corporate office?
R E F E R E N C E S
Albrecht, Carl, and Ron Zemke. 1985. Service
America! New York: Dow Jones–Irwin, pp.
37–38.
Allin, Nancy J., and Kelly Halpine. 1988. “From
Clerk and Cashier to Guest Agent.” Florida
International University Hospitality Review
6(1):42.
Bardi, James A. 1990. Hotel Front Office Manage-
ment. New York: Van Nostrand Reinhold.
Cross, Robert G. 1997. “Launching the Revenue
Rocket: How Revenue Management Can Work
for Your Business.” Cornell Hotel and Restau-
rant Administration Quarterly April:38(2):
32–43.
Massagle, Don J. 2002. “Multitasking Concierges
Provide Added Value to Properties.” Hotel
and Motel Management (August 1).
Nargil, J., S. Khan, and Mark Peterson. 2003. “Pro-
fessional Concierges Offer Tips to Improve
Guest Services.” Hotel and Motel Management
(January 13).
Quain, William J., Michael Sansbury, and Stephen
LeBruto. 1998. “Revenue Enhancement, Part
1: A Straightforward Approach for Making
More Money.” Cornell Hotel and Restaurant
Administration Quarterly 39(5):44–45.
Quain, B., M. Sansbury, and D. Quinn. 1999. “Rev-
enue Enhancement, Part 3: Picking Low-
hanging Fruit—A Simple Approach to Yield
Management.” Cornell Hotel and Restaurant
Administration Quarterly (40)2:76–83.
Rutherford, Denney G. 1985. “The Front Office
Manager: Key to Hotel Communications.”
Florida International University Hospitality
Review 3(2):38–48.
Sternberg, Lawrence E. 1992. “Empowerment:
Trust vs. Control.” Cornell Hotel and Restau-
rant Administration Quarterly 33(1):69–72.
Stiel, Holly. (no date). Ultimate Service: A Com-
plete Handbook to the World of the Concierge.
Englewood Cliffs, NJ: Prentice-Hall.
Withiam, Glenn. 1983. “Keeper of the Keys:
Concierges in American Hotels.” Cornell Ho-
tel and Restaurant Administration Quarterly
24(3):40–48.
———. 1993. “American Concierges Set Service
Standards.” Cornell Hotel and Restaurant Ad-
ministration Quarterly 34(4).
1327.ch04 12/19/05 9:30 AM Page 163
S U G G E S T E D R E A D I N G S
164 Chapter 4 ? Operations: Rooms
tions.” In VNR’s Encyclopedia of Hospitality
and Tourism, Mahmood Kahn, Michael Olsen,
and Turgut Var (eds.). New York: Van Nos-
trand Reinhold.
Lewis, Robert C. 1983. “When Guests Complain.”
Cornell Hotel and Restaurant Administration
Quarterly 24(2):23–32.
Lieberman, Warren H. 1993. “Debunking the
Myths of Yield Management.” Cornell Hotel
and Restaurant Administration Quarterly
34(1):34–41.
Murthy, Bvsan, and Chekitan S. Dev. 1993. “Aver-
age Daily Rate.” In VNR’s Encyclopedia of
Hospitality and Tourism, Mahmood Kahn,
Michael Olsen, and Turgut Var (eds.). New
York: Van Nostrand Reinhold.
Rutherford, Denney G. 1985. “The Front Office
Manager: Key to Hotel Communications.”
Florida International University Hospitality
Review 3(2):38–48.
Van Dyke, Tom. 1993. “Guest Registration.” In
VNR’s Encyclopedia of Hospitality and
Tourism, Mahmood Kahn, Michael Olsen, and
Turgut Var (eds.). New York: Van Nostrand
Reinhold.
Vallen, Gary K. 1993a. “Organizational Climate
and Burnout.” Cornell Hotel and Restaurant
Administration Quarterly 34(1):54–59.
———. 1993b. “A Comparison of Hospitality
Burnout with Other ‘High-Burnout’ Indus-
tries.” Hospitality and Tourism Educator
5(2):31–36.
Books
Bardi, James A. 1996. Hotel Front Office Man-
agement, 2nd ed. New York: Van Nostrand
Reinhold.
Bryson, McDowell, and Adele Ziminski. 1992. The
Concierge: Key to Hospitality. New York: John
Wiley and Sons.
Deveau, Linsley T., Patricia M. Deveau, Nestor de
J. Portocarrero, and Marcel Escoffier. 1996.
Front Office Management and Operations.
Upper Saddle River, NJ: Prentice-Hall.
Ford, Robert. 2000. Managing the Guest Experi-
ence in Hospitality. Albany, NY: Delmar.
Heldenbrand, H.V. 1944. Front Office Psychology.
Chicago: American Hotel Register Company.
(Editor’s note: This little volume is out of print
but generally is carried in hotel school li-
braries and some faculty offices. Many of
Heldenbrand’s observations are as valid today
as they were in 1944.)
Vallen, Gary K., and Jerome J. Vallen. 1996. Check-
In Check-Out. Chicago: Richard D. Irwin.
Articles
Brownell, Judi. 1990. “Grab Hold of the Grape-
vine.” Cornell Hotel and Restaurant Adminis-
tration Quarterly 31(2):78–83.
Brymer, Robert. 1991. “Employee Empowerment:
A Guest-driven Leadership Strategy.” Cornell
Hotel and Restaurant Administration Quar-
terly 32(1):58–68.
Kasavana, Michael L. 1993. “Front Office Opera-
S O U R C E N O T E S
Chapter 4.2, “The Electrifying Job of the Front Of-
fice Manager,” by James A. Bardi, adapted
from Hotel Front Office Management, 2nd ed.,
by James A. Bardi, Copyright © 1996 by John
Wiley & Sons, Inc. Adapted by permission of
John Wiley & Sons, Inc.
Chapter 4.3, “A Day in the Life of the Front Office
Manager,” by Garry Dickover.
1327.ch04 12/19/05 9:30 AM Page 164
Chapter 4.4, “Yield Management: Choosing the
Most Profitable Reservations,” by William J.
Quain and Stephen M. LeBruto, is adapted
from the following two articles:
Quain, B., M. Sansbury, and S. LeBruto. 1998.
“Revenue Enhancement, Part 1: A Straight-
forward Approach to Making More Money.”
Cornell Hotel and Restaurant Administration
Quarterly 39(5):42–48.
Section 4.8 ? To Change or Not to Change: A Case Study at the Front Desk 165
Quain, B., M. Sansbury, and D. Quinn. 1999. “Rev-
enue Enhancement, Part 3: Picking Low-
hanging Fruit—A Simple Approach to Yield
Management.” Cornell Hotel and Restaurant
Administration Quarterly 40(2):76–83.
Chapter 4.5, “Concierge (cone-see-air-j),” by
Mario Arnaldo.
Chapter 4.6, “As I See It: Management of the Front
Office,” by Oliver Meinzer.
1327.ch04 12/19/05 9:30 AM Page 165
1327.ch04 12/19/05 9:30 AM Page 166
c h a p t e r f i v e
O P E R AT I O N S :
H O U S E K E E P I N G ,
E N G I N E E R I N G , A N D
S E C U R I T Y
menting with taking housekeeping out of the
rooms division and making it a staff function,
with the director of housekeeping reporting
directly to the general manager. Others are
combining housekeeping and other property
management functions such as mainte-
nance and engineering. At one firm’s resorts,
housekeeping directors are titled Director of
Services and have responsibility for all non-
golf recreation in addition to traditional
housekeeping.
Historically, however, information on
housekeeping administration for hotels has
been organized around models set forth in
textbooks that date to the 1951 treatment of
hospital housekeeping by LaBelle and Bar-
ton. Brigham (1955) focused her analysis of
the structure of the housekeeping functions
and responsibilities on the small hotel. Tucker
and Schneider (1982), Schneider and Tucker
5.1 I NTRODUCTI ON
?
HOUSEKEEPING
Awhile back, I was talking with a large group
of housekeeping directors representing most
of the major metropolitan hotels in a large
northeastern city. I asked the following ques-
tion: How many of you, as part of your career
plan, initially considered housekeeping as a
managerial role that had any attraction to
you? The answer, not surprisingly, was none!
This points up a major dilemma facing
modern hotel management structures. One of
the most important, most labor-intensive, and
largest cost centers in the hotel is neither uni-
versally understood nor respected by the bulk
of the hotel’s department managers, their em-
ployees, and, to a large extent, the hotel’s
guests and clients. Some encouraging signs in-
dicate that this situation is in a state of
change. Some hotel companies are experi-
167
1327.ch05 12/19/05 9:31 AM Page 167
(1989), and Martin and Jones (1992) provided
a comprehensive inventory of the theoretical
constructs, responsibilities, relationships, and
techniques important to the modern house-
keeper in a range of operational situations.
(See the Jones contribution elsewhere in this
section that updates those authors.)
Generally speaking, these works present
information in a traditional structure that
says the housekeeper administers four major
areas of responsibility:
1. Management of people, equipment, and
supplies
2. Preservation of building finishes, fabrics,
and furnishings
3. Cost control
4. Recordkeeping
(Tucker and Schneider 1982, 38)
In analyzing the differences between the
folklore and fact of the manager’s job,
Mintzberg (1975) concluded that substantial
differences existed between the popular or
academic notion of managers’ jobs and their
actual work.
In the last study of its type, Rutherford
and Schill (1984) studied housekeepers in a
similar fashion. They addressed this question:
What is the relationship between what has
been written about housekeeping and what
housekeeping directors themselves deem
important?
A survey was sent to a national sample of
housekeeping executives asking them to rate
on a scale of 1 to 5 the importance of 100 the-
oretical constructs common to the house-
keeping literature. Statistical procedures
(factor analysis) grouped the housekeepers’
responses into eight groupings. While the tra-
ditional responsibilities of records, costs, sup-
plies, and furnishings were still important, the
issues central to the management of people
168 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
were of overwhelming importance. Specifi-
cally highlighted were the following:
• Leadership
• Communication
• Strategic planning
• Hotel organizational interactions
• Departmental management
• Training
The authors concluded that new arrange-
ments of traditional knowledge, constructs,
and tactics such as those explored in their
model may present future managers with win-
dows of operational, educational, or market-
ing opportunity that improve competitive
position or streamline the transfer of knowl-
edge. The dissemination of this knowledge in
the most efficient and effective manner is also
important, for, as Mintzberg (1975) points
out, “[T]he manager is challenged to find
systematic ways to share his privileged
knowledge.”
Since 1985, very little, if any, analytic em-
pirical research has been done on operational
aspects of housekeeping and other labor-
intensive hotel departments. Until there is,
there will be little forward movement in the
theory of housekeeping. Inspired practical ex-
perimentation on the part of housekeeping
managers, however, is not lacking.
When he started his career in hotel man-
agement, Kurt Englund, like the housekeep-
ers referenced at the start of this section,
never expected that housekeeping would be a
major stop on his career journey. It was, how-
ever, and he feels the many tasks involved in
keeping the house for a major asset like a
Four Seasons property prepared him well to
be the resort manager at the Four Seasons
Resort Costa Rica at Peninsula Papagayo. He
was previously the director of rooms for the
luxury hotel, Regent Beverly Wilshire. In this
1327.ch05 12/19/05 9:31 AM Page 168
view of a day in his life, it is important to note
that housekeeping is still one of his important
responsibilities.
Professor Tom Jones of the University of
Nevada, Las Vegas, describes how housekeep-
ing departments are organized and staffed.
He provides an overview and organizational
perspective of the department, paying partic-
ular attention to the responsibilities of the
various personnel within the modern house-
keeping department. Professor Jones brings
deep knowledge of executive housekeeping
management to his writing and structures his
description of the organization with a real-
world, tell-it-like-it-is narrative.
As John Lagazo states in the introduction
to his description of being an executive
housekeeper, most people are surprised to
learn that housekeeping is an important ca-
reer stop for hotel managers. Now the direc-
tor of operations at the luxurious Madison
Hotel in Washington, D.C., Lagazo still deals
with housekeeping every day, although it is
now one of his direct reports. John wrote this
piece for the third edition, but it holds up so
well, I am including it here because he cap-
tures the essence of the job of managing this
complex organizational element.
In most cases, the management of the
housekeeping function is no longer the
province of the lead maid type. Increasingly,
the expense of running the department cou-
pled with the large numbers of employees on
its staff mandates that the head of this de-
partment be well versed in all managerial
skills and a sophisticated and creative leader.
?
ENGINEERING
In a way, housekeeping, engineering, and se-
curity can all be considered guest services. In
most hotels, guest services (see previous sec-
Section 5.1 ? Introduction 169
tion) is a visible component that can include
concierge, uniformed service, garage, and spe-
cialized recreational and leisure activities.
Housekeeping, security for the hotel and its
guests, and the maintenance of the hotel’s en-
gineering systems are under the best of cir-
cumstances behind the scenes and neither
noticed nor experienced by guests in any but
an abstract sense. They are, nonetheless, ser-
vices that are critical to a safe, comfortable—
and, by extrapolation, successful—guest stay
at your hotel.
As stated in the first of the two articles in-
cluded here on the engineering function, in
the past, the chief engineer and his or her de-
partment have been metaphorically relegated
to roughly the same position in the hotel’s or-
ganization that they physically occupy—usu-
ally the basement or otherwise out of sight.
These two articles explore the numerous indi-
cations that the importance of the engineer-
ing function can no longer be ignored or
treated with less respect than any other aspect
of management.
It is important that the reader recognize
that the first of these articles overviews the
department, explores some of the issues that
affect hotel engineering, and outlines typical
job functions. Part of the thrust of this article
is that unlike in the past, the chief engineer is
responsible for major components of the as-
set and the physical comfort of the guest. This
argues for consideration of the chief engineer
as no different than any other hotel depart-
ment head.
The DeFranco and Sheridan article on
how chief engineers (CEs) use financial infor-
mation illustrates that idea. As their research
demonstrates, computer technology and the
use of financial information in the engineer-
ing department are vital in maintaining an ef-
ficient operation. This was not widely true
even ten years ago. This research contributes
1327.ch05 12/19/05 9:31 AM Page 169
to the argument that, like that of the execu-
tive housekeeper, the position of CE in the
modern hotel organization mandates a leader
who is more manager/leader than technician.
At the same time, the CE still must manage a
diverse collection of talents and skills among
the engineering staff. In a fashion, this raises
the question of what type of manager such a
person is. Structured research is still sparse on
this topic.
The number of employees for which the
CE is responsible varies widely, mainly with
the size of the hotel. A 1986 study (Fisher) set
the ratio for an engineering staff at 3.9 for
each 100 rooms, but a lot has changed since
then. Other factors that can influence the di-
versity of human-related management for the
engineering manager are market niche,
sophis-tication of the building’s design and
equipment, and corporate philosophy. There-
fore, if a 1,000-room hotel has 40 or more peo-
ple on the engineering staff, each of them
presumably highly trained, qualified, and
skilled technical people, the CE’s job takes on
aspects of management that strongly suggest
a need for refined people-related skills.
When Wasmuth and Davis studied the
management of employee turnover, they
found it to be relatively low in engineering
departments in the majority of the hotels
studied. They also found that quality of super-
vision was a key element in maintaining low
turnover rates among these engineering de-
partments. The most successful supervisory
style had as a critical element the talent that
“allowed and encouraged (the engineers) to
work autonomously” (1983, 68).
Allowing the engineering staff to work
autonomously pays tribute to both the nature
of their jobs and concern for the human side
of management. It also suggests that while
some supervisory or management styles may
170 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
be appropriate in engineering departments,
others may not. Managerial style refers to the
way managers manage, control, motivate, and
otherwise direct subordinates. It is through
managerial style that employees may or may
not be encouraged and allowed to work on
their own. The extent to which an atmosphere
is fostered by the manager significantly af-
fects the range with a manager’s human-
related challenges, of which turnover is a
prime example.
An unpublished, proprietary study of 49
hotel CEs with one hotel company sought to
determine their managerial styles. They were
asked to take a standardized managerial-style
inventory and fill out a short demographic
questionnaire in order to determine what
managerial style predominates among the
self-described successful chief engineers in a
major international hotel corporation.
This inventory instrument judges primary
managerial style to be in one of six categories
(see below), with a secondary or backup style
that is one or a combination of the others.
Managerial Styles
• Coercive: The “do-it-the-way-I-tell-you”
manager closely controls subordinates
and motivates by threats and discipline.
• Authoritative: The “firm but fair” man-
ager gives subordinates clear direction
and motivates by persuasion and feed-
back on task performance.
• Affiliative: The “people first, task second”
manager emphasizes good personal rela-
tionships among subordinates and moti-
vates by trying to keep people happy
with fringe benefits, security, and social
activities.
• Democratic: The “participative” manager
encourages subordinate input in decision
1327.ch05 12/19/05 9:31 AM Page 170
making and motivates by rewarding team
effort.
• Pacesetting: The “do it myself” manager
performs many tasks personally, expects
subordinates to follow his or her example,
and motivates by setting high standards
and letting subordinates work on their
own.
• Coaching: The “developmental” manager
helps and encourages subordinates to im-
prove their performance and motivates
by providing opportunities for profes-
sional development. (McBer, no date)
A managerial style profile reflects both
primary and backup styles. Primary is the
managerial behavior one uses most often, is
most comfortable with, and is the style to
which one normally turns under stress.
Backup refers to an alternative way of man-
aging one uses when the primary style is inef-
fective. Some individuals have more than
one primary style, and some utilize multiple
backups.
The comparisons showed that each group
of CEs is primarily affiliative in style, a trait
that flies in the face of their reputation as
crusty curmudgeons.
With affiliative as the primary style of this
group of engineers, it was somewhat surpris-
ing that the backup style was democratic.
Combining the democratic backup style with
the predominant affiliative style would cer-
tainly produce an organizational atmosphere
where the employees would feel encouraged
to be independent and autonomous.
The data developed through application
of this instrument to this sample of CEs tends
to support the theory that successful CEs and
their departments favor management styles
that put people first. At least at this juncture,
it appears that the affiliative style works best
Section 5.1 ? Introduction 171
in the milieu with people and tasks managed
by the CE. This was, however, a small study of
a single company and as such can only be sug-
gestive. The data in this study do, though, pro-
vide us with a broader view of the facets of
management of the modern hotel engineering
function.
?
SECURITY
It is an unfortunate fact of modern hotel man-
agement that the days of simply providing
comfort, high-quality food, beverage and
lodging services, and a home-away-from-
home atmosphere are severely affected by
the inventory of problems presented by the
predatory elements of modern society. At the
same time, hotel security departments are re-
sponsible for protecting the hotel’s assets
from loss.
Hotels are usually fairly close-mouthed
about their security and its functions, duties,
and personnel. On an individual basis, a good
overview of security can be found in publica-
tions of the Educational Institute of the
American Hotel and Motel Association
(http://www.ei-ahla.org/). Typically, however,
the modern hotel security department is or-
ganized as a staff function, with the director
of security reporting directly to top manage-
ment. We have little data or insight about the
manager of the hotel security function, as
little, if any, research has been done on the
subject. Anecdotally, from the editor’s exper-
ience, most of the managers recently hired to
fulfill this function have a security back-
ground in the military or a law enforcement
career with civil authorities.
Typically, the director of security has a
staff in keeping with the nature and size of the
threats to a particular hotel, the size of the
1327.ch05 12/19/05 9:31 AM Page 171
hotel, its location, and its managerial strategy.
A director of security administers the func-
tions of his or her department against two
broad and general classifications of threats:
external and internal.
External threats are generally those that
present risk for the hotel and its guests due to
the actions of outsiders. Internal security is a
functional area that generally is concerned
with reducing the threat of loss of assets; in
most cases, this refers to control of highly at-
tractive and popular consumer goods such as
wine, expensive foodstuffs, furnishings, and, of
course, the hotel’s cash.
The responsibilities of the security man-
ager in contending with the above threats in-
clude the following:
• Providing physical security at the perime-
ter of the hotel
• Adapting policies and procedures to the
building design and location
• Utilizing electronics, modern telecommu-
nications devices, proximity alarms, mo-
tion detectors, and closed-circuit TV to
enhance the hotel’s ability to eliminate
threats
Security directors participate in certain
levels of administrative or operational activi-
ties that deal with policies, training, educa-
tion, and human resources to avoid hiring
what has become known as the high-risk em-
ployee. This is due primarily to the increasing
risk hotels and other employers face from
negligent hiring.
Having policies and procedures in place
to deal with the management of emergencies
is also a fundamental aspect of the hotel secu-
rity director’s job. These emergencies can take
a number of forms; in recent years they have
been known to include fires, hurricanes,
172 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
floods, earthquakes, blackouts, robberies,
bombs or bomb threats, medical and dental
emergencies, and some forms of terrorism. It
is a fact of modern life that the properly man-
aged hotel, from a security standpoint must
have contingency plans in place and training
programs to help its employees deal with
these potential threats.
A further responsibility of the security di-
rector is liaison with civil authorities. Increas-
ingly, as the article included here points out,
hotels are being held accountable for what
they either knew or should have known about
potential threats. The best way to keep up on
this is by cultivating a good relationship with
the local police.
Finally, the major responsibility of a mod-
ern hotel security director is to assist in policy
development. Hotels must have policies that
guide the implementation of procedures,
training, and inspection to meet the inventory
of potential risk. Hotels also must gather data
to make sure they are aware of all facets of
the risk environment. The security function
must also assist the hotel in formalizing a
structure that links all pertinent parts of the
hotel’s organization to the concept of total se-
curity for the organization, its employees, and
its guests.
In the legal analysis contributed to this
edition, Melissa Dallas outlines and discusses
the major families of risk facing hotel man-
agers. She also includes in her analysis current
examples of how the law affects the manage-
ment of hotels in the modern era. This com-
prehensive and detailed article has a
conversational and engaging style unusual in
legal treatises.
In the article included here by Abbott and
Fried, the authors explore in some depth one
of the trickiest risk environments that (liter-
1327.ch05 12/19/05 9:31 AM Page 172
ally) surround many hospitality operations:
the parking lot. Because parking lots can be
remote, poorly lighted, or not patrolled, they
are increasingly sources of risk. Courts are in-
creasingly finding that landlords have liability
for third-party criminal activity, so operators
are advised to be aware of this potential
liability.
As if that were not enough to give one
pause, the article by Beattie and Gau serves
notice that there is yet another realm of risk
that now affects our ability to manage hotels
safely. Workplace violence—including homi-
cide—is a growing problem for hospitality op-
erations. The authors explore telling examples
and discuss a structural theory to guide further
research and the establishment of policies.
Section 5.2 ? A Day in the Life of a Director of Rooms 173
?
SUMMARY
Housekeeping, engineering, and security,
while not, typically, obvious functions, are
nonetheless critically important to the man-
agement of any hotel. All of them are and
have been evolving for the past several years
into professionally managed departments re-
sponding to internal and external stimuli that
can critically affect their interactive relation-
ships with other hotel departments and, ulti-
mately, in the delivery of hotel guest services.
A number of books dealing with these de-
partments are listed as suggested readings.
The reader seeking more in-depth informa-
tion can find it in these books.
5.2 A DAY I N THE L I FE OF A DI RECTOR
OF ROOMS
Kurt Englund
A day in the life with Four Seasons Hotels
and Resorts focuses on people, both guests
and employees. One of the first things I do in
the morning is walk around the departments
that are my responsibility: front desk,
concierge, communications, valet parking,
door attendants, bell desk, health spa, house-
keeping, laundry, and valet. It is important to
be visible with the staff we depend on to pro-
vide a superior level of service to all of our
guests. Knowing who they are and what they
are facing each day makes a big difference in
how they carry out their job.
Every morning, we have an operational
meeting to review how we are going to take
care of our guests, the other key component
in hospitality. This meeting is attended by a
wide range of managers: the general manager,
hotel manager, all of the planning committee
(including the director of human resources),
housekeeping, conferences services, sales
managers, and catering managers. The entire
day is laid out, reviewing the expected arrivals
for the day from the VIPs to return guests,
guests with pets, guests with special dietary
requirements or mattress firmness. We discuss
these to ensure the requirements are met in
advance. We also include in the discussion all
catering functions and any other movement
of individuals en masse.
1327.ch05 12/19/05 9:31 AM Page 173
In our effort to provide a high-quality ex-
perience, we also discuss any glitch or poor
experience any of our guests may have expe-
rienced. Our concern is not whose fault the
glitch was but rather how can we make the
stay better for our guest and prevent it from
happening to any of our other guests. If the
city decides to jack hammer at 8:30 in the
morning on a Saturday, it may not be directly
our fault, but it is certainly our guests who
have been inconvenienced. We will do a follow-
up with the guest to explain what we know, of-
fer a new room if appropriate, and ascertain
their overall happiness with their visit.
We have a number of other meetings to
keep the communication going. Our weekly
meetings include planning committee, group
resume, and rooms division. Every other
week we hold a department head meeting.
As mentioned, we hold the care of our
employees to be as important as taking care
of our guests. One of the ways we do this is by
being prepared to work alongside them when
business levels suddenly peak. We do our best
to staff at appropriate levels, but sometimes
everything hits at once. We call these crunches
and respond with an all-page for assistance to
the area in need. The management response is
incredible; from our general manager on
down, we get the assistance we need to help in
valet parking, bell desk, front desk, room
174 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
service, and so on. This is an excellent exam-
ple of the teamwork at our hotel making an
impact on the morale of the staff.
Walking around the hotel and checking in
with staff is an important communication
tool. Employees develop a comfort level for
raising concerns about their jobs. It is equiva-
lent to bringing the open-door policy to em-
ployees in their work area. Issues have been
brought to my attention in this format such as
conflicts with coworkers, questions about pay-
checks, suggestions to improve a work proce-
dure, and requests for assistance in following
up with maintenance concerns.
Hiring new staff is another crucial role in
day-to-day activities. Our interviewing pro-
cess involves a screening by HR, an interview
with the department head, an interview with
the division head, and final approval from a
meeting with the hotel manager or general
manager. We attempt to be as flexible as pos-
sible when it comes to making time to inter-
view these candidates. If the right candidate
comes through the door, we make every ef-
fort to free our schedule so we can keep the
interview process moving.
Balancing the needs of our guests and
employees requires flexibility. There is no typ-
ical day in our business, which is one of the
reasons I enjoy my job. I face a new challenge
every day.
1327.ch05 12/19/05 9:31 AM Page 174
Section 5.3 ? Housekeeping Organizations: Their History, Purpose, Structures, and Personnel 175
5.3 HOUSEKEEPI NG ORGANI ZATI ONS:
THEI R HI STORY, PURPOSE, STRUCTURES,
AND PERSONNEL
Thomas Jones
?
ORIGINS OF HOSPITALITY
AND HOUSEKEEPING
By definition, hospitality is the cordial and
generous reception and entertainment of
guests or strangers, either socially or commer-
cially. From this definition we get the feeling
of the open house and the host with open
arms, of a place where people are cared for.
Regardless of the reasons people go to a
home away from home, the presumption is
that they need to be cared for there. They
need a clean and comfortable place to rest or
sleep, food service, an area for socializing and
meeting other people, access to stores and
shops, and a secure surrounding.
Americans have often been described as
a people on the move, a mobile society. Even
as our country expanded, we required bed
and board. Travelers in the early 1700s found
hospitality similar to that in their countries of
origin, even though these new accommoda-
tions might have been in roadhouses, mis-
sions, or private homes, and the housekeeping
might have included no more than a bed of
straw, changed weekly.
Facilities in all parts of young America
were commensurate with the demand of the
traveling public, and early records indicate
that a choice was usually available; travelers
based the decision on where they expected to
find good food, overnight protection, and
clean facilities. Even though the inns were
crude, they were gathering places where any-
one could learn the news of the day, socialize,
learn the business of the area, and rest.
The business of innkeeping has become
the hotel industry of today, but the main
tenets remain: a clean, comfortable room, ac-
cess to food and entertainment facilities, and
a courteous and concerned staff who mean it
when they ask, “May we be of service?”
Housekeeping departments play a vital
role in today’s lodging industry. People in-
volved in housekeeping operations service
guest rooms, maintain and service public and
special areas, and, in many instances, operate
laundries and recreational and health facili-
ties. The people of housekeeping are also a
part of the overall team of hosts and hostesses
who welcome the hotel’s guests. They show
concern and care when something goes wrong
with the guest’s visit, and they are quick to ini-
tiate action that will make things right again.
Major hotel companies have been quick
to recognize the value of housekeeping and
other service industry workers. Good hotel
management does not see housekeeping
work as demeaning or menial. To the con-
trary, all high-quality hotel operational man-
agement personnel have, at one time or
another, performed housekeeping functions;
as a result, they understand the worth and
value of the people who perform such func-
tions regularly.
Students of the service industry should re-
member the statement made proudly by one
1327.ch05 12/19/05 9:31 AM Page 175
of America’s most prestigious resorts, The
Greenbriar of White Sulfur Springs, West Vir-
ginia. This statement appears on a sign that is
visible as one enters the resort: “Ladies and
Gentlemen Being Served by Ladies and
Gentlemen.”
?
THE ROOMS
DEPARTMENT
?
Front Desk and
Housekeeping
The rooms department of a lodging establish-
ment is directly and solely involved with all
aspects of the sale, occupancy, and servicing of
guest rooms. The department manager is usu-
ally called the resident manager, although the
title is somewhat misleading in its implication
that this manager lives on the premises; most
do not. Synonymous titles include rooms
manager, rooms director, director of rooms
operations, and, simply, hotel manager (not to
be confused with the general manager).
The rooms department is usually a combi-
nation of two principal operating depart-
ments: the front office and the housekeeping
department. The manager in charge of the
front office oversees several subdepartments:
reservations, front desk, bell staff, PBX, trans-
portation, possibly concierge, and any other
form of guest reception function.
The manager in charge of housekeeping
functions is most commonly known as the ex-
ecutive housekeeper. Depending on the size
of the hotel, subdepartments within the
housekeeping sphere of operations (e.g., in-
house laundry, recreation department), and,
in some cases, corporate policy, the person in
charge of housekeeping may have any one of
176 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
a number of titles, all considered synonymous
with executive housekeeper. A few such titles
are:
• Housekeeper
• Housekeeping manager
• Director of services
• Director of internal services
• Director of housekeeping operations
For the purposes of this article we refer to
this manager as the executive housekeeper.
There was a time when most executive
housekeepers worked under the direction of
the front office manager. They were, in fact,
not executives but people who had worked
their way up from a maid’s position, with little
or no managerial training. Today, however,
the size, cost, and complexity of housekeeping
operations have put the executive house-
keeper on an equal footing with other depart-
ment managers. As a result, executive
housekeepers are now seen as sharing equally
in responsibility under the resident manager
for the operation of rooms departments.
The hotel industry is a highly labor-
intensive hospitality business. More total
employees may be involved in food and bev-
erage (F&B) operations than in any other de-
partment. Because of the diversity of F&B
operations (restaurants, lounges, banquet
services, and kitchen), there are plenty of
managers to control the total operation. In
housekeeping, however, a single department
head (the executive housekeeper) is responsi-
ble for the largest staff, operating cost center,
and physical area of the property.
Today’s modern executive housekeeper
must be a trained manager skilled in plan-
ning, organizing, staffing, directing, and con-
trolling operations. He or she must also be
skilled in employee and human relations,
1327.ch05 12/19/05 9:31 AM Page 176
have a superior understanding of cost con-
trols, and have a strong technical background
in purchasing, decorating, and renovation.
Last but not least, the executive housekeeper
must be an able delegator. Without strong ex-
pertise and the inclination to pass tasks to
others, convey the necessary power to act,
and, finally, hold others accountable for their
actions, the executive housekeeper must per-
sonally perform all working functions. This
writer has never yet found the person who
could make 3,000 beds in one day.
?
ORGANIZATION
Housekeeping organizations are as varied as
types and sizes of hotel. Except for bed-and-
breakfast operations, the trend today is away
from the small, 80-room mom-and-pop hotel.
It is therefore appropriate to discuss hotels of
a size that might be considered a model ap-
propriate to the greatest variation—say, 200
or more rooms. Most hotels would have iden-
tical functions, but size might dictate that one
person perform several functions in a small
hotel. Obviously, the larger the facility, the
greater the need for a large staff with enough
individuals to fill each unique function. Con-
sider then, the following hotel:
• A modern suburban corporate transient
hotel
• 350 rooms
• Two restaurants (one 24-hour and one
dinner house)
• Banquet area with 15,000 square feet of
meeting space
• Room service
• Kitchen to support all food services
• Main lounge with nightly entertainment
Section 5.3 ? Housekeeping Organizations: Their History, Purpose, Structures, and Personnel 177
• Banquet beverage service and service bar
outlets for both restaurants and room
service
• Outdoor pool and winter indoor pool
with health club facilities, sauna, and
steam room
• Game room (video games, pool, and table
tennis)
• In-house laundry for rooms department
and banquet linen
• Two company-owned gift shops.
• Front desk fully computerized with a
property management system
?
Hotel Organization
Prior to investigating the housekeeping de-
partment organization, it is appropriate to vi-
sualize an organization for the entire hotel.
The organization diagram in Figure 5.1 could
easily be that of the model hotel just
described.
Note the position of the executive house-
keeper within the organization. Executive
housekeepers may occupy greater or lesser
positions in any organization. Some executive
housekeepers report directly to the general
manager; others even hold corporate execu-
tive positions. Others report to the chief of
maintenance. In this case, however, the execu-
tive housekeeper is a middle manager—a full
department head, equal to the front office
manager and other principal department
heads within the staff. Two junior managers
report to the executive housekeeper, the
housekeeping manager, and the laundry man-
ager. Both the executive housekeeper and the
front office manager report to the resident
manager, who is a member of the property ex-
ecutive committee. This committee is the top
1327.ch05 12/19/05 9:31 AM Page 177
policymaking body for the property under the
general manager.
?
The Housekeeping
Organization
Figure 5.2 describes a typical housekeeping
department organization, suitable for the
model hotel.
Note the utilization of the two principal
assistants. The housekeeping manager is the
first assistant to the executive housekeeper
and is in direct charge of all guest rooms in
178 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
the hotel. This emphasizes the delegation that
has taken place in that the housekeeping
manager is not just an assistant to the execu-
tive housekeeper but a junior manager with a
functional responsibility. This part of the or-
ganization can be managed in several ways.
Each individual room attendant can be sched-
uled independently, or attendants may be
grouped into schedule teams, with the same
hours on and the same time off. In this illus-
tration, team staffing and scheduling are pre-
sented because this approach is more efficient
for daily scheduling.
The laundry is another specific function
General
Manager
Executive
Secretary
Director
sales and marketing
Chief
engineer
Resident
manager
Controller
Personnel
director
Food and beverages
director
Front office
manager
Executive
Housekeeper
Catering
director
Executive
chef
Restaurant
manager
Beverage
manager
Reservations
manager
Front desk
manager
Guest
services
PBX
manager
Housekeeping
manager
Laundry
manager
Sous
chef
Steward
Banquet
chef
Administrative
assistant
HOTEL ORGANIZATION
(THROUGH DEPARTMENT HEAD)
Top management—
executive committee.
Hotel policymaking body.
(Middle management)
(Bells) (Junior management)
Figure 5.1 Hotel Organization (Through Department Head)
1327.ch05 12/19/05 9:31 AM Page 178
to which a junior manager is assigned. In this
case, the required technical expertise is more
specific. It includes knowledge of commercial
laundry machinery and equipment, knowl-
edge of piecework production, the utilization
of chemicals, and their effects on an expensive
inventory of linen.
Section 5.3 ? Housekeeping Organizations: Their History, Purpose, Structures, and Personnel 179
Both junior managers and the executive
housekeeper have line supervisors who re-
port directly to them. (Below the manage-
ment level, we recognize an hourly structure
for employees who are paid by the hour at a
given wage rate as opposed to being on
salary.) Each supervisor has one or more
Figure 5.2 Housekeeping Department Organization
Executive
Housekeeper
Room
attendant
Room
attendant
Room
attendant
Room
attendant
Room
attendant
Housekeeping
manager
Laundry
manager
Floor
supervisor
Floor
supervisor
Floor
supervisor
Floor
supervisor
Night
supervisor
Linen room
supervisor
Senior
housekeeping aide
Recreation
supervisor
Night
housekeeper
Night
housekeeping
aide
Linen room
attendant
Lobby
housekeeper
Lobby
housekeeping
aide
HOUSEKEEPING DEPARTMENT
ORGANIZATION
(Indefinite size and scope to be
determined at a later time.)
1327.ch05 12/19/05 9:31 AM Page 179
hourly workers who round out the depart-
ment organization.
Note that the organization shown in Fig-
ure 5.2 under the housekeeping manager is
incomplete. The number of floor supervisors
or team leaders and workers depends on the
number of rooms a room attendant is ex-
pected to clean in a given eight-hour period.
The national standard for rooms cleaned by
one room attendant in one eight-hour period
varies from 13 to 20, depending on the market
mix. Hotels occupied primarily by traveling or
group business transient guests are more effi-
cient to clean because occupancy is primarily
single, and such guests are up and out of their
rooms early each day. Also, they are inclined
to leave their rooms fairly neat. For this seg-
ment, room attendants can clean from 18 to
20 rooms per day. When the mix features
more double occupancy with families on va-
cation, access to rooms for cleaning is more
difficult and cuts into the efficiency of
staffing. In such cases, room attendants are
not able to clean as many rooms in the same
eight-hour period.
?
Staffing and Scheduling
Concerns
For our model hotel of 350 rooms, assume an
18-room workload per day. On any 100 per-
cent occupancy day we would need approxi-
mately 20 room attendants to clean all guest
rooms. Placing these room attendants in
teams of five, each working under one floor
supervisor, creates a need for four supervi-
sors. Also assume that one section house-
keeping aide is assigned to each team to
handle corridor cleaning, provide certain
services to room attendants during the day,
and to care for other public areas within the
180 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
guest room portion of the hotel. Finally, as-
sume that five laundry workers are needed in
the laundry regularly, and that persons hired
to relieve room attendants on days off can
also relieve in the laundry.
The complete organization should now
come into focus, except for one remaining
concern. Hourly personnel cannot work seven
days a week but are usually confined to a five-
workday schedule. The following formula can
establish the entire rooms cleaning, laundry,
and relief staff requirement; increasing the
staff allows for days off for regular room at-
tendants, laundry workers, floor supervisors,
and section housekeeping aides. (See the
staffing guide, discussed below.)
At 100 percent occupancy on a continu-
ous basis:
regular staff ? seven days ?
total staff ? five day maximum
S
1
? 7 ? S
2
? 5
S
2
? S
1
? 7 ? 5
For the model, S
2
?25 ?7 ?5 ?35 total
working staff, all limited to a five-day work-
week. The additional ten employees can be
organized into two special teams identical in
composition to the regular teams and the
laundry workforce. These swing teams relieve
all regular and laundry personnel teams twice
each week and have two days off themselves.
This portion of the organization can now be
scheduled to work by team units rather than
as individual workers, which greatly simplifies
personnel scheduling. (For further informa-
tion on scheduling techniques, the reader is
encouraged to read the basic text from which
this article is drawn.)
The balance of the housekeeping organi-
zation is noted in the functions to be per-
1327.ch05 12/19/05 9:31 AM Page 180
Section 5.3 ? Housekeeping Organizations: Their History, Purpose, Structures, and Personnel 181
Table 5.1 Department Staffing Guide
Position No. Title Name Assigned
Management Team
1 Executive housekeeper ______________________________
2 Housekeeping manager ______________________________
3 Laundry manager ______________________________
Fixed Team
4 Linen room supervisor ______________________________
5 Linen room attendant ______________________________
6 Senior housekeeping aide (public area supervisor) ______________________________
7 Public area housekeeper 1 (male) ______________________________
8 Public area housekeeper 2 (female) ______________________________
9 Public area housekeeper (relief) ______________________________
Evening Team
10 Night supervisor ______________________________
11 Night section housekeeper ______________________________
12 Night housekeeping ______________________________
13 Night (public area) housekeeper 1 (male) ______________________________
14 Night (public area) housekeeper 2 (female) ______________________________
15 Night (public area) housekeeper (relief) ______________________________
Regular Rooms Cleaning Teams:
Red Team
16 Senior housekeeper (supervisor) ______________________________
17 Section housekeeping aide ______________________________
18 Section housekeeper 1 ______________________________
19 Section housekeeper 2 ______________________________
20 Section housekeeper 3 ______________________________
21 Section housekeeper 4 ______________________________
22 Section housekeeper 5 ______________________________
Yellow Team
23 Senior housekeeper (supervisor) ______________________________
24 Section housekeeping aide ______________________________
25 Section housekeeper 6 ______________________________
26 Section housekeeper 7 ______________________________
27 Section housekeeper 8 ______________________________
28 Section housekeeper 9 ______________________________
29 Section housekeeper 10 ______________________________
1327.ch05 12/19/05 9:31 AM Page 181
182 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
Table 5.1 (Continued)
Position No. Title Name Assigned
Brown Team
30 Senior housekeeper (supervisor) ______________________________
31 Section housekeeping aide ______________________________
32 Section housekeeper 11 ______________________________
33 Section housekeeper 12 ______________________________
34 Section housekeeper 13 ______________________________
35 Section housekeeper 14 ______________________________
36 Section housekeeper 15 ______________________________
Green Team
37 Senior housekeeper (supervisor) ______________________________
38 Section housekeeping aide ______________________________
39 Section housekeeper 16 ______________________________
40 Section housekeeper 17 ______________________________
41 Section housekeeper 18 ______________________________
42 Section housekeeper 19 ______________________________
43 Section housekeeper 20 ______________________________
Laundry
44 Laundry supervisor (washman) ______________________________
45 Laundry helper/sorter ______________________________
46 Laundry attendant (ironer) ______________________________
47 Laundry attendant (ironer) ______________________________
48 Laundry attendant (folder/stacker) ______________________________
49 Laundry attendant (folder/stacker) ______________________________
50 Laundry attendant (folder/stacker) ______________________________
Swing Team 1
51 Senior housekeeper (swing supervisor) ______________________________
52 Section housekeeping aide (ST-A) ______________________________
53 Section housekeeper A-1 ______________________________
54 Section housekeeper A-2 ______________________________
55 Section housekeeper A-3 ______________________________
56 Section housekeeper A-4 ______________________________
57 Section housekeeper A-5 ______________________________
Swing Team 2
58 Senior housekeeper (swing supervisor) ______________________________
59 Section housekeeping aide (ST-B) ______________________________
60 Section housekeeper B-1 ______________________________
61 Section housekeeper B-2 ______________________________
62 Section housekeeper B-3 ______________________________
63 Section housekeeper B-4 ______________________________
64 Section housekeeper B-5 ______________________________
1327.ch05 12/19/05 9:31 AM Page 182
formed, and for purposes of illustration must
be scheduled individually. Specifically, per-
sonnel required for the second shift, persons
required to staff the linen room housekeeping
communications central, and personnel or-
ganized under the senior housekeeping aide
for public area cleaning and maintenance
round out the total department staff.
The entire housekeeping department staff
might then take on the appearance provided
in the staffing guide outlined in Table 5.1.
The staffing guide is created to accurately
document the need for total personnel. Every
position within the department is listed and
can be used to fill vacancies when they occur.
Note teams identified by color.
This identification system shows which
teams are regular teams, the one that works in
the laundry, and which ones are considered
swing teams. This particular staffing guide
presumes that a 100 percent staff has been
hired to support an occupancy averaging 85
percent or more for an extended period.
Should occupancies be forecast as a lesser
amount, a 100 percent staff need not be hired,
and staff vacancies can be distributed over the
entire team network. Fluctuations in daily oc-
cupancy are dealt with by scheduling down
within each team on a fair and equitable ba-
sis. This task can be delegated to the floor su-
pervisor, but controls must be in place that
guarantee fairness to all who must be cut out
of a day’s work due to low occupancy.
?
PERSONNEL AND JOBS
IN THE HOUSEKEEPING
DEPARTMENT
What follows is a listing of the jobs one
might find in a hotel housekeeping depart-
Section 5.3 ? Housekeeping Organizations: Their History, Purpose, Structures, and Personnel 183
ment. The basic function and scope of respon-
sibility are indicated for managerial positions,
and for hourly jobs, titles and responsibilities
are listed. Where several names or titles apply
to the same function in the hourly structure,
each name is noted.
?
The Executive
Housekeeper
The executive housekeeper usually assumes
complete direction, operational control, and
supervision of the housekeeping, laundry, and
recreation departments.
The scope of responsibility is normally
broad to ensure that the incumbent has the
freedom necessary to do the job. This position
is now recognized as a career-enhancing step.
The executive housekeeper operates the de-
partments under his or her control in the most
efficient manner possible through effective ap-
plication and enforcement of company policies,
the use of methods described in standard oper-
ating procedures, and the use of sound man-
agement principles. He or she is primarily
responsible for the cleanliness of guest rooms
and public areas assigned to the housekeeping
department. He or she accomplishes tasks
through proper training, motivation, and super-
vision of all personnel assigned to the house-
keeping, laundry and recreation departments.
?
The Housekeeping
Manager
In the model organization, the housekeeping
manager assumes primary responsibility for
guest room cleaning and servicing and acts
as the primary assistant to the executive
housekeeper.
1327.ch05 12/19/05 9:31 AM Page 183
Under the direction of the executive
housekeeper, the housekeeping manager is
responsible for the efficient and orderly man-
agement of guest room cleaning, servicing,
and the reporting of rooms status.
He or she represents employees directly
involved in rooms cleaning and is directly in-
volved in their work schedules. He or she
must react to occupancy in scheduling to keep
costs under control.
?
The Laundry Manager
The laundry manager normally assumes pri-
mary responsibility for operation of the ho-
tel’s in-house commercial laundry. He or she
also acts as second assistant to the executive
housekeeper.
Under direction of the executive house-
keeper, the laundry manager is responsible
for the efficient and orderly management and
operation of the hotel laundry. Through the
proper use of assigned personnel, he or she
provides clean linen to the house and to the
banquet department according to plans and
budgets.
?
HOURLY EMPLOYEES
?
The Guest Room Attendant
(also known as the GRA,
maid, or section
housekeeper)
The guest room attendant is primarily re-
sponsible for guest room cleaning and servic-
ing. He or she is usually assigned a section of
rooms each day, constituting a workload of a
184 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
designated number of rooms to be cleaned. In
general, the room attendant performs the
same functions in each room assigned. The
room attendant also conducts rooms checks
at set times to assist in determining the re-
porting condition of the house: rooms occu-
pied, rooms ready (vacant and ready to rent),
and rooms on change (vacant but not yet
serviced; also known as check-outs).
The room attendant also participates in
general cleaning of one or more rooms each
day as it is serviced in order to keep quality
standards high.
Most room attendants work in compli-
ance with standard operating procedures
(SOPs) that may specify as many as 60 items
that must meet a given standard in each guest
room. This is not as daunting as it may sound,
but the SOP system guarantees coverage
where necessary.
Finally, the room attendant reloads his or
her own linen cart at the end of each workday.
If so organized, the room attendant is one
of several members of a housekeeping team
under a floor supervisor.
?
The Section Housekeeping
Aide (previously Section
Houseman)
The section housekeeping aide works in the
guest room portion of the hotel, attending to
the regular and daily cleaning of corridors, el-
evator cabs and landings, stairwells, service
areas, floor linen rooms, vending areas, and
other public spaces in the vicinity of guest
rooms. The aide also helps room attendants
with general cleaning, if necessary. He or she
also removes soiled linen and rubbish from
room attendants’ carts on a regular schedule
1327.ch05 12/19/05 9:31 AM Page 184
and brings supplies from storerooms to floor
linen rooms when needed. The section house-
keeping aide works at the direction of the
floor supervisor and, when so organized, as a
member of a housekeeping team.
?
The Floor Supervisor (also
known as Senior
Housekeeper or
“Inspectress”)
Floor supervisors are team leaders to whom
several room attendants and a section house-
keeping aide report. They are assigned to spe-
cific divisions of the rooms section of a
property and are responsible for the quality
of work performed in the several rooms sec-
tions to which their room attendants are as-
signed. They also are responsible for the
public sectors assigned to their section house-
keeping aides. They make inspections and re-
ports and are, in all respects, supervisors of
the persons assigned to their teams. They also
assist in the personnel administration of the
people assigned to them.
The floor supervisor is sometimes called
inspectress, but this may be outdated. [Editor:
It is now outdated, for the term was coined to
indicate a female inspector. Most operations
now simply call this job inspector, regardless
of gender.] Many floor supervisors are in-
spectresses just because they inspect rooms.
Other inspectresses do nothing but inspect
rooms and report directly to the manager on
what they observe, but they have no responsi-
bility to correct identified discrepancies be-
cause no other staff is assigned to them for
work purposes. [This writer is of the opinion
that persons who do nothing but inspect guest
Section 5.3 ? Housekeeping Organizations: Their History, Purpose, Structures, and Personnel 185
rooms, then have no employees or authority
with which to take corrective action, are a su-
perfluous use of manpower.]
?
The Senior Housekeeping
Aide (in the past known as
Head Houseman)
The senior housekeeping aide is a major su-
pervisor in the housekeeping department. He
or she is usually in charge of all public areas
not directly associated with guest rooms: lob-
bies, major public corridors, public rest rooms,
offices, and other areas specifically negotiated
as part of the overall housekeeping responsi-
bility. The senior housekeeping aide is usually
responsible for basic training of section
housekeeping aides and for supervision of
utility housekeeping aides who might per-
form tasks such as shampooing carpets, wash-
ing windows, or project work. The senior
housekeeping aide is usually responsible for
the storage and accountability of cleaning and
guest supply inventories. He or she normally
works as a supervisory assistant to the execu-
tive housekeeper and performs other tasks as
the executive housekeeper directs.
?
The Night Supervisor
The existence of a night supervisor presumes
a second shift to which no management is reg-
ularly assigned. This situation, of course, can
vary with the size and complexity of night op-
erations. Other than as intermittently visited
by housekeeping management, the night su-
pervisor assumes total control of the depart-
ment after the major rooms and hotel
cleaning evolution for each day is concluded.
Overseeing one or two night room attendants,
1327.ch05 12/19/05 9:31 AM Page 185
a night section housekeeping aide, and several
night lobby or public area personnel, the
night supervisor is accountable for the bal-
ance of services performed by the housekeep-
ing department. He or she ensures that all
rooms are left cleaned and ready to rent and
that guest requests for service or equipment
such as cribs, bedboards, and extra linen are
fulfilled. The night supervisor works closely
with the hotel night manager, is usually on
beeper, and makes routine inspections
throughout the hotel until the department is
secured each evening at the designated time.
The night supervisor, like the senior house-
keeping aide, is a major supervisor within the
department.
?
The Linen Rooms
Supervisor
The main linen room, a service area of the ho-
tel, is the hub of housekeeping communica-
tion and activity. It might be better described
as housekeeping central. The linen room su-
pervisor, under the executive housekeeper, is
the supervisor in charge of main linen room
operations. His or her primary responsibility
is maintaining and operating the communica-
tion link to the front desk, engineering, and
each guest in need of housekeeping attention.
In addition, the linen room supervisor is
sometimes referred to as the chief status op-
erator for housekeeping. Keeping up with,
changing as necessary, and reporting the sta-
tus of each guest room throughout the day is
another major function of the linen room su-
pervisor. He or she is the prime guest contact
representative. Also, he or she oversees the
activities of one or more linen room atten-
dants who perform supply and distribution
functions for items such as bedspreads, blan-
186 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
kets, bed pads, and curtains. On the second
shift, the night supervisor assumes the re-
sponsibilities of the linen room supervisor.
?
The Laundry Supervisor
Working as a principal assistant to the laun-
dry manager, the laundry supervisor, as the ti-
tle indicates, supervises the activities of
laundry attendants. Normally the laundry su-
pervisor works as the head washperson and is
in charge of all major wash equipment and
chemicals. He or she also supervises the work-
load process and production. In our model
hotel, when the laundry supervisor and team
of laundry attendants is scheduled off, a swing
team supervisor assumes the responsibilities
of the laundry supervisor and brings his or her
swing team into the laundry. Because there
are two swing teams, each works in the laun-
dry one day each week, providing the entire
department with maximum flexibility and
training.
?
The Recreation Supervisor
In our model hotel, the recreation supervisor,
under the direct supervision of the executive
housekeeper, assumes responsibility for all
recreation areas of the hotel. All swimming
pool attendants work for the recreation su-
pervisor and are fully Red Cross or water
safety instructor qualified. (Swimming pools
are properly signed to indicate “No lifeguard
on duty. Swimmers enter at their own risk.”
This prevents the guest from abdicating re-
sponsibility for their own and their children’s
safety. However, all pool attendants are fully
qualified to save a life.) Pool attendants, un-
der direction of the recreation supervisor,
also work in the health club, sauna, and game
1327.ch05 12/19/05 9:31 AM Page 186
room, providing service to guests and main-
taining cleanliness and order.
?
Other Employees
Other employees may be found in the depart-
ment, their titles indicating their activities and
who they might work for. All such positions
have titles appropriate to either male or fe-
male employees and are therefore nonsexist.
Such titles are as follows:
• Utility housekeeping aide
• Linen room attendant
• Lobby housekeeping aide
• Laundry attendant
• Housekeeping trainer (a secondary job
sometimes carried by a room attendant to
ensure standardization of training)
?
NEW HORIZONS IN
HOUSEKEEPING
The National Executive Housekeeper’s Asso-
ciation (NEHA) has long recognized the
similarity in responsibilities of persons per-
forming housekeeping functions in hospitals,
hotels, and nursing homes. The association
therefore draws its membership not only from
hotels, retirement centers, and contract clean-
ing establishments but also from hospitals and
nursing homes. The movement of manage-
ment personnel between venues is well docu-
mented. When asked how difficult it is for a
manager to make the transition in either di-
rection, a member in hospital service once re-
marked, “The main function of housekeeping
in both areas is to clean rooms and public ar-
eas, and to dispose of trash and rubbish. There
Section 5.3 ? Housekeeping Organizations: Their History, Purpose, Structures, and Personnel 187
is only one major difference, however, and
that is in hospitals, we know exactly what we
are walking into, and in hotels, we don’t know
what we may be dealing with.” That was
true—until the advent of the AIDS crisis.
On December 2, 1991, new rules issued by
the Occupational Safety and Health Adminis-
tration (OSHA) made it mandatory that em-
ployers provide to all employees who might,
as a result of their job classification, come in
contact with human blood or other bodily flu-
ids, information, training, and compliance
with federal precautions designed to maintain
a safe workplace with regard to bloodborne
pathogens (microorganisms that can cause
disease in humans), especially the HIV virus
and the HBV (Hepatitis B) virus.
Specifically, department managers must
establish control plans to combat the threat
and provide access for employees to read
and understand the OSHA compliance stan-
dard. Employees such as housekeeping and
laundry personnel, who as a part of their reg-
ular daily assigned duties come in contact
with bodily fluids such as blood, semen, spu-
tum, and vomit and with spent needles
(sharps) discarded by diabetics or drug users,
must be advised of the potential dangers.
Furthermore, they must be trained and
tested in how to handle such risks when they
occur, and they must be offered the opportu-
nity to be inoculated against the HBV virus
at company expense. Records must be kept
of all training conducted and of all exposures
that occur.
?
CONCLUSION
Housekeeping operations is no longer the ex-
clusive territory of women, nor is it consid-
ered menial or less important than any other
1327.ch05 12/19/05 9:31 AM Page 187
function in the hospitality organization. Any-
one who thinks otherwise should try to imag-
ine hotel operations without housekeeping;
the picture might have general managers and
presidents cleaning rooms.
Because of the large staffs involved, house-
keeping operations provide junior managers
outstanding opportunities to develop leader-
ship and supervisory skills, an opportunity not
always available in other departments.
This writer recalls a moment of truth sev-
eral years ago when a general manager was
188 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
overheard commenting to a utility aide who
at the time, happened to be mopping a men’s
room at 1:00 A.M. The general manager said,
“You know, what you are doing is just as vital
and necessary as what I do every day. We just
do different things and work at different skill
levels. When the company thinks they can do
without either one of us, they’ll abolish our
jobs. I don’t think they will, so until they do,
don’t forget: Your job is just as important
around here as mine is!”
5.4 ON BEI NG AN EXECUTI VE
HOUSEKEEPER
John Lagazo
Ah yes, those were the days, sitting in our uni-
versity classes, wondering where our educa-
tion and futures would take us. I thought it
would be quite easy—go through the man-
agement training program, become an assis-
tant department head for a little while, move
to department and then division head, then
presto—general manager!
After going through the management
training in my first company, I decided I
wanted to stay in the rooms division—more
specifically front office, so the path was laid
out: hotel assistant manager, then front office
manager, brief exposure in either housekeep-
ing or reservations, then so on and so on.
Never did I think I would be the executive
housekeeper in arguably what are some of the
finest hotels and resorts not only in the
United States but even the world.
Why housekeeping? When my friends ask
what I do and I say, “I’m an executive house-
keeper,” the first response is, “Oh, so you
clean rooms?” Depending on who is asking, I
either agree or say it is much, much, more.
Over the years, I have had trainees or first-
time assistant managers who say that house-
keeping was never their initial choice, but by
the time they were done, they had a different
appreciation for the department.
So what is housekeeping? Is managing
housekeeping just making sure the room at-
tendants clean all the rooms every day? It is
actually just a little more than that.
It is managing what usually is the largest
regular staff in the hotel and the budget to pay
them. It is managing supplies—whatever is in
the room for the guests to use and whatever is
used to clean anything and everything in the
hotel, from the sidewalks to the staff areas (e.g.,
locker rooms, cafeteria, offices), from meeting
spaces to food and beverage outlets—not to
mention the guest rooms themselves.
1327.ch05 12/19/05 9:31 AM Page 188
It is managing teamwork and coordinat-
ing with all other departments in the hotel—
to make sure the rooms are ready for the
guests when they arrive. It is making sure that
all instructions and requests from sales are
carried out. Accounting must be satisfied that
we are in control of dollars. It is making sure
the food and beverage outlets are as clean as
the guest rooms. It is making sure all of the
human resource reporting requirements are
met.
For the hotels that have a full-service
laundry, it is managing that too—and if the
hotel utilizes an off-property service (for
laundry, overnight cleaning of the kitchens
and public areas, uniform and guest clothes
cleaning), the executive housekeeper must
manage that operation as well! Even though
off-property services are their own business,
they represent the hotel; if they do not clean
the linens well or are not efficient, it costs the
hotel money.
Executive housekeepers must be detail-
oriented and organized. Housekeeping is a
24/7 department, and it can get out of control
very quickly. This means phone calls at home
at 11:00 P.M. saying that your staff has not
shown up or that because the boilers are
down, there is no steam for the laundry. The
wildest calls I received (not too often, thank
goodness) were when I worked in Hawaii. Be-
cause of the staffing challenges, I had room
attendants and housepersons ferried over
from a neighboring island. If the weather was
bad or the boat had a mechanical problem,
the phone rang around 4:00 A.M. to tell me so.
I then had to figure out Plan B for cleaning
rooms and the rest of the hotel that day.
Getting away from the technical side of
things, being an executive housekeeper taught
me a lot about managing people; I was “di-
versity managing” well before it became po-
Section 5.4 ? On Being an Executive Housekeeper 189
litically correct and one of the new manage-
ment buzzwords. The staff is usually the most
ethnically diverse, with an accompanying
challenge being the level of English compe-
tency and overall education. These staff mem-
bers are asked to work with hazardous
chemicals in an environment with a high acci-
dent potential; they push and pull heavy
weights, are exposed to bacteria, and work
with dangerous equipment such as sheet and
towel folders and garbage and cardboard
compactors.
These people have one of the most detail-
oriented jobs—a room checklist can have as
many as 150 items that must be completed to
proper standard.
Contrary to popular belief, this staff
should also have high guest contact skills. Just
because room attendants and other house-
keeping staff members do not interact with
guests every time they perform their duties,
this does not mean they should not be skilled
in guest contact. One of my former room at-
tendants consistently told me the travel plans
of one of the regular CEOs that stayed with
us. She wrote down his travel dates and let us
know if his wife would be with him. Because
he was such a regular, we rarely had problems
in accommodating him even if we were sold
out, and he always had the same room with
the same room attendant.
In many of the hotels, the challenge was
to pull the ethnic groups together to work as
a team. Housekeeping gave me a great chance
to learn about different cultures—I probably
would still not know what a quincinera is (a
Sweet 15 birthday/debut in Latin American
countries). I have eaten foods that I probably
would not have otherwise and have picked up
smatterings of many languages (Spanish, Cre-
ole, Tongan, Polish, Cantonese, Filipino)—
which, depending on the situation, can either
1327.ch05 12/19/05 9:31 AM Page 189
get me in serious trouble or give everyone a
good laugh.
I learned about management styles and
group dynamics, and I advise all of you who
read this to learn as much about these sub-
jects as possible. I learned about identifying
the informal leaders of groups and how to in-
fluence them. I learned about individual per-
sonality styles, how to manage them, and how
to get them to work together to get things
done. From the people of different cultures I
have worked with, I learned about the ones
who avoid eye contact when you speak with
them, I learned about the ones that had Old
Country traditions—for instance, not respect-
ing a female or young boss—and how to turn
them around.
Housekeeping taught me how to adapt—
which, on the outside, should not have been
an issue because I was the boss and the staff
should do as I say (traditional management).
Managing people continues to change and
evolve—first there was Total Quality Man-
agement, then Generation X management,
and now whatever new theories are out there.
To me, the bottom line is that to be a success,
you must manage not only yourself but also
groups of people. Manage and lead the envi-
ronment (department), and you will be suc-
cessful in your endeavors. Get exposure to
different environments—work in city and re-
mote resort locations—and know and under-
stand that everywhere you go, the guest and
staff makeup is different. If you are adapt-
able, you will also be successful.
There are some other interesting things
too—for example, when I shop for home
cleaning items, I know way more than I need
to. Don’t bother listening to commercials;
send me an email or work in housekeeping
and you will know why I will not buy “window
cleaner with ammonia.” Having managed
190 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
laundry operations, I shop for clothes not only
for style but for materials used and construc-
tion of the item. If you buy an item with lots
of extra frills, beads, decoration, metallic but-
tons, and bring it to my dry cleaning store,
don’t be surprised if I charge you extra for
what it takes to properly clean it. I may even
turn you down and say I won’t clean it unless
you sign a damage waiver. I now know that
the dry cleaning and laundry processes are
murder on fabrics.
I have many great memories from house-
keeping over the years:
• Using a bullhorn to conduct a morning
meeting with 70 room attendants.
• Proving a Mobil inspector wrong (I had
been in his room during the incident in
question).
• Being the executive housekeeper at the
host hotel for the Mobil five-star winners
award ceremony—imagine having every
room checked with a magnifying glass
and white gloves!
• Having a local TV station doing a 60
Minutes–style report on hotel cleanli-
ness—we passed with flying colors!
• Having my rooms director keep checking
on me to make sure I did not get food poi-
soning because of food my staff would
give me—I was adventurous enough to
eat whatever was placed on my desk and
yes, jellyfish does have an interesting
texture.
I have encountered other situations too.
After a suicide in a hotel room, I could only
get new staff members to go into the room be-
cause of the strong superstitious beliefs of
some attendants. I have managed through
both strikes and decertifications in union ho-
tels. The celebrity stories—those alone could
1327.ch05 12/19/05 9:31 AM Page 190
take up a whole book. Perhaps I could get
rich from writing it!
I am glad my career path has taken me
through housekeeping. At the end of the day,
it really is the memories of the people I have
met and friends made over the years that
have made the difference. I think I would
have learned the technical aspects one way or
the other, but the people skills have been
even more valuable. Yes, I did hold the posi-
tions of hotel assistant manager, front office
assistant manager, and front office manager
at various points in my career, in addition to
spending time in all housekeeping manage-
ment positions, including laundry/valet
manager.
Where did I get all of these memories and
experiences? Since leaving my alma mater in
the mid-1980s, I have been at:
• Hyatt Hotels in California and Louisiana
• A Wyndham Hotel in California
Section 5.5 ? The Hotel Engineering Function: Organization, People, and Issues in the Modern Era 191
• Ritz-Carlton Hotels/Resorts in Califor-
nia, Boston, Florida, Hawaii, and Puerto
Rico (when I worked in these hotels, they
were all five-star and/or five-diamond, ex-
cept for Puerto Rico, which was still too
new)
• Four Seasons Hotels in Boston and
Chicago (both five-star, five-diamond
properties)
• Short stints in St. Louis and Florida with
Adams Mark and an independent four-
star resort
From my current perspective as director
of operations of the Madison Hotel in Wash-
ington, D.C., can I say my housekeeping ex-
perience helped me? You bet! The varied
experience with people, places, and manage-
ment styles has prepared me for anything in
this great hospitality business.
5.5 THE HOTEL ENGI NEERI NG
FUNCTI ON: ORGANI ZATI ON, PEOPL E,
AND I SSUES I N THE MODERN ERA
Denney G. Rutherford
?
INTRODUCTION TO
THE ENGINEERING
DEPARTMENT
?
History of Department
Historically, the functions and duties of the
chief engineer, his staff, and the engineering
department have been relegated to the sub-
conscious of hotel management and certainly
of the hotel guests. Their place in the organi-
zation was roughly analogous to their place in
the building structure: toward the bottom and
basically out of sight. The only time the func-
tions of the engineering department became
noticeable was on those unhappy occasions
when something went wrong with one of the
building systems and guests and/or manage-
ment were inconvenienced.
1327.ch05 12/19/05 9:31 AM Page 191
Consequently, in the past, “out of sight,
out of mind” treatment evolved for the engi-
neering department, and as a result its rela-
tive importance was diminished. Also, the
personnel of the engineering department
were craftspeople and semiskilled workers,
usually managed by one of their number who
through longevity and perseverance worked
their way up through the ranks to supervisory
status.
?
Evolutionary Stimuli
There is now clear evidence that this depart-
ment is changing in many of the same ways
that other departments of a modern hotel
have had to change. The reasons for these
changes are many, but four can be highlighted
here. Several of them, of course, are closely
connected.
Competition. As more and more hotel
organizations seek the business of ever
more carefully segmented markets, many of
the mechanisms of competition manifest
themselves first in features of the physical
plant. These can range from building design,
landscaping, elevators, and in-room ameni-
ties and facilities to the latest in traditional
fixtures and building systems such as plumb-
ing, kitchen equipment, elevators, heating,
ventilating and air conditioning (HVAC),
and the other behind-the-scenes parapher-
nalia that make up the domain of the chief
engineer.
Sophistication. Many building systems in
today’s hotels are interconnected, managed in
conjunction with other departmental systems,
and monitored by computerized facilities.
This increased sophistication has mandated
more sophisticated and knowledgeable man-
192 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
agement in all departments, but perhaps the
most drastic and substantive changes will be
(and are) occurring in engineering.
Return on Investment. Many modern ho-
tel plants are the result of plans and invest-
ments by a wide range of participants,
including (but not necessarily always) the
management firm that operates the hotel.
These investors expect a certain return on
their investment and subsequently expect the
hotel company will not only keep the hotel
filled with guests but keep the property in
such a state that the guests will continue to
want to come there. This also mandates
new dimensions of the engineer’s job. The
combination of increased competition and so-
phisticated systems makes for more than a
traditional repair-and-maintenance approach
to providing engineering support in all areas
of the hotel. To keep the hotel positively con-
tributing to the investors’ return on their
money, the engineering staff must be consid-
ered a major role player in the financial
health of the organization.
Energy. The cost, use, management, and
conservation of energy have added a new and
singular dimension to the job of the chief en-
gineer—one that did not exist in pre-1973 op-
erations, simply because energy was so cheap.
Since the OPEC oil embargo of 1973, energy
prices have undergone many changes, none of
them making it any cheaper. Prior to that,
buildings were neither engineered nor man-
aged to save energy.
Since then, most hotels and most modern
hotel companies have come to recognize en-
ergy as one building expense in which signifi-
cant savings can be made. If accomplished
with care, engineering can provide for deliv-
ery of hotel services without adverse or nega-
tive effects on the guest. We want to avoid, for
1327.ch05 12/19/05 9:31 AM Page 192
instance, the extreme step of requesting
guests to take short showers while at the same
time asking them to pay $180 a night for their
room.
The residual effects of the embargo are
twofold. Hotels built prior to 1973 were not
constructed to be particularly energy effi-
cient. Engineers in those hotels have a more
difficult job with respect to managing energy.
On the other hand, hotels that were de-
signed and built after 1973–1974 exhibit in-
creasingly more sophisticated systems for
managing and conserving energy without ad-
versely affecting guests.
The first instance presents the managerial
problem of making do for the engineering
manager; the second presents the dilemma of
expanding one’s knowledge in a rapidly
changing technological environment. It
should be noted that energy remains a signif-
icant management issue for the engineer in
the year 2005, and will for the foreseeable
future.
In no business system as complex as a ho-
tel is a mechanical or electronic system the
only answer. A tremendous amount of atten-
tion must be given to training personnel to
overcome wasteful habits where energy is
concerned. A classic example is that of kitchen
employees who turn on every appliance in the
kitchen at 6:00 A.M. when maybe only 20 per-
cent of them are used for the preparation of
breakfast and most of the rest are not needed
until close to lunch. This is representative of
the sort of wasteful habit that is out of the en-
gineer’s control but that he or she is obligated
to point out to other department heads.
Clearly, the engineer now must have an active
presence as a full member of the management
staff and must be adept at interacting with
other department managers.
Section 5.5 ? The Hotel Engineering Function: Organization, People, and Issues in the Modern Era 193
?
PERSONNEL
?
Manager of Engineering
Function
Variously referred to as the chief engineer, di-
rector of building operations, building super-
intendent, or some combination of those
terms, this is the individual responsible for the
management of the building’s systems and its
maintenance, repair, and upkeep (Figure 5.3).
As stated earlier, in the past, chief engi-
neers typically were people who had worked
their way up through the ranks from either
one of the crafts or as an engineering em-
ployee specializing in one of the building sys-
tems. They may have been in hotels all of their
professional career or may have come to a ho-
tel company from engineering positions in or-
ganizations as diverse as shipping lines,
manufacturing companies, office buildings,
university settings, and hospitals.
Research evidence, however, suggests this
trend may be changing (Rutherford 1987).
Chief engineers responding to this survey de-
scribe themselves collectively according to
the data set forth in Table 5.2. Over 25 percent
of those responding to this nationwide survey
indicated they have a university degree.
Three-quarters of those degrees were in some
area of engineering. This suggests that the so-
phistication of modern hotel building opera-
tions may be mandating management by
those whose formal education is more exten-
sive than that required in the past.
In this study, the typical engineer was 44.5
years old and had been in the hospitality busi-
ness about 11 years. This suggests that this
“typical engineer” probably had significant
on-the-job experience or training in his field
1327.ch05 12/19/05 9:31 AM Page 193
in other industries and only recently came
into the hospitality industry. After entering
the hospitality industry, however, it appears
they moved rapidly into management and
were fairly stable in their careers, as evi-
194 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
denced by the congruence of average years in
present position and average years at present
hotel.
Commenting on these data, one chief en-
gineer said that, in his experience, more and
Figure 5.3 Engineering Department Organization
ENGINEERING
MANAGEMENT
ASSISTANT
BUILDING SYSTEM
FUNCTIONS
HVAC
Plumbing
Electricity
Refrigeration
Food Protection Equipment
Computer Systems
Elevators
ADMINISTRATION
FUNCTIONS
Secretarial
Clerical
Purchasing
Inventory
Preventive Maintenance
Contracted Services
Scheduling
Records
CRAFTS
Carpenter
Cabinetmaker
Upholsterer
Painters
Groundskeepers
Table 5.2 Chief Engineer Demographics
(Raw Number,
if Applicable)
Average age 44.5
Percent male 100.0%
Percent Caucasian 92.9%
Median salary $35,000
Percent university degree 27.0% (20)
Percent of degrees in engineering 75.0% (15)
Percent of degrees in hotel/business 25.0% (5)
Average years in hospitality industry 10.9
Average years at present hotel 6.3
Average years in present position 6.15
74 respondents
1327.ch05 12/19/05 9:31 AM Page 194
more industry engineering managers in the
larger or international hotel firms are being
recruited from among those people who have
had at least some college education, if not ac-
tually holding a college or university degree
in engineering. He suggested that in his com-
pany this does not necessarily reflect a prefer-
ence for academic training over practical
experience but rather recognizes the realities
of doing business in today’s competitive envi-
ronment. Having completed college study
also suggests that the candidate will under-
stand and be able to manage the sophisticated
building systems that the company anticipates
installing and being developed for new hotels
into the next century.
In that comment lies one key to under-
standing the future of the chief engineer’s job.
The most successful engineers of the future
will very likely be those whose training and
education prepares them to think strategi-
cally, to recognize trends, and do their part to
help the hotel and its owners meet and deal
with the evolutionary issues discussed earlier.
?
Other Departmental
Management Staff
Refer again to Figure 5.3. Depending, of
course, on the size of the hotel and the extent
and sophistication of its engineering functions,
the chief engineer may enjoy the services of a
staff of administrators, including assistant
managers. These people help carry out the ad-
ministrative details of operating an increas-
ingly complicated hotel department. Related
tasks include secretarial support, which may
be combined with a clerical function.
Among the most important administra-
tive functions of the engineering department
are:
Section 5.5 ? The Hotel Engineering Function: Organization, People, and Issues in the Modern Era 195
• Helping other department heads make
purchasing decisions.
• Keeping an inventory of spare parts and
building equipment.
• Arranging for the performance of pre-
ventive maintenance on all building
systems.
• Administering contract services such as
pest control, window washing, landscaping,
swimming pool maintenance, grounds-
keeping, and construction projects.
As the department grows in size and
scope, a major administrative function in-
volves scheduling equipment and personnel
to accomplish the tasks of the department.
While scheduling may benefit greatly from
technological advances such as microcomput-
ers or the hotel’s mainframe computer sys-
tem, in a building whose systems are as
complicated and interrelated as those of a ho-
tel, part of the engineering function must be
the ability to react to nonscheduled events
ranging from overflowing toilets to stuck ele-
vators, gas leaks, and so forth.
A final administrative function is setting
the groundwork and maintaining the basis for
managerial and administrative decisions that
affect the long-term operation of the engi-
neering department and, by extrapolation, the
hotel itself. This involves keeping accurate
and up-to-date records regarding the various
building systems and the installation of
capital equipment for which the engineer is
responsible.
These sorts of administrative details
complicate the job of any manager but may
be particularly troubling to the engineer. One
of the main reasons is that while the engi-
neering department is responsible for the
maintenance and repair of sophisticated and
complicated building systems, under most
1327.ch05 12/19/05 9:31 AM Page 195
circumstances these systems, or their compo-
nents, are often operated by (and perhaps
misused by) non-engineering employees and
guests. Particularly in the case of guests, the
engineer has little or no control over the way
in which they treat guest room equipment
and fixtures for which the engineer is respon-
sible. Engineers who have the luxury of a
well-developed administrative staff find their
job in managing the building and its systems
and the attendant problems much easier if
complete, accurate, and up-to-date records
are available to formulate the basis for plan-
ning, purchasing, budgeting, and control.
?
Technical Specialists
Typical building functions, which are the re-
sponsibility of the engineering department,
are listed in Figure 5.3. Each has its own place
in providing for the comfort of the guest and
participating in the delivery of the hotel’s
services to the guests. Each has attendant
complications that provide challenges for the
management and staff of the engineering
department.
Heating, ventilating, and air conditioning
(collectively known as HVAC) is concerned
with supplying the production, public, and
guest room areas of the hotel with a clean,
controlled, and comfortable indoor environ-
ment. Modern building HVAC systems pro-
vide for heating or cooling the air, adding or
deleting moisture from the air to adjust for
optimum relative humidity, filtering or clean-
ing the air, and moving the air from place to
place within the hotel to provide for a number
of complete changes of air in a room per hour,
depending on local codes and activities within
that particular area of the hotel.
Among the complicating factors here that
196 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
challenge the engineering department are
that different areas of the hotel have different
requirements for air. It is easy to see that
kitchens and guest rooms place different de-
mands on the HVAC system. Lobbies have
different requirements than do other public
areas such as bars, restaurants, and house-
keeping laundry facilities. Engineers call this
job of meeting diverse air needs “providing
the system with balance,” and it is a major
function of the individuals in charge of the
HVAC to deliver the optimum environment
to each area of the hotel.
The plumbing system in a modern hotel
must also perform a number of balancing
functions. First and foremost in the mind of
management, of course, is the delivery of
high-quality water service to guest room ar-
eas. Guests want high-quality water that is
free from visual defects such as dirt and rust,
does not carry odors, and tastes clean and
fresh. Guests also want water that is hot
enough to shave, bathe, and wash in without
the danger of scalding themselves, and they
also want that water in generous supply.
Nothing is more frustrating to a hotel guest
who is paying over $200 a night for a room to
find that the hotel has run out of hot water in
the middle of a morning shave or shower. At
the same time, the engineering department is
expected to deliver production hot and cold
water to the kitchen areas, the housekeeping
and laundry areas, and the food service areas.
Providing for the delivery of high-quality wa-
ter service to the various user groups in the
hotel is a major part of the engineering func-
tion—one that, of course, is noticed only
when the system is malfunctioning.
A similar case may be made for the deliv-
ery of electricity. The electrical systems of the
hotel, like the plumbing systems, must be de-
signed and maintained to serve various user
1327.ch05 12/19/05 9:31 AM Page 196
groups. Again, like plumbing, there is no sub-
stitute for electricity. The engineering staff
must provide the hotel with electrical service
that meets the needs of individual depart-
ments and the needs of guests.
Refrigeration, food production equip-
ment, and computer systems are examples of
other building system functions for which the
engineering department may be responsible
for repairing, maintaining, replacing, or man-
aging. While the maintenance of many of
these systems may be contracted to outside
agencies such as the supplier, the engineering
department nonetheless is the first line of de-
fense in keeping them operating efficiently.
In most modern hotels, the installation
and service of elevator systems are generally
the province of the elevator manufacturer,
and hotels typically have extended mainte-
nance agreements for the elevators. Most en-
gineering departments, however, closely
monitor the operation of the elevator sys-
tems. In modern high-rise hotels with high-
speed elevator service, the slightest problem
with that service should be quickly and easily
identified and reported to the contractors. It
is generally the responsibility of the engineer-
ing department to monitor these services and
their contracts closely and carefully.
The crafts represented in Figure 5.3 illus-
trate the sorts of specialized skills required by
most hotel engineering departments. Depend-
ing on the size of the hotel and complexity of
its services, an engineering department may
employ on a full-time basis one or more car-
penters and cabinetmakers to maintain, re-
pair, and build fixtures and furniture for the
hotel’s guests and staff. Similarly, if the service
is not contracted out, hotels may employ an
upholsterer whose major task is to maintain
the high-quality appearance of the vast col-
lection of furniture in a typical hotel.
Section 5.5 ? The Hotel Engineering Function: Organization, People, and Issues in the Modern Era 197
Painting, upkeep of the hotel’s grounds,
and landscaping are additional ongoing func-
tions that require constant attention. These
services may be contracted to outside agen-
cies or suppliers but are included here to sug-
gest the range of functions for which the
engineering department is responsible.
?
ISSUES
In the Rutherford study (1987), the engineers
surveyed were asked to judge the relative im-
portance of the items on a list of 58 state-
ments relating to the operation of a modern
hotel engineering department. A statistical
procedure was applied to rank-order the
statements in terms of their rated importance.
The ten most important facets of an engi-
neer’s job, as derived from this list, are repro-
duced in Table 5.3 and serve as the basis for
suggesting the most pressing issues facing ho-
tel engineering managers at this time. While
these data are 20 years old, they still represent
important concerns of the modern mainte-
nance chief. An informal telephone survey of
15 CEs, utilizing the same items found little
change in the hierarchy. “Knowledge of main-
tenance of equipment” became secondary to
energy-related items and “relations with top
mangement,” but they were all bunched
closely at the top.
?
Departmental
Management
Items #4, 6, 7, and 8 of Table 5.3 suggest that
modern hotel engineers deem activities relat-
ing to management of their departments of
high importance to success. Communicating
with employees; providing a safe environment;
1327.ch05 12/19/05 9:31 AM Page 197
being able to organize the tasks, activities, and
personnel in the department; and providing
leadership all suggest that the foremost issues
facing the chief engineer today call for mana-
gerial skills rather than the traditional techni-
cal skills.
?
Energy
The fact that three energy-related items were
rated in the top ten by all responding engi-
neers suggests that the realm of issues relating
to energy has not yet been addressed satisfac-
torily by the majority of these professionals. It
also suggests that energy will continue to be
an issue in the foreseeable future.
?
Relations with Top
Management
Another major dimension of the engineer’s
job can be seen by the importance attached to
198 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
relations with top management. Of the other
departments that the engineers were asked to
rank their relationships with, only two, house-
keeping and purchasing, ranked within the
top 50 percent of the 58 survey items. Many of
the chief engineers contacted for comment
agreed with this ranking with top manage-
ment. They said it is becoming an increasingly
important part of their job not only to report
to top management but also to educate top
management about the importance of the en-
gineering function.
?
Equipment
It should be noted that the technical aspects
of the chief engineer’s job are not ignored in
the collective rankings assigned to these oper-
ational statements. That knowledge of equip-
ment maintenance ranked clearly first among
the statements and that knowledge of types of
equipment made it into the top ten suggests
that while the job of the chief engineer may in
Table 5.3 Importance of This Item to Operation of My Department
Rank Item Mean SD N
1 Knowledge of maintenance of equipment 4.760 .633 75
2 Energy conservation 4.655 .804 74
3 Energy management 4.589 .761 73
4 Responsibility for communication with employees 4.587 .680 75
5 Relations with top management 4.520 .811 73
6 Responsibility for leadership 4.514 .726 74
7 Responsibility for safety 4.486 .904 72
8 Responsibilities of an effective organizational ability 4.453 .810 75
9 Energy costs 4.444 .854 72
10 Knowledge of the types of equipment 4.370 .791 73
Scale: 1 ? not at all important
Scale: 5 ? of vital importance
1327.ch05 12/19/05 9:31 AM Page 198
fact be evolving toward one of a more mana-
gerial nature, its traditional technical aspects
still play a major role in the daily discharge of
an engineer’s responsibility.
?
FUTURE AND
CONCLUSION
?
Data from Empirical
Research
Interpretation of the data gathered in a sur-
vey of a broad cross section of chief engineers
and subsequent follow-up conversations with
selected engineers suggests that the job of the
chief engineer is, in fact, evolving, as sug-
gested at the outset of this chapter.
The engineers describe many more inci-
dents involving issues and problems related
to people and departmental action and inter-
action than in the past, when most issues and
problems involved equipment and systems.
Section 5.6 ? The Engineering Department and Financial Information 199
It also appears that in the future, chief en-
gineers are going to have to be more adept at
inter- and intradepartmental organizational
politics. To provide the hotel and its guests
with high-quality services relative to the phys-
ical and environmental systems of the build-
ing, the chief engineer must compete with
other department heads for scarce resources
related to personnel, technology, and operat-
ing elbow room.
Summing up, the engineering depart-
ment, its management, and, to a certain ex-
tent, its staff and technical experts represent
an organizational function of the modern ho-
tel that is in the process of evolutionary
change. This change is driven by a number of
factors. The future of successful hotel organi-
zations will hinge, to a great extent, on the
ability of hotel management to recognize the
importance of the contributions of the engi-
neering department to the delivery of guest
services and maintaining a high return on in-
vestment for the owners of the property.
5.6 THE ENGI NEERI NG DEPARTMENT
AND FI NANCI AL I NFORMATI ON
Agnes Lee DeFranco and Susan B. Sheridan
The engineering department is a vital part of
a hotel. Energy cost alone runs anywhere
from 4 to 6 percent of a property’s total oper-
ation budget. Savings in energy cost can be
accomplished by instituting simple steps such
as modifying staff members’ behavior (Dale
and Kluga, 1992). How can financial data be
used to continuously improve the perfor-
mance of the engineering department? To an-
swer this question, a survey was performed to
collect data from hotel engineers to deter-
mine their use of financial information. It is
postulated that if financial information is an-
alyzed correctly, the engineering department
can serve its profit centers better, which in
turn will assist these profit centers in reducing
both their cycle time and errors.
A number of studies have been done on
1327.ch05 12/19/05 9:31 AM Page 199
the use of financial information by managers
in profit centers of hotels, but not many were
performed specifically to collect information
regarding the engineering department. Malk
and Schmidgall (1995) discuss the use of fi-
nancial statements and information in the
food and beverage department of a hotel, par-
ticularly in an effort to contain costs and
maintain a profit. Turkel (1993) also advo-
cates the development of profit and loss state-
ments and allocating costs properly to
ascertain the profitability of a food and bev-
erage department. Malk and Schmidgall
(1994) also investigate the cost percentages in
the rooms division to help rooms division
managers with cost containment. Quain
(1992) explores the use of profit analysis by
the customer segment in addition to yield
management, and the topic of menu engi-
neering to improve profits in food and bever-
age establishments has also been discussed
(Bayou and Bennett, 1992; Dougan, 1994).
However, few, if any, studies can be quoted for
the engineering department.
?
THE SURVEY
The purpose of the study was to investigate
the use of financial information by hotel engi-
neers. Therefore, questions asked included the
types of financial information used, the fre-
quency at which this information was gener-
ated, the methods used to generate the data,
and the type of hardware and software used
in the department. Hotel engineers were also
interviewed to see how their use of financial
information could improve quality in their
departments by reducing cycle time and elim-
inating errors.
The population for this study consisted of
directors of engineering in U.S. hotels that
200 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
were listed in the Hotel and Travel Index,
Spring 1994 edition. The sample was ran-
domly selected from this index, and the selec-
tion criteria were based on the number of
rooms in the property. The sample hotels all
had 200 or more rooms. It was believed that
hotels of this size would probably have an en-
gineering department. The sample size was
400 hotels, and the sample hotels were located
throughout the 50 states.
For the first mail-out, a cover letter and a
questionnaire were sent to the general man-
ager of each sample hotel. It was felt that if
the surveys were addressed to the general
managers by name, they would be more likely
to read the surveys and pass them along to the
directors of engineering. The initial response
rate, however, was only 15 percent. In order to
improve the response rate, three weeks after
the initial mail-out, a second mail-out was
sent. The second mail-out was addressed
specifically to the director of engineering.
Follow-up letters and questionnaires were
sent to the entire sample. A total of 97 of the
400 questionnaires were eventually returned
for a response rate of 24.25 percent.
?
THE TYPICAL CHIEF
ENGINEER
Of the sample, 38 percent of the respondents
reported that chief engineer was their official
title, while 36 percent held the title director of
engineering and 7 percent director of property
operations. The majority of the respondents
(52 percent) had less than 6 years of experi-
ence with their present company and less than
3 years with their specific property (51 per-
cent). However, when asked their years of ex-
perience within the hospitality industry, most
1327.ch05 12/19/05 9:31 AM Page 200
Table 5.4 Profile of Respondents
n %
Job Title
Chief engineer 33 38
Director of engineering 32 36
Director of property operations 6 7
Facilities manager 3 3
Others: Eleven different titles 14 16
Number of Years with Company
0–3 31 32
3.1–6 19 20
6.1–9 11 11
9.1–12 11 11
12.1–15 13 14
15 and over 12 12
Number of Years with Property
0–3 49 51
3.1–6 17 18
6.1–9 10 10
9.1–12 12 12
12 and over 9 9
Number of Years in the Industry
0–3 5 5
3.1–6 9 10
6.1–9 12 13
9.1–12 23 24
12.1–15 18 19
15 and over 28 29
Number of Years with Engineering Department
0–9 15 16
10–18 37 39
19–27 31 32
28 and over 12 13
Number of Rooms in Property
200–300 29 31
301–400 28 29
401–500 16 17
501 and over 22 23
Average Daily Rate
Less than $50 2 2
$51–$100 48 56
$101–$150 26 31
$151 and over 9 11
Number of Employees in Department
3–6 16 17
7–9 31 32
10–12 13 14
13-15 11 11
16 and over 25 26
201
1327.ch05 12/19/05 9:31 AM Page 201
of them (56 percent) had 6 to 15 years of
experience.
The respondents also reported having sub-
stantial experience in engineering and prop-
erty operations and maintenance departments.
The highest response category was 9 to 18
years (39 percent), followed by 18 to 27 years
(22 percent) and 0 to 9 years (16 percent).
The majority of the respondents (60 per-
cent) worked in hotels that had 200–400
rooms, and these hotels had an average daily
rate of $95.60. The largest group of respon-
dents (32 percent) employed 7 to 9 engineer-
ing employees. Overall, the work performed
was primarily done in-house and by outside
contractors. Table 5.4 provides a summary of
the characteristics of the respondents.
?
HOW IMPORTANT IS
FINANCIAL
INFORMATION?
In order to assess how financial information
can affect the performance of the engineering
202 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
department, the respondents were asked to
rate ten criteria. A Likert rating scale of one
to five was used, with 1 being not important
and 5 being very important. Table 5.5 ranks
these ten criteria as perceived by the directors
of engineers.
The area that received the highest mean
score of 4.70/5.00 was “control costs more ef-
fectively,” with 80 percent of respondents rat-
ing the criterion at 5 and 14 percent at 4. This
was followed very closely by “evaluate the
performance of the department” and “plan
ahead more effectively,” both rated at 4.49.
The criterion that received the lowest rating
(3.55) was “improving communications with
the department staff.”Therefore, the majority
of these managers were aware that financial
information was an essential and integral part
of the operations of the department.
?
THE COMPILATION
PROCESS
These data show overwhelming agreement
that financial information can enable man-
Table 5.5 Usefulness of Financial Information
Mean Standard
Criterion Ranking Score Deviation
Control cost more effectively 1 4.70 0.09
Evaluate the performance of my department 2 4.49 0.14
Plan ahead more accurately 2 4.49 0.15
Be a better manager 4 4.47 0.16
Have information for evaluation purposes 5 4.33 0.16
Be more flexible financially 6 4.00 0.19
Be more innovative 7 3.99 0.19
Staff accordingly 8 3.93 0.22
Improve communication with my staff 9 3.63 0.22
Improve motivation of my staff 10 3.55 0.23
1327.ch05 12/19/05 9:31 AM Page 202
agers of the engineering department to con-
trol costs more effectively. The respondents
were then asked about the compilation
process. They were asked to specify the types
of financial reports that are generated, the
frequency at which they are generated, the
number of people involved in the process, and
the methods used to compile these reports.
All respondents used budgets or cost
tracking in their property. Variance analysis,
comparing the budgeted and actual figures,
was done by 95 percent of the respondents,
and 60 percent stated that a departmental in-
come statement was prepared.
The frequency at which these reports
were generated was quite varied. The respon-
dents were asked to indicate whether the
above-mentioned statements were generated
on a daily, weekly, biweekly, monthly, or an-
nual basis, and to check all that applied. For
the departmental income statements, monthly
reporting was the norm (51 percent). This was
also true for the budgeted income statement
(50 percent), cost tracking on individual ac-
counts (40 percent), variance analysis (49 per-
cent), and flexible budget (55 percent).
In addition to preparing these statements
monthly, 22 percent of the respondents pre-
pared daily department income statements,
and 31 percent did daily cost tracking. Al-
though budgeted income statements and vari-
ance analysis were not done daily, they were
compiled weekly.
The number of people involved in prepar-
ing these statements ranged from one to ten.
The responsibility, however, was generally
shared between the engineering department
itself and the accounting department. Half of
the respondents reported that cost tracking
was done by their own department and by the
accounting department. Cost tracking was the
analysis the engineering department per-
Section 5.6 ? The Engineering Department and Financial Information 203
formed on their own more often than they did
any of the other four analyses. The accounting
department, on the average, performed 62
percent of the engineering department’s fi-
nancial work.
The majority of the respondents used
computers to prepare these statements. Ap-
proximately 60 percent of the respondents
used computers to compile all of the five
statements. A combination of manual meth-
ods and computers was the second most com-
monly used method (40 percent), and no
respondents reported that financial informa-
tion was compiled manually only.
?
COMPUTER
TECHNOLOGY AND
FINANCIAL
INFORMATION
Because computers were used in compiling
information, the respondents were also asked
to describe the types of hardware and soft-
ware used in this endeavor. Among the direc-
tors of engineering who used a computer, the
IBM PC configuration was most widely used.
Overall, they reported that they used custom
software. For spreadsheet applications, they
reported using Lotus 1-2-3 and Excel.
?
COMMENTS FROM
THE FIELD
In addition to completing the surveys, a num-
ber of engineers in a large metropolitan area
in the southwestern United States were inter-
viewed in an effort to determine, in greater
depth, how they used financial information.
1327.ch05 12/19/05 9:31 AM Page 203
One of the engineers stated that he used fi-
nancial information now more than he used
to. His role as an engineer has changed over
the years, and he is currently much more of a
financial planner than he used to be. He re-
views all of the financial statements that re-
late to his department with his supervisory
employees in an effort to help contain costs.
This process was found to help empower em-
ployees because they could see how their per-
formance was directly linked to the results of
these statements.
Budgets were critical to all of these engi-
neers, and they generally felt it was important
to properly allocate their costs. This informa-
tion was also useful because it showed if their
costs (particularly repairs, maintenance, and
utilities) were in line with their projections.
One engineer was particularly adamant about
properly accounting for his costs. In his hotel,
bonuses were given on overall profitability of
the hotel, and he wanted to make sure, as
much as he could, that everyone received a
bonus. Another engineer stated that he used
financial information to help conserve and
cut down on waste. He also used his financial
information to be proactive in dealing with
costs. The engineers believed financial infor-
mation could help them in eliminating errors
such as problems in ordering inventories, or
to just make sure their departments were op-
erating as efficiently as possible, thereby re-
ducing cycle time.
?
CONCLUSIONS AND
IMPLICATIONS
It was apparent that managers of engineering
departments recognized the importance of fi-
nancial information. They worked together
204 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
with the accounting department to compile
budgets, actual statements, and variance
analyses, which were then used to evaluate
the performance and success of the engineer-
ing department. Computer technology was
common in their operations.
However, improvements can always be
made to achieve zero defects, reduce cycle
time, and enhance employee empowerment.
As noted, “improve motivation of my staff”
and “improve communication with my staff”
were rated as the bottom two of the ten crite-
ria given. In addition, two was the average
number of people involved in the preparation
of these reports. If it is not practical to have
more employees share in the compilation
process, the least an engineering department
can do is to have more employees participate
in the analysis process. When more employees
are involved, motivation and communication
tend to increase. This positive attitude may be
passed along to other employees and guests.
Asking employees to be involved does
not mean they must do the accounting work.
Rather, those who compile the information
can share with other staff members the im-
portance of cost control and how cost savings
in the engineering area can affect the bottom
line, which may ultimately affect their job per-
formance and bonuses. These discussions can
be in the form of employee meetings where
employees may make suggestions for im-
provements. Because employees encounter
day-to-day problems and situations that man-
agers may not be aware of, they may be able
to offer comments and suggestions that ad-
dress concerns such as staffing, cost control,
and physical plant improvements. This
process may help the entire department be-
come more innovative and further empower
engineering employees, reduce cycle time,
and, possibly, eliminate errors.
1327.ch05 12/19/05 9:31 AM Page 204
The majority of respondents (60 percent)
used computers to compile financial infor-
mation. The rest used a combination of com-
puters and manual methods. Engineering
departments that do not use a computer may
find that working with one may help improve
their overall efficiency.
As this study has shown, computer tech-
nology and the use of financial information in
engineering department are vital in maintain-
ing an efficient operation. According to the
Section 5.7 ? The Legal Environment of Lodging Operations 205
National Restaurant Association’s 1994 Res-
taurant Industry Operations survey, utility ex-
penses for restaurants increased 6.9 percent
from 1992 to 1993, while repairs and mainte-
nance increased 5.8 percent in the same pe-
riod (Riehle, 1994). If not watched, these costs
will probably continue to eat away the profits.
It is up to the engineering department to use
restaurant financial information to help con-
tain these costs.
5.7 THE L EGAL ENVI RONMENT OF
L ODGI NG OPERATI ONS
Melissa Dallas
Hotels, like other business entities, are subject
to a large and continually changing body of
law. However, because lodging facilities are
complicated systems, the laws affecting them
are more numerous and complex than those
affecting most other types of businesses. Be-
cause not complying with laws can result in
fines, lawsuits, and even imprisonment, it is
important that managers be familiar with the
many legal dangers to which hotels are sub-
ject. This does not mean they have to be
lawyers, but managers should have enough le-
gal knowledge to be aware of strategies that
minimize the property’s exposure to potential
litigation and to train employees to minimize
risks in their departments.
This chapter is a brief introduction to the
legal environment in which hotels operate.
We begin with a discussion of where our laws
come from and how they are classified. This
should give you a fundamental understanding
of the legal content. Then we look at the laws
and regulations that are specific to typical ho-
tel departments. Notice the significant num-
ber of detailed references and footnotes.
These are included to provide further detail
for specific discussion points and to provide a
source for reference.
?
HOW LAW WORKS
The following section briefly introduces you
to the law—where it comes from and how it is
classified. This will help you when we turn our
attention to the specifics of the law and how it
applies to the lodging industry.
?
Sources of Law
Law comes from four sources: (1) judge-made
common law (also called case law and stare
decisis); (2) the Constitution; (3) legislative
1327.ch05 12/19/05 9:31 AM Page 205
statutes and ordinances; and (4) adminis-
trative agencies. Each of these is discussed
below.
Common law originated in England and,
although decisions issued by courts in the
United States have added considerably to this
body of law, some decisions made several
hundreds of years ago still influence present-
day judicial decisions. The primary purpose of
common law is to provide stability and pre-
dictability as judges rule on cases. Judges use
past decisions as a precedent for deciding cur-
rent cases. This decision becomes binding for
lower courts in that jurisdiction and can even
be used as persuasive authority for courts in
other jurisdictions faced with cases having a
similar pattern of facts.
Constitutional law, of course, is derived
from the U.S. Constitution, which protects in-
dividuals from government excesses. When
the Supreme Court, made up of nine justices,
grants a writ of certiorari, it agrees to hear a
case and then renders a decision that subse-
quently becomes the law of the land. On the
other hand, if the Court refuses to issue a
writ, the law stands as decided by a lower
court.
Statutory law is made by local, state, or
federal legislatures or other governing bodies.
Federal and state laws are called statutes, and
local laws are called ordinances. Legislatures
can choose to modify or change common law
by enacting statutes that codify, or spell out, a
new law.
Finally, administrative law consists of reg-
ulations passed by agencies such as the Food
and Drug Administration and the Occupa-
tional Safety and Health Administration.
Congress approves the agencies, then author-
izes them to make regulations that affect busi-
nesses as well as individuals.
206 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
?
Classifications of Law
Laws generally fall into one of three major
classifications: civil, criminal, or international.
Most complaints filed against hotels are civil
suits in which an individual has been wronged
by another individual or by a corporation
(which, incidentally, is a legal individual). The
injured party—the plaintiff—files a lawsuit
that describes the facts of the situation and
asks for damages. These damages may be
compensatory or punitive or both. Compen-
satory damages are meant to restore people
to their original condition and include mone-
tary judgments for actual damages such as
back and future wages, medical costs, pain and
suffering, and breach of contract. Punitive
damages, on the other hand, are awarded to
punish the wrongdoer. Because punitive dam-
ages in civil suits are awarded only in the case
of violence, malice, or fraud, they are rela-
tively uncommon.
Most civil cases filed against hotels in-
volve claims of negligence. In order for plain-
tiffs to be successful, they must prove four
elements. First, they must prove the hotel had
a duty to them. Next, they must prove the ho-
tel breached that duty. Third, they must show
the breach was the reason for the incident oc-
curring in the first place, and the hotel should
have been able to foresee injuries. Finally,
they must have been injured in some way so
they can collect damages. The theory of negli-
gence requires a hotel to act reasonably to
prevent foreseeable injuries to guests and vis-
itors. To illustrate this theory, assume a front
office employee did not require identification
when issuing duplicate keys. A person was is-
sued a room key by this employee, then used
the key to enter a guest room and injured a
guest. Here, the hotel would likely be found
1327.ch05 12/19/05 9:31 AM Page 206
negligent because it breached its duty to keep
guests safe by not practicing proper key con-
trol. The intrusion and resulting injury would
not have happened but for the employee issu-
ing a duplicate key without requesting identi-
fication, and this omission resulted in injuries
to the guest.
In order for someone to be criminally
prosecuted, on the other hand, he or she must
be charged with committing a wrong against
society as a whole. Crimes require intent on
the part of the defendant; if found guilty, the
defendant may be charged a fine, imprisoned,
or both. Crimes most often affecting hotel op-
erations include theft, assault, and battery.
Theft, of course, can relate to goods, services,
or both. Assault is defined as the imminent
threat of bodily harm, and battery is the ac-
tual harmful physical contact. An example of
an assault is a bouncer in a nightclub wrong-
fully threatening a patron and running toward
the patron with his arms raised. Battery is the
bouncer picking up the patron and wrongfully
throwing him down the steps and out the door
of the club.
Although the hotel industry is becoming
increasingly global, international law that is
actually enforceable against an individual or a
hotel company is rare. Most international
laws are in the form of treaties, while others
are customary laws followed by nations over
time. The primary international laws applied
to hotel companies are treaties that govern in-
tellectual property such as trademarks and
copyrights. The Paris Convention of 1883 af-
fords its signatories (meaning citizens of the
countries that signed the treaty) the right to
file for trademark protection in any country
that also signed the treaty.
Suppose, for example, a hotel chain
named Paradise Lodges opened in the United
Section 5.7 ? The Legal Environment of Lodging Operations 207
States. Under the Paris Convention, the own-
ers could file for trademark protection in
other countries, thereby globally protecting
the identity of Paradise Lodges. The Berne
Convention of 1886 gives its signatories the
right to file for copyright protection of any
original literary or artistic material. Here, sup-
pose a hotel wanted to prevent other hotel
chains from using its unique jingle or song
that is integral to its marketing efforts. Under
the Berne Convention, the hotel could safe-
guard its song and prevent others from using
it in their advertising campaigns.
?
LAW AND THE LODGING
INDUSTRY
Now that you have a basic understanding of
how law works, we get more hotel-specific.
The only way to protect a hotel company
from lawsuits is to practice preventive law.
This requires management to know the com-
mon legal dangers for each department and to
follow the law as closely as possible.
We must first review one other concept.
Respondeat superior is a Latin term that liter-
ally means “let the master answer.” Under the
theory of respondeat superior, employers are
liable for acts of their employees if the em-
ployees are at fault and were doing work for
the employer at the time of the accident or in-
cident. The financial implication of respon-
deat superior for a hotel is obvious—the hotel
pays!
?
Food and Beverage
Potential costly legal situations are present in
all restaurants and bars. The most commonly
1327.ch05 12/19/05 9:31 AM Page 207
litigated areas involve food safety and alcohol
service.
Food Safety. Many laws governing food
safety are administrative laws established by
the Food and Drug Administration (FDA).
1
The FDA regulates everything from food pro-
cessing
2
and labeling
3
to packaging.
4
Food
and beverage sales are controlled by the Uni-
form Commercial Code (UCC), which lays
out rules governing the sale of goods and,
specifically, requires all food and beverages to
be merchantable, or fit for human consump-
tion.
5
This warranty applies whenever and
wherever food or beverages are sold.
6
In order to be protected from lawsuits,
the food preparation area should be in-
spected regularly to ensure that no hazards
exist. For example, employees should make
certain that no light bulbs or food shields are
broken, as glass could easily get into the food.
If a server breaks a glass in an ice bin, the bin
must be emptied and carefully cleaned out
before it is refilled with fresh ice.
Additionally, food must be properly han-
dled to ensure its safety. E. coli, bacteria often
present in undercooked hamburger, can be
dangerous or even deadly.
7
This threat has
prompted some restaurants to cook all their
hamburgers to 160 degrees to kill the bacteria.
Salmonella, bacteria that can result in se-
vere diarrhea, fever, and abdominal cramp-
ing, is most often found in undercooked eggs,
beef, and poultry, and can also be found in
milk and vegetables. Cooking meats until all
juices run clear and training employees to
practice good handwashing techniques are
imperative. Eggs pose a more difficult prob-
lem, however. In order to be perfectly safe, a
restaurant would warn patrons about the pos-
sibility of salmonella before serving poached,
over-easy, or over-medium eggs, hollandaise
sauce, Caesar salad dressing, mayonnaise, and
208 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
tiramisu. The practicality of this practice is
doubtful, but perhaps a general warning on
the menu would suffice.
Food and beverages must be served at
safe temperatures as well. In an often dis-
cussed case involving McDonald’s,
8
a 79-year-
old woman, Stella Liebeck, was seriously
burned when coffee spilled on her lap. After
her grandson gave her the coffee he pur-
chased from the drive-through window, he
stopped so Liebeck could add cream and
sugar to her drink. The entire contents of the
Styrofoam cup spilled on her lap, and she re-
ceived third-degree burns on over 6 percent
of her body. The temperature of the coffee
was initially believed to have been between
180 and 190 degrees Fahrenheit. A McDon-
ald’s quality assurance manager testified that
this was the standard serving temperature
range for the company’s coffee. For the sake
of comparison, the temperature of most
home-brewed coffee usually reaches between
135 to 140 degrees.
The jury initially awarded Liebeck
$200,000 in compensatory damages (reduced
to $160,000 as Liebeck was found to be 20
percent at fault), and $2.7 million in punitive
damages. An investigation following this ver-
dict revealed that the actual serving tempera-
ture of the coffee was 158 degrees Fahrenheit,
so the court reduced the punitive award to
$480,000, or three times compensatory dam-
ages. McDonald’s and Liebeck then agreed to
an undisclosed settlement to close the case.
9
The point here is that hotels need to serve
safe food and beverages and to serve food
and beverages safely. At the very least, cus-
tomers should be advised of any known risks
so they can decide for themselves whether to
eat the food or drink the beverage. Food and
beverage do not need to taste good under the
UCC, but they must be safe!
10
1327.ch05 12/19/05 9:31 AM Page 208
Alcohol Service. Establishments that
serve alcohol open themselves to a different
type of legal danger. Dram shop laws are
state statutes that permit an injured third
party to sue the establishment that unlaw-
fully served the alcohol. For example, let’s
say a bartender at the XYZ Hotel overserved
a patron. The patron then got into his car to
drive home. On the way home, the intoxi-
cated patron lost control of his car and se-
verely injured a bicyclist. Dram shop laws
permit the injured cyclist to sue the XYZ Ho-
tel for damages. Some states that have not
enacted dram shop laws permit third-party
suits under their common-law theories of
negligence.
Increased attention to alcohol problems
has caused an increasing number of states to
require their managers, servers, and bar-
tenders to be trained in responsible alcohol
service.
11
Although training does not com-
pletely protect an establishment from alcohol-
related suits, it may lower punitive damages.
?
Housekeeping and
Maintenance
Inspection and Repair. The primary legal dan-
gers in both housekeeping and maintenance
are related to negligence and involve lack of
inspection and repair. Broken furniture, loose
carpeting, slippery floor surfaces, potholes in
parking lots, unmarked changes in elevation,
snow- and ice-covered walkways, and faulty
electrical cords can easily injure guests and
visitors alike. In fact, injuries sustained from
slips and falls are the most common type of
lawsuit hotels encounter. Failure to regularly
inspect rooms and public spaces for dangers
may be grounds for a successful suit. Recov-
ery for a plaintiff is even more likely if the
Section 5.7 ? The Legal Environment of Lodging Operations 209
hotel knew about a danger and did not ad-
dress it.
Probably the most tragic maintenance-
related cases involve injuries or even death to
children. The attractive nuisance doctrine
holds a property owner liable for any injuries
resulting from “a potentially harmful object
so inviting or interesting to a child that it
would lure the child onto the property to in-
vestigate.”
12
It recognizes that children, be-
cause of their age, cannot fully appreciate
danger.
Lodging facilities with more than one
level and those who have swimming pools
must be especially diligent. Children should
not be able to open windows more than a few
inches, and all balconies must have railings
that are close together to prevent accidental
falls. Swimming pools must be maintained
properly and accessible only with a room key.
Signage around the pool area should be large
and clearly written and require adults to ac-
company children at all times. Children should
be entirely banned from Jacuzzis and saunas.
The best way to prevent suits in these ar-
eas is to be attentive. Both housekeepers and
maintenance workers should be required to
follow a regular preventive maintenance
schedule. Professionals can be hired to com-
plete periodic safety audits of hotels.
Lost and Stolen Guest Property. The
housekeeping staff in hotels collects an amaz-
ing array of items left behind in guest rooms.
Potential privacy problems arise if a hotel
contacts guests to notify them of articles they
left behind. The better way to handle this is to
transfer the items to a secured area, then hold
them until the guest contacts the hotel. Many
states have laws that govern the finding of lost
property. Generally, if the owner cannot be
found in a certain period, the property may be
sold in accordance with the state statute.
1327.ch05 12/19/05 9:31 AM Page 209
Stolen items pose an entirely different set
of challenges. All hotels are required to pro-
vide safes for guest use. Many hotels now
have in-room safes that must be programmed
by the guest and are reset when the guest
checks out. If guests choose not to use the
safe and find some valuables missing from
their room, the hotel is generally not liable.
13
All states have enacted limiting liability
statues that limit a hotel’s liability for guests’
property losses. These statutes vary from state
to state, but in all cases, a hotel must strictly
comply with the requirements to be pro-
tected.
14
Common requirements include post-
ing the availability of the safe as well as
stating the maximum amount for which the
hotel is liable in case of theft.
?
Front Office
Reservations and Overbooking. Every time
someone phones a hotel for a reservation, he
or she forms a contract with the hotel for a
room. What if the hotel overbooked or if a
guest stayed over and a room was not avail-
able for a guest with a reservation? Techni-
cally, the hotel breached the contract. To
avoid liability, front desk agents should check
area hotels for availability if they know that
overbooking is likely. In the case of a civil suit
for breach of contract, the would-be guest
could recover compensatory damages includ-
ing payment for travel to a different hotel, the
additional cost of lodging, if any, and other
costs associated with the inconvenience.
15
Due to the potential legal liability and the
damage to their reputation and goodwill,
some large hotel chains have completely
eliminated the practice of intentional over-
booking. Others continue to take the risk to
ensure their hotel is completely full.
210 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
Key Control. Poor key control practices
are dangerous, potentially expensive, and
mostly preventable. Too often, hotel guests
have been injured or even killed when a
stranger entered their room using a key given
to him by a front office staff member. Jury
awards have been staggering, especially if the
guest was raped or killed due to employee
negligence and if the hotel had been put on
warning for a similar event.
Good key control practices include:
• Requiring identification when issuing a
replacement or additional key.
• Installing a key card system.
• Changing locks when a room key is miss-
ing (assuming the hotel does not have a
key card system in place).
• Limiting the number of master keys is-
sued to employees.
• Installing elevators that require a key to
activate.
• Not having room numbers displayed any-
where on the key.
• Writing, not announcing, the assigned
room number when a guest checks in.
• Not orally confirming a name and room
number by telephone within earshot of a
non-employee.
• Refusing to give out room information—
period. The front desk agent should al-
ways phone guests to verify visitors or
inquiries.
• Placing key drop boxes behind the
counter on the front desk, not on top of
the counter.
• Regularly inspecting room locks for dam-
age and wear.
Although a hotel is not a complete en-
surer of guest safety, it must show diligence in
1327.ch05 12/19/05 9:31 AM Page 210
its duty to provide a safe environment. Em-
ployee negligence has often been the cause of
violent crimes against guests, but proper
training and reinforcement of acceptable key
control practices can drastically reduce, if not
eliminate, this type of tragedy and this type of
lawsuit.
?
Sales
Writing sales contracts is a regular part of any
salesperson’s job. Contracts are written for
catered events, wedding receptions, conven-
tions, meetings, and many other purposes. If
one party does not honor the contract, the
other party can sue for breach, so it is essen-
tial that all sales staff receive careful and thor-
ough training in contract writing.
Everything agreed to by the hotel and the
client should be written in the contract. This
practice ensures that the contract is enforce-
able in court and leaves no doubt as to the
agreement. All the contract terms must be
clear and unambiguous. It is important to
note that contracts are always interpreted
against the drafter, so in the case of a breach,
the contract would be interpreted in favor of
the client rather than the hotel.
A good rule of thumb for sales staff mem-
bers to follow: The more complex the event,
the more detailed the contract. No detail is
too small to put in writing!
?
Human Resources
Wrongful discharge, discrimination, and Fed-
eral Labor Standards Act claims are becom-
ing more and more commonplace. The human
resource staff handles the resolution of these
types of claims and many more.
Section 5.7 ? The Legal Environment of Lodging Operations 211
Wrongful Discharge. Even in states that
follow an employment-at-will doctrine, which
permits an employer to terminate an em-
ployee at any time, without cause or reason,
wrongful discharge suits are relatively com-
mon. Wrongful discharge claims arise when
an employee is fired for reasons that are
not legitimate. These wrongful discharge
cases are one of two types: traditional or
constructive.
Traditional wrongful discharge claims
arise when an employee is unlawfully fired.
An example is firing an employee for filing a
workers’ compensation claim, assuming the
state had a statute making this discharge un-
lawful. Another example is firing an em-
ployee for whistle-blowing (reporting a
company’s illegal activities to an official).
16
Constructive discharge occurs when an
employer’s actions, such as continual or se-
vere harassment, force an employee to quit. If
the hotel company is found liable, the plaintiff
can receive both compensatory and punitive
damages.
The wisest strategy for hotels is to de-
velop a formal policy manual that details the
possible reasons for discharge and discipli-
nary procedures. Employees should be thor-
oughly advised of these policies, and all
supervisors and managers should follow the
policies as closely and systematically as possi-
ble. Finally, management should document,
document, and document some more!
Discrimination. Discrimination in the
workplace has not always been unlawful. In
fact, not until 1964 was a federal statute en-
acted that addressed discrimination. Since
that time, other important federal statutes
have been passed dealing with pregnancy, age,
and disabilities. Sexual harassment suits have
become commonplace recently, and they are,
in effect, based on gender discrimination.
1327.ch05 12/19/05 9:31 AM Page 211
Title VII of the Civil Rights Act of 1964
17
made it illegal to discriminate against appli-
cants or employees based on race, religion,
color, national origin, or gender. The Act ap-
plies to employers with 20 or more employ-
ees, and it created the Equal Employment
Opportunity Commission (EEOC) as its en-
forcement arm.
18
Only in the case of business necessity or
bona fide occupational qualification (BFOQ)
can a hotel legally discriminate.
19
Note that
the courts interpret these exceptions quite
strictly, often resulting in rulings for the
plaintiffs.
The Pregnancy Discrimination Act of
1978
20
made it illegal to discriminate against
pregnant women unless the discrimination is
a business necessity or not being pregnant is a
BFOQ for the job. For example, a hotel could
probably refuse to hire a woman who is seven
months pregnant as a lifeguard because the
pregnancy could affect her ability to act
quickly to save lives.
The Age Discrimination Act of 1967 was
amended in 1986
21
to make it illegal to discrim-
inate against an applicant or an employee who
is 40 years old or older. Although portraying a
youthful and energetic image is important to
many hotels, it is simply illegal to discriminate
against an employee who is at least 40 years old
as long as that employee can perform the job
better than a younger employee.
The American with Disabilities Act
(ADA) of 1990
22
forbids discrimination
against otherwise qualified individuals on the
basis of a physical or mental disability. Title I
of the ADA bans discrimination in employ-
ment and applies to applicants or employees
who are otherwise qualified for the position.
This means the applicant or employee must
be able to perform the essential elements of
212 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
the job regardless of the disability. Title III
bans discrimination in public accommoda-
tions (lodging facilities, for one) and commer-
cial facilities. The ADA requires all
accommodations to be reasonable
23
and to
create no undue burden
24
for the business.
The courts, on a case-by-case basis, determine
what constitutes an undue burden.
Finally, the Civil Rights Act of 1991
25
gave plaintiffs claiming discrimination the
right to a jury trial as well as possible punitive
damages. The possibility of larger awards for
plaintiffs has caused more employers to adopt
stricter and clearer policies for selection, pro-
motion, layoffs, and termination.
By now, most people are familiar with the
plethora of sexual harassment claims that
have been filed in courts. The nature of the ho-
tel industry leaves hotels vulnerable to more
claims than business in most other indus-
tries—the late and long hours of work, the pri-
vacy of hotel rooms, and the alcohol service.
Courts recognize two types of sexual ha-
rassment. The first, quid pro quo, literally
means “this for that.” Quid pro quo
26
claims
occur when one person threatens action
against another unless he or she agrees to per-
form a sexual act. Hostile work environ-
ment
27
claims are much more common. Here,
the behavior must be sufficiently severe or
pervasive, unwelcome, and not voluntary, and
must affect a term, condition, or privilege of
employment. Workplace behaviors found to
create a hostile work environment are repeat-
edly sending sexually suggestive letters and
notes,
28
sending risqué emails,
29
and promi-
nently displaying nude pictures (when com-
bined with other lewd behaviors).
30
The best tactic for management to em-
ploy is to adopt a no-tolerance policy. This
policy should be included in the employee
1327.ch05 12/19/05 9:31 AM Page 212
handbook and posted conspicuously through-
out the hotel. Also, employees must feel free
to speak with more than one person in the
event of a sexual harassment complaint, be-
cause their supervisor might be the person
who is doing the harassing.
It is important to note that states and lo-
calities can adopt even stricter laws than the
federal statutes. For example, some areas pro-
hibit discrimination based on sexual orienta-
tion.
31
Others disallow discrimination based
on marital status.
Federal Labor Standards Act. The Fed-
eral Labor Standards Act
32
(FLSA) mandates
minimum wages, overtime pay, and equal pay
for equal work, and restricts child labor.
The rate of minimum pay is established
by Congress and applies to virtually all em-
ployers with annual sales of $500,000 more.
33
The FLSA, however, includes certain excep-
tions such as training wages
34
and tip cred-
its.
35
Training wages at 85 percent of the
minimum wage may be paid for the first 90
days to employees who are between the ages
of 16 and 19 and entering the workforce for
the first time. Tip credits permit employers to
pay regularly tipped employees, such as
servers, at a rate of pay equal to one-half of
the current minimum wage. However, the
combination of tips and actual wages must
equal at least the current minimum wage rate.
For example, if the minimum wage is $6.00
and a server receives tips averaging $3.00 per
hour, the hotel could pay the employee at a
rate of $3.00 per hour. If a server made only
$2.00 per hour in tips, the hotel would be re-
quired to pay the server at a rate of $4.00 per
hour to raise the hourly wages to the mini-
mum $6.00 required by law. Some states or lo-
calities require a minimum wage rate higher
than the federal mandate.
Section 5.7 ? The Legal Environment of Lodging Operations 213
Overtime wages must be paid to nonex-
empt employees, meaning those who must be
paid at least minimum wage, who work over
40 hours in one week. These wages are
mandated at a rate equal to 1.5 times the reg-
ular hourly wage rate.
36
On the other hand,
overtime rates need not be paid to exempt
employees. The FLSA defines exempt em-
ployees as those who spend 40 percent or
more of their time performing management
functions or work for a seasonal amusement
or recreational establishment.
37
It is important to understand that the
FLSA uses a weekly pay period to determine
overtime. This is especially important to ho-
tels who pay employees biweekly. For exam-
ple, if an employee works 30 hours during the
first week of the pay cycle and 50 hours dur-
ing the second, the hotel must pay 10 hours of
overtime for the extra hours worked during
the second week of the cycle, even though the
total hours worked during the pay period
equaled 80.
The equal-pay-for-equal-work require-
ment of the FLSA requires that employers
pay employees at the same rate if they per-
form substantially similar work that requires
equal skill, effort, and responsibility.
38
Human
resources must identify the core or essential
elements of each position, as the courts look
at these elements when comparing jobs.
Child labor laws affect many hotels, as
many of the employees are young, especially
during the summer season. The FLSA re-
quires all employees to be at least 14 years
old. Further, the Act restricts the number of
hours that teenagers under the age of 18 can
work during a one-week period. During
school days, 14- and 15-year-olds cannot work
more than 18 hours per week and no more
than 3 hours per day.
39
Some state laws are
1327.ch05 12/19/05 9:31 AM Page 213
even stricter than the federal ones, further re-
stricting work hours for teenagers.
Violations of the FLSA are reported to
the U.S. or state department of labor and can
be costly for hotels. If the violations are found
to be intentional, employers may be fined up
to $10,000 per offense. A second offense may
result in imprisonment for up to six months.
40
Many states have even stricter penalties for
noncompliance.
?
Security
While larger hotels often hire their own secu-
rity personnel, smaller properties usually ei-
ther outsource this function or rely on local
law enforcement officials in the case of a
problem. Regardless, every employee is re-
sponsible for the security of the hotel’s guests.
Most jurisdictions require that lodging facili-
ties exercise reasonable care to protect guests
and patrons from reasonably foreseeable
crime risks.
When deciding what preventive actions
are reasonable, courts look at certain factors
to determine if the hotel was put on notice.
Courts consider factors such as the frequency
and severity of past crimes, a recent increase
in the area crime rate, and security problems
posed by the facility’s design. Courts also look
at training and personnel activities and design
modifications the hotel has undertaken in the
effort to keep its guests safe.
The most common areas in which crimes
are committed against guests are guest rooms
and immediately outside of the property.
While proper key control is vital to guest
room safety, so is the regular inspection of ho-
tel room doors and locks. In a highly publi-
cized case, singer Connie Francis was raped at
gunpoint by a man who entered her room
214 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
through a sliding glass door that was easily
unlocked from the outside. Francis recovered
$2.5 million.
41
Crimes can also occur in hotel parking
lots. Low lighting levels support an ideal envi-
ronment for crimes. If the hotel is put on
warning of criminal activity, meaning it is
aware of crimes that occurred on the property
or in the immediate neighborhood, it should
take further security precautions. These pre-
cautions might include hiring additional per-
sonnel, installing more lights, constructing a
fence around the parking lot, adding a
guarded gate, and adding more security
monitors.
Again, all hotel employees are responsi-
ble for keeping the property as safe as possi-
ble. Employees must report any suspicious
activity or person to management. Guests,
too, can do their part. Placards should be con-
spicuously placed in guest rooms warning
guests to keep their doors locked, not divulge
their room number, and report any concerns
to the front desk.
?
SUMMARY
Many laws at the federal, state, and local lev-
els affect hotel operations. It is the responsi-
bility of management to be well informed of
these laws and to take preventive measures to
protect its employees, guests, and owners. Be-
cause laws often change and, in the case of a
jury trial, damage awards can be quite high, it
is important for management to keep abreast
of the constantly evolving interpretation and
application of all relevant laws. The best ways
to keep current are to be active in profes-
sional associations, read trade journals regu-
larly, and utilize the resources of legal
counsel.
1327.ch05 12/19/05 9:31 AM Page 214
C H A P T E R 5 ? E N D N O T E S
Section 5.7 ? The Legal Environment of Lodging Operations 215
Newsletter, 1(1), April 3, 1996. Can be found athttp://rrnet.com/mna/newsltr1.html.
10. The Educational Foundation of the National
Restaurant Association offers both ServSafe
and HACCP certification.
11. The Educational Institute of the American
Hotel and Motel Association offers Control-
ling Alcohol Risks Effectively (CARE) certi-
fication. The Educational Foundation of the
National Restaurant Association offers Bar
Code certification. Also widely used is Train-
ing for Intervention Procedures (TIPS) certi-
fication. For the current laws of individual
states, go tohttp://www.gettips.com/.
12. From ’Lectric Law Library, athttp://www.lect-
law.com/def/a090.htm.
13. See, for example, Gooden v. Day’s Inn, 395
S.E.2d 876 (Ga. App. 1990), in which an
innkeeper was not liable for the theft of a bag
of money from a guest’s room. The court rec-
ognized that the hotel provided a safe for
guests’ valuables, and the guest assumed the
risk of theft by failing to lock up the money.
14. See, for example, Searcy v. La Quinta Motor
Inns, Inc., 676 So. 2d 1137 (La. App. 1996), in
which the motel was liable for $4,938.95 for
property stolen from a guest’s room despite a
state statute limiting the motel’s liability to
$500. Although the motel posted notices of
the statute in guest rooms, it failed to do so in
the registration area as the statute required.
15. See Vern Wells et al. v. Holiday Inns, 522
F.Supp. 1023 (Mo., 1981), in which Vernon
Wells and Robert Hughes had reservations
with a Holiday Inn in San Francisco. The hotel
could not honor the reservations because it
was overbooked. The plaintiffs paid less to
stay at another hotel but were awarded reim-
bursement for their cab fares to the other
hotel.
16. A number of states have enacted whistle-
blowing statutes for both the public and
1. Pure Food and Drug Act of 1906, 21 U.S.C.
Sections 1–5, 7–15, as amended by the Federal
Food, Drug, and Cosmetic Act of 1938, 21
U.S.C. Section 301.
2. See Food Safety and Inspection Service, De-
partment of Agriculture, 9 C.F.R. Chapter III,
establishing HACCP and other controls.
3. Nutrition Labeling and Education Act of
1990, 21 U.S.C. Section 343.
4. Fair Packaging and Labeling Act of 1966, 21
U.S.C. Sections 1451–1461.
5. U.C.C. 2–314.
6. See, for example, Webster v. Blue Ship Tea
Room, 198 N.E.2d 309 (1964), in which the
court held that the fish chowder was mer-
chantable because bones are a natural part of
fish and should be reasonably expected.
See also Evart v. Suli, 211 Cal.App.3d 605,
Cal.Rptr. 535 (1989), in which the court held
that a jury could find that hamburger contain-
ing a large bone might not be merchantable.
Finally, see Kilpatrick v. Superior Court, 8
Cal.App.4th 1717, 11 Cal.Rtpr.2d 323 (1992),
in which the court decided that bacteria in
oysters were “foreign” to oysters and, thus,
made the food unmerchantable.
7. In 1993, more than 600 people in Washington
got sick from eating Jack in the Box hamburg-
ers contaminated with E. coli bacteria. Food-
maker, the parent company of Jack in the Box,
set aside $100 million to cover lawsuit settle-
ments. The largest single-case settlement was
$15.6 million to the family of Brianne Kiner,
who lapsed into a coma for 42 days after eat-
ing a tainted burger. The Seattle Times, Octo-
ber 30, 1997. The full text of the article is athttp://seattletimes.nwsource.com/extra/brows
e/html97/jack_103097.html.
8. Liebeck v. McDonald’s Restaurants, P.T.S.,
Inc., No. CV-93-02419, 1995 WL 360309 (N.M.
Dist., 1994).
9. Miller, Norman & Associates, Ltd. Electronic
1327.ch05 12/19/05 9:31 AM Page 215
private employment sectors: California, Con-
necticut, Florida, Hawaii, Illinois, Iowa,
Louisiana, Maine, Michigan, Minnesota, New
Hampshire, New Jersey, New York, North
Carolina, North Dakota, Ohio, Rhode Island,
and Tennessee.
17. Title VII of the Civil Rights Act of 1964, as
amended, 42 U.S.C.A. Sections 2000e-2000e-
17.
18. Title VII of the Civil Rights Act of 1964, as
amended, 42 U.S.C.A. Sections 2000e et seq.,
Section 705.
19. See Wilson v. Southwest Airlines Company,
517 F. Supp. 292 (N.D. Tex. Dallas Div. 1981), in
which the court held that being female was
not a BFOQ for flight attendants.
20. 42 U.S.C. 2000e(k).
21. 29 U.S.C. Sections 621–634.
22. 42 U.S.C. Sections 12102–12118.
23. 42 U.S.C. Section 12111(8). See, for example,
Martin v. PGA Tour, Inc., No. 9835309 (9th
Cir. 2000), in which the court held that it was
reasonable to permit professional golfer
Casey Martin, who has a congenital disability,
to drive a cart during golf competitions, as do-
ing so would not alter the nature of the sport.
24. 42 U.S.C. Section 12112(b)5(A). See, for ex-
ample, Rascon v. U.S. West, in which a U.S.
West network technician suffered from post-
traumatic stress disorder as a result of his
service in Vietnam. The court required U.S.
West to grant Rascon’s leave for treatment, as
doing so would be a reasonable accommoda-
tion and would place no undue burden on U.S.
West.
25. 42 U.S.C.A. Sections 2000e et seq. Section
105(b).
26. The first case decided under the quid pro quo
theory was Barnes v. Costle (D.C. Cir. 1977).
27. The first sexual harassment case to reach the
Supreme Court was Mentor Savings Bank v.
Vinson, 477 U.S. 57 (1986), in which the Court
defined a hostile workplace environment.
216 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
28. Ellison v. Brady, 924 F.2d 872 (9th Cir. 1991).
29. See, e.g., M.V. v. Gulf Ridge Council Boy Scouts
of America, Inc., 1988 WL 85195 (Fla. D. Ct.
App. 1988), which holds that an employer can
be liable if the employer knew or should have
known that a supervisor was harassing an em-
ployee and failed to take any action or even in-
vestigate the claim. More recently, in Faragher
v. City of Boca Raton, 524 U.S. 775 (1998) a
court tightened the standard and held that em-
ployers would be liable only if they knew that
the harassing activities were occurring. The
“should have known” was eliminated. There-
fore, if employers know of harassing emails
or jokes being sent to employees, they would
likely still be held liable.
30. Andrews v. City of Philadelphia, 895 F.2d 1469
(3d Cir. 1990).
31. Currently, at least 14 states have executive or-
ders, at least 71 cities or counties have civil
rights ordinances, and at least 41 cities or
counties have council or mayoral proclama-
tions banning sexual orientation discrimina-
tion in public employment.
32. Fair Labor Standards Act of 1938, as
amended, 29 U.S.C. 201 et seq.
33. 29 U.S.C. 201, Section 3(s)(1)(A)(ii). 29 U.S.C.
201, Section 6(a)(1) sets the minimum wage.
34. 29 U.S.C. 201, Section 6(d)(2)(g) and Section
14(b)(1)(A).
35. 29 U.S.C. 201, Section 3(m)(1) and (2) and
Section 3(t).
36. 29 U.S.C. 201, Section 7(a)(1) and Section
7(e).
37. 29 U.S.C. 201, Section 13(1) and (3).
38. 29 U.S.C. 201, Section 6(d)(1) and 29 U.S.C.A.
Section 206(d).
39. 29 U.S.C. 201, Section 3(l).
40. 29 U.S.C. 201, Section 16(a).
41. Garzelli v. Howard Johnson’s Motor Lodges,
Inc., 419 F. Supp. 1210 (N.Y. 1976).
1327.ch05 12/19/05 9:31 AM Page 216
Because criminal activity can occur near
major public facilities, developing risk-
management solutions for parking facilities is
now a focus of concern. Due to courts’ find-
ings of landowner liability for third-party
criminal acts, eliminating or at least reducing
the risk of any criminal activities must be an
important component of any property’s risk-
management plan. Ensuring public safety
within the facility itself is, of course, essential.
Parking lots and adjacent areas, however, are
equally important and should not be over-
looked. This article discusses the landowner’s
potential liability for the criminal acts of third
parties and describes some crime-abatement
actions that can be accomplished through fa-
cility design. Of course, landowners should
seek their own counsel for specific remedies
that might fit their particular circumstances.
For the purposes of this article, the term
“landowner” will include owners, managers,
tenants, and lessors.
?
PARKING FACILITIES
AND CRIME
Little in-depth analysis is available concern-
ing criminal acts occurring in parking garages
or parking lots. Crime statistics, however,
clearly indicate that parking facilities are the
location of much criminal behavior. A Crime
Control Institute study in Minneapolis
showed that many of the police departments’
chronic-call locations were businesses with
Section 5.8 ? Asphalt Jungle 217
parking lots (Berlonghi, 1990, 259). In 1993
over six million simple assaults were reported
throughout the United States, and a large
percentage of those incidents occurred in
parking facilities (Maguire and Pastore, 1995,
249). In 1994 parking lots and garages repre-
sented the second-most-frequent location for
attempts to take property without injury and
the most-frequent location for motor-vehicle
thefts (Maguire and Pastore, 1996, 230). Fur-
thermore, the same report showed 8 percent
of all violent crimes, 7 percent of all rapes and
sexual assaults, and 7 percent of total assaults
in 1994 occurred in parking lots or garages.
Despite the risks, parking lots and garages
clearly are critical to the success of major
public facilities. In terms of sports events, only
5 percent of fans attending games use public
transportation, while a similar number arrive
on leased buses (Baim, 1994, 200). Consider-
ing the large number of professional-sports
venues (both indoor and out) as well as man-
aged college stadiums and arenas, and adding
to those the number of hotels, convention
centers, and similar public-access facilities,
one can easily imagine that there are several
million parking spaces in use by major facili-
ties in the United States.
Security Risk. Parking facilities generally
cover large areas and are open to the public.
While there is plenty of activity inside a shop-
ping mall, office building, stadium, or conven-
tion center, there is relatively little or, at
times, no activity at all in the parking lot. Ad-
ditionally, to make the best use of space, cars
are parked fairly close together, resulting in
5.8 ASPHALT J UNGL E
Je’anna Abbott and Gil Fried
1327.ch05 12/19/05 9:31 AM Page 217
tight, shadowy spaces between parked cars
that generally are excellent hiding places for
criminals. Moreover, due to the cost and avail-
ability of land, many venues rely on multi-
level parking garages. Parking garages
typically have poor sight lines and numerous
dark corners and stairwells, making them a
potential harbor for criminal activity. Patrons
walking through a parking lot or a parking
garage may be inattentive to such hiding
places or to other individuals in the lot.
As we’ve just described, then, parking fa-
cilities present a significant opportunity for
criminal activity. Hospitality-industry profes-
sionals, however, often rank parking lots and
related facilities near the bottom of their list
of risk-management concerns. For example, a
1991 survey of approximately 600 sports- and
special-event professionals evaluated a variety
of risk concerns (Berlonghi, 1996, 13). Few of
those surveyed felt that parking-lot security
was a concern. Indeed, only one in ten felt that
“no parking lot security” was a problem at all
(when offered that choice among a list of se-
curity issues). In other words, parking-lot se-
curity was rated lower by these events
professionals than were other risk concerns
such as weather conditions, insufficient budg-
ets, one-of-a-kind or first-time events, and slip-
pery surfaces. We wonder, however, whether
those survey results indicate that parking-
lot-related crimes are simply under-reported.
Outside security firms or police often handle
those crimes and may not report specific
events to facility managers. It’s also possible
that landowners misunderstand and underes-
timate the magnitude of potential problems,
perceiving crimes perpetrated in parking ar-
eas to be low risk. On the other hand, when
specifically asked about just parking lots, “lack
of security” represented the highest-rated
concern by those same survey respondents.
218 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
?
CIVIL LIABILITY
Victims of criminal misconduct are increas-
ingly seeking compensation from the owner
or manager of the property on which the
criminal activity occurred (Gordon and Brill,
1996, 1–6). Such claims fall under the rules of
premises liability and, typically, Gordon and
Brill point out, allege a problem with the
property’s security system. Premise liability is
founded on negligence principles. In a negli-
gence claim, a plaintiff must prove (1) the de-
fendant owed the plaintiff a particular
standard of care, (2) the defendant deviated
from that standard, and (3) the deviation
caused the plaintiff’s injury.
In the case of a person’s injury or loss
while using a parking facility, the critical ques-
tion is whether the landowner had a duty to
protect that individual while she was using the
parking facility. A landowner normally does
not have a duty to protect individuals from
the criminal acts of third parties unless the
acts are foreseeable. Yet if crimes on the
property are likely, then a landowner has
some duty to warn customers, guests, and oth-
ers who may seek access to the property. A
landowner incurs varying degrees of duty to-
ward three types of people: “business invi-
tees,” licensees, and trespassers. The scope of
this article is limited to the first category of
individuals.
The duty owed to someone who is on the
premises for a business purpose or who is pro-
viding some benefit to the landowner (i.e., a
business invitee) is a high duty. The court re-
quires a landowner to protect this person
from any hidden dangers the landowner knew
about, or should have known about. With re-
spect to parking facilities, the fact that such
areas may be remote does not alleviate a
landowner’s duty to warn a business invitee of
1327.ch05 12/19/05 9:31 AM Page 218
all possible risks and, of course, to keep the fa-
cility well maintained and in good repair (see
Ammon, 1993, and Maloy, 1993).
Burden of Proof. Premises liability can
arise from such seemingly innocent activities
as a drunk committing an unintentional bat-
tery. In one case, for example, a female spec-
tator was walking across a parking lot after a
college football game when an intoxicated
man fell on her, breaking her leg [Bearman v.
University of Notre Dame, 453 N.E.2d 1196
(1983)]. The court in this case considered
whether the university had notice of the po-
tential harm and, once the university had no-
tice, whether it had a duty to protect its
patrons. The court concluded that the univer-
sity not only had notice but also owed the
spectator, a business invitee, a duty of safe
ingress and egress from the facility.
Another pertinent case involving a park-
ing lot and foreseeable conduct is Bishop v.
Fair Lanes Georgia Bowling, (803 F.2d 1548,
1986). A group of bowlers complained to the
bowling alley’s management of harassing be-
havior by the bowlers on an adjacent lane.
The management took no action and, more-
over, continued to serve alcohol to the
harassing group despite their obvious intoxi-
cation. At 2:30 A.M. the two parties were the
last to leave the facility, at which opportunity
the intoxicated group attacked the other
bowlers in the alley’s parking lot. The Bishop
court concluded that a jury could reasonably
find that the bowling alley’s managers knew
or should have known of the potential for a
dangerous altercation between the patrons
before the altercation occurred and would,
therefore, be negligent for taking no action
and failing to make its premises safe for
invitees.
Thus, the key point of analysis is the exis-
tence of information that puts a landowner on
Section 5.8 ? Asphalt Jungle 219
notice that an assault or accident is foresee-
able (Miller, 1993; van der Smissen, 1990, 3).
Attaching foreseeability to seemingly random
accidents further expands the specter of lia-
bility should serious criminal acts occur. In
other words, don’t be in denial about poten-
tial liability.
The Premonition. Notice is the key re-
quirement for proving foreseeability. For in-
stance, in a suit stemming from a brawl during
a 1980 AC/DC rock concert, the concert pro-
moters claimed they did not have notice be-
cause “no unruly behavior had taken place in
the arena, no fights had broken out, and no
drinking had been observed” (McCarthy,
1995, 7). Even though the arena had no prior
problems, the court nevertheless concluded
that the promoter was on notice because a po-
lice officer had investigated prior AC/DC
tour stops and had knowledge of various
problems at other venues, which he reported
to the concert promoters. The officer also
knew that when the band appeared at the
arena the previous year, the band had at-
tracted a rowdy, drunk, drug-using crowd
even though apparently no specific incidents
of inappropriate behavior had officially been
reported [Comastro v. Village of Rosemont,
461 N.E. 2d 616 (1984)]. Other cases have also
stressed the need for landowners to act as-
sertively to deter criminal conduct when they
have information that indicates the possibility
of such conduct (see, for example: McNeal v.
Days Inn of America, Inc., 498 S.E.2d 294 (Ga.
1998); and Whataburger, Inc., v. Rockwell, 706
So.2d 1226 (Ala. 1997).
Mean Streets. If a facility’s location is in
an area with a significant history of assaults,
muggings, and robberies, landowners may be
liable if they take no steps to protect patrons
from known potential dangers. That is, fore-
seeability issues can extend even to criminal
1327.ch05 12/19/05 9:31 AM Page 219
activity in surrounding neighborhoods (Clery,
1995, 5). A classic example of such a case is
Banks v. Hyatt Corporation [Banks v. Hyatt
Corporation, 722 F. 2d 214 (5th Circuit, 1984)].
Hotel guest Dr. Robert Banks was robbed and
shot to death as he approached the New Or-
leans Hyatt Hotel’s front entrance. His widow
and family brought a lawsuit against Hyatt, as-
serting that, although Banks was not actually
on the hotel’s property at the time of the rob-
bery and shooting, reasonable precautions had
not been taken by the hotel to protect him,
and the hotel had a duty to do so. Hyatt ar-
gued that it had taken reasonable precautions
to protect its guests and could not be expected
to protect guests who were off the premises.
Besides, the hotel contended, “Dr. Banks was
guilty of contributory negligence or had at
least assumed the risk by going out” (Ruther-
ford and McConnell, 1987, 60). The jury heard
testimony from both sides, including evidence
that Hyatt managers were aware of numerous
robberies and shootings that had previously
occurred in and around the same area where
Banks lost his life. Further, Hyatt employees
had logged incidents, many involving weap-
ons, in other areas around the hotel. The jury
looked at the evidence of prevalent crime in
the area and determined that the security pre-
cautions provided by the hotel were simply
not sufficient; that the hotel did have a duty to
“take reasonable care for the safety of its
guests, and that the duty [extended] to adja-
cent areas where guests [were] likely to go and
where the hotel could effectively maintain
control of safety” (Rutherford and Mc-
Connell, 1987, 62). The jury awarded the
Banks family $975,000.
Back to the Future. To a degree, the fre-
quency of prior acts represents the probabil-
ity that a certain risk or injury might occur
(Nilson and Edington, 1982, 34–37). Yet even
in the absence of prior criminal activity,
220 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
landowners must take precautions to prevent
reasonably foreseeable crimes. Rather than
examining just the frequency of prior acts,
courts are examining all the circumstances
that together indicate whether a landowner
should have reasonably foreseen a harm. In
making this determination, the court consid-
ers the following factors (Berlonghi, 1996, 13;
Gordon and Brill, 1996, 5–6):
1. The nature of the facility,
2. The facility’s surrounding locale,
3. Whether the facility’s records are ade-
quately maintained,
4. The experience of the facility manager,
5. Whether the manager was aware of the
criminal activity levels at the facility,
6. Security personnel’s compliance with as-
signed patrols, and
7. The lack of customary security precautions.
Therefore, it is vital for landowners to
work on the implementation of a comprehen-
sive crime-prevention program, addressing
all reasonably foreseeable criminal actions.
This means that landowners should include
parking-area security as a critical concern in
their risk-management plans (Ammon, 1993,
117; Berlonghi, 1990, 10–11). While it is
impossible to eliminate all potential suits,
risk-management plans can help identify, doc-
ument, and eliminate potential risks, and may
reduce the prospect of being sued (van der
Smissen, 1990, 3).
To determine liability, courts determine
whether a property’s security precautions
were sufficient to prevent the criminal activ-
ity and whether patrons were warned of im-
pending risks (allowing for the impossibility
of predicting all dangerous incidents or vio-
lent behavior). When reviewing specific pre-
cautionary measures, landowners should ask
the following (Clery, 1995, 5):
1327.ch05 12/19/05 9:31 AM Page 220
1. Are statistics maintained on the fre-
quency and type of criminal activity oc-
curring at the parking facility, and in the
surrounding neighborhood (within a
quarter mile)?
2. What is being done to prevent criminal
behavior?
3. Do both security and non-security per-
sonnel understand and use proper secu-
rity measures?
4. Is there a program in place to inform
patrons and employees about security
concerns?
5. Have security policies been reviewed, re-
vised or updated, and implemented?
Does such a review take place at least
once a year?
6. Are there any long-range plans for en-
hancing security and crime-prevention
initiatives?
7. What is the cost-benefit analysis of
adding security measures in light of the
possible harm or injury sustained by a
guest, or in light of a potential jury award
to a victimized patron or visitor?
Later in this paper we address common
yet critical approaches to risk management
(e.g., security patrols, alcohol management,
crowd control). First, we discuss design fac-
tors that are often overlooked and yet can
substantially affect the safety and protection
that a facility can offer its guests.
?
ENVIRONMENTAL
DESIGN
Environmental design refers to the process of
building or renovating facilities so that their
physical characteristics serve aesthetic and
Section 5.8 ? Asphalt Jungle 221
practical functions, including crime abate-
ment or prevention. The use of architectural
details to enhance patrons’ security is spread-
ing throughout the world (Sheard, 1995,
26–28). Litigants claiming negligent facility
supervision are starting to argue that an ap-
proach such as Crime Prevention through
Environmental Design (CPTED), first ad-
dressed by Jeffery (1971), could have reduced
criminal activities or, had a CPTED-like
system been used, it would have uncovered
foreseeable hazards (Gordon and Brill,
1996, 1–6).
CPTED principles. CPTED is a relatively
easy and economical way to augment secur-
ity efforts if incorporated at the time of fa-
cility construction. It is possible, although
somewhat more complicated to implement
CPTED after the fact. The general principles
of CPTED include natural surveillance, ac-
cess control, and controlling the environment,
all of which can be used effectively to dis-
courage violence in parking facilities.
CPTED involves carefully selecting
building features, materials, and systems to
meet established passive-security and active-
security requirements. Passive security refers
to the physical design, such as lighting, while
active security refers to the human element,
such as uniformed guards, intercoms, and
closed-circuit cameras.
Even though CPTED has been around
for almost 30 years, many parking facilities
have been designed with little or no attention
to security. There are several reasons for this
oversight. For one thing, little time is devoted
to parking-facility design in architecture cur-
ricula and the principles of CPTED are thus
not widely recognized by developers and ar-
chitects. Further, since the parking lot’s design
is often looked at as basic if not routine, that
task is generally left to the newest and least
experienced person on the architectural team.
1327.ch05 12/19/05 9:31 AM Page 221
Lack of planning, therefore, means that active
security methods are later needed to correct
problems that could have been avoided if the
architectural team had incorporated CPTED
principles from the start.
?
CPTED Concepts
With respect to parking facilities, CPTED in-
cludes the following areas: lighting, natural
surveillance, stair towers and elevator access
controls, and restrooms.
The Light Ahead. Lighting is generally
considered to be the most important security
feature in parking facilities. It is a well-
established fact that good lighting deters
criminal activity and increases the public’s
perception that the facility is safe (which may
increase patronage). Installing a parking-lot
lighting system reduces the need for active se-
curity and reduces or eliminates car break-ins.
The basic principles of lighting design in-
clude illumination, uniformity, and glare. Illu-
mination is simply the intensity of light falling
on a surface. Uniformity refers to the ability to
achieve a consistent level of lighting through-
out the parking facility. (Consistent lighting
can allow both patrons and security personnel
to see into the far edges of parking stalls, as
compared to seeing only the driving lanes
well.) Glare reduces the contrast of an object
against its background, making it difficult for
the eye to perceive depth accurately. This con-
dition is especially dangerous for individuals
with weak or impaired vision. Glare can be
minimized by the careful selection and posi-
tioning of fixtures in the parking facility. (For
example, many light manufacturers design
lights with glare shields, and those lights can
be located above the parked cars rather than
in the driving lanes to further reduce glare.)
222 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
One approach to achieving the desired
quality of lighting is the Level of Service
(LOS) approach developed by Mary S. Smith
(1996, 2–9). Each level is represented by a
grade, and this approach should be as familiar
to parking-facility owners, city officials, and
architects as it is to traffic engineers. The
highest grade is LOS A, which denotes supe-
rior design; LOS B is above average; LOS C is
average; and LOS D is the Illuminating Engi-
neering Society of North America’s minimum
standard.
In addition to meeting industry standards
and providing glare-free lighting, lights must
be: reliable, easy to maintain, able to with-
stand the elements, and vandal proof.
Where good lighting is not available due
to design or expense, concrete staining may
be an alternative. Concrete staining is the
process of dyeing walls, ceilings, and beam
soffits white to increase brightness. This cost-
effective method has been shown in some de-
signs to increase the LOS by an entire grade.
A top-quality concrete stain will last about
ten years. A good white paint will have the
same effect but requires constant mainte-
nance. (One problem with white stain or
paint, however, is that it may encourage graf-
fiti. Fortunately, there are anti-graffiti stains
that accommodate easy cleanup.)
Vision Quest. The second most critical
security-design issue is natural surveillance,
or the ability of individuals to observe their
surroundings. Natural surveillance is easiest
to achieve in open parking facilities; however,
it is not impossible to achieve in parking
garages. The most difficult garages in which to
use natural-surveillance concepts are those
garages that have numerous sloped parking
areas. So today’s designers are shying away
from extensive ramps. Moreover, because
openness increases natural surveillance, high
1327.ch05 12/19/05 9:31 AM Page 222
ceilings and open exterior facades are now
preferred as well. Clearly, an underground
parking garage cannot allow for open facades.
Yet there are underground-design schemes
that incorporate natural light and ventilation,
and that make it easy to hear a person in
distress.
Natural surveillance also includes the
manner in which employees direct people and
vehicles within the parking facility. For exam-
ple, it is best to direct pedestrians to desig-
nated areas where other people are likely to
be walking (and criminals absent), rather than
to let those guests wander through the parking
facility. Likewise, concentrating entrances and
exits makes supervision of those areas easier.
The Glass Tower. Since stairs, lobbies, and
elevators are high-risk areas for personal in-
jury, CPTED addresses such areas with an eye
toward open design. One of the basic precepts
of CPTED is to plan stairways and elevator
lobbies as openly as the building codes will
permit. The more visibility one has the better,
including using exterior and open-air spaces.
Where that option is not available due to
weather or code constraints, glass may be a
compromise, allowing both protection and
visibility.
A Safe Place. If the facility is in a low-risk
area, access control may seem unnecessary at
first. Nevertheless, it is prudent to consider
access control in the design stage, as the risk
level may change with time. Screens and gates
can be used to discourage unauthorized peo-
ple from entering the parking area. If possi-
ble, the parking facility’s design should guide
vehicular traffic through gated pathways.
Even if there is no charge for parking, an in-
dividual receiving a ticket and interacting
with an attendant is given the impression of
security. Moreover, measures such as those
discourage criminal activity.
Section 5.8 ? Asphalt Jungle 223
Location of security personnel is a critical
CPTED component. Some landowners don’t
wish to “advertise” potential security con-
cerns, and therefore locate their security per-
sonnel and parking-attendant booths to the
rear of the facility. That thinking is backward;
according to CPTED principles, landowners
should locate security personnel or attendant
booths at the front of the parking area, next
to the primary entrance. Besides giving secu-
rity employees a clear view of the property,
it’s a way for the owner to make a public
statement about the importance of security
and guests’ safety.
The Hiding Place. Landowners should
not include restrooms in parking-facility de-
signs, especially in underground garages. Such
restrooms present special security problems
because they make excellent hiding spots for
criminals. Many patrons recognize the poten-
tial danger and avoid using such facilities
themselves, resulting in minimal traffic and
thereby presenting a potentially dangerous
condition for the patron who happens to use
the restroom. Within the confines of the shop-
ping mall, convention center, or office build-
ing is a much more appropriate place for
public restrooms.
Secret Weapons. While CPTED generally
encompasses passive design concepts, a few
active ones are notable. Active design con-
cepts include panic buttons, emergency
phones, intercoms, sound surveillance, closed-
circuit cameras, and trained guards. Parking
facilities that failed to incorporate CPTED
during the planning stage often find it neces-
sary to use active techniques later. Although
all of those features have obvious advantages,
by themselves they are not an alternative to
CPTED. Further, they tend to be expensive,
and some are prone to abuse by pranksters
and vandals.
1327.ch05 12/19/05 9:31 AM Page 223
?
OTHER RISK-
MANAGEMENT
STRATEGIES
In addition to CPTED methods, there are
other critical aspects to risk management that
are well known but sometimes overlooked.
We address a few of those here.
Watch It. In a recent survey of municipal
football stadiums, 86 percent of the respon-
dents “always” had security personnel located
in the parking lot before and after the game
(Ammon, 1993, 117). According to that study,
only 3 percent of the respondents did not offer
any security protection in parking lots. In 63
percent of the stadiums, law-enforcement au-
224 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
thorities provided protection. Private security
firms, facility employees, or a blend of em-
ployees, private security, and law-enforcement
agencies provided the remaining security.
There is no consensus on the number of on-
duty security personnel required for given sit-
uations or even about the best security
measures. Risk-management professionals
agree, however, that providing adequate secu-
rity is an ongoing, evolutionary process that
requires consistent and detailed monitoring
(Ammon, 1993, 117–120; Christiansen, 1986,
46–52; Miller, 1989, 419–437; Ross, 1985, 22–29;
van der Smissen, 1990, section 23, 3).
One common measure is the use of roving
security patrols. In many parking lots, such as
those of malls, hotels, schools, and large
ALCOHOL MANAGEMENT
For certain types of events, alcohol
management is a key component of a risk
management plan. Arrests or evictions at
sports events often revolve around alcohol
abuse.
1
Alcohol management policies can be
enforced in several ways, including by pre-
venting patrons from bringing their own al-
coholic beverages into the facility. Also, in
many venues, the sale of alcoholic beverages
is terminated after a certain period in the
competition (e.g., after the seventh inning or
at the end of the third quarter).
Additional risk management strategies
designed to reduce alcohol-related injuries
and incidents include controlling tailgate
parties and creating a designated driver pro-
gram.
2
Finally, designating certain areas
within the stadium or facility as alcohol-free
zones may make events more attractive to
families and other users
3
and reduce the
likelihood that under-the-influence fans will
disrupt or interfere with sober patrons.
1
B. Gilbert and L. Twyman, “Violence: Out of
Hand in the Stands,” Sports Illustrated, Jan-
uary 31, 1983, pp. 62–72.
2
R.E. Ammon Jr., “Alcohol and Event Manage-
ment,” Crowd Management 1, no. 4
(1995):16–19.
3
R.E. Ammon Jr., “Risk and Game Manage-
ment Practices in Selected Municipal Foot-
ball Facilities,” unpublished doctoral
dissertation, University of Northern Col-
orado (Greeley, CO), 1993.
1327.ch05 12/19/05 9:31 AM Page 224
stores, roving patrols can be effective and use-
ful. Wal-Mart, for example, now employs uni-
formed security personnel on golf carts in
some regions. Wal-Mart conducted a study on
store crime and discovered that 80 percent of
non-shoplifting crimes occurred outside the
store. A Wal-Mart in Tampa, Florida, in par-
ticular, had been the scene of 226 car thefts, 25
purse snatchings, 32 burglaries, and 14 armed
robberies prior to its implementing the golf-
cart idea. Once the golf-cart program was in
place, however, crime outside the Tampa store
was reduced to zero (Lee, 1997, E1). Although
a guard with a vehicle of some sort and the
necessary security equipment (e.g., two-way
radio, flashing lights) can cost about $45,000 a
year, there is a strong possibility that such an
investment can reduce actual risk and there-
fore help the store avoid costly lawsuits (or, at
least, give the store’s security efforts some
credibility once in court). Wal-Mart, for ex-
ample was ordered to pay 75 percent of a
$1.5-million award to a man shot in the head
in a Wal-Mart parking lot (Lee, 1997, E1).
With that in mind, $45,000 a year is a small
price to pay to achieve better security and a
reputation within the neighborhood and
among customers as a safe place to shop.
The Crowd. Another risk-management
technique used to protect patrons when en-
tering and exiting a facility involves the use of
crowd-management personnel (Ammon, Jr.,
1995, 16–19). Traditionally, those individuals
were used to inspect patrons’ belongings for
alcoholic beverages at the entrance to events
(e.g., a football game or a concert). Today,
those same workers are as likely to assist in-
dividuals (e.g., the elderly or disabled) as re-
quired and to direct visibly intoxicated
individuals to a secure waiting room. Crowd-
management personnel are now used for all
sorts of public events, whether it be a rock
Section 5.8 ? Asphalt Jungle 225
concert, an exposition at a conference center,
or a farmers’ market at a shopping mall. In all
cases, some training for the job is desirable.
The number of security staff needed can vary
based on the following factors (Berlonghi,
1996, 13):
1. The type of facility or event,
2. The number of entrances and exits,
3. The number of limited- and restricted-
access areas,
4. The number of parking levels (or areas)
in the facility,
5. The facility’s capacity,
6. The facility’s history of unruly behavior
or dangerous conditions,
7. The time and length of the event (and, in
some cases, the expected weather),
8. The number of spectators,
9. The demographic profile of the expected
crowd,
10. Whether admission was free or paid,
11. Whether alcohol consumption is allowed
or expected (see box),
12. The types of security personnel on duty
(including municipal law-enforcement
officers) and the level of supervisory
expertise,
13. The presence and location of electronic
protection devices, and
14. Specific requirements imposed by insur-
ance carriers.
Sign of the Times. Signs are an important
consideration in a risk-management and
safety plan. In the parking facility itself, signs
should assist patrons in moving quickly
through the lot or garage to their destinations.
Lost and confused guests—whether arriving
or leaving—make easy targets for criminals.
1327.ch05 12/19/05 9:31 AM Page 225
Landowners therefore should strive to pro-
vide clear, visible signs that are both under-
standable and memorable so those guests can
safely move to and from their vehicles. Fur-
thermore, signs can be used to deter criminals
by announcing that regular security patrols
and electronic-monitoring systems are in
place.
Contract. Risk-management planning
should, of course, reduce potential fiscal
losses arising from the misconduct of others.
Appropriate contractual provisions help to
protect against such losses—in this case, when
dealing with parking-security personnel re-
tained from outside firms. Contracts with in-
dependent security vendors should contain a
clause promising indemnity and setting forth
what specific risk-management steps are to be
taken to secure the parking areas. The con-
tract should specify the number of security
personnel to be deployed, when those work-
ers will change shifts, what quality-control
measures are to be used (e.g., spot inspec-
tions), how security personnel will handle in-
toxicated persons, what specific actions to
take should a criminal act or personal-injury
event occur, and what follow-up reporting
procedures are appropriate after an injury or
crime.
?
THE SECURITY AUDIT
The design of a parking facility and the level
of security needed depend on many factors.
Because there is no “one size fits all” solution,
a security audit is a good way to determine
exactly what security a particular facility
needs.
The security audit is actually quite simple.
A facility might exist that originally incorpo-
rated CPTED but that has undergone many
226 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
physical changes over the years. For example,
imagine a convention center that started out
as a simple rectangular structure. Now, picture
how various asymmetrical additions could be
built into the parking lots over time. Such ad-
ditions now make it impossible to view large
sections of the parking lot at the same time
from the same vantage point. A facility such
as this should undergo a security audit to
identify the security lapses caused by the
building expansions. Additionally, if the facil-
ity has not changed its exterior lighting sys-
tem, the older system will almost certainly be
insufficient to meet the current needs of the
reconfigured parking areas, including being
unable to light some corners at all (Gordon
and Brill, 1996, 6). A security audit will show
what actions need to be taken to return the
level of security to where it once was.
Witness for the Defense. One aspect of
crime prevention is that the sight lines of po-
tential witnesses (patrons, employees, security
personnel, and passersby) not be obstructed
or hindered. For example, there should always
be a clear view into and out of any cashier’s
cubicle. If the windows of the cubicle are cov-
ered with posters, handbills, or other advertis-
ing or personal effects, a cashier would be
unlikely to witness a nearby crime, should it
occur. By the same token, the posters would
also hinder a potential witness’s view of an
attack on the cashier (Gordon and Brill,
1996, 6).
?
HESITATE, THEN LITIGATE
Protecting facility visitors and lowering the
risk of liability exposure is a primary concern
of landowners. To avoid liability, many
landowners are not waiting for criminal ac-
tivity to occur, but are implementing risk-
1327.ch05 12/19/05 9:31 AM Page 226
management plans, including for their parking-
facility operations. Security patrols, crowd
control, signs, alcohol management, and con-
cise agreements with independent security
providers are just some of the ways a
landowner can make the parking facility
Section 5.9 ? Workplace Violence in Hotels 227
safer. Using CPTED concepts is another ef-
fective method of reducing crime and liabil-
ity. Today, with litigation so frequent, it seems
absolutely mandatory for a landowner to
take all precautions possible.
5.9 WORKPL ACE VI OL ENCE I N HOTEL S
Mark Beattie and Jacinta Gau
Violence is the leading cause of workplace fa-
talities in the hospitality industry (U.S. De-
partment of Labor, 2002). Preparation for
dealing with a crisis situation is vital to man-
agement and employee training. There are
two categories of workplace violence: explicit
and implicit. Explicit violence is specifically
directed at a hospitality employee, while im-
plicit violence occurs in a hospitality estab-
lishment but is not directed at an employee.
Managers and employees need training tools
to effectively manage violence prevention,
crisis management, and the aftermath of trau-
matic incidents. Consider the following case:
Bruce Larson, Jr., was fatally shot in his room at
the Orchard Inn in Wenatchee, Washington.
Larson, his brother, and several friends had
rented rooms at the Inn during Wenatchee’s
1998 Apple Blossom Festival. The group threw
a party. A friend of Larson’s invited a young
man named Jeremy Read to the party at the
Inn. At three o’clock that morning, an alterca-
tion ensued, and Read pulled out a gun and
shot Larson in the chest (Larson v. MOA Hos-
pitality, Inc., 2003).
Larson’s estate subsequently filed suit
against MOA Hospitality, Inc. (the corporation
that owned the Orchard Inn), for breaching its
legal duty to protect guests from harm. The es-
tate alleged that the Inn should have known that
criminal activity increases during the Apple
Blossom Festival, should have taken greater
steps to ensure guests’ safety, and should have
prevented Read from entering the property. The
Washington Court of Appeals, citing its holding
in Wilbert v. Metro Park Dist. of Tacoma (1998,
10), reasoned that “[W]hen there is no evidence
that a business owner knew of the dangerous
propensities of the individual responsible for
the crime and there is no history of such crimes
on the premises, criminal conduct is unforesee-
able as a matter of law.”The court entered sum-
mary judgment in favor of respondent MOA
Hospitality because the record failed to estab-
lish that Orchard Inn recognized—or reason-
ably should have recognized—that Read posed
a foreseeable threat to Larson’s safety.
The linchpin of the Larson decision was
foreseeability: An innkeeper has a duty to pro-
tect guests who are within a zone of foreseeable
danger. Had the record indicated that the Or-
chard Inn knew or should have known that
Read was dangerous, summary judgment would
have been denied, and the case would have
been put before a jury.
1327.ch05 12/19/05 9:31 AM Page 227
Would you have been ready for this situa-
tion? How well trained are you to deal with a
violent situation on your property? Have
your employees been adequately prepared to
deal with such situations? Is your night audi-
tor trained to be alert for potentially danger-
ous situations? Do your housekeepers have a
procedure to follow if they discover weapons
or other dangerous items in a room? Does
your human resources manager know what to
do for employees who are victims of domestic
abuse or stalkers?
Workplace violence exists globally in all
segments of industry. The European Commis-
sion defines workplace violence as “Incidents
where persons are abused, threatened or as-
saulted in circumstances related to their
work, involving an explicit or implicit chal-
lenge to their safety, well-being or health”
(Wynn, Clarkin, Cox, and Griffiths, 1997). Vi-
olence is noted in reports from the European
Agency for Safety and Health, the United
States National Institute of Occupational
Safety and Health (NIOSH), and the United
States Department of Labor. The hospitality
industry is among the top five most dangerous
industries in which to work, ranking higher
than police in prevalence of violence (Hoel
and Einarsen, 2003).
According to Isaacs (2004, 13), there
are four categories of perpetrator–victim
relationships:
• Acts by persons who have no connection
to the workplace
• Violence directed at employees by
customers
• Violence against coworkers
• Violence committed in the workplace by
a nonworker with a connection
Due to the constant and sometimes in-
tense face-to-face contact in service encoun-
228 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
ters in the hotel and hospitality businesses,
physical and psychological stressors are often
intertwined in the conditions contributing to
a violent situation (Hoel and Einarsen, 2003).
?
MANAGING THE CRISES
Crisis management theory combines three
views of workplace violence—psychological,
social-political, and technical-structural—and
pragmatic planning for an emergency situa-
tion is important. From each of these view-
points, crisis situations can be assessed by
examining the causes, consequences, cautions,
and coping mechanisms of impending situa-
tions (Pearson and Clair, 1998). Tools for cri-
sis management planning can then be
provided in the curricula of management
training programs, and hospitality employees
will subsequently be prepared to deal with the
aftermath of a violent situation.
The most extreme form of workplace vio-
lence is homicide. Homicide within the ser-
vice sector accounted for 52 percent of all 347
workplace fatalities in that sector in 2002
(U.S. Dept. of Labor, 2004). Retail trade
workers under the age of 18 were the second
highest grouping of workplace fatalities be-
tween 1992 and 2000; 63 percent of those
deaths were attributed to violent acts
(NIOSH, 2003). Homicide is the leading
cause of occupational death for women and
occurs predominately in eating and drinking
establishments (Levin, Hewitt, and Misner,
1996). Because statistical tracking is general-
ized and inconsistent, the available data are
limited in scope (Hoel and Einarsen, 2003),
and the limited empirical research available
indicates a lack of effective training tools.
Workplace violence can devastate busi-
nesses financially, especially when litigation
results from an incident. Statistics provided
1327.ch05 12/19/05 9:31 AM Page 228
by Jury Verdict Research show that,
“[A]ccording to the reviews of more than
3,000 verdicts rendered since 1993, the me-
dian compensation awarded by juries against
hotels for [sic] assaults [was] $275,000”
(Donohue, 2000, 12). A study by the Liberty
Mutual Research Center for Safety and
Health placed the costs of nonfatal workplace
violence at $84 million between 1993 and
1996 (Hashemi and Webster, 1998).
Again, training is important; many violent
situations are preventable before they esca-
late. The Equal Employment Opportunity
Commission (EEOC) enunciated these
guidelines in 1965: Establish company poli-
cies, train employees, support employees’
legal rights, implement investigative proce-
dures, and punish the wrongdoer, not the vic-
tim (Donohue, 2004). These guidelines enable
the hospitality manager to spot and prevent a
situation before it becomes a problem. There
will, however, continue to be unforeseeable
events, such as those that transpired in the
Larson case.
?
RESEARCH FOR
TRAINING PROGRAM
Data collection is central to the success of a
preventive training program and vital to pre-
vention of workplace violence. The data pro-
Section 5.9 ? Workplace Violence in Hotels 229
gram logs incidents occurring within some
discrete reporting period, as are the data com-
plied by the Bureau of Labor Statistics. These
incidents are coded as explicit or implicit,
then narrowed into “categories of interest” to
facilitate incident analysis (Rossman and Ral-
lis, 2003, 321). These categories of interest re-
flect the four types of perpetrator–victim
relationships described in Table 5.6.
Taxonomizing workplace violence in this
manner provides the foundation for a series
of category-specific case studies. These case
studies focus on identifying the training tools
that exist to enable the hospitality employee
to identify and manage a crisis situation effec-
tively. Case study methods are based on de-
veloping a participatory relationship between
the researcher and the participants through
interviews and compilation of material cul-
ture such as press coverage and police reports
(Shank, 2002). A series of case studies ulti-
mately results in what Shank (2002, 55) de-
scribes as a “cumulative case study, a single
topic examined through the perspectives of
many different case samplings. A single com-
plex case is built by ordering of individual
cases.” Information from these case studies is
coded according to standardized organiza-
tional schemes for cross-case displays. The
displays are conceptually ordered to highlight
the three focus areas: prevention, crisis man-
agement, and aftermath. These displays are
analyzed using a case-ordered effects matrix
Table 5.6 Categories of Interest by Incident Type
Relationship Implicit Explicit
Criminal intent (no prior relationship) C-I C-E
Customer/Employee CE-I CE-E
Coworker CW-I CW-E
Nonworker Connection NW-I NW-E
1327.ch05 12/19/05 9:31 AM Page 229
to explain different effects that each emer-
gent theme may have (Shank, 2002). The
emergent themes point out critical areas for
hospitality curricula. To explain and justify
the identified emergent themes and their rel-
evance to practice, researchers rely on “asser-
torial” logic, which “draws on supportive
evidence to convince the reader that condi-
tions in the new circumstances are sufficiently
similar to the original research conditions for
generalization to be appropriate” (Rossman
and Rallis, 2003, 105). Replication of this re-
search model in other settings adds to the
reliability and generalizability of the find-
ings. Trustworthiness is maintained through
methodological rigor in the interview and
fieldwork procedures.
Further research focuses on the recogni-
tion of stressors that can catalyze violent
situations, as well as problems such as post-
traumatic stress disorder (PTSD) that victims
and witnesses may develop in the aftermath
of an incident. Models used in emergency re-
sponder curricula—such as the Assaulted
Staff Action Program (ASAP), used with po-
lice officers, firefighters, and emergency med-
ical technicians—may offer useful templates
to develop this curriculum component (Flan-
nery, 1998). The hospitality industry has an
230 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
obligation to provide a safe and healthy envi-
ronment for its guests and employees. Hunt-
ley (2004, 1) asserts, “A workplace shooting
that claims the lives of an employee and a
customer would be a nightmare for any com-
pany. For a retailer dependent on public per-
ception, it’s a crisis that demands careful
handling.” The time has come to develop cur-
ricula that enable managers to better prepare
for an incident of violence and more compe-
tently address the aftermath and ramifica-
tions. Only then will the hospitality industry
be in a better situation to manage a crisis such
as the following before, during, and after the
event.
November 10, 2004, Chicago Tribune: At 2:30
A.M., Gregg P. Phillips, clad in a bulletproof vest,
used an Uzi 9mm assault rifle to fatally shoot
his girlfriend, Sandra Wisniewski, at the Com-
fort Suites Hotel in Oak Ridge, Wisconsin. A
German businessman staying in the next room
was also killed, and two other people were in-
jured. Phillips took a hostage, whom he ulti-
mately released unharmed. Police called the
rampage a “domestic violence situation.” Upon
surrender, Phillips asked, “How many people
did I kill?” (Black, 2004).
5.10 CASE STUDY: HOUSEKEEPI NG,
ENGI NEERI NG, AND SECURI TY
?
INTERDISCIPLINARY
SECURITY PLAN
In 2001, as a regional manager for a hotel
chain that operated three urban core hotels in
a large eastern city, Denise Tomes was be-
coming concerned that the hotels for which
she was responsible were increasingly vulner-
able to threats of physical harm or financial
loss to guests from a variety of criminals. She
knew through news and media reports that
1327.ch05 12/19/05 9:31 AM Page 230
the streets of the city her hotels operate in
were becoming increasingly unsafe due to ag-
gressive panhandling, street crime, muggings,
physical and sexual assaults, and automobile-
related felonies.
Because her hotels total in excess of 1,500
rooms and cater mainly to convention, corpo-
rate, and free independent traveler (FIT)
markets, Tomes knew that at any given time a
large number of her guests were on the streets
of the city and that, additionally, due to the
public nature of hotels in general, it was likely
that criminals could enter the hotel properties
seeking victims.
These hotels were built during the late
early 1980s and, although regularly redeco-
rated and remodeled to continue to appeal to
the upscale market, they still reflected the ar-
chitectural and security consciousness of their
era in operational terms. This meant that
guest room door locks were still of the stan-
dard keyed variety; elevators, fire stairs, out-
Section 5.10 ? Case Study: Housekeeping, Engineering, and Security 231
side hotel entrances and exits, parking struc-
tures were relatively obscure and unmoni-
tored; and housekeeping, engineering, and
guest services staff training had not, as yet, re-
flected the security concerns of the twenty-
first century.
To help her deal with the potential prob-
lems presented by the current situation,
Denise Tomes called a meeting of the heads
of security, housekeeping, and engineering.
She challenged them to come up with a plan
to increase security for the hotels and their
guests without building armed fortresses. The
first task of the directors of security, house-
keeping, and engineering was to set forth for
Tomes an analysis of the potential risks. The
second is to produce a range of alternative
suggestions about how those risks might be
managed through the efforts of their depart-
ments and respective staffs, combined with
specific recommendations for equipment and
facility upgrades.
R E F E R E N C E S
Ammon, R.E., Jr. 1993. Risk and Game Manage-
ment Practices in Selected Municipal Football
Facilities. Unpublished doctoral dissertation,
University of Northern Colorado, Greeley,
CO.
Ammon, R.E. Jr. 1995. “Alcohol and Event Man-
agement.” Crowd Management 1(4):16–19.
Baim, Dean V. 1994. The Sports Stadium as a Mu-
nicipal Investment. Westport, CT: Greenwood,
p. 200.
Bayou, M. E., and L.B. Bennett. 1992. “Profitabil-
ity Analysis for Table Service Restaurants.”
Cornell Hotel and Restaurant Administration
Quarterly 33(3):49–55.
Berlonghi, A. 1990. Special Event Risk Manage-
ment Manual. Dana Point, CA: Event Risk
Management, p. 259.
———. 1996. Special Event Security Management,
Loss Prevention, and Emergency Services. Dana
Point, CA: Event Risk Management, p. 13.
Black, L. 2004. “$1 Million Bail Set for Suspect in
Hotel Killings.” Chicago Tribune, North Final
Edition, November 10, page 2, section C.
Brigham, G.H. 1955. Housekeeping for Hotels, Mo-
tels, Hospitals, Clubs, Schools. New York:
Ahrens.
Christiansen, M.L. 1986. “How to Avoid Negli-
gence Suits: Reducing Hazards to Prevent In-
juries.” Journal of Physical Education, Rec-
reation, and Dance 57(2):46–52.
1327.ch05 12/19/05 9:31 AM Page 231
Clery, B. 1995. “Commercial Insurance Carriers
Write Disclaimer for Crime.” Campus Watch
(1)1:5.
Dale, J. C., and T. Kluga. 1992. “Energy Conserva-
tion: More Than a Good Idea.” Cornell Hotel
and Restaurant Administration Quarterly
33(6):30–35.
Donohue, Chris Hiley (ed.). 2004. “Prevent Work-
place Harassment and Discrimination.” Hos-
pitality Law (October):12.
———. 2000. “Study Reviews Seven Years of
Hospitality Litigation.” Hospitality Law (Au-
gust):12.
Dougan, J. 1994. “Menu Engineering with Elec-
tronic Spreadsheets.” Bottomline 8(6):15–17.
Fisher, Reed Allen. 1986. “A Documentation of
Factors Which Determine Staffing Levels for
the Engineering Department of a Hotel Prop-
erty.” MPS Monograph. Ithaca, NY: Cornell
University School of Hotel Administration.
Flannery, R. 1998. The Assaulted Staff Action Pro-
gram: Coping with the Psychological After-
math of Violence. Ellicott City, MD: Chevron.
Gordon, C.L., and W. Brill. 1996 “The Expanding
Role of Crime Prevention through Environ-
mental Design in Premises Liability.” NCJ
Publication No. 157-309. Washington, DC: U.S.
Department of Justice, pp. 1–6.
Hashemi, L., and B. Webster. 1998. “Non-fatal
Workplace Violence Workers’ Compensation
Claims (1993–1996).” Journal of Occupational
and Environmental Medicine 40(6):561–567.
Hoel, H., and S. Einarsen. 2003. Violence at Work in
Hotels, Catering, and Tourism. Geneva, Inter-
national Labor Office, Sectoral Activities Pro-
gramme, WP.211.
Huntley, H. 2004. “Business Hit by Violence Must
Act Quickly to Address Its Workers’ Con-
cerns.” (Washington) Tribune Business News,
November 20, p. 1.
Issacs, A. 2004. Workplace Violence: Issues in Re-
sponse. E. Rugula, E. (ed.). Quantico, VA:
Federal Bureau of Investigation, FBI
Academy.
Jeffery, C. Ray. 1971. Crime Prevention Through
Environmental Design. Beverly Hills, CA:
Sage.
232 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
LaBelle, A.M., and J. Barton. 1951. Administrative
Housekeeping. New York: G.P. Putnam’s Sons.
Larson v. MOA Hospitality, Inc., 2003 Wash. App.
LEXIS 1872, 2003.
Lee, L. 1997. “Parking Lots Open to Crime.” Hous-
ton Chronicle, April 27, p. E1.
Levin, P.F., J.B. Hewitt, and S.T. Misner. 1996.
“Workplace Violence: Female Occupational
Homicides in Metropolitan Chicago.”
AAOHN Journal 44(7):326–331.
Maguire, K., and A.L. Pastore (eds.). 1995. Bureau
of Justice Statistics: Sourcebook of Criminal
Justice Statistics—1994. Albany, NY: Hinde-
lang Criminal Justice Research Center, p. 249.
———. 1996. Bureau of Justice Statistics: Source-
book of Criminal Justice Statistics—1995. Al-
bany, NY: Hindelang Criminal Justice
Research Center, p. 230.
Malk, M., and R.S. Schmidgall. 1994. “Financial
Analysis of the Rooms Division.” Bottomline
8(6):18–21.
———. 1995. “Analyzing Food Operations.” Bot-
tomline 10(3):23–27.
Maloy, B.P. 1993. “Legal Obligations Related to Fa-
cilities.” Journal of Physical Education, Recre-
ation, and Dance (64)2:28–30, 64.
McBer and Company. (no date). Managerial Style
Questionnaire.
McCarthy, P. 1995. “Lessons in the Law: To What
Extent Must a Venue Owner Be Held Re-
sponsible for Injuries On-site?” Crowd Man-
agement 1(4):7.
Miller, A.W. 1989. “Risk Management.” In Law for
Physical Educators and Coaches, G. Nygaard
and T. Boone (eds.). Columbus, OH: Publish-
ing Horizons, pp. 419–437.
Miller, L.K. 1993. “Crowd Control.” Journal of
Physical Education, Recreation, and Dance
64(2):1–32, 64–65.
Mintzberg, H. 1975. “The Manager’s Job: Folklore
and Fact.” Harvard Business Review (July–
August):49–61.
National Institute for Occupational Safety and
Health. July 2003. “Preventing Deaths, In-
juries, and Illnesses of Young Workers.” Re-
trieved August 10, 2004, fromhttp://www.cdc.
gov/niosh.
1327.ch05 12/19/05 9:31 AM Page 232
Nilson, R.A., and C.R. Edington, 1982. “Risk Man-
agement: A Tool for Park and Recreation Ad-
ministrators.” Park and Recreation (August):
34–37.
Quain, W.J. 1992. “Analyzing Sales Mix Profitabil-
ity.” Cornell Hotel and Restaurant Administra-
tion Quarterly 33(2):57–62.
Pearson, C., and J. Clair. 1998. “Reframing Crisis
Management.” Academy of Management Re-
view 23(1):59–76.
Riehle, H. 1994. “Table Service Restaurants Post
Sales Gain in 1993.” Restaurants USA 14(9):
43–44.
Ross, C. 1985. “Managing Risk.” Athletic Business
(June):22–29.
Rossman, G., and S. Rallis. 2003. Learning in the
Field: An Introduction to Qualitative Research,
2nd ed. Thousand Oaks, CA: Sage.
Rutherford, D.G. 1987. “The Evolution of the Ho-
tel Engineer’s Job.” Cornell Hotel and Restau-
rant Administration Quarterly 27(4):72–78.
Rutherford, Denney G., and Jon P. McConnell.
1987. “Understanding and Managing Your Li-
ability for Guest Safety.” Cornell Hotel and
Restaurant Administration Quarterly 27(4):
58–63.
Rutherford, D.G., and William J. Schill. 1984. “The-
oretical Constructs in Practice: Managers
Rate Their Importance.” International Journal
of Hospitality Management 3(3):101–106.
Saied, Jamelia. 1990. “Approaches to Risk Man-
agement.” Cornell Hotel and Restaurant Ad-
ministration Quarterly 31(2):45–55.
Schneider, Madelin, and Georgina Tucker. 1989.
The Professional Housekeeper, 3rd ed. New
York: Van Nostrand Reinhold.
Section 5.10 ? Case Study: Housekeeping, Engineering, and Security 233
Shank, G. 2002. Qualitative Research: A Personal
Skills Approach. Columbus, OH: Merrill
Prentice-Hall.
Sheard, R. 1995. “Architectural Influences in
Crowd Management in the U.K.” Crowd Man-
agement (2)2:4–7, 26–28.
Smith, M.S. 1996. “Crime Prevention through En-
vironmental Design in Parking Facilities.”
Research in Brief. Washington, DC: U.S. De-
partment of Justice, NCJ Publication No.
157–310, pp. 2–9.
Tucker, G., and M. Schneider. 1982. Professional
Housekeeping. Boston: CBI.
Turkel, S. 1993. “Deflating F&B Results.” Bottom
Line 8(2):8–10.
U.S. Department of Labor, Bureau of Labor Sta-
tistics. 2004. Census of Fatal Occupational In-
juries, 2002. Retrieved August 13, 2004, fromhttp://www.dol.gov.
van der Smissen, B. 1990. Legal Liability and Risk
Management for Public and Private Entities.
Cincinnati, OH: Anderson, p. 3.
Wasmuth, William J., and Stanley W. Davis.
1983. “Strategies for Managing Employee
Turnover.” Cornell Hotel and Restaurant Ad-
ministration Quarterly 24(2):65–75.
Whataburger, Inc. v. Rockwell, 706 So.2d 1226 (Ala.
1997).
Wilbert v. Metro Park Dist. of Tacoma, 90 Wn. App.
304, 309; 950 P.2d 522 (1998).
Wynn, R., N. Clarkin, T. Cox, and A. Griffiths. 1997.
Guidance on the Prevention of Violence at
Work. Brussels, European Commission, DG-
V, Ref. CE/VI-4/97.
S U G G E S T E D R E A D I N G S
Books
Berlonghi, A. 1990. Special Event Risk Manage-
ment Manual. Dana Point, CA: Event Risk
Management.
Cournoyer, Norman G., Anthony G. Marshall, and
Karen L. Morris. 1999. Hotel, Restaurant, and
Travel Law: A Preventive Approach. Albany,
NY: Delmar.
1327.ch05 12/19/05 9:31 AM Page 233
Marshall, Anthony G. 1995. Don’t Lose Your Hotel
by Accident. Cleveland, OH: Advansta Mar-
keting Services.
Martin, Robert J. 1998. Professional Management
of Housekeeping Operations. New York: John
Wiley and Sons.
Newland, Loren E. 1997. Hotel Protection Man-
agement: The Innkeeper’s Guide to Guest Pro-
tection and Reasonable Care. Spokane, WA:
TNZ.
Prestia, Kenneth Lane. 1993. Chocolates for the
Pillows, Nightmares for the Guests. Silver
Spring, MD: Bartleby.
Schneider, Madelin, Georgina Tucker, and Mary
Scoviak. 1999. The Professional Housekeeper.
New York: John Wiley and Sons.
Smith, Harry. 1993. Hotel Security. Springfield, IL:
Charles C. Thomas.
234 Chapter 5 ? Operations: Housekeeping, Engineering, and Security
Articles
Bean, Nelson R. 1992. “Planning for Catastrophe:
The Fast Track to Recovery.” Cornell Hotel
and Restaurant Administration Quarterly
33(2):64–69.
Dale, J. C., and Theodore Kluga. 1992. “Energy
Conservation: More Than a Good Idea.” Cor-
nell Hotel and Restaurant Administration
Quarterly 33(6):30–35.
Malk, M., and R.S. Schmidgall. 1994. “Financial
Analysis of the Rooms Division.” Bottomline
8(6):18–21.
———. 1995. “Analyzing Food Operations.” Bot-
tomline 10(3):23–27.
S O U R C E N O T E S
Chapter 5.2, “A Day in the Life of a Director of
Rooms,” by Kurt Englund.
Chapter 5.3, “Housekeeping Organizations: Their
History, Purpose, Structures, and Personnel,”
by Thomas Jones, adapted from Housekeeping
Operations, 2nd ed., edited by Robert Martin,
Copyright © 1992. Adapted by permission of
John Wiley & Sons, Inc.
Chapter 5.4, “On Being an Executive House-
keeper,” by John Lagazo.
Chapter 5.5, “The Hotel Engineering Function:
Organization, People, and Issues in the Mod-
ern Era,” by Denney G. Rutherford.
Chapter 5.6, “The Engineering Department and
Financial Information,” by Agnes Lee De-
Franco and Susan B. Sheridan.
Chapter 5.7, “The Legal Environment of Lodging
Operations,” by Melissa Dallas.
Chapter 5.8, “Asphalt Jungle,” by Je’anna Abbott
and Gil Fried, is reprinted from the April 1999
issue of Cornell Hotel and Restaurant Admin-
istration Quarterly. © Cornell University.
Used by permission. All rights reserved.
Chapter 5.9, “Workplace Violence in Hotels,” by
Mark Beattie and Jacinta Gau.
1327.ch05 12/19/05 9:31 AM Page 234
c h a p t e r s i x
F O O D A N D
B E V E R A G E D I V I S I O N
recognition lost during Prohibition. Recovery
was further delayed by the Depression and
the uncertainty and reordered national prior-
ities that accompanied World War II.
In 1945, at the conclusion of World War II,
well-documented major shifts in population
and economic emphasis began to occur. Free-
standing restaurants continued to compete ef-
fectively with hotel foodservice. Movement
was away from downtown and central busi-
ness district hotels. Motels and motor hotels
were built on highway and freeway inter-
changes to take advantage of the mobility of
the American family. Fast-food restaurants,
too, affected the away-from-home eating
habits of Americans. Consequently, many ho-
tel companies saw as too great the cost of pro-
viding high-quality competition in the face of
these forces. The net effect was that many ho-
tel guests and operators came to believe that
6.1 I NTRODUCTI ON
In discussing the ways that hotel organiza-
tions have changed, we pointed out that in
earlier times food played a significant role in
the organizational structure and product/
service mix of hotels. It has been speculated
that the preeminent role played by hotel
foodservice in society became significantly di-
minished with the onset of Prohibition and
during the 1920s. People stopped going to
foodservice establishments where they couldn’t
“get a drink.” Prohibition gave rise to compe-
tition from street restaurants that operated
sub rosa as speakeasies. These restaurants
were not constricted by the visible, public na-
ture of hotel dining rooms. This diminished
role was compounded in many ways by the
depression years of the 1930s and the war
years of the 1940s.
In general, it was difficult for most hotels’
foodservice to recover from the effects of
235
1327.ch06 12/19/05 9:32 AM Page 235
hotel foodservice was little more than a nec-
essary evil. For many operations, this became
a self-fulfilling prophecy, and hotel foodser-
vice floundered for many years.
This situation has been reversed in recent
years. Of the many factors mentioned earlier
that forced organizational change (market
segmentation, return on investment, demo-
graphic shifts, and so forth), it seems that re-
turn on investment has played a dominant
role in this turnaround. The double-whammy
issues of construction cost and return on in-
vestment expectations of people outside the
hospitality industry strongly suggest that
space devoted to foodservice should con-
tribute at least its share to the profit structure
of the modern hotel service system.
As a result, hotels seem to be willing to
try anything to capture additional revenue,
prestige, and competitive advantage. Among
the tactics addressed in several of the articles
and essays included in this section are part-
nering with restaurant companies, outsourc-
ing a hotel’s foodservice, new catering and
beverage management strategies, celebrity
chefs, and rethinking the entire role of hotel
food and beverage.
?
FOOD
Over 35 years ago, Allen Hubsch (1966) sug-
gested a number of ways to revitalize hotel
food and beverage service that have proved
eerily prescient. Among his suggestions were:
• Hotel food and beverage facilities must
become profit centers—no more a neces-
sary evil!
• Food and beverage management calls for
new and increased professionalism and
less reliance on the old chef–maître d’
model.
236 Chapter 6 ? Food and Beverage Division
• Food and beverage outlets must become
amenities that produce room-nights.
• Hotel food and beverage units must
adopt street restaurant philosophies; mer-
chandising, advertising, decor/ambience,
menu, and service must compete with lo-
cal competition.
• Food and beverage can be used to fill
marginally profitable space in rentals,
storage, or production areas.
• New food and beverage outlets can lever-
age existing facilities like storage and
kitchens by spreading fixed costs over a
wider sales base.
Hubsch’s article, now considered a classic,
is among the suggested readings for this
section.
Robert H. Bosselman is the director of
the Dedman School of Hospitality and Ded-
man Distinguished Professor of Hospitality at
Florida State University. From his perspec-
tive, looking ahead to the future state of hotel
food and beverage operations, Bosselman
provides an in-depth analysis of the way the
hotel food and beverage organization has
changed over the last eight to ten years and
offers tantalizing clues and examples that
echo the prescriptions proposed by Hubsch.
He also addresses the structure of the organi-
zation, interactions of food and beverage ele-
ments within the lodging operation, operating
ratios, and potential trends in this major—and
expensive—operational component.
Dominic Provenzano is director of opera-
tions of the Downtown Marriott at Key Cen-
ter in Cleveland, Ohio. From the perspective
of a previous position as director of food and
beverage, he provides front-line detail of how
Bosselman’s theory of food and beverage
plays out for the food and beverage director.
In a major research effort that began in
1998, Laurette Dubé, Cathy Enz, Leo Re-
1327.ch06 12/19/05 9:32 AM Page 236
naghan, and Judy Siguaw of the Center for
Hospitality Research at Cornell University
studied the best practices of hotels in the U.S.
lodging industry. In their words, “The goal of
this research was to surface and summarize
practices of use and value to the entire lodg-
ing industry” (Dubé et al., 1999, 7). Siguaw
and Enz summarize several of the practices
from that study that have been developed by
hotels to achieve the “strategic charge of prof-
itably meeting customer needs” (1999, 50).
The authors describe how top hotels integrate
the ideas of restaurant design and conceptual-
ization with all of the variables that affect the
quality of the food and the experience for the
guest.
The concept of outsourcing was men-
tioned earlier in the context of how some ho-
tel companies are rethinking the role of hotel
food and beverage and how to maximize in-
vestments in facilities, furnishings, and equip-
ment for foodservice outlets. According to
Strate and Rappole (1997), because hotel
restaurants have often been managed as a
secondary function, owners and operators are
questioning the conventional wisdom about
how hotel food and beverage is conceived and
managed. They state that this new focus on
hotel foodservice results in innovative con-
cepts and strategic alliances with well-known
restaurant brands. In their article, they ana-
lyze this trend outlining historic antecedents
of the practice and use the Texas firm Bristol
Hotel Company as a case study.
Few would argue that should a hotel
choose to do its own foodservice, a first-class
executive chef is essential to allow a hotel or-
ganization to compete effectively for food
and beverage business in today’s market. It is,
however, fairly clear that chefs today do not
have the dominant role they had a century
ago. Given the importance of the food and
beverage function, as established by the fore-
Section 6.1 ? Introduction 237
going articles, the chef is nevertheless an inte-
gral part of the competitive strategy and a
full-fledged department leader. He or she is
no longer purely a technician. This individual
must have developed a significant range of
managerial skills to complement the technical
and artistic training we have come to expect
from an executive chef. The appearance of
ultra-high-profile celebrity chefs adds an-
other interesting variable to the food and bev-
erage director’s mix of challenges. If a hotel
commits much of its food and beverage strat-
egy to the talents of one famous person, it can
enjoy a significant competitive advantage but
also become hostage to that person’s whims
and personality. Many high-profile hotels in
Las Vegas have “name” chef programs, and in
many major population centers, top chefs
have made their hotels destination venues
due to their fame in the kitchen.
Patti Shock and her colleague John Ste-
fanelli highlight the importance of the ban-
quet and catering functions of hotel food and
beverage in their piece, updated for this edi-
tion. With the increased national attention
and focus on the importance of conferences,
conventions, meetings, and events of all kinds,
foodservice professionals who specialize in
planning and serving meals and beverages
to large groups of people are increasingly
important. The authors note, “Although on-
premise catering is generally the second-
largest source of revenue for most hotels,
following sleeping rooms” and “often the
highest visibility the hotel has on a local
level,” banquets and catering are still too of-
ten ignored by hotel school curricula. In this
article, we partially address this lack.
Catered affairs represent a significant
contribution to the profit picture of hotel
food and beverage service. The efficacy of a
hotel’s efforts in selling and servicing the
group business market may very well be the
1327.ch06 12/19/05 9:32 AM Page 237
difference between profitability of the food
and beverage function and some less desir-
able outcome. Shock and Stefanelli explore
the organization, personnel, and processes
of the catering department and give the
reader an in-depth view of catering execu-
tives and banquet organizations. The article
includes Internet addresses for additional
information.
It is the revenue and visibility importance
of the catering function that makes the ener-
getic essay by Rich Benninger so intriguing.
From rising at 6:00 A.M. or so, thinking today
is the day he will “get everything done” in the
catering and convention services office of a
5,000-room resort hotel casino in Las Vegas,
to hitting the sack after midnight, Benninger
gives the reader an insider’s view of life in the
fast lane of Vegas catering and convention
services. As executive director of catering and
convention services at the Caesar’s Palace
Resort Hotel and Casino, Benninger is
uniquely positioned to provide these insights.
?
BEVERAGE
In any hotel that has more than one formal
bar, there is usually a separate function within
the food and beverage department called bar
or beverage management. Ideally, that office
coordinates all matters that concern liquors,
beers, and wines. The beverage manager is re-
sponsibile for purchasing, receiving, storing,
and issuing liquor, wine and beer inventory,
and quite obviously has the managerial re-
sponsibility to control that inventory.
Additionally, the beverage manager:
• Hires, trains, schedules, and controls all
beverage and bar personnel.
• Promotes the various beverage depart-
ment services.
238 Chapter 6 ? Food and Beverage Division
• Coordinates the requests of other depart-
ments that require beverage services—for
instance, banquet and catering, room
service, chefs, management.
• Assures that his or her department is in
compliance with federal, state, and local
laws and regulations.
The beverage manager administers or
manages up to four types of bars.
The front or public bar is that in which the
guest can, if he or she so desires, interact with
the bartender and other service personnel.
There are provisions for guest seating at the
bar itself, which may be part of a restaurant or
a separate room or area. Separate tables and
stand-up areas may also be available for bev-
erage service. A front bar may or may not in-
corporate entertainment.
A service bar is a hidden bar designed for
use by the hotel’s food and beverage service
staff only. It may serve one or more foodser-
vice areas and/or room service, and it is de-
signed specifically for efficiency and economy
of service. In most cases, speed is considered
the essential ingredient in service bars. Ser-
vice bars typically are centrally located in the
back of the house, out of guest view.
Portable bars are designed for maximum
flexibility and can be used in conjunction with
beverage sales associated with guest activities
anywhere in the hotel or on its grounds. This
may be extended in resort areas to include
recreational areas.
A new facility popular in many hotels is
that of the in-room bar, mini-bar, or honor
bar. While sometimes the responsibility for in-
ventory of these bars rests with room service,
the beverage manager in most cases is also
deeply involved in their design, marketing,
and control.
In many ways, the beverage manager’s
job can be compared, in terms of historical
1327.ch06 12/19/05 9:32 AM Page 238
stereotype, to that of the housekeeper. Often
the beverage manager has worked his or her
way up through the ranks of beverage server
and preparer and through experience,
longevity, and interest becomes the beverage
or bar manager. There is reason to believe
that in many ways this pattern is changing.
Like many other areas of hotel management,
the beverage management function now faces
a range of issues that are more sophisticated
and complicated than traditional beverage
management problems of the past. It may be
that the beverage managers of the future will
have to bring to their job a level of manage-
rial, organizational, and administrative so-
phistication that was previously unnecessary.
The issues, responsibilities, and structural
management of the hotel’s beverage function
are analyzed and discussed by Valentino Lu-
Section 6.2 ? Managing Food and Beverage Operations in Lodging Organizations 239
ciani, professor of beverage management at
the University of Nevada, Las Vegas. Lu-
ciani’s essay, reprised here from the third edi-
tion, draws on his industry experience,
research, and teaching beverage management
and provides a view of how the modern bev-
erage manager has evolved from his or her
historical counterparts.
The planning, preparation, service, and
management of food and beverage in modern
hotels have changed significantly since the
first edition of this book was written. The es-
says, research, and commentary presented
here are chosen to illustrate the breadth and
depth of this process of change. The reader
who is interested in hotel food and beverage
should be able to synthesize an accurate vi-
sion of the practices and realities of this major
operational division of modern hotels.
6.2 MANAGI NG FOOD AND BEVERAGE
OPERATI ONS I N L ODGI NG
ORGANI ZATI ONS
Robert H. Bosselman
Like the lodging industry in general, foodser-
vice in the hotel market has improved its po-
sition over the last few years. A typical
characteristic is a market posting steady but
not significant growth and emphasizing cost
containment and innovation. As lodging food-
service competes with the multitude of com-
mercial foodservice operations for the
consumer dollar, value remains the focus of
both operators and consumers. A number of
studies have identified food and beverage
services as a primary contributor of value to a
customer’s lodging experience.
This introductory essay discusses the
mission and goals of food and beverage de-
partments in lodging operations, the orga-
nizational structure of such departments,
interactions of food and beverage elements
within the lodging operation, operating ratios,
and potential trends in the area.
?
MISSION AND GOALS
“The goal of our food service operations is to
provide the highest quality of food and
1327.ch06 12/19/05 9:32 AM Page 239
service in a sophisticated, comfortable ambi-
ence, by friendly and professional staff, ensur-
ing that every patron returns,” states the Four
Seasons Hotel in Las Vegas. This statement,
succinct and focused, exemplifies what lodg-
ing operations nationwide are seeking. Most
lodging executives identify food and beverage
operations as one of the more complex areas
to manage in the entire lodging arena. Lodg-
ing foodservice not only involves the tradi-
tional difficulties associated with both
producing and serving food and beverages
but also the performance of these functions
every day, often 24 hours a day. The resulting
labor costs and operational expenses prove
burdensome for many lodging establishments.
In order for these food and beverage opera-
tions to survive and thrive, they must draw
not only guests of the lodging facility but also
consumers from the external market of the
lodging property. Hoteliers are analyzing
their operations to identify ways of increasing
the percentage of guests who stay to dine on-
site, known as the capture rate.
In fact, the more profitable lodging food
and beverage operations obtain more than 50
percent of their business from non-guests of
the property. The hotel or motel guest is not a
captive diner; he or she has many other op-
portunities for dining. Yet, in order for a hotel
property to be profitable, a significant per-
centage of sales must be produced by food
and beverage operations. To accomplish this,
lodging facilities must successfully compete
with the numerous chains and independent
restaurants that offer a variety of services.
One advantage for full-service hotels is the
banquet business, which can be a major rev-
enue producer and operate at a high profit
margin. It becomes critical for lodging opera-
tors to research tourists’ specific food needs
and wants, and how their specific operation
240 Chapter 6 ? Food and Beverage Division
can better serve these tourists. In addition, a
clear, objective analysis of local competition
is necessary to determine the segment and
genre in which the hotel can compete and
succeed.
If the hotel is competing with an estab-
lished local competitor, then the hotel food-
service operation must outdeliver on all levels
of quality, service, and ambience. In a large
hotel, it is also necessary not to compete di-
rectly with another unit in the same hotel.
Units must be diverse to give different seg-
ments of the market a choice; the ideal out-
come is that hotel and local guests choose to
dine in one of the hotel’s offerings. A strong
food and beverage program that delivers a
high-quality product and experience can be
used as a competitive advantage as well as a
sales tool for the lodging facility.
Many hoteliers choose not to compete in
this environment. Instead, their strategy is
to eliminate food and beverage operations
altogether, or to lease food and beverage op-
erations to outside companies, either chain-
operated or an independent restaurant (see
the article by Strate and Rappole elsewhere
in this section). In particular, food and bever-
age sales in motels and motor-hotel restau-
rants continue to decline as a percentage of
overall sales when compared to full-service
hotels, primarily as a result of an increasing
number of lower-priced lodging operations
offering free breakfast and no other meal
service. However, that free breakfast has be-
come a competitive positioning statement for
the property. Guests now expect it, and they
expect quality, yet such lodging facilities must
maintain their cost structure.
While the reader may start to think that
hotel food services are not major players in
the overall foodservice market, 2005 pro-
jected sales were estimated at $25 billion,
1327.ch06 12/19/05 9:32 AM Page 240
according to the National Restaurant Associ-
ation. There are five major hotel chains whose
foodservice sales per hotel average more than
$2.3 million. At the top lies Sheraton Hotels,
whose properties average well over $4.6 mil-
lion in foodservice sales. It should be noted
that a number of convention/resort hotels
could do well over $30 million in annual food
and beverage sales. Clearly, foodservice pro-
fessionals have as much or more opportunity
for success as in other segments of the food-
service industry. With potential sales like
those noted, lodging food services remain a
critical partner with respect to both the rev-
enue and profit of the property. A smart, re-
sourceful manager makes the foodservice
operation unique, thus attracting additional
patrons to the lodging establishment. Thus,
foodservice can be looked on as a means of
gaining competitive advantage over other
lodging operations.
The field of lodging has a long history of
serving people food and drink during their
travels. From the earliest days of the Roman
Empire, when people traveled on foot, on an-
imal, or in vehicles drawn by animals, to the
modern age of air, rail, and car transportation,
hotels and inns provided for their needs. In
fact, early hotels were usually the center of
community activity and often the only place
one could eat away from home. The glamour
years of the late nineteenth and early twenti-
eth centuries produced grander hotel proper-
ties, the so-designated palaces of the people,
which solidified this perception of hotels as
centers of public entertainment and as
sources of food and drink for guests. This rep-
utation continued well into the twentieth cen-
tury, as hotels became the logical place to
meet for entertainment and business discus-
sion. Foodservice operations independent of
hotels were rare even in the larger urban cen-
Section 6.2 ? Managing Food and Beverage Operations in Lodging Organizations 241
ters. It was not until the post–World War II
era that independent restaurants and restau-
rant chains grew in both number and influ-
ence over the customer. As we enter the
twenty-first century, lodging foodservice ac-
counts for approximately 7 percent of the
total foodservice market. From total domina-
tion of the market to its role as a secondary
player today, lodging foodservice has under-
gone dramatic change. As properties struggle
to decide whether or not to offer foodservice
and, if so, the number of foodservice units and
the level of service to offer, future managers
must recall what the goals and mission of the
foodservice operation should be:
1. To provide the appropriate level and de-
gree of food and beverage service to the
property’s guests.
2. To support the overall goal(s) of the
property.
3. To assist the property in gaining a com-
petitive advantage over other lodging
establishments.
4. To function efficiently and effectively in
order to produce a profit.
?
ORGANIZATIONAL
CONSIDERATIONS
The organization of foodservice departments
within lodging establishments varies depend-
ing on the type of facility and, in the case of
chain operations, corporate policies. Due to
this degree of variety, categorizing lodging
properties can be difficult. For example, a
property located in a resort environment may
also have extensive convention space. A prop-
erty known primarily as a convention hotel
has room enough to accommodate large
1327.ch06 12/19/05 9:32 AM Page 241
groups. Foodservice outlets likely include
restaurant(s), lounge(s), banquet facilities,
and room service. A resort property provides
all the amenities that focus on guest enter-
tainment and relaxation, with emphasis on
specialty restaurant(s) and room service.
Unique problems may face resort managers
with respect to seasonality of operations, lo-
cation, and layout. The latter points are im-
portant because the property itself, as well as
individual food and beverage outlets, may be
located in hard-to-access areas, which affects
operational expenses.
An example of a resort is the Renaissance
Sea World Resort in Orlando, Florida. David
McKeever, director of restaurant operations,
is responsible for three full-service restau-
rants as well as banquet and conference ser-
vices. David notes that his facilities aim for an
upscale perspective, highlighted by regional
and contemporary menu influences and char-
acterized by upscale wine sales. He identifies
the property clientele as wanting a relaxed
environment in food and beverage services.
Lloyd Wentzell, vice president of food
and beverage, provides a slightly different
view of these services at the Riviera Hotel
and Casino in Las Vegas. He notes that the
food and beverage operation there is an
amenity. The buffet and coffee shop are for in-
house guests, and the (three) gourmet rooms
are for guests including those who come to
the shows at the hotel’s four entertainment
venues. The snack bar in Nickel Town is used
to bring visitors from nearby properties.
Room service is a necessary loss leader used
to maintain resort hotel status.
Airport properties have grown with the
increase in air travel. Quite often, travelers
choose these properties based on the conven-
ience factor. While occupancy rates are high
during weekdays, weekend business tends to
drag. There does not appear to be an empha-
242 Chapter 6 ? Food and Beverage Division
sis on food and beverage operations in such
facilities.
Economy properties are coming off a pe-
riod of significant growth. This is the segment
that often rejects offering foodservice opera-
tions. Midscale brands such as Ramada Inn and
Hampton Inn are noted for their aggressive
growth in building new properties with little or
no food services. Additionally, significant
growth is expected in the lower-tier extended-
stay market. However, some properties are at-
tempting to redefine the concept of value to the
customers. An example is Courtyard by Mar-
riott, which combines comfortable lodging with
downsized foodservice operations. All-suite
properties remain one of the hottest concepts
in the lodging field. While some units contain
kitchen facilities, many offer complimentary
food and beverage services—particularly at
breakfast—for the busy traveler.
The Four Seasons Hotel in Boston
demonstrates one example of how a hotel
food and beverage operation can be organ-
ized. The food and beverage division has four
departments; food preparation, catering sales,
stewarding, and sales outlets. The latter has
five operations: private bars, room service, a
full-service lounge, a fine dining restaurant,
and banquet facilities. Each department has
line employees who report to assistant man-
agers who, in turn, report to department
heads, who then report to a director of restau-
rants and bars, who, in turn, reports to the di-
rector of food and beverages. Regardless of
the size of the lodging facility, food and bev-
erages must be produced and served. How-
ever, the increased size and complexity of
some operations makes it critical that man-
agers communicate well with all levels of em-
ployees. The trend may be toward flatter
organizational structures as well as to com-
pletely separating out certain functions of the
food and beverage area.
1327.ch06 12/19/05 9:32 AM Page 242
?
FOODSERVICE
PERSONNEL
Who are the key people in the organization
of lodging foodservice? Our attention here is
on the operational players, those individuals
most often responsible for the work of pleas-
ing the guest while holding the line on costs.
In most kitchen operations, an executive
chef is responsible for management related to
production activities. Depending on the size
and complexity of the operation, the execu-
tive chef may actually perform little in the
line of food production. In a small operation,
the chef may also be a part owner and per-
form most of the food-related functions. One
of the exciting trends today is the use of big-
name chefs in hotel food services, often al-
lowing them to create a signature room in the
lodging property. The proper positioning of
the restaurant in a niche market can also have
a residual positive effect on average rate and
occupancy. Marketing a celebrity chef as a
primary component of a hotel may yield a
competitive advantage among that specific
hotel’s competitive set.
With the trend toward downsizing opera-
tions, it would be the rare organization in
lodging foodservice that employed numerous
back-of-the-house employees engaged in a
single function. Some examples of the past
might include the sous-chef, the executive
chef’s assistant and often the staff supervisor;
the saucier, or sauce cook; the garde-manger,
the cook in charge of all cold food prepara-
tion; the chef pâtissier, or pastry chef; and the
banquet chef in charge of catering. Each of
these positions would have had assistants. In
addition, other jobs were steward, purchasing
manager, storeroom clerk, and several janito-
rial staff.
Some examples of how lodging foodser-
Section 6.2 ? Managing Food and Beverage Operations in Lodging Organizations 243
vice is organized today have been reported in
studies of best practices. The Boulders, lo-
cated in Arizona, created a food forager posi-
tion to improve quality of products. Menus
are designed around foods actually located,
which saves time spent trying to find ingredi-
ents to fit a menu while providing guests with
a unique dining experience. The Greenbrier,
in West Virginia, designed a formal three-year
culinary apprentice program. This allows the
resort to attract a continuous supply of tal-
ented chefs as well as create a cooking school
for guests (thus adding value to the guest ex-
perience). The Pierre in New York City uti-
lizes an independent consultant to manage
purchasing. This frees the chef to focus on
food production and has led to reduced food
and labor costs.
The dining room can have an equal de-
gree of complexity, depending on the opera-
tion. There may or may not be a supervisor,
often called a host or hostess, or a maître d’.
This individual greets guests and supervises
the waitstaff. At the actual service level are
the captains, servers, bussers, and cashiers. If a
lounge operation is present, so are bartenders
and cocktail servers. As one can readily imag-
ine, working as a team is imperative.
In today’s cost control environment, food
and beverage operations are trimming pay-
rolls and consolidating job responsibilities to
cut operational expenses. This cross-training
of staff allows an individual to take on multi-
ple responsibilities. The Breakers Hotel in
Palm Beach, Florida, utilizes a cross-training
program that allows the property to com-
pletely reorganize its staff annually, facilitat-
ing mobility of staff as well as improved
service to guests. In the past, it was not un-
common for the food and beverage operation
to employ workers around the clock, as most
items were made from scratch. With modern
equipment and the use of more convenience
1327.ch06 12/19/05 9:32 AM Page 243
food items, such as preportioned meats, it is
now rare to find butcher shops or pastry
shops in hotels. Again, hotel operations are
concentrating on quality, value, and cost. If
the property can find a product on the mar-
ket, the trend is to purchase rather than make
from scratch.
There has been increased attention on the
education level of chefs in lodging operations.
In recent years, traditional culinary arts pro-
grams have expanded from two-year to four-
year education programs, while traditional
four-year hospitality institutions have ex-
panded their curricula into culinary arts. Un-
der the direction of the author (when he
served there as department chair), the De-
partment of Food and Beverage Management
in the Harrah College of Hotel Administra-
tion at the University of Nevada, Las Vegas,
was the first four-year hotel administration
degree program to offer a bachelor of science
(B.S.) in culinary arts management. People
who earn this degree can command reward-
ing pay, but much is expected of them as well.
They must be able to produce high-quality
products utilizing minimal resources. They
must also direct all activities in the back of the
house, including the training and supervision
of employees. Their responsibility is the
means by which a food and beverage unit pro-
duces profit for its parent institution, the
lodging facility.
?
OPERATIONAL
INTERACTIONS
Hotels are complex institutions divided into
separate operational areas, among them
rooms, engineering, administrative, account-
ing, human resources, and sales, in addition to
244 Chapter 6 ? Food and Beverage Division
food and beverage. These divisions interact in
every imaginable way 24 hours a day to pro-
duce the guest experience. It is necessary that
the strategy or mission of the operation as a
whole be communicated to all levels of the or-
ganization to ensure a consistent guest expe-
rience. In order to maintain continuity within
the organization, all strategic moves must be
consistent with the mission of the operation
and build toward the long-term goals of
profit, quality, guest satisfaction/loyalty, and
employee retention and growth.
Perhaps the best way to describe this in-
teraction is to characterize food and beverage
and other departments as mutually depend-
ent. Direct interaction can be observed be-
tween food and beverage and the front desk
with respect to specific guest service issues.
Direct interaction can also be observed with
the sales department and the convention/ban-
quet department. Indirect interaction be-
tween departments comes from areas such as
rooms, in the form of overnight cleaning; en-
gineering, in the form of maintenance and re-
pair; and accounting, in the form of financial
analysis. For example, food and beverage
team members must communicate their
reservation needs or restrictions to concierge
and bell staffs. One example is announcing a
new menu that has been initiated, or that a
special activity will occur. Likewise, food and
beverage depends on information submitted
to them regarding occupancy, VIP guests, or
demanding guests.
No matter the type of lodging property, it
is critical for management and staff to meet
regularly to discuss department interaction
and better ways to service the guests. Another
example with a special case to consider is a
casino resort hotel. Historically, food and bev-
erage has been perceived as an amenity for
players. The casino and slot departments are
1327.ch06 12/19/05 9:32 AM Page 244
continually in contact with food and beverage
units, particularly room service, to request
special arrangements for their clients. These
requests might range from amenities being
delivered and set up in the guest room to sup-
plying the gaming area with special foods and
drinks.
The type of client sleeping in the guest
rooms significantly affects the revenue-gener-
ation potential of a lodging food and bever-
age operation. Because a majority of food and
beverage customers may be hotel guests, it is
important to book the right type of people
into the hotel. The sales mix of the hotel is a
delicate balancing act. Sales staff must make
sure they are contracting groups that maxi-
mize hotel revenue per available room
(Revpar). Do you know the utilization rate of
the food and beverage outlets for the various
market segments? Do business travelers eat
more or drink more than the leisure/pleasure
market? Which convention uses the food and
beverage outlets more than others? The ball-
room space must be managed closely to en-
sure that the best business opportunities are
maximized from the rooms and food and bev-
erage perspectives. Groups with high demand
for banquet space must meet room-night ob-
ligations at a given rate and provide the nec-
essary revenue in catering. Local niche
opportunities must be explored when there is
an opportunity to sell the ballroom when ho-
tel guests are not utilizing it. It is possible that
local catering sales can be a larger portion of
the total catering dollars, particularly when
the rooms mix changes to a larger proportion
of transient guests. Your management and
sales staff must know the answers to these
types of questions. Sales personnel cannot just
be concerned with achieving room-night quo-
tas or generating revenue; they must know
the impact of their decisions throughout the
Section 6.2 ? Managing Food and Beverage Operations in Lodging Organizations 245
hotel and how they affect its profitability.
When developing annual budgets, the team
must take into consideration seasonality,
group business and its particular needs, tran-
sient guests, and regional events that may af-
fect guest occupancy and mix.
The food and beverage manager must
know who the customers are and how many
patrons to expect. Information about hotel
guests such as house counts, market mix re-
ports, group commitment reports, and
rival/departure patterns assists the food and
beverage team in making decisions on sched-
uling, food ordering, and whether or not to
close a particular outlet.
Every hotel employee is a sales agent for
the property’s food and beverage outlets. The
staff must be trained to refer and recommend
hotel services to guests. It is clear that the
quality of food and beverage operations can
affect overall hotel operations and profitabil-
ity. Quality is particularly important for con-
vention hotels and resort hotel properties.
Guests come to such properties for specific
purposes. Therefore, a reputation as a high-
quality food and beverage operation will at-
tract customers. These operations generate
word-of-mouth advertising from travel
agents, corporate meeting planners, cab driv-
ers, airline companies, and tourism offices.
While this reputation can attract guests, it is
the responsibility of management to plan ef-
fectively for their needs.
Imagine you run a hotel restaurant, oper-
ate room service, provide food and beverages
for employees, and now are also catering sev-
eral types of meals/functions for different
groups. Recall that the goal of the hotel prop-
erty is to service its clientele. Therefore, each
area of the hotel must complement the other
in providing the service. Managers, particu-
larly in food and beverage, must communicate
1327.ch06 12/19/05 9:32 AM Page 245
effectively and train constantly in order to
maximize the goals of the lodging operation.
?
OPERATING RATIOS
Many operating ratios are utilized by the
food and beverage department. Controlling
operational expenses is perhaps the biggest
challenge facing food and beverage managers.
Managers at every level must be controllers.
In addition, it is the duty of every food and
beverage manager to maximize the revenue
and profit potential of his or her specific unit.
An empty seat cannot be resold later. If a
restaurant has a significant drop in sales on a
given day or time of year, a strategy must be
developed and implemented to fill that void
and thus provide a new revenue source. Most
hotels’ food and beverage operations have a
minimum fixed cost that must be maintained
in order to meet the needs of the hotel.
It is increasingly difficult to make a profit
and provide high-quality service when rev-
enue does not support the labor necessary for
even minimum levels. The challenge is to
maintain a strong revenue flow so that effi-
ciencies of scale take place. The kitchen is the
highest cost producer of any part of the food
and beverage operation. The challenge of the
kitchen manager or chef is to deliver a high-
quality product, yet maintain close controls
on food and labor costs.
The key for success in this area is to have
a clear understanding of production manage-
ment so as to reduce waste and spoilage, cre-
ate dynamic menus that drive business, and
continue to build an ongoing training pro-
gram to instill the best practices into line as-
sociates. In very large establishments, the
kitchen manager or chef may find himself or
herself using a computer more than a knife.
246 Chapter 6 ? Food and Beverage Division
A number of club managers the author
recently spoke with noted that operating ra-
tios are important to keep expenses in
check, as well as to monitor improvements
or income contributions from one area of
the property to another. They identified
food cost and labor cost percentages as most
important. A casino hotel controller from
Las Vegas utilizes operating ratios such as
cost per cover, percentage of sales, cost per
employee, utilization rate (number of cov-
ers/number of guests), revenue per occupied
room, sales per hotel guest, average check,
sales per employee, table turnover, inven-
tory turnover, revenue per square foot, rev-
enue per seat, cost per square foot, return on
investment, covers per employee, average
covers per day, and average sales per day. In-
dustry professionals note that ratios are
only tools and that it is more important to
have a clear idea of what needs to be meas-
ured and the impact of each variable on the
overall operation.
What we can observe is that food and
beverage managers utilize ratios to determine
whether or not they have been successful in
generating revenues and minimizing ex-
penses. Such ratios can then be compared
with figures from prior accounting periods of
that operation. Let us examine some of the
more common ratios.
Food and Beverage Sales per Available
Room
? $
Food and Beverage Occupancy
?Turns
Number of Covers
???
Number of Seats
Total Food and Beverage Sales
????
Number of Available Rooms
1327.ch06 12/19/05 9:32 AM Page 246
Sales per Available Seats
? $
Average Check
? $
Ratio of Beverage Sales to Food Sales
?
Be
F
v
o
e
o
ra
d
g
S
e
a
S
le
a
s
les
?
? 100 ? %
Food Cost Percentage
?
F
F
o
o
o
o
d
d
S
C
a
o
le
st
s
?
? 100 ? %
Labor Cost Percentage
? 100 ? %
Note that costs are usually stated as a per-
centage of sales. These percentages can then
be compared with those of previous time
frames. While the dollar values for costs are
necessary to determine the percentages, it is
difficult to compare dollars to dollars ex-
pended per time period. Measures of revenue
often tell management how much effort food
and beverage staff have expended for the
benefit of the operation. Those ratios combin-
ing food and beverages can be broken down
by category. Note from the comments pro-
vided earlier that ratios utilized vary depend-
ing on the operation. Your goal as manager is
to gain the best information available to assist
you in making decisions.
Individual units, such as catering, room
service, coffee shop, and sit-down restaurants,
Food and Beverage Labor Cost
????
Food and Beverage Sales
Food and Beverage Sales
???
Number of Covers
Food and Beverage Sales
???
Number of Available Seats
Section 6.2 ? Managing Food and Beverage Operations in Lodging Organizations 247
have different as well as similar factors. For
example, average check is common to all,
while a measure of seat turnover applies only
to the coffee shop or the sit-down restaurant.
The accumulation of information should be as
easy as possible for management. The use of
point-of-sale technology enhances this
process. Technology can also be applied to
storeroom management, including inventory
controls and purchasing. Labor management
technology has contributed to attaining opti-
mal staffing guidelines based on forecasts,
group needs, and position qualifications. Use
of the Internet is now a standard tool in mar-
keting strategy, where the guest may book a
reservation directly online. Managers should
not spend all their time determining what the
ratios are or what they mean. Management
should be able to quickly ascertain what has
occurred in the operation and take corrective
action, if necessary.
?
TRENDS IN LODGING
FOODSERVICE
In presenting trends, we must exercise cau-
tion, as what works in one food and beverage
operation may not in another. Recall that the
goal of lodging food and beverage operations
is to meet hotel guests’ desires, with attention
paid to price, value, quality, service, and at-
mosphere. Food and beverage managers are
wise to study similar hotel operations as well
as restaurant operations. Guest surveys are
also essential to determining customer de-
sires. Your objective should be to discover
what customers want and need in terms of
food and beverage products and delivery, and
how your operation can better serve them.
Hilton Hotels has added to its Vacation
Station program. It provides children a canvas
1327.ch06 12/19/05 9:32 AM Page 247
bag with an insulated compartment to hold
lunch or snacks, with a mesh-net drink holder
on the side. Parents can order from a variety
of Snack Pack selections via room service for
pickup later. Radisson Hotels and Resorts
teamed with a culinary school and supplier to
create a low-carbohydrate menu. Sheraton
Hotels has also introduced a Lo-Carb Life-
style program in its restaurants, banquets,
room service, lounges, and to-go snacks.
Holiday Inn Hotels and Resorts is testing
use of a wireless electronic menu that allows
a customer to view a list of options updated in
real time. The consumer can find related nu-
tritional information while searching for in-
formation about the hotel itself. Also in an
experimental phase is their new prototype
restaurant, Kem’s Café, named for founder
Kemmons Wilson. Guests can use the e-menu
to order from a choice of comfort food.
Back at the Breakers Hotel in Palm
Beach, management renovated their existing
formal dining and casual dining restaurants,
developing single-theme outlets to give guests
choice of cuisine rather than choice dictated
by guest attire. This has led to stronger hotel
restaurant identities and an increased capture
rate. Peacock Alley in New York’s Waldorf-
Astoria Hotel replaced appetizers and main
courses with a variety of dishes of in-between
portion sizes and added more wines by the
glass and half-bottle to complement the ex-
panded possibilities of the new menu. This
version of a tasting menu was developed in
response to diners, who kept substituting
dishes from the regular menu.
The concept of branding has also affected
hotel food and beverage operations. For ex-
ample, Country Inns and Suites has co-
branded with established restaurant concepts
(see Chapter 6.5 by Strate and Rappole). The
restaurants average approximately 20 percent
248 Chapter 6 ? Food and Beverage Division
of their business from hotel guests, and this
cooperative arrangement eliminates the capi-
tal cost of building a restaurant on site. Westin
has teamed with established steakhouse chain
operators The Palm and Shula’s Steak House
in its properties. Doubletree also developed
specialty steakhouses, but with their own pro-
prietary concept, Spencer’s.
Another example of branding your own
concept comes from the Riviera Hotel and
Casino. They created Hound Doggies as an out-
let that targets the walking traffic on Las Vegas
Boulevard (the Strip). The location is only a
few steps off the sidewalk and has been suc-
cessful in drawing nonstaying guests into the
property. They implemented this concept only
after studies identified walking traffic as a po-
tential market. The goal for the outlet was quite
basic: Bring people in the door. Through the
use of a 1950s theme, high-quality food, and low
prices, the Riviera has exceeded its expectation
of nonstaying guests. As the unit was not cre-
ated specifically as a revenue-generating cen-
ter, success is measured by its impact in other
areas, such as increased slot play.
Some Four Seasons Hotels and Regent
Hotels and Resorts are promoting the strate-
gic use of a single food and beverage outlet
coordinated with the concept of cuisine
choices. This strategy has resulted in a more
focused approach. In properties where it is
implemented, the strategy has resulted in sig-
nificant capture rates as well as increasing lo-
cal traffic (nonstaying guests).
One of the more exciting trends in lodging
foodservice operations is in hotel beverage
operations, specifically hotel bars. In many
large-city properties, hotel operators have
found such facilities to be considerable mon-
eymakers—as much as 50 percent bar profit
margin. These bar operations are clearly
driven by the youth and vitality of the new In-
1327.ch06 12/19/05 9:32 AM Page 248
ternet, or millennial, generation. The bars are
seen as lively gathering places where business
and personal time merge. Lodging chains are
taking notice of such activity. Starwood pur-
chased a stake in a company that initiated a
popular bar chain. Even the names of the bar
operations reflect a youthful vitality associ-
ated with the location: Whiskey Blue, Skybar,
and Whiskey Rocks. One concern associated
with these bar operations can be their impact
on traditional hotel guests. Many outsourced
bar operations do not extend traditional
amenities to lodging guests, such as billing to
room, preferred seating, and even reserva-
tions. In fact, the clientele of the bar may be
quite different from the hotel guest.
In order for your lodging food and bever-
age operation to succeed, sound marketing
and keen observation of what people want
must accompany high-quality food and ser-
vice. While consumers choose your hotel for
specific reasons, such as price or service, they
seek more creativity in a food and beverage
operation. If you cannot attract the hotel
guest, you will find that attracting clientele
from the local area is also difficult. Quite
likely, each hotel has its own character that
suggests a variation of food and beverage op-
erations in different markets. Management is
wise to remember that a food and beverage
unit in a hotel serves the interests of the hotel
as well as its own.
While some limited-service lodging oper-
ations have entered into cooperative relation-
ships with foodservice companies, the concept
holds significant potential for the appropriate
market. One example is where the hotel’s
foodservice operation is marginal at best. The
lodging property can concentrate its re-
sources on rooms and lease the food and bev-
erage service to an identifiable brand. Hotels
should be aware, though, that restaurant com-
Section 6.2 ? Managing Food and Beverage Operations in Lodging Organizations 249
panies, for example, might not be familiar
with room service or catering. In an extreme
case of moving away from foodservice, some
lodging properties limit services to in-room
minibars and microwaves, with limited food
items available for sale in the gift shop. The
gift shop may even be transformed into a con-
venience store.
We have observed that some properties
sense a rebirth of simplicity in food and bev-
erage operations. A good example is a coffee
shop. Over the last ten years, the coffee shop
concept has been abandoned in favor of
higher-priced dining. But in letting a coffee
shop be a coffee shop, you tap into the con-
sumer’s consciousness of value as well as
menu variety and fast service. While some
find the concept boring, consumers often seek
the comfort of knowing they can get a good
meal at a good price day after day in your
operation.
Room service is also seeing significant
changes. In some properties, the concept of
room service has been eliminated, while in
others it has been revived. For example,
menus are limited to particular concepts, such
as pizza or Asian food. Food items are pack-
aged to appear as though they came from a
freestanding restaurant. In some cases, the
lodging property has an agreement with a lo-
cal restaurant to provide the room service.
Some lodging properties even list the room
service phone number under the name of the
food item (for example, pizza). The key, again,
is to know your clientele. But the move to
simpler menus, accompanied by lower prices,
could bring room service back as a major con-
tributor to overall operations. Some larger
hotel operations are focusing on a tighter
menu and faster service through room ser-
vice. For example, one property has converted
a freight elevator into a mobile kitchen unit,
1327.ch06 12/19/05 9:32 AM Page 249
thereby allowing service delivery within min-
utes of an order. While this option may not be
possible for all hotels, it again points out
knowing what to offer your specific clientele.
Room service has seen a resurgence in certain
lodging properties, primarily as a result of
guest lifestyle. With more adults working and
engaged in active lifestyles, convenience
and accessibility become paramount. Room
service fits the criteria of convenience and
accessibility.
?
CONCLUSION
As you can see from the foregoing discussion,
it can be difficult to pinpoint which trends
may be most important to any individual ho-
tel. What we can say is some lodging proper-
ties, notably chain properties and large-size
properties, seem to be differentiating them-
selves to provide excitement for their food
and beverage clientele. These operations are
essentially reinventing themselves in order to
keep fresh and provide creative food and bev-
erage opportunities for staff and guests. These
operations view foodservice as integral to the
overall success of the lodging operation.
On the other hand, we can also see a
trend toward reduced or even nonexistent
foodservice, primarily in smaller properties
and the lower-end chain lodging properties.
These operations view their business as
strictly lodging and leave foodservice to
someone else, now often a well-known na-
tional brand restaurant.
250 Chapter 6 ? Food and Beverage Division
It should be obvious from reading this
overview that an emphasis on cost control is
likely a key strategy for lodging foodservices.
With increased competition from other food-
service operations, hotels are finding it more
difficult to generate revenues and increase
customer counts. Attention to value and ser-
vice is of significant concern to consumers.
Managers of lodging foodservice must utilize
better control tools, such as sound forecasting
techniques and menu analysis. Banquets,
catering, and room service hold the most po-
tential for profit generation in lodging food-
service. These functions allow management
the best opportunity for accurate forecasting
and staffing. Beverage areas, such as lounges,
continue to be profitable despite a trend to-
ward less alcohol consumption throughout
the population.
The probability of producing profit in ho-
tel restaurants depends on their type and size.
There is no reason why a hotel cannot do
well, but attention to detail is often lacking in
some operations. It is clear that lodging food-
service offers managers unique challenges in
the dynamic world of foodservice manage-
ment. Food and beverage operations may not
be the major focus in a lodging property.
However, they may have significant impact
on the customer’s perception of the quality of
the entire property. Therefore, food and bev-
erage operations in lodging properties can
serve to differentiate top performers in the
crowded lodging market and enhance guest
loyalty for the specific property.
1327.ch06 12/19/05 9:32 AM Page 250
A food and beverage director in a major lodg-
ing property must be ready for a variety of
tasks each and every day. In one sense, this
position requires two different individuals to
keep the operation moving forward. One is
the leader, or strategic visionary, looking
ahead to the future of the operation (that may
be just one or three months, or it could be one
full year out). The other is the day-to-day
manager, constantly moving through the or-
ganization to be sure all events are proceed-
ing according to plan and guests are treated
beyond their expectations.
In this position, I have the responsibility
of overseeing several departments: culinary,
banquets, room service, specialty and theme
restaurants, and all private bars. While an
ideal day is spent on planning, more often
than not I find myself in discussion with staff
or guests. Regular meetings include the fol-
lowing examples:
• (Daily) Banquet Event Orders (BEO)
Meeting. Purpose: To go over BEO for the
day.
• (Weekly) Food and Beverage Meeting.
Purpose: Review operations with depart-
ment managers.
• (Weekly) Executive Meeting. Purpose:
Overview operations with all executive
committee members and the general
manager of the hotel.
• (Weekly) One-on-One Meetings. Purpose:
Meet with individual food and beverage
departmental managers to establish
Section 6.3 ? As I See It: Hotel Director of Food and Beverage 251
goals and cover issues specific to each
department.
• (Monthly) Staff Meeting. Purpose: Re-
view operations by all department man-
agers and general manager of the hotel.
• (Monthly) Employee Recognition Meet-
ing. Purpose: Honor employees of the
month at a luncheon.
To gain a better appreciation of the job of
a director of food and beverage, we should
look at an actual job description. Again, rec-
ognize that all job descriptions are written as
an ideal, and every day brings deviations from
that ideal, given the unique daily circum-
stances found in any dynamic lodging
property.
?
Position: Director of Food
and Beverage
Reports to: General Manager
Objectives:
1. Meet and exceed guests’ needs and ex-
pectations by ensuring proper service
standards, providing quality food and
beverages, and managing all aspects of
operations, resulting in an increasing
guest satisfaction index (GSI) and de-
creasing guest complaints.
2. Provide all guests with the highest quality
food and beverage experience by working
as a team with all food and beverage
6.3 AS I SEE I T: HOTEL DI RECTOR OF
FOOD AND BEVERAGE
Dominic Provenzano
1327.ch06 12/19/05 9:32 AM Page 251
outlets ensuring prompt, courteous, and
professional services, resulting in increas-
ing employee morale, decreasing em-
ployee turnover rates, and lowering
employee service times.
3. Seek profitability in the food and bever-
age department by decreasing all costs,
maximizing sales in all outlets, achieving
budget and profit guidelines, creating pro-
motions, and meeting and/or exceeding
long and short range goals.
Specific Operations Functions:
• Provide the highest quality in food, bev-
erage, and service in all food and bever-
age outlets. Includes at least one daily
walk-through of all food and beverage
areas.
• Maintain existing programs and develop
new programs ensuring the highest qual-
ity of food and service. Consists of daily
talks with all staff and managers, review-
ing plate-ups in different outlets.
• Maintain a high-quality hotel image
through effective housekeeping and sani-
tation in the F&B operation.
• Maintain physical security for all F&B
property and inventories.
• Maintain knowledge of local competition
and current industry trends. Includes
changing menus based on seasonality,
product availability, and input from staff.
Specific Management Functions:
• Direct and coordinate the activities of all
assigned personnel and departmental re-
sponsibilities. Examples are daily contacts
with staff and performance reviews.
• Maximize sales potential through aggres-
sive marketing of each F&B unit. In-
252 Chapter 6 ? Food and Beverage Division
cludes ongoing monitoring of business
levels and review of daily performance.
• Achieve budgeted sales and maximum
profitability.
• Maintain an appropriate level of commu-
nity public affairs involvement.
• Maintain fair wage and salary administra-
tion in the department in accordance with
division policy.
?
Guest Relations
A major part of my job involves maintaining
warm, hospitable guest relations in all guest
contacts and positive employee relations in a
supportive environment. I also try to in-
crease guest satisfaction index scores (our
feedback mechanism) and to lower guest
complaints by ensuring prompt, courteous,
and proper service and surveying guest com-
ment cards to correct negative situations
immediately.
It is also important to ensure that my di-
vision is operating in compliance with all lo-
cal, state, and federal laws and government
regulations. To assure that our guests have a
quality stay, I am also responsible for commu-
nicating effectively within and between de-
partments, ensuring good safety practices of
employees and performing special projects as
requested.
In trying to achieve or exceed budgeted
sales goals, our division management team
constantly seeks ways to operate within bud-
geted guidelines by maintaining effective con-
trols. This includes developing and forecasting
accurate and aggressive long- and short-range
financial objectives and monitoring them
through daily, weekly, monthly, quarterly, and
annual reviews of our performance.
1327.ch06 12/19/05 9:32 AM Page 252
?
General Functions
I am expected to perform special projects as
requested and to maintain a high level of pro-
fessional appearance, demeanor, ethics, and
image of subordinates and myself. Part of our
culture in this hotel concerns professional de-
velopment of staff associates, and it is among
my responsibilities to find ways to provide for
this.
Section 6.4 ? Best Practices in Food and Beverage Management 253
As you can see, the job of a hotel food
and beverage director requires a high-energy
person who loves working with people in a
variety of dynamic situations. The ability to
lead a group of employees in pursuit of oper-
ational goals is paramount. Students should
actively seek experiences in their college ca-
reer that provide opportunity to learn the
skills mentioned in this article.
6.4 BEST PRACTI CES I N FOOD AND
BEVERAGE MANAGEMENT
Judy A. Siguaw and Cathy A. Enz
One critical attribute of successful hotel food
and beverage outlets is their ability to appro-
priately respond to the changing needs of the
market while maintaining a profitable opera-
tion. Yet few hotel food and beverage outlets
excel at this fundamental strategy. Instead,
generic restaurants that provide undistin-
guished menu items and offer guests a poor
value-for-money proposition frequently char-
acterize hotel food service. Such hotel restau-
rants fail to provide menu choices, ambience,
or service desired by the dining-out market
(let alone their guests), and therefore they
frequently operate at a loss. Indeed, some an-
alysts have declared that hotel restaurants by
their nature will lose money (Hanson, 1984).
Recently, as part of a large, comprehen-
sive study on best practices in the United
States lodging industry conducted by Cornell
University’s School of Hotel Administration
(Dubé et al., 1999), we identified a group of
best-practice food and beverage champions
that had developed practices to successfully
accomplish the strategic charge of profitably
meeting customer needs. The champions se-
lected via an intense screening process are
The Boulders, The Breakers, Country Inns &
Suites, Four Seasons & Regent Hotels & Re-
sorts, The Greenbrier, Hyatt Arlington Hotel,
The Pierre, Walt Disney World Resorts and
Theme Parks, The Waldorf-Astoria, and Wynd-
ham Hotels and Resorts (see Table 6.1).
Through their best practices, this select group
demonstrates the capability of executing
the strategic mandate of making money while
responding to the needs of their target mar-
kets through revitalized food and beverage
operations.
In the following pages we first present the
several practices that have been used by our
food and beverage champions to provide
their outlets with a competitive advantage.
We then examine the measures of success and
report the advice our champions give others
on how to prosper with hotel food and bever-
age service.
1327.ch06 12/19/05 9:32 AM Page 253
?
THE BEST PRACTICES
The best practices adopted by our champions
can be broadly categorized into three areas.
One group stresses providing a high-quality
F&B product to their guests (comprising
practices by The Boulders, Country Inns &
Suites, Four Seasons & Regent Hotels & Re-
sorts, The Greenbrier, and Wyndham Hotels
254 Chapter 6 ? Food and Beverage Division
and Resorts). A second group emphasizes the
elements of restaurant concept and design in
their best practices (namely, The Breakers
Hotel, Hyatt Arlington Hotel, and Walt Dis-
ney World Resorts and Theme Parks). Finally,
The Pierre’s and The Waldorf-Astoria’s best
practices focused primarily on controlling
costs and generating additional revenue (see
Table 6.2).
Table 6.1 Overview of Food and Beverage Best-Practice Champions
F&B Champions Practice Initiated, Developed Measure of Success
The Boulders Food forager to improve quality Increased food quality, decreased food cost,
of restaurant offerings decreased waitstaff turnover, and increased prices,
profits, and waitstaff gratuities
The Breakers Single-theme restaurant Increased revenues
concepts
Country Inns & Cobranding of hotel and Increased customer satisfaction, reduced hotel
Suites brand-name restaurant capital cost (from not building a hotel restaurant),
increased lunch and dinner business
Four Seasons & Single dining venue with broad Boosted capture rate of hotel guests; increased
Regent Hotels & cuisine choices (and two dining local patronage, labor cost savings
Resorts rooms)
The Greenbrier Establishing resort as a center Maintained occupancy and reputation, retained
for culinary excellence, including skilled kitchen staff, increased off-season
a culinary-apprentice program business
Hyatt Arlington Reconceptualization and Doubled revenues and cover counts, received
Hotel redesign of dated dining room, rave reviews
sports bar, and lobby lounge
The Pierre Independent consultant made Decreased food and kitchen labor costs, reduced
responsible for food purchases number of vendors
(with preferred-vendor program)
The Waldorf-Astoria Applying revenue-management Doubled cover counts, increased effectiveness of
practices in all F&B outlets F&B marketing, improved customer satisfaction
(plus staff training)
Walt Disney World Restaurants designed to provide Achieved high customer satisfaction and
Resorts and Theme a touchable experience return rate
Parks
Wyndham Hotels Upgrade of organization’s food Achieved higher average checks, increased staff
and Resorts and beverage culture earnings and retention, increased total sales,
wine sales, and profits
1327.ch06 12/19/05 9:32 AM Page 254
Section 6.4 ? Best Practices in Food and Beverage Management 255
Table 6.2 Food and Beverage Best-Practices Cases, Descriptions, Implementation,
Contact People
F&B Champion, Method of
Title of Case Description of Case Implementation Contact Person
The Boulders Created position of food Forager first focused on Gray Ferguson,
Food Forager to Improve forager to obtain the best buying the highest-quality food and beverage director
Quality in F&B fresh products, allowing produce only within the
creativity in the kitchen. state of Arizona, where the 602-488-9009
resort is located. Later, the Fax: 602-595-4664
forager broadened the
search and expanded the
number of items sought.
Forager hotline keeps all
F&B outlets apprised of
incoming supplies. Menus
are restructured around the
products the forager finds.
The Breakers Replaced formal dining Transformed old-fashioned Joanne Schultz,
Annual Food and and casual dining formal dining room into a director of food and
Beverage Staff restaurants and bars with modern, Florentine beverage
Reorganization and single-theme outlets to give restaurant; casual restaurant
Single-theme Restaurant the guest the choice of the into a top-caliber steak- 561-659-8434
Concepts cuisine desired rather that house; main bar into an Fax: 561-659-8452
the choice dictated by oceanside restaurant; and
guest attire. a Victorian restaurant into
a southern Italian pasta
house; plus opened a
French Riviera–style
restaurant.
Country Inns and Suites Developed cobranding Seeks an “A” location that Paul Kirwin,
Successful Cobranding strategy to locate Country provides visibility, president
with Established Inns and Suites adjacent to convenience, high traffic
Restaurant Concepts (co-owned) T.G.I. Friday’s count, and proximity to 612-212-1326
or Italiani’s. dense residential areas for Fax: 612-212-1338
the restaurant. Positions
restaurant at forefront of
property.
1327.ch06 12/19/05 9:32 AM Page 255
Table 6.2 (Continued)
F&B Champion, Method of
Title of Case Description of Case Implementation Contact Person
Four Seasons and Regent Uses only one F&B outlet Single outlet allows for a Alfons Konrad,
Informal Dining Venue with two dining rooms. focused approach for senior vice president,
and Alternative Cuisine Provides cuisine choices of improving food quality and food and beverage
Alternative Cuisine, presentation, grasp of small
homestyle, and vegetarian details, and delivering of 416-441-4306
options. higher service levels due to Fax: 416-441-4381
small, qualified staff.
Alternative cuisine was
developed in response to a
need for healthier items,
homestyle cuisine was
added for frequent travelers
who were tired of traditional
restaurant food, and
vegetarian was added due
to increased trend of
vegetarianism among
guests.
The Greenbrier Instituting a formal Established relationships Rod Stoner,
Programs Establishing the culinary apprentice program, with principal culinary vice president of food and
Resort as a Center for a culinary school for guests, schools in the United States. beverage
Culinary Excellence conferences and seminars Opened formal three-year
with food critics and writers, apprentice program to 304-536-1110
and a high school culinary- graduates of two-year Fax: 304-536-7860
training program. Also culinary schools or
publishes The Greenbrier individuals with equivalent
Cookbook and sends experience. Successful
newsletters to 600,000 applicants work in all areas
guests. of the hotel’s kitchens and
attend formal classes.
Promises permanent
employment to applicants
from local high school.
Hyatt Arlington Hotel Dated dining room, sports Comprehensive research George Vizer,
Redesigning and bar, and lobby lounge were and analysis indicated likely general manager
Revitalizing a Food and reconceptualized into success of a fusion of
Beverage Outlet Mediterranean cuisine contemporary and 703-525-1234
restaurant. Mediterranean themes. Fax: 703-875-3298
Floor-to-ceiling windows
replaced one side of
building, and martini bar
complemented redesigned
restaurant.
256
1327.ch06 12/19/05 9:32 AM Page 256
Section 6.4 ? Best Practices in Food and Beverage Management 257
Table 6.2 (Continued)
F&B Champion, Method of
Title of Case Description of Case Implementation Contact Person
The Pierre Has given financial The consultant and . Franz Klampfer,
F&B Cost-Plus responsibility for food executive chef write executive chef
Purchasing Agreements purchasing to an specifications for food
independent consultant. products; consultant 212-838-2000
negotiates contracts with a Fax: 212-826-0319
single vendor in each food
category on a percentage
markup basis. Consultant
audits the vendors’ books
annually.
The Waldorf-Astoria Instituted revenue Each unit developed a plan Christophe Le Chatton,
Revenue Maximization for management for all food to increase revenue and director of food and
the Food and Beverage and beverage outlets, profitability, with a focus beverage
Department scheduled staff more on reducing labor costs.
efficiently, and repositioned Matched staffing levels with 212-355-3000, ext. 4804
outlets to attract non-hotel expected volume of business. Fax: 212-872-7272
markets. Trained line staff to ensure
the highest level of service.
Walt Disney World A touchable dining Theme restaurants are Dieter Hannig,
Providing a Touchable experience is provided via designed to be as authentic vice president of
Dining Experience the atmosphere and the as possible in the decor, food and beverage
food to transport guests to menu, beverages, and
another setting, another service. Line-level 407-566-5800
country, or another culture employees are empowered Fax: 407-560-9131
while they dine. to make decisions with
respect to service recovery.
Wyndham Created “Best of Class” Reengineered menus and Patrick Colombo,
An Integrated Approach program to upgrade the recipes; reconceptualized vice president of
to Food and Beverage food and beverage culture. restaurants; modified dining food and beverage
rooms and introduced concepts
exhibition kitchens;
upgraded tabletops and 214-863-1000
uniforms, and china, glass, Fax: 214-863-1665
silver, and specialty
merchandise; developed
seasonal F&B festivals and
promotions; promoted F&B
1327.ch06 12/19/05 9:32 AM Page 257
?
FOCUS ON PRODUCT
QUALITY
The problem for The Boulders was that the
variety and quality of the produce it was ob-
taining were not up to the resort’s high stan-
dards. As a result, the food and beverage
department’s culinary passion seemed to be
declining along with the quality of the food
ingredients. The resort’s management re-
sponded by creating the position of food for-
ager, who initially focused on buying
high-quality produce locally (i.e., in Arizona).
Later, though, the forager traveled farther
afield and took on the additional responsibil-
258 Chapter 6 ? Food and Beverage Division
ities of purchasing spices, shellfish, cheeses,
and meats. To keep the kitchen apprised of
what items are coming, the forager uses a hot-
line to report expected delivery dates and ex-
penditures. The Boulders’ chefs then adjust
menus based on the incoming items. Conse-
quently, the food ingredients are of the high-
est quality, and the chefs have the chance to
experiment with a continuously changing
menu.
Also seeking to instill a passion for food
and beverage, Wyndham Hotels and Resorts
designed its “Best of Class” program, with the
overall objective of making Wyndham a
leader in food and beverage innovation, qual-
ity, and service. The Best of Class was a wide-
Table 6.2 (Continued)
F&B Champion, Method of
Title of Case Description of Case Implementation Contact Person
products within the hotels;
recruited culinary talent;
obtained unique product
from vendors; implemented
wine-by-the-glass program;
developed server-training
program emphasizing
product knowledge and
upselling; implemented
waitstaff incentive programs;
and reinvented room
service standard operating
procedures.
Note: The case titles correspond to the cases written on each champion in: Laurette Dubé, Cathy
A. Enz, Leo M. Renaghan, and Judy A. Siguaw, American Lodging Excellence: The Key to Best
Practices in the U.S. Lodging Industry (Washington, D.C.: American Express and the American
Hotel Foundation, 1999).
1327.ch06 12/19/05 9:32 AM Page 258
ranging effort that involved both sides of the
house. The chain:
1. Reengineered menus and recipes.
2. Reconceptualized its restaurants.
3. Modified dining rooms and introduced
display kitchens.
4. Upgraded tabletops, waitstaff uniforms,
china, glass, silver, and specialty merchan-
dising pieces.
5. Developed seasonal food festivals and
beverage promotions.
6. Promoted F&B products within the
hotels.
7. Recruited outstanding culinary talent.
8. Collaborated with food vendors to obtain
distinctive products and with wine ven-
dors to upgrade wine lists and conduct
tastings.
9. Implemented a wine-by-the-glass pro-
gram using premium varietals with high
brand awareness.
10. Developed a server training program that
emphasizes product knowledge and up-
selling techniques.
11. Implemented incentive programs de-
signed to motivate servers to become bet-
ter educated about food and wines being
served.
12. Reinvented room service procedures by
providing training in proper service eti-
quette, modifying training videos and
manuals, and upgrading equipment.
13. Revised in-house marketing materials,
such as menus and in-room directories.
To deliver high-quality food and beverage
products to its guests, Country Inns & Suites
chose to develop a cobranding strategy with
Section 6.4 ? Best Practices in Food and Beverage Management 259
restaurant brands that are co-owned by Carl-
son but freestanding, primarily T.G.I. Friday’s
or Italiani’s. This practice ensures the guest
access to a high-quality, brand-name restau-
rant on site, but it eliminates the capital cost
of building a generic restaurant in the hotel.
While the core concept of locating a limited-
service hotel adjacent to a restaurant is not
new, Carlson’s approach to the strategy is in-
novative, since it owns all the brands (another
brand that expressly pursued a strategy of lo-
cating next to restaurants in the 1980s was
Days Inns). To implement this cobranding
strategy, Carlson seeks a large, “A” location
that will support the restaurant, which is built
at the forefront of the property for visibility.
Both the restaurant and hotel benefit from
this arrangement.
The goal of Four Seasons hotels is to be
rated as having one of a given city’s top three
restaurants. To achieve this goal the chain of-
fers a single restaurant in its hotels—but that
restaurant has two dining rooms, one more
formal and one less formal. Thus, with a single
F&B outlet the hotel can offer two dining
rooms that differ in design, but that share the
same menu, chefs, line cooks, and kitchens.
Compared to having multiple outlets, this ap-
proach allows its F&B staff members to pro-
vide greater attention to food quality and
presentation, to focus on small details, and to
deliver higher service levels via a small, highly
qualified staff. In response to guests’ stated
desire for alternatives to a heavy, meat-based
cuisine, Four Seasons has broadened its menu
choices to include its trademark Alternative
Cuisine, comprising a nutritionally balanced
menu of alternative meals, vegetarian dishes,
and homestyle preparations. Alternative Cui-
sine items are low in fat, cholesterol, sodium,
and calories to correspond with guests’
1327.ch06 12/19/05 9:32 AM Page 259
greater interest in health and fitness. Simi-
larly, vegetarian recipes have been added to
the menu in response to an increased trend of
vegetarianism among guests. Homestyle
recipes, on the other hand, are just what the
name implies: they have been developed from
the chefs’ favorite family recipes. The latter
cuisine choice suits travel-weary guests who
wish for a homecooked meal.
The Greenbrier has instituted several
practices to establish itself as a center for
culinary excellence. The resort had to address
two major problems, both of which stemmed
from its remote location. First, for a time the
resort was having difficulty attracting and
retaining experienced culinary personnel.
To end a constant cycle of recruiting and
training workers and to improve the food
product being offered to guests, The Green-
brier established a three-year culinary-
apprenticeship program. The resort recruits
candidates from principal culinary schools in
the United States to complete an apprentice-
ship in all areas of the kitchens, as well as at-
tend classes. Because the program runs for
three years, the apprenticeship has helped to
stabilize the kitchen staff. Further stability
comes from an agreement with the local high
school by which the resort will provide per-
manent employment to interested students.
The second problem is attracting guests dur-
ing shoulder and off-season times. Continu-
ing with its theme of culinary education, The
Greenbrier established cooking classes for
guests and promoted symposiums conducted
by food critics and writers. The Greenbrier is-
sues a quarterly newsletter to 600,000 guests
and has published The Greenbrier Cookbook
to further identify the resort as a culinary
center—and to remain in contact with poten-
tial guests.
260 Chapter 6 ? Food and Beverage Division
?
RESTAURANT DESIGN
AND
CONCEPTUALIZATION
The common thread of the following cases
that feature restaurant redesign is that the ex-
isting restaurants were operated in a func-
tionally competent fashion. They had lost
their competitive spark, however (or stood in
danger of doing so), because of changes in
guests’ preferences. In response, operators
took a lead from freestanding restaurants and
focused tightly on customers’ current wishes
for theme-based casual dining.
The Breakers recognized that the public
has long had an aversion to hotel restaurants,
which stems from the days when hotel restau-
rants tried to have some of every variety of
food they thought a guest might desire—none
of it particularly distinguished and all of it
seemingly overpriced. In response to guests’
negative feelings about hotel restaurants,
many hotels have dropped food service en-
tirely, but this option is not open to a five-star
hotel or resort. Instead, The Breakers chose
to create its own strong restaurant identities
through single-theme outlets that replaced
the resort’s existing formal- and casual-dining
restaurants and bars. The practice not only
helped The Breakers change the public per-
ception of hotel restaurants, but it allowed
guests to choose their cuisine according to
what they wanted to eat, rather than what
they wanted to wear. Thus, the resort’s old-
fashioned formal dining room became a mod-
ern, Florentine-style gourmet restaurant. The
owners converted the former casual dining
room to a top-caliber steak house—with am-
bience to match. Perhaps most strikingly, the
resort converted its main bar and lounge,
1327.ch06 12/19/05 9:32 AM Page 260
which had virtually no business during the
day, to a beautiful ocean-side seafood restau-
rant. The former Victorian restaurant became
a Southern Italian–style pasta house, and the
Beach Club was converted to a French Riv-
iera–style restaurant. Thus, the resort now has
five restaurants that feature their own distinc-
tive decor and ambience, without a loss in
food quality.
The food and beverage outlets of the Hy-
att Arlington Hotel similarly had lost their
customer appeal because of their dated con-
cept and design. After the hotel undertook a
comprehensive market-research study, the
hotel’s managers selected a restaurant theme
that blends contemporary (postmodern) and
Mediterranean concepts. In developing the
new theme, the hotel replaced the restau-
rant’s outer wall with floor-to-ceiling windows
to transform the previously dark and unimag-
inative restaurant into a sun-drenched venue
splashed with the Mediterranean’s vivid col-
ors. To complement the new restaurant, the
hotel installed a quintessential martini bar.
Walt Disney World Resorts and Theme
Parks has long recognized the value of themes
to a guest’s experience—not only in its parks,
but also in its many restaurants. Conse-
quently, WDW set out to create a “touchable”
foodservice experience for the guest that
combines design, decor, ambience, food, ser-
vice, and entertainment in such a way as to
stimulate all of the senses, not just the palate.
The idea is to “offer a personal experience
which is highly customized, memorable, and
judged by our guests to be worth the price,”
remarked Dieter Hannig, vice president of
F&B.
With more than 500 theme food-and-
beverage outlets, WDW’s managers realized
that a restaurant’s design is crucial to provid-
Section 6.4 ? Best Practices in Food and Beverage Management 261
ing the “touchable” experience for the guest.
Each restaurant is designed to be as themati-
cally authentic as possible so that all elements
of the physical facility and operations com-
bine to transport the guest to another setting,
country, or culture. The dining adventure is in-
tended to produce the feelings, tastes, sounds,
and excitement the guest would experience at
the actual locale being replicated. Access to
the restaurants is designed to be easy and un-
complicated. Accordingly, many restaurants
are freestanding so that guests do not have to
walk into hotel lobbies or down corridors.
Further, line-level employees are empowered
to make decisions to improve service recov-
ery and ensure a great dining experience for
the guest.
?
CONTROLLING COSTS
Our last two champions focused on costs and
revenues in the food and beverage arena. The
Pierre focused on upgrading its restaurant’s
purchasing function—that is, setting specifica-
tions, selecting vendors, obtaining best prices,
and monitoring receiving. However, The
Pierre’s management was concerned that con-
trolling purchasing activities would divert the
executive chef’s attention from the kitchen’s
culinary creations. To allow the executive chef
to focus on the menu the hotel delegated fi-
nancial responsibility for food purchasing to
an independent consultant, who worked with
the chefs to develop specifications for all food
products. The consultant analyzes available
foodstuffs and may recommend changing
specifications if a less expensive item can be
substituted without comprising quality or
when off-site preparation would be equally
good but less expensive than preparing the
1327.ch06 12/19/05 9:32 AM Page 261
food item on site. The consultant also trained
kitchen employees to adhere to strict receiv-
ing standards. Most important to cost control,
the consultant negotiated contracts with each
vendor specifying that the vendor would earn
a given percentage profit over its cost. (Some
existing vendors may have blanched at this
proposal, but most signed on to keep the ho-
tel’s business.) To ensure that costs are in line
and that vendors are fulfilling their agree-
ments, the consultant regularly audits inven-
tory and cost lists from each vendor and
annually audits the vendors’ books to verify
that the vendors are accurately stating the
cost of each item.
The Waldorf-Astoria’s management also
believed that the revenue potential of the ho-
tel’s foodservice operations was not being
achieved, but they looked beyond cost con-
trols. Instead, the hotel took several steps to
boost F&B revenue—instituting a revenue
management program, implementing cost-
cutting measures, training chefs to schedule
employees more efficiently, and repositioning
F&B outlets to attract guests from outside the
hotel. The hotel created a marketing position
to coordinate the marketing efforts of all food
and beverage units and to help implement
revenue-maximization efforts. Service recov-
ery systems were improved. The hotel trained
line employees on wines to improve their ef-
forts in selling and serving wines. A new
restaurant reservations system was intro-
duced to improve dining-room use, cut tele-
phone use in restaurants, and improve
communication with guests. Lastly, a dining-
out program, which allowed servers and
kitchen employees to dine in various Waldorf-
Astoria restaurants, generated many ideas for
improvement and created an increased
awareness of food and service quality.
262 Chapter 6 ? Food and Beverage Division
?
SUCCESS OF THE
PRACTICES
The success of these practices can be gauged
by various indices, depending on the practice.
The food forager program at The Boulders,
for instance, improved the quality of the food
and lowered food costs. With new and inter-
esting foodstuffs, the chefs have developed
distinctive menus that allowed price in-
creases—boosting average checks and profits.
As a result of the increased average check,
waitstaff gratuities are higher and employee
turnover has been reduced. The resort also
implemented menu meetings in which chefs
explain their creations to servers. Chefs are
once again passionate about their creations,
and the meetings have created a greater rap-
port between the front and back of the house.
Wyndham’s “Best of Class” program also
reenergized the chain’s F&B culture—result-
ing in a 15 percent increase in total sales and
a 40 percent increase in wine sales. Since costs
were controlled as part of the program, the
hotels enjoy a 55 percent profit flow-through
on the newly generated revenue. As at The
Boulders, Wyndham’s higher average checks
have increased staff earnings and improved
retention. In addition, the promotion of high-
quality food has upgraded the chain’s overall
image.
At The Breakers the new theme restau-
rants have increased F&B revenue by 70 per-
cent over the last four years, with much of the
growth being fueled by the substantial
amount of local business attracted by the new
outlets. Likewise, the Hyatt Arlington Hotel
has doubled cover counts and revenues since
its restaurant renovation, and the restaurant
receives rave reviews.
1327.ch06 12/19/05 9:32 AM Page 262
One of many reasons that guests choose
to stay at The Greenbrier is its excellent culi-
nary reputation. Thus, its reputation as a cen-
ter for culinary excellence plays an important
role in maintaining guestroom occupancy. The
ability of Walt Disney World Resorts and
Theme Parks restaurants to provide a “touch-
able” dining experience contributes signifi-
cantly to WDW’s profitability. Furthermore,
both the number of return guests and per-
centage of satisfied customers are high—and
several WDW restaurants have won awards in
recent years (see sidebar).
The Country Inns & Suites cobranding
strategy has been a winning situation both for
Section 6.4 ? Best Practices in Food and Beverage Management 263
the hotels and for guests. For guests, having a
popular brand-name restaurant adjacent to
the hotel ensures that their dining needs will
be satisfied. For the restaurant, the hotel
guests account for 15 to 20 percent of its busi-
ness. For the hotel, the proximity of a name-
brand restaurant is an amenity that can
encourage guests to book a room.
By using an independent consultant to
negotiate with vendors and to monitor the
F&B purchasing function, The Pierre was able
to reduce food costs by approximately 5 per-
cent and kitchen labor costs by 2 percent. In
addition, the number of vendors used has de-
creased, resulting in greater efficiency for the
WALT DISNEY WORLD’S F&B AWARDS: A SAMPLING
Since 1989, Walt Disney World proper-
ties have earned more than 100 food and
beverage awards. Listed below is a represen-
tative sample of those honors.
• “Award of Excellence” (1999), from
Wine Spectator magazine, awarded to Victo-
ria & Albert’s.
• “Best Wine and Spirits Restaurant of
the Year” (1999), from Santé magazine,
awarded to California Grill.
• One of the “Top Ten Sports Bars in
the Country” (1998), from USA Today, and
one of the “Top Five Sports Bars in the
Country” (1998), from Men’s Health, both
honors awarded to ESPN Club.
• “Best Kid’s Menu” (1998, Readers’
Choice Foodie Awards), from Orlando Sen-
tinel, awarded to Chef Mickey’s.
• Among the “Best New Restaurants”
(1998), from Esquire, awarded to Citricos.
• “Best Cover” (1998), from Restaurant
Forum, awarded to Flying Fish Cafe.
• “Restaurant Wine Award” (1995),
from Wine Enthusiast, awarded to Artist
Point.
• “Most Imaginative” (1993), from the
National Restaurant Association, awarded
to Grand Floridian Café.
• “America’s Best Bar Menu” (1993),
from Cheers magazine, awarded to Crew’s
Cup Lounge.
• “Top of the Table” (1991, first place),
from Restaurant Hospitality magazine, one
each awarded to Beaches and Cream Soda
Shop and the Yacht Club Galley.
1327.ch06 12/19/05 9:32 AM Page 263
hotel. Finally, The Waldorf-Astoria’s revenue
maximization strategy improved cover counts
by a staggering 100 percent, while increasing
wine sales and guest satisfaction.
?
INSIGHTS
Our food and beverage champions offer the
following advice and observations to man-
agers seeking to implement similar programs:
1. The foundation for successful implemen-
tation is meeting challenges with enthusi-
asm and passion.
2. Some practices, such as food purchasing
by an independent consultant, may not be
warmly received by staff or vendors, but
the commitment of upper management
and a demonstration of benefits will help
gain acceptance.
3. Those practices that require constant
adaptation (like the food forager) will not
work in a rigidly structured organization.
4. Cobranding strategies are suitable only
when the hotels are partnered with
restaurants that are targeting the same
market segment.
5. Hotel F&B outlets’ development must in-
corporate the guest’s total experience
(and focus on competing with freestand-
ing restaurants).
6. Resources must be focused on a relentless
commitment to food and beverage consis-
tency, even when business is slow.
264 Chapter 6 ? Food and Beverage Division
?
PROFITABLE AND VITAL
Contrary to much conventional wisdom, the
experience of these F&B champions shows
that hotel restaurants can not only turn a
profit but can contribute greatly to the hotel’s
overall competitive position. We note, how-
ever, that virtually all the F&B champions are
operating in the upscale, deluxe, and resort
segments of the lodging industry. While many
hotel restaurants at all levels struggle to turn
a profit, the actions of our champions indicate
that focusing on guests’ needs can radically
reverse the downward trend of hotel restau-
rants. As Rod Stoner, vice president of food
and beverage at The Greenbrier, pointed out,
managers must stay abreast of industry
trends, study the programs of other proper-
ties, and seek distinctive ideas for adaptation
to their own hotels. This overview of best
practices in food and beverage champions
provides a starting point for what Stoner sug-
gests. We hope that those managers seeking to
revitalize or maximize the revenue potentials
of their F&B operations will carefully exam-
ine the practices discussed here and will con-
tinue their progress by also investigating the
practices of other properties and other in-
dustries. As a result, forward-thinking man-
agers will be able to identify those best
practices that will serve as the catalyst for im-
proving customer satisfaction and financial
performance.
1327.ch06 12/19/05 9:32 AM Page 264
Over the years hotel restaurants have often
been managed as a secondary function of the
hotel—that is, as a costly amenity rather than
a revenue center. In part because of the high
cost structure of hotel restaurants, which
means high prices relative to other restau-
rants, they developed among potential cus-
tomers a reputation for being a poor value,
offering indifferent service and inferior food.
Today, however, many hotel companies are
rethinking how to integrate food and bever-
age services into lodging facilities. In the
process of doing so, hotel owners and opera-
tors are asking at least four key questions
about their property-level F&B service.
• What are the hotel customers’ food and
beverage needs and expectations?
• Which food and beverage concept best
aligns with the positioning of the hotel?
• Would converting the hotel’s restaurant
to a brand-name restaurant concept im-
prove the property’s overall bottom line?
• Would turning to a brand-name F&B op-
eration give the property a competitive
edge?
Two results of owners’ and operators’
new focus on hotel food service are that (1)
innovative hotel F&B concepts are being cre-
ated, and (2) strategic alliances are being es-
tablished between well-known brand-name
hotel and restaurant companies.
The primary focus of this article is to an-
swer the four questions stated above and pro-
vide the basic decision-making framework for
Section 6.5 ? Strategic Alliances Between Hotels and Restaurants 265
matching the correct F&B concept to the target
market for which the hotel has been posi-
tioned. We will identify key criteria for estab-
lishing a seamless partnership between the
hotel and the restaurant. The results of such a
marriage should be an improved property im-
age overall, enhanced customer value, in-
creased revenues, and a competitive edge. The
following four main topics will be addressed:
• The value of a brand-name partner
• Existing hotel-and-restaurant alliances
• A description of Bristol Hotel Company’s
alliance with Good Eats Grill (including
critical-decision elements)
• Future trends
?
ALLIANCES
Developing alliances between brand-name
hotel and restaurant companies is not a new
business strategy, but it does seem that this
approach is currently being used more fre-
quently than ever to help companies maxi-
mize their profit potential (Lodging,
September 1995). There are at least five rea-
sons for this. An alliance may:
1. Create financial benefits.
2. Provide customers with greater value.
3. Improve a property’s overall image.
4. Strengthen an operation’s competitive
position.
5. Create operational advantages.
6.5 STRATEGI C AL L I ANCES BETWEEN
HOTEL S AND RESTAURANTS
Robert W. Strate and Clinton L. Rappole
1327.ch06 12/19/05 9:32 AM Page 265
One of the first branded restaurant con-
cepts to operate in hotels was probably Trader
Vic’s, founded by Victor Bergen in 1937. By
1949 Western Hotels (which became Westin)
integrated Trader Vic’s into 13 hotel-based
restaurants in nine countries (Withiam, 1995a,
14). Other chains also hosted the restaurants
and today, 60 years later, Trader Vic’s still op-
erates in such hotels as the Beverly Hilton,
the Palmer House (Chicago), the Marriott
Royal Garden Riverside (Bangkok), and the
New Otani properties in Tokyo and Singa-
pore. Ruth’s Chris Steakhouse is another
example of a popular restaurant brand oper-
ating successfully in unison with hotels, in-
cluding properties operated by Hilton,
Marriott, Holiday Inn, and Westin.
Despite the evidence of successful al-
266 Chapter 6 ? Food and Beverage Division
liances between brand-name hotel and
restaurant companies, most hotel companies
manage their own food and beverage services,
including those that also host Trader Vic’s. In
part that approach reflects the long industry
tradition of offering travelers both food and
lodging. The Marriott Corporation is a good
example of a hotel company that has used this
strategy of going it alone. John Randall, Mar-
riott senior director of food and beverage
concepts, states that it is Marriott’s primary
strategy to “completely manage our own
F&B services to provide food, service, and
quality consistency from property to prop-
erty” (Hensdill, 1996).
The strategy of developing their own
F&B concepts has not been successful for all
hotel companies. This is evident from the fre-
Table 6.3 Hotel and Restaurant Company Strategic Alliances
Hotel Companies Restaurant Companies
Holiday Inn Worldwide Damon’s, Denny’s, Ruth’s Chris Steakhouse, T.G.I. Friday’s, Convenience
Courts (Mrs. Fields, Little Caesars, Blimpies, Taco John’s, Sara Lee)
Doubletree Hotel Corporation New York Restaurant Group (Park Avenue Café, Mrs. Parks Café)
Marriott Hotels Ruth’s Chris Steakhouse, Studebakers, Benihana, Trader Vic’s, Pizza Hut
Hilton Hotels Trader Vic’s, Benihana, Ruth’s Chris Steakhouse, Damon’s
Four Seasons Bice Ristorante
Choice Hotels Picks Food Courts, Pizza Hut
Promus Corporation Grace Services, T.G.I. Friday’s, Olive Garden, Pizza Hut
Radisson Hospitality Worldwide* Carlson Hospitality* (T.G.I. Friday’s, Country Kitchen), Damon’s
*The relationship between Radisson Hospitality Worldwide and Carlson Hospitality is not an
alliance per se but rather an example of a hotel company that owns and has vertically integrated
both its lodging and foodservice products into one corporation.
Sources: See “Restaurant Chains Partner with Hotels to Satisfy Different Needs, Tastes,” Lodging, September 1995,
pp. 1, 8–9; “Holiday Inn Offers Assorted Food Options with New Quick Food Concept,” Hotel Business, June 1996,
p. 9; “Holiday Inn Offers Convenience Court Concept,” Nation’s Restaurant News, May 1996, p. 208; Frank H.
Andorka, “High Recognition Restaurants,” Hotel & Motel Management, November 1995, pp. 43–44; Cherie Hensdill,
“Partnerships in Dining,” Hotels, February 1996, pp. 57–60; Judy Liberson, “A Working Marriage,” Lodging, February
1996, pp. 63–66; and Madelin Wexler, “Partnerships That Pay Off,” Hotels, May 1995, pp. 47–50.
1327.ch06 12/19/05 9:32 AM Page 266
quent “reconcepting” found among hotel
restaurants. A hotel might run a lounge one
year, convert it into a brasserie the next year,
and later decide to make it a grill. The end re-
sult is inconsistency in F&B service and qual-
ity, and therefore low sales and profits
(Parseghian, 1996). Several factors may con-
tribute to a general manager’s believing that
she or he can operate the hotel’s restaurant
services better than a branded restaurant
company, not the least of which may be a
sense of self-assurance. Some hotel general
managers want to prove that they can provide
a fine-dining experience whether or not a
market actually exists. Others say it is because
some hotel F&B operations continue to try to
be all things to all people rather than provid-
ing a product that is affordable and matches
customer expectations (Wolff, 1995, 24).
Moreover, hotel restaurants in general have a
high cost structure relative to the freestand-
ing F&B operation down the street. Hotel
restaurants have to contribute to the overall
property’s expenses while the restaurant next
door has little capital expense and is probably
just leasing square footage.
A current trend among hotels that have
reevaluated their F&B operations is to re-
place the formal fine-dining, white-tablecloth
concept with a more casual and relaxed din-
ing experience (Allen, 1996; Liberson, 1996).
Another trend indicates that more and more
hotel companies are looking to establish
strategic alliances with brand-name restau-
rant companies. Doing this has allowed hotel
companies to focus on managing the hotel it-
self. Listed in Table 6.3 are examples of strate-
gic alliances between hotel and restaurant
companies. These examples illustrate that
some of the largest hotel companies have al-
ready established strategic alliances with ma-
jor restaurant chains.
Section 6.5 ? Strategic Alliances Between Hotels and Restaurants 267
?
BRISTOL AND GOOD
EATS GRILL
To comprehend fully the rationale and ad-
vantages of a hotel’s decision to turn to a
brand-name restaurant for the hotel’s food-
service, we analyzed the Bristol Hotel Com-
pany’s decision to match two of their hotels
with Good Eats Grill (Withiam, 1995b, 13).
Before creating the alliance with Good Eats
Grill, the Bristol Hotel Company’s primary
F&B strategy was to use its own internally de-
veloped restaurant brands. This is a strategy
that has worked well for Bristol—for exam-
ple, eight outlets produced 32.4 percent F&B
profit margins in 1995, and 20 out of 22 Bris-
tol hotel-restaurants continue to use their
own internally developed restaurant brands.
Despite the success of Bristol’s own F&B
operations, the firm decided to link two of its
properties (Holiday Inns in Jackson, Missis-
sippi, and Houston, Texas) with a franchised
restaurant brand called Good Eats Grill—a
concept developed by Gene Street, who also
developed the Black Eyed Pea and Dixie
House restaurant brands. We wondered why
Bristol deviated from its successful formula,
and so we decided to investigate why the Bris-
tol Hotel Company elected to team with
Good Eats Grill. We narrowed our focus and
analysis even further by evaluating just the
Houston property using interviews of the
principals involved.
We asked executives from both Bristol
and Good Eats Grill 70 questions in all, con-
ducted site visits, and found additional re-
search information in various hospitality
periodicals. Additionally, Mike Feldott, of
HRC Consultants, L.C., was a key adviser
on restaurant brands and operations for
hotels.
1327.ch06 12/19/05 9:32 AM Page 267
Bristol Hotel Company. The Bristol Hotel
Company is a 39-property chain with corpo-
rate headquarters in Dallas, Texas. In January
1995 Bristol acquired a Memphis-based hotel
company, United Inns, Inc., that had 26 hotels
based in six states. By the end of 1995 Bristol
Hotel Company had grown from 8 to 38 prop-
erties with more than 10,000 rooms, which
268 Chapter 6 ? Food and Beverage Division
generated $192 million in total revenues.
(Many of the properties acquired in 1995 re-
quired renovation, and many of these rooms
were out of order, which negatively affected
year-end 1995 financial numbers.) The rev-
enues predicted for 1996 are around $250 mil-
lion. The following key indices summarize
Bristol Hotel Company’s performance in 1995:
PRODUCT BRANDING
Product branding refers to establishing a
well-known name for a given product or
service whereby the particular product or
service and its attributes are highly recog-
nizable and easily recalled by consumers.
The basic concept behind such so-called
branding is to establish a standard on which
consumers may rely to predict value (e.g.,
price, quality, convenience). Within the hotel
industry a multitiered branding strategy has
evolved among lodging companies. The fol-
lowing table illustrates how some hotel
brands have become associated with differ-
ent tiers. Note that some companies have de-
veloped products for more than one tier.
Economy, Middle Luxury, All
Limited Service Market First Class Suites
• Motel 6 • Holiday Inn • Four Seasons • Marriott Suites
• Days Inn • Ramada Inn • Ritz-Carlton • Embassy Suites
• La Quinta • Sheraton • Marriott Marquis • Residence Inns
• Hampton Inn • Hilton • Beverly Hilton • Homewood Suites
• Travelodge • Courtyard by Marriott • Hyatt • Bristol Suites
• Sleep Inn • Radisson • Westin • Clarion Suites
• Guest Quarters
Source: Ron N. Nykiel, “Corporate Strategy within the Hospitality Industry,” in The Complete Travel
Marketing Handbook, ed. Andrew Vladimir (Lincolnwood, IL: NTC Business Books, 1988).
An example of the multiple-branding
strategy can be illustrated by examining the
different hotel brands of the Marriott Cor-
poration. Marriott has developed Marriott
Hotels, Marriott Resorts, Marriott Marquis,
Courtyard by Marriott, Marriott Suites, Res-
idence Inns, and Embassy Suites.
A somewhat similar branding strategy
also exists in the restaurant industry, as
shown in the following chart.
1327.ch06 12/19/05 9:32 AM Page 268
Average occupancy 64.10%
Average daily room rate $62.67%
RevPAR $40.20%
Gross operating margin 29.62%
Rooms margin 71.61%
Food, beverage margin 24.84%
Bristol primarily uses an owner-operator
Section 6.5 ? Strategic Alliances Between Hotels and Restaurants 269
strategy versus management contracts in
managing its hotels. As of the time of our
study it owned 36 of its properties (93 per-
cent) and managed the other three properties.
Bristol’s primary focus was in the full-service
segment, with 35 full-service properties (89
percent) and only four limited-service
properties.
Quick Service Casual, Family Upscale Theme
• McDonald’s • Red Lobster • Ruth’s Chris Steakhouse • Planet Hollywood
• Taco Bell • T.G.I. Friday’s • Trader Vic’s • Hard Rock Café
• Pizza Hut • Damon’s • Del Frisco’s • Benihana
• Domino’s • Good Eats Grill • Bice Ristorante • Lettuce Entertain You
• KFC • Chili’s • Palm Restaurant • Front Row Sports Grille
• Church’s • Olive Garden • NY Restaurant Group • Country Kitchen
(Mrs. Parks)
The Country Hospitality Partnership, a
subsidiary of Carlson Hospitality World-
wide, is an example of a restaurant company
with a multitier branding strategy. The
Country Hospitality Partnership restaurants
include Country Kitchen (252 restaurants),
T.G.I. Friday’s (365 restaurants), Italiani’s
(14 restaurants), and Front Row Sports
Grille (3 restaurants). Additionally, Carlson
provides a good example of a hotel company
that owns and has vertically integrated both
the hotel and the restaurant product into
one corporation. Carlson Companies, Inc.,
owns both Radisson Hotels Worldwide and
Country Hospitality Partnership. The T.G.I.
Friday’s concept is being integrated into
many Radisson Hotels (see: Laura Koss-
Feder, “Radisson Seeks Marketing Advan-
tages,” Hotel & Motel Mangement, pp. 3, 43;
Ron Ruggles, “T.G.I. Friday’s Cruises into
Summer,” Nation’s Restaurant News, June
1996, pp. 14, 43; and Lawrence White,
“Growth Meister,” Lodging, September
1996, pp. 52–58).
The Marriott Corporation is another ex-
ample of a hospitality company that owns
and integrated its own restaurant brands
into its hotels. The key point is that the
brand is recognizable, and this recognition
equates to reliable value from the cus-
tomer’s perspective. This enhanced cus-
tomer perception can be used by a firm to
gain a competitive edge and, in turn, in-
crease revenues and profits for the company.
1327.ch06 12/19/05 9:32 AM Page 269
Its primary target market is the mid- to
upper-level corporate traveler (the source of
90 percent of the company’s revenues). It also
does substantial group-meeting business.
Bristol is anticipating that full-service hotels
will play an important role in meeting the fu-
ture lodging and business demand of those
two market segments. John Beckert, the chief
operating officer of Bristol, considers the
“full-service segment as a segment that has
been somewhat abandoned, but Bristol con-
siders the segment to be ‘solid’ as far as de-
mand (anticipate 6 to 10 percent increase in
demand) and a segment that allows for
greater pricing power.”
Bristol’s overall strategy is to provide cus-
tomers with a first-class-hotel experience—
but without being stuffy—and extraordinary
overall value (price and quality). While those
goals are not unusual among hotel companies,
Bristol has distinguished itself in several
ways. First, it has an excellent track record, es-
270 Chapter 6 ? Food and Beverage Division
tablished in part by achieving strong operat-
ing and financial results during the industry’s
recent recession.
Second, it maintains a distinct corporate
culture and management style that translates
into low executive-management turnover.
Third, its centralized management struc-
ture allows managers to focus on the quality
of a guest’s stay as the number-one priority.
The company’s primary operating strate-
gies are listed in Table 6.4.
Throughout our discussion we will ana-
lyze Bristol’s six operating strategies. How-
ever, our emphasis will be on understanding
why Bristol Hotel Company aligns its F&B
services within their hotels in a certain fash-
ion and how it reaches the decision to do so
one way instead of another.
Among its 39 hotels Bristol has 22 hotel
restaurant outlets and uses three internally
developed restaurant brands in 20 of those
properties, as shown in Table 6.5.
Table 6.4 Bristol Hotel Company Operating Strategies
Strategies Implementation
Unique management culture Entrepreneurial and team-oriented
Control over hotel operations Owner-operator focus
Assets in select geographic markets 28 properties located in Atlanta, Dallas, and Houston (fast-growing
markets)
Direct sales and marketing Focus on local market
Flexible use of brand names Operate under its own brand names:
Harvey Hotels, Bristol Suites, Harvey Suites
Operate under national franchise brands:
Holiday Inn, Marriott, Promus properties, Hospitality Franchise
Systems brands
Emphasis on food and beverage services Bristol’s F&B profit margins (32 percent original eight and 25
percent overall) are above December 1994 national industry levels
of 17.1 percent.
Source: Bristol Hotel Company 1995 Annual Report
1327.ch06 12/19/05 9:32 AM Page 270
In addition to Bristol’s own restaurant
concepts and the two franchised Good Eats
Grills previously mentioned, Bristol execu-
tives are considering leasing space to a
branded restaurant in two of their limited-
service properties.
Good Eats Grill. The Good Eats Grill
Company is a privately held firm that cur-
rently has 17 restaurant outlets, of which 16
are located in Texas and another in Missis-
sippi. Four of the 17 restaurant outlets are
franchised, while the others are owned and
operated by the company founder, owner, and
president, Gene Street. Bristol Hotel Com-
pany is the only hotel company that is cur-
rently allied with Good Eats Grill. In 1995
Good Eats Grill’s annual revenues were $23
million. Good Eats Grill is a casual, family
restaurant stressing food quality and low
price. A Good Eats Grill can seat 150 to 200
diners, serves lunch and dinner, has a com-
fortable decor and casual atmosphere, and of-
fers excellent food quality at an affordable
price. Good Eats Grill’s best-selling entrees
are its chicken-fried steak and vegetable
Section 6.5 ? Strategic Alliances Between Hotels and Restaurants 271
plate. The approximate square footage re-
quired for a Good Eats Grill is 4,000 to 6,500
square feet (includes both front and back of
the house).
The following key indices summarize
Good Eats Grill’s 1995 performance:
Total revenues $23 million
Food-revenue percentage 94%
Beverage-revenue percentage 6%
Overall F&B cost percentage 28.5%
Food-cost percentage 29%
Beverage-cost percentage 22%
Average check $8.12
Covers/year (approx.) 2.8 million
Table 6.6 summarizes the Good Eats Grill
menu.
At the time of this writing, Good Eats
Grill was doing business with no other hotel
company besides the Bristol Hotel Company.
We wondered why, and asked key people
within the Good Eats Grill management why
they had agreed to team with Bristol Hotels.
The key factors from the perspective of those
managers were:
Table 6.5 Bristol’s Own Restaurant Brands
Brand Concept
Scoops Diner (4 units) • Theme restaurant with a 1950s concept
• Comfortable and casual
Remmington’s (4 units) • Eclectic
• More upscale than a Scoops
• Nice hotel coffee shop
Bristol Bar and Grill (12 units) • Designed as a hotel restaurant
• Flexible in handling fluctuations in sales volume
• Self-serve
• Friendly and fast
1327.ch06 12/19/05 9:32 AM Page 271
• The companies share similar proactive,
team-oriented management styles.
• The firms’ corporate cultures blend well.
• The projects were financially feasible.
• Bristol was looking for exactly the prod-
uct that Good Eats Grill could deliver
(i.e., customer value in terms of quality
and price).
• Both companies wanted the deal to
happen.
Good Eats Grill executives believe more
hotel-and-restaurant alliances are imminent
and such deals represent a trend that is here
to stay. Good Eats Grill’s management ex-
pects to do more restaurant-franchise deals
with hotel companies as doing so offers a vi-
able option for expanding quickly without in-
tensive capital requirements.
Property location. For our study we se-
lected the Holiday Inn Intercontinental, a
Bristol Hotel Company property located near
the Houston Intercontinental Airport. From
the outside, the Good Eats Grill appears as if
272 Chapter 6 ? Food and Beverage Division
it is a freestanding restaurant, but in reality
the restaurant is as much a part of the hotel as
the lobby.
This particular Holiday Inn, a 400-room
property opened in 1971, recently underwent
$11.5 million in renovations (of which some
$1.5 million was for the conversion of the pre-
vious restaurant into a Good Eats Grill). This
hotel generates approximately $7.5 million in
room revenues, operates at an 85-percent oc-
cupancy level, and has an average daily rate of
$60 and RevPAR of $48. Restaurant revenues
are targeted to be approximately $1.5 million;
food profit, 25 percent; beverage profit, 55 to
60 percent; food cost, 28 to 29 percent; and
beverage cost, 20 to 22 percent.
Property selection. During 1995, the year
Bristol acquired the United Inns properties,
Bristol Hotel Company executives evaluated
all of their hotel-restaurant outlets and made
decisions as to which restaurant concept best
supported the targeted positioning of each in-
dividual hotel. Among Bristol’s development
strategies was a decision to use the Good Eats
Grill concept in two of its properties. Just as
Table 6.6 Good Eats Grill Menu
Menu Items Price Range Comments
Appetizers 6 $1.99–$4.99
Soups and salads 5 $2.19–$5.79
Burgers and sandwiches 7 $5.29–$6.29
Entrées 20 $5.99–$8.99 Steaks, pork chops, chicken, pasta, grilled fish
Served with garden-fresh vegetables
Add salad for 99 cents
Desserts 5 $2.49–$2.99
Beverages (alcoholic Full service
and nonalcoholic)
Source: “Ride the Branding Wave,” Lodging, September 1996, pp. 62–73.
1327.ch06 12/19/05 9:32 AM Page 272
we asked the Good Eats Grill executives,
“Why Bristol?” we asked Bristol executives,
“Why the decision to go with Good Eats Grill
versus going with proven internally devel-
oped restaurant brands or renovating the ex-
isting restaurant?” The key element in
Bristol’s selection of Good Eats Grill for two
new locations was in Bristol’s overall assess-
ment of which restaurant concept would be
the best match for the repositioning strategies
for those specific hotels.
At the Houston Holiday Inn Interconti-
nental, the existing restaurant, the Grand
Cargo Cafe, was a typical hotel restaurant
with a coffee-shop feel. The Grand Cargo
Cafe had average food quality and service,
low profit margins (5 percent), low sales vol-
ume, high employee turnover, little name
recognition, and a below-average reputation
among those customers familiar with the op-
eration. In short, the Grand Cargo Cafe was a
costly amenity for the hotel’s previous owners
and Bristol executives quickly determined
that a change was required.
Bristol first looked at the possibility of re-
placing the Grand Cargo Cafe with one of
Bristol’s own internally developed F&B con-
cepts (i.e., Bristol Bar & Grill, Scoops Diner,
or Remmington’s). After some consideration
it was determined that Bristol’s own concepts
did not adequately complement the prop-
erty’s repositioning strategy. The Bristol Bar
& Grill is a quick-and-friendly self-serve con-
cept that is primarily focused on serving hotel
guests (i.e., banquet guests). Such a foodser-
vice arrangement would be inappropriate for
the repositioned Holiday Inn Intercontinen-
tal, which has a large sales-volume potential
comprising both walk-in diners (85 percent of
the lunch trade and 40 percent for dinner)
and overnight guests (15 percent at lunch and
60 percent at dinner).
Section 6.5 ? Strategic Alliances Between Hotels and Restaurants 273
Another objective in replacing the Grand
Cargo Cafe was to change dramatically the
perceived atmosphere of the outlet from that
of a coffee shop to a substantial restaurant.
Bristol’s Remmington’s concept, also reminis-
cent of a coffee shop but more upscale than
Grand Cargo Cafe in price and quality, was
not considered sufficiently different to
achieve that goal. Moreover, Remmington’s
did not completely match the “casual and
comfortable” atmosphere desired to comple-
ment the overall hotel repositioning strategy.
Bristol’s Scoops Diner concept offered a
close match to Bristol’s goal of providing the
customer with good overall value in a casual
and comfortable atmosphere. Scoops’ 1950s-
theme concept, however, was developed pri-
marily for walk-in diners rather than a hotel’s
overnight and meeting guests. Like Rem-
mington’s, then, the Scoops concept did not
exactly fit the needs of the property’s new tar-
get markets.
While hotel guests were to be a prime
customer base for the Intercontinental’s
restaurant, the property was seen to also offer
great opportunity for walk-in business. (Here
are some of the key site-specific characteris-
tics of the Holiday Inn Intercontinental that
indicated a freestanding restaurant could gen-
erate substantial walk-in business: (1) the
physical layout of the property—parking, en-
trance, signs, and size—was considered excel-
lent; (2) the property is located close to
Houston International Airport on a major
highway; and (3) there was limited restaurant
competition in the area despite the potential
for customers from local businesses and sur-
rounding hotels, some of which are limited-
service properties.) With that in mind, Bristol
executives realized that the Scoops and Rem-
mington’s concepts did not have sufficient
preexisting customer brand awareness in
1327.ch06 12/19/05 9:32 AM Page 273
Houston to generate substantial walk-in traf-
fic. In the final assessment, then, Bristol pur-
chased the franchise rights to operate a Good
Eats Grill in Houston (and at one other
location).
A good match. Bristol management con-
siders Good Eats Grill to be a competitive
concept that offers a quality product, a casual
environment that customers enjoy, a re-
spected and recognizable restaurant name in
the Houston area, and proven sales volume.
Another key factor mentioned by Bristol ex-
ecutives was that the two organizations
clicked, meaning that the corporate culture of
each was well matched with the other. Both
have an entrepreneurial base, both are flexi-
ble, and both have high-quality standards for
a midlevel product at an affordable price.
Shown on the next page is a table that com-
pares the hotel, restaurant, and combined
marketing strategies of the two companies
(Table 6.7).
Key positioning criteria. We found that a
critical factor in the selection process of a ho-
tel’s F&B brand or concept is to determine
the customer perception that you want to cre-
ate at the property and then select a restau-
rant theme that complements the overall
274 Chapter 6 ? Food and Beverage Division
property’s image. Bristol COO Beckert illus-
trated this by saying, “At Bristol we try to
identify uniqueness in our F&B concepts,
which then become selling points for the
property. The restaurant then goes on a short
list that our sales staff use to sell rooms.”
The “right” match between the hotel and
the restaurant can vary from property to
property. At Bristol, all 39 properties were
evaluated to determine which F&B concept
best fit each property, and only two locations
were selected for a Good Eats Grill franchise.
As we will point out later, several key factors
such as conversion costs and nearby competi-
tion must be taken into consideration prior to
making the final decision.
Turn up the volume. Another element re-
lated to positioning is to determine the vol-
ume and customer mix expected. For example,
let’s review Bristol’s existing company-owned
restaurant brands: Scoops, Remmington’s, and
Bristol Bar & Grill. Bristol management will
locate a Scoops or a Remmington’s in those
properties that have above-average hotel vol-
ume, and where restaurant-customer volume
comprises primarily walk-in diners who are
not using the hotel’s other services. A Bristol
Bar & Grill concept is used when the F&B
Table 6.7 Operating Strategies
Hotel Restaurant Combined
• Primary market • Family-style restaurant • Appeal to corporate and family travelers
• —Corporate business travelers • Excellent food quality • Mid- to upper-market value
• —Mid- to upper-range travelers • —Fresh • Casual and comfortable
• Secondary market • Value • Best overall value
• —Family travelers • Brand recognition • —Price and quality
• Brand recognition • Casual, comfortable decor
• First-class hotel, but not stuffy
• Physically competitive
1327.ch06 12/19/05 9:32 AM Page 274
market is primarily hotel guests and banquet
business. The Bristol Bar & Grill is targeted
specifically to serve hotel patrons with a
quick-serve breakfast, convenient lunch, and
buffet-style dinner. The Good Eats Grill con-
cept, on the other hand, generally operates as
a freestanding restaurant, has a proven sales
volume ($1.5 to 2 million per year), offers con-
sumer value, and has a comfortable decor
that’s attractive to both walk-in diners and ho-
tel guests.
During Bristol’s examination of its hotel
restaurants, it was determined that a Good
Eats Grill should be used when (1) it is neces-
sary to reposition the hotel, (2) a great restau-
rant-volume potential exists, (3) the physical
layout and location of the property can sus-
tain a freestanding restaurant, and (4) the
market mix comprises both hotel guests and
walk-in customers.
Why Houston? Bristol’s management felt
that the Houston Holiday Inn Intercontinen-
tal needed repositioning and a recognized
restaurant brand like Good Eats Grill was es-
sential for any repositioning strategy to work.
Good Eats Grill already had two successful
freestanding restaurants in the Houston re-
gion. Additionally, Good Eats Grill main-
tained an ongoing investment in local
advertising. By contrast, a Remmington’s, a
Scoops, or even the Grand Cargo Cafe did not
have anywhere near the same level of local
brand awareness and consumer acceptance.
The following list summarizes the key fac-
tors that Bristol’s executives considered when
selecting Houston as a location for a fran-
chised Good Eats Grill.
• The property was being repositioned.
• Financial feasibility was evident.
• The property’s existing hotel restaurants
were producing low revenues.
Section 6.5 ? Strategic Alliances Between Hotels and Restaurants 275
• The physical layout of the property al-
lowed for conversion.
• Parking, entrances, and signs would be
relatively easy to provide.
• The local labor market could support the
concept.
• The high-traffic location of the property
(in a commercial area near the airport).
• Since there was only one freestanding
restaurant within a two-mile radius, the
potential for non-hotel-guest business
was great.
?
SELECTION PROCESS
Asummary of the key advantages and disad-
vantages to consider when going with a fran-
chised restaurant brand in your hotel are
listed below (Lodging, 1995), while illustrated
on the next page is a flow chart of the basic
steps to take when evaluating and choosing
which franchise restaurant company to use
(Figure 6.1).
Advantages
• Integral part of repositioning the hotel
• Potentially increases revenues, occupancy,
profits
• Restaurant franchiser is continually as-
sessing the menu, whereas a hotel’s ten-
dency is not to change the menu
• Franchiser is knowledgeable about the
restaurant business
Disadvantages
• Franchise fee
• Requires a certain level of volume to war-
rant utilizing a franchise brand
• High initial investment
1327.ch06 12/19/05 9:32 AM Page 275
• Brand can lose reputation and recogni-
tion or quality levels could drop during
the term of the franchise agreement
• Room service and banquet service could
still require a separate kitchen operation
276 Chapter 6 ? Food and Beverage Division
As previously noted, Bristol chose the
Good Eats Grill concept over other restau-
rant companies because the Good Eats man-
agement was (1) flexible and (2) determined
to minimize the bureaucracy to make the deal
Figure 6.1 Selection-process Flow Chart
Identify
positioning
strategy
Contact
restaurant
brokers
• Make contacts
• Establish options
Define exactly
what you
want
Meet
with
principals
Perform
feasibility
analyses
• Projected P&Ls
• Capitalization est.
• Projected ROIs
• Assumptions
Make
decisions
• CEO, COO
• Board of directors
Negotiate
contracts
1327.ch06 12/19/05 9:32 AM Page 276
Section 6.5 ? Strategic Alliances Between Hotels and Restaurants 277
CRITICAL ELEMENTS TO CONSIDER
Summarized below are critical elements
to consider when assessing which restaurant
brand concepts will best match a particular
hotel property.
1. Determine the desired hotel market
position and customer perception you want
to create for each property. This includes
knowing all about the property’s competi-
tion, environment, and customers, and in-
volves creating a unique image for your
property.
2. Make sure that you objectively assess
the revenue and expense potential of each
operational option when examining your fi-
nancial trade-offs. Such options include run-
ning your hotel company’s own brand,
buying and operating a franchised brand,
and leasing space to a brand-name restau-
rant company.
3. Select a restaurant company that has
a corporate culture that mirrors your hotel’s
corporate culture and also shares the same
basic operational goals.
4. Evaluate each property on a stand-
alone basis using all available facts and data.
Avoid making generalizations about what
will work for all properties.
5. The key criteria in identifying which
properties could benefit most from a brand-
name franchise-restaurant concept are:
• Desired positioning of the hotel
• Financial trade-offs and feasibility
analyses
• Competitive marketing analysis
• Physical layout of the facility
(parking, entrances, signs, location
of kitchen)
• The site location
• The local labor market
6. The key criteria in selecting a partic-
ular restaurant company are:
• Similar business goals and corpo-
rate culture
• Initial investment cost
• The menu offered
• Ongoing new menu development
• New recipes on a regular basis
• Cooking specifications
• Franchise fee
• Restaurant decor
• Training support
• Management support
• The ability to handle room service
and banquets
7. View the hotel’s restaurant outlet as a
selling point that can enhance rooms sales
and as a profit center that can be held ac-
countable for achieving established profit.
1327.ch06 12/19/05 9:32 AM Page 277
happen. In today’s competitive market, busi-
ness decisions must be made quickly and ac-
curately or else the window of opportunity
may be lost. In this particular example the ba-
sic deal was struck after two executive meet-
ings (however, it did take the lawyers a little
longer). The rest of the steps in the process
caught up with the decisions that were made
after those two executive meetings. Such a
quick decision was possible because the two
companies have similar proactive manage-
ment styles, the project made financial sense
for both companies, the corporate cultures
blended well, and the decision-makers went
with their instinct.
?
CONTRACT
RELATIONSHIPS
There are four basic types of operational op-
tions that can be established between the ho-
tel and the F&B outlet in a hotel. Those four
options are (1) internally developed restau-
rant brand, (2) franchised restaurant brand,
(3) straight lease, and (4) management con-
tract. Bristol’s first choice (used for 20 of its
22 restaurant outlets) is to use its own inter-
nally developed restaurant brands. Bristol be-
lieves it has a proven track record in
managing F&B operations profitably (Hotel
Business, 1996).
When Bristol introduced Good Eats Grill
into two of its 22 hotels with food service, it
showed a willingness to purchase a franchised
brand, provided Bristol could maintain full
control of restaurant operations and products
(as long as all franchise agreements were
maintained). Currently Bristol is also assess-
ing a leasing arrangement with yet another
restaurant company for a couple of Bristol’s
278 Chapter 6 ? Food and Beverage Division
Fairfield Inn properties. In those cases Bristol
managers seem to be indicating that it would
be more profitable for them to lease out
square footage in the hotels versus operating
the F&B outlet themselves.
Key franchise elements. Bristol has pur-
chased the franchise rights for its two Good
Eats Grill operations. The key elements of
the franchise agreement are the menu,
recipes, cooking specifications, franchise fee,
restaurant decor, music package, training
support, and negotiated special provisions
(e.g., use of Good Eats Grill recipes for ban-
quets). Basically, Bristol purchased a turnkey
operation from Good Eats Grill. Moreover,
Good Eats Grill provides pre- and post-
opening training support, new and updated
menu development, and such regional man-
agement support as consulting, auditing, and
trouble-shooting.
In exchange for the franchise and its
management services Good Eats Grill re-
ceives 3.5 percent of lunch and dinner rev-
enues as a franchise fee.
?
MARKETING
We have already mentioned how the Bristol
sales office uses the company’s restaurants as
a selling point to assist in booking rooms,
meetings, and banquets. In addition there are
three other marketing concerns that need to
be considered: (1) the competition, (2) cus-
tomer expectations, and (3) advertising.
Competition. The primary hotel competi-
tors for Bristol’s Houston Holiday Inn Inter-
continental are a Marriott hotel (569 rooms),
a Hyatt hotel (315 rooms), and a Sheraton ho-
tel (450 rooms). As for nearby foodservice
competition, Marriott uses internally devel-
oped restaurant brands (Allie’s American
1327.ch06 12/19/05 9:32 AM Page 278
Grill and CK’s) along with a Pizza Hut kiosk,
while the Hyatt and Sheraton offer typical ho-
tel restaurants. Additionally, there are some
limited-service hotel properties in the area
that factor into the secondary market com-
petitive analysis.
The freestanding restaurant competition
in the area is negligible. There is a Kettle
Restaurant nearby, but it does not pose a
strong business threat to Good Eats Grill as it
has a different target market. There is a Ben-
nigan’s and T.G.I. Friday’s within three miles
of the Holiday Inn, but there is no other no-
table restaurant competition within a two-
mile radius of the hotel. As it turns out, the
Holiday Inn’s Good Eats Grill is popular with
Marriott’s, Hyatt’s, and Sheraton’s hotel
guests, and also with those hotel guests that
are staying at the surrounding limited-service
properties. It can be expected, then, that a
guest who stays at a hotel other than the Hol-
iday Inn, yet eats at the Good Eats Grill, may
decide to stay at the Holiday Inn on return
trips to Houston. The value of the strategic al-
liance between the hotel and the restaurant is
that it establishes a unique identity for this
property that sets it apart from its competi-
tion and provides a marketing edge.
Customer expectations. A primary mission-
statement goal of both companies is to exceed
customer expectations. With the alliance of
the Holiday Inn Intercontinental and Good
Eats Grill, Bristol management believes the
customer is pleasantly surprised with the
overall product and services that the property
provides. Even though the hotel and restau-
rant renovations were completed just re-
cently, in July 1996, the perceived overall
value of this property to the customer is al-
ready generating new corporate accounts.
Bristol management believes the hotel repo-
sitioning strategy in combination with the ad-
Section 6.5 ? Strategic Alliances Between Hotels and Restaurants 279
dition of the Good Eats Grill is a major rea-
son it is landing those new accounts.
Advertising. Bristol Hotel Company be-
lieves in a direct sales-and-marketing ap-
proach. The company therefore relies less on
national promotion activities than many other
firms. The Holiday Inn Intercontinental is no
different in this regard. The hotel does some
limited local advertising, but it relies primarily
on a direct-sales approach along with making
personal local contacts. Other than the signs
around the property, there is no joint advertis-
ing or promotion done between the hotel and
the restaurant. Good Eats Grill has four
lighted signs on the property, and Bristol pur-
chases no billboard ads for this property.
There are two other Good Eats Grill restau-
rants located in Houston, and Good Eats Grill
does do some radio promotion and rents bill-
boards for those two restaurants.
?
OPERATIONS
As a franchisee Bristol maintains total opera-
tional control of the restaurant, but Good
Eats Grill recipes must be followed exactly.
Unlike other Bristol properties, the restau-
rant has its own general manager. Bristol de-
termined quickly that this particular property
needed to establish the restaurant as a prior-
ity, but did not want the hotel general man-
ager to get distracted from managing the rest
of the hotel. Bristol therefore elevated the
restaurant-manager position to that of restau-
rant general manager at this property. The
restaurant GM reports to the hotel GM, and
the result is that the property receives maxi-
mum management focus for all of its key
operations.
Another distinguishing operational ele-
ment at this property is the way room service
1327.ch06 12/19/05 9:32 AM Page 279
and banquets are handled. The Good Eats
Grill kitchen serves them. There is no sepa-
rate kitchen or menu to handle room service.
Bristol also uses the Good Eats Grill kitchen
for banquets, and has the final say in estab-
lishing banquet menus and costs. Moreover,
Bristol has the option of using Good Eats
Grill menu items and recipes in preparing the
banquet meals (provided that the recipes are
followed exactly).
?
FINANCE
We have shown how the correct match be-
tween a restaurant company and a hotel op-
erator can help to reposition a hotel, increase
occupancy, and increase F&B profit. We can
280 Chapter 6 ? Food and Beverage Division
investigate other potential financial gains by
comparing a summary of the actual 1995
profit-loss statement of the Holiday Inn’s
original (pre-Bristol) foodservice concept
(Grand Cargo Cafe) with a conservatively es-
timated profit-loss statement of the Good
Eats Grill for 1997 (its first year of full opera-
tion; see Table 6.8).
A quick comparison of those profit-loss
figures shows how establishing a strategic al-
liance between a hotel and restaurant can im-
prove the overall profitability of the property.
Other expenses such as franchise initiation
fee ($40,000–$50,000), cost of renovation
($750,000), cost of signs ($5,000), and other
miscellaneous marketing costs (grand open-
ing, flyers), must also be factored into assess-
ing the feasibility of converting or opening an
Table 6.8 Profit–loss Comparison
Grand Cargo Cafe Good Eats Grill
Actual Projected
1995 % Item description % 1997
831,519 70.5 Outlet revenues
1
59.8 1,269,455
199,920 16.9 Banquet revenues 28.4 601,000
148,072 12.6 Other revenues
2
11.8 251,430
1,179,511 100.0 Total revenues 100.0 2,121,885
405,354 34.4 Food cost 26.4 561,137
525,634 44.5 Payroll
3
43.2 917,621
43,561 3.7 Other expenses 7.1 148,532
974,555 82.6 Total expenses 76.7 1,627,289
204,956 Profit in dollars 494,596
17.4 Profit percentage 23.3
1
Outlet revenues include restaurant revenues and room service.
2
Other revenues include banquet-room rental, house portion of the gratuity, and
miscellaneous banquet fees.
3
Including employee benefits and payroll taxes.
Source: Bristol Hotel Company.
1327.ch06 12/19/05 9:32 AM Page 280
operation prior to proceeding with a project
like the one between Holiday Inn Interconti-
nental and Good Eats Grill.
Final analysis. Throughout this case study
analysis, we emphasized how important the
repositioning strategy was in turning around
the Houston Holiday Inn Intercontinental. A
quick look at key property performance indi-
cators (Table 6.9) demonstrates the success of
that repositioning strategy.
Moreover, we focused primarily on only
one part of the hotel’s repositioning strategy,
that is, its strategic alignment with a particular
restaurant concept. Other factors also con-
tributed to the property’s improved per-
formance, including new ownership and
management, an influx of cash for renova-
tions, and its new market position. Neverthe-
less, the alliance between Bristol and Good
Eats Grill is seen as key to the property’s
turnaround. The property’s previous restau-
rant, the Grand Cargo Cafe, was being oper-
ated as a hotel amenity rather than as a profit
center. To capitalize on the restaurant’s po-
Section 6.5 ? Strategic Alliances Between Hotels and Restaurants 281
tential, the Bristol management team recog-
nized that a new restaurant concept was
needed. After objectively evaluating their op-
tions, including their own F&B concepts, the
team determined that a Good Eats Grill fran-
chise matched Bristol’s restaurant needs for
this particular property. The Bristol experi-
ence demonstrates the importance of evaluat-
ing each property on an individual basis
rather than making generalizations about
what will work for all hotel properties.
In conclusion, from our perspective there
is no question that now and in the future we
will see more hotel and restaurant companies
establishing strategic alliances. It is no longer
financially feasible for a hotel restaurant to be
operated as just a support function to the ho-
tel’s lodging operations. The hotel restaurant
must now be viewed as a selling point to gen-
erate increased room and restaurant rev-
enues. The hotel restaurant must be managed
as its own profit center where the goal is to
maximize overall property profits. For the en-
tire property to be profitable, the restaurant
concept and the hotel’s market position must
complement each other. Put another way, in
today’s competitive business environment the
hotel restaurant cannot—and should not try
to—be all things to all people. To achieve a
competitive edge, hotel companies must con-
sider operating a franchised restaurant brand
or leasing space within the hotel to a restau-
rant company. Doing so may improve cus-
tomer perception and value, and as a result
increase the overall profitability of the
property.
Table 6.9 Key Property Performance
Indicators
Projected
1996 1997
Hotel occupancy 72% 85%
ADR $49 $60
Food profit 5% 25%
Beverage profit 50% 60%
1327.ch06 12/19/05 9:32 AM Page 281
Although on-premise catering is generally the
second largest source of revenue for most ho-
tels, following sleeping rooms, the on-premise
catering area has been virtually ignored in the
hotel school curriculum. The colleges that do
offer a course in catering usually focus
on hands-on classes consisting of planning,
cooking, and serving a meal, which is good
background, but is not the role of the hotel
catering department.
Catering is often the highest visibility the
hotel has on a local level. Catering can create
an image for the hotel, both locally and
nationally.
?
DEPARTMENT
ORGANIZATION
In most hotels the Director of Catering re-
ports to the Director of Food and Beverage,
with Banquet Managers and Banquet Set-Up
Managers reporting to Catering. In other ho-
tels you may find a Director of Catering and
Convention Service reporting to the Director
of Marketing, with the Banquet positions re-
porting to Food and Beverage. In the latter
arrangement, Convention Service usually
handles food and beverage functions for
groups with 20 or more sleeping rooms with
Catering selling and servicing the local social
and business markets. Convention Service
then does not sell; the room sales department
handles that aspect. Convention Service in
most hotels, however, handles all of the non-
food related logistics, including room set-up,
282 Chapter 6 ? Food and Beverage Division
audio-visual requirements, etc. In hotels
where conventions are not an important mar-
ket segment, Convention Service may not ex-
ist, in which case Catering would handle all
food and non-food logistics.
The Director of Catering assigns and
oversees all functions; oversees catering sales
managers; oversees all marketing efforts; in-
teracts with clients and catering managers; co-
ordinates with the hotel sales director; and
works with the chef to update and create
menus.
Under the Director of Catering there may
be an Assistant Catering Director who helps
with marketing, oversees Catering Sales Man-
agers, and services one or more accounts.
There may be several Catering Sales Man-
agers, depending on the size of the hotel.
Catering Sales Managers maintain client con-
tacts and service accounts. Their role is to sell
and service functions. They must seek and
consult with clients, plan menus, themes, room
set-up and decor; negotiate prices; and coor-
dinate with inside departments and outside
vendors. There are several excellent graphic
room-setup software packages available on
the market.
The Catering Department may also em-
ploy Catering Sales Representatives who are
usually involved only with selling, leaving the
servicing to others.
The Banquet Manager implements the
Director of Catering’s requests; oversees
room captains; supervises functions in
progress; staffs and schedules servers and bar-
tenders; and coordinates all support depart-
ments. He or she is the operations director, as
6.6 CONTEMPORARY HOTEL CATERI NG
Patti J. Shock and John Stefanelli
1327.ch06 12/19/05 9:32 AM Page 282
opposed to catering executives, who primarily
sell and work with clients to plan events.
The Assistant Banquet Manager reports
to the Banquet Manager and supervises table
settings and decor. There may be two (or
more) assistants; for example, a hotel may
have one for the day and one for the evening
shift.
The Banquet Set-up Manager supervises
the banquet set-up crew; orders tables, chairs,
portable bars, and other room equipment
from storage; and supervises the tear-down of
the room after the event has concluded.
The Scheduler, often referred to as the
Diary Clerk, enters bookings in the Master
Log (now usually computerized); oversees the
timing of all functions and provides adequate
turnover time between functions; is responsi-
ble for scheduling meeting rooms, reception
areas, pool-side areas, meal functions, bever-
age functions, other functions, and equipment
requirements; keeps appropriate records to
ensure against overbooking and double book-
ing of space; and is responsible for com-
municating this information to relevant
departments.
The Maître d’Hôtel is the floor manager.
He or she is in charge of all service personnel
and oversees all aspects of guest service dur-
ing meal and beverage functions in the vari-
ous function rooms on the floor.
The Captain is the room manager and is
in charge of service at meal functions in a spe-
cific room. Captains typically oversee all ac-
tivity in the entire function room or,
depending on the size of the room, in a por-
tion of it. They also supervise the Servers in
their room or section of the room.
There are two types of Servers, Food
Servers and Beverage Servers. Food Servers
deliver foods, alcoholic and non-alcoholic
beverages, and utensils to the table; clear ta-
Section 6.6 ? Contemporary Hotel Catering 283
bles; and attend to guest needs. Beverage
Servers serve alcoholic beverages, usually at
receptions. Bus persons, whose primary re-
sponsibilities are to clear tables, restock side
stands, and serve ice water, rolls, butter and
condiments, sometimes back up servers.
The Bartender concentrates on alcoholic
beverage production and service. Bartenders
are often assisted by Bar Backs, whose pri-
mary responsibility is to initially stock and re-
plenish the bars with liquor, ice, glassware and
other necessary supplies.
Housemen (sometimes referred to as
porters) set up function rooms with risers,
hardware, tables, chairs and other necessary
equipment. They report to the Banquet Set-
up Manager.
Attendants “refresh” meeting rooms dur-
ing breaks by emptying ashtrays when smok-
ing is permitted, refilling water pitchers, and
removing trash. Some catered functions also
require Coat-Check Attendants or Restroom
Attendants.
The Clerk (or Secretary) handles routine
correspondence, types contracts and banquet
event orders (BEOs), handles and routes tele-
phone messages, and distributes documents
to relevant staff members and other hotel
departments.
The Engineering Department provides
necessary utilities service, such as air condi-
tioning/heating, setting up electrical panels
for major exhibits, hanging banners, and set-
ting up audio visual displays.
Other miscellaneous positions include the
following. A Sommelier (or Wine Steward) is
used only at fancy, upscale events. The
Cashier sells drink tickets to guests at cash
bars. A Ticket Taker may be required to col-
lect tickets from guests at the door to the
function. Finally, most catering departments
employ Stewards to deliver the proper
1327.ch06 12/19/05 9:32 AM Page 283
amount of china, glassware, and silver to func-
tion rooms.
Whatever the organizational structure,
catering’s favorable impact on hotel prof-
itability is primarily due to the fact that cater-
ing has more control over the variable
expenses than does the manager of a typical
restaurant. In a restaurant, labor must be
scheduled, heat/air conditioning must be on,
and food must be kept in inventory, whether
or not any guests are present in the facility. In
catering, a function must be booked before
these items are scheduled or purchased. So
there are more variable costs in catering, and
more fixed costs in restaurant foodservice.
?
THE SALES AND
SERVICE PROCESS
Selling is a vital part of catering (see Figure
6.2). To sell a catering event, potential mar-
kets must be identified and cultivated. Target
markets must be established. Potential mar-
kets include association meetings (local
monthly meetings as well as the national an-
nual conventions); corporate meetings, in-
cluding training sessions and incentive
banquets; weddings and anniversaries; bar
mitzvahs; proms; garden clubs; holiday par-
ties; reunions, both school and military; and
fraternal organizations, such as Rotary and
Lions. The list is endless.
A marketing plan should be developed
that clearly defines the desirable target mar-
kets; defines the demand; describes compet-
ing caterers; sets financial goals; considers
other potential income that catering can gen-
erate for the hotel; and describes standard-
ized procedures that must be used to canvass
for new clients, qualify leads, make sales calls,
284 Chapter 6 ? Food and Beverage Division
develop contracts, and provide required prod-
ucts and services.
The initial contact for a function can
come from the client or the catering depart-
ment. In many cases, the potential client
makes the first inquiry. He or she may contact
you by phone, by letter, fax, email, or in
person.
If the contact is by phone, be sure the per-
son answering the phone can answer ques-
tions, or that someone knowledgeable is
always available. Too often a low-paid, un-
trained person in the office answers the
phone, and this can hamper the selling effort.
The phone should always be answered within
three rings. Always secure the name and
phone number of the caller.
If the initial contact is by letter, email, or
fax, try to answer with a phone call. Copies of
the letter were most likely sent to several
caterers and it is best to be the first to re-
spond. More information is often needed,
such as the budget the client has for the event
or the objective of the function. This initial
contact also provides the opportunity to in-
vite the potential client to the property for
lunch and a tour. Every effort should be made
to get the potential client into the hotel, on
your home turf.
Sometimes a letter will include a Request
for Proposal (RFP), which is a written pros-
pectus from professional meeting planners.
An RFP usually indicates that the poten-
tial client is very knowledgeable about
catering and is usually a sophisticated
negotiator.
If potential clients stop by in person with-
out an appointment, have someone see them
as soon as possible. Offer some light refresh-
ments to keep them occupied until someone
is available. Give an accurate estimate of how
long they will have to wait. Have the recep-
1327.ch06 12/19/05 9:32 AM Page 284
tionist obtain preliminary information, such
as their desired date(s) and type of function,
to get them involved in the planning process
right away. Also, keep a binder handy for
browsing that contains testimonial letters
from happy clients and photos of previous
events.
Section 6.6 ? Contemporary Hotel Catering 285
A Group History File should be created
whenever initial contact is made. The file
should include all facets of the business rela-
tionship, from initial contact to final disposi-
tion. Standardized information includes name
of contact, name of decision maker, titles, or-
ganization, types of events held, number of
Payment
by telephone, letter,
fax, request for proposal,
in person
by telephone, personal letter,
direct mail, cold call,
sales blitz
Hotel qualifies
potential client;
credit check
Isolate
decision
maker
Negotiations
Proposal:
menu, decor, prices,
objective, budget, theme
Facility
tour
Contract(s)
Signature(s)
BEO
distribution
Book room.
Plan menu, floor plan/layout.
Inform chef, banquet service and banquet
setup, engineer, outside vendors, other
internal departments.
Implement
Follow-up
Potential
client
contacts
hotel
Hotel
contacts
potential
client
Figure 6.2 Steps in Selling and Servicing a Catering Event
1327.ch06 12/19/05 9:32 AM Page 285
events held, when events are held, attendance
figures, all correspondence, notes from phone
conversations, contracts, credit history, poten-
tial for future business, and client preferences.
The manager responding to client in-
quiries must understand the hotel’s capabili-
ties. He or she especially needs knowledge of
food and beverage production and service.
Planning a menu for a small group is quite dif-
ferent from a large group. For example, souf-
flé for 1,000 would be quite impossible.
When planning a menu, the caterer must
first know the occasion or reason for the
event. The style of service also depends on the
occasion. It would be inappropriate to have a
deli sandwich buffet for an auspicious awards
banquet.
With international events, protocol must
be considered in everything from decor to di-
etary restrictions. The World of Culture web-
site (http://www.webofculture.com/) provides
good information on a variety of cultures.
Public space or function rooms must be
forecast for space utilization, just as the hotel
sales department forecasts sleeping rooms
requirements.
Working well with inside departments is
critical. Linens have to be requisitioned from
the linen room; engineers must insure that the
room temperature is appropriate; tables must
be set up; and purchasing must order the
correct amounts and types of food and
beverages.
Outside vendors, such as decorators,
audio-visual companies, florists, printers, and
photographers may be needed by the client to
ensure a successful event.
Performing well is the next step. Here the
emphasis shifts from sales to service. Guests
must be treated with care; service must be
punctual; foods, presentations, cleanliness,
and ambiance must meet desired quality stan-
286 Chapter 6 ? Food and Beverage Division
dards; professional attention must be paid to
all details; the function host should be made
to feel like a guest at the event, instead of a
harassed and worried manager. Last minute
requests and crises must be handled quickly
and efficiently. It is imperative to be flexible.
Follow-up is vital for repeat business.
Standardized procedures should be devel-
oped for thank-you calls and individualized,
personal thank-you letters. Completed
events should be evaluated with staff and
client input. Referral business should be so-
licited. Appropriate souvenir gifts may be
presented. And outstanding accounts should
be settled.
?
FUTURE ISSUES
Issues facing the catering department in the
future include new alcohol restrictions; the
demand for more menu alternatives, includ-
ing low-fat, pesticide-free, generally safe, un-
contaminated products; the competition from
off-premise catering firms; waste disposal reg-
ulations and recycling; consumers becoming
more value conscious; and service becoming a
more important point of differentiation.
Subcontracting will become more com-
mon, especially for labor and food. Calling
one company to provide servers is more effi-
cient than having staff on the phone calling
individual on-call workers. The independent
labor contractor trains staff and does all of
the payroll and paperwork.
Caterers can’t afford to have all types of
expertise on their staffs. With a Japanese
theme, a sushi restaurant may be subcon-
tracted. Or a local barbecue specialist, oyster
roaster, or coffee service company can handle
unique events. The hotel would add about 20
percent markup to the subcontractor’s bill,
1327.ch06 12/19/05 9:32 AM Page 286
and then add the cost of the rest of the meal
prepared in-house.
In the past, menus rarely changed. Today,
many menus are changed with the season. In
the future it will be important to be able
to distinguish between a fad and a trend.
Fads, such as Nouvelle Cuisine, are short-
lived. Trends, such as the demand for fresh
foods and more nutritious food, are more
permanent.
Probably the biggest challenge is the per-
ception among guests that all caterers are ex-
actly alike. Buyers may feel that there is
always another caterer able to provide similar
service. It is imperative for the successful
caterer to differentiate their food and service
from their competition. The price/value rela-
Section 6.7 ? A Day in the Life of an Executive Director of Catering Sales and Convention Services 287
tionship will become more important as ca-
terers attempt to rise above the competition.
There are a multitude of resources avail-
able on the web, including, for example,
Room Calculator (http://www.mmaweb.com/
meetings/Workshop/roomcalc.html), which
will determine how many guests you can fit
into a room in various configurations. Many
caterers have their menus online which are in-
teresting to see. Special Events Magazine
(http://www.specialevents.com/magazine/)
and Event Solutions (http://www.event-solu-
tions.com/) have timely articles that are
archived online and are searchable.
A large collection of useful catering web
links can be found at:http://www.unlv.edu/
Tourism/Catering_and_Special_Events.html.
6.7 A DAY I N THE L I FE OF AN
EXECUTI VE DI RECTOR OF CATERI NG
SAL ES AND CONVENTI ON SERVI CES
Rich Benninger
Each day I wake up saying, “Today is the day
I will get everything done.” It is my optimist
side taking control before my realist side has
a chance to ruin my day. Because I ply my
trade at a 5,034-room hotel with over 380,000
square feet of banquet space, it is usually
around 8:00 A.M. when my realist side kicks in.
By this time I have been at work for an hour
or more and start taking victories as soon as
they come. The day is half over for the dedi-
cated line cast members who started working
at 4:00 A.M. so our thousands of guests can en-
joy their morning breakfast. These employees
are the backbone of catering. Their workday
here will end in four more hours, and many
will go to a second job.
The day will not end for the catering di-
rector until a few things are completed. The di-
rector has just one job, sort of, and is the front
person for the operation. Now, please allow
me to take you on a journey through a typical
day in the life of a catering director. But first I
must make coffee. Nobody else in the office
notices that 1 ounce of coffee left in a pot does
not mean “There’s coffee in the pot.” The fol-
lowing describes what I did today.
1327.ch06 12/19/05 9:32 AM Page 287
?
BOOKING BUSINESS
Customers are the number-one component of
a successful catering operation. Without cus-
tomers, the grandest ballrooms, the most
spectacular cuisine, and the best service are
all moot points. So, every day you must work
to fill the pipeline with customers. The rooms
sales managers are really doing a great job.
They are booking over quota and getting con-
tracts with great food and beverage mini-
mums. For just a moment, I fantasize that this
will never end and life will always be good.
Oh no! We have just been asked why the
week between Christmas and New Year’s does
not have any events. Transient room sales are
strong, but they do not use function space. It’s
up to catering sales to fill in the hole. My team
tells me that had sales not already done so
they could easily fill space a week before or a
week later, but that holiday week is going to
be tough to fill. I know this is true, but the sen-
ior vice president does not care that some-
thing is tough. He wants to know what we are
doing to get business. And by the way, not dis-
count business. We start out looking for full-
paying customers and if that does not work,
then we will look at discounting.
I am excited to meet a customer for a site
visit at 7:30 A.M. I am the first property she is
looking at for a 2,500-guest reception and
concert. I just talked to her yesterday for the
very first time. All our meeting space is
booked but I’m in luck; we have space in our
arena. I work with the arena for about an
hour to get the space and brainstorm on
things we can do to book this business. The
arena operations guys are great to work with.
They enjoy coming to the catering office for
cappuccino. I smile when I think how cheap
cappuccino is and how many favors it buys
from operations cast members.
We spend an hour walking our customer
through her event. Her company sells very
288 Chapter 6 ? Food and Beverage Division
large industrial trucks, and when we tell her
we can put a concrete mixer right in the mid-
dle of her reception she is all smiles. I make
note to get the dimensions of the roll-up
doors. We are going to be more expensive
than the competition, but we provide more
value. We can make this a one-stop shopping
experience. I make a note to call transporta-
tion companies and gather quotes. I know the
other properties will not get involved in deal-
ing with all the outside vendors, and I use this
as a selling advantage. I make a note to list
this as a tentative piece of business worth
$165,000 or more.
Next I make a hasty trip across property
to check on a breakfast we are doing on the
stage of our production show. We are lucky to
have an incentive house tour our property,
and we have pulled out all the stops to let this
VIP group know we value their business. I am
pleased with the spectacular stage sets and
the look of the breakfast. I laugh with the
sales manager when he apologizes for only
giving us 36 hours notice on the breakfast. I
assure him the financial rewards of getting
large incentive bookings will more than make
up for the short notice. I make a note to send
each guest a thank-you note for taking the
time to tour our property.
?
FINALIZING PROGRAMS
The only time a program is truly finalized is
once the customers are gone and the final bill
is paid. And then just the physical stuff is
over. Conversations about the really good
stuff and the sometimes bad stuff can go on
for years. Repeat customers are usually the
best ones to have, but they tend to remember
that five years ago the potato salad did not
have a spoon in it when the company presi-
dent went to the buffet 15 minutes before it
1327.ch06 12/19/05 9:32 AM Page 288
was scheduled to open. “Let’s not let that hap-
pen this year.”
You spend months working to get every-
thing planned at least three weeks in advance.
Then you give all the information to the op-
erating departments two weeks out. For some
groups this works really well, and once you
work out the details they only make minor
changes. Other groups are not quite so tidy in
their planning.
Today I had a group arrive on site, and we
reviewed their banquet event orders. It would
be easier to say we redid their banquet event
orders (BEOs). At 9:00 A.M. we started re-
viewing 45 meal function BEOs. By 2:15 P.M.
we had made major changes to 42 of them. I
wonder aloud if they would like to change the
other three just for good measure. The chefs
are circling the catering office like sharks. All
the food ordering is on hold until the revised
BEOs are signed off on. While I’m working
with the clients to refinalize, the chefs and
purchasing agents are on the phone undoing
all the ordering they did days ago. Purveyors
are all on standby to rush product to us. I am
thankful we have excellent relationships with
these wonderful people, who will now pull off
miracles to get us product over the weekend.
My assistant is ready to shoot someone.
Making the changes once is enough of a
challenge, but now we are changing things
for a second and third time in one day. I
smile as I say, “Yes, I’m sure I can get you a
completely new set of BEOs by 5:00 P.M.”
Just as I tell myself we must be done with
changes, my contact calls and changes two of
the remaining original three BEOs. I get no
comfort from the fact that the one lone orig-
inal BEO is for an event that does not hap-
pen until five days from now. I do, however,
get great comfort from the knowledge that
my clients will spend over $800,000 in the
next eight days.
Section 6.7 ? A Day in the Life of an Executive Director of Catering Sales and Convention Services 289
?
CREATING MENUS
I promise a major corporate client that I will
write three custom menu options for their
opening reception. I tell them I will do it on
Saturday and I’ll fax the menus so they have
them for a Monday meeting. I promise myself
I will not commit to doing any more projects
on Saturday. It is going to be my catch-up
day, and I’ve been filling the day with new
projects. I may have to work a few hours on
Sunday to get on track for next week. The
great thing about writing custom menus is
every time I do one I add it to my hot menu
file and just keep reusing it. I do make a no-
tation of whom I send each one to. I would
hate to send someone the same custom menu
twice.
In this world of ever more sophisticated
customers, the quest for new menus has taken
on a life all its own. The unfortunate side of
this sophisticated customer often comes with
fond memories of a gourmet dinner for two at
some exotic trendy restaurant. Other favorite
sources of wonderful ideas are glossy cooking
magazines and TV cooking shows. Now the
simple task of any caterer is to figure out how
to make these menus, designed to serve eight,
work for hundreds or thousands. Of course,
you are not alone in this situation. The culi-
nary staff is right there with you. Please don’t
take it personally that many of them think
you are crazy.
?
WORKING EVENTS
Luckily for my catering department, we work
at a property where we are cast in the role of
salespeople. Another team of professionals
handles operations. Still, I can’t resist taking
10 minutes and going down to see how setup
is going for a poolside reception. Somehow
1327.ch06 12/19/05 9:32 AM Page 289
I spend 45 minutes at the pool, and now I’m
going to have to rush to a pre-con meeting.
The clients who spent the day making
changes are very big customers, and the pre-
con will be a big production. We have all our
top executives coming by to say hello. I am
anxious to see how the eight cheerleaders will
do with the dance number they are perform-
ing in the center of the hollow square. I am
very pleased to see the banquet and enter-
tainment departments have everything in per-
fect order.
?
LEADING AN OFFICE
One of my catering managers comes into my
office and asks to talk. In two days she will re-
new her wedding vows and she is very nerv-
ous. I go into father mode and we make a list
of things she has to do. I laugh when I ask her
why she is nervous about having a party for 30
people when every day she books parties for
hundreds of guests. I try to ease her burden of
preparing some of the food herself. I suggest
she just bring in the bowls she wants to use
and I’ll have the kitchen fill them up with
whatever she wants. I smile when she says,
“No, thank you, I make really good salads my-
self.” I wonder, does that mean our salads are
not really good?
Throughout the day, my staff gives me en-
couragement while I am working to get all the
changes made on my group. They all offer to
help, and I notice the number of things I am
asked to look at is very low today. I am proud
of my staff and make a note to have a special
breakfast at our catering meeting next week.
It has been almost two months since we
started a new format for our catering meet-
ings, and I must say they are much better and
everyone seems happier with them.
290 Chapter 6 ? Food and Beverage Division
?
BUDGETS
Yesterday we had our review for next year’s
budget. I must start working on a really ag-
gressive marketing plan to make the revenue
number we are after. For today, I’ll just start
by having a binder made so I feel like I’m
making progress. I ask my assistant to run
some reports so I can take them home and
look at them. I know I’ll never look at them
while I’m home, but if I find spare time I’ll
have them, just in case.
?
MENTORING AND
INDUSTRY INVOLVEMENT
I call two new interns from the university to
confirm their Saturday appointments with
me. I need to meet with them to determine
their interests and what program they are go-
ing to follow for the eight months they will
spend with us. I hope they will want to work
on the marketing plan and be active in the
National Association of Catering Executives
(NACE). I also have a protégé from the uni-
versity, and it would be nice if all three can
work together on projects. I feel pressure to
provide these students with an overwhelm-
ingly positive experience. Last year I was
voted Outstanding Mentor of the Year, and
now I feel a higher level of expectation.
Unfortunately, I have to cancel my NACE
Board of Directors meeting scheduled for to-
day. I am the president of our chapter, and I
have not had time to work on the things I
need for the meeting. I do not want to waste
the board’s time. I make a note to call our
NACE intern and schedule a meeting to see
what tasks I can have her handle for the
Board. Involvement in NACE is rewarding,
1327.ch06 12/19/05 9:32 AM Page 290
but it is like a part-time job. What was I think-
ing when we agreed to do a fund-raising din-
ner for 1,000 in February? I’m sure it was the
same thing I thought when I said I would love
to teach an extension class at the University.
It all seems so far away when I say yes. Some-
how it all works out.
?
ENTERTAINING
It’s 5:00 P.M. and I need to leave for a cocktail
party at a sister property across the street. I
am joining the vice president of sales and the
executive director of convention services to
entertain clients. We have a cocktail party and
then a 7:30 P.M. dinner and a 10:00 P.M. show.
The evening is wonderful. Our clients really
enjoy the special attention we give them.
When 10:00 P.M. comes, I wonder if I’ll stay
awake at the show. My fears are unjustified.
The comedian is so funny my sides hurt from
laughing. I think, what a great career. I get to
have fun while I work. As the evening ends at
11:30 P.M. I confirm that I’ll play golf in two
weeks—just another sacrifice for my clients.
Section 6.8 ? The Organization and Management of Hotel Beverage Operations 291
?
PERSONAL LIFE
My four golden retrievers are really happy to
see me. I know they have had dinner and were
well cared for while I was gone, but I feed
them again. It is the most wonderful thing I
do each day. I take my suit off and get into
sweats. It’s time to go for a walk and tell them
all about my day. They agree that making so
many changes is just not right. We devise a
plan to keep others from making my day so
stressed. Then we talk about the three-day
trip we are taking to Utah the day my in-
house group ends. It will be our first motor
home trip, and we are all excited. It seems my
golden retrievers are tired of camping in a
tent. Additionally, I plan to spend time work-
ing on my online masters degree, and a motor
home will be a good place to work. I try not to
think too hard about my degree. It makes it
hard to sleep when I think of working on my
final project.
Now it’s 12:30 A.M. and I need to get in
bed. As I lie down, I resolve that tomorrow
will be “the day I get everything done.”
6.8 THE ORGANI ZATI ON AND
MANAGEMENT OF HOTEL BEVERAGE
OPERATI ONS
Valentino Luciani
?
BRIEF HISTORY OF
BEVERAGES
Abeverage such as a glass of wine, a beer, or
a cocktail has the magic power of bringing
people together. Beverages have always made
an impact on the evolution of humankind.
Thanks to modern technology and more ad-
vanced carbon-dating techniques, archeolo-
gists have now established with certainty
that our species has been around for several
1327.ch06 12/19/05 9:32 AM Page 291
hundred thousand years—a lot longer than
was estimated 50 years ago. In accepting the
fact that alcohol is as old as we are, it would
be of great interest to discover what type of
beverages were consumed over such a span of
time. We can only assume that the earliest bev-
erages were fermented cider-type concoctions
made from various kinds of fruit, or brews
made from grain, seeds, and anything else na-
ture had to offer. These drinks were perhaps
enriched with spices, herbs, and probably more
exotic flavoring agents, some of which have
been forgotten or lost over the centuries.
What is known for certain is included in
recorded history, and it is relatively recent
when compared to the newly found lifespan
of Homo sapiens erectus. In recent excava-
tions, some of the first evidence of eating food
and consuming a beverage in a communal
fashion is found in the Orkney Islands, close
to Denmark. It was a custom then to build
dwellings around a common dispenser where
foods and drinks were prepared.
Egyptologists have recently published
photos of wall paintings found in pharaohs’
tombs. In these remarkably preserved works
of art one can clearly see Egyptian workers
harvesting grapes and preparing them for
winemaking. The (presumably filled) wine
vessels were then placed in an orderly fashion
next to the tomb. The Egyptian nobles be-
lieved that these beverages made the best
companions for the pharaoh’s eternal travel.
Greek and Roman historians report that
wine and other alcoholic beverages played a
vital role in their societies. The fun-loving Ro-
mans went as far as worshiping a beverage de-
ity: Bacchus, the god of wine. Wine and brew
shops, which are thought to have been intro-
duced approximately 6,000 years ago, could
be found at every street corner of ancient
Rome. In the United States, the first person
292 Chapter 6 ? Food and Beverage Division
on record to own a tavern and sell alcoholic
beverages to patrons was Samuel Cole. His
beverage business was already prospering by
1634.
Beer, which presently accounts for 51 per-
cent of alcoholic beverage sales, carries on a
fine tradition in our country. According to the
diary of the Mayflower’s captain, the ship was
not scheduled to dock on Plymouth Rock but
was made to stop there mainly because it had
run out of beer.
Nonalcoholic beverages such as coffee,
tea, fruit juices, and, later, carbonated bever-
ages have also made a considerable impact on
our evolution and lifestyle. During the past
five decades, Coca-Cola has taken the world
by storm. Of the hot beverages, coffee and tea
are the uncontested kings. One has to only
observe the proliferation of specialty coffee
shops and kiosks to begin to understand the
impact of this beverage.
?
OVERVIEW
The beverage industry grows in popularity
every year. Restaurant U.S.A., the official pub-
lication of the National Restaurant Associa-
tion, reported in 1995 that total sales for bars
and taverns neared the $11 billion mark. For
the year 2005, total sales for bars and taverns
are expected to exceed the threshold of $15
billion in sales. Hotels, restaurants, and resorts
have for some time regarded the beverage sec-
tor as a profitable one. In a medium to large-
size hotel, a typical beverage department can
produce a profit of over 50 percent of sales. In
comparison, a food department shows, at best,
a profit of between 15 and 18 percent of sales.
Beverage is also gradually gaining a larger
share of sales. Hotel operators report that
while two decades ago the sales ratio was
1327.ch06 12/19/05 9:32 AM Page 292
85–15 (85 percent food sales, 15 percent bev-
erage sales), today the average is closer to
80–20.
Before World War II, in a small to
medium-sized hotel and restaurant operation,
the person in charge of the beverage depart-
ment was the restaurant manager. In many
properties, a lead bartender or the wine stew-
ard was given the responsibility to run the
department.
Today, in a medium to large-size hotel op-
eration, the beverage department has a dis-
tinct place in the organization chart, and the
beverage manager is the person in charge of
Section 6.8 ? The Organization and Management of Hotel Beverage Operations 293
running and supervising all of the department
activities. The organization chart is a diagram
that shows the operation’s working positions
and how they interconnect. The beverage
manager usually reports to the food and bev-
erage director. In a very large hotel operation
(over 2,000), the F&B director reports to the
vice president of food and beverage.
During the last decade, some properties
have adopted a different strategy where there
are separate food and beverage directors. In
these properties the executive chef, who in
most cases acts more as a food director than a
hands-on chef, is placed in charge of the food
Figure 6.3 Organization Chart of
Beverage Department in a
Medium to Large Hotel
Bartenders
Bar Backs
(Bartender Assistants)
Beverage Servers
General Manager
Hotel Food and
Beverage Director
Assistant Beverage
Manager
(Head Bartender)
Beverage Manager
1327.ch06 12/19/05 9:32 AM Page 293
department. He or she enjoys a higher degree
of independence and reports directly to the
general manager, vice president of operations,
or, in some instances, directly to the hotel
president. The same is true of the beverage
director.
Both of these directors are considered
equal in the organization chart. They strive to
work together effectively and to communi-
cate daily. They are interdependent in many
ways but also aware of the need for commu-
nication. In addition, each must establish a
sound working rapport with department
heads of other hotel sectors. These include
front desk supervisors, executive housekeep-
ers, human resource directors, and so forth.
Typical of this case, the food manager and the
beverage manager, particularly, come to-
gether at the end of the month, when the re-
sults of their efforts are included in the same
profit and loss statement.
Although larger properties find this or-
ganization chart modification beneficial to
the operation, the majority of hotel properties
retain the traditional hierarchy, structuring
the chain of command in the same fashion as
for the past six or seven decades. A typical ex-
ample of a classic organization chart for a
beverage operation in a large hotel is shown
in Figure 6.3.
?
SHOP TALK AND THE
ACTIVE MANAGER
The bar manager or beverage director is the
person who makes it all happen in relation to
hotel beverages. Although specific responsi-
bilities may vary from one hotel to another,
the fundamental role of the manager is to
make certain that the five basic functions of
294 Chapter 6 ? Food and Beverage Division
management are applied effectively. As in
many other business sectors, these are plan-
ning, organizing, directing, staffing, and con-
trolling. The wise and competent bar manager
applies and adapts the fundamental principles
of each of these functions to the specific
needs of the operation. All five functions are
determining factors in meeting the opera-
tion’s ultimate objective: profitability.
It all begins with planning and continues
in directing and organizing so that the staff
on a daily basis diligently adheres to the es-
tablished standards. Examples: checking
bartenders’ opening and closing duties, stan-
dardizing drink recipes, verifying that the bar
par stock (established amount of beverage
product) is at the proper level, scheduling,
forecasting, frequently communicating with
other fellow managers (in particular the
catering manager and the executive steward),
and so forth.
The competent bar manager always finds
sufficient time to inspect the underbars (the
working area behind and underneath the bar
counter), the jockey boxes (the small com-
partment next to the ice bin), and the speed
racks (where the inexpensive, or well, bottles
and the more popular brand-name liquor are
placed).
The above are also the areas where man-
agers cannot place enough emphasis on how
vital it is to the operation to continuously ap-
ply sanitary standards and practice the utmost
cleanliness. Glassware must not only be
cleaned but sanitized as well.
An important organizational and training
function is the sequencing of beverage stock.
This is the order in which spirits and cordials
are placed on the shelves or speed rack. It
also refers to the order by which the drinks
are called to the bartender by the serving
staff, and it must always be the same. Super-
1327.ch06 12/19/05 9:32 AM Page 294
vising the beverage staff and ensuring that
control methods are foolproof are crucial and
demanding tasks; sequencing provides part of
the structural mix that helps assure consis-
tency of product and service.
?
MARKETING AND
MERCHANDISING
Throughout the competitive hotel industry,
beverage managers consider smart marketing
and effective merchandising the keys to suc-
cess. The marketing of the overall operation
and the merchandising of the beverage prod-
uct require time, experience, and commit-
ment. To make the beverage operation
attractive to different types of patrons and to
convey a message of value in the service of
beverages, bar managers and directors regu-
larly brainstorm. More trendy cocktails are
being created daily. Light and refreshing
blush wines and sparkling wines are intro-
duced in the preparation of new drinks.
Promotional programs and attractive enter-
tainment are featured to keep lounges full
and patrons eager to return.
Conscientious beverage managers never
rest on their laurels—they are always on the
lookout for profitable ways to stay ahead of
the competition. As the beverage sector
grows and patrons’ expectations increase,
there are always new and challenging tasks to
deal with. The following is a list of managerial
tasks with which beverage managers are oc-
cupied on an ongoing basis:
• Introducing control systems that are
more effective in monitoring the opera-
tion—for example, upgrading forms for
properly storing and issuing beverage
products and for inventory purposes.
Section 6.8 ? The Organization and Management of Hotel Beverage Operations 295
• Establishing ongoing training sessions.
• Evaluating beverage staffs’ work per-
formance.
• Checking city and county ordinances re-
garding the service of alcohol and review-
ing state and federal laws on handling
liquor responsibly.
• Preventing bartenders from committing
fraud and attempting illegal practices.
• Ensuring proper sanitary standards are
applied throughout the bar outlets and
the storage and the service areas.
• Making certain everyone in the depart-
ment adheres to proper safety standards.
• Writing, rewriting, and updating bar
working manuals and handbooks accord-
ing to need.
• Evaluating the bar menu offerings and,
whenever possible, substituting slow-
selling liquor brands with more attractive
and trendy ones.
• In particular, renewing beverage product
selection of specialty beers (e.g., by fea-
turing microbrewed products), brandies,
and cordials.
• Tracking trends. For example, a current
trend is apparent in cordials or liqueurs.
Beverage operators are finding that light,
sweet, and pleasant-tasting cordials such
as Godiva White Chocolate, Nocello,
Grand Marnier, Frangelico, Drambuie,
and Bailey’s Irish Cream are enjoying
newfound popularity. They are also seeing
lots of movement in attractive new prod-
ucts such as Remy Red and the fabulous
premium tequilas and Polish vodkas.
• Last but not least, assuring the consis-
tency and quality of the service provided
to the bar and lounge patron.
1327.ch06 12/19/05 9:32 AM Page 295
?
HUMAN RESOURCES
Outstanding service is the result of a sound
organization and diligent recruiting. Bar-
tenders and beverage servers can be talented
and willing, but if they are not provided with
the necessary resources, total management
support, encouragement, and guidance, their
efforts will be in vain. A situation may arise
where the deciding factor in the delivery of
fine and consistent service depends less on
personnel skills and attitude than on the role
played by management.
Service is the backbone of the hospitality
industry. According to Kotschevar and Luciani
(1996), “with the new millennium passing by,
customers’ expectations are on the rise.”An ef-
fective leader finds the proper ways and means
to provide the employees with the tools they
need to meet these expectations.
Progressive beverage managers now also
use the empowerment concept. Empower-
ment is a management decision by which an
employee is given authority to take steps out-
side the spectrum of regular duties and make
certain decisions that are normally in man-
agement’s domain. According to many new
beverage managers, the progressive coach ap-
proach seems to yield positive results among
beverage staffs. The old disciplinarian man-
agement style is increasingly out of place in
today’s beverage business world.
?
THE FUTURE OF
BEVERAGE OPERATIONS
In medium to larger hotel properties, like all
department managers, beverage managers are
required to prepare a business forecast based
on historical data, hotel occupancy, and spe-
296 Chapter 6 ? Food and Beverage Division
cial event bookings for the forecasting period.
An accurate forecast helps the manager pre-
pare for clientele volume so that potential
revenue can be maximized. It also helps
greatly in effectively managing beverage
stock, payroll, staff scheduling, and other
expenses.
Many hotel executives agree that the first
decade of the twenty-first century will be sig-
nificant for the beverage industry. One pecu-
liar prediction is that, although total hotel
revenues are expected to grow considerably,
the ratio of beverage sales to room sales will
remain the same or decrease slightly. Because
of the terrorist attacks in 2001 and the ongoing
wars in the Middle East, hotel revenues have
not met expectations. Beverage sales, though,
have seen an increase in revenue growth.
Much of this is due to vigorous promotion and
merchandising, particularly of new cocktails
and ambitious—even spectacular—wine sales
programs. Independent bar and lounge opera-
tors also feel confident that, unless more un-
predictable events take place, the rest of the
decade will be challenging but prosperous.
Beverage distributing firms are also opti-
mistic. They foresee a wider availability of
beverage products not only for the hospitality
industry but also in areas such as convenience
stores, supermarkets, and beverage-specific
retail outlets. Beverages that are expected to
substantially increase in sales volume are bot-
tled waters, bottled specialty teas, single-malt
Scotch whiskys, Cognacs, aged bourbons, pre-
mium tequilas, and grappas. There is a general
consensus among vendors that beer sales will
remain static and that wine will experience a
marginal but steady growth, particularly from
new areas of production, both nationally and
internationally.
It is expected that federal and state liquor
laws will remain substantially unchanged,
1327.ch06 12/19/05 9:32 AM Page 296
with minor exceptions. It also appears that the
states will maintain the basic structure of be-
longing either to control or license categories.
Many beverage managers are concerned
about government-imposed taxes on liquor
and hope they will not be increased.
Beverage managers are concerned about
the continuing lowering of the blood alcohol
threshold for driving under the influence
(DUI) of alcohol or drugs. The lower the
threshold—say, 0.08—the more careful in hir-
ing, training, and supervising managers have
to be. Over-service of alcohol is an industry-
wide problem that presents managers with a
variety of challenges. It is important to have
policies under which the manager and opera-
tion work that minimize the risk to the busi-
ness and to the public while legally selling and
serving beverages.
Education in beverage management is ex-
pected to extend to new horizons. Sonoma
State University offers a bachelor of science
degree in wine management. Through a well-
planned university extension program, the
University of California, Davis, is expanding
on specialized short courses associated with
their degree programs in enology and viticul-
ture. The William F. Harrah College of Hotel
Administration at the University of Nevada,
Las Vegas, started a beverage management
major commencing in the fall semester of
2001. Cornell University’s School of Hotel
Administration, among others, is considering
expanding their professional development
courses and adding courses on handling and
serving alcoholic beverages with care.
?
AS I SEE IT
While reviewing the industry’s projections, it
would be difficult to leave out hotel execu-
Section 6.8 ? The Organization and Management of Hotel Beverage Operations 297
tives’ most recent comments on labor issues
and concerns. During the past decade, it has
been frequently reported that staffing or find-
ing the person most suitable for a particular
job is becoming a tougher management func-
tion. Many managers agree that staffing re-
sponsibilities are requiring more time and
effort than ever before. Part of this is attrib-
uted to labor trends. The pool of steady and
loyal workers is decreasing in size. In addi-
tion, the hospitality industry is experiencing
unprecedented employee turnover. A major
restaurant company has recently reported to
me employee turnover of nearly 200 percent
for hourly employees, 60 percent for clerical
and secretarial staff, and 25 percent for mana-
gerial staff. The turnover ratio of bartenders
and cocktail servers was reported to be al-
most the same as that of typical dining room
staff such as food servers and bus persons
(Lattin, 1998). One can imagine the frustra-
tion of a beverage manager who, after spend-
ing considerable effort, time, and company
money in coaching and training a new bar-
tender, finds out she is planning to quit the
following week.
What can be done to deal effectively with
this concern? Rewards as motivators provide
some positive results. Other means of provid-
ing monetary incentives so the operation
can retain employees longer may also be
effective.
It is strongly recommended here that the
best measure management can undertake for
this purpose is to provide the employee with a
comfortable working environment, promote
teamwork and camaraderie, and foster healthy
working relationships. In short, the beverage
manager is challenged to become the em-
ployer of choice for beverage professionals.
In general, the beverage future looks
brighter than most other sectors of the
1327.ch06 12/19/05 9:32 AM Page 297
hospitality industry. However, the managers
and directors who truly will make a difference
will be those who step out, participate, and
make things happen. The aggressive new
manager always finds ways to establish a good
rapport with community leaders and is tire-
less in devising and developing new means of
attracting additional clientele. Whenever pos-
sible, he or she makes the effort to attend bev-
erage conventions and trade shows; uses the
hotel website to reinforce marketing strate-
298 Chapter 6 ? Food and Beverage Division
gies and list bar special drinks, promotions,
and happy hour times; and never rests on his
or her laurels.
The modern beverage manager is no
longer just the head bartender. This profes-
sional is responsible for millions of dollars of
the hotel’s assets and operates in a high-
energy, fast-paced, and challenging environ-
ment. It’s a lot of fun, though, and rewarding,
too. It is a managerial position with a solid
future.
6.9 CASE STUDY: CRI SI S I N THE FOOD
COURT
Nancy Swanger
Morgan Black is the director of operations of
an on-property food court made up of five
branded quick-service restaurant concepts
and one full-service casual dining outlet. The
resort hotel, of which the food court is a part,
attracts affluent guests who are traveling with
their families. The food court is located in a
common area not far from some of the re-
sort’s most popular, kid friendly recreational
activities. It also attracts local guests who are
not staying at the resort, but just visiting.
One Sunday afternoon, when the hotel’s
2,500 rooms and suites were nearly at full oc-
cupancy, an incident occurred at the branded
sandwich shop that was both bizarre and
frightening to those involved.
As was typical of the property, lunchtime
in the common restaurant area was busy and
extended well into the afternoon as families
arrived for weeklong stays. A father and son
approached the counter of the sandwich shop
to order a bite to eat. They were nearing the
register to pay for their meal when the son
suddenly collapsed and fell to the floor, hit-
ting his head on the glass window separating
the customers from the sandwich preparation
area. The boy, who was wearing short pants,
fell into a puddle of his own bloody feces as
he hit the floor. As it all happened so sud-
denly, those who were witnesses said it was
like the boy must have voided as he was col-
lapsing, as there were no signs of any problem
prior to the actual fall.
As one might expect, the scene caused
quite a stir among guests in the area. One of
the shop’s employees promptly called 911 for
an ambulance. Within a very short period,
paramedics arrived to care for the boy. It was
several minutes before he was stable enough
to transport, as they could not get the bleed-
ing to stop. Morgan, who was on property, ar-
rived just as the boy was being transported to
the local hospital for treatment.
Of course, a crowd had gathered, and talk
1327.ch06 12/19/05 9:32 AM Page 298
of the tragedy was spreading rapidly through-
out the property. The store was immediately
closed and the area around the sandwich shop
cordoned off. In trying to assess the situation,
Morgan discovered the following:
1. When the young boy hit the floor, the
puddle of bloody excrement splattered
everywhere—even hitting other guests
who were in line.
2. One of the employees, who probably re-
acted without thinking, began to clean up
the mess with her bare hands.
3. The identities of the father and son were
not known.
4. A reporter from the local newspaper was
a guest at the food court that day and
wanted comments on what happened.
Suggest a plan for Morgan’s handling of
the situation.
Section 6.10 ? Case Study: Outside the Box in the Food and Beverage Division 299
Points to Consider
• Involvement of the health department?
• Notification of the brand’s corporate
office?
• Condition of the boy?
• Clean-up process?
• Treatment of contaminated items?
• Handling affected guests and employees?
• Methods to reassure resort guests?
• When to reopen and resume business as
usual?
• Implications of what happened—short
and long term?
• Role of the resort’s crisis team?
• Training gaps?
6.10 CASE STUDY: OUTSI DE THE BOX I N
THE FOOD AND BEVERAGE DI VI SI ON
The Corporate Food and Beverage Commit-
tee, through its executive director, has or-
dered each hotel in the SunRise Hospitality
chain (11 medium-size, full-service hotels sit-
uated in the Southeast, South, and Southwest)
to submit a plan to completely rethink one
restaurant in each hotel. SunRise Hospitality
specializes in catering to the upscale business
traveler and, increasingly, the high-tech com-
panies that are now moving to the South from
California, the Seattle region, and the North-
east. Their average room rates are consis-
tently in the top 15 percent of all hotels in
their market areas. Historically, though, this
has been a fairly conservative and risk-averse
hotel company.
The corporate office wants to change this
and, in the process, to involve each hotel in
decision making. The executive director of
F&B wants to evaluate plans from each ho-
tel’s food and beverage director that “think
outside the box.” Among the ideas floating
around the company on the F&B directors’
grapevine are the following:
• Feature menus that emphasize local or re-
gional cuisine. The idea here is to utilize
fresh ingredients and local meat, produce,
1327.ch06 12/19/05 9:32 AM Page 299
and seafood, and to feature the ethnic and
cultural diversity of each hotel’s local
market area. One goal of this plan is to
make the hotel restaurant appeal to local
clientele in addition to its guests.
• Outsource one restaurant to a well-
established regional independent operator.
• Outsource one restaurant to a national
chain.
• Hire a celebrity chef to bring prestige and
favorable publicity to the hotel.
These are only a few of the possibilities.
As food and beverage director, you have
brought this plan to a meeting of your staff
for purposes of general background discus-
sion and ideas about how to proceed. In-
cluded in this meeting are the executive chef
and chief steward, the manager and assistant
manager of your formal French-service dining
room, the wine steward, and the director of
purchasing.
After presenting the corporate plan, you
ask for ideas and comments. The chef, who is
French, is absolutely devastated and seems to
be treating the corporate directive as a per-
300 Chapter 6 ? Food and Beverage Division
sonal insult. He walks out in a huff, threaten-
ing to pack up his knives and recipes and go
back to France. The restaurant manager is in-
terested in the corporate idea but says she has
just spent the last five months hiring and
training about half of her restaurant staff in
tableside preparation and service of the
French menu. She is worried that switching
menus this fast may cause her operation to
suffer, at least in the short term.
The wine steward considers the challenge
somewhat ambiguous because, depending on
what eventually is decided, he will have to
choose a complementary wine list to enhance
the new concept or lose his job to an outsider.
The director of purchasing is intrigued by
the idea of exploring new local markets. How-
ever, he too worries that some of the options
may diminish his responsibilities.
Your job as director of food and beverage
is to help each department head to develop a
plan that will satisfy his or her concerns while
following the dictates of corporate policy.
(Note: Additional insights into potential
solutions to this case may be gained by reading
the essay by C. Lee Evans later in this book.)
R E F E R E N C E S
Allen, Robin Lee. 1996. “Hotel Chains ‘Taking It
to the Street’ in Quests for Mainstream Din-
ing Appeal.” Nation’s Restaurant News 30(17).
Dubé, L., C.A. Enz, L.M. Renaghan, and J.A.
Siguaw. 1999. The Key to Best Practices in the
U.S. Lodging Industry. Ithaca, NY: Cornell
University, Center for Hospitality Research.
Hanson, Bjorn. 1984. “Hotel Foodservice: Where’s
the Profit?” Cornell Hotel and Restaurant Ad-
ministration Quarterly 25(2):92–96.
Hensdill, Cherie. 1996. “Partnerships in Dining.”
Hotels 30(2):57–60.
Hubsch, Allen W. 1966. “Hotel Food and Beverage
Management.” Cornell Hotel and Restaurant
Administration Quarterly 7(3):9–11, 18–19.
Kotschevar, L., and V. Luciani. 1996. Presenting
Service. Chicago: Education Foundation of the
National Restaurant Association.
Lattin, Gerald. 1998. The Lodging and Foodservice
Industry. East Lansing, MI: Educational
1327.ch06 12/19/05 9:32 AM Page 300
Institute of the American Hotel and Motel
Association.
Liberson, Judy. 1995. “Restaurant Chains Partner
with Hotels to Satisfy Different Needs,
Tastes.” Lodging (September):1, 8–9.
———. 1996a. “The Global Dinner Plate.” Lodg-
ing 22(1):85–88.
———. 1996b. “Holiday Inn Offers Assorted Food
Options with New Quick Food Concept.” Ho-
tel Business (June):9.
Parseghian, Pamela. 1996. “Branding Offers Ho-
tels Opportunities to Increase Food Sales.”
Nation’s Restaurant News 30(23):96.
Siguaw, Judy A., and Cathy A. Enz. 1999. “Best
Practices in Food and Beverage Manage-
ment.” Cornell Hotel and Restaurant Adminis-
tration Quarterly 40(5):50–57.
Section 6.10 ? Case Study: Outside the Box in the Food and Beverage Division 301
Strate, Robert W., and Clinton L. Rappole. 1997.
“Strategic Alliances Between Hotels and
Restaurants.” Cornell Hotel and Restaurant
Administration Quarterly 37(3):50–61.
Withiam, Glenn. 1995a. “Trader Vic’s Wraps Up
60th Birthday Bash.” Cornell Hotel and
Restaurant Administration Quarterly 36(3):14.
———. 1995b. “Harvey: Expansion and Conver-
sion.” Cornell Hotel and Restaurant Adminis-
tration Quarterly 36(4):13.
Wolff, Carlo. 1995. “Hyatt Regency Columbus
Blazes F&B Trails.” Lodging Hospitality
51(9):24.
S U G G E S T E D R E A D I N G S
Books
Birchfield, John C., and Raymond T. Sparrowe.
2002. Design and Layout of Foodservice Facil-
ities, 2nd ed. New York: John Wiley and Sons.
Foster, Dennis L. 1992. Food and Beverage: Opera-
tions, Methods, and Cost Controls. Lake For-
est, IL: MacMillan/McGraw-Hill, Glencoe
Division.
Katsigris, Costas, Mary Porter, and Chris Thomas.
2002. The Bar and Beverage Book, 3rd ed.
New York: John Wiley and Sons.
Khan, Mahmood A. 1990. Concepts of Foodservice
Operations and Management, 2nd ed. New
York: John Wiley and Sons.
Pavesic, David V. 1999. Restaurant Manager Hand-
book Series: Menu Pricing and Menu Design.
New York: Lebhar-Friedman.
Shock, Patti J., and John M. Stefanelli. 1999. Hotel
Catering: A Handbook for Sales and Opera-
tions. New York: John Wiley and Sons.
Articles
Allen, Robin Lee. 1996. “Hotel Chains ‘Taking It
to the Street’ in Quests for Mainstream Din-
ing Appeal.” Nation’s Restaurant News
30(17):124–128.
Hanson, Bjorn. August 1984. “Hotel Foodservice:
Where’s the Profit?” Cornell Hotel and
Restaurant Administration Quarterly 25(2):
92–96.
Hensdill, Cherie. 1996. “Partnerships in Dining.”
Hotels 30(2):57–60.
Hubsch, Allen W. 1966. “Hotel Food and Beverage
Management.” Cornell Hotel and Restaurant
Administration Quarterly 7(3):9–11, 18–19.
Parseghian, Pamela. 1996. “Branding Offers Ho-
tels Opportunities to Increase Food Sales.”
Nation’s Restaurant News 30(23).
———. 1996. “Holiday Inn Offers Assorted Food
Options with New Quick Food Concept.” Ho-
tel Business (June).
Withiam, Glenn. 1995. “Harvey: Expansion and
Conversion.” Cornell Hotel and Restaurant
Administration Quarterly 36(4).
1327.ch06 12/19/05 9:32 AM Page 301
S O U R C E N O T E S
302 Chapter 6 ? Food and Beverage Division
Chapter 6.6, “Contemporary Hotel Catering,” by
Patti J. Shock and John Stefanelli, adapted
from Hotel Catering, by Patti J. Shock and
John Stefanelli, Copyright © (year and
owner). Reprinted by permission of John Wi-
ley & Sons, Inc.
Chapter 6.7, “A Day in the Life of an Executive
Director of Catering Sales and Convention
Services,” by Rich Benninger.
Chapter 6.8, “The Organization and Management
of Hotel Beverage Operations,” by Valentino
Luciani.
Chapter 6.9, “Case Study: Crisis in the Food
Court,” by Nancy Swanger.
Chapter 6.2, “Managing Food and Beverage Oper-
ations in Lodging Organizations,” by Robert
H. Bosselman.
Chapter 6.3, “As I See It: Hotel Director of Food
and Beverage,” by Dominic Provenzano.
Chapter 6.4, “Best Practices in Food and Beverage
Management,” by Judy A. Siguaw and Cathy
A. Enz, is reprinted from the October 1999 is-
sue of Cornell Hotel and Restaurant Adminis-
tration Quarterly. © Cornell University. Used
by permission. All rights reserved.
Chapter 6.5, “Strategic Alliances Between Hotels
and Restaurants,” by Robert W. Strate and
Clinton L. Rappole, is reprinted from the June
1997 issue of Cornell Hotel and Restaurant
Administration Quarterly. © Cornell Univer-
sity. Used by permission. All rights reserved.
1327.ch06 12/19/05 9:32 AM Page 302
c h a p t e r s e v e n
MA R K E T I N G A N D
A S S O C I AT E D A C T I V I T I E S
planners who represent and book group and
convention business are educated and in-
formed consumers. To serve this clientele, ho-
tels have had to develop marketing efforts
and product segmentation, first to interest the
market, and second to allow people repre-
senting that market to make intelligent
choices among competitors. Increasingly, indi-
vidual consumers and small businesses are
becoming more sophisticated in arranging
their own travel plans over the Internet. This
represents yet another challenge to hotel
marketers: How do we market most effi-
ciently to all groups? Good question.
Marketing has become an umbrella term
that covers a number of strategic and tactical
activities designed to tell the clientele the
story of the hotel’s services and to encourage
that clientele to make choices based on how
one hotel’s marketing message matches their
7.1 I NTRODUCTI ON
For most hotel companies, it was only during
the 1980s that the word marketing was any-
thing more than a euphemism for sales. In-
deed, in the competitive landscape of the not
too distant past, an aggressive and knowl-
edgeable sales staff could accomplish most
activities that related to putting guests in
rooms. In the competitive environment of the
present time, this has become impossible.
Hotel companies that design and market a
sophisticated inventory of hospitality services
need a similarly sophisticated scheme for
letting potential clientele know about their
services.
For most hotel companies in the twenty-
first century, true marketing has evolved to
reflect this sophistication. This development
also acknowledges increased sophistication
on the part of guests and potential clientele.
Business travelers, travel agents, and meeting
303
1327.ch07 12/19/05 9:33 AM Page 303
needs better than the available alternatives.
In any given hotel or hotel company, market-
ing includes a range of sales activities, public
relations, advertising in all media, design of
symbols and images, and (increasingly) the
departments of convention services, reserva-
tions, revenue management, and, perhaps,
catering.
It should be noted that research plays a
major role in designing marketing strategies
and tactics. The monograph presented in this
edition by Bianca Grohmann and Eric Span-
genberg has a research orientation at its core.
It is designed to assist managers in choosing
and generating data that are useful to staying
successfully competitive. It is important that
managers understand the range within which
this data may be interpreted and applied.
Successful managers and high-quality organi-
zations are always seeking information and
data that allow them to make accurate deci-
sions and design effective marketing and
managerial efforts.
These data can take a number of forms
but, for the most part, deal with the charac-
teristics of the hotel’s target market segment
that affect their choice of hotels. In this case,
the research seeks to understand how con-
sumers make choices among hotels based on
the value of their various attributes.
Among other data that hotels find mech-
anisms to accumulate and interpret are these
kinds:
• Geographic: what sorts of communities
are represented; what parts of the country
or world; how far people travel
• Demographic: age, sex, occupation, in-
come, ethnicity, family, education
• Psychographic: client’s self-image, social
or peer group, lifestyle, personality traits
• Behavioral: whether the hotel choice is a
routine or special occasion; what guest
304 Chapter 7 ? Marketing and Associated Activities
seeks in terms of quality, service, econ-
omy; user status (nonuser, ex-user, poten-
tial user, regular user, first-time user);
usage rate (light, medium, heavy); loyalty
(none, medium, strong, absolute)
While many of the specific details or pro-
grams implied under the marketing umbrella
may be farmed out to agencies that specialize
in advertising or public relations, the genesis
of the hotel’s strategic marketing plan must
be within the hotel organization itself.
The article contributed to this section by
Fletch Waller provides a strong argument for
broadening the definition of marketing to in-
clude all operational aspects of the hotel. This
article is an excellent overview of the market-
ing process. Waller illustrates the relationship
between marketing and operations as a “con-
tinuing process” without which hotels proba-
bly cannot remain competitive.
Yield management, long a practice of the
airline industry, has found total acceptance by
hotel marketing and reservations systems. In-
deed, it has become an industry standard. The
article in this section by Paul Chappelle can
be read in conjunction with that by Quain and
LeBruto in Section 4 for a comprehensive
primer on yield management. Together, these
articles explore various aspects of that prac-
tice from the viewpoint of Chappelle, current
practitioner. Chappelle lives the theory of
yield and revenue management on a daily ba-
sis and provides insights about how it works
in practice. As the revenue manager for over
30 hotels, Chappelle has the experience to
back up the theory.
New for this edition, the Sinclair essay on
hotel pricing should be read in the context of
the issues and suggestions raised by the con-
tributions on yield management. But it goes
beyond that. Drawing on Sinclair’s deep ex-
perience in hotel operations, particularly
sales, this contemporary work on pricing is up
1327.ch07 12/19/05 9:33 AM Page 304
to date and useful not only from a conceptual
standpoint but a practical one.
Shaw and Morris bring their collaborative
talents in academe and industry to the essay
on the organization of the sales function in
hotels. Because, as noted elsewhere in this
text many times, the potential markets for a
hotel’s services and the types of hotel are so
numerous, sales efforts can be complicated.
Shaw and Morris present this complex de-
partmental function in a clear, straightfor-
ward fashion that is both theoretically
relevant and operationally practical.
Traditionally, the function of public rela-
tions for any organization, particularly hotels,
was oriented toward the generation of favor-
able—usually free—publicity and the sup-
pression or management of bad news. Louis
Richmond proposes the different and ex-
panded but not necessarily contrary position
that public relations activities can positively
enhance the hotel’s sales and marketing ef-
forts. He discusses his experiences in the case
of the Seattle Sheraton Hotel and Towers. Us-
ing that example, he argues that through cre-
ative cooperative efforts with local charity,
Section 7.2 ? Building Market Leadership: Marketing as Process 305
cultural, and volunteer organizations, hotels
can serve the activities of those groups’ fund-
raising efforts and simultaneously position
themselves to show the arbiters of potential
business how well the hotel can perform. His
examples are instructive. Richmond, who is
president of his own very successful public re-
lations firm in Seattle, retains the Sheraton
and other hospitality concerns as clients.
All in all, the strategies, tactics, activities,
personnel, and concepts described in articles
and essays in this section provide an overview
that only hints at everything important to ef-
fective management of the marketing func-
tion. Marketing is perhaps the most
written-about topic in hospitality literature.
Because of the great diversity of opinion, it
can be argued that there is no one “right” way
to market, nor is any single piece of literature
generally considered seminal to hotel market-
ing. The reader is urged to consider the refer-
ences cited by contributing authors, the
suggested readings, and active perusal of re-
cent hospitality journals to achieve greater
understanding of this fascinating process—
and, by extension, its management.
7.2 BUI L DI NG MARKET L EADERSHI P:
MARKETI NG AS PROCESS
Fletch Waller
The hotel business has changed enormously
over the last 30 years, embracing special niche
forms of lodging (e.g., extended stay), new
ways of segmenting markets (e.g., W’s “fash-
ionables”), brand proliferation and consolida-
tion, new tools for acquiring customers (e.g.,
email), distribution innovations (e.g., Expe-
dia), and globalization. These changes in mar-
kets and in ways hotels relate to and
capitalize on them have put new demands on
marketing.
Marketing, as addressed herein is not the
sales and marketing department; I mean mar-
keting in its broadest sense of how hotels re-
spond to and seize on market opportunities.
Definition? Marketing is a process of creating
1327.ch07 12/19/05 9:33 AM Page 305
and sustaining productive relationships with
desirable customers. Its goal? To produce
such relationships more effectively than com-
petitors do.
Let’s examine the definition and its impli-
cations. Marketing is . . .
• . . . a process . . . A process, a series of
functions and actions for approaching
and dealing with opportunities. Market-
ing, as used herein, is not a job but a way
of proceeding to create and operate a ho-
tel focused on customers and competitors,
a way that incorporates all members of
the hotel staff and its support.
• . . . of creating . . . The essence of
marketing is creation: imagination, in-
306 Chapter 7 ? Marketing and Associated Activities
sight, willingness to change and evolve,
and, yes, discard.
• . . . and sustaining . . . Loyalty over
time and repeat customers are the key to
productivity and optimal contribution
margins.
• . . . productive relationships . . . A re-
lationship must be two-sided, with bene-
fits for both partners in the relationship. In
the case of customers, the benefits are
wants and needs consistently fulfilled and
full value received; in the case of staff, pro-
fessional satisfaction and operating profits
sufficient to fund improvements provide
attractive compensation, and provide re-
turns on investors’ or owners’ capital.
In the late 1990s, rising costs of acquiring
customers in U.S. hotels were masked by
strong increases in the average daily rate
(ADR). In 1995, marketing costs per occu-
pied room (franchise and marketing fees,
commissions, reservation costs, and property
marketing and sales expenses) in full-service
hotels averaged 15.3 percent of ADR. By
2000, it had risen to 15.6 percent; that three-
tenths of a point increase over four years
hardly alarmed people. But consider, of the
expenses that make up the costs of acquiring
customers, only commissions vary directly
with rate; most of the expenses are personnel
compensation and benefits and purchases—
of ads, brochures, sales calls, websites, global
distribution system (GDS) delivery services,
telephone time, and so on. These expenses
grow over time, but not as a function of the
price for which a room is sold. If marketing
were truly productive, we should have been
seeing costs per unit dropping.
In dollar terms, full-service hotels saw
marketing costs per occupied room balloon
38 percent in just five years, to $17.96 in 2000
from $12.99 per room-night in 1995! In
higher-rated full-service hotels, acquisition
costs rose to $22.71 from $15.86, a 43 percent
increase. Resorts suffered a 27 percent in-
crease, to $22.96 from $18.07 just five years
earlier. By 2002, as rates and occupancies
softened, marketing costs per occupied
room in full-service hotels had begun to be
reined in, at $17.02, but now accounted for
16.4 percent of ADR (PKF’s Trend Reports,
1996, 1998, 2001, 2003.) The main culprit is
distribution costs. Whatever the cause, mar-
keting productivity must be improved.
1327.ch07 12/19/05 9:33 AM Page 306
• . . . with desirable customers. Not all
customers are equally desirable; we want
those who are willing to pay, growing in
numbers, making multiple purchases, and
whose needs we are able to fully satisfy.
And the goal?
• . . . To produce such relationships . . .
Production implies inputs, outputs, and
the measurement of productivity. Market-
ing productivity has been lagging for the
last decade; the rising costs of acquiring
customers must be reined in. (Note: If
marketing efforts are a cause of customer
decisions to purchase, then marketing
productivity is the cost of stimulating that
purchase decision relative to the value of
that decision. Productivity is best mea-
sured by the cost of acquiring a customer
not only as a percent of sales but also as
dollars per unit of sale—for example, dol-
lars per occupied room, dollars per group
contract, dollars per cover.)
• . . . more effectively than competitors
do. Marketing success is judged in rela-
tive terms, using competitors and similar
hotels as benchmarks. As a creative
process, especially in a field like hospital-
ity wherein innovations are unprotected
and easily copied, the benchmarks and
goals are always moving targets. Besting
the competition is the constant challenge.
By the end of this chapter, it will be clear
that successful marketing of a hotel requires
the orchestration of a wide variety of talents
and skills, of which sales and marketing per-
sonnel are only a part. Chain hotels approach
the process one way; independents must do so
another. But in either case, market success de-
pends on an effective integration of market-
ing and operations at the property level under
the direction and leadership of a market-
driven general manager.
Section 7.2 ? Building Market Leadership: Marketing as Process 307
?
THE MARKETING
PROCESS
Peter Drucker (1974) says the purpose of op-
erating a business is to create a customer and
keep him (or her). Investors in a hotel may
have return on investment as their purpose,
but for us operators, it is useful to conceive
our purpose as being to create and keep cus-
tomers. If we do this successfully, profits and
capital returns flow. Our marketing process is
our way of creating and keeping customers.
Every business has a marketing process, a
way it “goes to market.” It is the way man-
agement decides what they are going to do
and offer, with whom they will compete, how
they will attract the customers, and how they
will satisfy and keep them. Most businesses,
many hotels among them, do not reflect on
and carefully articulate their marketing
process; they just do their thing by habit and
by tradition. Other businesses make con-
certed efforts to regularly plan and review
their “going to market.”
A hotel is a 24/7 business, running without
stop. Typically, because of the pressure just to
keep up, we do what we’ve done in the past,
repeating our marketing process by habit.
This is risky, for customers and competitors
are always changing. Does a hotel need a
planned and regular review of its marketing
process? Considering our high fixed costs and
the large leverage on profits from small
changes in revenues, yes—hotels should take
concerted and disciplined care of their mar-
keting process. For a hotel to remain effective,
it should formally review its marketing
process at least once a year to be sure it is still
suited to its market; if it is not, revise it to fit
changing customer and competitor patterns.
Further, the hotel must measure the cost of
acquiring its customers so as to steadily
1327.ch07 12/19/05 9:33 AM Page 307
increase the productivity of its marketing
process.
A hotel marketing process (Figure 7.1)
starts with deciding what to be and what to of-
fer to whom. This is not just for new hotels in
pre-opening; existing hotels must adjust and
fine-tune their offerings as market conditions
change. The next step is to set the price struc-
ture. These first two steps establish the hotel’s
value proposition.
Next, create awareness and stimulate de-
mand among the people you hope to make
your customers. Then you must make the ho-
tel available to them, and close the sale—that
is, commit, confirm, and manage revenue.
Flexible rate management within the pricing
structure and response to short-term swings
in demand and supply are necessary to create
customers and optimize revenue per available
room.
Now begins the transition to operations,
but this is no less a part of the marketing
process. In fact, this is the critical part of the
process. You must prepare the hotel staff to
meet and fully satisfy the wants and expecta-
308 Chapter 7 ? Marketing and Associated Activities
tion of these customers you have attracted.
Then you have to work to retain those cus-
tomers and turn them into repeat loyalists.
Lastly, you must measure their satisfaction and
evaluate your performance.
Let’s examine these steps and, along the
way, comment on ways of improving their ef-
fectiveness and productivity.
?
DECIDING WHAT TO BE
AND WHAT TO OFFER
TO WHOM
In an existing hotel, the developer and archi-
tect already may have decided many of the
things it is—high-rise or resort, in the business
center or on the edge of town, large rooms
and baths or smallish, one restaurant or sev-
eral, wood or marble, with ballroom or not,
and so on. Even so, the management team
must still consciously examine what they in-
tend the hotel to be and offer to whom. The
type of customer originally in mind may not
Figure 7.1 The Hotel Marketing Process
DECIDING WHAT TO BE AND WHAT TO OFFER TO WHOM
SETTING PRICES
CREATING AWARENESS AND STIMULATING DEMAND
MAKING THE HOTEL AVAILABLE
CLOSING, CONFIRMING, & MANAGING REVENUE
PREPARING TO DELIVER & DELIGHT
RETAINING CUSTOMERS
MEASURING SATISFACTION & EVALUATING PERFORMANCE
1327.ch07 12/19/05 9:33 AM Page 308
be available now in enough numbers to sup-
port the hotel. Perhaps a competitor has come
in and taken away a piece of the market. Per-
haps the business center has shifted to an-
other part of the city. Perhaps new customers
from Korea or California have replaced the
original ones from Europe and the East
Coast. Even though the owner has provided a
basic envelope within which to operate, there
still are options—many things the hotel team
can control, many choices to be made on what
to offer and to emphasize to various market
segments. Is the hotel the place to be seen or
the place that guards privacy? Is it better to
stress family style or crisp, professional busi-
ness style? Should the hotel add services, like
a Japanese breakfast, to meet the needs of
one particular group? Should the team put in
meetings express and add more small meeting
spaces to tap the short-lead-time corporate
meetings market? Should it drop some ser-
vices the market no longer wants to support?
The answers to what to be and offer are
found by studying the marketing situation,
which comprises three parts: (1) strengths and
weaknesses, (2) the kinds and numbers of cus-
tomers available in the marketplace, and (3)
the other hotels with whom this hotel com-
petes for these customers. Careful analysis
yields a picture of which segments the hotel is
best able to attract and serve. These become
Section 7.2 ? Building Market Leadership: Marketing as Process 309
the target markets—the “to whoms”—and
their needs and wants become the “what to
be’s.”The key to successfully deciding what to
be and offer to whom is a matter of strategic
selection of, focus on, and commitment to a
well-defined set of markets for whom the ho-
tel is best suited to compete. Trying to be all
things to all potential customers is a guaran-
tee of ineffectiveness.
A good example of focus and targeting is
Starwood’s W. At risk of turning off a sizeable
portion of the business and leisure travel mar-
ket and leaving families well behind, Star-
wood focuses tightly on a lifestyle segment of
professional and business people, with re-
markable success.
The talents required to assess the market-
ing situation, create a data model of the mar-
ket’s segments, calculate a feasible share of
each, and select the targets on which to focus
are comfort with data, the ability to observe
and infer, creativity, patience with detail, com-
fort with the hypothetical, and an analytic
curiosity. Usually, such analyses are uncom-
fortably foreign to people with backgrounds
in sales, and often to operators as well. It is es-
sential that we teach, motivate, and reward
curious, careful, insightful analysis of history
and market information—skills that are not
natural to those typically attracted to hospi-
tality management.
IMPROVEMENT TIPS
• Send prospective general managers
and directors of marketing to a marketing
course, one with examples or cases in mar-
ket analysis.
• Assign analytic exercises to a prospec-
tive director of marketing, like coming up
with three options for cutting into the small
business meetings of a competitor or in-
creasing sales of the gift shop.
1327.ch07 12/19/05 9:33 AM Page 309
?
SETTING PRICES
Having decided what to be and offer and to
whom, the next most important decision is
price. Pricing is a critical decision because it
determines, first, whether or not the intended
customers will purchase, and second, whether
they will be satisfied with the value offered
and, thus, be willing to return. Third, it deter-
mines whether the hotel will be financially
healthy enough to maintain itself and reward
its employees so customers can once again be
satisfied when they do return.
Three factors must come into considera-
tion in pricing—the Three Cs of pricing, if you
will: costs, competition, and customers’ com-
fort zones. In F&B, costs drive pricing of
menu items and beverages. Drucker (1999,
115–6) says American industry has too much
cost-driven pricing, and that it needs more
price-driven costing. Doesn’t F&B have the op-
portunity to build and test menus to discover
where price points should be set, and is not the
chef challenged to manage ingredients and por-
tion size to deliver the cost and margin structure
desired? Yet the cost-driven practice continues.
In rooms, competition is most often the
dominant factor. Costs play a role, but
changes in variable cost of an occupied room
are generally small and rooms’ contribution
margins are large, typically 65 percent or bet-
310 Chapter 7 ? Marketing and Associated Activities
ter. Moreover, hotel accounting does not
measure discounts from a standard price, as
do almost all other industries. So there is no
visible cost in reducing price to meet com-
petitors. Remember: Any damn fool can cut
his price, and some damn fool always will.
Must everyone follow? No. The key is to get
in the head of the customer. The truly con-
trolling factor is customer comfort zones, and
all too often hotel management leave money
on the table because they don’t know what
those comfort zones are. At what price does
the offer attract and deliver value? That is the
key question in setting prices.
Price setting requires talent and skill in
data gathering and analysis, accounting and
building pro formas, interpreting and drawing
inferences, and decision making. Do not let
salespeople set prices; do not let controllers
set prices. Only one person—the GM—can
pull together the inputs of sales, control, oper-
ations, reservations, and the rest, and make
this crucial judgment call. Also, build at least
three price scenarios and have the controller
and marketing director agree on occupancy
impacts. Then run a GOP pro forma on each.
Out of that exercise will come a sense of the
best pricing approach to take. Setting prices is
the one task the GM cannot delegate, for he
or she must live with and be accountable for
all that results from this critical decision.
PRICING TIP
Include staffers in contact with cus-
tomers in pricing discussions. A ski resort
owner-operator asked me to review his pro-
posed price schedules. I asked to have in-
cluded in our meeting a senior reservation
agent, a bellman, a bartender, and a front
desk agent. After probing them on what they
heard from customers about value, we in-
creased four of the seven proposed room type
prices, to the owner-operator’s delight.
1327.ch07 12/19/05 9:33 AM Page 310
?
CREATING AWARENESS
AND STIMULATING
DEMAND
Herein are the typical roles of the marketing
department: using sales, communications, and
promotions to attract the target markets. But
creating awareness is not only marketing’s
job. Everything the public sees and hears
about the hotel—its name or brand, its signs,
its restaurants, the public activities of its man-
agers, its charitable support and festivals—all
create a meaning, a picture of what this hotel
means and offers.
Starwood’s W again offers an example:
Every element of their presentation expresses
the “to whom” they target. In decor, uniforms
(costumes?), tone, and attitude, they focus
and send a coherent message. It is critical that
every department understands the target
markets and agrees on the idea, the meaning
the hotel intends to have for each of the tar-
get customer groups. This is called position-
ing; it’s something done not to the product
but to the mind of the prospect.
The team should prepare written posi-
tioning statements, including a compatible but
individual positioning statement for each
Section 7.2 ? Building Market Leadership: Marketing as Process 311
market segment they intend to target. These
statements are the blueprint against which
each ad, promotion, and sales call is tested to
assure consistent messages are being sent.
And those statements should be shared with
all employees. When all parts of the hotel are
sending a coherent and consistent message of
what the name or brand means and what un-
derlying promise is being made, the hotel es-
tablishes a clear position in the mind of the
prospects—ideally, one that is attractively dis-
tinctive from competitors.
Marketers can use a variety of tools to
create awareness and stimulate demand—for
example, sales blitzes, telemarketing, newspa-
per ads, Internet sites and ads, partnership al-
liances, radio ads, and price promotions. The
marketing mix is the range and balance of
tools selected and resources devoted to each
to achieve the hotel’s marketing goals.
In most hotels, direct selling is still the pri-
mary marketing tool used to create awareness
and stimulate demand. There are two parts of
effective direct selling: sales skills and sales
management. Consider one the weapon, the
other the shooter.
Sales skills are not natural; enthusiasm
may be natural, liking to meet people may be
natural, but selling is a process that anyone
POSITIONING IN FIVE QUESTIONS
1. Who are the prospects; what do they
like; how do we find them?
2. What do they now know or believe
about us?
3. What, specifically, do we want them
to do?
4. What do they need to come to be-
lieve so they will do that?
5. What reasons can we offer them to
hold this new belief?
1327.ch07 12/19/05 9:33 AM Page 311
can learn and that must be practiced. Make
sure your salespeople are taught how to re-
search their prospect, to listen for needs and
purposes, to acknowledge that they have
heard the prospect, to transform relevant fea-
tures into benefits and to sell the customer’s
success, to anticipate objections and prepare
responses, to negotiate, to ask for the order,
and to thank the customer and facilitate
delivery.
Sales management is quite another thing;
often (usually?) the top salesperson does not
make the best sales manager. The sales man-
ager must be able to select salespeople; rein-
force their training; coach, counsel and
motivate them; assign them to prospects and
market segments; set goals, manage compen-
sation, review performance; and troubleshoot.
He or she must also be the gatekeeper on
contracts and rates, making sure that inven-
tory of group space is optimally committed.
312 Chapter 7 ? Marketing and Associated Activities
Compensation of salespeople need not be
complicated. First principle: Tie compensation
to goals set in terms of what you want them to
do—that is, produce contracts and room-
nights. Don’t just set room-night goals; add
measures of relationship or share of a specific
customer’s business. Have salespeople sug-
gest their own goals for the coming year;
participation builds commitment. Second:
Provide them near-term reward and rein-
forcement, not postponed rewards. Pay out
bonuses quarterly. Third: Build teamwork so
that one salesperson supports and encourages
another. Add a team bonus multiplier to per-
sonal performance measures. Last: Separate
performance bonuses from overall job ap-
praisal. No one attends to suggestions for per-
formance improvement if he or she has just
received a big check for exceeding goal.
Many full-service hotels are over-
resourced in group sales and under-weighted
SALES PRODUCTIVITY TIPS
• Track competitors’ group commit-
ments so that a market’s uncommitted meet-
ing spaces for future dates are foreseen,
guiding pricing.
• Don’t “be fair” by treating everyone
the same; motivate each salesperson individ-
ually with incentives and attention suitable
to his or her own style and need.
• Focus on team members who are be-
low average, constantly improving the bot-
tom and driving average production up.
• Don’t just focus on room-nights. Cal-
culate the number of contracts needed (us-
ing your average size of group) to fill the
annual room block and set goals for weekly
contract production as well. This will bal-
ance the sense of importance among sales-
people, whether assigned to large or small
group segments.
• Don’t waste sales talent on cold call-
ing. Use a prospecting service to qualify
leads; focus your selling power on prospects.
• Clean out files at least annually. Sales-
people tend to hold on to prospects long af-
ter the likelihood of a booking has dwindled.
• Automate. Customer and booking
management systems pay.
1327.ch07 12/19/05 9:33 AM Page 312
in transient market tools. Sales efforts should
be balanced with other parts of the marketing
mix—advertising, publicity, and promotions.
The range of communication options in-
creases geometrically with proliferation of
new media—cable television, news magazines
and national papers, the Internet, and direct
mail and telemarketing. But the eyeballs are
not growing apace, meaning the audience for
any one medium is steadily shrinking, putting
increasing demand on measures of productiv-
ity, care in allocating resources, and creativity
to get through the clutter. As audiences of
prospects become increasingly expensive to
reach through advertising, the tools of public-
ity, the Internet, and direct marketing are in-
creasingly the media of choice.
The Internet is a demanding medium for
communication; use professional help to de-
sign, maintain, and market the hotel’s website
as though it were, itself, a product for which
awareness must be created and demand stim-
ulated. To draw audience to the site and man-
age its visibility in search engines are skills
beyond the property team. Set specific goals
for the site: They might be to attract qualified
prospects, to sell services, to provide customer
Section 7.2 ? Building Market Leadership: Marketing as Process 313
service. Don’t just have a site. And measure
the experts against those goals. A passive, un-
managed, and undermarketed site is a waste
of money.
Promotions can powerfully stimulate de-
mand, but too often, price promotions are re-
sorted to as a last-minute attempt to prop up
a weak demand period. Promotions should be
planned, justified on a breakeven basis, and
used sparingly. Not all promotions need be
price promotions; customers invest energy
and time in transactions, too: value-added
promotions that offer nonmonetary savings
can be used to avoid habituating consumers
to buying only on sale or shopping only on
price. Well-forged alliances for copromotion
can increase both productivity and absolute
sales volume.
The skills and talents necessary in a com-
prehensive effort to create awareness and
stimulate demand include:
• In sales: Initiative; being goal-directed; lis-
tening with empathy and imagination;
time management; self-confidence.
• In sales management: Coaching and coun-
seling; quantitative skills (for setting
COMMUNICATION AND PROMOTION TIPS
• Run breakeven analyses on each ad
or promotion, asking what percentage in-
crease over normal unit sales it will take to
return these dollars, using contribution mar-
gins, not revenues. Is that a reasonable
expectation?
• Assign individual toll-free numbers to
each ad and medium so response to each can
be tracked.
• Don’t ask if your GM likes an ad; ask
if the intended prospect is likely to respond
to it.
• Make sure the message the audience
will take away is consistent with your basic
positioning: what you intend to mean and of-
fer to that market.
1327.ch07 12/19/05 9:33 AM Page 313
booking goals and recordkeeping); prior-
ity setting, time management, and sense
of urgency; leadership and problem solv-
ing; ability to manage incentive programs.
• In communications: Ability to write
clearly; ability to select, engage, and man-
age professional creative talents; ability to
evaluate and allocate resources among
options; comfort with and appreciation of
the Internet and the Web.
• In promotion: Ability to analyze
breakevens; creativity; anticipation; con-
ceiving and selling partnerships and
alliances.
?
MAKING THE HOTEL
AVAILABLE
Once a person in one of your target markets
is interested in buying, how does he or she
reach you? Your hotel’s reservations office,
the central reservation system, airline global
distribution systems, corporate sales offices,
and your property sales office are all parts of
a distribution network. Travel agents, corpo-
rate travel managers and secretaries, meeting
planners, and travelers themselves reach your
hotel through this network.
Travel industry distribution channels are
in chaos by virtue of the shift of travel agen-
cies from commission to fee-for-service mod-
els, the rise of the Internet as a consumer’s
direct booking channel, and online third-
party intermediaries like Expedia and Trave-
locity. Increasingly, the Internet will become
your key distribution channel, but in the
meantime, you must manage two parallel sys-
tems, the traditional central reservation and
travel agency channels and the new electronic
channels. Are the rooms you want to offer
314 Chapter 7 ? Marketing and Associated Activities
available in both systems, with helpful and up-
to-date information? Are your prices sensible
in each outlet? Making the hotel available is
no longer a passive stance but an active part
of your marketing.
In other industries, distribution channel
revolutions have brought efficiencies that
benefit both consumers and suppliers. In the
travel distribution revolution now underway,
the consumer has benefited, but costs to ho-
tels—the suppliers—have skyrocketed. Since
1993, full-service hotel costs of distribution
(commissions, Global Distribution System
fees, and reservation expenses) more than
doubled, to $1,377 per occupied room per
year in 2002 (PKF, 2003).
Along with these new channels and third-
party room merchants has come pressure on
prices. In the downturn of 2001–2003, this was
devastating. Price comparisons are quick and
easy for the consumer. Packagers and auction
sites, like Priceline.com, unconsciously culti-
vate the destructive idea that a hotel room is
a commodity, as is an airline seat. But hotels
are not commodities; each differs in location,
features, and benefits. A hotel team must re-
sist the idea that a room is a room is a room,
must emphasize their hotel’s distinctive posi-
tioning, and must resist the urge to simply
match the lowest price offered.
For the foreseeable future, both the tradi-
tional and Internet-based distribution sys-
tems will coexist and have to be managed.
This raises a new question: What channels do
you want to encourage, and what ones dis-
courage? Conventional wisdom, in recent
years, has been to make the hotel’s inventory
and rates available via as many channels as
possible so as to capture from anywhere in
the world the last drop of demand for arrival
on a given day. Given their sharply differing
costs, however, and the difficulty of managing
1327.ch07 12/19/05 9:33 AM Page 314
coordinated presence in these new and over-
lapping channels, the time may be coming for
a new strategy. One possibility is to starve un-
desirable channels with limited information
and access while being fully open and trans-
parent to others. Another approach might be
to price differentially among channels to re-
flect their different costs. A large Hawaiian
resort group is already doing that by explain-
ing to consumers what comparative options
and costs are. Other chains advertise a guar-
antee that the lowest price will be found on
their own website, which is a low-cost channel
for them.
Reservations, revenue, and channel man-
agement constitute the fastest-changing part
of hotel management today. Channel man-
agement requires a comfort with and interest
in technology and systems, and a knack for
problem solving, anticipating, and risk taking
(to shut down past patterns and undertake
new initiatives).
?
CLOSING,
CONFIRMING, AND
MANAGING REVENUE
How one commits space—a room, meeting
space, ballroom, or even a restaurant table—
and at what price—determines the revenues
Section 7.2 ? Building Market Leadership: Marketing as Process 315
and financial health of the hotel and deter-
mines the customer’s expectation of value.
Revenues must be managed to optimize fi-
nancial returns and customer satisfaction—
that is, the customer’s willingness to return.
No one department controls the tools of
revenue management. They are shared
among salespeople, catering and banqueting
managers, front desk agents, reservation
agents, and so on. To manage properly re-
quires frequent and open conversation be-
tween managers, good forecasting, skillful
selling by customer contact people, and an ap-
preciation of each week’s goals and targets
for the hotel. Poor forecasting, inflexible in-
ventory policies, and conflicting approaches
by different departments with whom the cus-
tomer deals can undo all the best advertising,
selling, and promotion.
Through the same forecasting disciplines,
hotel teams manage their revenues to maxi-
mize the productivity of the hotel and assure
its financial health. Revenue management
tools and increasingly affordable yield sys-
tems can have a major and salutory effect on
the financial health of the hotel.
Another part of revenue management is
incentives for reservations upselling, conver-
sion of callers, and average rate increases, and
for front desk agents upselling. In the same
way, F&B staff should be viewed as salespeo-
ple and given training on suggestive selling.
TIPS FOR DISTRIBUTION PRODUCTIVITY
• Bid all groups on net price basis; do
not commission meeting planning agencies.
• Analyze and understand the contribu-
tion margins achieved through each chan-
nel, not just the revenues and average rates.
Consider differential prices by channel to
equalize contribution margins after variable
distribution costs.
1327.ch07 12/19/05 9:33 AM Page 315
Inventory policies for tier price quotes by
forecast levels of occupancy, for stay-through
restrictions, for same-rate substitutions and
upgrading to clear demand inventory cate-
gories—all these are tools through which
reservation and revenue managers optimize
the RevPAR performance of the hotel.
It is in the area of revenue management
that chains, especially multibrand manage-
ment companies, have achieved significant
advantage over independent hotels and fran-
chisees that do not participate in cluster or re-
gional revenue management. Decisions on
pricing are still the domain of the property
GM, but with a centralized expert staff col-
lecting data and forecasting, the advice and
guidance available has brought yield and
RevPAR premiums to the chain member
properties.
Revenue management requires attention
to detail and analytic and forecasting skills;
tolerance for ambiguity and comfort with
change; and managing, training, leading, and
motivating reservations agents. This is one of
the most critical and dynamic areas of hotel
management, one with which every aspiring
general manager or director of sales and mar-
keting should take pains to become familiar.
316 Chapter 7 ? Marketing and Associated Activities
?
PREPARING TO DELIVER
AND DELIGHT
Amarketer of a product can count on the fac-
tory quality-control system to deliver a con-
sistent product for sale. When the sale is
closed, the customer takes the product away
and uses it. In a service business, however, the
product is human behavior, and the customer
uses the product in the hotel. Because we are
humans, both customers and employees, our
interactions are never the same one time to
the next. The job of the marketer is to help
employees understand what the customer will
want, need, and expect, and to sell employees
on doing their job with enthusiasm.
In a full-service hotel, the conference
services department embodies this preparing
idea as its primary function. Conference
service managers are the essential group
business brokers between sales and opera-
tions. Conference services people can create
loyal and repeat meeting planners; the job
requires empathy, attention to detail, willing-
ness to work unusual hours, action orienta-
tion, internal relationship building, and
persuasiveness.
PRODUCTIVITY TIPS
• Eschew seasonal price schedules and
adopt pricing tiers based on forecast occu-
pancy for the dates in question.
• Saturday has become the highest de-
mand day of the week; make sure you are
not leaving discounts on the table out of
habit.
• Teach reservation agents that stay-
through restrictions are not mistreating
guests. A three-night stay room is a different
inventory unit than a one-night stay room,
and is to be rationed.
1327.ch07 12/19/05 9:33 AM Page 316
Preparing the hotel to fully satisfy and
regularly make customers happy is as much a
marketing task as attracting customers in the
first place. What makes marketing hospitality
services harder than marketing a tangible
product is that for every market segment
there must be two marketing programs, one
directed externally to customers, the other in-
ternally to employees.
?
RETAINING CUSTOMERS
The key to both financial health and market
leadership is retaining a higher proportion of
customers than do any of your competitors.
Retain more customers than others do, and
over time your costs drop—because of effi-
ciency, lower advertising and selling costs, bet-
ter forecasting—and your occupancy and
rates rise. Numerous studies validate the high
correlation between profit leadership and
customer retention.
Frequent-stay rewards are often mistaken
for retention programs. They are not. Re-
wards can motivate returns only as long as the
customer values the points or airline miles or
whatever. But they do not create loyalty. They
are valuable only insofar as they give employ-
ees the opportunity to come to recognize and
satisfy the guest, and insofar as they give the
marketing department information on who
the customer is and where he or she is coming
from.
Retaining customers takes more than just
doing the job well. Guests and customers
must come to know they are valued. Manage-
ment must build relationships—the tie that
binds regardless of a new hotel opening in the
market or a hot promotional offer from
across the street. Relationships are built on
Section 7.2 ? Building Market Leadership: Marketing as Process 317
recognition and familiarity, on trust, and on
appreciation. Thus, guest and customer reten-
tion must be a planned and creative activity
that involves both sides of the relationship—
the customers and the employees. It takes
more than just smiling and trying hard.
Among the talents and skills needed are ana-
lytic skills, curiosity, direct marketing plan-
ning, and management of data retrieval and
direct marketing service providers.
?
MEASURING
SATISFACTION AND
EVALUATING
PERFORMANCE
If the purpose of the business is, in part, to
keep customers, does a financial statement of
rate, occupancy, revenue, expense, and profit
give enough information? No. Also needed is
a scorecard of customer satisfaction, of how
likely customers are to return or tell others
about your good hotel. That scorecard is the
guest satisfaction survey. Accounting state-
ments tell of the hotel’s financial health; a
guest satisfaction scorecard tells of its reputa-
tion’s health. The scorecard also helps man-
agement spot changes in expectations.
Customers are not the same from one visit to
the next. Experience with a new hotel, per-
haps even in another city, may raise a cus-
tomer’s standards. To measure satisfaction,
one needs quantitative skills for tracking, an-
alyzing, and reporting data, and the ability to
manage the logistics of repetitive distribution,
collection, and processing.
(Note: Many hotels rely on comment
cards for tracking guest satisfaction. That may
work in some situations, but if your property
1327.ch07 12/19/05 9:33 AM Page 317
has a high rate of repeat customers and/or fre-
quent business travelers, comment card data
are unreliable. It is the infrequent traveler
who bothers to fill out comment cards—un-
less there is a gripe to be expressed. Develop
and use a continuing survey to get a reliable
measure of guest satisfaction levels.)
The information helps management fig-
ure out what the hotel needs to be and to of-
fer next in order to remain competitive and
keep customers. Note, now, the return to the
first step of the marketing process.
?
THE CIRCULAR
MARKETING PROCESS
In other words, the marketing process isn’t the
straight-line, step-by-step process shown in
Figure 7.1 but rather, as shown in Figure 7.2, a
318 Chapter 7 ? Marketing and Associated Activities
continuous circle around which management
must go again and again as competition im-
proves and as the customer segments in the
market change. Only by reviewing and renew-
ing the marketing process will a hotel get
ahead and continue to be the leading hotel in
its market. This model of the marketing
process applies to both the whole hotel and to
any revenue or profit center within it. Use it
like a checklist when thinking through im-
proving the revenue and competitiveness of
any operation.
?
THE MEASURES OF
MARKETING
The health of the marketing process should
be measured over a longer time than a
month or quarter or fiscal year, and it should
1. Deciding What to Be &
Offer to Whom
2. At What Price
3. Creating Awareness &
Stimulating Demand
4. Making the Hotel
Available
5. Closing, Confirming, &
Managing Revenue
6. Preparing to Satisfy
& Delight
7. Retaining Customers
8. Measuring
Satisfaction
Copyright, FCW Consulting, 1996.
Figure 7.2 The Hotel Marketing Process
1327.ch07 12/19/05 9:33 AM Page 318
be measured by more than just profit and
loss data. A healthy marketing process re-
sults in:
• Rising room revenues per available room
and rising F&B revenues per available
seat and catering space.
• Rising market share to a share index over
100—that is, a larger share of a competi-
tive set’s occupied rooms than the hotel’s
share of the set’s available rooms, which is
its “fair share.”
• Falling costs of acquiring customers, not
on a percentage-of-revenue basis but as
dollars per unit of sale—for example,
dollars per occupied room, dollars per
cover, and so on. What is the acquisition
cost? The total of the advertising and
business promotion budget (more often
now called the marketing and sales ex-
pense), plus commissions, reservation
costs, franchise fees, and marketing fees.
These costs in times of inflation may not
actually decline but at least should grow
more slowly than do gross operating
revenues.
• Rising customer satisfaction ratings.
• Increasing retention rates measured by
the percentage of business from repeat
customers.
• Growing top-of-mind awareness among
target customer segments and, if the hotel
can afford to measure it, preference by
segment rising to number one among
your competitive sets.
Management and owners should ask for
an annual report card on the health of the
marketing process—of the hotel, of a chain, of
a franchise group.
Section 7.2 ? Building Market Leadership: Marketing as Process 319
?
MANAGEMENT OF THE
PROPERTY’S MARKETING
PROCESS
As should by now be clear, the marketing
process is larger than any one individual’s job.
Further, no hotel can afford the myriad tal-
ents and skills that must be orchestrated to
create and sustain a healthy marketing
process; a single hotel is simply not a large
enough business to afford having all those tal-
ents on staff.
Franchise companies and managed chains
have the mass to employ a large proportion of
those talents at headquarters, but even they
must call on outside services in design, data-
base management, advertising, direct market-
ing, and so on. But the chains’ ability to invest
in new tools and hire diverse talents has led
branded chains, both management companies
and franchisers, to collect increasing numbers
of hotels under their umbrellas. The trend to-
ward centralizing marketing functions to
serve several hotels in a region, often even
hotels of different brands, is accelerating, es-
pecially with the advent of Internet-driven in-
formation sharing. The advantages are the
ability to integrate multiple sources of infor-
mation, to hire experts that a single hotel
might not be able to afford, to share the cost
of sophisticated systems for forecasting, rev-
enue management and customer relation-
ships, and to reduce the expense of marketing
to individual properties.
Independents must counter such attrac-
tions with cooperative activities and aggressive
local marketing. The Internet has leveled the
playing field somewhat, allowing independents
to be found and reviewed by consumers and
travel agents in a way not possible when GDS
systems were the only means of access.
1327.ch07 12/19/05 9:33 AM Page 319
?
PROPERTY
RESPONSIBILITY FOR ITS
OWN MARKETING
To optimize performance, a property can nei-
ther abdicate its marketing to a chain or fran-
chise group nor passively rely on location and
presence to bring customers to the door. Each
property, whether flagged or independent,
must be responsible for creating and manag-
ing a marketing process tailored to its partic-
ular marketing situation—that is, its available
customers; its inherent strengths, weaknesses,
and employees; and its competitors. Each
marketing situation is unique, even among
cookie-cutter chain properties. Each has its
own location, competitor, and customer
dynamics.
So, given the wide range of talents and
skills that must be orchestrated to create an
effective marketing process, who is to lead it?
Directors of sales and marketing cannot, for
the process is much larger than the marketing
department. Only the general manager can
lead his or her marketing process; only he or
she can integrate chain supports, operating
departments, human resources (HR), the con-
troller, and—yes, marketing and sales.
?
THE GM AS LEADER OF
THE MARKETING
PROCESS
General managers must come to see them-
selves as the leader of their marketing process
and be comfortable in the role. This does not
mean becoming expert in all tools and disci-
plines; it does mean seeing the whole and ap-
preciating when to bring in what talents, when
320 Chapter 7 ? Marketing and Associated Activities
to apply what tools, and how to judge the ef-
fectiveness of the process. It means using the
marketing process as an organizing concept
for creating the management team and a uni-
fied viewpoint of mission and challenge.
When a hotel is led by a general manager
who sees herself or himself as leader of the
marketing process, when that process is
thoughtfully conceived and well executed,
when all employees see themselves as joint
operators/marketers, that hotel becomes
customer-centered, competitive, and a leader
in its markets.
Few GMs are trained to do this. Many
come to appreciate that location and flag are
not enough; many intuitively pick up a smat-
tering of sales, distribution, advertising, and
customer retention. But it is the rare GM who
weaves these parts into a coherent whole and
thinks through the challenge of creating and
leading the marketing process. As marketing
continues to develop more complex tools and
as marketing productivity becomes a more
pressing matter, owners, universities, and
chains must address this issue of how to de-
velop GM candidates who are comfortable
with and capable of leading a comprehensive
marketing process.
?
THE MARKETING
PROCESS MODEL AS A
PROBLEM-SOLVING TOOL
One last word: The circular model of the
marketing process is presented here mainly in
terms of rooms marketing. But the model can
be applied to every revenue department—to
food and beverage outlets, catering, the health
club, the business center, and even the laun-
dry. The model can be used for planning, for
1327.ch07 12/19/05 9:33 AM Page 320
business reviews, for presentations to lenders
and owners, for troubleshooting, and as a
checklist when preparing proposals for new
services or facilities.
Use the model, make it part of your bag
of management tools, and get your team to
see their role in terms of this holistic and
never-ending marketing process. If you
achieve that, you will have gone far to create
a customer- and competitor-focused organiza-
Section 7.3 ? Consumer Decision Rules and Implications for Hotel Choice 321
tion, one in which employees see themselves
as operators/marketers rather than just “in
operations” or “in marketing” or “in HR.”
The few hotels that achieve and nurture a
well-tuned marketing process and whose em-
ployees see themselves as integral parts of it
become leaders—in market share, in cus-
tomer and employee loyalty, and in financial
returns to owners.
7.3 CONSUMER DECI SI ON RUL ES AND
I MPL I CATI ONS FOR HOTEL CHOI CE
Bianca Grohmann and Eric Spangenberg
Consumers’ choices are influenced by the
goals they attempt to achieve. Once a person
has recognized a need, such as the need for ac-
commodation when traveling for business or
pleasure, he or she engages in an information
search to identify alternatives from which to
choose. Understanding how consumers evalu-
ate competing alternatives in their purchase
decision processes enables marketers in the
hospitality industry to design better advertis-
ing and promotional campaigns leading to a
more favorable evaluation of their offerings in
travelers’ eyes. This is an important step in in-
creasing the likelihood that consumers will
choose their offering as opposed to that of
competitors. Given that most travelers’ desti-
nations offer several hotels, how do people
choose among them? The answer to this ques-
tion lies, in part, in research on consumers’
attitudes and their relation to purchase inten-
tions and subsequent purchase behavior. This
chapter describes several methods consumers
may use to make choices based on the evalua-
tion of identified alternatives.
Attitude is the tendency to respond in a
consistently favorable or unfavorable manner
toward a target (e.g., brand or product). Im-
portant to marketers is that, if measured ac-
curately, attitudes are predictive of behavioral
intentions and relatively stable over time.
Simply put, consumers generally form inten-
tions to choose a hotel brand toward which
they hold positive attitudes. Behavioral inten-
tions, however, do not always translate into
corresponding behavior. For example, al-
though some consumers have preferences
and therefore form intentions to stay at Fair-
field Inn when traveling across the country,
they might end up choosing other forms of ac-
commodation from time to time. Why would
they act inconsistently with their intentions?
Traveling with friends who have different at-
titudes and preferences, temporary price re-
ductions of competitors, or the fact that a
1327.ch07 12/19/05 9:33 AM Page 321
Fairfield Inn is not readily available in a spe-
cific area might be reasons for inconsistencies
between behavioral intentions to stay at a
Fairfield Inn and actual choice behavior.
Despite situational factors sometimes in-
fluencing travelers’ choices, attitudes are ulti-
mately useful in predicting actual behavior;
changing or strengthening the basis of con-
sumer attitudes may therefore increase the
likelihood of consumers engaging in desired
behaviors. In order to change attitudes and
subsequent related behavior, marketers must
understand a few basic decision rules associ-
ated with consumer attitudes. Below we intro-
duce decision rules likely to be implemented
by different segments of consumers under
varying market conditions.
?
DECISION RULES
Decision rules are strategies consumers use to
choose among alternatives. Several factors
can influence what decision rule consumers
ultimately apply in a specific situation. Typi-
cally, the more important and less frequent a
purchase decision is, the more time and effort
consumers are willing to expend making that
decision. Choosing a resort at which to spend
a twenty-fifth wedding anniversary, for exam-
ple, is a decision most consumers face only
once and therefore are likely to take a rela-
tively long time to make, and they are likely
to be careful and thorough in evaluating al-
ternatives. On the other hand, a salesperson
traveling frequently in a familiar territory
likely chooses a hotel using a routine process
where far less time and consideration are
given to alternatives. Further, brand-loyal cus-
tomers might choose to stay with the same
hotel chain whenever possible, thereby avoid-
ing a situation where they are forced to
322 Chapter 7 ? Marketing and Associated Activities
choose among alternatives. In general, the
stronger a consumer is motivated to search
and the greater the risk associated with a
choice, the greater the complexity of the deci-
sion rule he or she implements.
Another important characteristic of mod-
eling decisions is the fact that (counterintu-
itively and often counterattitudinally) people
often do not attempt to optimize choice. If a
person’s goal is optimal choice, considerably
more time and effort is typically required to
identify and evaluate alternatives. Therefore,
consumers often choose a satisfactory (as op-
posed to optimal) alternative (as opposed to
the best alternative possible) in order to save
time and effort. The use of decision rules in
these instances enables people to take short-
cuts in making decisions in the face of the ap-
parently unlimited or overwhelming amounts
of information available regarding all possi-
ble alternatives. Consumers usually work with
a consideration set (i.e., a subset of alterna-
tives from the entire universe of choices) so
they do not have to work as hard cognitively
when required to make a decision in a given
product category. They then make a final de-
cision from this reduced set of alternatives.
Such decision rules are referred to as heuris-
tics or rules of thumb. Employing heuristics,
people save time and limit complex informa-
tion processing while still making reasonable
or satisfactory choices based on the few brand
attributes or characteristics most important to
them at the time of choice. In the context of
hotel choice, brand attributes are things like
location, room rates, and availability of a
swimming pool, restaurant, and so forth.
Although the number of consumer deci-
sion rules is almost infinite and likely varies
by consumer, basic categories and a few spe-
cific examples serve as useful tools in model-
ing and predicting traveler decisions. Two
1327.ch07 12/19/05 9:33 AM Page 322
general categories of decision rules are (1)
compensatory and (2) noncompensatory. Be-
low we discuss how travelers make decisions
using these two types of rules.
?
Compensatory Decision
Rules
Compensatory decision rules model con-
sumers as deriving an overall brand evalua-
tion such that alternatives performing poorly
on one attribute can compensate for their re-
spective shortcomings by positive evaluations
of other attributes. For example, a high-priced
hotel might not be perceived positively on the
dimension of room rates by some travelers;
however, these same travelers might be will-
ing to spend more money knowing they will
receive better service or that the hotel is con-
veniently located—that is, in this example,
service and location compensate for the per-
ceived disadvantage of high room rates. The
multi-attribute attitude model described in
the next section is perhaps the most popular
compensatory decision rule.
Multi-attribute Attitude Model. The
multi-attribute attitude model we describe
herein is also referred to as a weighted addi-
tive model or the Fishbein (1975) linear com-
pensatory model. In this model, people not
only assess the value of each salient (or im-
portant) attribute of brand but also consider
the extent to which a given alternative pos-
sesses the attributes. (Note: In this context, it
is important to note that salience is essentially
equivalent to importance. Further, the attri-
butes salient to one market segment may be
very different from those of another segment.
For example, business travelers may not care
at all about a spa, an airport shuttle, and room
service breakfast quality, while to another
Section 7.3 ? Consumer Decision Rules and Implications for Hotel Choice 323
market segment, these property attributes
may be very important.) The evaluations of
salient attributes and the beliefs that brands
possess the salient attributes are included as
weights in an equation determining overall
brand attitude. The model is represented as:
A
brand A
?
?
n
i?1
e
i
b
i
where A
brand A
is the overall attitude toward
hotel brand A, e
i
is the evaluative weight as-
sociated with attribute i, b
i
is the extent to
which the consumer believes brand A pos-
sesses attribute i (i.e., strength of belief that i
is present in brand A), and n is the number of
salient attributes in consideration.
Operators and marketers typically mea-
sure importance weights and strengths of be-
liefs using questionnaires. First, survey
respondents are asked to provide evaluative
weights associated with each of the attributes
salient to their decision; these numbers repre-
sent each attribute’s relative positive or nega-
tive associations in consumers’ minds.
Although scale endpoints may vary by re-
searcher preference, our demonstration of
this model assumes use of a 7-point scale on
which ?3 is the lowest importance rating pos-
sible, ?3 is the highest, and a neutral impor-
tance rating is zero. An attribute that is
evaluated entirely negatively by survey re-
spondents (e.g., the availability of guest laun-
dry) would be assigned a value of ?3,
whereas an attribute that is highly positive in
a consumer segment’s evaluation (e.g., low
room rates) might be assigned a value of ?3.
Once consumer attribute evaluations are
determined, survey respondents state the ex-
tent in which they believe a brand possesses
respective attributes. Again, for simplicity of
demonstration, we assume that the belief
strength regarding any of the attributes to be
1327.ch07 12/19/05 9:33 AM Page 323
evaluated ranges between ?3 (i.e., the brand
definitely does not possess the attribute) and
?3 (the brand definitely possesses the attrib-
ute). For example, if a traveler believes that
Hotel X is a relatively high-priced establish-
ment, the consumer might assign a belief
value of ?2 to this hotel on the attribute “low
room rates,” thereby indicating that Hotel X
does not possess the attribute “low price” to a
great extent. In other words, Hotel X per-
forms poorly on the traveler’s low room rate
criterion. The hotel offering the absolute low-
est price—say, Hotel Q—may be assigned a
value of ?3 on the attribute “low room rates,”
thereby indicating the traveler strongly be-
lieves that Hotel Q does indeed offer low
room rates.
The next step in the model is multiplica-
tion of attribute evaluation (e
i
) and belief
strength (b
i
) for each of the salient attributes.
If the traveler evaluated low room rates very
positively (e
room rate
? ?3), and Hotel X re-
ceived a belief score of b
room rate
??2, we cal-
culate Hotel X’s contribution to overall
attitude score relative to the attribute “low
room rate” by multiplying evaluation and be-
lief scores e
room rate
? b
room rate
? (?3) ?
(?2) ??6. Evaluation of Hotel Q on the low
room rate attribute will be more favorable—
specifically, e
room rate
? b
room rate
? (?3) ?
(?3) ? 9. This procedure is followed for each
salient attribute for all brands in a considera-
tion set. Other attributes, for example, could
include location near the airport, availability
of room service, or complementary breakfast,
and the e
attribute
? b
attribute
products calcu-
lated for each brand and attribute.
Finally, the products of e
i
? b
i
for each
salient attribute are summed for each brand.
The resulting scores represent the relative
overall attitudes held for each brand. This
weighted additive model is applied to all the
brands included in the survey as the consider-
324 Chapter 7 ? Marketing and Associated Activities
ation set, and the brand associated with the
highest overall attitude score is selected as the
preferred alternative.
A few considerations should be kept in
mind that are important to implementation of
this model. First is the notion that the model
is relative in nature—that is, an overall atti-
tude score of ?21 for a single hotel means
nothing unless it is compared to the overall
attitude scores of its competitors as evaluated
by survey respondents in a relevant market
segment. Further, it is important to include all
relevant competitors in the model. As a rela-
tive model, it may be that the market segment
considers only one of five low-budget proper-
ties when traveling to a particular locale. If so,
include only those five; it is not helpful to
have comparisons made (explicitly or implic-
itly) in respondents’ minds if they are not re-
alistic (e.g., it is likely that inclusion of the
Four Seasons in the consideration sets of
Quality Inn customers is inappropriate). By
the same token, leaving out alternatives that
respondents in the market segment may truly
consider can introduce error; the result may
be a finding that the property has the highest
attitude score among those included on the
survey, yet the model is not predictive be-
cause the survey omitted a strong competitor.
Also of paramount importance is the selec-
tion of appropriate salient attribute sets. If
critical, differentiating attributes are left out
of the model, summated scores are not pre-
dictive of behavioral likelihood; consumers
using a compensatory model in actuality are
implicitly calculating scores using attributes
that may have been missed by survey admin-
istrators. Thus, it is critical to select the appro-
priate salient attributes for inclusion in the
model. Note that appropriate does not mean
all attributes. Surveyors often ask about
things that do not really matter to respon-
dents. Once primed, however, respondents
1327.ch07 12/19/05 9:33 AM Page 324
provide a score on attributes they may never
have thought of on their own, thereby con-
tributing falsely (positively or negatively) to
overall attitude scores.
We now provide an example of the linear
compensatory model, necessarily simplified
with regard to number of brands under con-
sideration and salient attributes included.
Consider Charlie and Elsa Brown, a wealthy
New York couple looking for a hotel to stay at
while spending a weekend skiing in Vermont;
the Browns represent a market segment that
regularly visits this area for this purpose.
Based on a discussion with friends who know
the area well, the Browns identified four ho-
tels (associated with four different brands) in
the area they plan to visit. Table 7.1 shows
four salient attributes the Browns consider,
the importance of each attribute (e
i
ranging
from ?3 to ?3) and the beliefs (b
i
ranging
from ?3 to ?3) regarding the extent to which
each of the properties possesses attribute i.
(Note that there could be more or fewer
salient attributes depending on the product or
service in consideration and the attributes
salient to the perspective market segment.)
Using the above scores derived from sur-
vey responses, we derive an overall attitude
score for each of the hotels in the Browns’
consideration by computing the sums of the
products of importance (e
i
) multiplied by be-
lief strength (b
i
) for each attribute for each
brand. For example, for Brand E:
Attitude
Brand E
?
?
n
i?1
e
i
b
i
? (e
proximity to skiing area
)
? (b
proximity to skiing area E
) ? (e
low rates
)
? (b
low rates E
) ? (e
fine restaurant
)
? (b
fine restaurant E
)
? (e
indoor pool
) ? (b
indoor pool E
)
Section 7.3 ? Consumer Decision Rules and Implications for Hotel Choice 325
Note that the evaluation weights (e
i
) as-
signed to attributes remain constant across
brands, while belief strength may differ from
brand to brand (indeed, should differ, unless
brands are identical). The overall attitude to-
ward hotels E, F, G, and H can therefore be
calculated as follows:
A
Hotel E
? (?3)(?1) ? (?2)(?1)
? (?1)(?3) ? (?2)(0)
? ?3 ? 2 ? 3 ? 0 ? 2
A
Hotel F
? (?3)(?2) ? (?2)(?2)
? (?1)(?3) ? (?2)(?2)
? 6 ? 4 ? 3 ? 4 ? 17
A
Hotel G
? (?3)(?3) ? (?2)(?1)
? (?1)(?2) ?(?2)(?3)
? 9 ? 2 ? 2 ? 6 ? 11
A
Hotel H
? (?3)(?1) ? (?2)(?2)
? (?1)(?1) ? (?2)(?3)
? 3 ? 4 ? 1 ? 6 ? 6
Thus, assuming an optimized score being
sought in this instance, Hotel F, scoring high-
est in overall brand attitude (17), is most
likely to be chosen. Hotel E, on the other
hand, scored lowest on overall brand attitude
(2), and is unlikely to be selected.
?
Noncompensatory
Decision Rules
Although many factors (e.g., high involve-
ment, high physical, social, or economic risk)
associated with a decision may lead con-
sumers to use a compensatory decision rule,
the effort is relatively complicated and often
too time- and effort-intensive for people to
1327.ch07 12/19/05 9:33 AM Page 325
employ for many day-to-day decisions. As
suggested above, consumers may use a com-
pensatory decision rule if they spend a lot of
time on the road, for a special vacation, or for
an extended stay abroad. However, they are
unlikely to use such an elaborate rule when
purchasing a beverage at a gas station or
when they need to find inexpensive lodging in
the middle of a long drive to visit friends.
Thus, many decisions are made using much
simpler rules. Noncompensatory decision
rules tend to simplify decision making; they
may lead to less than optimized results but
are often employed when consumers satisfice,
or seek an outcome that is good enough
rather than optimal.
When noncompensatory decision rules
are used, a brand or product cannot compen-
sate for weak performance on one attribute
by performing well on other attributes when
competing alternatives are compared. For ex-
ample, if consumers choose a hotel based on
the single criterion attribute of low room
rates, a hotel offering higher-priced accom-
modations with better service would not be
chosen (unless rooms are not available at the
hotel offering lower rates). In this case, con-
sumers do not trade off room rates and ser-
vice quality but make their decision guided
solely by a property’s rates.
326 Chapter 7 ? Marketing and Associated Activities
The most commonly used noncompen-
satory decision rules are the lexicographic de-
cision rule, the elimination-by-aspects decision
rule, and the conjunctive decision rule. To
demonstrate consumers’ use of noncompen-
satory decision rules, we can use the same sur-
vey data as the compensatory decision model
regarding salient attribute evaluations and
brand beliefs regarding those attributes. The
data, however, are used differently, as de-
scribed below. For the noncompensatory rules
defined below, we again consider the evalua-
tions and beliefs regarding Hotels E, F, G, and
H introduced in Table 7.1.
Lexicographic Decision Rule. When us-
ing a lexicographic decision rule, consumers
select a brand according to the alternative
that scores highest on a single attribute
deemed most important. This is probably the
way we make a lot of decisions. What is
cheapest? What is most convenient? What is
the best-looking alternative?
Consider the values in Table 7.1 as results
of a different survey for consumers from a dif-
ferent market segment: Four brands of hotels
are evaluated on the four attributes of prox-
imity to skiing area, low rates, fine restaurant,
and indoor pool. The importance of each of
these attributes is given by e
i
. Importance rat-
ings are proximity to skiing area (?3), low
Table 7.1 Four Salient Attributes K Considers
Attribute Hotel E Hotel F Hotel G Hotel H
e
i
b
iE
b
iF
b
iG
b
iH
Proximity to skiing area ?3 ?1 ?2 ?3 ?1
Low rates ?2 ?1 ?2 ?1 ?2
Fine restaurant ?1 ?3 ?3 ?2 ?1
Indoor pool ?2 ?0 ?2 ?3 ?3
1327.ch07 12/19/05 9:33 AM Page 326
rates (?2), fine restaurant (?1) and indoor
pool (?2). Proximity to skiing area is the
most important attribute in this case of hotel
choice, followed by indoor pool, fine restau-
rant, and low rates, respectively. According to
the lexicographic decision rule, proximity to
skiing area is the attribute determining con-
sumer choice in this case. Consumers have
reason to believe that Hotel G is closer to the
slopes (b
proximity to skiing G
? ?3) than are the
other hotels in the consideration set, and
therefore Hotel G is chosen.
Elimination by Aspects. When an elimi-
nation-by-aspects decision rule is used, attri-
butes are again ranked according to their
importance. Unlike choosing the hotel brand
that performs best on a single most important
attribute as with the lexicographic rule, how-
ever, elimination by aspects involves the use
of cutoff values. A cutoff value is a minimal
performance score a brand must have to stay
in the consumer’s consideration set. A con-
sumer first looks at performance scores of
brands regarding the most important attrib-
ute and eliminates all brands that do not ex-
ceed the predetermined cutoff value. We
often do this with multiple attributes: “I won’t
pay more than $110 a night in city X, so I
don’t even look at properties more expensive
than that, but my choice also has to have a
pool.” We essentially eliminate by the aspect
of price first and then by whether or not the
hotel has a pool.
In the example shown in Table 7.1, prox-
imity to skiing area is the most important at-
tribute, with an importance rating of ?3. Let
us assume the consumer’s cutoff value is ?2.
That means that all of the hotel brands that
have a score of at least ?2 on the proximity to
skiing area attribute are retained in the con-
sideration set, while brands that do not meet
this cutoff criterion are dropped from the
Section 7.3 ? Consumer Decision Rules and Implications for Hotel Choice 327
consumer’s consideration set. For this exam-
ple, only Hotel F (b
proximity to skiing area F
??2)
and Hotel G (b
proximity to skiing area
??3) meet
the cutoff criterion (?2). Hotel E (b
proximity to
skiing area E
? ?1) and Hotel H (b
proximity to ski-
ing area H
? ?1) are not close enough to the
skiing area to make the cut.
When implementing the elimination-by-
aspects decision rule, the consumer replicates
these steps: He or she now considers the per-
formance of the remaining brands with re-
spect to the attribute ranked second-highest
in importance. In our example, the consumer
next looks at the availability of an indoor pool
at Hotels F and G. Assuming the cutoff value
to be employed is ?2, both brands remain in
the consumer’s consideration set, as the
scores for indoor pool Hotel F (b
indoor pool F
?
?2) and Hotel G (b
indoor pool G
? ?3) both
meet this criterion. At this point, the con-
sumer has not yet found the best offering ac-
cording to the elimination-by-aspects rule.
Consequently, the consumer applies the
same procedure to the attribute ranked
third—that is, the availability of a fine restau-
rant. Assuming the consumer still uses a cut-
off criterion of ?2, Hotel G (b
fine restaurant G
?
?1) is eliminated from the consideration set.
Hotel F (b
fine restaurant F
? ?3), on the other
hand, exceeds the cutoff criterion, is now the
only brand left in the consumer’s considera-
tion set, and is therefore selected.
Note that using the same data set, the
elimination-by-aspects decision rule leads to
a different choice than the lexicographic deci-
sion rule. From a strategic standpoint, the fact
that some consumers use an elimination-by-
aspects decision rule should encourage hotels
to improve their performance on several at-
tributes important in consumer choice. It is
not enough to be situated close to a skiing
area. Other aspects of the offering might also
1327.ch07 12/19/05 9:33 AM Page 327
be important in consumers’ hotel selections,
and performance in these areas should be
monitored and, if necessary, improved. You
can see, however, that it is crucial to improve
services that are valued by consumers—in
other words, aspects of a hotel’s offering that
have high importance ratings. Shortcomings
in aspects that are valued highly by con-
sumers, such as cleanliness and employee
friendliness, cannot be compensated for by
strong performance in areas to which con-
sumers attach no importance (e.g., internal
cost-control systems).
Conjunctive Decision Rule. When a con-
junctive decision rule is employed, consumers
process information by brand, as opposed to
attribute by attribute, as with the lexico-
graphic and the elimination-by-aspects deci-
sion rules. With this rule, consumers establish a
cutoff criterion that must be met by alterna-
tives in the consideration set on all salient at-
tributes for brands to remain in consideration.
Let us assume that a consumer desires
that the chosen hotel should have a score of at
least ?1 on all of the attributes he or she con-
siders important. In our example, then, prox-
imity to a skiing area, low rates, fine
restaurant, and indoor pool must all rate a ?1
on each of these dimensions to remain in the
consideration set. First, the consumer evalu-
ates Hotel E on each of these attributes.
While Hotel E meets the cutoff criterion of
?1 on fine restaurant, it falls short of the con-
sumer’s cut-off rule when it comes to proxim-
ity to skiing area, low rates, and indoor pool,
and therefore is eliminated from considera-
tion. The consumer then turns to evaluation
of Hotel F, which meets the cutoff value of ?1
on three out of four relevant attributes. It is
eliminated from choice consideration, how-
ever, due to its failure to deliver on low rates.
The consumer’s assessment of Hotel G also
328 Chapter 7 ? Marketing and Associated Activities
leads to elimination from choice considera-
tion because it does not meet the cutoff crite-
rion of ?1 on the attribute “fine restaurant.”
Hotel H, on the other hand, exceeds the cut-
off criterion of ?1 on all of the criteria. Thus,
using a conjunctive decision rule, Hotel H is
selected.
Accounting for Ties. Note that ties can
frequently occur using compensatory or non-
compensatory decision rules; this usually re-
sults in consumers moving to a new rule in
order to break the tie. For example, if com-
pensatory values were equal for two competi-
tors (not shown in the examples above), a
consumer might implement a lexicographic
decision rule with proximity to a skiing area
as the most important attribute used to pick a
hotel. Or, if the conjunctive cutoff value were
?1 for all attributes, both Hotels E and H in
our example would stay in consideration; the
consumer may then use a lexicographic deci-
sion rule based on availability of an indoor
pool, resulting in Hotel H being chosen as it is
rated higher on this attribute than Hotel E.
?
MARKETING
IMPLICATIONS
Once consumer evaluations of salient attri-
butes (e.g., availability of room service, con-
ference facilities, wheelchair accessibility,
children’s programs) are determined and
their beliefs regarding a hotel brand’s offer-
ings are known, managers can use this infor-
mation to improve their hotel’s competitive
positioning in the market. The goal of any
marketing strategy is to increase positive atti-
tude toward the offering or to encourage the
use of certain decision rules, thereby increas-
ing the likelihood of being chosen by
consumers.
1327.ch07 12/19/05 9:33 AM Page 328
As we have seen, when consumers use a
compensatory decision rule, the overall atti-
tude toward a hotel is determined by the sum
of the products of evaluations multiplied by
beliefs regarding salient attributes associated
with the offering. Consequently, travelers’
overall attitudes toward a hotel can be ren-
dered more positive by strategies targeted at
increasing the evaluation of an attribute in
consumers’ decision making, or by changing
consumers’ beliefs about a hotel’s offerings.
Travelers’ attribute evaluations can be
influenced by stressing the attribute in adver-
tising (e.g., less money spent on accommoda-
tion can be used to have more fun with the
whole family by spending the savings on
other activities, the availability of a business
center enables business customers to save
time). This strategy of influencing attribute
evaluations is effective in attitude change
and also relatively easy to pursue. It is, how-
ever, not a strategy always recommended for
changing consumers’ attitudes when they are
using a compensatory model. The potential
problem associated with this approach is that
attribute evaluations are constant across
brands in a consideration set. In our example
above, travelers evaluating importance of the
availability of an indoor pool (?2) is the
same for all hotel brands, E, F, G, and H. If
Hotel H were successful in a marketing mes-
sage in increasing the evaluation of an indoor
pool with a segment of consumers, say to a
rating of ?3, it would increase consumers’
overall attitude toward its brand. At the same
time, however, consumers’ overall evaluation
of Hotel G would increase by the same
amount, as both brands do not differ with re-
spect to consumers’ beliefs about their hav-
ing a great indoor pool (i.e., both have a
belief rating of ?3). In the end, the attempt
to increase consumers’ overall attitude to-
Section 7.3 ? Consumer Decision Rules and Implications for Hotel Choice 329
ward Hotel H would also benefit some of its
competitors.
Thus, sometimes a more effective strategy
for improving consumers’ overall attitude to-
ward a hotel’s offerings is to improve con-
sumers’ brand-specific belief ratings. For
example, Hotel F could strive to improve con-
sumer belief that it offers a pleasant indoor
pool by providing a picture of the pool on its
website, or by stressing the availability of the
indoor pool in advertisements. While con-
sumer brand-specific beliefs are then likely to
increase, Hotel F’s competitors will not bene-
fit from its strategy, and Hotel F thereby im-
proves its competitive position.
Assuming that Hotel E cannot do any-
thing to increase consumers’ belief that it is
not located in proximity of a skiing area (i.e.,
its location is indeed far from a skiing resort),
a strategy it may employ to increase con-
sumers’ overall attitude toward the property
is to add a salient attribute to the set of at-
tributes consumers consider when making ho-
tel choices. For example, Hotel E could
provide free accommodation for children
staying with their parents. It is likely that par-
ents would consider this option important
when choosing a hotel. As long as other com-
petitors do not offer this service, Hotel E en-
joys some advantage in the choices made by
its target market. It is essential that when
adding a new attribute, marketers consider
the following: First, the attribute added must
be important enough to the hotel’s target
market to be included in consumers’ subse-
quent decision making (i.e., is it indeed
salient?). Second, the belief that a particular
hotel possesses this attribute must be stronger
than the belief that any of its competitors do.
This marketing strategy, often referred to as a
strategy of differentiation, is likely to be
successful when these conditions are met.
1327.ch07 12/19/05 9:33 AM Page 329
Differentiation, however, is unlikely to be sus-
tainable—that is, over time, competitors iden-
tify what added attributes successfully attract
customers and copy them, thereby creating
consumer belief regarding their own proper-
ties. Thus, the hotel that introduced the new
salient attribute often can expect to lose its
differential advantage over time unless it
maintains a unique characteristic like a spe-
cial location (e.g., “there is only one view
property on this section of coastline”) or a
fabulous chef in the kitchen.
Increasing belief strength for a hotel’s at-
tributes is not always a successful strategy, as-
suming a compensatory model is being used.
For example, consumers may find it relatively
unimportant whether the hotel offers low
room rates or not. In the example data in
Table 7.1, the importance rating for low room
rates is ?2—that is, consumers in this particu-
lar target segment evaluate low room rates
negatively, perhaps because they associate
low rates with low quality or with small, un-
derfurnished rooms. In this case, stressing that
a particular hotel offers low rates, thereby in-
creasing the strength of consumers’ beliefs,
may adversely affect consumers’ overall eval-
uation of a property. If you compare Hotels F
and H, you will see that the strong belief that
Hotel H offers low rates (b
low rates H
? ?2)
negatively affects its overall evaluation, as
(e
low rates
? b
low rates H
) ? (?2)(?2) ? ?4.
Hotel F, on the other hand, benefits from con-
sumers not being aware of low rates, such that
(e
low rates
? b
low rates F
) ? (?2)(?2) ? ?4.
It is important to note that importance
weights associated with attributes vary across
market segments. For example, while business
travelers on corporate expense accounts or
consumers on a once-in-a-lifetime vacation,
such as a honeymoon, may attach less impor-
tance to low rates, more price-sensitive mar-
330 Chapter 7 ? Marketing and Associated Activities
ket segments usually weigh low rates more
heavily in their hotel choice. It is therefore
important for marketers to carefully define
the targeted market segment(s) prior to con-
ducting their research and applying evalua-
tion weights and beliefs to similarly disposed
consumers.
In general, it is crucial to find out what at-
tributes targeted consumers feel are most
salient to their decisions and, in response, in-
crease performance (or perceived perfor-
mance) regarding these attributes and
commensurately inform market segments of
this stronger position. The resultant positive
attitude toward the offering should then in-
crease the likelihood of the hotel being cho-
sen by travelers using a compensatory
decision-making model. Alternatively, as a
strategic move, particularly for special niche
properties, marketers may want to encourage
consumers to abandon the linear compensa-
tory model. Niche market segments may exist
or may be created through marketing com-
munications; these target markets might be
better served by hotels focusing on one or
more of the noncompensatory decision rules
presented. For example, a segment of highly
price-sensitive customers predominantly us-
ing a lexicographic decision rule with low
rates as the most important attribute may
constitute the primary target market for a
property. In this case, travelers can be tar-
geted by offering low prices and/or frequent-
stay loyalty programs. At the same time,
services deemed unnecessary or unimportant
by this customer segment can be eliminated
or minimized. The fact that some customer
segments expect a minimal level of perfor-
mance on several attributes (e.g., cleanliness,
convenience, and friendly service) when they
use an elimination-by-aspect or conjunctive
decision rule, however, implies that focusing
1327.ch07 12/19/05 9:33 AM Page 330
performance and/or marketing on a single at-
tribute may be inadequate for some segments
of travelers. A hotel would then benefit from
creating a level of “at least acceptable” attri-
butes in addition to providing stronger pack-
ages of the same attributes offered by
competitors targeting the same market seg-
ment. Overall, knowing how consumers make
decisions should help hotel managers to de-
sign better properties, packages, and services,
and help them market those offerings to their
respective target segment(s), thereby improv-
ing competitive position.
?
COMPREHENSIVE
EXERCISE
Understanding consumer decision-making
rules enables you to make strategic and mar-
keting decisions, thereby effectively targeting
segments with varying goals, using multiple
criteria, and following different decision rules
when choosing hotel venues. This exercise
gives you an opportunity to review the con-
sumer decision-making rules discussed in this
chapter and demonstrate the strategic impli-
cations of these rules for marketers in the
hospitality industry.
Section 7.3 ? Consumer Decision Rules and Implications for Hotel Choice 331
Shannon Clarke is a chocolatier operat-
ing a small chocolate store in Knowlton, Que-
bec. This year, she is planning to attend the
Sixth Annual Chocolate Show in New York
City. Shannon has carefully considered vari-
ous transportation options and decided to
travel by car. She is now considering a num-
ber of accommodation alternatives. Shannon
knows very well what characteristics are
salient to her regarding hotel choice. For ex-
ample, low rates are significant, as Shannon
has a limited budget for traveling expenses. It
is also imperative that the hotel offer free
parking and be located not too far from the
Metropolitan Pavilion on Eighteenth Street,
where the Annual Chocolate Show will take
place. To keep in touch with her business
while staying in New York, Shannon would
also like Internet access from her room. On
the other hand, she does not require the hotel
to offer a nice restaurant, as she will go out on
the town each night to have dinner with fel-
low chocolatiers. Other attributes considered
in the hotel choice of small business owners
attending trade shows and conventions in
New York are noted in Table 7.2.
Shannon identified four hotels in an
online search. The information provided
online makes it easy to determine what ser-
vices are offered at what rates for each of the
Table 7.2 Shannon’s Salient Attributes
Attribute Hotel Park Hotel Union Hotel Chelsea Hotel Lion
e
i
b
iP
b
iU
b
iC
b
iL
Low rates ?3 ?2 ?2 ?3 ?1
Location ?3 ?2 ?3 ?2 ?1
Free parking ?2 ?3 ?2 ?1 ?2
Internet access ?1 ?1 ?2 ?1 ?3
Fitness facilities ?0 ?1 ?1 ?2 ?3
Nice restaurant ?1 ?1 ?0 ?2 ?2
1327.ch07 12/19/05 9:33 AM Page 331
properties. Shannon now must decide which
of the four hotels she should choose. Table 7.2
shows relevant attributes, evaluation ratings,
and belief ratings to be taken into considera-
tion in Shannon’s decision-making process.
Use the information provided above to
answer the following questions:
1. Calculate the overall brand attitudes for
all of the brands using the weighted addi-
tive/linear compensatory model.
2. According to beliefs and evaluations
shown in the table above, which hotel is in
the best competitive position? Which ho-
tel is in the worst competitive position?
3. Describe three strategies the hotel with
the lowest overall attitude rating could
use to improve consumer attitudes.
4. Which hotel would be chosen using a lex-
icographic decision rule if Shannon
Clarke considers low rates most impor-
tant?
5. Which hotel would be chosen using the
conjunctive decision rule with a cutoff
value of 0?
6. Given the lexicographic decision rule
with “nice restaurant” as the most impor-
tant attribute, what should Hotel Chelsea
do? What should Hotel Lion do?
7. List salient attributes not included in the
table that could be considered for hotels
catering to small business owners attend-
ing conferences and trade shows in the
New York area.
8. Using the elimination-by-aspects rule,
which hotel would be chosen given a cut-
off value of ?2?
Answers to Practice Questions
1. The overall brand attitudes are calculated
using the formula ?
n
i?1
e
i
b
i
.
332 Chapter 7 ? Marketing and Associated Activities
A
Hotel Park
? (?3)(?2) ? (?3)(?2)
? (?2)(?3) ? (?1)(?1) ? (0)(?1)
? (?1)(?1) ? 6 ? 6 ? 6 ? 1
? 0 ? 1 ? 16
A
Hotel Union
? (?3)(?2) ? (?3)(?3)
? (?2)(?2) ? (?1)(?2) ? (0)(?1)
? (?1)(0) ? 6 ? 9 ? 4 ? 2 ? 0
? 0 ? 21
A
Hotel Chelsea
? (?3)(?3) ? (?3)(?2)
? (?2)(?1) ? (?1)(?1) ? (0)(?2)
? (?1)(?2) ? 9 ? 6 ? 2 ? 1
? 0 ?2 ? 20
A
Hotel Lion
? (?3)(?1) ? (?3)(?1)
? (?2)(?2) ? (?1)(?3) ? (0)(?3)
? (?1)(?2) ? ?3 ? 3 ? 4 ? 3
? 0 ? 2 ? ?1
2. If the weighted additive/linear compensa-
tory model is used, Hotel Union is in the
best competitive position because its
overall attitude rating (?21) is higher
than its competitors’. Hotel Lion is in the
worst competitive position because its
overall attitude rating (?1) is lower than
its competitors’.
3. Strategy 1: Hotel Lion could attempt to
change the perceived relevance of some
of the attributes. It could stress the im-
portance of a good restaurant and excel-
lent fitness facilities for a hotel in which
businesspeople stay while attending a
trade show or conference. The drawback
of this strategy is that some of its com-
petitors could also benefit from it. Strat-
egy 2: Hotel Lion could improve its
performance on some of the attributes
considered important by consumers in
this target segment, thereby increasing
the strength of consumers’ belief that it
possesses these attributes. More specifi-
1327.ch07 12/19/05 9:33 AM Page 332
cally, Hotel Lion could lower rates if fi-
nancially feasible, or provide better free
parking. Strategy 3: Hotel Lion could
encourage consumers to consider other
relevant attributes when choosing accom-
modation for trade show visits or confer-
ence attendance. These attributes should
be associated with a strong performance
by Hotel Lion and a weaker performance
by other competitors. For example, Hotel
Lion might introduce a shuttle service to
important conference and trade show lo-
cations to make it convenient for business
travelers and conference participants to
reach their destination; they could also of-
fer a coffee shop for short breaks and
breakfast suited for their target segments’
busy schedules, and/or introduce secretar-
ial or other business services for travelers.
4. If a lexicographic decision rule were used,
with low rates as the most important at-
tribute, Hotel Chelsea would be chosen. It
scores highest on this attribute (b
low rate C
? ?3).
5. Hotel Union would be chosen because it
is the only hotel in the consideration set
meeting the cutoff value of 0 on all salient
attributes.
6. Assuming that a lexicographic rule in this
instance is looking for positive belief rat-
ings on nice restaurant (i.e., evaluation
score is now positive), Hotel Chelsea
must improve its restaurant offering in
terms of food, beverage, and service.
These changes must be fairly substantial
in order to affect consumers’ impressions
of the restaurant. It is thus likely that a
considerable amount of time and money
will have to be spent to rethink the
restaurant concept and offerings. Hotel
Lion should maintain its high level of
Section 7.3 ? Consumer Decision Rules and Implications for Hotel Choice 333
restaurant quality; it would also be possi-
ble to strengthen consumers’ belief that
Hotel Lion offers an excellent restaurant
by increasing marketing communica-
tions. It is important to note here that un-
derstanding the consumer decision-
making process is crucial in devising a
successful marketing strategy: Only if a
substantial (in terms of number of cus-
tomers and/or profit potential) market
segment is using the lexicographic deci-
sion rule based on positive evaluations of
a nice restaurant in choosing a hotel does
it pay to improve the restaurant (for Ho-
tel Chelsea) or to maintain a nice restau-
rant offering (for Hotel Lion). If the
targeted segments rely primarily on a
compensatory decision rule using impor-
tance weights described in Table 7.2
above, then establishing or maintaining a
nice restaurant may be counterproduc-
tive, as these consumers do not positively
value that attribute (e
i
? ?1). In this
case, creating a strong belief that a nice
restaurant is offered decreases overall
evaluations of the hotel—and is opera-
tionally expensive and time-consuming—
that is, when targeting customers like
Shannon, offering a great restaurant will
not increase Hotel Lion’s likelihood of
being chosen. The hotel could, however,
benefit from its strong performance on
attributes like “nice restaurant” or “fit-
ness facilities” not valued by the current
market segment through changing its tar-
get marketing strategy. A property could,
for example, target business travelers for
whom exercise and fine dining are more
important than low room rates or central
location.
7. The following is a (nonexhaustive) list
of additional attributes hotels might
1327.ch07 12/19/05 9:33 AM Page 333
consider that might be salient for en-
trepreneurs attending trade shows and
conventions: access to fax and copy ma-
chines, secretarial services, complemen-
tary breakfast, cable TV, including
channels covering business topics, com-
plementary newspaper, and shuttle ser-
vice to train station or airport.
8. Using elimination by aspects (cutoff
value ? ?2), we initially eliminate Hotel
Lion and see that hotels Park, Union, and
334 Chapter 7 ? Marketing and Associated Activities
Chelsea stay in consideration based on
beliefs about those brands regarding the
equally important attributes of low rates
and location. The next most important at-
tribute is free parking, and we are left
with hotels Park and Union in considera-
tion after eliminating Hotel Chelsea. Fi-
nally, we eliminate Hotel Park and select
Hotel Union based on the Internet access
attribute (lowering the cutoff value to
?1).
7.4 HOTEL PRI CI NG
Marta Sinclair and Carl R. Sinclair
?
TRADITIONAL APPROACH
The single most important criterion of success
in any business, including hotels, is profit. The
purpose of this article is to discuss the impor-
tance of hotel pricing and its influence on
yield or revenue management, especially in
terms of profit generation, and because of in-
herent dangers to the industry worldwide, in-
tegrity of the established pricing structure.
Historically, price has been determined by the
triangular relationship of cost and demand in
the context of competition (see Figure 7.3).
The actual pricing structure is developed with
one of these three components as the decid-
ing factor while the other two play supple-
mentary roles.
The traditional pricing strategy was
largely cost-driven. Many hotel operators
tended to favor the rule-of-thumb method.
This approach, also called the $1 per $1,000
rule, states that hotels should charge approxi-
mately $1 per night for every $1,000 of room
cost, based on an average 70 percent occu-
pancy. Although popular in its day, the calcu-
lation of cost was commonly misunderstood
(see Hanson, 1995). Another widely used
quantitative method was the Hubbart For-
mula, developed in the late 1940s as a
guideline issued by the American Hotel Asso-
ciation. It focused on computing an average
room rate that would cover operational costs
Figure 7.3 Three Forces of Pricing
PRICE
DEMAND COST
COMPETITION
1327.ch07 12/19/05 9:33 AM Page 334
and yield a reasonable return on investment
(ROI). These quantitative methods are fairly
static and therefore suited for a stable eco-
nomic environment. Qualitative pricing ap-
proaches, such as percentage increase of
previous-year rates adjusted for inflation,
payroll increases, and new cost of supplies,
reflect more realistically the projected cost.
Other qualitative techniques are less ex-
Section 7.4 ? Hotel Pricing 335
act but, by being competition-oriented, they
offer more flexibility. The Pied Piper or
Follow-the-Leader method uses competition
as the basis for rate setting, while the Gouge
’Em approach tries to lure business away
from other properties by undercutting their
prices. If there is no competition to speak of,
Hit or Miss fluctuation of rates tied to prof-
itable occupancy levels could be employed.
Table 7.3 Traditional Room Rate-Setting Methods
Quantitative Methods Qualitative Methods
$1 Per $1,000 • Determine the cost of the property Gouge ’Em • When demand is low, set rates
• (building, furnishings and equipment). • below the market level.
• Divide the total by number of rooms. • When demand is high, set rates
• Divide the calculated cost per room • at a premium.
• by $1,000.
• Estimate at 70% average occupancy. Hit or Miss • Record occupancy at each
• pricing level.
Hubbart Formula • Calculate operating expenses. • Analyze the collected
• Add taxes and insurance. • information periodically to
• Add expenses for asset depreciation. • determine which level was most
• Deduct income from sources other • profitable.
• than room revenue. • Set the rate at the most
• Divide the total by number of rooms • profitable level.
• in the hotel.
• Adjust the calculated room rate for Percentage • List the rates that were charged in
• estimated occupancy. Increase • the previous year.
• Calculate rate of inflation,
• payroll increase, the new cost
• of supplies.
• Convert the increased cost into
• percentage increase.
• Increase previous year rates by
• the calculated percentage
• increase.
Pied Piper • Set rates according to what
• other hotels in the area are
• asking for comparable
• accommodation.
Source: DeVeau, L.T., P.M. DeVeau, N.J. Portocarrero and M. Escoffier. 1996. Front Office
Management and Operations, pp. 83–91.
1327.ch07 12/19/05 9:33 AM Page 335
The drawback of competition-driven pricing
is its sole focus on rate comparison, ignoring
differences in operating expenses and cus-
tomer-perceived value. An effective ap-
proach, therefore, calls for a mix of methods
adjusted for different situations (see Table
7.3). The fundamental question remains: What
should be the driving force in formulating a
sound pricing strategy? In today’s dynamic
business environment, which discards the tra-
ditional view that market demand for room
rates is largely inelastic, demand orientation
seems to provide the best fit.
?
CURRENT PRICING
CRITERIA
“Our pricing is market-driven, not cost-
based,” says Scott Farrell, corporate director
of distribution with Fairmont Hotels and Re-
sorts, a Toronto-based chain of luxury proper-
ties. When the chain is setting its prices, it
starts with comprehensive market research.
Based on the data, the correct price for each
marketplace is determined. If there is a major
shift in a market, then the prices will adjust
for that. However, if there is a major shift in a
demand curve, then a shift of price may have
no effect. It may actually leave more money
on the table. For example, if the airlines go on
strike, a significant shift in the demand curve
would result. Under such conditions, decreas-
ing the rate by $50, for example, would only
result in a $50 loss. If there is an opportunity
to go after a new targeted market with a spe-
cific offer, enabling the chain to capture a
greater market share, then lowering the rate
serves its purpose. Generally, however, lower-
ing rates across the board is not the preferred
pricing strategy.
336 Chapter 7 ? Marketing and Associated Activities
?
PRICING: WHO IS
IN CHARGE?
While independently owned properties make
their own pricing decisions, in case of a chain
it is usually corporate headquarters (HQ) that
sets pricing guidelines. Often, individual prop-
erties are still responsible for the actual pric-
ing. Because they are held accountable, they
must balance corporate guidelines with their
autonomy to set their prices. Caroline Shin,
member of the revenue management team at
Starwood Hotels and Resorts Worldwide,
which operates a number of upscale brands,
such as Sheraton and W Hotels, stresses the
cooperative nature of this relationship. Suc-
cessful pricing strategies arise from an ongo-
ing interaction of both sides. Corporate HQ
provides sophisticated tools and in-depth mar-
ket analysis that would be beyond reach of in-
dividual properties. Property managers, on the
other hand, offer their experience and knowl-
edge of regional specifics that may have gone
unnoticed by the corporate team. “The people
who have been in the property understand the
dynamics of that market, and they have devel-
oped pricing intuition,” explains Shin. Some
experts view intuition as a valuable part of the
pricing mechanism, and even managers who
are technically savvy check the numbers
against their gut feeling.
?
PRICING: SCIENCE,
ART, AND INTUITION
Pricing distribution and revenue manage-
ment techniques are a mix of science and art.
Recent research shows that two-thirds of
managers making strategic decisions under
pressure and time constraints use a combina-
1327.ch07 12/19/05 9:33 AM Page 336
tion of analysis and intuition (Sinclair, 2003).
The advent of modern technology, such as
yield management software packages, has fur-
ther strengthened this link. “Even the most
sophisticated analytical model for forecasting,
may it be for hotel pricing or for thermal dy-
namics of a nuclear plant, still needs variables
based upon assumptions,” says Shin, who used
to work as a nuclear engineer. The more busi-
ness-savvy hotel management becomes and
the more they understand the hotel dynamics
and the market, the more can be gained from
training them how to define their experience-
based intuition and put it into numbers. In
this respect, an interaction between the cor-
porate revenue management team and indi-
vidual hotels is paramount. “Every time I go
out to a property, I learn something new. It
only helps me when I build my analytical
models to almost translate what they know
into numbers,” confirms Shin. The better ho-
tels can do that, the better models they can
develop. Nonetheless, inaccurate historical
data remains a major limitation.
No model is ever going to be perfect,
though. What seems to work best is to teach
hotel managers how to use the model and to
understand the direction of the pricing deci-
sions they need to make. That is the scientific
part. The art piece comes into play when they
infuse the model with their knowledge and in-
tuition. Staff training is an important part of
this process. “We can’t just have Ph.D.s sitting
in one room coming with all these models and
we just roll it out. At the same time, we can’t
just have people with intuitions run around
and set prices,” says Shin.
Revenue management teams must make
sure that hotels understand how to employ
the models in their daily pricing decisions.
When science is applied, the revenue team
can go to their experts, ask probing questions,
Section 7.4 ? Hotel Pricing 337
and get solid results. Even though intuition is
a part of this process, it is based only on a hy-
pothesis that could have been triggered by a
discussion with a customer, knowledge of
what is happening in the marketplace, or his-
toric trends. That is why pure intuition is not
sufficient. “Managers must have reliable data
to support their hunches,” cautions Scott
Farrell.
?
CUSTOMER NEEDS
Customer satisfaction is a crucial part of mar-
keting, pricing, and yield management. Any
pricing strategy established by the hotel man-
agement must attract customers willing to pay
the specified rate. While price is a determina-
tor of the customer profile the hotel is looking
for, it is also an indicator of the quality of
services and the market segment the hotel is
competing in. Therefore, yield management
uses information about targeted customers’
purchasing behavior and product sales to de-
velop pricing strategy together with inventory
control that delivers products that are better
matched to customer needs, create greater de-
mand, and, on that account, produce greater
revenues. Lieberman (1993) states that yield
management is the process of maximizing
profits from the sale of perishable assets, such
as hotel rooms, by controlling price and in-
ventory and improving service through sys-
temization. An exact definition of the target
market is essential. There is a definite and
firm perception in the psyche of the customer,
who views the price as the value forthcoming.
Therefore, the eventual satisfaction of the
customer is the paramount task of the pricing
mechanism. This is the make-or-break factor
of the entire hotel, especially if the value ex-
pected does not match the price.
1327.ch07 12/19/05 9:33 AM Page 337
?
ROLE OF TECHNOLOGY
While the approach to hotel pricing is still
ruled by supply and demand, speed and so-
phistication of room-rate yield or revenue
maximization is now much increased due to
two technological factors: yield management
software and Internet bookings.
Yield management software packages en-
able hotels to use a higher number of room-
rate levels, or buckets, and to control
inventory for rate availability in real time.
Each level may consist of several room rates
open under given conditions to yield a maxi-
mum profit. Traditionally, hotels used be-
tween three and five rate levels; otherwise,
the adjustment became too complex for the
human brain to work with. The introduction
of software removed this barrier, and some
hotel chains now use up to ten rate levels. This
allows implementation of much narrower
ranges for each bucket, thus optimizing price
elasticity. This further means the software
model recognizes the point at which the same
number of bookings can be achieved at a
higher rate.
Online monitoring of room inventory in
real time facilitates the timing of the adjust-
ment. So far, the biggest limitation is the reli-
ability of historical data. Even in its imperfect
form, the system has made a difference. How-
ever, hotel managers are fully aware that it
takes years to develop brand recognition and
quality but just a push of a button to damage
or even destroy it, if the pricing is not set up
knowledgeably. As the technology becomes
more sophisticated, it will eliminate such
questionable practices as overbooking, which
aims at compensating for last-minute cancel-
lations by taking in more than 100 percent
reservations. Besides the question of whether
338 Chapter 7 ? Marketing and Associated Activities
overbooking is ethical and, in some countries,
even illegal, better technology would defi-
nitely improve the quality of service provided
by properties that engage in this practice.
Another area where technological ad-
vancement had a great impact on hotel pric-
ing is the Internet. Its use as a booking tool
has created a new level of pricing trans-
parency and tiered competition. It also pene-
trated the negotiation of corporate rates.
Many hotels see the effect of the Internet as
both good and bad. The good side is that web-
site bookings are growing every day. As more
customers become familiar with their favorite
hotel websites, hotel companies have started
investing heavily in website development and
upkeep, which gives them several advantages.
First, the cost of online bookings is lower than
for bookings made through other distribution
channels. Companies do not have to pay com-
mission because the booking is direct, circum-
venting all intermediaries. Online booking
also provides an opportunity to monitor in-
ventory in real time without reliance on a dis-
tributor willing to share and regularly supply
data. Last but not least, it generates loyal cus-
tomers by making them eligible for bonus
points, which they cannot earn if they use an
Internet intermediary.
That is exactly where the flip side of the
Internet lies. The intermediaries are getting
more powerful and growing significantly in
volume. Because most of them show all hotel
rates on their website, they make the infor-
mation accessible to any computer user. One
way to meet the challenge of more powerful
intermediaries, especially if hotels need to
move inventory, is to utilize auctions where
the name of the hotel is not disclosed to the
customer until the transaction is finalized.
Such action, however, calls for extreme cau-
1327.ch07 12/19/05 9:33 AM Page 338
tion so that it does not damage a hotel’s rep-
utation or threaten its strategic partnerships.
As intermediaries become bigger, rate trans-
parency will increase to the point where it
will drive the market, especially when com-
puter literacy and Internet access become the
norm.
Moreover, the Internet allows non-
branded hotels to compete more heavily with
the branded hotels because they can now be
displayed just as readily. Without significant
advertising expense, they can compete on
price. For some markets this does not matter,
especially when the brand is powerful enough
to charge the premium and get the business.
In highly competitive markets, however, the
competition creates an additional strain for
the individual property. Many branded hotels
must now compete with other brands through
the traditional distribution channels and with
nonbranded hotels on the Internet, which, in
principle, lowers hotel rates. A frequently
adopted strategy is to invest heavily in web-
site development and customer loyalty
programs, assuring excellent website func-
tionality and that customers are rewarded for
booking directly through the hotel website
rather than through the website of a third-
party intermediary. Both Fairmont and Star-
wood, for example, utilize their high-quality
loyalty programs in this way.
Internet booking also changed the way
corporate accounts are negotiated. Because
many companies now require that their em-
ployees make business travel arrangements
via the corporate website, the placement of a
hotel or a brand on this booking tool is of
strategic importance. Being listed first in the
accommodation section, for example, may
bring in a higher volume of business and thus
substantiate a lower negotiated rate.
Section 7.4 ? Hotel Pricing 339
?
LONG-TERM STRATEGY
FOR THE INTERNET
Because hotels cannot expect that Internet
distributors will go out of business, they
smartly conclude that a partnership with the
devil is better than a fight with him. Besides
using their own websites, hotel companies are
also making sure that the cost of their trans-
actions goes down continuously so they can
compete even at lower rates—while main-
taining a good relationship with their care-
fully selected online intermediaries.
There is a large number of distributors to
choose from. On one end of the spectrum is,
for example, Expedia, which allows partici-
pating hotels to control their rates, meaning a
hotel can change its rates any time it wants. At
the other end are companies, such as Hotel
Reservation Network (HRN), that bind ho-
tels contractually to a locked rate that cannot
be changed. Some hotel chains do not want to
partner with these distributors because they
like pricing flexibility and want to make sure
their rates yield as much as possible.
Adaptation to new technology has been
the biggest component of change for interme-
diaries as well. Companies that do not have
the most current technology working in real
time or allowing hotels to yield rates in real
time are usually not considered a suitable dis-
tribution partner for some chains. On the
other hand, companies that invest in real-time
technology to yield rates are ideal partners
because, as the industry sees it, they work
with, not against the industry by permitting
hotels to raise or lower rates in real time.
“They work with us,” says Caroline Shin.
“They give data to us very frequently so that
we understand the travel pattern bookings on
1327.ch07 12/19/05 9:33 AM Page 339
their website. Then we compare it with what is
happening on our website and also what we
are getting outside the Internet to make sure
that our market mix is set appropriately.”
Pricing flexibility, compatibility with the de-
sired hotel image, and protection of its strate-
gic partnerships, together with cost, play
important roles in selecting an intermediary.
?
THE ROLE OF CREATIVITY
IN PRICING
Creativity, either of an individual or a team,
can and often does lead to innovative pricing
ideas. However, its application must be spe-
cific, not just directional. It is not enough to
state, “We have to do something about our oc-
cupancy level.” A pricing campaign must tar-
get a number of sold rooms or generated
revenue that is required in order to break
even or to do better. This specific approach
injects efficiency into allocating marketing
money to areas where it is most effective and
in periods when it is desired. If there is no task
direction or overall pricing leadership, the
most creative idea may book only ten room-
nights instead of one hundred. It may gener-
ate more customer loyalty, but that is
something the hotel may not need at the mo-
ment, although it could be an acceptable out-
come in a low-season month. Pricing
leadership helps team members understand
the hotel’s current situation and direct money
and creativity to do exactly what is needed.
Creativity comes up with the idea, which
serves as a vehicle, but spending marketing
money the smart way is a matter of experi-
ence in innovation, which turns the idea into a
successful product. Creativity also plays a
large part in employee satisfaction, and it low-
ers turnover.
340 Chapter 7 ? Marketing and Associated Activities
In a sluggish economy, some hotels start
paying attention not only to profit as the bot-
tom line but also to revenue. This means they
monitor closely the accrued cost as well as the
generated revenue, thus achieving the maxi-
mum yield. Interestingly, contemporary price
leadership may take different forms. It could
mean, for example, elimination of smoking
rooms throughout the property. Many U.S.
motels are revamping rooms, ripping off ciga-
rette-damaged furniture and carpets, and des-
ignating them as nonsmoking. This saves on
maintenance and adds to overall packaging
flexibility when the business is hurt by lacklus-
ter demand. This tactic means drapes, carpets,
bedding, and other furnishings must be re-
placed less frequently; it also mitigates fire risk
and enhances cleanliness and overall safety.
?
THE ROLE OF HUMAN
RESOURCES IN PRICING
Some large chains recognize that pricing is a
complex issue and that they need to get better
at it. There is a new focus on analyzing the cul-
ture of pricing (how it is being done) and how
it can be improved. This approach is reflected
even in the kinds of people chains are hiring.
Although the majority of staff involved in
strategic pricing are in the hotel industry and
have a background in revenue management,
others are in the airline industry and have in-
depth travel revenue management experience.
Some chains have sought access to this experi-
ence by hiring from outside the hotel industry.
This is to encourage diversification of thinking
and new ways of thought—completely out of
the box, as the traditional team members are
joined by researchers doing a different kind of
optimization analysis. The goal could be as
radical as trying to manage risk or optimize to-
1327.ch07 12/19/05 9:33 AM Page 340
ward the railroad industry and its scheduling.
On the surface, these tactics have nothing to
do with revenue management per se. A lot of
experience in optimizing difficult travel, how-
ever, can only be gained by bringing in people
with different backgrounds in consulting or
with in-depth Internet experience. In order to
move pricing and revenue management to a
different level of thought, a new mix of people
is necessary. For this approach to work, ade-
quate training must be in place.
In this respect, basic HR functions, such
as hiring and training, have an impact on pric-
ing. What is necessary is not only to train per-
sonnel in quantitative core skills but also in
strategic thinking. For example, when a hotel
does not want to take a specific piece of busi-
ness, it must ask such questions as: What is the
revenue? What is the rate? What am I dis-
placing by this decision? Where do I think this
will go? How does it help my RevPAR?
Hotel managers must become more ana-
lytical so they can use all the new tools now
available. When reports are created, team
members must be taught how to use them. A
lot of training must be provided for corporate
executives, general managers, and regional
revenue directors as well. They all must be
trained to think more strategically and to un-
derstand analysis and the reports so they can
help their individual properties.
?
DIVERSIFICATION: THE
IMPROVEMENT OF THE
PRICING PROCESS
As noted, exclusive hotel industry experience
may lead to ossification due to one-sided
judgment and the inability to see beyond the
familiar. From this perspective, experience is
Section 7.4 ? Hotel Pricing 341
both an asset and a liability. It is human na-
ture to take for granted the way things are
done after being in the same environment for
a while. Therefore, hotel chains are continu-
ously creating and refining pricing strategies
to accommodate not only different market
segments but also different situations a hotel
may face based on occupancy levels.
Corporate HQ tries to identify these dif-
ferent situations and associated variables. “It
is almost like a bag of goods, a bag of pricing
strategies that should be tested,” says Caroline
Shin. Hotels are given the full menu and en-
couraged to try a certain strategy if they are in
a specific situation. Depending on the region,
an individual property may use one set of
strategies more than another. In a weak econ-
omy, however, the chains have to work harder
and be more flexible because the market is
overflowing with demand. Adapting step by
step, a hotel may apply a different strategy
every week. The problem for the corporate of-
fice is to identify situations a hotel might be in
and seek remedy. For example, if group book-
ings are low this week but competitors are full,
how can the property make up the difference
with transient or leisure business? The general
manager may ask the corporate team, “What
pricing strategies can I use in order to fill my
house?” Then he or she may ask, “What else
worked before for other hotels, and what may
work for me based on my market specifics and
market characteristics?” That way he or she
can test each strategy using the provided tool
and personal experience.
?
PRICING: SUPPORT
AND PROTECT
The corporate pricing structure is also in
place to support and protect members of the
1327.ch07 12/19/05 9:33 AM Page 341
chain in a number of areas including pricing
and partnerships. The corporate office sets
guidelines for hotels in terms of pricing struc-
ture and the market segments they deal with.
Fairmont Hotels and Resorts, for example, fo-
cuses on four segments: transient leisure
travel, group travel, business travel, and
wholesale. The corporate structure provides
guidelines about how the segments fit with
each other, how they cross over, and where
they reside in the overall pricing structure.
This information is necessary because every
segment acts differently. Most market seg-
ments are dynamic and require frequent rate
adjustments. One exception is the wholesale
market, where pricing is still largely done the
traditional way: A wholesaler provides a net
rate, marks it up, and sells it to the general
population. There may be a hidden cost, how-
ever, if the distribution chain includes an op-
erator acting as a middleman between the
wholesaler and the supplier.
When setting up the overall pricing struc-
ture, one starts with the retail rate, which is a
bucket of premium or best available rates
(BAR) charged on the open market. They
usually do not carry any restrictions, such as
cancellation fees, and they are fully billable.
Depending on the level of occupancy, one of
these rates is available on any given day when
the hotel is not fully booked. It is up to the
yield management system to identify which
BAR to offer. All other rate types, such as dis-
count rates and prenegotiated rates, are de-
termined in relation to the retail rate. For
instance, a corporate rate for a high-volume
client will be probably set lower than the
BAR rate that is estimated to sell most during
the period when the contract is in place. This
way the rates are nested within each other in
a manner that makes economic sense.
342 Chapter 7 ? Marketing and Associated Activities
The corporate pricing guidelines follow
two main criteria: to maximize revenue and to
protect key partnerships. While the hotel sales
force negotiates contracts with key partners,
such as longstanding corporate accounts or
wholesale volume accounts, they make sure to
protect these partnerships and provide them
value. At the same time, they take every op-
portunity to maximize revenue. One cannot
survive without the other, reiterates Scott Far-
rell. However, it is up to the hotels them-
selves, with guidance and additional research,
to determine in their marketplace what their
pricing structure should look like.
A diversified corporate team, with a mix of
people with a hotel industry background and
others skilled in optimization modeling, fulfills
an additional function. It acts as a risk preven-
tion mechanism, a necessary prerequisite for
managing the risk inherent in pricing. Any
chain with a wide variety of hotels must make
sure the properties are covered in all kinds of
situations. One risk containment scenario
might be that the chain, in response to a chang-
ing demand curve, acquires a type of business
that the brand has not catered to traditionally.
Caroline Shin explains, “Sheraton did not take
on airline crew business because we did not
want crew members lingering in the lobby; it af-
fected our brand image. But we thought maybe
we could start taking that when our RevPAR
index or occupancy slips to a certain point. So
we are trying to change the standards of differ-
ent market segments we are willing to take.”
On the international scale, another risk
management plan would be analyzing opera-
tional cost and determining whether to close
down part of the hotel if market research
shows occupancy will not be high enough.
When PESTEL (political, economic, sociocul-
tural, technological, environmental, legal)
1327.ch07 12/19/05 9:33 AM Page 342
analysis indicates demand will drop precipi-
tously for an extended period (due to political
unrest, economic crisis, or health scare, for ex-
ample), instead of hoping for the best and
running a full house with a full staff, the hotel
may decide to shut down floors or restaurants
and save cost until the market picks up again.
Selection of the appropriate strategy will de-
pend on the market specifics and protection
of the image. A property may opt to close
down several floors over the weekend if it
caters mostly to business clientele staying
during the week. It would not, however, sus-
pend room service, although unprofitable, if
that is considered an integral part of the of-
fered product. In a worst-case scenario, the
chain may decide to sell properties in global
risk areas when it determines the external cir-
cumstances make it difficult to raise occu-
pancy on an ongoing basis.
?
BETTER UTILIZE YOUR
DISTRIBUTION
CHANNELS
The Internet creates a new level of trans-
parency as it allows the opportunity to maxi-
mize profitability. There is now a multitude of
channels to choose from. Understanding the
cost of each channel in relation to the value of
provided service has an impact on the quality
of pricing decisions. Therefore, it is necessary
to determine how much revenue bookings
through an Internet intermediary generate
and whether or not they justify the accrued
cost. There is also a tremendous risk involved.
As discussed earlier, one of key guidelines of
corporate marketing is that partners are pro-
tected. Just because there is a new Internet
Section 7.4 ? Hotel Pricing 343
site it does not mean a chain can use it and ad-
vertise a lower rate, which would undermine a
partnership of many years. In terms of cost,
the chain must review its pricing strategy not
only by market segment but also by distribu-
tion channel. “Several years ago, we would
not consider the cost of distribution in our
ROI. Today we do,” concedes Scott Farrell.
Another challenge is to keep up with new
Internet sites. The chains must reevaluate
constantly and prioritize their yield so as to
choose which channels to keep or drop. Fair-
mont Hotels and Resorts, for example, applies
the 80–20 rule. They focus on the 20 percent
of the online wholesalers that capture more
than 80 percent of the business. As Scott Far-
rell puts it, “Why would I play with the other
10–12 percent? I only have so many hours in
a day to manage. I may as well work with the
lion’s share.”
?
QUALITY ABOVE ALL?
Criteria for selecting an online distribution
partner vary by price levels as well. Budget
and economy properties are driven mostly by
financial considerations, while upscale and
luxury hotels are more concerned with com-
patibility. As for chains, they ask two basic
questions: (1) How can the partnership in-
crease our brand recognition or a brand
reach, and (2) How much is it going to bring
us in terms of revenue or profitability? Their
choice has to match the brand first, and then
it has to drive the revenue. If the brand is
equaled with quality, online providers that
project a connotation of cheapness will not be
considered at all. The quality image refers not
only to the hotel asset itself but also to how
and where this asset is sold.
1327.ch07 12/19/05 9:33 AM Page 343
Fairmont Hotels and Resorts, as a quality
brand on the luxury side, cannot compete on
price. The quality of their product and the
offering of the experience must be considered
by the customer at the price being offered.
When their hotels play with price, the corpo-
rate office watches closely. Scott Farrell
explains, “If our property wanted to shift their
rate by $50, I would ask why? Give me the
case behind it and tell me what you are going
to do to make up the additional $50 you are
going to lose. If they come back to me and say
they are moving their rate from $300 to $250
while driving a certain volume, I would make
them go through the process of determining
what incremental volume they will need to
make up for the $50 in loss.” In other words,
pricing decisions must be driven by ROI, not
only a feeling. Feelings and experience may
be involved, but properties must present a
strong case based on the estimated ROI and
what they plan to get out of the proposed
strategy. It allows them to go into the pricing
change with their eyes open. They also must
consider how the competition will respond. A
carelessly lowered rate may lead to a price
war.
?
SPEED AND STRATEGY
The speed and immediacy of exposure via the
Internet have reshaped how marketing cam-
paigns are conducted. Having eliminated the
delay of exposure to marketing collateral ma-
terial, such as brochures or newspaper adver-
tisements, hotels can conduct targeted
discount mini-campaigns on their own web-
sites when the yield management system indi-
cates a drop in occupancy for specific dates. In
a similar manner, brand recognition can be
enhanced by a carefully orchestrated online
344 Chapter 7 ? Marketing and Associated Activities
auction. The South African hospitality group
Protea (2000) was among the first in the in-
dustry using this method by offering their
prospective guests the opportunity to bid on a
limited number of weekend getaways in their
properties that needed to boost occupancy.
By setting a minimum bidding price, the in-
tegrity of the hotel image was protected. Sim-
ilar auction systems, used to encourage
room-night sales during slow periods, are
nowadays available in the United States and
Canada via several Internet intermediaries.
For chains in particular, a long-term strat-
egy in distribution pricing is paramount. It
stipulates the criteria and accepts or rejects
short-term adjustments depending on what is
happening in the industry, what is new in the
technology, and who the new players are. In
terms of corporate hierarchy, pricing is for-
mulated and executed on three levels: (1)
strategy, (2) tactics and execution, and (3)
measurement. Strategy comes first, followed
by tactics meant to support that strategy and
their execution. Finally, the achieved outcome
is measured against the set benchmarks. If the
strategy is sound, it will last longer than the
other two steps. Frequently, new tactics must
be implemented; these drive the execution
and the measurement. This requires a devel-
opment of proprietary criteria for measure-
ment and their continuous adjustment to
changing conditions.
?
PRICE ELASTICITY
Contrary to the traditional view that hotel
rates are, in the long-term, generally inelastic,
price elasticity is receiving a lot of attention
nowadays thanks to yield management. Its
goal is to take advantage of and to cover the
entire spectrum of the customers’ ability to
1327.ch07 12/19/05 9:33 AM Page 344
purchase. Price elasticity allows hotels to cap-
ture customers who do not mind paying the
high rate as well as those who are more price-
conscious. This can be done in a number of
ways. By using different room categories, a
luxury hotel can have on the same day suites
available at $500 and entry-level rooms at
$200. Every room rate category has a differ-
ent value proposition associated with the in-
cremental revenue. If the variance between a
standard room and a deluxe room is $75, the
latter should provide an adequately greater
value to the customer. The result is a clear
product differentiation, which can be also
achieved by stay restrictions or by the use of
fencing. Examples of physical differences, or
fences, are room type, view, amenities, and lo-
cation. Nonphysical fences may mean differ-
ent customers, transactions, or consumption
characteristics. These bear many similarities
with airline pricing strategies, which differen-
tiate the product by, for example, cancellation
restrictions or last-minute availability of a
prenegotiated corporate rate. The result is
nested pricing, allowing properties to have a
very high rate available on the same day as a
rate that is more attractive to the lower-end
customer.
Section 7.5 ? A Day in the Life of a Regional Revenue Manager 345
?
NEW AREAS OF
PRICING AND YIELD
MANAGEMENT
Hotel pricing strategies traditionally have
been limited to setting and adjusting room
rates and other ongoing activities. In order to
survive in the current dynamic, competitive,
and even dangerous global environment, ho-
tels and resorts are taking on other types of
business, some of which are one-time projects.
Organizing shows, festivals, and conferences
or undergoing renovations requires a new
type of core competency. Therefore, in addi-
tion to mastering current pricing strategies,
hotel practitioners must acquire project man-
agement skills, such as those that are taught
and practiced by Project Management Insti-
tute (pmi.org). Mastering these skills will
make hotel team members capable of maxi-
mizing yield from project-type functions the
same way as they optimize revenue from
room rates.
7.5 A DAY I N THE L I FE OF A REGI ONAL
REVENUE MANAGER
Paul Chappelle
As the sun rises, so does the stack of reports
on my desk. Every morning I am greeted with
the accomplishments of the day, week, month,
and year before, all in the form of paper-and-
ink reports roughly 2 inches thick. Each report
attempts to explain the basic numbers perti-
nent to the smooth function and revenue gen-
eration of a hotel. Although I enjoy the
development and success of the latest revenue
management systems, I still prefer to do things
1327.ch07 12/19/05 9:33 AM Page 345
the old-fashioned way. These reports are my
comfort food for revenue management.
The first meeting of the day is the revenue
maximization meeting, or revmax for short.
The meeting consists of the hotel’s revenue
manager, general manager, director of rooms,
and the entire sales and catering staff. We dis-
cuss what happened the day and night before,
and we evaluate sales leads from the previous
day. As a group, we decide what our approach
is to each lead. We evaluate whether we will
pursue the lead or refer it to a nearby hotel
within the company. The revenue manager
upholds any decisions made regarding the
rate strategy for that day and for the next few
days, which are set at that time. Any changes
that need to be made are communicated
throughout the day.
The next meeting of the day is the rev-
enue management meeting. This meeting, fa-
cilitated by the revenue manager, happens
once a week and is attended by the general
manager, controller, director of sales and
marketing, director of rooms, reservations
manager, and most operations managers. In
this meeting, similar to the daily revmax
meeting with the sales team, we go over the
numbers in much greater detail and for a
much longer time. We look at the number of
room-nights and rates generated through the
different revenue channels, trends both good
and bad, upcoming marketing strategies, and
the results of past marketing strategies, and
we talk about anything and everything that
may affect the number of room-nights and the
rate the rooms are sold at the hotel for the
past year and as far out as one year.
After the leadership team has identified
our opportunities, we discuss a plan for how
we are going to exploit these opportunities
and how we are going to measure whether
what the team decided was an effective strat-
egy. Each of these meetings is repeated in
346 Chapter 7 ? Marketing and Associated Activities
some form or another in person or over the
phone for all the hotels I oversee.
?
RESPONSIBILITIES
The daily, weekly, monthly, and yearly fore-
casts are the most important responsibility of
a revenue manager. I am responsible for fore-
casting the number of rooms and the rate at
which the guest will pay for a given period. I
generate these forecasts based on many criti-
cal factors and some less critical. History is al-
ways a good indicator of what the future will
hold for hotels. The correlation between what
happened last year on this day in this month
to what happens today can be between 60
percent and 80 percent.
What is going on in the area can have a
huge impact on the occupancy and rate of a
hotel. Local events such as festivals, races, and
tournaments can all affect the number of ad-
ditional persons in the city who need hotel
rooms. The competition can negatively affect
your hotel by running a special promotion.
On the other side of the coin, the competition
can and will create a positive situation for
your hotel when they have abysmal service or
a ramshackle product.
Other factors that may contribute to a
forecast are additions to the supply of hotel
rooms in the area, weather, seasonality,
pickup and departure patterns of conven-
tions, and the ever-changing local and re-
gional economies. However, when it comes
down to it, a forecast is exactly that—it is a
guess of what we think may happen or what
we really want to happen.
Once the forecasts are completed, they
are used to project the amount of variable
costs associated with running a hotel—for ex-
ample, labor, or how many housekeepers,
front desk clerks, and hash slingers we are go-
1327.ch07 12/19/05 9:33 AM Page 346
ing to need for a given period. Goals are set
for sales and catering managers based on the
forecast. The quarterly and annual forecasts
are reported to the corporate offices for the
purpose of forecasting the entire company’s
projected revenues and expenses. In turn, that
information is put out to the stockholders and
others with a financial stake in the company.
Forecasts and tracking of how we did
compared to the forecast take up 75 percent
of my time. The other 25 percent is spent ex-
ploring new opportunities for revenue
growth, maintaining the various revenue
channels into the hotel, managing the reser-
vations department, acting as the liaison be-
tween the sales department and operations,
and having fun.
Additional duties include exploring new
revenue channels for the hotel. I have been
known to visit the local competitor on a par-
ticularly busy day and offer a shuttle to our
hotel and a no-line guarantee—this as the line
behind the front desk stretches out the front
door and halfway to the street. I am responsi-
ble for researching the demographics of the
travelers coming to the area. Why are they
coming? Are they traveling because of busi-
ness, conventions, leisure, or are they part of a
contract piece of business? How often do they
come? How long do they stay? How much do
they spend when they come? Where are they
coming from?
The most important thing I do as a rev-
enue manager is to ensure the different rev-
enue channels are set up and functioning
properly. These channels include the hotel
brand’s generic toll-free vanity number and
central reservations office, the convention and
visitors bureau, the local hotel’s reservation
and front desk, the Internet, and the global
distribution system (GDS). The most critical
of these channels is the Internet, which in-
cludes the brand website. Only a few years ago
Section 7.5 ? A Day in the Life of a Regional Revenue Manager 347
it was GDS that was the most critical. In our
chains, in 2004, Internet channels generated al-
most twice the volume of the GDS. However,
the GDS is still crucial for the survival of al-
most every hotel. It is the system that travel
agents and some of the Internet sites use to
make reservations at my hotels. It contains in-
formation about rates and availability at a ho-
tel. It must be checked daily and routinely
maintained. The scary thing about the GDS is
that most hotels don’t know they have a prob-
lem until several months down the road. As
technology grows and more and more people
stop calling and start booking through their
travel agents and directly over the Internet, so
does the need to understand the GDS and ex-
actly how it affects the hotel. When one of our
competitors initiated a cleanup of their GDS,
it resulted in several million dollars in addi-
tional revenue in six months.
Managing the reservations departments is
the easy part of my job. Interacting with peo-
ple is always easier than trying to interact
with numbers and reports. The staff must be
kept up to date on changes in strategic goals
of the hotel and changes in marketing the dis-
count and frequent-stayer programs. I am re-
sponsible for ensuring that the training of the
reservations staff and anyone else who takes
reservations is consistent and current, com-
plete with ongoing positive feedback.
It is key that a revenue manager be
skilled in the art of diplomacy. As the liaison
between the operations and sales depart-
ments (see Waller, 7.2), I sometimes must me-
diate any challenges that may occur. Part of
the diplomacy is understanding each depart-
ment’s strategic goals and how both depart-
ments depend on each other for their own
survival. The easiest and simplest approach to
serving as a liaison between the two depart-
ments is facilitating frequent, open, and
honest communication between all parties.
1327.ch07 12/19/05 9:33 AM Page 347
Having fun is one of my key goals in
working at a hotel and in a regional capacity.
It is important to maintain a balanced ap-
proach to work in a hotel. It is easy to get
burned out trying to do too much. The nature
348 Chapter 7 ? Marketing and Associated Activities
of the hotel is that it is open 24 hours a day
and 365 days a year. Anything that can hap-
pen to a person on any given day can happen
at a hotel as well.
7.6 HOTEL SAL ES ORGANI ZATI ON AND
OPERATI ONS
Margaret Shaw and Susan V. Morris
?
SALES AND MARKETING
Sales and marketing are related concepts,
and each is an art and a science. Sales flow
from marketing. Marketing, well stated by
Lewis et al. (1995), “is communicating to and
giving target market customers what they
want, when they want it, where they want it,
and at a price they are willing and able to
pay.”The primary focus of sales is on the com-
munication aspect of marketing. It involves
direct personal selling to potential customers
that you and your organization have the right
product, in the right place, at the right time,
and at the right price—be it a hotel, a restau-
rant, a casino, or contract food services.
Marketing is getting and keeping a cus-
tomer, a macro approach to managing a suc-
cessful business. In a broad sense, marketing is
the development and delivery of a successful
product, that is, the development and delivery
of a satisfied customer. Hotel sales comprises
finding that customer and matching his or her
specific needs with the right product offering,
a micro or one-on-one approach to customer
satisfaction. For example, a meeting planner
from Texas Instruments (TI) is planning an an-
nual sales meeting to be held in Dallas. From
a macro perspective, this planner has selected
the city and is searching for full-service lodg-
ing accommodations for 200 TI sales represen-
tatives for a five-day conference. From a micro
perspective, he or she visits several hotel alter-
natives and meets with the hotel sales repre-
sentatives to find the best “fit.” Various
aspects of the meeting being planned are dis-
cussed including dates, rates, guest room ac-
commodations, function room requirements,
food and beverage services, and so forth. It is
the job of the hotel sales manager to learn the
specific needs and wants of the planner and
“create” the right product, place, time, and
price for a successful conference.
A successful conference is what the plan-
ner is really buying, not bricks and mortar.
Thus, successful selling is understanding the
real needs of the buyer, communicating how
your product and service can best respond to
those needs, and then delivering it. In another
context, McDonald’s Golden Arches markets
fun, simplicity, good service, and a good price.
McDonald’s sells friendly service, good value
for price paid, convenient locations, and those
delicious golden chicken nuggets on which
many of us grew up. Ronald McDonald is an
ancillary product, a public relations endeavor,
1327.ch07 12/19/05 9:33 AM Page 348
which augments and supports the idea or con-
cept of kids and why they are special.
Public relations, advertising, and special
promotions often support the selling effort.
Advertisements for the Ritz-Carlton Hotel
Company are directed to their business trav-
eler clientele. Such advertisements incorpo-
rate both the selling and marketing aspects of
this upscale hotel chain. The company is si-
multaneously selling hotel rooms to busy
business executives and marketing a hotel
that “remembers your needs,” and is hall-
marked by the vision implicit in their slogan
“ladies and gentlemen serving ladies and gen-
tlemen.” A travel agent, a corporate travel
manager, or a secretary, however, may have
handled the actual purchase of the hotel
room. Thus, the Ritz-Carlton advertisements
support the sale, but they do not actually
make the sale happen.
?
SALES AND OPERATIONS
Sales is the critical link between marketing
and operations. While hospitality profession-
als may espouse marketing, all too often it be-
comes ignored in the daily hustle and bustle
of operations. It is the role of sales to help
bridge this gap and find ways for the key
customer-contact members of the hotel to
keep the promise of marketing.
Selling starts by the professional sales
managers prospecting, making contacts, es-
tablishing relationships with clients, uncover-
ing their specific needs and wants. But it
doesn’t end there. Sales is also the host or
hostess greeting restaurant patrons. Sales is
the front desk clerk welcoming a guest at the
local Holiday Inn or at the Waldorf-Astoria in
New York City. Sales is the housekeeping
staff delivering the extra set of towels re-
Section 7.6 ? Hotel Sales Organization and Operations 349
quested by a guest. Sales is the sommelier in a
gourmet restaurant recommending wines to
complement an entrée choice. Sales is the
front office cashier saying, “Thank you for
staying with us. We hope you enjoyed your
stay.” It is amazing how a simple thank-you
can express appreciation for a customer’s pa-
tronage and bring them back.
All client-contact personnel of a hospital-
ity organization perform personal selling ei-
ther consciously or unconsciously. This
includes staff who does not regularly have
guest contact, such as the credit manager. One
of the authors nearly lost a $100,000 annual
account when a poorly trained credit man-
ager called the client to collect a payment that
had not yet been billed. A well-trained and
motivated employee who understands how a
hotel works is key to successful selling. This is
accomplished through the hiring and training
process, and although the many facets of hu-
man resources are beyond the scope of this
chapter, its importance to guest satisfaction
cannot be overstated.
In this particular context, however, the
hotel’s human resources department can per-
form services on behalf of the sales depart-
ment by recruiting sales associates who
understand the nature of the hotel industry
and its place in the broader category of the
services segment of business. Services are dif-
ferent from products and require specialized
knowledge and training to be competitive.
Because hospitality is very much a part of
the services industry, it is useful to understand
how services differ from products. Those
characteristics that are unique to the services
industry product include perishability, simul-
taneity, heterogeneity, and intangibility.
Perishability refers to the short shelf life
of the hospitality product. If it is not sold to-
day, the potential revenue from the sales of
1327.ch07 12/19/05 9:33 AM Page 349
that product is gone. A hotel room has a 24-
hour shelf life. A restaurant seat has a two-
hour shelf life. Manufactured goods have a
much longer period of durability. If a televi-
sion set is not sold today, it can be sold to-
morrow or next week. The potential revenue
from the sale of that product is not lost. But a
Tuesday-night hotel room cannot be resold
on Wednesday. Tuesday has come and gone. If
the hotel guest room goes unsold Tuesday, the
potential revenue lost from that vacant room
cannot be recouped.
Simultaneity means that production and
consumption occur at the same time. How can
you produce a guest experience without the
guest? Our customers, in a sense, are part of
the assembly line. They need to be present for
final production of the product offering. A va-
cant guest room produces nothing. Yes, the
carpeting is installed; the bed is made, the
bathroom plumbing works. But it all just ex-
ists until a guest arrives to use it. Simultane-
ous production and consumption is a unique
challenge for successful operations in hospi-
tality management. The guest needs to be
present, because many of the facets of the
service involve performances by hotel staff.
A related service characteristic in hospi-
tality is heterogeneity. Heterogeneity refers to
the variability of service delivery. Guest ser-
vice agents have their moods. Customers have
their moods. All have personalities of varying
shapes and sizes. Hospitality is a very people-
oriented business. Service personnel change
from shift to shift, typically on an 8-hour
schedule. Though operational manuals exist
in most hospitality establishments, rarely are
policies and procedures followed in an exact
manner. Guests’ “personalities,” too, can
change throughout their stay, and it may have
nothing to do with how they were treated by
service personnel. Dealing with heterogeneity
350 Chapter 7 ? Marketing and Associated Activities
in service operations is dealing with reality.
Mistakes will happen. But more importantly,
mistakes can be addressed. Often a simple
apology can win back a customer regardless
of who was at fault when a mistake happens.
Intangibility is a fourth major characteris-
tic of service businesses. Some consider it the
most important component to recognize. In-
tangibility refers to the highly intangible na-
ture of the service product offering.
Intangibility is a feeling; it is having a sense
about something that one cannot fully articu-
late. The intangible nature of the service prod-
uct cannot be prejudged. Consumers cannot
really see, touch, smell, hear, or taste a service
product prior to consumption. They can only
anticipate. One can test-drive a car before an
automobile purchase is made to see what it
feels like to drive. But a hospitality customer
cannot test-drive a hotel weekend package or
a restaurant meal prior to consumption. The
intangibility aspect of hospitality emphasizes
that service delivery is critical to customer sat-
isfaction. Most customers have an idea of what
to expect. But, in the end, they are really not
sure of what they are buying until the hospi-
tality experience actually takes place. Finally,
after the service has been consumed, the guest
has only the memory of the performance.
The foregoing unique characteristics rep-
resent the foundational challenge to the ho-
tel’s sales staff: they must find a way to
promise performance and experience in such
a way that the hotel’s operations departments
can deliver on the promise. If the essence of
marketing is finding and keeping a customer,
then the sales promise is fundamental to that
effort. Operations’ most important role is the
keeping of that promise to the customer—
having that customer walk away with a posi-
tive and memorable experience and want to
return again.
1327.ch07 12/19/05 9:33 AM Page 350
?
MANAGEMENT OF THE
SALES PROCESS
Sales management is effectively directing the
personal selling efforts of a hospitality estab-
lishment. It involves managing the sales
process from both an individual and team
perspective. In other words, sales manage-
ment addresses the logistics of sales solicita-
tion and the development of sales account
executives to enhance their sales productivity.
Sales account executives need to manage
their day-to-day activity, sales teams need to
coordinate their efforts, and customers need
to feel that they are working with a profes-
sional and well-managed organization.
There are several components to hospi-
tality sales management. These include sales
organization, sales account management, re-
cruitment, training and development, goal
setting, and performance appraisals. Sales or-
ganization refers to departmental and indi-
vidual organizational issues and inventory
management. The following section focuses
on the sales organization aspect of hospitality
sales management.
?
SALES ORGANIZATION
Sales organization can be viewed from three
perspectives. These include departmental or-
ganization, individual planning of sales activ-
ity, and inventory management. A sales
department needs to be organized, and sales
managers within that organizational setup
need to coordinate their efforts. Sales man-
agers need to plan or organize their individual
activities on a daily, weekly, and monthly ba-
sis. Allocating the sale of inventory to various
customer segments needs to be managed, as
Section 7.6 ? Hotel Sales Organization and Operations 351
well. These are important issues in hospitality
sales management, and following is a more
detailed discussion of each.
?
Departmental
Organization
Organizing a sales department means deter-
mining who is going to do what. Sales solicita-
tion needs to take place, administrative tasks
need to be completed, and managerial deci-
sions need to be made on a regular basis. In
medium- to large-size hospitality establish-
ments, a director of sales and/or a director of
marketing coordinates these efforts. In
smaller operations, it is not unusual to have
one individual responsible for all of the
above. For most bed and breakfast operations
in the United States and Canada and the
small boutique hotels in Europe, for example,
the owner and/or manager of the establish-
ment typically handles sales activities.
Figure 7.4 is a sample sales organizational
setup for a midsize urban hotel targeting busi-
ness clientele. The sales managers in this ex-
ample are organized by target market and by
geographic territory. Sales manager 1 is re-
sponsible for corporate accounts located in
the immediate downtown and surrounding
area. Sales manager 2 is responsible for na-
tional corporate accounts. This refers to com-
panies based in other areas that conduct
business or have the potential to conduct
business at the hotel. Both of these sales man-
agers solicit group and transient business
from their account base.
Sales manager 3 targets meetings and
convention business from national associa-
tion accounts. This business may include exec-
utive board meetings, committee meetings,
regional conferences, and annual conventions.
1327.ch07 12/19/05 9:33 AM Page 351
In this example, once group events have
been booked they are turned over to the con-
ference services department for service deliv-
ery. Both the sales managers and director of
conference services report to the director of
sales and marketing. The sales team meets
weekly to discuss issues pertinent to achiev-
ing the department’s sales objectives.
Weekly sales meetings are very much a
part of a sales department’s organizational
structure, be it a sales force of two or twelve
sales account executives. They are critical for
effective communication within the depart-
ment. At these meetings, each team member
highlights his or her weekly activity with re-
gard to new prospects uncovered, tentative
352 Chapter 7 ? Marketing and Associated Activities
bookings, verbal definites, cancellations, etc.
(Verbal definites are bookings where clients
have verbally committed their meeting or
function to the facility but a signed contract is
not yet in hand.) In other words, sales man-
agers share with each other progress reports
on various accounts they are currently work-
ing on. Thus, each team member gets an up-
to-date informal report on the status of all
current sales activity.
For example, one sales manager may be
working on a tentative booking but considers
it weak because of strong competition for this
particular account. Call this Group A. An-
other sales manager may have a new prospect
with similar space requirements interested in
the same dates. Call this Group B. Assume,
however, that the property has the capability
of booking only Group A or Group B over
the same dates because of space limitations.
When these types of issues surface at sales
meetings (which they frequently do), discus-
sion will occur raising the following types of
questions:
• What is the likelihood that either group
will eventually book its business at the
property?
• What is the estimated profitability and/or
contribution margin for each group?
• Is either group a regular client?
• What is the likelihood of repeat business
from either group? In other words, what
is the long-term profitability for each?
• Can either group consider alternative
dates? (A very important question.) What
would incite them to move dates?
• Do convention history reports match
their current space allocation requests?
These are just a sampling of questions
that need to be raised and answered. It is a
Figure 7.4 Organization of an Urban
Hotel Sales Department
General Manager
Director of Sales and Marketing
Sales Manager 1
Corporate Market
(Metropolitan)
Sales Manager 2
Corporate Market
(National)
Sales Manager 3
Association Market
(National)
1327.ch07 12/19/05 9:33 AM Page 352
never-ending process in hospitality sales man-
agement to search for the best fit for both the
buyer and seller.
?
CONCLUSION
The organization of sales management is the
process of directing the personal selling ef-
forts of a hospitality establishment. It involves
effectively managing the sales process from
both an individual and team perspective.
Sales or account managers need to manage
their day-to-day activity; sales teams need to
coordinate their efforts. Sales account man-
agement involves developing, maintaining,
and enhancing customer relationships. Sales
managers develop expertise for specific mar-
ket segments, industry segments, and/or cus-
tomer accounts, and common traits among
successful sales account executives include
Section 7.7 ? Putting the Public in Public Relations: The Case of the Seattle Sheraton Hotel and Towers 353
self-confidence, high energy, empathy, enthu-
siasm, and a sense of self-worth.
This chapter introduces the foundation
for hospitality sales and marketing. First and
foremost, sales flow from marketing. If man-
agement doesn’t have a marketing mindset,
then sales efforts will be all for naught.
Marketing is giving the targeted cus-
tomers what they want, when they want it,
where they want it, at a price they are willing
and able to pay. Sales is direct communication
with potential customers letting them know
we have what they want. In many respects,
sales is the link between marketing and oper-
ations. Operations is essentially the delivery
component of marketing and the final deter-
mination of a happy (or unhappy) customer.
Marketing begins, transcends, and ends
with the consumer. Sales makes sure it
happens.
7.7 PUTTI NG THE PUBL I C I N PUBL I C
REL ATI ONS: THE CASE OF THE SEATTL E
SHERATON HOTEL AND TOWERS
Louis B. Richmond
The powerful world of nonprofit organiza-
tions can make or break a hotel. This is a very
strong statement when you consider our pub-
lic relations firm, Richmond Public Relations,
represents the Seattle Sheraton Hotel and
Towers, a hotel that has potential revenues of
$80 million to $100 million a year in rooms,
food, and beverage and employs more than
600 people. Although the fortune of large
convention hotels usually rests on the ap-
proval of large associations, meeting planners,
Mobil and AAA awards, and myriad corpo-
rate decisions, nonprofit organizations defi-
nitely play a role in a hotel’s financial success.
The time and effort that hotels allot to public
relations and nonprofits can profoundly influ-
ence destination decisions of meeting plan-
ners and major associations.
1327.ch07 12/19/05 9:33 AM Page 353
?
DONATIONS,
DONATIONS
Every day the Sheraton receives three or four
letters from local organizations soliciting do-
nations of cash, rooms, and meals for benefits,
auctions, and raffles. These seemingly simple
requests add up to approximately 1,000 re-
quests every year. All of these organizations
have nonprofit status and are doing valuable
work in the community. They range from the
symphony, opera, and ballet to large hospitals
and universities. The smallest of preschools
and local grassroots citizen activist organiza-
tions are also regular solicitors. Each of these
organizations has a mission and purpose, that,
if realized, could make the community a bet-
ter place in which to live. Because mostly
every request is valid, how does the hotel or
public relations firm go about deciding which
organizations to support? Each decision must
be based on a benefit to the hotel.
Let me give an example of how working
with the community has, indeed, benefited the
hotel. One such request was a handwritten
note from an elementary school student re-
questing a complimentary room for her
school raffle. We were promised in the letter
that the hotel would be mentioned in the raf-
fle and given as much publicity as possible.
This school was located 20 miles from the ho-
tel in a small town that, on the surface, did not
seem it could provide a lot of return benefit to
the hotel. Due to the sincerity of the request,
we decided to donate a room package. About
four months after the donation was made, our
firm received a call from someone who
worked for a very large company in Seattle
wanting to make room reservations. He called
me rather than the hotel because he wanted
me to know he was booking the Sheraton be-
354 Chapter 7 ? Marketing and Associated Activities
cause of its donation to his child’s school. Be-
cause we were the only hotel to donate a
room to his child’s school auction, he felt an
obligation to have his guests stay at the Sher-
aton. Therefore, his company was moving
from another hotel to ours because of a dona-
tion that in actuality cost about $35. The po-
tential revenue from his account was valued
in the thousands of dollars. Additionally, his
company is a member of trade associations
that hold numerous regional and national
conventions that can also influence business
to the Sheraton.
Other benefits linked to this donation
were that the Sheraton’s name was seen in
print on more than 1,000 raffle tickets, and
people who attended the drawing were made
aware of the Sheraton’s contribution. The re-
turn on investment from this one donation
was enormous in direct revenue alone and
also generated an excellent amount of good-
will in the local community. All of this rev-
enue and potential revenue was due to one
small donation!
?
ASSOCIATIONS,
NATIONAL MEETINGS
When large associations choose Seattle as
the host city for their national conferences,
the individual hotels bid on being the host ho-
tel. The host hotel is in a favorable situation
concerning room rate and food and beverage
functions. A well-thought-out public relations
program can play an important role in an as-
sociation deciding which hotel to use. Work-
ing with the sales staff, the public relations
firm can obtain as much information about
the association as possible and decide how
they can influence the association to use the
Sheraton.
1327.ch07 12/19/05 9:33 AM Page 354
A major southwestern association was
in the process of deciding which hotel to use
for its Seattle conference. With research, we
found that this particular organization sup-
ported a major national charity that was also
supported by the Sheraton. We contacted the
director of the local charity organization,
who, in turn, phoned his counterpart in the
southwestern city. He was informed of the
Sheraton’s sponsorship of his nonprofit and
that one of his large corporate sponsors was
looking for a hotel to use in Seattle. The di-
rector of the southwestern nonprofit called
his contact in the corporation and apparently
did a good job of convincing him to use the
Sheraton. Whether or not the decision was
made directly because of this call or the com-
bination of other sales efforts, most of the
sales and marketing staff concurred that the
hotel’s support of the local nonprofit organi-
zation was instrumental in securing a major
piece of association business. We have found
that the nonprofit world will go all out to help
corporations that help them. In addition, non-
profit organizations can effectively utilize this
win-win model of partnership between busi-
ness and nonprofits to solicit help from other
companies and businesses.
?
SOCIAL EVENTS AND
FUND-RAISERS
The social catering business is fiercely com-
petitive. Nonprofit organizations are always
seeking the lowest possible rates and prices,
but because of their standing in the commu-
nity, they sponsor important events at hotels.
The more prestigious the organization, the
higher the ticket price and the more potential
that the attendees can generate revenue for
Section 7.7 ? Putting the Public in Public Relations: The Case of the Seattle Sheraton Hotel and Towers 355
the hotel in the future by booking rooms for
other events. Most members of the boards of
directors of nonprofit organizations are lead-
ers in the community and business world.
Their recommendation can go a long way to-
ward securing a favorable image for the hotel
in the local market.
In dealing with social catering events for
nonprofit groups, we always inform organiza-
tions that the hotel staff will work closely with
them to ensure the success of their event.
However, the nonprofit must clearly under-
stand that the hotel is a for-profit business. We
have to strike a deal that is good for the or-
ganization and, at the same time, good for the
hotel. The organization is helped to under-
stand that the more profitable the hotel, the
more support can be provided for the non-
profit organization. If the hotel does not
make a profit, it cannot continue to offer its
support. By offering the organization special
services rather than lowering the price to the
point where the hotel will not make any
profit, we ultimately help the organization
raise even more money for their event. We
have come up with many creative contribu-
tions to nonprofit organizations that not only
increase their potential for raising money but
also favorably highlight the services of the
hotel.
One of the hotel’s most popular dona-
tions to nonprofit organization auctions is a
series of cooking classes for ten people that
includes a kitchen tour and lunch. This item,
usually set at a minimum bid of $500 to $700,
enables a group of people to combine their fi-
nancial resources for a potentially higher bid.
The cooking classes also enable the hotel to
highlight one of its chefs and give people a
back-of-the-house view of the kitchen. We
have tracked the success of these cooking
classes and found that almost every one of the
1327.ch07 12/19/05 9:33 AM Page 355
participants has booked reservations in the
hotel restaurants. What is given away as a do-
nation comes back many times over in in-
creased business and greatly enhances the
perception of the hotel’s goodwill in the
community.
Another innovative donation was a tour
with the hotel’s curator of the corporate art
collection. The Sheraton, well known for its
art collection, employs a professional curator.
Most of the major social service organizations
and nonprofit organizations show an interest
in the arts, and this type of donation stands
out from the overnight accommodations typi-
cally offered by other hotels.
The hotel’s limousine can also play a part
in the donation program. The use of the lim-
ousine always adds a prestigious quality to a
gift and raises more money for the organiza-
tion while costing the hotel only a minimal la-
bor and operating cost.
Making a major donation to social cater-
ing fund-raisers that are booked in the hotel
helps ensure the event will be rebooked the
following year (assuming the food and service
are high quality). The ability to predict annual
bookings provides savings in sales staff time
and marketing efforts.
When major social catering events are
held in other hotels, the Sheraton also makes
significant donations to show organizations it
is interested in supporting their cause no mat-
ter where their event is held. Of course, the
hotel remains interested in having the group
book their event at the Sheraton next season.
However, our agency always encourages the
Sheraton to purchase a table when events are
hosted in another hotel, for several reasons: to
show support for the organization; to let the
staff see how the event is managed at another
facility; and to compare quality of service and
food.
356 Chapter 7 ? Marketing and Associated Activities
?
HOLIDAY CARD
PROGRAM
Another significant community contribution
we make is our annual holiday card. Each
year we select a different organization to be
the beneficiary of this program. We print the
Sheraton corporate holiday card and then
provide the organization with an extra 10,000
cards for its own fund-raising campaign.
These cards are printed at no charge to the or-
ganization as long as they provide us with
original artwork. The organization that is cho-
sen is always selected so there is a return to
the hotel. The organization chosen in 1987
had previously held a major event at another
hotel. We informed them that if they switched
to the Sheraton, they would be the beneficiar-
ies of the 1988 holiday card campaign.
?
CONTROL
The hotel has certain prerequisites in making
donations to nonprofit organizations.
1. The organization must be a 501(c)3 or-
ganization recognized by the Internal
Revenue Service.
2. A request must be received in writing on
the organization’s stationery.
3. The organization must return to the hotel
written notification of the donation
through a raffle advertisement, program
book, or announcement.
4. The donation must be in a live and not a
silent auction whenever possible.
5. All responses are filed, and when a re-
quest for next year’s gift arrives, we check
to see if we received the recognition we
required.
1327.ch07 12/19/05 9:33 AM Page 356
Different levels of donations are awarded
based on the event and the amount of recog-
nition received. The Sheraton has donated gift
certificates to the dessert buffet and a dinner
for 100 people in Fullers, the hotel’s award-
winning restaurant.
Our commitment to the community is
based on the belief that each member of the
organizations we support can act as a public
relations spokesperson for the hotel. When
businesses help organizations, their members
and volunteers usually develop a loyalty to
the giver. Our goal is to infiltrate the commu-
nity aggressively as a good corporate citizen.
At the same time, we want the community to
know that we need their business. The more
business they give us, the more help we can
return to the community.
?
CLASSIFICATION OF
ORGANIZATIONS
The nonprofit world can be divided into six
general areas, as set out below. For each clas-
sification, major examples of the many possi-
ble representative organizations are listed.
Cultural Organizations
Most of these organizations have a large and
prestigious board of directors. There is a
tremendous amount of potential room busi-
ness and catering functions from the organi-
zations and their board members.
• Symphony orchestras, opera companies,
ballet companies, chamber music organi-
zations, and presenting organizations, as
well as campus cultural organizations
• Art museums, museums of history and in-
dustry, science museums, and craft and
folk art museums
Section 7.7 ? Putting the Public in Public Relations: The Case of the Seattle Sheraton Hotel and Towers 357
• Major, alternative, and community the-
ater companies
Health Organizations
• Hospitals
• Medical schools
• Research centers
Educational Organizations
• Alumni associations
• University and college fund-raising cam-
paigns
• High school and PTA organizations
• Preschool and private school fund-raisers
Religious Organizations
• Churches
• Synagogues
• Religious schools and camps
• Adult religious community organizations
Social Service Agencies
• United Way
• Community charity groups
• Neighborhood grassroots organizations
• Charities such as Easter Seals and March
of Dimes
• Food banks
• Cystic Fibrosis Foundation
• Juvenile Diabetes Foundation
• Boy Scouts of America
Social and Fraternal Organizations
• Rotary
• Kiwanis
• Elks
• Shriners
1327.ch07 12/19/05 9:33 AM Page 357
?
MARKETING
APPROACHES
Before you approach an organization, you
need to have a plan that puts you on the of-
fensive rather than the defensive. Many times
hotels find themselves responding to people
asking for money rather than actually going
to the organization to tell them they are there
to help them. The more creative you can be,
the easier it will be for the organization to
work with you. Your plan should include re-
searching the following items:
• The members of the board of directors
and their company affiliations
• The needs of the organization
• Their budget—easy to do because they
are a tax-exempt organization
• Past catering functions—where they were
held, prices, and number of attendees
• Housing needs of the organization and
how you can help
Read newspapers about the organization
and totally familiarize yourself with their
goals. Make sure you meet with a major staff
member and a board member. To meet with
just one or the other simply means you will
have to hold another meeting to review what
you discussed at the last meeting. The most
important overall consideration is to under-
stand the nonprofit organization’s needs and
to work together with their representatives
for a win-win solution.
Make sure you work out before the event
how the hotel will be credited and recognized.
Recognition of the hotel’s contribution is of-
ten assumed, forgotten, or left to chance. The
hotel can be recognized in many ways. A com-
plimentary ad in a season’s program or
358 Chapter 7 ? Marketing and Associated Activities
newsletter will go a long way in justifying
your investment. If you are trying to attract
the organization, it must have an audience
that is part of your marketing mix. Calculate
what it would cost to advertise in their pro-
gram book throughout the season. Bargain
with the organization for a complimentary ad
for the amount of the donation you are mak-
ing. Other possible returns for your donation
include:
• Having the organization give the hotel
complimentary tickets that can be used by
the staff for entertaining clients. This
strategy can be effective if concerts are
sold out and your hotel is in possession of
the only tickets.
• Asking the organization to give you ac-
cess to their mailing list. This strategy can
be crucial in trying to publicize a new
weekend program or the opening of a
new food and beverage outlet.
• Requesting the organization to commit to
a two-year contract. This strategy not only
makes it easier for the organization to
plan ahead but helps the hotel in project-
ing revenues.
• Donating meeting rooms to the organiza-
tion for seminars and retreats if food and
beverages are ordered. Most organiza-
tions have to pay for meeting facilities.
One of the most important aspects of any
donation is the follow-up. Make sure you are
aware of the news created by the organization
you are helping and make them feel they are
part of your organization. If major events
take place, have the hotel’s general manager
send a congratulatory letter. If someone has a
birthday, have your pastry chef send over a
birthday cake. If you can help them publicize
their events in your newsletter, work with
1327.ch07 12/19/05 9:33 AM Page 358
them and inform them you are giving them
complimentary publicity. Work together all
the time so that each organization receives
something from each other, if possible, on a
fairly regular basis.
?
CASE STUDY
Our firm approached the board of directors
of the Seattle Symphony in hopes that they
would move a major luncheon to the Shera-
ton. We told them we would be happy to offer
complimentary room accommodations for
the conductor and his wife for the duration of
the symphony season if they would help influ-
ence their women’s organization to use the
Sheraton for their luncheon. By hosting the
conductor and his wife in the best available
room, we not only built up a good relation-
ship with the conductor but also showed the
board of directors we were very interested in
supporting the symphony.
By proactively informing the board of di-
rectors that the Sheraton was committed to
the symphony, we, at the same time, helped
them understand our need for their board
members’ business so we could continue our
support for them. Donating to significant cul-
tural institutions is often a sound business de-
cision because most members who serve on
boards of large cultural organizations are the
community’s business leaders. They know the
wisdom of a sound decision, and, indeed, con-
tinue to offer ongoing support to the Shera-
ton. As a result of the Sheraton donating a
room to the conductor and his wife, the sym-
phony moved the luncheon to the hotel. The
hotel maintains a strong relationship with the
conductor, and the symphony continues to
use the Sheraton for their room, food, and
beverage business. In a classic example of a
Section 7.7 ? Putting the Public in Public Relations: The Case of the Seattle Sheraton Hotel and Towers 359
win-win situation, the symphony supporters,
their board of directors, and their musicians
act as public relations spokespeople for the
Sheraton. In many ways, the results of this
strategy have ensured several hundred people
working on our behalf.
?
PRESS AND MEDIA
It is important to remember that the people in
the press are also part of the community. Ul-
timately, donations to nonprofits will touch
many press and other media people in per-
sonal ways by helping their local organiza-
tions, such as schools, hospitals, and social
service and cultural organizations. They will
be especially interested in publicizing events
with personal impact. It is also important to
realize that hotels with many events create a
buzz that generates more local press activity.
Organizations like to be involved in active
and exciting hotels. If a certain number of
events are in one hotel and twice that amount
are in another hotel, the more active hotel is
bound to have more requests for events.
?
COSPONSORSHIP
Another effective way to maximize public re-
lations in the area of nonprofit donations or
charities is to cosponsor events with radio sta-
tions or newspapers. The exposure that can be
provided through this medium not only
places your property with other responsible
companies but helps spread the word of
your company’s involvement automatically
through the media.
Take advantage of your local and regional
radio stations to develop joint promotions.
Work with the promotion director to find out
1327.ch07 12/19/05 9:33 AM Page 359
how the hotel can help the station’s favorite
charity. Donate the ballroom or smaller meet-
ing rooms for dances, parties, etc., with a guar-
antee of a no-host bar. The radio station acts
as a free advertising service to draw people to
the event. It is in their best interest for their
advertisers to draw large audiences. Have the
nonprofit organization receive an admission
charge to the event so that it is up to the non-
profit organization to also try to draw a large
audience. By working with the radio station
and the charity, the hotel not only maximizes
its exposure but also increases its potential
revenue.
?
REGIONAL
ORGANIZATIONS
Identify major nonprofit organizations in
feeder markets and work with them in their
major fund-raising events. This will help in-
crease weekend business and act as a rein-
forcer to advertising placed in those markets.
The impact of regional organizations can be
just as strong as your local organizations. If
your property has a strong regional weekend
market, this program can be an effective way
to increase room business.
360 Chapter 7 ? Marketing and Associated Activities
Identify corporations that have branches
in feeder cities with ties to major nonprofit
organizations. Any time your property can get
its name across to the public in a major feeder
market, you reinforce advertising dollars or
actually save them. Remember, the return on
investment, if carefully monitored, can be
significant.
?
CONCLUSION
The more times your hotel property is written
and talked about, the more people automati-
cally identify it with positive community ac-
tivity. It is eventually in the best interest of a
community to ensure the business success of
your hotel when it knows you will help its fa-
vorite charities or organizations. In order to
work with the community, you must educate
the community to work for and with you. The
best recommendation is that made by the
public, and only when public relations truly
works with the public can the property bene-
fit. By putting the public in public relations,
the public speaks for you and your property
and results in profits through public relations.
7.8 MI NI CASE: REVAMPI NG THE
MARKETI NG RESEARCH DEPARTMENT
You’re the new director of marketing re-
search for the Mississippi Region Affiliated
Resorts (MRAS), located along the length of
the Mississippi River from Minneapolis to
Memphis. This branded distribution company
of 38 independently owned and operated ho-
tels has become a major player in its regional
competitive marketplace. As part of the com-
pany’s strategic plan, however, it has been de-
termined that the structure of the market is
1327.ch07 12/19/05 9:33 AM Page 360
changing, and the general future direction of
the hotels will be toward more sales and ser-
vice to the conventions and meetings market
that has become increasingly important be-
cause of the central location of the chain.
To become more competitive in this bur-
geoning market, the company has undertaken
and encouraged an ambitious remodeling
program among its members that has up-
graded the furnishings, fixtures, and equip-
ment of the hotels. The hotels are also
committing to a minimum of the following
capital investments:
• 60,000-square-foot ballroom
• 30,000 square feet of meeting and break-
out rooms
• 15,000-square-foot registration and pre-
function areas
With these upgraded facilities, the com-
pany feels it can compete effectively for the
Section 7.8 ? Mini Case: Revamping the Marketing Research Department 361
lucrative conventions and meetings market
with the hard-flagged chains.
This strategy and capital investment re-
quires a consequential change in research
paradigms. As the director of marketing re-
search, you’ve been requested by the com-
pany president to propose a completely
revamped research department that will re-
flect this new strategy and be designed to help
the independent member hotels market their
new facilities most effectively.
Propose a model marketing research de-
partment for your firm that will produce the
sorts of data that hotels in the chain can use to
help compete with the national chains. In-
clude in your proposal what new sorts of data
would be most useful, where those may be
found, and how they might be specifically use-
ful to reflect the new mission.
R E F E R E N C E S
DeVeau, Linsley T., Patricia M. DeVeau, Nestor J.
Portocarrero, and Marcel Escoffier. 1996.
Front Office Management and Operations.
Upper Saddle River, NJ: Prentice-Hall.
Drucker, Peter F. 1974. The Practice of Manage-
ment. New York: Harper and Row.
Drucker, Peter F. 1999. Management Challenges
for the 21st Century. New York: Harper
Collins, pp. 115?116.
Fishbein, Martin, and Icek Ajzen. 1975. Belief, Atti-
tude, Intention, and Behavior: An Introduction
to Theory and Research. Reading, MA: Addi-
son-Wesley.
Hanson, Bjorn. 1995. “The $1 per $1,000 Rule.”
Cornell Hotel and Management Administra-
tion Quarterly 36(4):7.
Lewis, R.C., R.E. Chambers, and H.E. Chacko.
1995. Marketing Leadership in Hospitality:
Foundations and Practices, 2nd ed. New York:
Van Nostrand Reinhold p.3.
Lieberman, Warren H. 1993. “Debunking the
Myths of Yield Management,” Cornell Hotel
and Restaurant Administration Quarterly
34(1):34–41.
———. 2003. PKF Trends Reports. Dublin, Ireland:
Pannell, Kerr Forster.
Protea Hotels Partners with SalesBid. 2000. Press
Release. June 8.
Sinclair, Marta. 2003. “The Use of Intuition in
Managerial Decision-Making: Determinants
and Affective Moderators.” Ph.D. dissertation.
University of Queensland [Australia] Busi-
ness School.
1327.ch07 12/19/05 9:33 AM Page 361
S U G G E S T E D R E A D I N G S
362 Chapter 7 ? Marketing and Associated Activities
Articles
Cunningham, Mark W., and Chekitan S. Dev. 1992.
“Strategic Marketing: A Lodging ‘End Run.’ ”
Cornell Hotel and Restaurant Administration
Quarterly 33(4):36–43.
Jarvis, Lance P., and Edward J. Mayo. 1986. “Win-
ning the Market Share Game.” Cornell Hotel
and Restaurant Administration Quarterly
27(3):73–79.
Levitt, Theodore. 1981. “Marketing Intangible
Products and Product Intangibles.” Cornell
Hotel and Restaurant Administration Quar-
terly (August):37–44.
Lieberman, Warren H. 1993. “Debunking the
Myths of Yield Management.” Cornell Hotel
and Restaurant Administration Quarterly
34(1):34–41.
McCleary, Ken. 1993. “Marketing Management.”
In VNR’s Encyclopedia of Hospitality and
Tourism, Mahmood Kahn, Michael Olsen, and
Turgut Var (eds.). New York: Van Nostrand
Reinhold.
Morgan, Michael S. 1991. “Travelers’ Choice: The
Effects of Advertising and Prior Stay.” Cornell
Hotel and Restaurant Administration Quar-
terly 32(4):41–49.
Nordling, Christopher W., and Sharon K. Wheeler.
1992. “Building a Market Segment Model to
Improve Profits.” Cornell Hotel and Restau-
rant Administration Quarterly 33(3):29–36.
Books
Astroff, Milton T. and James R. Abbey. 1998. Con-
vention Sales and Service, 5th ed. Cranbury,
NJ: Waterbury.
Ismail, Ahmed. 1999a. Catering Sales and Conven-
tion Services. Albany, NY: Delmar.
———. 1999b. Hotel Sales and Operations. Albany,
NY: Delmar.
Kotler, Phillip, John T. Bowen, and James C. Mak-
ens. 1996. Marketing for Hospitality and
Tourism. Upper Saddle River, NJ: Prentice-
Hall.
Kudrie, Albert E., and Melvin Sandler. 1995. Pub-
lic Relations for Hospitality Managers: Com-
municating for Greater Profits. New York:
John Wiley and Sons.
Lewis, Robert C. 1989. Cases in Hospitality Mar-
keting and Management. New York: John Wi-
ley and Sons.
Lovelock, Christopher, and Lauren Wright. 1999.
Principles of Service Marketing and Man-
agement. Upper Saddle River, NJ: Prentice-
Hall.
Lovelock, Christopher. 2001. Services Marketing:
People, Technology, Strategy. Upper Saddle
River, NJ: Prentice-Hall.
Shaw, Margaret, and Susan V. Morris. 2000. Hospi-
tality Sales: A Marketing Approach. New York:
John Wiley and Sons.
S O U R C E N O T E S
Chapter 7.2, “Building Market Leadership: Mar-
keting as Process,” by Fletch Waller.
Chapter 7.3, “Consumer Decision Rules and Im-
plications for Hotel Choice,” by Bianca
Grohmann and Eric Spangenberg.
Chapter 7.4, “Hotel Pricing,” by Marta Sinclair and
Carl R. Sinclair.
Chapter 7.5, “A Day in the Life of a Regional Rev-
enue Manager,” by Paul Chappelle.
Chapter 7.6, “Hotel Sales Organization and Oper-
1327.ch07 12/19/05 9:33 AM Page 362
ations,” by Margaret Shaw and Susan V. Mor-
ris, adapted from Hospitality Sales: A Market-
ing Approach, by Margaret Shaw and Susan V.
Morris, Copyright © 2000 by John Wiley &
Sons, Inc. Reprinted by permission of John
Wiley & Sons, Inc.
Section 7.8 ? Mini Case: Revamping the Marketing Research Department 363
Chapter 7.7, “Putting the Public in Public Rela-
tions: The Case of the Seattle Sheraton Hotel
and Towers,” by Louis B. Richmond.
1327.ch07 12/19/05 9:33 AM Page 363
1327.ch07 12/19/05 9:33 AM Page 364
c h a p t e r e i g h t
F I N A N C I A L C O N T R O L
A N D I N F O R MAT I O N
MA N A G E ME N T
departments have been reorganized so that
major portions of their functions are now re-
sponsible to the controller’s office. The prime
example of this is in the front office, where in
the past the front office manager supervised
the activities of the night audit staff, cashiers,
and other front desk clerks. Increasingly, hotel
firms are transferring the responsibility for
night audits and cashiers to the accounting of-
fice, with the ultimate responsibility for these
information-gathering and controlling func-
tions resting with the hotel controller.
It should also be noted that an increas-
ingly important department in hotels is the
one responsible for the swiftly changing
world of information management, or infor-
mation technology (IT). In many instances, IT
is now also the responsibility of the hotel con-
troller. This recognizes the training and the
ability of hotel controllers to provide for the
8.1 I NTRODUCTI ON
This section on financial control and informa-
tion management was substantially reconfig-
ured for the third edition. At the suggestion of
reviewers and textbook users, articles were
chosen to illustrate the relationships among
and between the activities that contribute to
the hotel’s profitability and operational suc-
cess through the managerial responsibility for
operational control. That philosophy is con-
tinued in this fourth edition.
As a department, financial management
in a hotel—called many things, but usually
controller—is far more important to the suc-
cess of that hotel than the few readings in-
cluded here would suggest. In most major
hotel firms, the chief financial officer or con-
troller ranks among the top two or three deci-
sion makers in the hotel’s hierarchy. The
importance of this job can be established by
the observation that many traditional hotel
365
1327.ch08 12/19/05 9:34 AM Page 365
structured accumulation, storage, and report-
ing of data in forms that are most useful to the
operating departments and other executives
of the hotel.
In his lead article on the hotel chief finan-
cial executive, longtime contributor to this se-
ries of books Professor Ray Schmidgall,
Hilton Professor with the School of Hospital-
ity Business at Michigan State University, re-
views recent research on the hotel controller
and compares findings over time. This review
presents a good view of the job and responsi-
bilities of this key hotel executive. Schmidgall
finds interesting differences in the groups
studied over the years and provides a wider
window for viewing the hotel controller as a
career path in management of a modern hotel
operation. In the past, students were merely
instructed in the process of accounting and au-
diting and, for the most part, were unaware of
the sort of career that can result from a flair
for management, leadership, and number-
crunching.
In Schmidgall’s companion piece written
with Agnes DeFranco, the critical practices of
budgeting and forecasting are examined.
While this is only a sampler of the critical du-
ties of the hotel’s financial function and its
leadership, in today’s business environment
the accuracy of forecasting and budgeting
may indeed be the difference between profit
and loss.
If the Schmidgall and DeFranco pieces
represent the academic side of examination
of the hotel’s financial leadership, Mike
Draeger is the chief financial executive who
lives the theory on a daily basis. After a sig-
nificant career with Four Seasons Hotels and
Resorts and the Cal-Neva Lodge, he now
serves as the controller for a company operat-
ing a number of casinos in Nevada. Join Mike
366 Chapter 8 ? Financial Control and Information Management
for a look at the chief financial executive’s job
in his “As I See It” essay. Pay particular atten-
tion to his war story about the budget-
ing process—and, yes, the lessons from the
embezzler.
No discussion of financial and opera-
tional control in a hotel would be complete
without attention paid to the extremely im-
portant function of purchasing.
In the past, when the bulk of a hotel’s pur-
chasing revolved around food and beverage
items, the executive chef, chief steward, and
other department managers usually devel-
oped their own sources for the goods and
services needed to effectively and efficiently
run their department. In the modern context,
however, with the vast and diverse needs of
hotel operating and staff departments, this
practice is no longer advisable. Neither is it a
good idea from a control standpoint. Most ho-
tel companies have established a professional
purchasing function. If purchasing is not a
whole department, it is the responsibility of at
least one highly experienced individual.
The purchasing director or manager typi-
cally is a person who knows a great deal about
departmental operations in every phase of
the hotel. He or she is able to discuss and an-
alyze intelligently the needs of all department
managers. This individual is expert in the
markets where hotels purchase goods and
products essential to accomplishing the de-
partment and hotel missions. The purchasing
director is familiar with variety, quality stan-
dards, style, and methods of packaging. Such
arcane technical details as chemical composi-
tion, fabric and furnishing lifetimes, and other
details too numerous to mention here are also
the responsibility of the purchasing manager.
Lee Evans, who held corporate executive
positions in purchasing with Station Casinos,
1327.ch08 12/19/05 9:34 AM Page 366
Westin Hotels and Resorts, and at the hotel
level, offers the reader real-world insights
into the duties, responsibilities, and interac-
tions of the hotel purchasing director. His es-
say provides rich detail and examples of
how a hotel’s purchasing director fulfills the
purchasing requests of numerous hotel de-
partments. Evans is currently director of pur-
chasing for the Oasis Resort, Casa Blanca Spa
and Golf Resort, and the Virgin River Hotel
and Casino in Nevada.
Few people in this day and age would dis-
agree that the management of data and infor-
mation in all its forms is critical to business
success. As recently as 1995, the year the sec-
ond edition of this book was published, the
Internet and World Wide Web were still
pretty much off the radar screens of most
businesses. Well . . . now it seems that the
pace of technology and the means and neces-
sity to manage huge volumes of information
are as common as any other aspect of busi-
ness in the twenty-first century. In other
words, “What did we ever do without it?”
That’s why I am hesitant to include too
many readings here about IT and information
management—it will be old news in a couple
of years, or maybe even a couple of months. I
bought a new PDA last summer (2004), and it
is already out of date!
The success of any hotel firm in the mod-
ern era will depend on how well it manages,
controls, and utilizes the available informa-
tion. This is true for current operations, but as
managers develop new—unheard-of now—
sources of information in the lodging business
environment, the information will have to be
managed like any other asset or product com-
Section 8.1 ? Introduction 367
ponent. In the last edition of this book, I in-
cluded an article about data warehousing. In
the words of the author (Griffin, 1998), “data
warehousing” represents a “central informa-
tion storehouse designed to answer business
questions.” This usually involves a company-
wide database system designed to provide in-
formation to all corporate components. In a
way, information has become a commodity,
and data warehouses are designed to most ef-
ficiently manage this new commodity. Well,
maybe. According to the “Data Mining. . .” ar-
ticle included here by Magnini and his coau-
thors, identifying important variables in these
warehouses can be a daunting task; hence the
need for data mining. Their article discusses
this new development.
Because this area is so volatile and devel-
opments in IT happen so swiftly, it is probably
best for the student to develop broad, general
outlines of what is possible rather than, in the
context of this textbook, to focus on details of
current technology. As we’ve seen, progress in
even our desktop computers has been so
rapid that any current writing will probably
be outdated by the time this book reaches
print.
The articles included in this section are
designed to help the reader gain knowledge
about and appreciation for the range and
realm of activities, largely behind the scenes,
that contribute to the financial and opera-
tional health of the hotel. These activities are
often overlooked by those of us who focus
our attention on the more public aspects of
hotel management, but they are, nonetheless,
critical to any hotel’s success.
1327.ch08 12/19/05 9:34 AM Page 367
Chief financial executives of lodging opera-
tions are given various titles including
controller, chief accounting officer, vice
president–accounting, and chief financial offi-
cer. The most common title, at the property
level, is controller. Who are these people?
What are their skills? What responsibilities do
they have? Answers to these questions and
many others are provided in this chapter.
The lodging financial executive histori-
cally was viewed as a mere bookkeeper—that
is, he or she prepared financial statements.
Research shows that the lodging controller
has evolved into a full-fledged member of the
management team of a lodging property.
Considerable research has been con-
ducted over the past 20 years of the member-
ship of the Hospitality Financial and
Technology Professionals (HFTP), formerly
known as the International Association of
Hospitality Accountants. The results of this
research form the basis for this chapter. The
HFTP was founded in 1953 for the purpose of
advancing the accounting profession. Its chief
publication, The Bottomline, is published
eight times annually (bi-monthly and two spe-
cial editions). The HFTP currently has over
4,300 members in over 50 countries. The
HFTP in 1981 established the Certified Hos-
pitality Accountant Executive (CHAE).
Since that time, more than 840 hospitality ac-
countants have earned their CHAE. In 1994,
the HFTP established the Certified Hospital-
ity Technology Professional (CHTP), and in
the past six years over 100 technology profes-
sionals have earned their CHTP. These two
368 Chapter 8 ? Financial Control and Information Management
certifications bring immediate recognition to
these professionals in the hospitality industry.
?
PAST RESEARCH
Over the past 20 years, several studies have
been made of HFTP members. Geller and
Schmidgall conducted one of the first studies in
1984. They surveyed 1,000 HFTP members, and
311 lodging financial executives completed
questionnaires covering education, skills, au-
thority, responsibilities, salaries, and involve-
ment with committees of their properties.
Geller, Ilvento, and Schmidgall replicated
this study in 1990, mailing the questionnaire
to 750 members of the HFTP associated with
the lodging industry.
The DeVeaus surveyed the 291 CHAEs
in 1988. Their survey covered the usual demo-
graphics of age, gender, title, compensation,
and education. They also addressed marital
status, hours worked, and community/indus-
try participation. This study included all
CHAEs, not only those in the lodging seg-
ment of the hospitality industry.
Tse surveyed the HFTP membership in
1989, covering three specific areas as follows:
• Demographic information such as age,
gender, and educational level
• Professional activities such as position ti-
tle, years in profession, and buying
authority
• Information about the respondents’
companies
8.2 THE L ODGI NG CHI EF FI NANCI AL
EXECUTI VE
Raymond S. Schmidgall
1327.ch08 12/19/05 9:34 AM Page 368
Her survey was not limited to members
associated with the lodging industry, though
hotels and resorts employed over 65 percent
(648) of the respondents.
Damitio and Schmidgall updated Tse’s
1989 study in 1996. Three hundred mem-
bers associated with the lodging industry
responded.
?
PROFILE OF THE
LODGING FINANCIAL
EXECUTIVE
The demographic information of lodging
financial executives includes age, gender,
education, certification, experience, and
compensation.
?
Age
Three of these studies report the age distribu-
tion of respondents to their studies. The De-
Veaus’ respondents averaged 40 years old,
and the largest group of respondents (57 per-
cent) was between 30 and 39 years of age. Tse
reported that 25 percent of her respondents
were 31–35 years of age and that two-thirds
were in the 26–45 age groups. She did not re-
port an average age; however, based on her
reporting of salary by age, it appears that the
average age was approximately 38. Damitio
and Schmidgall reported an average age of
37, with 72 percent of the respondents be-
tween the ages of 30 and 46. Thus, the trend
suggests a slight reduction of the average age
as the HFTP membership expanded from
1988 through 1995. This trend can be expected
to continue as HFTP’s membership grows.
Section 8.2 ? The Lodging Chief Financial Executive 369
?
Gender
The three studies covering age also included
gender of respondents. DeVeau and DeVeau
reported 20 percent of their respondents were
female, while Tse reported 25.7 percent and
Damitio and Schmidgall reported 28.7 per-
cent. This trend of an increasing percentage of
females is expected to continue, as a majority
of students in both accounting and hospitality
programs at colleges and universities across
the United States are female.
?
Education
All five studies surveyed lodging financial ex-
ecutives with respect to their levels of educa-
tion, as shown in Table 8.1. The most common
degree in all studies is the four-year college
degree. The DeVeaus reported 68 percent of
their respondents have a bachelor’s degree,
while Tse reported a low of 55 percent. The
DeVeau study was limited to CHAEs, while
the Tse study covered members of HFTP
from all hospitality segments. The DeVeaus
reported only 8 percent had earned master’s
degrees, while later studies reveal master’s re-
cipients in double digits and increasing to 14
percent in the most recent study by Damitio
and Schmidgall. Increases in graduate degrees
can be expected to continue in the twenty-
first century.
Three studies included the major of the
college graduates. The Geller et al. studies re-
port that 55 percent and 56 percent, respec-
tively, have degrees in accounting, while the
DeVeaus report only 37 percent. Another in-
teresting statistic is the increasing percentage
of financial executives with degrees in hospi-
tality education. Geller and his coresearchers,
in their 1990 study, suggest the dramatic
1327.ch08 12/19/05 9:34 AM Page 369
T
a
b
l
e

8
.
1
L
e
v
e
l

o
f

E
d
u
c
a
t
i
o
n
L
e
v
e
l

o
f

E
d
u
c
a
t
i
o
n
M
a
j
o
r

o
f

C
o
l
l
e
g
e

G
r
a
d
s
H
i
g
h

S
c
h
o
o
l
A
s
s
o
c
i
a
t
e
’
s
B
a
c
h
e
l
o
r
’
s
M
a
s
t
e
r
’
s
O
t
h
e
r
A
c
c
o
u
n
t
i
n
g
H
o
s
p
i
t
a
l
i
t
y
G
e
l
l
e
r

a
n
d

S
c
h
m
i
d
g
a
l
l
1
0
%
2
1
1
%
6
1
%
1
1
%
2
%
2
5
6
%
8
%
D
e
V
e
a
u

a
n
d

D
e
V
e
a
u
1
2
%
1
1
1
%
6
8
%
8
%
1
%
2
3
7
%
7
%
T
s
e
2
2
%
2
9
%
5
5
%
1
3
%
1
%
2
—
—
G
e
l
l
e
r

e
t

a
l
.
7
%
2
1
5
%
5
8
%
1
3
%
6
%
3
5
5
%
1
7
%
D
a
m
i
t
i
o

a
n
d

S
c
h
m
i
d
g
a
l
l
1
5
%
4
1
1
%
5
8
%
1
4
%
2
%
2
—
—
1
T
h
e

D
e
V
e
a
u
s

r
e
p
o
r
t
e
d

1
2

p
e
r
c
e
n
t

a
s

“
n
o
n
e
”
b
u
t

d
i
d

n
o
t

i
n
c
l
u
d
e

h
i
g
h

s
c
h
o
o
l

a
s

a

l
e
v
e
l
.
P
r
e
s
u
m
a
b
l
y

t
h
e
s
e

C
H
A
E
s

h
a
v
e

a
t
l
e
a
s
t

a

h
i
g
h

s
c
h
o
o
l

d
i
p
l
o
m
a
.
2
T
s
e

r
e
p
o
r
t
e
d

1
8

p
e
r
c
e
n
t

a
s

h
a
v
i
n
g

s
o
m
e

c
o
l
l
e
g
e

b
u
t

l
e
s
s

t
h
a
n

a
n

a
s
s
o
c
i
a
t
e
’
s

d
e
g
r
e
e
.
T
h
i
s

1
8

p
e
r
c
e
n
t

i
s

c
o
m
b
i
n
e
d

w
i
t
h

t
h
e
4

p
e
r
c
e
n
t

w
i
t
h

h
i
g
h

s
c
h
o
o
l

d
i
p
l
o
m
a

t
o

e
q
u
a
l

t
h
e

2
2

p
e
r
c
e
n
t

r
e
p
o
r
t
e
d

a
b
o
v
e
.
3
G
e
l
l
e
r

e
t

a
l
.
s
t
a
t
e
s

t
h
a
t

i
n

m
o
s
t

c
a
s
e
s

“
o
t
h
e
r
”
r
e
p
r
e
s
e
n
t
s

m
u
l
t
i
p
l
e

d
e
g
r
e
e
s
,
s
u
c
h

a
s

t
w
o

m
a
s
t
e
r
’
s

d
e
g
r
e
e
s
.
4
D
a
m
i
t
i
o

a
n
d

S
c
h
m
i
d
g
a
l
l

c
o
m
b
i
n
e
d

3

p
e
r
c
e
n
t

w
i
t
h

h
i
g
h

s
c
h
o
o
l

d
i
p
l
o
m
a
s

w
i
t
h

1
2

p
e
r
c
e
n
t

o
f

t
h
o
s
e

w
i
t
h

s
o
m
e

c
o
l
l
e
g
e
.
370
1327.ch08 12/19/05 9:34 AM Page 370
increase to 17 percent from only 8 percent in
1984 may be because students graduating from
hospitality programs are choosing to work in
accounting or because lodging companies are
beginning to recognize the value of hospitality
education for accounting positions.
?
Certification
The DeVeau and DeVeau study focused on
HFTP members holding the CHAE. In addi-
tion, they reported the highest percentage of
certified public accountants (CPAs). The
other studies suggest an increasing percent-
age of lodging financial executives earning
the CHAE from 8 percent in the Geller and
Schmidgall study in 1984 to 20 percent in the
Damitio and Schmidgall study, conducted in
1996. In addition, the total certifications in-
creased from 21 percent in 1984 to 52 percent
in 1996, as shown in Table 8.2. By any meas-
ure, this is a dramatic increase. This increase
clearly supports Schmidgall and Kasavana’s
conclusion regarding certifications:
“. . . initials after one’s name suggest excel-
lence, failure to have earned the initials may
well lead one’s peers and supervisors to ques-
tion not only one’s knowledge but also abili-
ties.” (Schmidgall and Kasavana, 2000)
Most likely, lodging financial executives
will continue to earn various certifications in
the future as proofs of their excellence.
Section 8.2 ? The Lodging Chief Financial Executive 371
?
Experience
Several studies provide limited insight into
the professional work of the lodging financial
executive. The DeVeaus reported that 53 per-
cent of the CHAEs have between 10 and 15
years of work experience and that the average
is 16 years.
Tse reported that a plurality (24 percent)
of lodging controllers had 11 to 15 years of
work experience. Geller et al. reported a me-
dian average of 10–12 years of hospitality ac-
counting experience, while the median from
the Damitio and Schmidgall study was 11–15
years. Across these four studies, the average
years of experience (generally hospitality-
related) is 10–15. The average years added to
an expected age of 21 or so at graduation with
a bachelor’s degree suggests that most lodg-
ing financial executives have spent most of
their professional years working in the hospi-
tality industry, as their average age in the
most recent study was 37.
?
Compensation
A major element of each study is the compen-
sation of hospitality financial executives. Of
course, over time the average pay is expected
to increase. Table 8.3 addresses increasing
compensation. The Geller and Schmidgall
Table 8-2 Certifications of Lodging Financial Executives
CHAE CPA Other Total
Geller and Schmidgall 8% 13% — 21%
DeVeau and DeVeau 100% 22% 18% 140%
Tse 14% 15% 12% 41%
Geller et al. 17% 14% 12% 43%
Damitio and Schmidgall 20% 12% 20% 52%
1327.ch08 12/19/05 9:34 AM Page 371
study conducted in 1984 revealed a median
salary of $30,000–$34,999 and a median bonus
of 9–12 percent of the controller’s salary.
Based on this information, the average annual
bonus approximated $3,400. The 1996 study by
Damitio and Schmidgall reported a median
salary between $45,001 and $50,000 and an av-
erage bonus of $6,100. At the beginning of the
twenty-first century, it appears lodging finan-
cial executives’ median salaries are most likely
to be greater than $50,000, as the last study
was conducted five years previously.
?
Skills and Knowledge
What skills and knowledge should the lodging
financial executive have, and how have these
changed over time? Geller and Schmidgall
studied the technical skills and knowledge of
lodging financial executives in 1984, and
Geller et al. repeated the study in 1990. Table
8.4 reflects the results of these studies. The
1990 study included more skills, and the re-
port provided results by type of controller.
As expected, the percentage of respondents
with technology knowledge (computers) in-
creased, and most likely a study conducted to-
day would result in a 100 percent response.
372 Chapter 8 ? Financial Control and Information Management
Other areas that more than 90 percent of re-
spondents indicated were required skills and
knowledge included cash management and
internal controls.
A study by Cichy and Schmidgall in 1996
focused on leadership of lodging financial ex-
ecutives. Financial executives not only must
know the numbers but must also lead, as they
supervise several employees. The 1996 Dami-
tio and Schmidgall study revealed that the
number of employees supervised by these fi-
nancial executives varied from one to more
than 30. Just over one-third (34 percent) man-
age two to five employees, while nearly an-
other third (31 percent) manage six to ten
people. Another one out of five (22 percent)
manage 11 to 30 people, and 6 percent man-
age over 30 individuals. They found that lodg-
ing financial executives are expected to have
skills and knowledge beyond the technical
skills covered in the two Geller studies. The
study of lodging financial executives covered
seven keys to leadership (see Table 8.5) and
17 secrets of leadership (see Table 8.6).
Lodging financial executives strongly
agreed that four of the seven listed keys to
leadership were important to their own lead-
ership style. The most important key was
“trust your subordinates,” followed by “de-
Table 8-3 Compensation
Median Salary Bonus
Geller and Schmidgall $30,000–$34,999 9%–12% (median)
DeVeau and DeVeau $49,900 (mean) 44% received benefit packages including a bonus
Tse $30,000–$40,000 $2,000–$5,000 (median)
Geller et al. $40,000–$49,999 11%–20% (median)
Damitio and Schmidgall $45,001–$50,000 $6,100 (mean)
1327.ch08 12/19/05 9:34 AM Page 372
velop a vision.” Consistent with all other sur-
veys of U.S. chief executive officers and pres-
idents in lodging and foodservice, “be an
expert” was dead last. Leaders from all seg-
ments clearly realize that being an expert is
Section 8.2 ? The Lodging Chief Financial Executive 373
not the most essential aspect of leadership.
Nevertheless, “be an expert” received a score
of 4.0, indicating that respondents believe
that having relevant expertise is not unimpor-
tant either. Rather, the survey results indicate
that these leaders believe it is more important
to surround themselves with the necessary ex-
pertise than to have the expertise themselves.
Of the 17 secrets of leadership, respon-
dents strongly agreed or agreed that leaders
in their organizations must have 14 of them.
At the top of the list were dependability, cred-
ibility, responsibility, and accountability. At
the bottom of the list was physical stamina,
with a score of 4.4. (A score above 4.0 indi-
cates inherent importance; in this case, the
low score for physical stamina is merely an
indication of its relative unimportance when
compared to the other secrets of leadership
presented to the survey participants.)
Table 8.4 Technical Skills and Knowledge
Division or 1984
Skills, Knowledge Corporate Area Hotel Other Total Study
Taxes 89% 77% 74% 69% 75% 60%
Computers 92% 96% 99% 95% 97% 70%
Personnel 81% 82% 84% 77% 82% 78%
Cash management 100% 89% 94% 81% 91% 89%
Capital budgeting 87% 89% 87% 77% 85% 80%
Statistics 68% 81% 85% 71% 88% 82%
Auditing 87% 96% 87% 72% 84%
†
Internal controls 92% 100% 100% 94% 97%
†
FASB* rulings 28% 23% 14% 18% 18% n/a
Risk management 55% 35% 36% 26% 36% n/a
*Financial Accounting Standards Board
†
In 1984, “auditing” and “internal control” were presented as a single item. Ninety-five percent of the respondents in
1984 indicated they possessed skills in those areas.
Table 8.5 Keys to Leadership
Mean Level of
Importance*
Trust your subordinates 5.4
Develop a vision 5.3
Simplify 5.2
Keep your cool 5.1
Encourage risk 4.8
Invite dissent 4.5
Be an expert 4.0
*The scale is from 1, “very unimportant,” to 6, “very
important.”
1327.ch08 12/19/05 9:34 AM Page 373
?
Responsibility and
Authority
Four of five of the studies focused on author-
ity. Table 8.7 reveals the results of the two
studies (1984 and 1990) conducted by Geller
and others. The 1990 study divides the re-
sponses by type of controller. The vast major-
ity (over 75 percent) of lodging financial
executives have authority to sign checks, ap-
prove purchases, and extend credit. Tse found
that only 56 percent of hospitality financial
executives have authority to approve pur-
chase decisions. Damitio and Schmidgall re-
374 Chapter 8 ? Financial Control and Information Management
ported 56 percent were authorized to make
purchasing decisions without the approval of
others. They indicated controllers were most
involved with technology purchases (90 per-
cent) and, to lesser degrees, guest supplies (29
percent), furnishings and equipment (44 per-
cent), security/maintenance systems (43 per-
cent), and fire/safety/energy conservation
systems (30 percent).
The expansion of authority based on the
two Geller studies is the greatest for investing
funds (from 2 percent to 46 percent) and to
set or change prices (from 21 percent to 41
percent).
Both the Tse and the Damitio and
Schmidgall studies covered hiring and firing
authority. Tse found that more than 80 per-
cent of the respondents have the authority to
hire and fire either in their own department
or in their company. The percentage increased
to 90 percent when only accounting personnel
were involved. The 1996 study by Damitio
and Schmidgall revealed 76 percent have au-
thority to hire and fire within their own de-
partment, while 7 percent have no authority
to hire or fire.
Only the two Geller studies (1984 and
1990) covered responsibility, and the compar-
ative results are shown in Table 8.8. Again, the
1990 study provided detail by type of con-
troller and included areas not covered by the
1984 study.
More than 90 percent of the respondents
indicated they have responsibility for such
standard accounting functions as general ac-
counting, receivables, and payables. Other
major areas of responsibility shared by most
controllers (75 percent or more) include pay-
roll, night and income audits, computers in ac-
counting, and cash management.
There are indications that controllers are
becoming increasingly involved with the op-
Table 8.6 Secrets of Leadership
Mean Level of
Agreement*
In our organization/company, leaders must possess . . .
Dependability 5.6
Credibility 5.5
Responsibility 5.5
Accountability 5.5
Self-confidence 5.3
Decisiveness 5.3
Emotional stamina 5.2
Loyalty 5.2
Desire 5.2
Stewardship 5.1
Courage 5.1
Empathy 5.1
Tenacity 5.0
Anticipation 5.0
Timing 4.9
Competitiveness 4.8
Physical stamina 4.4
*The scale is from 1, “strongly disagree,” to 6, “strongly
agree.”
1327.ch08 12/19/05 9:34 AM Page 374
Section 8.2 ? The Lodging Chief Financial Executive 375
Table 8.7 Extent of Authority over Specific Functions
Type of Controller
Division or
Functions Corporate Area Hotel Other Total 1983 Study
Invest funds 70% 46% 48% 30% 46% 2%
Sign checks 79% 85% 88% 59% 79% 87%
Extend credit 66% 85% 92% 63% 80% 85%
Set or change prices 26% 62% 48% 28% 41% 21%
Borrow funds 36% 27% 20% 10% 20% 19%
Approve purchases 83% 89% 94% 69% 86% 82%
Table 8.8 Controllers’ Responsibilities
Type of Controller
Division or
Responsibilities Corporate Area Hotel Other Total 1984 Study
Hotel security 15% 27% 25% 18% 22% 9%
Receivables 89 89 100 73 91 95
Payables 89 92 99 77 92 93
General accounting 89 92 98 80 92 91
Payroll 85 89 95 68 87 89
Night auditors 60 85 94 60 80 83
Income auditors 57 81 89 60 77 79
Cashiers 43 65 77 47 64 63
Food controls 47 77 78 44 65 53
Computers: Accounting 83 89 95 73 88 *
Computers: Front office and reservations 49 77 65 44 58 *
Purchasing 32 62 77 40 60 50
Receiving 28 54 66 36 52 50
Storage (inventory) 23 58 66 39 52 34
Tax returns 70 58 61 54 61 n/a
Risk management 51 39 37 24 36 n/a
Cash management 85 81 86 51 77 n/a
Beverage controls 49 77 81 42 67 n/a
Investments 75 39 40 27 42 n/a
Internal auditors 47 62 46 31 44 n/a
* In 1984, a single question asked controllers about their computer-system (EDP)
responsibilities. Fifty-two percent of the respondents in 1984 had some responsibility for EDP.
1327.ch08 12/19/05 9:34 AM Page 375
erational aspects of their hotels. More than 50
percent of the respondents indicated that
their responsibilities included purchasing, re-
ceiving, food and beverage controls, and stor-
age (inventory). The number of respondents
responsible for the storage function increased
18 percentage points from 1984 to 1990, from
34 percent to more than 52 percent, and a
purchasing function was claimed by 60 per-
cent of the respondents in 1990, which is 10
points greater than in 1984. Responsibility for
hotel security, the least commonly shared
function among the controllers, more than
doubled in the last six years, growing from 9
percent in 1984 to almost 22 percent in the
1990 study.
The controllers’ role in electronic data
processing (EDP) and computer system man-
agement grew by leaps and bounds during the
1980s. In 1990, 88 percent of the respondents
indicated responsibility for the computer sys-
tems used for accounting functions.
Additionally, 58 percent indicated re-
sponsibility for front office and reservations
system computers—systems clearly not under
the umbrella of traditional accounting func-
tions. In the 1984 study, respondents were
asked just one question about responsibility
for EDP, and 52 percent of the controllers in-
dicated that they had some responsibility for
EDP. It’s clear that, over the years, computer-
oriented responsibilities have escalated
376 Chapter 8 ? Financial Control and Information Management
sharply. This trend can be expected to con-
tinue into the twenty-first century.
?
Committee Involvement
Just how involved have lodging financial ex-
ecutives been on committees of their lodging
businesses? Both of the studies conducted by
Geller and others reported over 80 percent of
the respondents were members of the execu-
tive committee, although the Tse study
showed only 71 percent (see Table 8.9). The
difference may be that the Tse study covered
all hospitality segments employing HFTP
members, while the Geller studies were re-
stricted to the lodging industry. In addition,
the involvement of financial executives from
1984 to 1990 increased significantly on both
the compensation and strategic planning
committees. The 1990 study by Geller and
others also included involvement in train-
ing and risk management committees, and a
majority (66 percent and 72 percent, respec-
tively) of lodging financial executives re-
vealed involvement.
A 1998 study by Woods and others sur-
veyed general managers of large hotels (500
rooms or more). Eighty-one percent of the re-
spondents in this study reported that either
the vice president of finance or the controller
of their hotel was a member of the executive
committee.
Table 8-9 Committee Involvement
Executive Compensation Strategic Planning
Geller and Schmidgall (1984) 82% 23% 41%
Tse (1988) 71% — —
Geller et al. (1990) 86% 75% 94%
1327.ch08 12/19/05 9:34 AM Page 376
?
SUMMARY
Considerable research has been conducted
over the past 20 years on lodging financial ex-
ecutives. These studies indicate that the most
common title is controller and the average
age is the late thirties. Males are still domi-
nant, though females are increasingly assum-
ing the top financial position with lodging
operations. The majority of these leaders have
bachelor’s degrees and majored in account-
ing. An increasing number of lodging finan-
cial executives are certified and have 10–15
years of hospitality accounting experience.
The skill set of financial executives in-
cludes both technical and leadership skills.
The technical skill set includes technology,
cash management, internal controls, and sta-
tistics. The most important leadership skills
Section 8.3 ? Budgeting and Forecasting: Current Practice in the Lodging Industry 377
are trusting subordinates, developing a vision,
dependability, credibility, responsibility, and
accountability.
Financial executives commonly have au-
thority to sign checks, extend credit, and ap-
prove purchases. To a lesser extent, they
invest funds, may set or change prices, and
borrow funds.
Their responsibilities range from manag-
ing receivables, payables, payroll, general ac-
counting, night and income auditors, cash, and
computers in accounting to hotel security,
risk management, investments, and internal
auditors.
Finally, financial executives commonly
serve on the executive, compensation, and
strategic planning, training, and risk manage-
ment committees of their hotels.
8.3 BUDGETI NG AND FORECASTI NG:
CURRENT PRACTI CE I N THE L ODGI NG
I NDUSTRY
Raymond S. Schmidgall and Agnes L. DeFranco
Financial forecasts and budgets can
strengthen management’s control of hotel op-
erating expenses and help determine the
profitability of the property (Chamberlain,
1991, 89–90; DeMyer and Wang-Kline, 1990,
64; and Karch, 1992, 21–22). Specifically, fore-
casts give owners a projected level of sales,
while budgets alert owners and operators
alike to significant expenditures that are on
the horizon or predictable shortfalls in rev-
enues. Used together, forecasts and budgets
can provide a benchmark for sales-incentive
programs, executive-compensation bonuses,
incentive-based management fees, and capital
expenditures (Temling and Quek, 1993).
A major difference between forecasting
and budgeting is that budgeting is normally
viewed as a process that covers a longer pe-
riod of time than forecasting. Budgeting often
results in a formal, long-range plan, normally
expressed in terms of dollars over time—for
example, the predicted revenues and ex-
penses of a hotel for 24 months (Schmidgall,
1997, 369–372, 411–413). On the other hand,
1327.ch08 12/19/05 9:34 AM Page 377
forecasts are generally prepared by hoteliers
to establish staffing levels and may cover a
period of just seven to ten days (Schmidgall,
1989, 101–2, 104–5). Long-range budgeting,
therefore, is a form of strategic planning. It
may entail several years’ financial projections,
a coordinated management policy, and a
control-and-correction mechanism that al-
lows actual results to be compared to esti-
mates and followed by corrective steps, if
necessary (Coltman, 1994).
?
THE CURRENT STUDY
Our study serves the following purposes:
• to determine the purposes, methods, and
procedures in performing an operations
budget,
• to determine how an operations budget is
used in budgetary control, and
• to determine the techniques used in fore-
casting revenues in the various operating
departments in lodging properties.
Limitation. Our study used a random-
sampling technique to select 600 samples that
yielded 171 responses (almost 30 percent of
the sample). As a result, there may be respon-
dents who belong to the same national chain
and thus represent the same set of corporate
operating procedures. In addition, with the
full-service and luxury segments of the hotel
industry constituting more than 90 percent of
our responses, the results are likely more ap-
plicable to those two groups than to limited-
service hotels. Thus, although more than
one-quarter of the hotel executives solicited
by this study responded, it may not be useful
to generalize the study’s results (particularly
beyond full-service hotels).
378 Chapter 8 ? Financial Control and Information Management
The instrument. We designed a four-part
questionnaire with the assistance of a number
of lodging controllers and by modifying a sur-
vey previously used in 1995 (Borchgrevink
and Schmidgall, 1995). We also employed a pi-
lot study in which other lodging controllers
offered comments and allowed us to fine-tune
the final survey. Part I of the questionnaire in-
cluded six questions that collected demo-
graphic data about the respondents and their
lodging operations. Parts II and III consisted
of 14 questions regarding the procedures and
methods used to develop an operations
budget, and about how the budget is used for
financial control. Finally, the last part of the
questionnaire asked respondents to provide
information regarding their various operating
departments’ forecasting techniques.
Sampling. As mentioned, a simple random-
sampling technique was used to select our
study’s population. Six hundred financial ex-
ecutives who are associated with lodging op-
erations were chosen from the 1997
membership list of the association of Hospi-
tality Financial and Technology Professionals
(formerly the International Association of
Hospitality Accountants).
Data collection and analysis. We first sent
the survey in October 1997 to each of the 600
executives, requesting them to participate in
our study. To ensure a good response rate, we
sent a second copy of the survey to everyone
in January 1998, as a reminder. Data received
were analyzed using the software package
SPSS for Windows.
?
RESULTS AND
DISCUSSION
Of the 600 executives who received our sur-
vey, 171 responded, yielding a 28.5-percent re-
1327.ch08 12/19/05 9:34 AM Page 378
sponse rate. The majority of the respondents
held the title of hotel controller (147, or 86
percent), while the others reported such titles
as assistant controller, regional controller,
corporate controller, VP-controller, executive
VP-CFO, and director of accounting. Respon-
dents were mainly associated with full-service
hotels (72 percent). Together with those from
the luxury segment (21 percent), those execu-
tives constitute well over 90 percent of the re-
sponses. As for affiliation, the majorities (62
percent) were part of a national chain, and 29
percent reported working for independent
lodging properties. International chains ac-
counted for another 7 percent, while 2 per-
cent of the responses came from franchisees.
Most of the properties reported having more
than 250 rooms (71 percent) and enjoyed
1996 annual gross revenues of at least $10 mil-
lion (also 71 percent). Figures 8.1 and 8.2
show the details of the lodging-property size.
Preparing the budget. The operations
budget is an integral part of the financial op-
eration of a lodging property, and virtually all
Section 8.3 ? Budgeting and Forecasting: Current Practice in the Lodging Industry 379
of the respondents reported that they pre-
pared an operations budget for the year—
only three reported not preparing a budget.
Moreover, almost 60 percent indicated that
they set a tentative financial goal prior to de-
veloping the operations budget. The majority
of those (64 percent) related that tentative fi-
nancial goals were based on either sales (33
percent) or net-income (31 percent) levels.
(In this case, sales equals revenues, while net
income refers to the financial statement’s bot-
tom line.) Other financial executives’ finan-
cial goals were based on gross operating
profit, net operating profit, EBITDA, debt-
service coverage, occupancy percentage,
RevPAR, or some combinations of those.
We presented five possible reasons why
an operations budget might be prepared, and
we also offered the fill-in-the-blank answer
“other.”When asked to give one major reason
why a budget was prepared, 45 percent se-
lected the option that stated “It is used as a
standard by which the lodging operation is
Figure 8.1 Lodging Property Size, by
Number of Rooms
251–500
45.6%
151–250
14.7%
101–150
10.5%
>500
25.7%
50–100
3.5%
Profile of properties represented in this study.
$2M–$3M,
2.9%
$3M–$5M,
7.1%
$20M,
37.1%
$15M–$20M,
15.9%
$10M–$15M,
18.2%
Figures in U.S. dollars (millions). Profile of properties
represented in this study.
$5M–$10M,
17.6%
Figure 8.2 Lodging Property Size, by
Annual Gross Revenues
(1996)
1327.ch08 12/19/05 9:34 AM Page 379
managed.” Another 28 percent chose the an-
swer “It is a planning tool.” About 15 percent
of the respondents gave more than one rea-
son, and their responses almost always noted
a budget’s value as a standard of comparison
or as a planning tool.
More than 90 percent of the respondents
reported that a co-operative effort among ho-
tel departments was used to prepare the op-
erations budget. Nevertheless, 73 percent
reported that the controller was the one who
held the main responsibility for preparing the
operations budget using the input provided
by other department heads and the general
manager.
Only five respondents indicated that the
controller prepares the budget with little in-
put from others. Thus, in more than three-
quarters of the hotels surveyed, the controller
was primarily in charge of budget prepara-
tion. In another 5 percent, the lodging units’
controllers and general managers jointly pre-
pared it, and in 12 percent of the hotels, the
general manager coordinated the budget-
preparation process with the various depart-
ment heads. Other responses indicated that
budget-preparation responsibility fell to an
380 Chapter 8 ? Financial Control and Information Management
executive committee, department heads, the
general manager (with input from the owner),
or a budget team (for example, a team might
comprise the general manager, owner, and
controller).
While all but three of our 171 respondents
confirmed that they prepared an operations
budget for the year, less than half prepared a
long-range budget (i.e., for more than a year at
a time). Of those who prepared long-range
budgets, more than three-quarters used a five-
year time span for future planning.
Making adjustments. Only one in four of
the respondents revised their budget at any
point during the operating year, with the most
common frequency of change being monthly
(40 percent). Other responses to this question
included “as needed” (21 percent), “quar-
terly” (16 percent), “semiannually” (12 per-
cent), “bimonthly” (3 percent), and some
combination of the above (4 percent).
?
BUDGETARY CONTROL
The majority of the respondents who used
budgets declared that the operations budget
Table 8.10 Cost Tolerances Between Budget and Actual Costs
Food Beverage Labor “Other”
cost cost cost operating costs
Less than 1% 11.5 14.3 8.2 8.2
1%to 1.9% 33.8 33.3 26.5 16.3
2% to 2.9% 29.0 23.1 25.9 21.1
3% to 3.9% 10.1 13.6 16.3 14.3
4% to 4.9% 6.1 4.1 12.2 17.0
5% to 5.9% 6.8 8.2 6.8 17.0
More than 5.9% 2.7 3.4 4.1 6.1
Median 2.2% 2.1% 2.6% 3.3%
Median, 7996 Study* 1.9% 1.9% 2.8% 3.7%
*R. S. Schmidgall and C. P. Borchgrevink, 1996.
1327.ch08 12/19/05 9:34 AM Page 380
was used for budgetary control, with 90 per-
cent reporting that budgets were prepared for
all of the hotel’s operations, versus just for se-
lected departments. Next, we asked what level
of variance between the budget (original or
revised) and actual performance is permitted
before corrective action is taken. The results
for this question are summarized in Table
8.10. About a third of the respondents try to
hold food, beverage, and labor costs within
the range of 1 to 2 percent of the budgeted
amounts. One-fifth of the respondents hold
“other” budget items within a range of 2 to 3
percent. (The median of the responses for
food and beverage costs was about 2 percent,
with the medians for labor and “other” costs
at about 3 percent.) Compared to responses
to a similar question in a 1996 study, it ap-
pears that hotels today are slightly more tol-
erant in food and beverage cost variances and
slightly less tolerant in allowing labor and
other operating costs to deviate from the
budget (Schmidgall, Borchgrevink, and Zahl-
Begnum, 1996).
Section 8.3 ? Budgeting and Forecasting: Current Practice in the Lodging Industry 381
?
FORECASTING
TECHNIQUES
The last part of our questionnaire outlined in
a grid presentation seven forecasting tech-
niques, ranging from simple to complex (i.e.,
smoothing-constant method), and five princi-
pal hotel revenue-generating departments.
We also allowed space so that respondents
could write in other techniques. Respondents
were then asked to reveal the methods they
used for forecasting department revenues
(see Table 8.11).
From this exercise, we find that some
hoteliers used more than one technique for
each department and that the methods used
varied among departments. More than 40 per-
cent of the restaurant and beverage depart-
ments, for example, appear to favor the use of
“number of guests by expected spending per
guest.” While the chief technique applied to
the rooms department was “expected units to
be sold multiplied by the expected average
Table 8.11 Various Departments’ Forecasting Techniques
Techniques Rooms Room Service Restaurant Banquet Beverage
Prior year’s budgeted dollar 10% 8% 9% 10% 10%
amounts multiplied by 1 ? X%
Number of guests by expected 7% 28% 46% 25% 41%
spending per guest
Expected units sold by expected 73% 27% 27% 26% 21%
average price per unit
Change in advance bookings 27% 6% 4% 22% 5%
from prior year
Last year’s actual revenues 16% 18% 16% 19% 16%
Last year’s actual revenues 20% 24% 25% 33% 29%
adjusted subjectively
Average of several past years’ 5% 6% 5% 6% 6%
revenues multiplied by 1 ? X%
Source: R. S. Schmidgall and C. P. Borchgrevink, 1996.
1327.ch08 12/19/05 9:34 AM Page 381
382 Chapter 8 ? Financial Control and Information Management
LITERATURE REVIEW
Accurate budgets are considered essen-
tial to profitable hotel operation. Yet obtain-
ing reliable data is a problem. Smith and
Lesure state that perhaps the greatest prob-
lem with forecasting and budgeting is the
number of widely varying forecasts that are
regularly published side by side, without
question or support, and in some cases mak-
ing all predictions vague.
1
Moreover, busi-
ness prejections and financial trends are
often published without any explanation of
the underlying assumptions. Smith and
Lesure contend that perhaps the way to con-
struct reliable forecasts and budgets is to
build a statistically reliable industrywide
database that can be regularly updated with
and compared to new economic and finan-
cial information. Those numbers can then be
used to develop a short-term outlook for the
industry as a whole or various geographic
and market segments.
Hoteliers’ desire and need for accurate
budgeting and reliable data are not new. In
1989, hoteliers reported being generally sat-
isfied with their forecasting accuracy, and yet
they desired improvement.
2
Just one year
earlier, Lasky noted that budgeting was one
of the factors hoteliers ignored when open-
ing a hotel. Thus, he wrote, he was personally
involved in rescuing 130 hotels and motels
from bankruptcy due to this oversight.
3
Besides the budget’s role as the business
plan for owners and operators, Temling and
Quek discuss the importance of hotels’
budgets to lenders.
4
The budget is important
to this group, as it can indicate a lodging
company’s potential for success. It also lets
the officers of financial institutions know
about the financial health of the business.
As the lodging industry’s competitive-
ness increases, so does the interest in budg-
eting practices, as indicated by studies that
appear biennially, on average. In 1995, 122
U.S. lodging properties were asked about
their budgeting practices.
5
The areas of in-
vestigation included: budget development
processes, budget reforecasting procedures,
and budgetary control methods.
To further investigate the budgeting
process, 140 U.S. lodging controllers were
asked in 1997 about their use of forecasting
and budgeting at the department level.
6
1327.ch08 12/19/05 9:34 AM Page 382
Section 8.3 ? Budgeting and Forecasting: Current Practice in the Lodging Industry 383
That study reported that controllers rated
“proper staffing” as the main benefit of
preparing forecasts and “strategic planning”
as the main benefit of budgeting. That
study’s results also showed that a hotel’s size
(as measured by the number of rooms) did
not significantly influence the perception of
the usefulness or the practices of forecasting
and budgeting.
Some years earlier, Records and Glen-
nie provided insights to the Boca Raton Re-
sort and Club’s budgeting and business
forecasting processes.
7
Forecasting business
volume and scheduling the required labor to
serve its customer are crucial steps in main-
taining an operation’s quality. Thus, using a
relatively simple computer network and ba-
sic software, the Boca Raton Resort and
Club ensured it could control budgets, fore-
casts, and labor schedules.
1
R. A. Smith and J. D. Lesure, “Don’t Shoot the
Messenger—Forecasting Lodging Perfor-
mance,” Cornell Hotel and Restaurant Ad-
ministration Quarterly, Vol. 37, No. 1
(February 1996), pp. 80–88.
2
R. S. Schmidgall and J. D. Ninemeier, “Budget-
ing Practices in Lodging and Food Service
Chains: An Analysis and Comparison,” In-
ternational Journal of Hospitality Manage-
ment, Vol. 8, No. 1 (1989), pp. 35–41.
3
M. Lasky, “An Rx for Hotel Health,” Lodging
Hospitality, Vol. 44, No. 6 (May 1988), pp.
75–77.
4
W. P. Temling and P. Quek, “Budget Time,”
Lodging Magazine, Vol. 19, No. 3 (Novem-
ber 1993), pp. 21–22.
5
C. P. Borchgrevink and R. S. Schmidgall, “Bud-
geting Practices of U.S. Lodging Firms,”
Bottomline, Vol. 10, No. 5 (August–
September 1995), pp. 13–17.
6
A. L. DeFranco, “The Importance and Use of
Financial Forecasting and Budgeting at the
Departmental Level in the Hotel Industry
as Perceived by Hotel Controllers,” Hospi-
tality Research Journal, Vol. 20, No. 3 (Feb-
ruary 1997), pp. 99–110.
7
H. A. Records and M. F. Glennie, “Service
Management and Quality Assurance: A Sys-
tems Approach,” Cornell Hotel and Restau-
rant Administration Quarterly, Vol. 32, No. 1
(May 1991), pp. 26–35.
1327.ch08 12/19/05 9:34 AM Page 383
384 Chapter 8 ? Financial Control and Information Management
price per unit” (reported by 73 percent of re-
spondents), the banquet department was the
high user of “last year’s actual revenues ad-
justed subjectively” (33 percent).
?
THE EFFECTS OF
AFFILIATION, SALES,
AND PROFITABILITY
To see whether a property’s (1) affiliation, (2)
size in terms of sales, and (3) profitability
have any effect on its budgeting practices, we
used the chi-square statistic. The properties’
budgeting practices were reflected in the an-
swers to eight questions that asked about the
procedures and methods used to develop op-
erations budgets and how those operations
budgets were used in budgetary control.
We first classified the responses according
to the properties’ affiliation. A chi-square was
then calculated by cross-tabulating the affilia-
tion on one hand and the eight questions on
the other. Next, the same procedure was used
to classify the responses according to sales
level, and then by profitability. If an effect has
a probability value (p-value) or a significance
level of less than 0.05, it is significant. That
means, in general, the effect happens due to
chance less than 5 percent of the time. As seen
in Table 8.12, two of the practices were af-
fected by property affiliation, one was af-
fected by sales, and one was affected by
profitability (see those data marked with an
asterisk).
When the chi-square test was performed
based on annual sales, a significant difference
(p ? 0.05) was found in the preparation of
long-range operating budgets (Table 8.13).
That is, the higher the sales level a property
enjoyed, the greater the likelihood that the
property prepared a long-range operations
budget.
Our second set of cross-tabulations deter-
mined whether differences occur between
Table 8.12 Property Characteristics Correlated with Budgetary Practices
Selected Property Characteristics
Chain Versus Size
Budgetary Practices Independent Operation (sales) Profitability
Major reason for having an operations budget 0.009* 0.015* 0.017*
Tentative financial goal set in advance 0.018* 0.562* 0.156*
Base for the tentative financial goal 0.116* 0.292* 0.202*
Long-range operating budgets prepared 0.062* 0.008* 0.067*
Revision of operating budget 0.252* 0.914* 0.675*
Monitoring food costs 0.440* 0.516* 0.398*
Monitoring beverage costs 0.535* 0.342* 0.447*
Monitoring labor costs 0.447* 0.299* 0.416*
*Significance level is less than 0.05.
1327.ch08 12/19/05 9:34 AM Page 384
branded lodging operations and independent
properties (Table 8.12). We noted two statisti-
cal differences, namely (1) the major reason
for having an operations budget and (2)
whether a tentative financial goal was set in
advance.
First, it appears that national-chain hotels
cited different reasons for having an opera-
tions budget than did the independent prop-
erties, as shown in Table 8.14.
Hoteliers affiliated with national chains
tend to have more than a single reason for
Section 8.3 ? Budgeting and Forecasting: Current Practice in the Lodging Industry 385
creating an operations budget. In addition, it
appears that national chains prepare the
budget to be used for comparison purposes
more often than do the independents, and
that the independents prefer to use the oper-
ating budget as a planning tool (compared to
the national chains).
Second, 65 percent of the chain properties
responding to our questionnaire established
tentative financial goals prior to developing
their operations budgets compared to only 45
percent of the independent properties. This
difference is most likely due to pressure from
chains’ corporate offices on individual prop-
erties to deliver the required “profit” to meet
the chains’ overall financial objective.
The last step of our research was to test
for differences according to profitability. The
profitability of each respondent was deter-
mined by dividing the net income reported by
each hotel by its total sales. Respondents
were then divided into four categories ac-
cording to their profitability: less than 11 per-
cent, 11 to 20 percent, 21 to 30 percent, and
over 30 percent (Table 8.15). The greater the
respondent’s profit margin, the more likely
that a single reason was cited for having an
operations budget.
Table 8.13 The Effect of Annual Sales
on Long-Range Planning
Percentage of respondents
who prepared long-range
Annual sales operatons budgets
Less than $5 M 28%
$5 M to $10 M 28%
$10 M to $15 M 37%
$15 M to $20 M 48%
Over $20 M 74%
Figures in US dollars (millions).
Table 8.14 The Effect of Affiliation on Budget Usefulness
Major reason for having an operations budget
Planning Use as a More than
Affiliation tool standard one reason
Chain property 26% 53% 22%
Independent property 48% 48% 5%
Note: Totals may not add to 100 due to rounding.
1327.ch08 12/19/05 9:34 AM Page 385
?
SUMMARY AND FUTURE
RESEARCH
Operations budgeting is an important part of
U.S. hotels’ financial planning. The majority of
hoteliers set tentative financial goals prior to
preparing their operations budgets. The goal
for the majority of hoteliers is based on either
sales or net income. Most hoteliers indicated
that the major reason they used budgets at all
was as a standard for comparison to actual
performance figures. The second most com-
mon use was as a planning tool. At the major-
ity of hotels, a cooperative effort among
departments was used to produce the budget.
In a clear majority of those hotels, the finan-
cial executives coordinated this process. Less
than half of all respondents prepared long-
term operations budgets, and less than a quar-
ter of all respondents indicated that their
budgets were revised during the year.
All but two of the 171 respondents indi-
cated that their operations budgets were used
for control purposes. For all departments, the
mean of the allowable deviation between the
386 Chapter 8 ? Financial Control and Information Management
budget and actual performance ranged near 2
to 3 percent. That range is slightly tighter and
smaller than the range measured in a similar
study in 1996 (Schmidgall, Borchgrevink, and
Zahl-Begnum).
Respondents’ revenue-forecasting tech-
niques varied by department within individ-
ual hotels. A number of respondents reported
they used multiple techniques for a single de-
partment. The most commonly used tech-
nique was “expected units sold by expected
average price per unit.” Other techniques that
were used by more than 20 percent of the re-
spondents included “number of guests by ex-
pected spending per guest” and “last year’s
actual revenues adjusted subjectively.”
Our research uncovered several points
that deserve attention. First, virtually all ho-
tels use an operations budget and yet less
than half of the hotels budget beyond one
year at a time. Future researchers might ex-
plore the reasons why more hoteliers don’t
prepare long-range operations budgets. Sec-
ond, few hoteliers revise their budget during
the year (only about one in four). Budgeting
is not an exact science, so regular adjustments
Table 8.15 The Effect of Profit Margin on Budget Usefulness
Major reason for having an operations budget
Planning Use as a More than
Affiliation tool standard one reason
? 11% 45% 52% 4%
11% to 20% 46% 46% 9%
21% to 30% 36% 44% 20%
? 30% 10% 60% 30%
Note: Totals may not add to 100 due to rounding.
1327.ch08 12/19/05 9:34 AM Page 386
should be expected and planned. Third, for
most hotels, the largest single cost is labor. Yet
our research shows that hotels’ food and bev-
erage costs appear to be more closely con-
trolled than are labor costs.
Future research could also focus on spe-
cific control techniques to monitor hotels’
costs and to determine whether more-
profitable hotels use different techniques
Section 8.4 ? As I See It: The Hotel Controller 387
than less-profitable hotels. Finally, further
study could examine closely the forecasting
techniques actually used by the operating de-
partments. For example, in our study, the
technique “last year’s actual revenues ad-
justed subjectively” was rated high, and future
research could explore exactly what “subjec-
tive” adjustments are being used.
8.4 AS I SEE I T: THE HOTEL CONTROL L ER
Mike Draeger
The controller is the manager with overall re-
sponsibility of the accounting department.
This executive is credited with having his or
her hand on the purse strings, eye on the bot-
tom line, and ear of the general manager, all
while counting the beans and balancing the
books. In fulfilling this role, the controller
must know the hotel operations and be famil-
iar with what goes on in each department. As
is the same with all other managerial roles,
the controller must have many skills that are
used daily.
Obviously, the controller is an administra-
tor. He or she supervises the accounting func-
tions, including payroll, payables, receivables,
purchasing, and auditing. The controller wants
to know that procedures are being followed
and deadlines are being met. He or she ques-
tions what is happening in each hotel depart-
ment. Is all the money getting to the bank,
and is there enough to pay all the vendors and
staff? That large group function in the ball-
room is being extended 30-day credit; have
their references been checked? Are purchase
orders on file in the receiving department?
Do the actual payroll tax deposits equal what
is reported on the IRS form? Accounting af-
fects almost every aspect of the hotel opera-
tion, and the controller is the one looked to
when it comes to the proper functioning and
conduct of this department.
The controller is an advisor, meaning he
or she provides information and recommen-
dations to every department in the hotel.
Regarding giving information, accounting
generates more reports than any other depart-
ment. Daily reports to management showing
sales, labor, and purchases are a must in any
business, with comparisons to budget and/or
last year. The financial statements, in-
cluding the balance sheet and income state-
ment, are periodically produced in accounting.
The controller is expected to be prepared to
discuss these types of reports with managers
and owners, and to make sense of all the num-
bers and percentages. A hotel holds any num-
ber of meetings where the controller discusses
the financial or operational results. At these
meetings, the controller is a part of the process
of generating recommendations and sugges-
1327.ch08 12/19/05 9:34 AM Page 387
tions to improve operations in areas the re-
ports might point out. Often, a morning oper-
ations meeting finds the controller addressing
labor costs that are creeping higher than ap-
propriate given current levels of business, or
the monthly manager’s meeting starts with the
controller giving an overview of last month’s
financial results and the hotel’s year-to-date
standing. When the owners visit the hotel, they
usually attend a meeting to discuss financial
results and what is being done to ensure prof-
itability expectations are being met. The con-
troller might even be asked to sit in on a
specific department’s staff meeting as its
members brainstorm ways to reduce depart-
mental costs. As others digest the information
accounting provides, the controller offers ad-
vice and counsel on its significance.
The controller is also a technician. He or
she must have a foundation in the debits and
credits of accounting. Regardless of whether
the accounting department is staffed with one
person or two dozen, the controller is prepared
to jump in and do the work. A tight labor mar-
ket and staff turnover sometimes necessitate
that the controller assist in every function.
There are always balance sheet accounts to
reconcile, budget variances to explain, and
journal entries to post. It takes a lot to keep an
accounting department functioning.
Very early in my accounting career, I be-
gan working in a small accounting department
of a regional restaurant chain. Due to state
laws, the restaurants could buy alcoholic bev-
erages with cash or check only, and never on
credit. To facilitate purchasing, the restaurant
general manager was provided an imprest
checking account for purchasing alcohol. (An
imprest account is one that has a specific
amount of money in it, and money replaced
with precise amounts checks are written for.)
This account had $1,000 in it, and each week
388 Chapter 8 ? Financial Control and Information Management
the manager called the home office and have
deposited into the account the amount equal
to the checks written in the previous week.
Then the invoices for what had been pur-
chased were forwarded to the home office,
which supported the amount of the transfer.
In theory, the account balance never exceeded
$1,000. The bank statements were sent to the
general manager of the restaurant to balance
and send completed to the home office.
Because I was the new guy, I was given
the task of balancing the checking account of
one restaurant, which had not been balanced
in over two years. It was well known that this
restaurant’s manager, an exceptional people
person, wasn’t good with numbers and never
found time to balance that puny checking ac-
count. So I went to work ticking off the
checks and deposits and trying to make the
account balance to the $1,000 imprest
amount. There were several irregularities,
and, of course, many documents (cashed
checks) were missing. I worked with the bank
to recreate copies and research the irregular-
ities, of which there were many. When all was
finished, I had discovered the manager had
embezzled over $18,000! This manager had
actually been a very astute numbers person
and had found ways to divert extra funds into
the account and then wrote checks to himself
and others for personal use.
It was a technician who caught him. But
had a technician balanced that checkbook
monthly and always verified the purchases
through the invoices, it never would have hap-
pened in the first place. Procedures were
wrong and not enforced, and the climate was
ripe for trouble. A good bookkeeper or ac-
countant is primarily a good technician in ac-
counting aspects, and a good controller does
not lose sight of this ability as his or her ca-
reer develops.
1327.ch08 12/19/05 9:34 AM Page 388
Most successful businesses create a finan-
cial plan or budget to operate by. The more
honest and detailed this plan is, the better one
can gauge actual performance. Most budgets
are prepared annually, with monthly detail
breakdowns. The controller is a planner and is
usually the one who prepares the budget—or,
better yet, coordinates the hotel’s efforts in
preparing departmental budgets to consoli-
date into one master document. I worked for
a company that provided major cash incen-
tives for meeting and exceeding the annual
budgeted bottom-line numbers. Budgeting
was taken very seriously, and each member of
management had a vested interest in all de-
partments’ performance. Budgeting is not
hard to do, but it can be time-consuming.
Over the years, I became a detail-oriented
and effective budgeter, although my first
budget review taught me the most. My hotel
and I had spent weeks and months preparing
the next year’s budget. All the numbers had
been gone over, comparisons completed, and
volumes of expense and revenue backup cat-
alogued and bound in three-ring binders. The
general manager and I flew 3,000 miles, with
our binders, to present the budget to our area
and regional vice presidents and receive the
company’s stamp of approval. We were sched-
uled for a five-hour review session, if that
much time was needed. As the GM and I
came into the review room, the vice presi-
dents were already seated and waiting. They
stated that this could be a short and produc-
tive meeting. If we would only commit to in-
creasing our bottom line by $200,000, we
could all be out of there in five minutes. No
way! The GM and I had solid defendable
numbers, and we weren’t going to let months
of everyone’s hard honest work get blown
away. Needless to say, the review lasted the
entire five hours, our budget was ripped to
Section 8.4 ? As I See It: The Hotel Controller 389
shreds, and the GM and I were verbally
bloodied, bruised, and beaten at the end of it
all. Oh yes, our bottom line increased
$350,000, and we did not make budget or our
bonuses that year. A good manager should al-
ways know what the people above him are
looking for and then strive or rather plan to
produce it, and this includes budgeting.
Additionally, the controller is an educa-
tor. All managers have a responsibility to in-
struct and train others, and the controller is
no exception. Obviously, the accounting staff
must be proficient in their duties to perform
their jobs, and the controller must ensure this
is happening. However, to the majority of the
hotel, what accounting does and how they do
it can be quite a mystery. Controllers should
demystify the role of accounting. Managers
with an understanding of accounting find they
have more tools to work with in the operation
of their departments after they have been in-
volved in just one year’s budget process. The
controller can be building public relations for
accounting by using opportunities to develop
others’ financial awareness and expertise.
Finally, controllers should be mentors.
They should be involved in the development
of people. The accounting staff should experi-
ence new challenges to keep them interested.
Cross-training in other accounting or hotel po-
sitions can give staff perspective on areas not
previously understood. This aids staff in devel-
oping their careers and additionally helps
within the department when staff is short.
There was a time when this backfired on
me, though. My accounting department had a
staff of 14, and each was cross-trained to per-
form at least part of a job besides their own.
My general cashier was responsible for count-
ing the previous day’s receipts and preparing
the bank deposit. Additionally, she replen-
ished the cash banks used in the restaurants
1327.ch08 12/19/05 9:34 AM Page 389
and stores and at the front desk. She was re-
sponsible for maintaining a safe in her office
that contained close to $400,000. Sadly, her fa-
ther passed away and she needed to leave
town for a week or so. No problem! We had
someone in accounts receivable that had
cross-trained in the cashiering position and
was able to step in immediately. The cashier-
ing temp completed her first week without a
hitch. We left work for the weekend feeling all
was well. On Monday, my cashiering temp
didn’t show up for work. She also didn’t call.
In fact, I have never seen her since. Over the
weekend, she had taken advantage of proce-
dural flaws and helped herself to $30,000 of
the hotel’s money and fled.
When I was able to step back and take a
broad look at what had happened, I realized
the problem. The accounting procedures
were such that one person could steal from
the safe and not be questioned. Not only was
this an opportunity for a dishonest employee,
but it placed an honest employee in danger!
One employee had both the combination and
the key to the safe tumbler. One employee
could go into the accounting offices alone on
a day when the entire hotel knew the ac-
counting department was closed. One em-
ployee could go into the cashier’s office alone
with a backpack and exit the office, depart-
ment, and the building without anyone ask-
ing to see inside the backpack. A single
employee could be in physical danger if oth-
ers knew all of this and were hard up for
cash. Needless to say, procedures were
changed immediately and policy manuals
were rewritten with haste.
The controller should be on the lookout
for promising managers who show potential.
Managers enjoy taking a few minutes over
coffee or lunch or even just sitting in the of-
fice to talk about their objectives and goals.
390 Chapter 8 ? Financial Control and Information Management
Often the controller can facilitate a manager’s
accomplishments by being a friend and being
aware of the manager’s professional develop-
mental needs.
Mentoring and educating can benefit the
controller in many ways—maybe, most inter-
estingly, his or her personal advancement
and compensation. Several hotel companies
evaluate and offer incentives to the back-
of-the-house departments for criteria previ-
ously reserved for more service-oriented or
revenue-producing departments. As a con-
troller of an accounting department, I am
measured by the service my department pro-
vides to the hotel operation—our internal
customers. Accounting becomes a support de-
partment and the rest of the operation its
customers. In this way, accounting offers
products and services, and it works to satisfy
customers. The manager and even staff can es-
tablish quantifiable objectives focused on the
department’s product. These become the cri-
teria for performance evaluations, bonuses,
and other incentives and rewards.
Current objectives in accounting might
now include:
• Working professionally with all other
departments.
• Meeting deadlines and issuing timely
reports.
• Achieving superior results on internal
and external audits.
• Training operational managers in the fi-
nancial aspects of their departments.
• Stocking storerooms at appropriate par
levels.
• Keeping the accounting offices neat, or-
derly, and presentable.
• Being willing to answer questions and as-
sist with problems.
1327.ch08 12/19/05 9:34 AM Page 390
With this type of product and service atti-
tude, there is no limit to what a department
might do for its customers.
It is not easy to describe the controller’s
job as a daily routine. However, the position
does call for skills and traits that are continu-
ally in use. Just as with all other aspects of the
Section 8.5 ? The Hotel Purchasing Function 391
hotel, the scenery is always changing, guests
are constantly arriving and departing, restau-
rants open and close, telephones ring 24 hours
a day. Each day brings new challenges and op-
portunities, and the controller, as part of this,
must embrace the many facets of the hospi-
tality industry.
8.5 THE HOTEL PURCHASI NG FUNCTI ON
C. Lee Evans
The hotel purchasing function did not change
very much from 1970 to 1990. Until the late
1980s, various tax advantages and benefits
were the primary reason for the construction
of U.S. hotels. Providing a substantial return
on investment was not expected or required.
In our current economy, expectations of
hotel profitability have changed. Profitability
is now required, along with maintaining the
established level of quality. This has brought
about a new level of interest in the purchasing
function and greater importance placed on
cost savings.
The financial aspects of the hotel business
changed in the 1990s. Hotels enjoyed the
longest boom in revenues and profitability
over the previous 40 years.
Today, however, in the slump following
the terrorist attacks of 2001, hotel managers
realize that true cost savings generated in the
purchasing department are dollars that drop
directly to the bottom line without associated
incremental cost. It is not difficult to generate
arbitrary savings; the true challenge is to
create cost efficiency utilizing a standard
specification.
Purchasing for the hotel requires much
more than obtaining three bids and circling
the lowest price. The true definition of pur-
chasing should be “purchasing the right prod-
uct, at the right price, at the right time.”
The statement sounds extremely simple,
but when it is applied to the thousands of
items a hotel purchases, it presents a great
challenge for the purchasing manager. The
hotel purchasing function supports virtually
every department within the property,
whether purchasing chemicals for housekeep-
ing or stewarding, office supplies for market-
ing, computer supplies for accounting, or food
and beverage products for the restaurant
outlets.
The purchasing manager usually reports
to the hotel controller or the hotel’s financial
control division, but I am convinced this will
change. There is a need for a more opera-
tional approach to managing the purchasing
function. We need to build a team that is com-
mitted to the common goal of servicing our
customers and maintaining established qual-
ity standards. The reporting structure will be-
gin to shift to operations, with the purchasing
manager directly reporting to the general
manager or, in larger properties, to the execu-
tive assistant/operations manager. This will
help promote the philosophy of team building
1327.ch08 12/19/05 9:34 AM Page 391
and support and service customers directly.
As matters stand now, purchasing is viewed as
a support department.
With the increasing importance of the
purchasing function, the mission of the pur-
chasing manager is to procure products and
services cost-effectively that will meet or ex-
ceed the customer’s expectation. The purchas-
ing manager must continually evaluate
product specifications to incorporate new
products and technology. Reviewing the spe-
cific need based on the expectation of the cus-
tomer helps product evaluation.
392 Chapter 8 ? Financial Control and Information Management
The purchasing function is changing for
several reasons. In the past five to seven years,
the hotel industry has undergone tremendous
consolidation. With this consolidation have
come economies of scale for support areas,
which include marketing, accounting, pur-
chasing, and reservation systems. Many of to-
day’s hotel companies have centralized the
purchasing function to some extent. They ne-
gotiate purchasing agreements with produc-
ers and processors and distribute products
and supplies through predetermined distribu-
tion channels.
General Manager
Purchasing
Manager
Outlet
Managers
Executive
Chef
Storeroom
Supervisor
Storeroom
Clerk
Beverage
Clerk
Sales
Manager
Director of
Catering
Director of
Human
Resources
Controller
Director of
Marketing
Director of
Food & Beverage
Figure 8.3 Partial Hotel Organization Chart
1327.ch08 12/19/05 9:34 AM Page 392
?
PURCHASING
ORGANIZATION
The purchasing department can be organized
into three basic areas:
• Administrative: This area consists of pric-
ing, vendor selection, and the purchase of
nonstocked items. Nonstocked items are
products purchased for immediate use or
held in storage in other departments
throughout the hotel.
• Receiving: There are two categories of re-
ceiving: (1) hotel goods that are placed in
storage in the purchasing area or are im-
mediately issued to the requesting de-
partment or guest/group; and (2) items
that have been shipped to a registered
guest or expected guest/group.
• Issuing: Product issuing falls into two cat-
egories: (1) consumable food and bever-
age supplies consisting of all food items
and liquor, beer, wine, and mixes to be
held in the purchasing department store-
rooms; and (2) office supplies, printed
forms, and linen. This is just a small listing
of items, depending on the physical layout
of the hotel.
The staffing and segregation of duties
varies from hotel to hotel depending on the
property size and physical layout of the back-
of-the-house areas. A partial organization
chart is shown in Figure 8.3. See sidebar,
“Sample Job Descriptions.”
?
INTERDEPARTMENTAL
RELATIONSHIPS
It is essential that the purchasing manager de-
velop close working relationships with key
Section 8.5 ? The Hotel Purchasing Function 393
managers within the hotel. These relation-
ships should build and demonstrate trust, con-
fidence in judgment, and integrity. Key
managers include the following:
• Corporate purchasing manager
• Hotel general manager
• Executive assistant/operations manager
• Director of food and beverage
• Executive chef
• Director of housekeeping
Interaction between the purchasing man-
ager and all other departments occurs regu-
larly. Spoken interaction, either by telephone
or in person, is the most frequent. With the
technological implementation of the Internet
and email, the communication process has be-
come more efficient. Communication can be
accomplished quickly with large numbers of
people.
Most day-to-day interactions of the pur-
chasing manager involve the following key
managers and issues, among others:
• General manager/executive assistant
manager: Issues relating to quality
changes and all discussions regarding cap-
ital expenditures (defined as equipment
or renovation purchases exceeding
$2,000).
• Director of food and beverage: Unre-
solved food purchasing issues and infor-
mation related to wine, liquor, and beer
purchases.
• Executive chef: Issues relating to food
purchases. This area requires close com-
munication with respect to vendor per-
formance, food markets, quality, and
availability information.
• Director of housekeeping: Coordination
and purchase of linens, paper goods
1327.ch08 12/19/05 9:34 AM Page 393
394 Chapter 8 ? Financial Control and Information Management
SAMPLE JOB DESCRIPTIONS
Purchasing Manager
POSITION TITLE: Purchasing manager
DIVISION/DEPARTMENT: Administra-
tive and general
REPORTS TO (TITLE): Controller
DIRECTLY SUPERVISES: Storeroom su-
pervisor, beverage clerk, storeroom clerk
NO. OF EMPLOYEES SUPERVISED: 3
BASIC FUNCTION OF POSITION: To
support the hotel department with depend-
able sources of materials and services; to buy
competitively; to control inventories; to de-
velop and train personnel; to implement
planning to avoid emergencies; and to im-
plement and supervise all procedures and
staff in the purchasing department.
EDUCATION AND EXPERIENCE OR
SKILLS NORMALLY NEEDED: College
helpful but not required. Previous buying
experience a must. Food and beverage buy-
ing necessary. Accounting background
needed. Extraordinary organizational skills
required. Must display excellent manage-
ment skills and a great deal of diplomacy.
TYPE OF GUIDANCE REQUIRED
TO DIRECT THE ACTIVITIES OF THE
POSITION AND MAGNITUDE OF IN-
DEPENDENT DECISION-MAKING RE-
SPONSIBILITY: Must have the ability to
function independently within the parame-
ters established by the controller and other
upper management in the hotel. Has the au-
thority to hire and terminate.
FUNCTIONS:
20%: Develop and monitor policies, proce-
dures, and performance objectives for the
purchasing team.
30%: Solicit competitive price quotation.
40%: Supervision of purchasing staff.
10%: Miscellaneous duties (O-G ?ongoing):
O-G: Review par stock levels.
O-G: Schedule storeroom hours.
O-G: Develop employees for supervi-
sion position.
O-G: Maintain high levels of employee
motivation.
O-G: Insure proper handling of receiv-
ing, storing, and issuing.
O-G: Assure accurate and timely prepa-
ration of daily records for purchases and
issues for food and beverage forms.
O-G: Visit surveyors and stay abreast of
market trends.
Storeroom Supervisor
POSITION TITLE: Storeroom supervisor
DIVISION/DEPARTMENT: Purchasing
REPORTS TO (TITLE): Purchasing
manager
DIRECTLY SUPERVISES: Beverage
clerk, storeroom clerk
NO. OF EMPLOYEES SUPERVISED: 2
BASIC FUNCTION OF POSITION: To su-
pervise the storeroom staff and resolve day-
to-day problems in food and beverage
1327.ch08 12/19/05 9:34 AM Page 394
Section 8.5 ? The Hotel Purchasing Function 395
storerooms. To assist in the procurement of
all consumable food and beverage items as-
suring that they are of the right quality and
right quantity. To maintain minimum invest-
ment and reduce unnecessary expenditures
to maintain high sanitation standards and
enforce all hotel policies relating to the food
and beverage storerooms.
EDUCATION AND EXPERIENCE OR
SKILLS NORMALLY NEEDED: College
degree helpful but not required. One to two
years’ prior food and beverage background
required. Must be able to read, write, and
speak English fluently. Must have good or-
ganizational skills.
TYPE OF GUIDANCE REQUIRED TO
DIRECT THE ACTIVITIES OF THE
POSITION AND MAGNITUDE OF IN-
DEPENDENT DECISION-MAKING RE-
SPONSIBILITY: Must have the ability to
act as administrator of the purchasing de-
partment in the absence of the purchasing
manager. Must have the ability to function
independently within the parameters estab-
lished by the purchasing manager. Has the
authority to hire and terminate.
FUNCTIONS:
50%: Supervise food and beverage clerks
and provide assistance when necessary.
5%: Prepare daily food order.
5%: Prepare semiweekly food order.
5%: Maintain perpetual inventory (liquor,
beer, wine).
2%: Assist purchasing manager in placing
orders.
5%: Prepare weekly food bid sheet.
5%: Prepare monthly food bid sheet.
2%: Maintain accurate food and beverage
vendor files.
2%: Assist in monthly inventory.
2%: Prepare monthly Food Dead Stock list
(raw materials for which there is no finished
product) for chef.
2%: Prepare monthly Beverage Dead Stock
list for director of food and beverage.
10%: Assign miscellaneous duties (O-G ?
ongoing):
O-G: Product quality inspection.
O-G: Communication with the chef.
O-G: Keep abreast of industry trends
and information.
O-G: Maintain accurate and organized
filing system.
Storeroom Clerk/Beverage Clerk
POSITION TITLE: Storeroom clerk/bever-
age clerk
DIVISION/DEPARTMENT: Purchasing
REPORTS TO (TITLE): Storeroom
supervisor
DIRECTLY SUPERVISES: None
NO. OF EMPLOYEES SUPERVISED:
None
(continues)
1327.ch08 12/19/05 9:34 AM Page 395
(toilet paper, facial tissue, paper towels),
uniforms, and laundry and cleaning
chemicals.
A good purchasing manager bases pur-
chasing decisions on the same criteria as all
business decisions: data. One cannot be an ex-
pert on every product available. This is where
396 Chapter 8 ? Financial Control and Information Management
purchase specifications come into play. Writ-
ten specifications must be developed for all
key products. These products should be tested
periodically to verify that they meet or exceed
specifications. Examples of testing: a monthly
butcher yield test on specific meat cuts; a
yearly test of terry linen by an independent
laboratory.
SAMPLE JOB DESCRIPTIONS (continued)
BASIC FUNCTION OF POSITION: To re-
ceive, store, issue, rotate, and secure mer-
chandise as outlined in the storeroom
procedures. To accurately record transac-
tions and to follow written policies and pro-
cedures relating to purchasing and the food
and beverage storerooms.
EDUCATION AND EXPERIENCE OR
SKILLS NORMALLY NEEDED: Prior ex-
perience in food and beverage consumable
receiving. Prior storeroom experience in is-
suing stock, and inventory control. Must
have math aptitude and be detail oriented.
TYPE OF GUIDANCE REQUIRED TO
DIRECT THE ACTIVITIES OF THE
POSITION AND MAGNITUDE OF IN-
DEPENDENT DECISION-MAKING RE-
SPONSIBILITY: Must have the ability to
function independently within the parame-
ters established by the purchasing manager
and storeroom supervisor.
FUNCTIONS:
25%: Responsible for the second thorough
inspection of the product as it is being stored
and rotated; assure proper stock storage lo-
cation on shelving units.
10%: Maintain high standards of sanitation
and inventory organization.
10%: Participate in monthly inventory.
40%: Insure completion of paperwork in a
timely manner:
A Form (daily record of purchases and
issues of food).
B Form (daily record of purchase and is-
sues of beverage).
Issue recap food.
Issue recap beverage.
Perpetual inventory, beverage.
Perpetual inventory, paper.
Food stock levels.
Beverage stock levels
15%: Miscellaneous:
To complete projects in a timely manner.
1327.ch08 12/19/05 9:34 AM Page 396
?
PURCHASING SOURCES
There are many sources of information about
producers, processors, and manufacturers.
Technical data are also available. Suppliers
are the best source of information. The list-
ings in the sidebar “Purchasing Sources” are a
small sample of material available to the pur-
chasing manager. The latest and greatest
means of identifying product sources has to
be the Internet.
?
THE PURCHASING
MANAGER’S DAY
7:00 A.M. Inspect the quality of food and bev-
erage consumables as they are delivered to
the hotel. This includes rejecting incorrect or
inferior products and then contacting the ap-
propriate vendor(s) to rectify issues or deter-
mine another source, if necessary. The
average daily purchase cost could vary from
$3,000 to $50,000, depending on the size of
the property and level of business.
9:00–11:00 A.M. Attend daily meeting with
catering department, chef, stewarding, and
banquet departments to review upcoming
banquet business. Review the room setup
for each scheduled function, menus, and,
most important, the guaranteed attendance
numbers.
12:00 noon. All food and beverage pur-
chases have been received and issued. Inven-
tory is now taken on all items in storage to
determine the next day’s needs. After review-
ing the current levels and calculating banquet
business requirements, select the vendors and
place orders with suppliers, which may range
in number from 1 to 25.
Spend the rest of the afternoon on pur-
Section 8.5 ? The Hotel Purchasing Function 397
chasing nonconsumable food and beverage
items, obtaining bids, and following up on
outstanding purchase orders overdue for
delivery.
The average workweek for the purchas-
ing manager is 50 to 60 hours and may include
weekends. For the most part, normal business
hours are 7:00 A.M. to 6:00 P.M., Monday
through Friday, and 7:00 A.M. to noon on
Saturday.
?
CORPORATE DIRECTION
AND INTERACTION
Corporate direction and control varies with
each hotel company. As a general rule,
though, hotel companies that manage rather
than franchise their properties are more in-
volved in setting policies and procedures. The
minimum standards of the purchasing man-
ager vary by hotel company as well.
The corporate purchasing function is still
viewed with skepticism, although not as much
as in the past. Today, purchasing is nonprofit
and established to benefit managed proper-
ties. The idea of doing more with less applies
at the corporate level as well as to the indi-
vidual properties. The most efficient method
of purchasing systemwide is targeting where
dollars are spent and creating the most cost-
efficient way to purchase high-volume ex-
pense items. Corporate hotel purchasing
offices are currently working to accomplish
this goal. Examples of items that could be
considered for systemwide agreements be-
tween corporate and property purchasing of-
fices are uniforms, flatware, paper goods,
laundry supplies, and food products; these,
too, vary by company.
1327.ch08 12/19/05 9:34 AM Page 397
?
CASE IN POINT
The company I worked for out of college and
until 1995 had its own in-house profit-driven
purchasing company. This approach was not
unique to this company; many of the large ho-
tel companies had their own profit-driven
purchasing arm, subsidiaries that, from a ho-
tel owner’s standpoint, could be considered
double dipping, as the owner was already pay-
ing the hotel management company a man-
agement fee. In the late 1980s and early 1990s,
many hotel owners were looking for a greater
return from their management company. I
had the privilege and opportunities to be in-
volved in the overthrow of the company’s in-
ternal purchasing subsidiary. At that time we
had been sold to foreign investors, and they
were looking at every function and subsidiary
398 Chapter 8 ? Financial Control and Information Management
in the company. With some prodding directly
at the hotel company’s new owner by one of
the senior management, we were able to
demonstrate that the days of double dipping
had to go and that the individual properties
would recognize and support a corporate-
level purchasing function whose only mission
was to generate benefit for the properties. My
boss and I succeeded in accomplishing what
was once thought could never be done due to
politics.
?
CONCLUSION
Hotel purchasing must focus on and utilize
resources in the most efficient manner today.
In the past, a heavy-handed approach was
used to resolve issues with suppliers. As we
PURCHASING SOURCES
The Meat Buyers Guide (1988)
by National Association of Meat Purveyors
8365-B Greensboro Drive
McLean, VA 22102
(703) 827-5754
Fresh Produce Manual (1989)
by the Produce Marketing Association
P.O. Box 6036
Newark, DE 19714-6036
The Food Professional’s Guide
by Irena Chalmers
American Showcase, Inc., New York
Quantity Food Purchasing (2d ed.)
Lendal H. Kotschevar
John Wiley and Sons, Inc., New York
The Encyclopedia of Fish Cookery
by A. J. McClane
Holt, Rinehart, and Winston, New York
The Advanced Seafood Handbook
Seafood Business Magazine
P.O. Box 908
Rockland, Maine 04841
The Packer 1990
Produce Availability & Merchandising
Guide
Vance Publishing
7950 College Blvd.
Overland Park, Kansas 66210
1327.ch08 12/19/05 9:34 AM Page 398
move toward building partnerships with key
vendors today, a teamwork approach pro-
vides an environment to build on the
strengths of both the hotel and the vendor.
This is now called supply-chain management.
Another key component in business to-
day is communication, both internal and ex-
ternal. One of our national suppliers has the
capability to link their customer service for
placing orders with our domestic properties
through a mainframe computer network
Section 8.6 ? Data Mining for Hotel Firms: Use and Limitations 399
linked to each property by PCs. Our hotels
can place orders directly with the supplier
through the network system and receive im-
mediate confirmation from the supplier. This
nationwide system allows both our properties
and the corporate office to access pricing,
availability, and consumption.
To succeed, we must resist the confines of
our traditional paradigms. We must continu-
ally examine the ways we conduct business
and strive for new and innovative approaches.
8.6 DATA MI NI NG FOR HOTEL FI RMS:
USE AND L I MI TATI ONS
Vincent P. Magnini, Earl D. Honeycutt Jr., and Sharon K. Hodge
In the hotel industry, knowing your guests—
where they are from, how much they spend,
and when and on what they spend it—can
help you formulate marketing strategies and
maximize profits. Fueled by the proliferation
of centralized reservation and property-
management systems, hotel corporations ac-
cumulate large amounts of consumer data.
This information can be organized and inte-
grated in databases that can then be tapped to
guide marketing decisions. However, identify-
ing important variables and relationships lo-
cated in these consumer-information systems
can be a daunting task. The relatively new
process known as data mining can be instru-
mental in overcoming such obstacles. [For a
discussion of the use of compiled data, see
Robert K. Griffin, “Data Warehousing: The
Latest Strategic Weapon for the Lodging In-
dustry?” Cornell Hotel and Restaurant Ad-
ministration Quarterly 39, no. 4 (August 1998),
pp. 28–35. For a discussion of the use of guest-
history data, see Paula A. Francese and Leo
M. Renaghan, “Database Marketing: Building
Customer Profiles.” Cornell Hotel and Restau-
rant Administration Quarterly 31, no. 1 (May
1990), pp. 60–63.] From stores of information,
data mining technology extracts meaningful
patterns and builds predictive customer-
behavior models that aid in decision making
(Kamrani, Rong, and Gonzalez, 2001,
361–377).
Data mining is a largely automated
process that uses statistical analyses to sift
through massive data sets to detect useful,
non-obvious, and previously unknown pat-
terns or data trends (Frawley, Piatetsky-
Shapiro, and Matheus, 1992, 213–228). The
emphasis is on the computer-based explo-
ration of previously uncharted relationships
(i.e., using “machine learning” methods that
typically require only limited human involve-
ment) (Peacock, 1998a). Without data mining,
valuable marketing insights about customers’
1327.ch08 12/19/05 9:34 AM Page 399
characteristics and purchase patterns may re-
main largely untapped (Shaw, Subramaniam,
Tan, and Welge, 2001, 127–137). By uncover-
ing such previously unknown relationships,
managers have the potential to develop a win-
ning marketing strategy that increases their
hotel’s bottom line.
Hotel managers understand the impor-
tance of adapting to the changing business en-
vironment not only to remain competitive,
but merely to survive. As a result, technology
has become a large and growing expense for
many hotel corporations. Under such a tech-
nology framework, data mining is a valuable
competitive tool being adopted by hotel cor-
porations in an effort to create customer
value. However, given the importance and
complexity of data mining, senior hotel man-
agers report a low level of understanding
about data mining’s capabilities, how it works,
and what value this technology contributes
(Dev and Olsen, 2000, 41–47). The purpose of
this paper is to educate hotel managers about
the benefits and application of data mining on
the properties they oversee.
?
DATA MINING VERSUS
STATISTICAL MODELING
Data mining differs from traditional statisti-
cal modeling in a variety of ways. Data mining
focuses on machine-driven model building,
while statistical modeling stresses theory-
driven hypothesis testing. Data mining tech-
niques build models, whereas classical
statistical tools are supervised by a trained re-
searcher who possesses a preconceived no-
tion of what to examine. With statistical a
priori analysis, relevant associations may be
overlooked. By building dependency hy-
400 Chapter 8 ? Financial Control and Information Management
potheses instead of merely verifying them,
though, data mining techniques reveal impor-
tant links. For example, Marriott Vacation
Club International reduced the volume of di-
rect mail it needed to reach target sales levels
by correlating response rates to specific vaca-
tion offerings and specific customer charac-
teristics (Peacock, 1998a).
Data mining also offers enormous gains
in terms of performance, speed of use, and
user friendliness (Le Bret, 1997). While data
miners must understand statistical principles,
highly specialized statistical knowledge is not
necessary to study, understand, and improve
decision-making processes. Data mining helps
managers to spot trends more quickly.
Because researchers may ignore the as-
sumptions and limitations of a theoretical
model, traditional statistical analyses in
customer-satisfaction research are often bi-
ased. Satisfaction research includes measures
of the importance that customers place on
product and services attributes. Typically,
these measures are highly correlated, which
can dramatically bias the statistical values
that determine attributes’ importance rank-
ings. Also, statistical analyses usually assume
that relationships between independent and
dependent variables are linear—which is of-
ten not the case. Therefore, violation of these
assumptions can result in biased and mislead-
ing statistical outcomes. Data mining tech-
niques (e.g., neural networks) overcome these
limitations and outperform traditional statis-
tical analyses in cases where such assump-
tions do not apply (Le Bret, 1997).
Another considerable advantage over tra-
ditional statistical models is data mining’s abil-
ity to easily handle large and complex datasets
(Peacock, 1998a). Data mining techniques are
not hampered by large numbers of predictive
variables, and that feature makes data mining
1327.ch08 12/19/05 9:34 AM Page 400
useful for selecting variables, that is, identify-
ing those within a set that are most relevant.
The ability to handle large numbers of vari-
ables also makes data mining more realistic
than statistical models in representing the
complexity of a typical business environment.
While many analytical techniques can be
classified as data mining tools, opinion has not
coalesced regarding exactly which techniques
should be considered part of the data mining
Section 8.6 ? Data Mining for Hotel Firms: Use and Limitations 401
toolkit. The tools listed in the sidebar “A Data
Mining Toolkit” almost certainly belong,
however.
Looking at that toolkit, decision trees, as-
sociation rules, case-based learning tools, neu-
ral networks, and genetic algorithms are
categorized as machine-learning methods,
while the others can be thought of as
machine-assisted aids to support human
learning (Peacock, 1998a).
A DATA MINING TOOLKIT
• Association rules: Information from
customer-purchase histories is used to for-
mulate probabilistic rules for subsequent
purchases.
• Case-based reasoning: Sets of attrib-
utes from new problems are compared with
attribute sets from previously encountered
problems (called cases) to find one or more
boilerplate examples that provided good
outcomes or solutions.
• Decision trees: Automatically con-
structed from data, these yield a sequence of
step-wise rules; good for identifying impor-
tant predictor variables, non-linear relation-
ships, and interactions among variables.
• Descriptive statistics: Averages, varia-
tion, counts, percentages, cross-tabs, simple
correlation; used at the beginning of the
data mining process to depict structure and
identify potential problems in data.
• Genetic algorithms: Use procedures
modeled on evolutionary biology (e.g., se-
lection, mutation, survival of the fittest) to
solve prediction and classification problems
or develop sets of decision rules.
• Neural networks: Applications that
mimic the processes of the human brain; ca-
pable of learning from examples (large
training sets of data) to discover patterns in
data; can combine information from many
predictors and work well even with corre-
lated variables, non-linear relationships, and
missing data.
• Query tools: Provide summary meas-
ures such as counts, totals, and averages.
• Regression-type models: Ordinary
least-squares regression, logistic regression,
discriminant analysis; used mostly for confir-
mation of models built by “machine-learn-
ing” techniques.
• Visualization tools: Histograms, box
plots, scatter diagrams; useful for condensing
large amounts of data into a concise, com-
prehensible picture.—V.P.M., E.D.H., and
S.K.H.
1327.ch08 12/19/05 9:34 AM Page 401
With data mining techniques, levels of a
priori specification can vary. In some cases,
certain independent variables and dependent
variables may be specified for examination,
while predictor variables in other cases may
be uncovered only by the data mining tool.
The point remains, though, that in comparison
with traditional statistical methods, data min-
ing techniques invariably are more data
driven than they are user driven.
We have observed that some hotel corpo-
rations are attempting to harness the power
of information by investing in data mining
technology that exploits consumer informa-
tion. Hilton Corporation uses E.piphany E.4
software at its Beverly Hills headquarters, for
instance (Stevens, 2001a, 35–38), and Star-
wood Corporation recently invested in Unica
Corp’s Affinium software (Tischelle and
Maselli, 2001, 31–32). Such data mining tech-
nology allows hotel corporations to predict
consumer-behavior trends, which are poten-
tially useful for marketing applications. For
example, Starwood’s marketing staff can run
reports and analysis on customer and occu-
pancy data stored in a data warehouse that
combines customer and transaction informa-
tion from all company properties. Such infor-
402 Chapter 8 ? Financial Control and Information Management
mation indicates where customers who visit a
specific hotel live. If the data reveal that the
Sheraton Fisherman’s Wharf in San Francisco
experiences a surge in visitors from Fort
Lauderdale in April, for instance, hotel mar-
keters can increase promotional efforts in
Fort Lauderdale during the late winter
months (Tischelle and Maselli, 2001, 31–32).
The sidebar “Examples of the Uses of Data
Mining Information in Hotel Marketing” lists
examples of how information gleaned from
data mining can be used in a hotel corpora-
tion’s marketing activities.
?
HARRAH’S DATA MINING
SUCCESS STORY
In 1997 Harrah’s hotels and casinos intro-
duced a trademarked loyalty-card program,
“Total Rewards,” which tracks customers’
purchasing activities and provides rewards
that encourage spending at Harrah’s proper-
ties. Rather than build glitzy properties with
eye-popping attractions, Harrah’s pursued a
customer-service-oriented strategy centered
around data mining techniques. Harrah’s
used an information system called WINet to
EXAMPLES OF THE USES OF DATA MINING INFORMATION IN
HOTEL MARKETING
• Create direct-mail campaigns.
• Plan seasonal promotions.
• Plan the timing and placement of ad
campaigns.
• Create personalized advertisements.
• Define which market segments are
growing most rapidly.
• Determine the number of rooms to
reserve for wholesale customers and busi-
ness travelers.
1327.ch08 12/19/05 9:34 AM Page 402
link all its properties, allowing the firm to
collect and share customer information
company wide. The process effectively
changed the corporate culture from an every-
property-for-itself mentality to a collabora-
tive, customer-focused enterprise (Levinson,
2001).
The WINet system connects and consoli-
dates customer information from all of the
company’s transaction, slot-machine, hotel-
management, and reservation systems. Key
pieces of information—gender, age, place of
residence, and types of casino games played—
help predict which customers are most likely
to become frequent users. Based on this in-
formation, Harrah’s designs marketing strate-
gies to retain those customers. Customers’
purchasing and gaming patterns are tracked,
too, so that the company can target its cus-
tomers with the most appropriate incentives.
For example, customers who reside outside
the local area receive complimentary hotel
rooms or transportation, while drive-in cus-
tomers receive food, entertainment, or cash
incentives (Nickell, 2002).
Data mining techniques help to reveal
data patterns and relationships that can be
used to develop strong models for predicting
the potential value of each customer. Given
that retaining a customer is less costly than at-
tracting a new one, building strong relation-
ships with valued existing customers can
boost profits. Having information regarding
such things as the customer’s birthday, an-
niversary, and favorite foods and drinks al-
lows a hotel to provide excellent, tailored
customer service that cements brand loyalty.
Harrah’s discovered that the 30 percent of its
customers who spent between $100 and $500
per visit accounted for 80 percent of company
revenues and generated nearly 100 percent of
Section 8.6 ? Data Mining for Hotel Firms: Use and Limitations 403
profits. In the first two years of its rewards
program, Harrah’s saw a $100-million in-
crease in revenue from customers who visited
more than one property (Nickell, 2002). Cur-
rently, Harrah’s ranks first in the industry in
profit growth (Levinson, 2001).
Because the WINet system can consis-
tently identify which customers will be most
valuable over the long term, data mining is
also useful for determining when to avoid of-
fering incentives to customers who are not lu-
crative. Harrah’s estimates that it has saved
some $20 million by withdrawing incentives
from customers who are not likely to return
(Levinson, 2001).
Despite Harrah’s success, some remain
skeptical of data mining’s customer benefits
and long-term financial payoffs. As an exam-
ple, Susan Dobscha, co-author of “Preventing
the Premature Death of Relationship Mar-
keting,” advises hotels that giant central data-
bases “are not where customers want a
relationship forged. A customer would proba-
bly prefer a lower price over, say, having their
beverage choice anticipated” (Mining Hotel
Data, 1998).
Another important caveat regarding data
mining is that any relationship discovered
must be valid to benefit a company’s per-
formance. When British Columbia Telecom
tried to reward 100 of its best customers
by inviting them to a Vancouver Grizzlies
basketball game, for instance, it selected
customers from the database comprising fre-
quent 900-number users. After sending invita-
tions to the printer, the marketing staff
realized that those 900-number users in-
cluded a large number of sex-line enthusiasts.
The company avoided a serious gaffe by re-
fining the criteria to create a list of truly loyal
guests (Press, 1998, 58–61).
1327.ch08 12/19/05 9:34 AM Page 403
?
DATA MINING
APPLICATIONS FOR THE
HOTEL INDUSTRY
The tasks performed by data mining can be
grouped into the following five categories.
1. Classification arranges customers into
pre-defined segments that allow the size
and structure of market groups to be
monitored. Also, predictive models can be
built to classify activities. An illustration
of such a model is one that predicts which
segment’s usage rate will experience the
largest decrease when a particular pro-
motion expires. Classification uses the in-
formation contained in sets of predictor
variables, such as demographic and
lifestyle data, to assign customers to
segments.
2. Clustering groups customers based on do-
main knowledge and the database, but
does not rely on predetermined group
definitions. This function is beneficial be-
cause it aids hoteliers in understanding
who are their customers. For example,
clustering may reveal a subgroup within
a predetermined segment with homo-
genous purchasing behavior (e.g., a
subgroup of holiday shoppers within the
transient segment) that can be targeted
effectively through a specific ad cam-
paign. (The idea is that the members of
the subgroup will increase their number
of stays or become more loyal.) On the
other hand, clustering may indicate that
previously determined segments are not
parsimonious and should be consolidated
to increase advertising efficiency. Infor-
mation such as demographic characteris-
tics, lifestyle descriptors, and actual
404 Chapter 8 ? Financial Control and Information Management
product purchases are typically used in
clustering.
3. Deviation detection uncovers data anom-
alies, such as a sudden increase in pur-
chases by a customer. Information of this
type can prove useful if a hotel corporation
wants to thank a guest for her or his recent
increase in spending or offer a promotion
in appreciation. Marketing managers may
also attempt to draw correlations between
surges in deviations with uncontrollable
business-environment factors that are not
represented in the database (e.g., a sharp
increase in gasoline prices).
4. Association entails the detection of con-
nections between records, driven by asso-
ciation and sequence discovery. For
example, a possible detected association
may be that a particular segment’s
average length of stay increases after a
specific advertising campaign. Another
association task could be employed in an
effort to determine why a specific promo-
tion was successful in one market, but in-
effective elsewhere. Specific information
regarding customer-purchase histories is
necessary to formulate probabilistic rules
pertaining to subsequent purchases.
5. Forecasting predicts the future value of
continuous variables based on patterns
and trends within the data. For instance,
the forecasting function can be used to
predict the future size of market seg-
ments. With forecasting one can also use
data trends to project which hotel ameni-
ties are of growing importance to con-
sumers and will be key drivers of the
consumer’s future perception of value.
In the hotel industry, the most common
sources of data are CRSs and PMSs. Some ho-
tel corporations also use information that re-
1327.ch08 12/19/05 9:34 AM Page 404
sides in guest-loyalty-program databases.
Hilton, for instance, analyzes data contained
within its trademarked Hilton Honors data-
base (Stevens, 2001b, 29–30). Another poten-
tially important source of data is the
information provided by guest-satisfaction
surveys.
?
GUIDELINES FOR
EFFECTIVE DATA MINING
When properly employed, data mining is a
powerful and valuable marketing tool. How-
ever, simply investing in data mining technol-
ogy may not guarantee success. As presented
below, seven guidelines influence the effec-
tive management of data mining technology.
Guideline #1: Match your IT priorities
with an appropriate provider. There is high de-
mand for and low supply of data mining ex-
pertise as more companies realize the
potential value of the information residing
within their databases. To capitalize on this
demand, a number of second-tier research
firms now provide data mining services
(Brandel, 2001, 67–70). However, providers
offer a wide range of skill levels. The most-
skilled providers can turn data into useful in-
formation. Companies that initially set clear
priorities have a greater chance of reaping
maximum benefits from data mining projects
than do firms that are unsure of their goals
(Stevens, 2001). Clear priorities include goals
about what the firm would like to achieve
through data mining and when it will be
achieved. Without goals and objectives the
hotel corporation is uncertain about what it is
shopping for when seeking a data miner. It is
also important to communicate these goals to
prospective providers. When selecting a
provider, ask the following six questions:
Section 8.6 ? Data Mining for Hotel Firms: Use and Limitations 405
• Does the provider have experience setting
up predictive models with marketing ap-
plications? Data mining has applications
other than marketing. Data mining’s abil-
ity to detect patterns in data is used
extensively in criminal justice and anti-
terrorism efforts to anticipate illegal ac-
tivity, for instance. Wall Street also
employs data mining to predict moves in
the financial markets. Large global corpo-
rations use data mining to gain efficien-
cies in purchasing and production
throughout their networks. Therefore, it is
not enough to have a data mining con-
sultant, but one must find a provider that
has experience in marketing. Building
models to predict consumer behavior is a
form of data mining that requires specific
expertise. For example, a data miner with
marketing-applications experience would
know to replace a zip code with resident
characteristics, such as median income
(Brandel, 2001).
• Does the provider have experience in creat-
ing models within the hospitality industry?
Marketing applications of data mining are
employed across diverse industries. Build-
ing predictive models for a grocery store, a
furniture chain, an airline, or a hotel is dif-
ferent in each case. It is beneficial to find a
provider that has experience in setting up
models in the hotel industry. Such a
provider would more clearly understand
hotel-guest-segmentation processes, for
example.
• Is the provider reputable? Because many
second-tier companies provide mining
services, it is important to check the cre-
dentials and reputation of the vendor.
• Does the provider offer the latest technol-
ogy that is appropriate? Because of the
wide range of products available, it pays
1327.ch08 12/19/05 9:34 AM Page 405
to do your homework. It is crucial to in-
vest in the latest appropriate technology
because it is extremely expensive and
time consuming to switch products after
one is installed—in no small part because
switching products requires retraining the
IT and marketing staff.
• Does the provider offer a product that has
visual-exploration capabilities? Cutting-
edge data mining software has visual-
exploration capabilities, which means that
data patterns can be viewed as three-
dimensional objects that can be rotated or
zoomed for detailed analysis. In addition,
pixel-oriented technology assigns colors
to data values so that patterns and trends
can be examined. Visual exploration is an
immense aid to managers and marketers
because it often serves as a preliminary
tool in selecting the appropriate variables
for data mining tasks (Shaw et al., 2001).
• Is the provider willing to provide a custom
contract? Contract negotiations are a crit-
ical step in initiating a successful data
mining program. The contract should be
as precise as possible and should abstain
from nebulous clauses discussing partner-
ship (Lacity and Hirschheim, 1995).
Moreover, the vendor’s standard contract
should not be used, because the standard
contract does not customarily include
specific performance standards or penalty
clauses if the vendor falls short of re-
quirements. Worse, payment schedules in
standard contracts may favor the vendor
(Lacity and Hirschheim, 1995). A custom
contract should be written to include
service-level measures and a termination
clause. The buyer should be particularly
suspicious of so-called change-of-charac-
ter clauses, which state that the buyer may
406 Chapter 8 ? Financial Control and Information Management
have to pay for any changes in “function-
ality” throughout the life of the contract.
Change-of-character clauses have caused
many disputes because of the ambiguous
nature of the term “functionality” (Lacity
and Hirschheim, 1995).
Guideline #2: Build segmentation and pre-
dictive models. Building appropriate segmen-
tation and predictive models necessitates an
extensive knowledge of the hotel business.
The sidebar “Examples of Hotel-Guest Seg-
ments” provides examples of some of the
many ways that hotel guests can be seg-
mented (Kotler, Bowen, and Makens, 1999).
Transient hotels, convention hotels, extended-
stay hotels, and resort properties all segment
guests differently. Furthermore, guest seg-
mentation is distinctive for most hotel
properties. Hilton’s and Marriott’s property-
management systems segment and code mar-
kets at the property level, for instance, since
each location has its own particular segments.
A given property may serve a set of corporate
clients, a group of government clients, and so-
cial clients (e.g., weddings and reunions). The
segment categories contained in the sidebar
can be strung into a large set of combinations.
Furthermore, a guest could potentially fit into
several categories, which poses a challenge for
current data mining techniques (Shaw et al.,
2001). As a consequence, finding a provider
that has experience creating models in the ho-
tel industry is a major benefit. Additionally,
even if the provider has hotel experience, it is
critical that IT and marketing managers work
closely with the provider to segment the mar-
ket and build predictive data mining models.
Once a data mining model is built, confir-
matory testing must be conducted to assess its
predictive accuracy. For instance, a model de-
signed to predict who will respond to a pro-
1327.ch08 12/19/05 9:34 AM Page 406
motion should be based on a prior offering in
which it is known who did or did not respond.
After the model is constructed, a “holdout”
group from a previous promotion can be ana-
lyzed to verify reliability. If the holdout pre-
dictions do not replicate the results of the past
promotion, then the model may not be signif-
icantly predictive. To further enhance accu-
racy, a score can be assigned to the model
based on the level of agreement between the
holdout group and the entire group. Subse-
quent refined models can then be tested and
scored. Another standard approach to model
validation involves drawing two random sam-
ples from the data. The first sample is used as
a calibration sample to build the model, while
the second is used as a holdout sample to
evaluate the model built from the calibration
sample (Peacock, 1998b, 15–25). The valida-
tion process requires a knowledgeable IT
professional, because when data subtleties
Section 8.6 ? Data Mining for Hotel Firms: Use and Limitations 407
that arise only in the sample are used to build
the model, the model may be highly predic-
tive of the sample but biased with regard to
the population (Shaw et al., 2001). This is
called overfitting the data. To avoid creating a
biased model, the IT professional must be
knowledgeable of the analytical procedure
and possess a basic understanding of the hotel
segment and promotional scenario from
which the sample was extracted.
Guideline #3: Collect data to support the
models. Accurate data collection is critical for
successful data mining. The major obstacle to
effective data mining, however, is inadequate
data gathering and input (Smith, 2001,
36–37). Data problems lead to a decrease in
the value of any data warehouse, in addition
to diminishing the value of proposed models
(Shaw et al., 2001). Problems with data are
related to one or more of at least three dif-
ferent shortcomings.
EXAMPLES OF HOTEL-GUEST SEGMENTS
Geographic
Nations
States
Counties
Cities
Demographic
Age or life-cycle stage
Gender
Income
Psychographic
Social class
Life-style
Personality
Behavior
Occasion of purchase decision
Occasion of use
Benefits sought
User status (e.g., potential, former, first
time)
Usage rate
Loyalty status
Buyer-readiness stage
Source: P. Kotler, J. Bowen, and J. Makens, Mar-
keting for Hospitality and Tourism, 2nd ed. (Up-
per Saddle River, NJ: Prentice-Hall, 1999).
1327.ch08 12/19/05 9:34 AM Page 407
The first possible difficulty involves miss-
ing or inaccurate data. For example, when oc-
cupation information is available for only 15
percent of a data set, it is difficult to create a
profile of customer occupations. Then again,
it’s a problem if the data file contains occupa-
tion information for 90 percent of the popula-
tion, but the accuracy of the information is
poor. Hotel corporations can reduce inaccu-
racy of this kind by asking guests for their cur-
rent occupation.
A second obstacle is poorly coded data.
Databases must have standards regarding
data formats, text case, and redundant codes
(Stevens, 2001b). Although some software au-
tomatically formats the data properly, most
do not. Problems then occur when data-input
sources are added over an extended time and
no one has ensured that the data entering the
warehouse is properly formatted. This would
occur, for instance, if, when original data min-
ing technology was installed, predictions were
made based on the reservations system and
the property-management system, but then a
subsequent decision was made to input data
from guest-satisfaction surveys. Problems
would transpire when additional data inputs
are not standard or are coded improperly. For
example, some models require continuous
and ordinal data, while others demand cate-
gorical data fields or binary constructs (Sira-
gusa, 2001).
A third potential problem involves using
homonyms (that is, putting the same label on
two or more different data elements) and syn-
onyms (that is, using two different labels for
the same data element) (Chopoorian et al.,
2001, 45–51). While it may seem tautological
to advise precluding this occurrence, the most
common culprit is a new user on the system.
It is common for hotel and IT professionals
to change companies from time to time.
408 Chapter 8 ? Financial Control and Information Management
Turnover causes coding problems when new
employees bring their old labels and fail to
use their new employer’s framework.
Guideline #4: Select the appropriate tools
for analysis and prediction. Numerous analyt-
ical tools can be employed to transform data
into useful information. Some of the less-
common analytical tools used by data mining
software include regression models, factor
analysis, cluster analysis, structural equation
modeling, and self-organizing maps. On the
other hand, the most common statistical
methods used in data mining applications are
decision trees, neural networks, and genetic
algorithms. As previously mentioned, a deci-
sion tree is a rule-based model constructed of
nodes (decision points) and branches (con-
nections between nodes) that reach numer-
ous outcomes based on traveling through two
or more nodes. A neural network is a nonlin-
ear predictive model that resembles a biolog-
ical neural system and has the ability to learn
through training. Last, a genetic algorithm is a
learning-based model founded on the concept
of evolution. That is, partial solutions to a sce-
nario compete with each other, and then the
best solutions are used for further problem
solving (Hair et al., 1998).
Most of the statistical methods employ
techniques that achieve a desired outcome.
Likewise, each methodology has strengths
and weaknesses, and each is appropriate for a
specific scenario. Therefore, the most effec-
tive results emanate from data miners who
have the expertise to select the most appro-
priate statistical method for a given scenario
and the hotel’s intended goals (Siragusa,
2001). For instance, a positive attribute of ge-
netic algorithms is that they converge on an
optimal solution, but the method is most ap-
plicable to large databases since arriving at a
valid outcome may require many generations
1327.ch08 12/19/05 9:34 AM Page 408
of competing solutions. Likewise, there are
also pros and cons associated with neural net-
works. They are beneficial in analyzing com-
plex data because of their ability to discover
unusual trends, but monitoring accuracy is
difficult because many intricate relationships
are handled invisibly by the methodology
(Hair et al., 1998).
Guideline #5: Demand timely output.
Timeliness is critical in making marketing de-
cisions. The length of time required to pro-
duce output varies widely among data mining
packages. Before Hilton Corporation up-
graded its data mining technology, for in-
stance, the reports that managers requested
from IT would take three to six weeks to ar-
rive. “By the time they’d get the report, it was
often too late to act on it,” said Joanne Flinn,
vice president of leisure marketing. With the
new technology, managers receive reports in
30 minutes or less (Stevens, 2001b).
Guideline #6: Refine the process. By its
nature, data mining involves knowledge that
evolves over time. Never complete, data
mining involves a continuous cycle of inputs
and outputs based on models that must be
modified and refined as conditions change in
the competitive environment. Flexibility is
needed to adapt the established models and
processes to changes that occur (Cline, 2000).
Refinement consists of three actions:
1. Chart progress toward initial goals. Use
the forecasting function of data mining to
regularly set new goals.
2. Compare and contrast the characteristics
of the clustering output with the attrib-
utes of the classification output. When
necessary, modify predictive models
based on changes in the size or structure
of customers’ market segments. For in-
stance, notable variances in purchase pat-
Section 8.6 ? Data Mining for Hotel Firms: Use and Limitations 409
terns in one segment and similarities in
purchase patterns among other segments
may lead to refinement of the segment,
usually by adding a new criterion or di-
mension. This action can result in the dis-
covery of previously undetected segments
with homogenous characteristics.
3. In addition to clustering and classification
features of data mining, also use the asso-
ciations and deviation-detection func-
tions to assess the effects of promotions.
Maintain a promotional history table in
the database to use as a learning tool for
future campaigns and models (Siragusa,
2001).
Guideline #7: Hire a well-trained staff and
a knowledgeable IT manager. Information
technology was initially viewed by the hotel
industry as a back-office function that sup-
ports the finance and accounting areas (Cline,
2000). The industry has advanced far beyond
this view during the past decade. In two ses-
sions sponsored by the International Hotel
and Restaurant Association (IH&RA), one in
Singapore in 1997 and the second in Nice,
France, in 1998, hotel-industry leaders pon-
dered the role of technology. Among the con-
clusions reached were: “Going forward,
technology will be the most competitive
weapon for any hospitality company. If hospi-
tality organizations want to compete success-
fully, they must do so by using technology to
drive value to both the customer and to the
firm” (Olsen and Connolly, 1999, 29). How-
ever, implementing such recommendations at
the property level can be a difficult task.
Training is a key to effective implementa-
tion of data mining systems. Productive data
mining requires two-fold proficiency among
both IT managers and those who interpret the
outputs.
1327.ch08 12/19/05 9:34 AM Page 409
The hotel’s IT managers must also be pro-
ficient with the data mining system because
the system requires continuous refinement.
Just as market segments, sources of data, and
property goals change, so must predictive
models and analyses be modified and refined.
It is an unsound policy for the IT staff to be
totally dependent on the provider’s recom-
mendations for refinement and alterations.
Instead, the IT staff and data mining provider
should work together, with their common
goal being to maximize the technology’s effec-
tiveness. The most effective data mining proj-
ects occur when IT managers and providers
collaborate and share project information.
Second, adequate training must be pro-
vided to all potential users of data mining
outputs. At the corporate level this includes
the marketing staff, operations managers, and
those developing new properties. Users at the
property level include general managers, di-
rectors of sales and marketing, and the sales
staff. Users must be instructed about the
available reports and how to properly inter-
pret the information. Since the information is
used for decision making, it is important for
users to understand the boundaries and limi-
tations of the information.
?
BOUNDARIES AND
LIMITATIONS
Technology must serve managers’ purposes,
rather than dictate processes (Chudnow, 2001,
28–29). Along that line, data mining cannot
capture all the information relating to what
drives consumer behavior. Data mining is
simply one of a number of research methods
that help predict travelers’ demand trends.
Therefore, data mining technology should be
used in conjunction with other forecasting
and research techniques. With this in mind,
410 Chapter 8 ? Financial Control and Information Management
managers should be aware of the following
four limitations of data mining technology.
Limitation #1: Data mining analyzes only
data collected from existing customers. Data
mining software generates information by an-
alyzing data patterns derived from the com-
pany’s reservation, property-management,
and guest-loyalty-program systems. Patterns
thus detected can help predict the actions of
current guests in the system and of those with
similar needs and wants. Data mining tech-
nology does not, however, provide informa-
tion about market segments not found in the
company’s databases. Moreover, a market
segment that is currently small but is on the
verge of experiencing substantial growth may
not be detected by data mining.
Another blind spot is the data in com-
petitors’ reservation systems. A key question
in planning a marketing strategy in the hotel
industry is: Who are my competitors’ guests
and where are they coming from? Data min-
ing technology is unable to answer those
questions.
Limitation #2: Databases used in the min-
ing process are often hotel-brand specific. Just
as data mining cannot analyze competitors’
markets, it also creates prediction models that
are brand specific. Thus, corporations that op-
erate multiple brands often must create a data
warehouse and conduct data mining for each
brand. This is also true for the franchisees that
may have a portfolio comprising, say, six Hol-
iday Inns and four Marriotts.
Brand-specific marketing information is
useful for the brand’s corporate office to plan
marketing programs, which is largely what
franchisees purchase. Conversely, brand-
specific marketing information may not be
helpful if the hotel corporation that fran-
chises numerous brands wants to predict cus-
tomer demand based on a multiple-brand
portfolio.
1327.ch08 12/19/05 9:34 AM Page 410
Limitation #3: Data mining may not seg-
ment travelers by psychographic traits. Seg-
menting consumers based on psychographic
traits, such as personality and lifestyle, can be
useful in the hotel industry. This is because
psychology and emotion play significant roles
in the hotel guest’s decision process. That is, as
seen in the sidebar “Psychological Determi-
nants of Demand,” a traveler may select a
destination for a variety of psychological rea-
sons (Kotler et al., 1999). One limitation of
data mining is that common system inputs do
not account for psychological factors that in-
fluence a traveler’s purchase decision.
A time-tested tool used in understanding
hospitality demand trends is Stanley Plog’s
psychographic scale (Plog, 2001, 13–24).
Many key drivers of demand identified by
Plog, such as personality distribution among
travelers (e.g., dependables, venturers, and
centrics), are not common inputs into data
mining systems. Hotels can acquire this infor-
mation from customer surveys.
Limitation #4: Data mining does not pro-
vide information about consumers’ thought
processes. It is important to engage con-
sumers in research to better understand their
thinking. Information generated by data min-
ing does not account for the fact that approx-
imately 80 percent of human communication
is nonverbal (Zaltman, 1997, 424–437). Inter-
Section 8.6 ? Data Mining for Hotel Firms: Use and Limitations 411
views and focus groups are both useful meth-
ods for gathering information about the
needs and wants of hotel guests. The insight
gained from those techniques is difficult to
capture in the statistical data mining outputs.
That is why it is important to step back and
ask what the hotel guest’s inherent needs are
and what the product is really about. This in-
volves conducting in-depth conversations
with guests. At times, improved insight and
perspective are gained from talking with
three customers for two hours rather than by
surveying a thousand customers (Ohmae,
1999).
?
CONCLUSION AND
MANAGERIAL
IMPLICATIONS
Data mining technology can be a useful tool
for hotel corporations that want to under-
stand and predict guest behavior. Based on
information derived from data mining, hotels
can make well-informed marketing deci-
sions—including who should be contacted, to
whom to offer incentives (or not), and what
type of relationship to establish.
Data mining is currently used by a num-
ber of industries, including hotels, restaurants,
PSYCHOLOGICAL DETERMINANTS OF DEMAND
Education
Escape
Family bonding
Prestige
Relaxation
Self-discovery
Sexual opportunity
Social interaction
Source: P. Kotler, J. Bowen, and J. Makens, Mar-
keting for Hospitality and Tourism, 2nd ed. (Up-
per Saddle River, NJ: Prentice-Hall, 1999).
1327.ch08 12/19/05 9:34 AM Page 411
auto manufacturers, movie-rental chains, and
coffee purveyors. Firms adopt data mining
to understand the data captured by scanner
terminals, customer-survey responses, reser-
vation records, and property-management
transactions. This information can be melded
into a single data set that is mined for nuggets
of information by data mining experts who
are familiar with the hotel industry.
However, data mining is no guarantee of
marketing success. Hotels must first ensure
that existing data are managed—and that re-
quires investments in hardware and software
systems, data mining programs, communica-
tions equipment, and skilled personnel. Affil-
iated properties must also understand that
data mining can increase business and profits
for the entire company and should not be
viewed as a threat to one location. As seen in
the Harrah’s example, implementing a data
412 Chapter 8 ? Financial Control and Information Management
mining system is a complex and time-
consuming process.
We advise hospitality managers to adopt
a data mining system and strategy if they have
not done so. Guidelines presented in this pa-
per—including how to select and manage the
data mining provider—offer guidance for im-
plementing a viable data mining strategy.
Since data mining is in its initial stages in the
hotel industry, early adopters may be able to
secure a faster return on investment than will
property managers who lag in their decisions.
Hotel corporations must also share data
among properties and divisions to gain a
richer and broader knowledge of the current
customer base. Management must ensure that
hotel employees use the data-management
system to interact with customers even
though it is more time consuming than a
transactional approach.
R E F E R E N C E S
Borchgrevink, C. P., and R.S. Schmidgall. 1995.
“Budgeting Practices of U.S. Lodging Firms.”
Bottomline 10(5):13–17.
Brandel, M. 2001. “Spinning Data into Gold.”
Computerworld (May) 26:67–70.
Chamberlain, D. 1991. “A Written Budget Is a
Valuable Tool for Tracking Your Meeting Dol-
lars.” Successful Meetings 40(6):89–90.
Chopoorian, J., R. Witherell, O. Khalil, and
M. Ahmed. 2001. “Mind Your Business by
Mining Your Data.” S.A.M. Advanced Man-
agement Journal 66(2):45–51.
Chudnow, C. 2001. “Knowledge Management
Tools.” Computer Technology Review 21(11):
28–29.
Cichy, Ronald F., and Raymond S. Schmidgall.
1996. “Leadership Qualities of Financial Exec-
utives.” Cornell Hotel and Restaurant Admin-
istration Quarterly 37(2):56–62.
Cline, Roger. 2000. “Hospitality 2000: The Capi-
tal.” Lodging Hospitality 56(7):20–23.
Coltman, M.M. 1994. Hospitality Management Ac-
counting, 5th ed. New York: Van Nostrand
Reinhold.
Damitio, James W., and Raymond S. Schmidgall.
1996. “A Profile of the Lodging Financial
Executive.” Bottom Line (September):
9–11.
DeMyer, J.P., and D. Wang-Kline. 1990. “What’s On
the Books? A Practical Guide to Forecasting
and Budgeting.” Hotel and Resort Industry
13(1):64.
Dev, C.S., and M.D. Olsen. 2000. “Marketing Chal-
lenges for the Next Decade.” Cornell Hotel
and Restaurant Administration Quarterly
41(1):41–47.
DeVeau, Patricia M., and Linsley T. DeVeau. 1988.
“A Profile of the CHAE: Gaining Strength in
1327.ch08 12/19/05 9:34 AM Page 412
Numbers.” Bottomline (October/November):
18–19.
Frawley, W., C. Piatetsky-Shapiro, and C. Matheus.
1992. “Knowledge Discovery in Databases:
An Overview.” AI Magazine (Fall):213–228.
Geller, A. Neal, and Raymond S. Schmidgall. 1984.
“The Hotel Controller: More Than a Book-
keeper.” Cornell Hotel and Restaurant Admin-
istration Quarterly 25(2):16–22.
Geller, A. Neal, Charles L. Ilvento, and Raymond
S. Schmidgall. 1990. “The Hotel Controller
Revisited.” Cornell Hotel and Restaurant Ad-
ministration Quarterly 31(3):91–97.
Griffin, Robert K. 1998. “Data Warehousing.” Cor-
nell Hotel and Restaurant Administration
Quarterly 39(4):28–35.
Hair, J., R. Anderson, R. Tatham, and W. Black.
1998. Multivariate Data Analysis, 5th ed. Up-
per Saddle River, NJ: Prentice-Hall.
Kamrani, A., W. Rong, and R. Gonzalez. 2001. “A
Genetic Algorithm Methodology for Data
Mining and Intelligent Knowledge Acquisi-
tion.” Computers and Industrial Engineering
40(4):361–377.
Karch, R. 1992. “Streamlining Your Hotel Cost.”
Hotel and Resort Industry 15(11):88–90.
Kotler, P., J. Bowen, and J. Makens. 1999. Marketing
for Hospitality and Tourism, 2nd ed. Upper
Saddle River, NJ: Prentice-Hall.
Lacity, P., and R. Hirschheim. 1995. Beyond the In-
formation Outsourcing Bandwagon. New
York: John Wiley and Sons.
Le Bret, C. 1997. “Have You Heard About Data
Mining?” Science Tribune (October).
Levinson, M. 2001. “Harrah’s Knows What You
Did Last Night.” Darwin (May).
“Mining Hotel Data.” 1998. Data Warehouse Re-
port, October 20.
Nickell, J.A. 2002. “Welcome to Harrah’s.” Busi-
ness 2.0 (April).
Ohmae, K. 1999. The Borderless World. New York:
McKinsey and Company.
Olsen, M., and D. Connolly. 1999. “Antecedents of
Technological Change in the Hospitality In-
dustry.” Tourism Analysis 4:29.
Peacock, P.R. 1998a. “Data Mining in Marketing:
Section 8.6 ? Data Mining for Hotel Firms: Use and Limitations 413
Part 1.” Marketing Management (Winter):
9–18.
———. 1998b. “Data Mining in Marketing: Part 2.”
Marketing Management (Spring):15–25.
Plog, S. 2001. “Why Destination Areas Rise and
Fall in Popularity.” Cornell Hotel and Restau-
rant Administration Quarterly 42(3):13–24.
Press, S. 1998. “Fool’s Gold?” Sales and Marketing
Management (June):58–61.
Schmidgall, R.S. 1989. “While Forecasts Hit Tar-
gets, GMs Still Seek Better Guns.” Lodging
15(3):101–102, 104–105.
Schmidgall, R.S., C.P. Borchgrevink, and O.H.
Zahl-Begnum. 1996. “Operations Budgeting
Practices of Lodging Firms in the U.S. and
Scandinavia.” International Journal of Hospi-
tality Management 15(2):189–203.
Schmidgall, R.S. 1997. Hospitality Industry Man-
agerial Accounting, 4th ed. East Lansing, MI:
Educational Institute of the American Hotel
and Motel Association.
Schmidgall, Raymond S., and Michael Kasavana.
2000. “Certifications by HFTP.” Bottomline
(April/May):20–22.
Shaw, M., C. Subramaniam, G. Tan, and M. Welge.
2001. “Knowledge Management and Data
Mining for Marketing.” Decision Support Sys-
tems (May):127–137.
Siragusa, Thomas J. 2001. “Implementing Data
Mining for Better CRM.” Customer
Inter@ction Solutions 19(11):38–41.
Smith, M. 2001. “Refining Raw Data.” Printing Im-
pressions 43(9):36–37.
Stevens, L. 2001a. “CRM Analytics—CRM by
the Slice—Running Analytics Is Expensive,
So Companies Are Focusing on Areas
with Customers.” Internetweek, April 9, pp.
35–38.
———. 2001b. “IT Sharpens Data Mining Focus—
Instead of Building Data Mining Applications
with No Clear Goal, Companies Are Setting
Priorities Up Front to Maximize ROI.” Inter-
netweek, August 6, pp. 29–30.
Temling, W.P., and P. Quek. 1993. “Budget Time.”
Lodging 19(3):21–22.
Tischelle, G., and J. Maselli. 2001. “Hotels Turn to
1327.ch08 12/19/05 9:34 AM Page 413
IT to Stem Losses.” Informationweek, Decem-
ber 17, pp. 31–32.
Tse, Eliza C., 1989. “A Profile of the IAHA Mem-
ber.” Bottomline (October/November):12–18.
Woods, Robert H., Denney G. Rutherford, Ray-
mond S. Schmidgall, and Michael Sciarini.
414 Chapter 8 ? Financial Control and Information Management
1998. “Hotel General Managers.” Cornell Ho-
tel and Restaurant Administration Quarterly
39(6):38–44.
Zaltman, G. 1997. “Rethinking Market Research:
Putting People Back In.” Journal of Marketing
Research 34(4):424–437.
S U G G E S T E D R E A D I N G S
Books
Jagels, Martin G., and Michael M. Coltman. 2003.
Hospitality Management Accounting, 8th ed.
New York: John Wiley and Sons.
Schmidgall, R.S. 1997. Hospitality Industry Man-
agerial Accounting, 4th ed. East Lansing, MI:
Educational Institute of the American Hotel
and Motel Association.
Articles
Borchgrevink, C.P., and R.S. Schmidgall. 1995.
“Budgeting Practices of U.S. Lodging Firms.”
Bottomline 10(5):13–17.
Cichy, Ronald F., and Raymond S. Schmidgall.
1996. “Leadership Qualities of Financial Exec-
utives.” Cornell Hotel and Restaurant Admin-
istration Quarterly 37(2):56–62.
Damitio, James W., and Raymond S. Schmidgall.
1990. “Internal Auditing Practices of Major
Lodging Chains.” Hospitality Research Journal
14(2):255–268.
Dubé, Laurette, Cathy A. Enz, Leo M. Renaghan,
and Judy Siguaw. 1999. “Best Practices in the
U.S. Lodging Industry—Overview, Methods,
and Champions.” Cornell Hotel and Restau-
rant Administration Quarterly 40(4):14–27.
Schmidgall, R. S., C. P. Borchgrevink, and O.H.
Zahl-Begnum. 1996. “Operations Budgeting
Practices of Lodging Firms in the U.S. and
Scandinavia.” International Journal of Hospi-
tality Management 15(2):189–203.
S O U R C E N O T E S
Chapter 8.2, “The Lodging Chief Financial Execu-
tive,” by Raymond S. Schmidgall.
Chapter 8.3, “Budgeting and Forecasting: Current
Practice in the Lodging Industry,” by Ray-
mond S. Schmidgall and Agnes L. DeFranco, is
reprinted from the December 1998 issue of
Cornell Hotel and Restaurant Administration
Quarterly. © Cornell University. Used by per-
mission. All rights reserved.
Chapter 8.4, “As I See It: The Hotel Controller,” by
Mike Draeger.
Chapter 8.5, “The Hotel Purchasing Function,” by
C. Lee Evans.
Chapter 8.6, “Data Mining for Hotel Firms: Use
and Limitations,” by Vincent P. Magnini, Earl
D. Honeycutt, Jr., and Sharon K. Hodge, is
reprinted from the April 2003 issue of Cornell
Hotel and Restaurant Administration Quar-
terly. © Cornell University. Used by permis-
sion. All rights reserved.
1327.ch08 12/19/05 9:34 AM Page 414
c h a p t e r n i n e
H U MA N R E S O U R C E S
P O L I C Y MA N A G E ME N T
about it, but no one does anything about it.
This is a problem faced by a good many man-
agers. If an HR department is to be effective
in dealing with the people they recruit, hire,
and train, they need a strategic view of the fu-
ture and strategies to achieve that view.
It has been said we should be very inter-
ested in the future, for that is where we are
going to spend the rest of our lives. It has also
been said, “Predicting is difficult, especially
about the future” (Berra, quoted in Woods,
1999). That was the premise of the lead article
in this section of the third edition, by Bob
Woods. Now a professor in the Harrah Col-
lege of Hotel Administration at the Univer-
sity of Nevada, Las Vegas, Woods suggested
that for this edition he convene a select panel
of his colleagues at UNLV and, using a varia-
tion of a predictive model, discuss the future
based on what these researchers and teachers
9.1 I NTRODUCTI ON
In the third edition, this section on human re-
sources (HR) became a different creature
than it had been in previous editions. It used
to be called “The Management and Processes
of Human Resources” and included several
how-to articles. I now believe the reader will
be better served by contemplating broad
strategic policy considerations.
Part of this shift in focus grew out of re-
cent research that strongly suggests the future
health of any organization will be based on
human resources—that is, of course, if HR is
called upon by top management for advice on
legally and functionally delivering hotel ser-
vices. A well-managed hotel HR department
will be a competitive advantage.
Among observers and participants on the
hotel management scene are those who com-
pare human resources, formerly personnel
management, to the weather: Everyone talks
415
1327.ch09 12/19/05 9:35 AM Page 415
know about present and foreseeable trends.
Their wide-ranging and instructive discussion
of the future challenges to HR is presented in
9.2.
Perhaps the most insidious and pervasive
human resource challenge the above-
mentioned group addressed was turnover. For
whatever reasons, lots of employees leave ho-
tel companies, and whenever they do, it is ex-
pensive—not only to the hotel but also to the
employees. That is why Riegel’s presentation
of a conceptual model of turnover is an im-
portant inclusion here. This material updates
research he and two colleagues did among
foodservice employees, but the conceptual
model holds equally well for hotel employees.
It is included here because in many ways the
strategic concepts of legal environment, HR
professionalism, and management respect are
avenues to control or reduce turnover.
In a series of guest lectures in my class at
Washington State University, Jim Treadway,
formerly president of Westin Hotels and Re-
sorts—North America and currently presi-
dent and CEO of MTM Management L.L.C.,
outlined how he sees the job of hotel general
manager. Among the components of his “job
description” is “to keep the owners out of
jail,” by which he means the GM must man-
age the business without incurring legal trou-
ble and must avoid all possible risk of liability.
The essay by Murrmann and Becker on the
legal environment discusses the realms of risk
facing hotels and their human resources de-
partments. Increasingly, hotels are finding
themselves at legal risk for hiring “high-risk
employees.” The most professional HR de-
partments are aware of and prepared to ad-
416 Chapter 9 ? Human Resources Policy Management
vise their internal customers (department
heads and the GM) how to employ the best
people without running afoul of the ever-
increasing regulatory and liability environ-
ment. See also the essay by Melissa Dallas in
Section 5.
Reinforcing the importance of consider-
ing the HR function in a strategic light rather
than an enabling one is the article included
here by Tracey and Nathan. They argue that
because human capital considerations are
top-of-mind in research and trade publica-
tions, leadership still fails to consider HR
when making strategic plans and that many
firms are still mired in archaic policies and
practices that threaten business activities in
the business and regulatory environment.
They argue their position cogently and with
vigor; see if you agree with them.
There is no lack of research and commen-
tary in hospitality publications, both academic
and trade, that deal with human resources.
Many of the articles and essays in this book
could be and should be looked at with an eye
toward their implications for the manage-
ment of human resources in a hotel. Perhaps
second only to marketing, human resources is
the most written-about topic in not only the
academic but also the trade press. Readers
are encouraged to find publications that offer
solid, practical, objective, and legally valid ad-
vice for aid in determining their individual
model of how a human resources philosophy
and its resultant practices should be designed.
A good place to start is the list of suggested
readings and references at the end of the
chapter.
1327.ch09 12/19/05 9:35 AM Page 416
It has been five years since the publication of
“Predicting Is Difficult, Especially About the
Future: The Future of Human Resources in
Hospitality Management,” the journal article
used in the third edition of this book (Woods,
1999). As Yogi Berra would say, since then,
the future has changed. Indeed, the future has
changed, and it is time to attempt to forecast
it once again.
Time flies. Ten years ago, decoding the hu-
man genome was a pipe dream (Mack, 2005).
Five years ago, terrorism was something that
people outside the United States had to worry
about. As Mack noted, “Imagine if you could
have understood the potential for such monu-
mental changes before they happened”
(Mack, 2005). The value of predicting the fu-
ture is evidenced by the fact that major cor-
porations spend millions of dollars annually
on studying the big picture, or macroenviron-
mental analysis, as most strategic planners call
it. Futurists, those who predict the future, of-
ten call this a six-sector analysis, but it’s the
same thing. A six-sector analysis uses trends
and forecasts in technology, economics, envi-
ronment, society, demography, and govern-
ment to predict the future. One can easily
imagine the changes that have occurred in
these six sectors since 1999.
In this article, we use what might be called
a seven-person analysis—that is, the insight of
seven experienced professors from the Uni-
versity of Nevada—Las Vegas to predict the
future. These seven professors have experi-
Section 9.2 ? Driving Hospitality into the Future 417
ence in a wide range of areas and were asked
to lend their expertise to predicting the future
of HR in the hospitality industry. What fol-
lows is an edited transcript of a lengthy dis-
cussion among these seven professors on this
subject. We start with a discussion of the im-
pact of unions in the hospitality HR future
and range widely from there.
Note: This chapter has seven authors.
Each is identified by name, and quotes are as-
sociated with each throughout. For instance,
the first quote is from William (Bill) Werner,
the second from Cheri Young, and so on. Top-
ics are presented in random order.
Werner: One of the big issues human re-
sources managers will have to think about in
the future is whether health care is or is not a
natural right of every employee. Recently there
was a merger between the hotel employees
union and the restaurant employees union.
The resulting merger is a union of about
500,000 members. One of the big discussions
between these unions has been about even
trying to merge with more unions and to fol-
low the current corporate pattern of merger
and acquisition. Employers are going to have
to find a way to find a middle ground with the
union stance that employees pay nothing for
health care benefits, no matter what other
bargaining positions the unions might as-
sume. Eventually, this is something with which
every employer is going to have to come to
terms. Health care among union workers
has become an expected normal benefit of
9.2 DRI VI NG HOSPI TAL I TY I NTO THE
FUTURE
1
Christian Hardigree, Ellis Norman, Gail Sammons, Vince Eade, William Werner,
Robert H. Woods
2
and Cheri Young
1327.ch09 12/19/05 9:35 AM Page 417
employment, but the cost is rising so fast, ba-
sically out of control, and employers are going
to have to come to terms with this.
Young: Only 8.2 percent of the private
sector employees are unionized in the United
States. Union membership has steadily de-
clined from its peak decades ago and is at an
all-time low. One question to ask of the future
is whether this trend will continue. Mergers
among unions may be able to counter that de-
cline, or the decline in union membership may
continue.
Werner: The political power of unions is
the one thing that they still have to hang on
to, and their political strength in Washington
particularly really is the one thing that unions
are still able to claim, despite their declining
membership. Even if unions do not increase
membership, they are likely to be able to hold
on to what they have through amalgamation
and mergers. The question is, will unions be
able to turn declining membership into in-
creasing membership? The only way to do
this is through union organizing efforts.
Therefore, we are likely to see more of such
efforts in the future. Unions are not likely to
continue to decline without a fight, and that
fight comes through organizing efforts. This
means human resources departments and
managers are more likely to need to address
union issues in the future than they have in
many years. Because unions have steadily de-
clined, many human resources managers may
not ever have had to address this issue in the
past. Since hospitality organizations (and hos-
pitality human resources professionals) today
have little experience with unions because
they have not played a major role in recent
years, they are likely to have to devote time
and money to learning how to address such
needs in the future.
418 Chapter 9 ? Human Resources Policy Management
Eade: In the 1940s, unions represented
about 30 percent of the workers in the United
States. According to the Bureau of Labor Sta-
tistics, today unions represent about 12–14
percent of workers in all industries.
Norman: According to statistics recently
released, unions now represent only about 12.9
percent of the workers in the United States.
Eade: While unions have been declining,
cooperation between unions and hospitality
organizations may not be headed in the same
direction. There might be more cooperation
in the future. There is significant evidence of
this here in Las Vegas, where one can find sev-
eral models of training and development co-
operation between organizations and unions.
Such mutually beneficial developments might
hinder the growth of union membership in
the future, or it might result in more growth.
At any rate, such cooperation might mean
there are fewer, not more, union organizing
efforts in the future.
Werner: These cooperative efforts are in-
teresting. The largest hotel and restaurant
workers’ unions have recently noted that they
actually have a dual agenda—that is, working
cooperatively with organizations that are
good to their employees and fighting like
dogs with those which are not. In 2004, for in-
stance, we saw the demise of the Golden
Horseshoe hotel and casino in Las Vegas. This
demise began with a culinary union strike 11
years ago over health benefits. The union kept
up their efforts for 11 years! When unions are
pushed to the wall, they will fight.
The interesting part about the mergers we
are seeing, however, is that unions with differ-
ent special skills are merging. In hospitality,
we have seen the merger of a union with spe-
cial skills in organizing with one that has spe-
cial skills in striking employers.
1327.ch09 12/19/05 9:35 AM Page 418
To me, this means that unions are likely to
start going after companies which have been
traditionally non-union in the past.
Young: It is my understanding that at one
time unions fought against open immigration
laws because they believed that immigrants
would take jobs from union workers. How-
ever, in recent years some unions have
adopted a policy of welcoming immigrants.
For instance, UNITE here in Las Vegas is
largely made up of recently immigrated Lati-
nos and Asians. The rapid population growth
of these two ethnic groups would seem to in-
dicate that some unions are likely to be able
to exert more pressure on hospitality organi-
zations in the future.
Woods: Much of the future on this topic
might be attributed to the outcome of current
political efforts to extend amnesty to illegal im-
migrants already in the United States. If this is
done, are we not more likely to see an increase
in hospitality industry union membership?
Werner: This does seem likely, doesn’t it?
Eade: Many recent immigrants working
in the hospitality industry have jobs in de-
partments such as housekeeping in hotels. Be-
cause of this, some form of amnesty for illegal
aliens certainly seems like it might affect how
hospitality human resources managers work
with employees in such departments.
It seems to me that one of the big issues in
the future for hospitality unions will be out-
sourcing of jobs.
Young: Yes, I read recently where some
California hotels were sending their laundry
to Mexico, having it washed and shipped
back, thus outsourcing jobs. When we think of
outsourcing we typically think of this happen-
ing in manufacturing sector jobs, but this ex-
ample indicates how it might happen in
service industries as well.
Section 9.2 ? Driving Hospitality into the Future 419
Norman: There are already hotels that
outsource all of their food and beverage op-
erations, not to foreign countries but outside
the organization nevertheless. This is a differ-
ent type of outsourcing, but an important one
to unions, as non-union companies are pro-
viding the food and beverage operations. This
means a net loss in jobs for unions.
Eade: The point is that in the future these
will be life-and-death issues for unions. We
tend to look at issues such as this from the or-
ganizational viewpoint. From that perspec-
tive, such developments might be relatively
small issues. However, for unions they are
life-or-death issues.
Werner: The bottom line is that unions in
the hospitality industry will be forced to at-
tempt to increase membership. Some hospi-
tality unions today have almost as many
retirees as members as they have currently
employed workers. Some unions seem to have
taken the position today that they can get
more new members by attempting to de-
crease the workload of employees. For exam-
ple, would union efforts to reduce the
workload of housekeepers from an average of
16 rooms cleaned daily to an average of 12
rooms lead to increased membership, or
would attempting to maintain health care
benefits for members be better for increasing
membership? The unions deal with strategic
issues such as this all of the time; they are al-
ways trying to predict what will be important
in the future for their members. It may be that
more immediately tangible efforts such as re-
ducing workloads would lead to more new
members than benefit extensions.
Sammons: An issue that concerns unions
in the casino industry is the rapid and contin-
uing development of casinos on Native Amer-
ican land. My understanding is that National
1327.ch09 12/19/05 9:35 AM Page 419
Labor Relations Laws do not apply to such
locations because they are on Native Ameri-
can land. Interestingly, unions fought against
Native American casinos because they be-
lieved that such organizations would take
away union jobs. Now that this fight is lost
and these casinos are growing rapidly, unions
would like to be able to organize their work-
ers. Politics breeds strange bedfellows, doesn’t
it?
Hardigree: Actually, some of the casinos
that are being built on Native American land
may have to adhere to NLRB (National La-
bor Relations Board) requirements. For in-
stance, they do not if they are wholly owned
tribal entities, but they do if they are a part-
nership with a gaming organization such as
Harrah’s or MGM.
Actually, I want to make sure that there’s
a difference between what laws apply to a
wholly owned tribal entity versus a partner-
ship with a Caesar’s or a Harrah’s or some-
thing like that. Because if there is that
partnership, they do have a requirement to
adhere to the NLRB. This also applies if the
manager is employed by a non–Native Amer-
ican organization.
This is significant to unions because 5 of
the 25 top-grossing casinos in the United
States are tribal facilities, but some of them
are partnerships with nontribal companies.
Young: This brings up a related issue be-
cause the human resources skills needed to
manage in Native American casinos may be
somewhat different than the HR skills
needed in other sectors of the industry. Hu-
man resources professionals would have to
understand the importance of tribal cultural
and work ethic issues, for instance. These casi-
nos are providing jobs to some Native Amer-
icans who have not worked in years, for
instance. The HR challenges that might be
420 Chapter 9 ? Human Resources Policy Management
faced in such an environment are new for
most managers.
Hardigree: Such issues are not limited to
Native American casinos. For instance, I did
some work on employee training in St. Croix,
U.S. Virgin Islands. In the island culture, as
many people know, time is not as important as
it is here on the mainland. One of the training
issues that I faced was training employees
that they had to show up for work at a specific
time. In some cases I found properties that
were not opening on time simply because
their workforce had not showed up yet. Peo-
ple unfamiliar with human resources in the is-
lands will have to learn how to address such
issues in the future.
Woods: The responsibility of human re-
sources departments and managers to address
the culture of their workforce seems to be a
pervasive issue. This is as true in the United
States today as it is in foreign countries. There
are many hospitality properties in which the
employees are predominantly from another
culture and even speak another language. I
remember a few years ago talking to a general
manager from a hotel in Toronto who said
that there were 60 different languages spoken
by employees in his hotel. This is certainly a
problem that hospitality companies did not
have to address 20 years ago.
Norman: I agree, we sometimes forget to
think about the impact of subcultures here in
the United States. Some employees from
other cultures do things a certain way before
they eat and before they work and they don’t
show up when you want them to for various
reasons. A question for human resources in
the future is whether or not the organization
can prescribe strict rules and absolutes as they
have in the past. First you have to understand
the way things work within the subculture,
then you can attempt to effect policies that
1327.ch09 12/19/05 9:35 AM Page 420
apply. This means that human resources will
become more complicated in the future. This
becomes an issue of addressing the diversity
of all employees, not simply those who are
obviously from another country. In the past
employers have been able to say simply, “This
is the rule for everyone.” In the future this
may not be so easy to do, as it has become in-
cumbent on organizations to think about the
individual diversity of its employees, too.
Hardigree: This is the issue in many
“English-only” cases. English-only refers to
organizations that prohibit employees from
speaking their native language while at work.
To managers this might seem logical—that is,
employees speaking a different language
might be threatening simply because you
don’t know what they are talking about.
Whether or not the same rules will be applied
for everyone in such cases might lead to sig-
nificant HR issues in the future as well.
Woods: I recently read an article from a
futurist who believes that the clash of cultures
in organizations—that is, the clash between
the cultures of so-called native (or American)
employees and managers and foreign cul-
tures—could easily destabilize organizations
in the future.
Young: It seems obvious that, in the fu-
ture, hospitality managers will certainly need
to be more culturally sensitive and flexible
than they have in the past. Hospitality organ-
izations will be challenged to get the most out
of their human capital but within the parame-
ters of the cultural values of their employees.
This brings up some interesting challenges.
For instance, our notions about motivation
are based on our model, the American model
of motivation. Some might call this the white
Anglo-Saxon motivation model because this
is who it has applied to in the past. Much has
been written about motivation with this set of
Section 9.2 ? Driving Hospitality into the Future 421
employees. However, in the future managers
will also need to know how to motivate em-
ployees from culturally diverse backgrounds
as well. This means that managers and HR
professionals will need expertise in areas that
they are not today prepared to deliver. This, of
course, will mean training in these (and per-
haps other) areas will become more impor-
tant in the future. Whether this means
hospitality organizations will have to spend
more time and money on training in the fu-
ture is not clear, but it certainly seems that is
the case.
Werner: When I was in grade school, we
used to hear a lot about America as the melt-
ing pot of the world. The American ideal then
seemed to be that anyone could come to this
country and start over. However, the signifi-
cant thing about that phrase is that it meant
that those people would be gradually melted
into the mix and everyone would come out
the same. We thought then about a “typical
American.” There is much more appreciation
today for diversity, and that has been a signif-
icant change in American society during my
lifetime. Today there is more emphasis on di-
versity and less on assimilation through melt-
ing peoples together.
Corporate cultures appear to have em-
phasized the melting pot approach for many
years. Everyone wanted to create a corporate
culture and assimilate everyone into that one
culture. Now we see the reverse of that at
work. In the future we may see people believ-
ing that the best approach is to forget corpo-
rate culture. Instead we may see people
thinking of corporations simply as legal enti-
ties without personality. If so, the emphasis
then will be on employee personalities, not
corporate personalities.
Young: I disagree on that because I think
organizations do have a personality. We call it
1327.ch09 12/19/05 9:35 AM Page 421
corporate culture and it ends up being a social
organization. There’s a whole social system in
there and how people relate and get their
needs met and power and politics and you
name it. Looking at culture as something you
created as a corporate control mechanism
might have been prevalent at one time but
not today or in the future. I believe that we
have finally acknowledged this as a myth, that
we have finally come to realize that we actu-
ally do have all these subcultures in organiza-
tions. Today we should think not of a melting
pot but of a soup or stew. Now we see all these
identifiable pieces floating around in the stew.
Now and in the future HR people will have to
peer into that soup and figure out how to
make things work for all the ingredients.
Norman: For instance, in Native Ameri-
can and Latino cultures, family is more im-
portant than it is in what has been known as
the mainstream culture in the past. Family is
the number-one priority in these and other
cultures. Family is more important than work.
The impact of this on work-based motivation
practices in the future will be interesting to
see. In the traditional theory of motivation we
have understood that certain practices by em-
ployers will lead to improved work perfor-
mance by employees. This is not necessarily
true for all cultures.
Young: The same thing could be said
about Generation X. Much has been written
about the failure of Generation X to put work
first in their lives. Quality of life appears to be
more important to this group than to past
generations. Quality of life is a priority over
work in some cases. This group wants to be-
lieve that quality of life is more important
than some work-related issues.
Woods: This all seems to tie together for
HR in the future, doesn’t it? Whether or not
employees will be unionized might depend on
422 Chapter 9 ? Human Resources Policy Management
organizational approaches to diversity and
cultural awareness, or even on how employ-
ees are motivated to work. It is a big chal-
lenge for HR.
Norman: What is interesting to me is that
in some organizations training seems to focus
on do’s and don’ts pretty exclusively. At-
tempts to match the employee with the orga-
nizational culture are not as prevalent as
trying to make employees behave in organi-
zationally specific ways. For instance, I re-
cently worked with an organization on casino
card-dealer training. In this instance, the or-
ganization was spending quite a lot of time
training dealers in technical skills that they will
seldom use. For example, dealers are taught
how to perform card tricks like fancy shuffling
and things like that. They will never use these
skills in most cases, but this is the emphasis in
training. In comparison, orientation for these
groups consists primarily of a discussion of
what actions will get you fired. In effect, there
is no effort to attempt to identify the person
with the property and its values.
In the casino industry, most managers
came up the old way, the “hard way,” as they
describe it. This means that they started as an
employee, worked their way up to supervisor
and then to manager. These people have good
technical skills; that is likely why they were
promoted. However, they may never have
had any experience or training in interper-
sonal skills—that is, managing people. Yet,
how the human capital of the organization
will be managed and motivated will likely de-
termine the company’s future success. The
HR department of the future will likely have
to address more managerial training than it
has in the past.
Woods: For several years we have been
seeing and reading about the lack of em-
ployee and managerial loyalty in organiza-
1327.ch09 12/19/05 9:35 AM Page 422
tions. Most predictions are that people will
bounce from company to company in the fu-
ture. In the past, of course, managers and em-
ployees worked for one organization most of
their lives. Predictions are that people will
probably follow a pattern of working for one
organization for five or six years, then moving
on to another. In some cases these people will
move from one industry to another, taking
time off between the two to retrain. Since
most current employees and managers pro-
duce at higher levels than new employees and
managers, this becomes an issue of how to
make work interesting enough for people to
stay. Getting people not to quit then will be-
come a focus of HR in the future.
I’m glad you brought up managers, Ellis. I
think the human resources department of the
future will spend more time on managerial
human resource issues that aren’t employee
human resource issues because of the chang-
ing nature of the managerial workforce. All
the predictions are, and we see this already,
that people will not stay in the same job their
entire career. They will probably follow a pat-
tern of working five or six years in one organ-
ization, then may take a sabbatical for six
months and retrain for another career or re-
train for another year. So, I think what we’ll
see is more people moving from career to ca-
reer to career—maybe not in the same indus-
try—and that poses interesting problems for
the human resources department.
Hardigree: And this might mean that HR
personnel will be training older and older
workers and managers in the future. It might
become more common for HR people to have
to know how to recruit, hire, and train employ-
ees and managers who are older in the future
as a result. As these people bounce from career
to career, they will need additional training at
ages we are just not used to training.
Section 9.2 ? Driving Hospitality into the Future 423
Woods: When you combine this move-
ment between jobs with retirement issues for
baby boomers, the problem becomes exacer-
bated. The baby boom population is starting
to retire now and will retire in greater num-
bers in the future. HR people will need to de-
cide how to address that issue in the future as
well. This means not only how to address re-
tirement issues for managers and employees
but also how to address replacing that
worker. Will it lead to downsized organiza-
tions, which cannot find enough employees in
the future, or will the employees simply
change dramatically as we have discussed ear-
lier—that is, will workers from other cultures
predominate? It seems that organizations will
have to make a decision about which direc-
tion to go and, either way, more training will
be required. It could also lead to increased
job design changes, too. Will we change how
work is done to accomplish it with fewer peo-
ple, or will we simply employ a different type
of worker?
Young: I know of one 82-year-old cocktail
server at a hotel. Think of the problems asso-
ciated with working with this type of work-
force when you are accustomed to working
with a young workforce.
Norman: In the past, we read predictions
about how baby boomers were going to have
such a huge impact on leisure and hospitality
industries, and we have certainly seen this.
More and more people are taking advantage
of leisure activities today than in the past, and
this has certainly helped to increase revenues
for hospitality companies. However, there are
also indications that baby boomers will not
necessarily opt to retire for many reasons,
from personal to economic. One characteris-
tic of the baby boomer population is the
active lifestyle of its members. Some people
are working out more, exercising more, and
1327.ch09 12/19/05 9:35 AM Page 423
working later into life. The rapid changes in
medical care and life expectancy are affecting
this too, of course. Some people simply work
longer because they live longer.
Woods: This might certainly mean that el-
dercare issues will become more prevalent for
HR, too. We think of eldercare today as how
to address the issues of older citizens, but
these people may also be employees. HR will
have to deal not only with how to address the
challenges employees face from taking care
of both elderly parents and children, but also
the issue of how to make work accessible and
meaningful for a more elderly population.
Hardigree: HR already has to address the
issue of younger workers who believe they
are ready for management, or managers who
want to move up but can’t because the baby
boom population is blocking their path. Baby
boomers are not leaving these positions as
quickly as predicted, and as the next genera-
tion is coming of age they feel they are enti-
tled to move up—but those positions are not
opening up. I think this also contributes to
people moving back and going into different
careers and reeducating themselves as they
move. This also leads to disgruntled managers
and employees, some of whom have come to
think of older employees as roadblocks to
their own careers.
Young: The impact of baby boomers on
retirement issues is still four or five years
away, but not long. What will happen when
this population attains retirement age will
certainly impact hospitality.
Werner: This issue of moving from job to
job and career to career will depend on the
rate of unemployment prevalent at the time.
People who once enjoyed the opportunities
associated with jumping from job to job and
telling their employers to take this job and
424 Chapter 9 ? Human Resources Policy Management
shove it will be greatly influenced by the im-
pact of unemployment issues. That approach
is okay with low unemployment, but what
happens with high unemployment? You can’t
jump from job to job as easily when unem-
ployment is 10 to 12 percent.
In the future, HR people may need to
adapt to their organization rather than vice
versa. I think of this like coaching basketball.
There are coaches who are very well known
for their strategy, and they create a program
and then they find people to put in it. Then
there are other coaches that take whatever
talent they have and make the most of it. I
think that continues to be just different man-
agerial skills and techniques. It will be inter-
esting to see which type of manager, or coach,
prevails in the future. One would think that
those who can adapt will succeed more.
Norman: I recently read a book about go-
ing from good to best. According to this, the
enemy of best is good. It reminded me of
Steve Wynn, the casino icon in Las Vegas. You
ask Steve Wynn if he’s got a mission state-
ment; he doesn’t have one. What he does do is
get the right people on the bus to begin with.
His approach is to find the best possible peo-
ple and go with that instead of attempting to
force everyone into one mold.
Young: Some people see human capital as
an asset worth investing in because they be-
lieve that the employee is capable of generat-
ing revenues in the future. One thing that
organizations must surely do in the future is
develop ways of accounting for the value or
worth of employees on the balance sheet. Be-
cause people in organizations make indirect
contributions, most companies do not do this
today. The HR people have stomped their
feet up and down and said nobody thinks that
we’re important, nobody thinks we’re impor-
1327.ch09 12/19/05 9:35 AM Page 424
tant. The problem is that HR has not been
able to equate human capital to dollars, so the
people making decisions today in organiza-
tions cannot relate. HR people are finally fig-
uring out that if they compute human capital
in financial terms, they will get more. One
mission of HR in the future is to learn how to
do this better.
Eade: Work performance will be a more
important term in the future. The human per-
formance of people can make a difference in
organizations, and HR is finally figuring that
out. Organizations need a department of hu-
man performance that spends all of its time
assessing performance and figuring out how
to do things better. This is not just perfor-
mance for the bottom line but performance
for and by people.
Some organizations are doing this
through training programs such as how to
manage your household, or parenting skills,
or how to plan retirement. It comes down to
organizations showing that they care about
employees. They have to show that they are
attempting to improve performance in all ar-
eas, not just in the bottom line. These are
likely the organizations that will attract and
keep the best people in the future.
Young: Organizations need to assess and
define the benefits of such programs. They
need to answer the question of why they
should train people in parenting skills, for in-
stance. The answer is in empowerment. As
people learn how to better manage their lives,
they gain a sense of control over their envi-
ronment, and that helps them to perform bet-
ter. Hopefully these same employees will
make the connection between what the or-
ganization is doing for them and commitment
or loyalty to the organization.
Eade: It’s either this or move to inde-
Section 9.2 ? Driving Hospitality into the Future 425
pendent contractor status with employees,
and that seems worse. We seem to be moving
toward the independent contractor type of
relationship between organizations and
employees.
Woods: I read recently that the half-life of
an engineer’s knowledge is now six months.
This means that college freshmen will have to
renew their knowledge base five or six times
during their college careers. Just think how
this might affect the workplace. I wonder
how true this is for hospitality management
education?
Young: Another issue for hospitality is
how women are treated. Housekeeping is a
female ghetto in many organizations. Let’s get
a woman to be the director of rooms or the
CEO or the VP of finance.
Norman: In the 1980s, the executive
housekeeper reported not to the GM or the
executive committee but to a person three or
four rungs below. We have made progress, but
it’s slow.
Hardigree: We still use lots of sexist terms
in hospitality. We also have jobs reserved for
one gender or another. For instance, we still
use cocktail waitresses in most properties, and
too often they are still hired on the basis of
height and weight. Not everyone is five foot
nine and 125 pounds, and hospitality needs to
address that in the future. Many customers to-
day want to see a diversity of employees in
places they frequent, partially because they,
too, are diverse. Customers like to see em-
ployees who look and act like they do.
Christian: From an Asian standpoint, am I
discriminating against Asians because I re-
quire all my dancers to be five foot nine or
taller?
Young: Now are there lawsuits coming up
about this?
1327.ch09 12/19/05 9:35 AM Page 425
Christian: I’ve seen a few claims. I don’t
know if they’ve resulted in full-blown litiga-
tion. Cosmetic practices, such as use of terms
like cocktail models to avoid the gender-
specific term waitress, just do not do the
trick.
Werner: The average hospitality discrimi-
nation case results in a judgment of only about
$7,500. As a result, many companies are not
too concerned about this issue. Most cus-
tomers believe that the awards are much
higher. This is an example of a fundamental
philosophy that needs to change in hospitality.
Eade: This issue of segmenting women for
certain types of jobs, even specific shifts,
needs to change to satisfy the customer base.
For years companies got away with saying
that women could be security guards, but not
at night . . . and things like that. In fact, one
case that did go to court resulted in a win by
the company, which said they were only think-
ing about the safety of the female guard in
question. Today we have female soldiers dy-
ing in war, and this has forced some compa-
nies to rethink their position on such issues.
Hardigree: In some cases, changes in this
type of issue must wait for the courts to catch
up. For instance, in one case a man with dis-
abilities wanted to do a job that the company
thought was too dangerous for him. He sued,
and the company won. The court believed the
company was only trying to protect the em-
ployee from himself.
I strongly believe that one of the changes
we will see in the future is more acceptability
of sexual orientation issues. Today, there are
only about 12 states that protect employees
based on sexual orientation. Some of these
may actually repeal their laws on this issue,
sensing that the public mood has changed.
The public mood may or may not have
changed, but what companies need to be
426 Chapter 9 ? Human Resources Policy Management
afraid of is using gender discrimination to
bootstrap a sexual orientation claim.
Young: The whole issue of whether or not
to extend benefits to gay partners really raises
the larger issue of who should receive bene-
fits. What do you do about two heterosexuals
who have lived together for 15 years? Many
people today are living together and having
children outside marriage. They are going to
start screaming for benefits as well, and this
may be a significant issue in hospitality.
Woods: We may find that the more we
disenfranchise people, the more viable they
become as a political entity. I expect this to
happen within hospitality due to the large
number of gays and lesbians employed there.
Sammons: One of the cultural issues we
are likely to deal with in the future is the
growth of spirituality in the workplace. I don’t
mean just religious spirituality, but all kinds.
As more and more people serve in overseas
positions, they are likely to bring back new
and different kinds of spirituality to their
workplace.
Woods: I read the same thing in a futurist
publication recently. Many futurists believe
that organizations will be forced to address
the spirituality of their employees soon.
Sammons: One issue I see being more im-
portant in the future is that of training. I mean
who and what we train. Some companies are
outsourcing training; others are keeping it in-
side their companies. Organizations will de-
cide which approach they want to pursue. The
objective for most companies will be how to
acquire needed training at the lowest cost.
Sometimes this can be done through third
parties.
Woods: An issue for hospitality will be
what happens to the HR department if you
outsource some aspects. Does the department
become more or less fundamental to the com-
1327.ch09 12/19/05 9:35 AM Page 426
pany, and, if it becomes less fundamental, who
in the corporation will look after the rights
and issues of employees that we have been
talking about?
Would companies hire human capital
agents, or would they simply ignore employ-
ees more than they do today?
Sammons: In some organizations, HR has
been included on the executive committee
and is respected as an important strategic
partner in the company. Others see HR as
functional only and not part of strategic de-
velopment. Which method a company em-
ploys will likely have a major impact on how
their employees view the relationship. Hence,
it may drastically affect the performance of
employees and companies.
Hardigree: I wonder what impact out-
sourced training may have in the future. Few
employees view training programs as some-
thing that they want to do today; perhaps that
is because of how the training is approached.
What happens in the future when you have an
outsider come in and attempt to conduct
training sessions? My guess is that some em-
ployees will resent this and others simply
won’t care.
Sammons: Some outsourced training may
be acceptable and other types may not be. For
instance, we have outsourced food processing
in hospitality for years. At one time, of course,
most food processing occurred on site. Today
we commonly see packaged products. Train-
ing in how to handle this type of product
might be acceptable to employees because
the processing is done outside, while training
on other issues may not be acceptable. Some-
times the cutting edge of technology is out-
side the corporation, of course, and
organizations need to take advantage of that.
This occurred back in the 1980s when point-
of-sale technology arrived in hospitality. Or-
Section 9.2 ? Driving Hospitality into the Future 427
ganizations learned that the training from
outsiders didn’t really stick with employees
until they, themselves, understood the
processes.
Young: What if we think about the out-
sourcing of the entire HR program? I don’t
think that’s a fantasy; it could be a reality. It
kind of follows along the lines that we don’t
see HR as strategically critical to the organi-
zation because HR hasn’t been at the execu-
tive committee table for that long. What if
hospitality companies outsource the entire
HR department? I see that as being a bad
thing because we know that human capital or
human performance and the ability to get the
most out of your employees is one of the only
sustainable competitive advantages out there.
If it’s true that HR has a sustainable compet-
itive advantage, then typically you’re going to
want to do it in-house because you do not
want it replicated. Unfortunately, I don’t be-
lieve many hospitality executives agree with
us on this issue. While we see it as bad in the
long term, they see it as good in the short run.
They also can always bring HR back in-house.
We can probably expect those companies on
the top, the really great companies in our
industry, to never outsource HR because
they believe it is too important. Others will
outsource.
Sammons: Outsourced HR has grown
from a $2.5 billion industry in 2002 to what is
expected to be over $15 billion in 2005. How-
ever, I agree that what we are likely to see are
outsourcing of some processes, not whole HR
departments.
Young: Some processes do not have
strategic advantage. For instance, everyone
does fire safety training, and it is pretty much
the same in most companies. This type of HR
training does not increase strategic advantage
and could, and perhaps should, be outsourced
1327.ch09 12/19/05 9:35 AM Page 427
in the future so that HR departments can con-
centrate on more important issues.
Sammons: The issue is money. Outsourc-
ing saves money. If it didn’t, third-party com-
panies would not exist.
Werner: I think the future of outsourcing
can be anticipated. Ten years ago we didn’t
have this word in our vocabulary. Today we all
use it.
Eade: However, we have always out-
sourced jobs. We called it subcontracting for
many years, now outsourcing. It is the same
thing. In the 1970s, many hospitality compa-
nies subcontracted many parts of their HR
departments. Then they mostly brought the
processes back in-house, so it’s back to the fu-
ture for hospitality.
Young: Hospitality owners today are ex-
pecting more. They expect every department
to make money. Food and beverage was, at
one time, viewed as a service, an amenity for
guests. This is no longer true. Today every de-
partment has to make money or it will be out-
sourced or closed. Hotels learned a long time
ago how to turn a food and beverage opera-
tion space into retail shops because they
make more money. Mean, lean, and flexible,
that’s what owners expect today.
Sammons: How people are trained has an
impact on outsourcing. In 2001, for example,
using a lead instructor in a classroom-like en-
vironment completed 77 percent of training.
Two years later this had dropped to 69 per-
cent of training. We are replacing people-led
training with Internet and computer training
because it is more cost-effective. We may
never see the day in hospitality where less
than 50 percent of training is done through
some means other than instructor-led, but it is
likely to be close that percentage. It may well
depend on the age of the employees and man-
agers being trained. Some age groups are
428 Chapter 9 ? Human Resources Policy Management
more amenable to computerized and Internet
training than others.
Another issue of interest to HR in the fu-
ture might be how part-time workers are
used. We now have on-call boards in most
hospitality organizations for most revenue-
producing positions. We are likely to see that
expand to security issues because of the in-
creased criminal and terrorist threat.
Eade: How to address the needs of part-
timers and on-call personnel will be a big is-
sue in the future, and we have not even talked
about it. What do you do about those on-call
steady extras working for you, building loy-
alty? The question for organizations will be
how to keep them on board. This is only one
of the many issues that may be important in
the future.
?
CONCLUSION
Some people say the best way to predict the
future is to look at the past. Others believe
that paying attention to the past simply re-
stricts one’s thinking about the future. No one
really knows.
“The future” does not spring on us all of a
sudden. Instead, it takes its time and eases
over us. Today’s trends predict tomorrow’s
events. The problem is knowing which trends
are important and will affect the future and
which are not. One cannot track all trends,
and even if you could, this would not neces-
sarily help predict the future. Some trends be-
come future events and some do not.
Sometimes the trends are obvious and some-
times they are not. Thus, predicting is difficult,
especially about the future. The past is easier
to predict.
What we have done in this chapter is at-
tempt to analyze the current trends and
1327.ch09 12/19/05 9:35 AM Page 428
events we see in hospitality human resources
and use them to predict the future. We hope
you enjoyed reading our thoughts on this sub-
Section 9.3 ? The Causes and Consequences of Turnover in the Hospitality Industry 429
ject. Remember, the past is history; the future
is a mystery; today is a gift. That is why we call
today the “present.”
9.3 THE CAUSES AND CONSEQUENCES
OF TURNOVER I N THE HOSPI TAL I TY
I NDUSTRY
Carl D. Riegel
C H A P T E R 9 ? E N D N O T E S
1. The title is based on a quote from Marshall
McLuhan, “We drive into the future using
only our rearview mirror.”
2. Corresponding author, Harrah College of Ho-
tel Administration, UNLV.
Turnover is and has been a pervasive problem
for the hospitality industry. Substantial anec-
dotal evidence suggests that turnover rates
can reach as high as 200 or 300 percent in
rank-and-file positions, and management
turnover, at least at the operations level, can
approach 100 percent in some organizations.
While the importance of turnover as a prob-
lem for our industry was somewhat obscured
by the recession of the early and mid-1990s, it
has moved to the forefront with the advent of
unprecedented full employment.
A low unemployment rate presents a
three-pronged challenge for the industry.
First, the number of workers in traditional
target markets for hospitality is decreasing.
This is likely to remain this way for some
years to come. Second, unless the industry can
present opportunities for meaningful ad-
vancement in pay and responsibility, it will
continue to attract, in large measure, a tran-
sient workforce—that is, employees will view
working in the industry as something to do
while they prepare to do something else or
while they wait for “something better” to
come along. Unfortunately, at the time of this
writing, “something better” can easily be
found by talented people who are not happy
working in the industry. Finally, despite un-
precedented efforts to change its image, the
industry is frequently perceived as the em-
ployer of last resort rather than the much-
touted employer of choice. Although this
perception is probably not deserved, it acts to
make the current labor shortage much worse
for the hospitality industry than for many
other fields of employment.
For service industries like hospitality,
turnover is a serious problem. It makes an ex-
isting workforce shortage worse, and in some
1327.ch09 12/19/05 9:35 AM Page 429
cases it can be argued that turnover is a symp-
tom of an insidious organizational disease.
More important, however, is that recent re-
search has established a strong link between
employee satisfaction and overall profitabil-
ity. In this article we examine the concept of
turnover in detail—what it is and why we
should care. Next, we examine what many be-
lieve to be the causes of turnover, and we then
turn our attention to emerging areas of con-
cern about the real costs of employee
turnover. Finally, we examine what some re-
searchers believe will help stem excessive
turnover.
?
WHAT IS TURNOVER,
AND WHY SHOULD WE
BE CONCERNED?
In general, turnover refers to either voluntary
or involuntary separation from organizations
(Bluedorn, 1982). Involuntary separations
(firings) can be a problem if they occur
frequently, but the focus of this article is pri-
marily on voluntary separation from organi-
zations—that is, the process by which people
quit their jobs.
Historically, hospitality organizations
have perceived turnover in two ways. First,
many companies are concerned that turnover
costs the organization money and, because of
that, unacceptable levels should be avoided.
Turnover costs money for a variety of reasons,
including:
1. The actual costs related to separation
2. The cost of replacing employees, such as
advertising, interviewing, and moving
expenses
3. Learning curve inefficiencies by new
employees
430 Chapter 9 ? Human Resources Policy Management
4. Costs associated with the temporary dis-
ruption of the work force
5. Nonquantifiable costs due to diminished
image, customer loyalties to previous em-
ployees, and so forth
Some hospitality firms take the view that
turnover is not necessarily undesirable be-
cause performance and longevity have an in-
verse U-shaped relationship. As Figure 9.1
suggests, performance increases over the
short to the intermediate term but decreases
or stagnates over the long term—that is, the
longer employees stay, the less likely they are
to demonstrate increases in performance.
More importantly, the longer they stay, the
more they cost in raises and increased bene-
fits. Firms adopting this tenure/performance
position are concerned primarily with the dis-
tribution of tenure throughout the organiza-
tion and more likely to concentrate on
appropriate rates of turnover rather than re-
duced rates of turnover. For many firms hold-
ing this philosophy, turnover control
strategies may be viewed as not worth the ef-
fort when pay raises are combined with antic-
Tenure
P
e
r
f
o
r
m
a
n
c
e
Source: Adapted from Staw.
Figure 9.1 Tenure/Performance
Philosophy
1327.ch09 12/19/05 9:35 AM Page 430
ipated future performance. The problem with
both of these philosophies, as we show later in
this article, is that they are limited. They view
turnover as an event or phenomenon rather
than a process. Thus, it is the event that man-
agers must control rather than the process. A
more expansive and probably a more effec-
tive approach does not focus on the turnover
event per se; rather, it comes from a process
perspective that views turnover as but one
outcome of a sequential chain of events. Be-
fore we discuss this notion of phenomenon
Section 9.3 ? The Causes and Consequences of Turnover in the Hospitality Industry 431
versus process, let us turn our attention to the
causes of turnover.
?
THE CAUSES OF
TURNOVER
Many researchers (March and Simon, 1958;
Porter and Steers, 1973; Price, 1977; McFillin,
Riegel, and Enz, 1986) believe that turnover
occurs as a result of a complex series of
Job
Satisfaction
Higher
Organizational
Commitment
Intention to
Stay
Short-term
Impact
(positive job
attitudes, etc.)
The model suggests that intent to leave a job is a function of two
interrelated factors: the level of job satisfaction and the degree of
personal commitment to the organization. Intent to leave is used as
a substitute for turnover, because the ability to leave often influences
whether an individual actually leaves a job.
Lower
Organizational
Commitment
Intention to
Leave
Short-term
Impact
(negative job
attitudes, etc.)
Job
Events
Personal
Characteristics
Job
Dissatisfaction
Source: Adapted from McFillin, Riegel, and Enz, 1986.
Retention
Turnover
Ability to
Leave
Figure 9.2 Model of Turnover
1327.ch09 12/19/05 9:35 AM Page 431
factors that influence employee attitudes and
eventually affect employee behavior. Models
sometimes oversimplify the processes they
represent; however, a model is useful to
provide a reasonable approximation of
reality and is, therefore, useful in assisting our
understanding and predicting outcomes.
The model shown in Figure 9.2 uses “in-
tent to leave” as a measure for actual depar-
ture. Intent to leave is a surrogate or stand-in
measure; however, it has been well substanti-
ated in previous research as a proxy for actual
departure. As the model suggests, intent to re-
main in or leave an organization is a function
of two related factors: the level of job satis-
faction and the degree of an employee’s com-
mitment to the organization. Job satisfaction
is also influenced by individual personality
traits and specific job events. If the level of
job satisfaction is high, then the employee’s
commitment to the organization tends to be
strong and he or she will hold positive job at-
titudes and can be expected to stay on the job.
On the other hand, if the level of job satisfac-
tion is low, commitment decreases, job atti-
tudes decline, and the employee, if given the
opportunity, leaves the organization. This
gives rise to new areas of concern.
?
NEW AREAS OF
CONCERN
We previously explored two of the tradi-
tional philosophies that describe how hospi-
tality organizations view turnover. While
these philosophies point out reasons for or-
ganizations to control or reduce turnover,
they offer a limited perspective of the poten-
tial damage excessive turnover can have. As
we discussed earlier, a more comprehensive
432 Chapter 9 ? Human Resources Policy Management
model views turnover not as an isolated event
but as a process. This process views turnover
as a series of related events, and each of these
events can have negative consequences for
employees as well as for organizations. A
closer look at Figure 9.2 demonstrates this.
According to the diagram, turnover results
from negative attitudes toward the organiza-
tion and occurs only if an employee has the
ability to leave. This means that he or she
must have other job options, not need to
work, or not care to work. If employees have
limited or unacceptable options and do not
have the ability to leave the organization,
they may adopt other withdrawal behaviors
such as complaining, absenteeism, poor per-
formance, or unacceptable customer service
behavior. This implies that turnover is only
one choice of a variety of withdrawal behav-
iors available to disaffected employees, and
disaffected employees can act out these be-
haviors either as isolated occurrences or as a
set of behaviors. Furthermore, the individual
choice of withdrawal behavior depends on a
variety of other factors such as degree of un-
happiness, perception of self-worth, and, most
importantly, the ability to find acceptable al-
ternative employment.
Given this view of turnover, companies
with high rates of turnover are likely to expe-
rience a variety of negative outcomes. One
way to categorize these outcomes is to look at
how they affect individual employees as well
as how they affect the organization in both
the short and the long term. Figure 9.3 indi-
cates that both organizations and individual
employees suffer from the effects of high
rates of turnover including attendance prob-
lems, decreased cooperation, decreased work
performance, and even sabotage. In the
longer term, however, the effects are more
systemic and potentially more devastating.
1327.ch09 12/19/05 9:35 AM Page 432
For example, high rates of turnover can
worsen existing turnover rates, contribute to
system problems such as poor customer rela-
tions, and even eventually limit a firm’s ability
to develop and implement strategy. The po-
tential dollar cost of this is incalculable but
potentially enormous. A question of major
Section 9.3 ? The Causes and Consequences of Turnover in the Hospitality Industry 433
importance for firms with high turnover rates
is not only who leaves but also who stays. In
some cases, it may be that employees who
stay with an organization are not necessarily
the ones the organization wants to keep and
those who do leave are not necessarily the
ones the organization wants to see go. In
INDIVIDUAL
EFFECTS
IMMEDIATE
ORGANIZATIONAL EFFECTS
LONG-TERM
ORGANIZATIONAL EFFECTS
Prewithdrawal
Attitudes
Decreased job
satisfaction
Decreased
organizational
commitment
Intent to leave
Withdrawal
Behaviors
System
Effects
Management
Constraints
System
Effects
Diminished
Strategic
Capacity
Intentional
Attendance
problems
Tardiness
Decreased
cooperation
Decreased
work performance
Complaints to
co-workers
Unintentional
Stress and/or
stress-related illness
Preoccupation with
causes of
dissatisfaction
Inattention
Safety problems
Increased
pressure on
co-workers to
pick up slack
Social learning
of negative
attitudes
Contributes to
routine system
problems
Increased
selection ratio
increases
turnover
Decreased
ability to
develop
managers
Who stays?
Who goes?
Decreased pool
of promotable
managers
Socialization
problems
Norms and goals
Dependence on
survivors
Dependence on
crossovers
Portable
commitment
Culture of
turnover
Other cultural
influence
Management
development
Strategy as
environmental
enactment
Limited range
of strategic
options
Operations
fixation
Managerial
succession
problems
Substitute for
management
Technology
problems
Operational
bureaucracy
Figure 9.3 Effects of Turnover on Hospitality Organizations
1327.ch09 12/19/05 9:35 AM Page 433
some cases, outstanding employees find the
organizational environment so dissatisfying
they opt to separate from the company, and
those who remain are those who can adapt to
a dysfunctional environment or those who
have no choice but to stay.
In addition, there is evidence that exces-
sive turnover rates can have a substantial and
negative impact on profitability. Recently, a
great deal of discussion has centered on cus-
tomer loyalty and the importance of avoiding
customer defections. Simply put, the argument
goes something like this. It costs a great deal to
434 Chapter 9 ? Human Resources Policy Management
create new customers. The costs associated
with advertising, promotion, and other mar-
keting efforts are staggering. Thus it is wiser to
try to retain existing guests than to create new
ones. Furthermore, the longer customers stay
with a company, the more they are worth.
Generally, they buy more, buy more fre-
quently, and are less price-sensitive. In fact,
one management writer (Reichheld, 1996)
suggested that decreasing customer defections
by as little as 5 points can double profits. With
respect to the monetary value of customer or
guest loyalty, several researchers (Heskett
et al., 1984) suggested a strong relationship be-
tween employee satisfaction, customer loyalty,
and profitability. They call this concept the
service-profit chain. As Figure 9.4 illustrates,
employee retention is a key driver in creating
customer retention and is therefore a critical
factor in determining profitability.
The new concerns about turnover dis-
cussed in this section strongly indicate that
the conventional thinking about turnover
may capture just a small portion of its devas-
tating effects. Now let’s look at ways of reduc-
ing turnover.
?
WHAT CAN BE DONE?
A study of turnover in the hospitality indus-
try (McFillen, Riegel, and Enz, 1986) found
that hospitality employees in one organiza-
tion ranked these reasons as the most likely
causes for high turnover rates:
1. Treatment by superiors
2. Amount of work hours
3. Job pressure
4. Scheduling
5. Training
Increased Profitability & Growth
Customer Loyalty
Customer Satisfaction
Perceived Service Value
Employee Retention & Productivity
Employee Satisfaction
Internal Work Quality
Source: Adapted from Heskett et al., 1994.
Figure 9.4 The Service-Profit Chain
1327.ch09 12/19/05 9:35 AM Page 434
6. Fringe benefit packages
7. Better opportunities elsewhere
8. Physical demands of the job
A short-term strategy would be for man-
agers to focus on these reasons—in other
words, working on fair treatment of employees,
creating fair and reasonable schedules, and so
forth. However, these strategies do not neces-
sarily address the causes of excessive turnover
and are likely to have limited effectiveness and
to be short-lived. A longer-term solution would
take into account the causes of worker dissatis-
faction and attempt to deal with these in a com-
prehensive and continuous manner.
Frederick Herzberg (1976) suggests that
dissatisfaction occurs as a result of a lack of
what he calls “hygiene factors” and that satis-
faction occurs as a result of what he calls “mo-
tivators.” While there is not necessarily any
linkage in the organizational behavior litera-
ture between job satisfaction and job per-
formance, a substantial body of theory does
suggest that satisfied employees adopt pro-
social and, therefore, committed behaviors to-
ward the organization. Herzberg says hygiene
factors that can cause dissatisfaction among
employees include salary, working conditions,
fringe benefits, and job security. While paying
a fair salary or providing job security de-
creases dissatisfaction, it does not necessarily
create satisfaction in employees. Motivators
or satisfiers recognized by Herzberg include
achievement, recognition, challenging work,
responsibility, and advancement. These fac-
tors, if provided for by the organization, cre-
ate satisfaction and therefore commitment.
Thus, hospitality managers who are con-
cerned about turnover as an insidious disease
process should not only take care of the ex-
trinsic job factors, such as job security and
salary, they also must pay a great deal of at-
Section 9.3 ? The Causes and Consequences of Turnover in the Hospitality Industry 435
tention to providing opportunities for ad-
vancement, challenging work, and so forth.
In addition to attending to environmental
factors in the organization, paying attention
to the selection of employees in the first place
goes a long way toward quelling dissatisfac-
tion and, therefore, diminishing turnover. An
axiom in the human resource field is that the
goal of selection is not to hire the best-quali-
fied employee but rather to hire the best em-
ployee for the particular job, the point being
that it is important to match prospective em-
ployees to the organization and the position.
Similarly, efforts to select employees who will
be successful in a particular job as well as suc-
cessful in the organizational culture enhance
the likelihood of their retention. Selection is
an important human resource function that is
worthy of substantial effort and care.
?
SUMMARY
Turnover is a problem of longstanding signif-
icance for the hospitality industry. The effects
of high turnover rates on hospitality busi-
nesses are substantially greater than many ex-
isting philosophies suggest, and dealing with
turnover as an isolated event fails to acknowl-
edge its causes and, therefore, is likely to have
limited impact as a turnover control strategy.
Comprehensive approaches that attempt, on
the one hand, to eliminate sources of dissatis-
faction and, on the other hand, to promote
employee satisfaction and retention have
greater potential to strengthen commitment
and, therefore, encourage a wide variety of
pro-social behaviors that will strengthen or-
ganizational effectiveness, eliminate with-
drawal behaviors (of which turnover is one),
and, ultimately, contribute to guest loyalty
and profitability.
1327.ch09 12/19/05 9:35 AM Page 435
Fairness in the workplace is a significant issue
affecting the productivity, loyalty, and com-
mitment employees have to their organiza-
tions. The treatment an employee receives
from his or her supervisor affects the worker’s
motivation to provide excellent service to
customers, ultimately affecting the bottom-
line profits of the organization. Many factors
influence workplace justice. These include the
voluntary human resource management poli-
cies that organizations put into place to pro-
vide fair and equal employee treatment. In
addition, a significant number of federal and
state laws and regulations protect employees
from various forms of discrimination, provide
employees with certain rights, and specify ac-
tions employers must take when hiring and
managing their workforce. Such laws may
vary in their wording and coverage from state
to state. However, they generally mirror law
at the federal level. These laws, which signifi-
cantly affect the human resource function in
hospitality organizations, fall under four gen-
eral categories:
• Those governing equal employment and
opportunity and nondiscrimination
• Those governing compensation and
working hours
• Those governing the health and safety of
workers
• Those governing labor relations and col-
lective bargaining (Jackson and Schuler,
2000)
The judicial process is a dynamic one.
436 Chapter 9 ? Human Resources Policy Management
Continual changes occur in laws and regula-
tions due to amendments to existing laws, en-
actment of new laws, and interpretations
made by courts and regulatory agencies. It is
mandatory for managers to keep up to date
with the status of laws that affect their HR ac-
tivities. Even with appropriate legal counsel,
day-to-day activities of supervisors and man-
agers are often where organizations run into
legal problems. Therefore, it is necessary that
managers be aware of their legal obligations.
Because space does not permit a full dis-
cussion of all relevant employment laws, the
following text concentrates on federal laws
that have seen significant changes in the last
decade as well as those that are forecasted to
change significantly in the next several years
(Flynn, 2000; Goldberg, 1998). They include
sexual harassment and employer liability un-
der Title VII of the Civil Rights Act, the
Americans with Disabilities Act, the Family
and Medical Leave Act, and the Immigration
Reform and Control Act. A discussion of
these laws and implications for hospitality
managers follows.
?
SEXUAL HARASSMENT
In general, sexual harassment is defined as un-
welcome sexual conduct in the workplace
that is a term or condition of employment.
Complaints of sexual harassment fall under
two categories: quid pro quo and hostile work
environment. Quid pro quo harassment is
9.4 CURRENT I SSUES I N HOSPI TAL I TY
EMPL OYMENT L AW
Suzanne K. Murrmann and Cherylynn Becker
1327.ch09 12/19/05 9:35 AM Page 436
said to occur when submission to or rejection
of unwelcome sexual conduct by an individ-
ual is used as a basis for employment deci-
sions affecting an employee. In other words,
when a supervisor demands sexual favors
from his or her subordinate and either prom-
ises an employment benefit, such as a raise or
promotion, or threatens the employee with
loss of such benefits, quid pro quo harassment
exists. Such activities may be subtle or overt,
and the employee must show that he or she
belongs to a protected group, was subject to
unwelcome harassment that was based on his
or her gender, and that acceptance or refusal
resulted or could result in tangible changes to
the working conditions.
While quid pro quo harassment implies
an exchange of sexual favors for work bene-
fits, hostile work environment harassment
refers to the overall working environment in
which employees function. Hostile work envi-
ronment harassment is conduct that unrea-
sonably interferes with the ability of an
employee to perform his or her job properly
or creates an intimidating, hostile, or offen-
sive working environment. This may be so
even if it does not lead to tangible or eco-
nomic job consequences. As in quid pro quo
harassment, the activities or conduct in ques-
tion are unwelcome by the employee and are
based on gender. The employee must also
show that they are sufficiently pervasive and
severe as to have caused an abusive working
environment and that the employer is liable
for these activities. Typical examples of this
type of harassment include unwelcome physi-
cal touching; whistling, leering, improper
gestures, or offensive remarks; unwelcome
comments about appearance; sexual jokes;
and the use of sexually explicit derogatory or
otherwise offensive language.
Sexual harassment in the workplace con-
Section 9.4 ? Current Issues in Hospitality Employment Law 437
tinues to be an important discrimination is-
sue, particularly with recent Supreme Court
rulings (Goldberg, 1998). Two of particular
note, Burlington Industries v. Ellerth and
Faragher v. Boca Raton,
1
have significantly
shaped the obligations of hospitality man-
agers. In them, the Court clearly articulated
the liability of employers for the actions of
their harassing supervisors. First, in cases in
which an employee has suffered tangible,
detrimental employment actions, such as de-
motion, termination, or loss of benefits, the
employer is strictly liable regardless of fault.
Strict liability is premised on the fact that the
supervisors are acting for the employer (com-
pany), and regardless of whether or not the
employer can show it has an antidiscrimina-
tion policy, final responsibility rests with the
company. In cases, however, where the em-
ployee has suffered no loss of tangible job
benefits, the employer can avoid liability by
showing that reasonable care was taken to
prevent and promptly correct any sexually
harassing behavior. Documentation that the
harassed employee subsequently failed to
take advantage of any preventive or correc-
tive opportunities provided by the employer
further minimizes the likelihood of employer
liability for harassment charges.
For hospitality managers to protect them-
selves against charges of sexual harassment,
they need to focus on three major areas: (1)
implementation and dissemination of anti-
harassment and complaint policies, (2) training
of personnel, and (3) complaint investigation.
Though the Court has not specifically
ruled that companies must have policies
specifically targeted to sexual harassment,
many human resource management profes-
sionals feel employers can more easily
demonstrate their “reasonable duty of care”
by developing separate antiharassment
1327.ch09 12/19/05 9:35 AM Page 437
policies. Such policies should explicitly define
sexual harassment, both in terms of quid pro
quo and hostile environment harassment, and
give specific examples of inappropriate con-
duct. Though this point seems obvious, the
policy should also unambiguously prohibit
such conduct. It should also indicate protec-
tion for employees from retaliation for re-
porting harassment. Numerous studies have
shown that employees are often afraid to re-
port inappropriate activities because of fear
of retaliation by their supervisors. Managers
should develop and include in their policy
multiple avenues for filing harassment com-
plaints. One such avenue would be to start
with the employee’s immediate supervisor;
however, an additional route would be to by-
pass the supervisor and complain to an indi-
vidual outside of the supervisor’s direct chain
of command. Assurance of prompt and thor-
ough investigations and privacy are equally
important components of an antiharassment
policy.
As necessary as a well-developed and
well-written policy is, it is also important that
the policy be disseminated in such a way that
all personnel in the hospitality organization
are aware of it. Merely including it in an em-
ployee handbook may not be sufficient. Anti-
harassment policies should be posted in
locations regularly visited by employees as
well as discussed with new employees. This is
especially important in an industry where a
significant part of the labor pool is composed
of employees who do not read and speak
English as their primary language. The com-
pany should also attempt to keep written
acknowledgment that each employee under-
stands the policy.
Periodic training in what constitutes sex-
ual harassment is essential for the prevention
of misconduct in the workplace and the de-
438 Chapter 9 ? Human Resources Policy Management
fense of the employer against liability in court.
The purpose of such training is to make su-
pervisors and employees aware of conduct
that constitutes harassment and provide them
with mechanisms for effectively dealing with
it. Training must be tailored to the individual
workplace and take into account the diversity
of the workforce; however, a number of key
components should be common to training in
this area. Though all employees should attend
training, separate sessions should be held for
supervisors and managers to instruct them in
their obligations to subordinates and their re-
sponsibilities for investigating harassment
complaints. The language and the customs of
employees should always be taken into ac-
count when developing training materials, par-
ticularly when such activities as role-playing
are used. Training in the hospitality industry
should take into account the interaction of
employees with third parties such as cus-
tomers and outside vendors. Managers must
be aware that the employer has an additional
duty of care in the area of customer harass-
ment of employees, and they should be trained
to delicately but effectively deal with such sit-
uations. Finally, care must be taken to select an
appropriate resource for carrying out training.
This may be an in-house trainer or an outside
individual or firm. In any case, the individual
selected should have recognized expertise in
the area of sexual harassment.
The final area of concern for managers is
prompt investigation of harassment com-
plaints. The employer who fails to document
fair investigation of employee complaints will
more than likely be found liable for harass-
ment. All complaints should be investigated
as swiftly as possible by an unbiased investi-
gator who is sensitive to the privacy concerns
of the complainant. If, during the course of
the investigation, there is sufficient reason to
1327.ch09 12/19/05 9:35 AM Page 438
believe the complainant and the accused
should be separated, the complainant should
not be assigned to a lesser job. Such action
could be seen as retaliation for filing a com-
plaint. Relevant material and information
should be obtained, in private, from the ac-
cused and additional witnesses. Based on this,
immediate and appropriate corrective action
should be taken by doing whatever is neces-
sary to end the harassment, to make the em-
ployee whole by restoring lost employment
benefits or opportunities, and to prevent the
misconduct from recurring. If appropriate,
disciplinary action should be taken against
the offending supervisor or employee, rang-
ing from reprimand to discharge. Generally,
the corrective action should reflect the sever-
ity of the conduct. Document the findings and
subsequent steps taken, if any, and place this
documentation in a confidential investigation
file. The Equal Employment Opportunity
Commission policy guidance on sexual ha-
rassment suggests that follow-up inquiries be
made to ensure that harassment is not re-
sumed and that the employee does not suffer
retaliation. Finally, use what was learned from
these investigations to streamline or cus-
tomize future training and policy restate-
ments in this area to more closely align with
specific company needs.
?
AMERICANS WITH
DISABILITIES ACT
The Americans with Disabilities Act of 1990
(ADA) prohibits an employer from discrimi-
nating against a qualified individual with a
disability with respect to job application pro-
cedures, hiring, advancement, discharge, com-
pensation, training, and other “terms,
Section 9.4 ? Current Issues in Hospitality Employment Law 439
conditions, and privileges of employment.”
The Act has undergone almost a decade of in-
terpretation by the courts, which continue to
refine and define its coverage and the respon-
sibilities of hospitality managers. As noted by
many professionals in human resource man-
agement, these rulings at times leave as many
unresolved questions as they answer concern-
ing employer responsibilities.
Under the ADA, a qualified individual is
defined as “an individual with a disability
who, with or without reasonable accommoda-
tion, can perform the essential function of the
employment position that such individual
holds or desires.”
2
There are two questions
the manager must ask when determining
whether an individual is qualified. First, does
the individual satisfy the prerequisites for the
position, such as the appropriate educational
background, employment experience, skills,
or licenses? Second, can he or she perform
the “essential functions” of the position with
or without reasonable accommodation? The
former is answered by comparing the qualifi-
cations of the individual to job-related re-
quirements and production standards
traditional to the industry—for example,
number of rooms cleaned per day. When iden-
tifying requirements, employers should use
those used for other employees in the posi-
tion and not those selected to intentionally
exclude the disabled person. The latter ques-
tion may be answered by defining the funda-
mental job duties of a position in a
well-constructed written job description. Fac-
tors suggested for identifying essential func-
tions include the amount of time spent
performing the function, the number of em-
ployees available to perform the task, the
work experience of past incumbents and pres-
ent employees in the position, and the conse-
quence of not performing the function. For
1327.ch09 12/19/05 9:35 AM Page 439
instance, several courts have found atten-
dance to be an essential function of the job
because the inability to maintain regular at-
tendance creates an undue hardship upon an
employer.
3
A disability is defined under the Act as
(1) “a physical or mental impairment that
substantially limits one or more of the major
life activities of such individual,” (2) “a record
of such an impairment,” or (3) “being re-
garded as having such an impairment.”
4
Impairments may include physiological disor-
ders or conditions, cosmetic disfigurements,
and anatomical loss affecting one or more
major body systems. Before 1998, it was gen-
erally accepted that for an impairment to be
covered under the definition of a disability, it
needed to be a permanent condition that, if
uncorrected, substantially limited a major life
activity such as walking, seeing, hearing, or
speaking. Several Supreme Court rulings
have limited this definition, stating that “an
individual’s corrections, medications, and
even subconscious mechanisms for coping
with an impairment are to be considered
when assessing whether that individual is dis-
abled” and covered under the ADA (Sher-
wyn, Eigen, and Klausner, 2000). These
rulings, though limiting the definition of a dis-
ability in one respect, in no way clarify the is-
sue of what is considered a disability, nor may
they actually limit the number of individuals
claiming discrimination if managers continue
to perceive individuals impaired even with
corrective devices.
Traditional human resource functions and
employment decisions can be considered dis-
criminatory under the ADA. These include
such activities as recruiting, advertising, and
the processing of applications for employ-
ment, hiring, updating, promotion, termina-
tion, compensation, job assignment, and the
440 Chapter 9 ? Human Resources Policy Management
like. In other words, the ADA mirrors, to a
great extent, the rights of protected groups
under Title VII of the Civil Rights Act. Hos-
pitality managers should be aware of a num-
ber of issues unique to disability law. An
employer risks violating the ADA by asking
about medical conditions and disabilities in a
preemployment situation. Questions at this
point should be job-related, with inquiry lim-
ited to the applicant’s ability to perform the
essential functions of the job as described in
the written job description. Preemployment
medical examinations and tests, with the ex-
ception of testing for illegal drug use, are also
seen as discriminatory in the hospitality in-
dustry. The ADA also prohibits disparate
treatment discrimination—that is, limiting
and segregating employees in a way that af-
fects their opportunities because of a disabil-
ity. A hospitality employer that demonstrated
a pattern of hiring disabled job applicants for
back-of-the-house, non-customer contact po-
sitions, though such applicants were able to
perform effectively in customer contact posi-
tions, would be demonstrating potentially dis-
criminatory behavior. The use of employment
tests or other selection criteria that are not
job-related to screen out disabled applicants
is prohibited under the ADA. For example, if
an employer requires an interview that is job-
related and consistent with business necessity
as part of the application process, it would not
be legal to reject a hearing-impaired appli-
cant solely because he or she could not be in-
terviewed.
5
Finally, failure to reasonably
accommodate disabilities of either job appli-
cants or employees constitutes discrimination
under the ADA.
Accommodation for individuals with dis-
abilities is at the core of the ADA. By law, rea-
sonable accommodation mandates employers
to accommodate qualified individuals who
1327.ch09 12/19/05 9:35 AM Page 440
can perform the essential functions of a job,
unless this causes significant difficulty or ex-
pense—that is, undue hardship.
6
Accommo-
dations can be modifications or adjustments
(1) in the job application or testing process
that allow a qualified applicant with a disabil-
ity to be considered for a position equally
with other applicants; (2) in the workplace or
in the manner or method in which the job is
performed that allow the employee to per-
form the job; or (3) that enable the disabled
employee to enjoy the benefits and privileges
of the job equally to those without disabilities.
Types of accommodations may include but
are not necessarily limited to the following:
1. Modifications of existing facilities (ramps
and entrances, bathroom facilities, work-
stations, etc.)
2. Job restructuring
3. Modified work schedules
4. Reassignment to vacant positions
5. Acquisition and modification of equip-
ment or devices
6. Adjustment or modification of examina-
tions or training materials
7. Provision of qualified readers and inter-
preters (for preemployment activities,
etc.)
The EEOC has issued guidelines for em-
ployers to follow for compliance. Hospitality
managers should follow these procedures.
Using the interactive process outlined in the
following guidelines should increase the like-
lihood of employees viewing a manager as
reasonable and concerned about their needs.
1. Notify employees and job applicants of
the employer’s obligation under the Act
to make reasonable accommodations.
2. Wait for a request for a reasonable ac-
Section 9.4 ? Current Issues in Hospitality Employment Law 441
commodation by a qualified individual
with a disability.
3. Analyze the particular job to determine
its purpose and essential functions. Com-
municate to the employee your under-
standing of the essential functions of the
job and the abilities needed to perform
them.
4. Consult with the disabled individual to as-
certain the precise job-related limitations
imposed by the disability and how those
limitations can be overcome.
5. With the disabled individual’s assistance,
identify potential accommodations and
assess the effectiveness of each in en-
abling the individual to perform the es-
sential functions of the job.
6. Consider the disabled individual’s accom-
modation preferences and select and
implement the accommodation most ap-
propriate for both the employee and em-
ployer. This is a final decision that should
be made by the manager.
Given the relative youth of the ADA, it is
anticipated that interpretation of even the
most basic areas of the law—for example, the
definition of a disability—will continue to
evolve. There are, however, certain steps that
many feel to be appropriate for managers
(Sovereign, 1999). Facilities should be made
as accessible as possible. This is particularly
true of the hospitality industry, given its pub-
lic accommodation requirement. Because the
concept of reasonable accommodation is
based on a clear understanding of the essen-
tial functions of the job, well-written job de-
scriptions are extremely important in
managing liability associated with the ADA.
With the exception of drug testing, all preem-
ployment medical inquiries and examinations
1327.ch09 12/19/05 9:35 AM Page 441
should be eliminated. Always attempt to ac-
commodate a qualified disabled individual. A
case of undue hardship can be made after ac-
commodation is researched. Finally, in orga-
nizations that are large enough to support
service staff, an individual should be desig-
nated as the ADA resource for other man-
agers and used when accommodations are
requested.
?
FAMILY AND MEDICAL
LEAVE ACT OF 1993
All hospitality employers with 50 or more
employees are covered by the Family and
Medical Leave Act of 1993 (FMLA). The
FMLA was passed in an attempt to balance
the demands of the workplace with the family
and medical needs of employees. Employers
both in and outside of the hospitality industry
expressed grave concerns over the impact of
the law on workplace productivity and em-
ployer compliance. Many of these fears
proved unfounded; many, however, were not.
Compliance with the law has proved cumber-
some, given its technical recordkeeping na-
ture. Since the enactment of this act, the
Department of Labor (DOL), which oversees
the FMLA, has seen thousands of complaints
filed and has changed the guidelines and di-
rectives to comply with dozens of court
rulings.
The FMLA allows employees up to 12
weeks of unpaid leave during any 12-month
period to deal with family and medical issues.
Companies that employ 50 or more people
(within a 75-mile radius), including part-time
and temporary workers, during each of 20 or
more calendar workweeks in a year are cov-
ered. In order for an employee to be eligible
442 Chapter 9 ? Human Resources Policy Management
for leave, he or she must have worked at least
1,250 hours for the employer. An eligible em-
ployee may take unpaid leave for the follow-
ing reasons;
• The birth of a child
• The placement of a child with the em-
ployee for adoption or foster care
• A serious health condition of a spouse,
child, or parent
• The employee’s own serious health condi-
tion
The DOL regulations define serious
health condition as any illness, injury, impair-
ment, or physical or mental condition that
involves:
• Any period of incapacity or treatment in-
volving inpatient care in a hospital, hos-
pice, or residential mental care facility
• Any period of incapacity requiring ab-
sences from work, school, or other regular
daily activities of more than three calen-
dar days that also involves continuing
treatment by a health care provider.
(Continuing treatment means either treat-
ment two or more times by a health care
provider or one treatment that results in a
regimen of continuing treatment. A regi-
men of continuing treatment includes only
those treatments that cannot be initiated
without a visit to a health care provider,
such as taking prescription drugs. It does
not include taking over-the-counter med-
ication, nor does it include therapy such
as bed rest, drinking fluids, and exercise.)
• Continuing treatment by a health care
provider for any period of incapacity due
to pregnancy or for prenatal care, or for a
chronic or long-term health condition
that is incurable or so serious that, if not
1327.ch09 12/19/05 9:35 AM Page 442
treated, would likely result in a period of
incapacity of more than three calendar
days
As a general rule, ailments such as the
common cold, the flu, earaches, upset stom-
ach, minor ulcers, headaches other than
migraine, routine dental or orthodontia prob-
lems, and periodontal diseases are not seri-
ous health conditions unless complications
arise.
Employers covered by the FMLA must
post notice of the Act and their obligations as
well as provide additional information to em-
ployees concerning their entitlements and ob-
ligations through standard mechanisms such
as employee handbooks and manuals. An em-
ployee requesting leave is required to give 30
days notice to his or her employer, if possible.
If such notice is not possible, the employee
must provide “such notice as is practical” so
that the employer has an opportunity to plan
for the employee’s absence. As little as one to
two days’ notice (or less) may be sufficient in
emergency situations. Employers may require
a medical certification, such as a doctor’s
statement, from a health care provider to sup-
port leave requests. Additional opinions con-
cerning the employee’s condition and
periodic reports from the employee on leave
regarding his or her status and intent to re-
turn may also be required. During the time of
the leave, the employer must continue exist-
ing health care benefits.
Leave can be taken intermittently or on a
schedule that reduces the typical number of
hours per workday or workweek when med-
ically necessary. Incremental leave may be
taken in increments as short as one hour.
Under the FMLA, the employer is obli-
gated to place the employee, once returned
from leave, in the same position he or she left.
If this is not possible, the employee must be
Section 9.4 ? Current Issues in Hospitality Employment Law 443
placed in a position equivalent in pay, bene-
fits, and other terms and conditions of em-
ployment. Based on rulings to date,
“equivalent” appears to be construed as
“identical” by the DOL.
A number of significant compliance is-
sues cause difficulty for human resource pro-
fessionals and employment law attorneys.
Due to their technical nature, they are not dis-
cussed here. However, several issues are wor-
thy of note because they affect hospitality
managers and supervisors in general.
While attendance has been successfully
defended by several employers under the
ADA as an essential function of a job, FMLA
leave absences cannot be used in discipline
and termination decisions. Therefore, it is par-
ticularly important in intermittent leave situ-
ations to record the reasons for absences.
Supervisors should be encouraged to docu-
ment “verbatim reasons” for absences. This
information allows a manager to conduct an
“FMLA audit” of employees who may be un-
dergoing disciplinary action for excessive
absenteeism.
Though the FMLA does allow for man-
agers to require medical certification from
employers for leave purposes, as well as sec-
ond opinions, overuse of such information
could open up liability under the ADA (Shea,
2000). Managers must be wary of asking for
more medical information than is necessary
for the purposes of granting FMLA leave.
Medical certification is a useful tool to em-
ploy if there is doubt about the existence or
extent of an employee’s health condition.
However, it is not necessary as long as the ab-
sence has been noted as FMLA leave.
A “serious” health condition under the
Act may include many “minor” illnesses
and conditions of short duration. Absences of
less than three days may also be considered
1327.ch09 12/19/05 9:35 AM Page 443
legitimate reasons for leave. This is due to the
interpretation of the FMLA-specific wording.
Indeed, many experts in the area agree that
regulations have gone beyond the intent of
the legislation in terms of interpreting what a
serious illness should be. Managers should be
aware that, at this point, a liberal interpreta-
tion must be placed on this definition.
?
IMMIGRATION REFORM
AND CONTROL ACT
OF 1986
In 1986, Congress enacted the Immigration
Reform and Control Act (IRCA) in response
to significant increases in undocumented im-
migration and vocal concerns from unhappy
voters. This law was an attempt to control un-
documented immigration in a number of
ways, including the imposition of sanctions
on employers for knowingly hiring un-
documented workers. In addition, the law
provided for amnesty for undocumented im-
migrants who could demonstrate a record
of continuous residence in the United States
for a designated period. These regulations,
along with increased support for border pa-
trol activities, were thought to significantly di-
minish the attractiveness of U.S. jobs for
undocumented workers, thereby protecting
jobs and wages for legal workers in the
United States.
Critics of the IRCA argued that it would
encourage employers to engage in greater
discrimination against U.S. citizens and legal
aliens based on their appearance and cultural
background, and safeguards against such dis-
crimination were included in its content.
However, several studies to date have shown
that even with these safeguards in place, a
444 Chapter 9 ? Human Resources Policy Management
pattern of discriminating against individuals
based on physical appearance or accent exists
(Phillips and Massey, 1999). Such discrimina-
tion includes the denial of jobs as well as pay-
ing lower wages to undocumented workers.
This decrease in pay, below legal minimum, is
thought to take place to compensate for the
risk involved in being sanctioned under the
Act.
The IRCA requires employers to verify
the employment eligibility of all employees
hired by and working for the organization and
to complete and maintain eligibility paper-
work. This paperwork, commonly referred to
as I-9 forms, must be maintained on all em-
ployees, U.S. citizens as well as aliens author-
ized to work in the country. The Immigration
and Naturalization Service (INS) is charged
with enforcing the IRCA. However, any num-
ber of other federal agencies, including the
EEOC, the Justice Department, and the De-
partment of Labor, may request a review of
the eligibility documentation records of a com-
pany. Employers must verify an employee’s or
applicant’s identity and eligibility to work by
requesting proof of both within three days of
hire. Documents that can be used to verify
identity include a state driver’s license, state
or school I.D. card, and a voter’s registration
card. Eligibility to work may be established
using a number of documents including a So-
cial Security card, birth certificate issued by a
U.S. state, county, or municipal authority, or
an unexpired INS employment authorization.
Some documents, such as a U.S. passport, es-
tablish both identity and work eligibility. A
complete list of all appropriate documents is
provided on the back page of the I-9 form.
As mentioned earlier, the Act contains
antidiscrimination provisions that are in addi-
tion to and do not change discrimination un-
der Title VII of the Civil Rights Act. The
1327.ch09 12/19/05 9:35 AM Page 444
IRCA bans discrimination against legal aliens
or people intending to become U.S. citizens.
An alien has employment rights equal to a
U.S. citizen, unless citizenship is a bona fide
occupational qualification. If an alien is au-
thorized to work in the United States, an em-
ployer cannot give preference to a U.S. citizen
who is less qualified.
Employers have several responsibilities
under the law:
1. Employers cannot request more or differ-
ent documents than are required under
the provisions of the law. Though it is of-
ten easier for managers to require spe-
cific, approved documentation such as a
driver’s license or Social Security card,
they must accept any qualified document
from the I-9 list if it appears to be valid.
2. Employers cannot knowingly use, at-
tempt to use, possess, obtain, accept, or re-
ceive any forged, counterfeit, altered, or
falsely made documents. It is often ex-
tremely difficult to identify counterfeit
documents. However, managers should
closely scrutinize the documentation of
all applicants for obvious falsification—
for example, multiple individuals with the
same or similar Social Security numbers.
3. Employers cannot backdate or otherwise
falsely make I-9 forms appear as if they
are or have been in compliance with the
IRCA. Individuals responsible for hiring
on an ongoing basis should perform eligi-
bility verification. Paperwork should be
kept up to date.
4. Employers must have new employees
complete Section 1 of the employment
verification I-9 at the time of the hire by
filling in the correct information, signing,
and dating the form.
Section 9.4 ? Current Issues in Hospitality Employment Law 445
5. Employers are responsible for reviewing
and ensuring that the employees fully and
properly complete Section 1 of the em-
ployment verification I-9. Applicants who
do not fully complete this section should
not be hired.
6. Employers must examine the original
documents(s) (the only exception is a cer-
tified copy of a birth certificate) pre-
sented by the employee and then fully
complete Section 2 of the employment
verification I-9.
7. Employers must keep the employment
verification I-9 for three years after the
date employment begins or one year after
the person’s employment is terminated,
whichever is later.
In order to avoid penalties under the
IRCA, hospitality managers should use the
following checklist:
• Verify employment status of every person
hired.
• Employ only U.S. citizens and aliens au-
thorized to work in the United States.
• Verify employees’ status within three
days of their being hired to work.
• Inform each new job applicant, either
orally or in writing, that you hire only U.S.
citizens and aliens lawfully authorized to
work in the United States and that you re-
quire all new employees to complete the
designated verification for I-9.
• Examine documentation presented by
new employees, record the information
on the I-9, and sign. Retain these docu-
ments for three years.
• Do not ask for proof of citizenship or au-
thorization to work before deciding to
hire the applicant.
1327.ch09 12/19/05 9:35 AM Page 445
• Do not refuse to offer employment to
anyone on the basis of foreign accent or
appearance.
• Do not discharge present employees
based on foreign appearance or language.
The above discussion of these key issues
only scratches the surface of the legal chal-
lenges facing hotel HR managers. When you
446 Chapter 9 ? Human Resources Policy Management
consider that the 535 members of Congress
and the members of 50 state legislatures are
constantly proposing laws that result in regu-
lation, it is easy to see why HR managers can
face daunting tasks in assisting the organiza-
tion and its managers in staying out of legal
trouble.
C H A P T E R 9 ? E N D N O T E S
1. Burlington Industries v. Ellerth: 524 U.S. 742;
118 S. Crt. 2257 (1998); Faragher v. Boca Ra-
ton: 524 U.S. 775, 118 S. Crt. 2275 (1998).
2. 42 U.S.C. §1211(8).
3. Tyndall v. National Education Centers: 31 F.
3rd 209 (4th Cir. 1994); Earl v. Mervyns Inc.:
No. 99-4264 (11th Cir. 2000).
4. 42 U.S.C. §12102(2).
5. 29 CFR Part 1630, Appendix § 1630.15(a).
6. Undue hardship is assessed by reviewing the
nature and cost of the accommodations
needed; the financial resources of the em-
ployer; the size of the company and the num-
ber of its facilities; the financial resources of
the facility itself; and the effect of the accom-
modation on the expenses or operations of the
facility, on other employees’ ability to do their
jobs, and on the facility’s ability to conduct
business (ADA Sec. 101[10], 42 U.S.C.
12111[10]; EEOC Sec. 1630.2[p]).
9.5 THE STRATEGI C AND OPERATI ONAL
ROL ES OF HUMAN RESOURCES—AN
EMERGI NG MODEL
J. Bruce Tracey and Arthur E. Nathan
Effective human-resources management is
one of the most important considerations in
creating and maintaining a competitive ad-
vantage for a hotel (or, for that matter, any
hospitality organization). Indeed, human-
capital considerations top the list of current
managerial concerns in the hospitality indus-
try (Enz, 2001, 38–45). Despite the industry’s
concern with human resources, however, the
HR function is oddly disconnected from the
line function. That disconnect is evident on
two primary levels. First, we argue that many
business leaders fail to fully consider HR in-
fluences when making long-term plans. While
most executives acknowledge the importance
of HR for implementing strategic plans—
1327.ch09 12/19/05 9:35 AM Page 446
“making it happen”—we have seen few who
formally incorporate HR concerns when de-
veloping a strategic direction. While the pre-
dominant framework requires consideration
of HR strengths and weaknesses during the
strategy-formulation process, HR is primarily
viewed as an “enabling” function, responsible
for implementing “the plan,” and thus largely
ignored during the initial planning stages.
Second, we argue that many HR depart-
ments fail to execute even the most basic
functions effectively. Many firms’ policies and
practices are archaic, inflexible, and do not di-
rectly benefit those who are most keenly af-
fected by HR actions. Based on those
concerns, we advocate the need for a new
model of HR—one that should be used as a
guide for developing vision, values, and goals,
and one that creates a more effective and ef-
ficient function for attracting, developing, and
retaining quality employees.
To explain our model, we will first discuss
the manner in which HR can contribute to the
strategic-planning process. We then present
data that demonstrate the link between HR
practices and systems on important business
objectives. Finally, we offer some ideas that
may change the prevailing paradigm and
the operational role of HR in hospitality
organizations.
?
HR AND STRATEGIC
PLANNING
Our observations are that HR suffers from a
negative image in many hospitality organiza-
tions and that, sadly, it has earned that nega-
tive image. The following views of HR may
be familiar: HR is basically an employee-
advocate function and represents the “soft”
Section 9.5 ? The Strategic and Operational Roles of Human Resources—An Emerging Model 447
side of the business; HR is a cost center since
it does not generate revenue; HR serves as an
administrative-support office and organizes
the company picnic; and HR is responsible for
implementing strategy, not developing strat-
egy. We could go on, but the point is made: hu-
man resources gets much lip service but no
respect.
One of the reasons for this negative im-
age may be the narrow application of the
strategic-planning process taken by many
business leaders. Too often, the human-
resources function is left out of key planning
steps. The following comment illustrates our
point. A successful hospitality executive and
colleague of ours maintains that his primary
function is to determine the vision and direc-
tion of the firm, and then it’s up to HR and
other departments to “make it happen.” This
statement summarizes his views:
HR as a function does not per se have a dedi-
cated role in the strategic-planning process.
Corporate strategic planning begins with an ex-
ternal assessment of opportunities and threats
and an internal assessment of firm strengths
and weaknesses. This process is not driven by a
function or discipline formula, but rather by an
evaluation designed to determine the relative
importance and veracity of assumptions man-
agement has made about the industry and the
firm. Management combines its fact-based
knowledge with its assumptions and beliefs
about the business it is evaluating. Strategic
planning, at its core, is the process by which the
veracity of these assumptions and the relative
importance each has to the overall outcome are
revealed. Functional executives confound and
corrupt the initial stages of the planning process
by becoming caught up in interdisciplinary is-
sues that should be subservient to the strategy
process they aspire to influence. As such, the
1327.ch09 12/19/05 9:35 AM Page 447
CEO is forced to pull the process of formulat-
ing strategy away from these executives and
rely more heavily on his or her own judgment
or a formal strategy group of executives with-
out discipline responsibilities.
1
In this leader’s view, HR plays a sub-
servient and reactionary role in the business-
planning process. While this is only one
individual’s perspective, we’ve encountered
many who share similar views. We contend
that HR considerations must be taken into ac-
count not only during strategy implementa-
tion, but also during the process of developing
that strategy. Indeed, the prevailing models of
business planning support this contention.
Several approaches can be used to predict
a firm’s competitive position and develop
strategic plans. The traditional SWOT model
(i.e., strength, weakness, opportunity, and
threat) is based on a matching process such
that a firm’s strategic direction is based on the
fit between external conditions (i.e., opportu-
nities and threats) and internal capabilities
(i.e., strengths and weaknesses). Based on this
assessment of fit, leaders can then take ac-
tions intended to achieve a sustained level of
competitiveness—for instance, by using inter-
nal strengths to exploit external opportunities
and taking advantage of opportunities to mo-
tivate change and fix internal weaknesses. An-
other popular framework, VRIO analysis,
extends the SWOT model and maintains that
competitive advantage is gained by identify-
ing and exploiting the rare, distinctive compe-
tencies of the firm (Barney, 1997). The VRIO
explanation considers a firm’s resources—un-
derstood in terms of value, rarity, imitability,
and organization—as keys to long-term effec-
tiveness. In simplified terms, value is charac-
terized by the firm’s internal resources that
can be used to respond to external threats;
448 Chapter 9 ? Human Resources Policy Management
rarity is associated with the scarcity of such
resources in the external environment; im-
itability is based on the ability of competitors
to acquire, duplicate, or substitute valued re-
sources; and organization is associated with
the firm’s structure and systems that are used
to extract the greatest degree of value from a
given resource.
These and other models (e.g., portfolio
assessments, competitor ranking) that can be
used to analyze strategic positions and develop
plans have at least one thing in common: the
human element is central to an analysis of in-
ternal strengths, resources, and capabilities.
Technology, in contrast, is quite imitable and
thus should not be considered as a source of
competitive advantage. Human capabilities,
and the social context in which such capabili-
ties are applied, are difficult and perhaps im-
possible to copy or transfer to settings outside
the focal context. While access to capital, rela-
tive market share, brand image, and service
quality are all essential to a hospitality busi-
ness, such concerns would be largely irrelevant
if the appropriate human resources were un-
available. Therefore, while HR may not be the
most important consideration during the
strategic-planning process, this factor cannot
be ignored when developing long-range plans.
?
EVIDENCE FOR THE
STRATEGIC IMPORTANCE
OF HR
Despite HR’s apparent image problem, it re-
mains an essential function. Much has been
written about the critical role of HR for
achieving business goals and objectives, and
there is a growing literature that shows HR
policies, practices, and systems are related to a
1327.ch09 12/19/05 9:35 AM Page 448
variety of financial and operational success
indicators.
2
Indeed, there is some rather com-
pelling evidence that the proper alignment
between HR systems and business strategy
will enhance a firm’s performance.
3
We will
complement this literature by presenting two
hospitality-specific examples that support the
strategic importance of HR for not only im-
plementing long-range plans, but also devel-
oping such plans.
Example 1: Compensation and turnover.
The 2000 Lodging Compensation and Bene-
fits Survey, conducted by Realtime Hotel Re-
ports (now part of Smith Travel Research)
and sponsored by the American Hotel Foun-
dation, provides direct evidence for the
need to consider HR factors throughout the
strategic-planning process. In addition to
compensation levels and benefits offered by
over 2000 hotels, the survey also gathered
information about employee turnover.
Turnover is a key concern to many hospitality
employers. It can be quite costly (Hinkin and
Tracey, 2000, 14–21) and has been shown to be
related to many important outcomes, includ-
ing profitability (Simons and Hinkin, 2001,
65–69). As such, understanding HR policies
and practices that can contribute to turnover
can lead to more insightful strategic and op-
erational decision-making.
An analysis of the relationship between
compensation level and total annual em-
ployee turnover (Table 9.1) yielded statisti-
cally significant results for the following
positions.
4
While the magnitude of the correlations
demonstrates that a great deal of variance in
the compensation-turnover relationship re-
mains unexplained, the data suggest that com-
pensation does have an effect on intentions to
stay or leave—a finding supported by related
research (Simons and Enz, 1995, 20–27).
Section 9.5 ? The Strategic and Operational Roles of Human Resources—An Emerging Model 449
Example 2: Training, turnover, and sales.
The second example is based on an analysis of
training, employee turnover, and sales data
gathered from a privately held restaurant
company that currently owns and operates
approximately 115 restaurants and franchises
an additional 70 throughout the United
States. Complete data for 96 corporate-owned
stores were gathered over a 12-month period
beginning in January 2001. The primary
proposition was that investments in training
and employee turnover would be significant
predictors of net sales. The training variable
was expressed as the number of hours per
month dedicated to skill-based programs (e.g.,
new employee training) and development-
based programs (e.g., interpersonal customer
service) for line staff. Employee turnover was
also measured on a monthly basis (i.e., num-
ber of new hires divided by the total number
of employees at the end of the month), as was
net sales.
After accounting for store-specific effects
(e.g., location, size) and time effects, the re-
sults from regression analyses of the panel
Table 9.1 Analysis of the Relationship
Between Compensation Level and Total
Annual Employee Turnover
Position N X
General manager 363 ?0.24
Director of sales and marketing 172 ?0.20
Sales manager 145 ?0.19
Reservations manager 94 ?0.19
Controller 125 ?0.19
Front-office manager 220 ?0.17
Restaurant manager 109 ?0.17
Chief engineer 252 ?0.11
Executive housekeeper 311 ?0.10
1327.ch09 12/19/05 9:35 AM Page 449
data showed that both training and turnover
accounted for significant variance in store
sales.
5
These results suggest that if sales are
influenced by training and employee
turnover, then long-range plans for growth
must consider the consequences of HR deci-
sions regarding employee development and
retention.
These two examples demonstrate the ef-
fects that HR can have on strategic and oper-
ational goals. Although researchers and
practitioners have yet to fully understand the
process by which the various HR policies,
practices, and systems might influence long-
range effectiveness, the data presented here
reinforce the need to consider HR through-
out the planning process. However, it’s not
enough simply to incorporate HR influences
more broadly—the HR function must also be
reconsidered. We contend that a holistic and
collaborative approach to HR is required, one
in which the HR function is closely integrated
within the strategic and operational elements
of the firm. Thus, HR plays a critical role in
designing structures, facilitating change, and
evaluating progress. This objective requires
that firms embrace a new model of HR to
achieve and sustain a competitive advantage.
?
A NEW MODEL FOR
HUMAN RESOURCES
The traditional role of HR is more appropri-
ately termed “personnel.” In this role, person-
nel professionals were responsible for
recruiting and hiring, compensation- and
benefit-program design, negotiating and ad-
ministering collective-bargaining agreements,
policy development, personnel recordkeep-
ing, and serving as a conduit for employee
450 Chapter 9 ? Human Resources Policy Management
views and concerns. Over the years, personnel
was renamed human resources, and its role in
the organization (in addition to its existing
functions) became one of integrating people,
policies, and cultures. To meet the needs of
this role, HR practitioners’ responsibilities
were expanded to include communications,
training, safety, employee relations, and
recognition and reward programs. Along with
those additional responsibilities the HR
department became responsible for the orga-
nization’s legal compliance in the ever-
expanding area of employment law.
The expansion of the HR function re-
sulted from changes in the way businesses
were managed. One such change was the ex-
plosion of mergers and acquisitions in the ho-
tel and restaurant industry. In the past 20
years mergers and acquisitions have tested
HR practitioners’ ability to be flexible, detail
oriented, and expeditious in both their sup-
port of other business functions and in the de-
cisions they make related to HR issues. These
increases in responsibility, occurring along-
side changes in the business, transformed HR
professionals from generalists to specialists.
This metamorphosis also fostered the percep-
tion—often promoted by HR—that only
“specialists” could handle such complicated
issues. The HR model that emerged was one
based on the centralization of knowledge, re-
sponsibility, authority, accountability, and
control within the HR department.
Even as all this was taking place, however,
business practices were changing. As a col-
league of ours succinctly put it:
As organizations began to realize that different
businesses needed and could afford different
types of HR programs and benefits, even within
the same corporation, HR began to decentral-
ize, replicating the centralized HR structure at
1327.ch09 12/19/05 9:35 AM Page 450
division and even business-unit levels. This had
the advantage of supporting differentiated HR
for each business, but its redundancies cost a lot
of money and the specialist jobs got smaller
(i.e., they supported smaller groups of employ-
ees) and thus attracted less capable or experi-
enced people.
6
Added to the complexity of this decen-
tralized approach is the fact that business
leaders are under extreme pressure to reduce
expenses, increase productivity and revenues,
and realign their organizations to become fo-
cused on core issues. In the last five years,
these changes have led to enormous pressures
being placed on businesses to reevaluate the
HR function, its role and responsibilities, and
how these integrate with the rest of the or-
ganization. High-performing organizations
today are looking for ways to transfer author-
ity, responsibility, and accountability for HR-
related transactions and decisions to line
managers and, in some instances, employees.
The ramifications of this are enormous. Ironi-
cally, we see the most resistance to this change
often coming from HR itself.
?
A DECENTRALIZED
FOUNDATION
The underlying premise of our model is that
all decision-making authority, responsibility,
and accountability should be vested in the
person who supervises the employee. Thus,
decisions related to hiring, promotion or de-
motion, training, work actions,
7
pay, and
scheduling can and should be made by the im-
mediate supervisor of the affected employee.
In many cases actions of this kind do require
additional approvals from the company’s up-
per echelons. However, the farther away from
Section 9.5 ? The Strategic and Operational Roles of Human Resources—An Emerging Model 451
the source that these decisions are actually
made, the less likely it is that real-time and
relevant information about the decision and
its outcome will be available for the decision
maker. It is also important to note that the
time it takes to complete the decision-making
process is extended in direct proportion to the
distance it has to travel through an organiza-
tion’s bureaucracy.
One key construct in our proposed HR
model is that HR practitioners will no longer
make operational decisions, but rather act as
consultants to other business functions by de-
signing, developing, and delivering programs
that give line managers the tools and training
they need to effectively perform their respon-
sibilities. The following scenarios represent
common decisions made by HR practitioners.
Scenario 1: An employee resigns and the
manager needs to fill the vacancy. The process
will probably include deciding whether the
open position can and should be filled, locat-
ing and interviewing applicants, determining
whom to hire and how much to pay that per-
son, assigning a start date, conducting train-
ing, and determining whether to retain the
new employee. In the real world the immedi-
ate supervisor will know the most about
everything relating to those issues and be in
the best position to make the most appropri-
ate and timely decisions. The need for direct
HR intervention should be minimal.
Scenario 2: A service employee is not per-
forming up to expectations in spite of being
trained and supervised. The organization has
documented policies and practices relating to
progressive discipline and the issuance of no-
tification to the employee. The supervisor
should have full authority to determine the
need, timing, wording, and level of notice to
be given. While it’s practical to assume that
this type of decision might require some
1327.ch09 12/19/05 9:35 AM Page 451
additional approvals, the managers directly
related to the employee’s performance are
best suited to understanding the issues and
nuances involved.
In these situations, usually there are poli-
cies and processes that require the involve-
ment of the HR department. Yet in most
organizations these decisions are best made
in a timely manner by the individuals who
know the most about the issues. HR special-
ists should be involved in this decision-
making process, but final decisions would
ultimately be made by individuals outside of
the HR function.
Our model has drawbacks, perhaps, but
some of that relates to the fact that HR infor-
mation is not always shared with line man-
agers. One drawback is line managers’
potential ignorance of the fine points of HR
practice and law. The centralization of the HR
function occurred in part because there was a
belief that the legal and organizational issues
involved in making HR decisions were so
complicated that it would not be prudent to
trust non-HR supervisors to make them.
Moreover, the decentralized model’s re-
dundancies could be costly. Under the new
HR model the power to make decisions is en-
trusted to line managers. In this model it is the
role of the HR practitioners to assist compa-
nies in training managers how to make and
implement business decisions and then en-
trust them with the authority to do so. If such
decision-making power is not distributed to
line managers, they will not gain the necessary
skills to be able to effectively perform their
duties. In contrast, if line managers are sup-
ported in the HR function, the necessary in-
formation will be spread throughout the
organization.
The examples in Table 9.2 illustrate how
HR practitioners can use the constructs of
this new model.
452 Chapter 9 ? Human Resources Policy Management
The responsibilities identified in Table 9.2
follow the functions that are traditionally
found in HR departments. Organizations with
centralized HR functions adopt these “tradi-
tional practices” on the theory that they are
specialized and should only be conducted by
those who are trained and skilled. That ap-
proach presupposes that being in HR is the
only way to gain that expertise, and further,
that this expertise is more important than un-
derstanding the operational nuances that ex-
ist at the line level. We suggest that HR
expertise can be gained by those at the line
level more easily than can the nuances of de-
partmental activity be understood by those in
HR. The key to transferring these responsibil-
ities to the line level is training the supervi-
sors in how best to perform these duties,
providing them with the tools and technology
to effectively and efficiently carry out these
responsibilities, supporting them with advice,
and monitoring their performance. This
means that the role of HR changes from gate-
keeper and decision maker to trainer and
supporter.
Additionally, management should put in
place strategies that reinforce the perfor-
mance of managers who adopt and success-
fully handle these duties. Indeed, that should
be tied to their reviews and total compensa-
tion. This is consistent with the goals of (a) the
organization to have better-trained and -per-
forming managers, and (b) most HR profes-
sionals to be more of an internal consultant
and strategic partner than mere arbiters of
proper practice. This new construct allows the
line managers to achieve new competencies
and control, while giving HR professionals
the chance to become more of what they
want to be—and should be. The organization
benefits from using this new model, be-
cause decisions are made more quickly and
appropriately, allowing the business to be
1327.ch09 12/19/05 9:35 AM Page 452
Section 9.5 ? The Strategic and Operational Roles of Human Resources—An Emerging Model 453
Table 9.2 Examples of the New HR Model in Operation
Traditional Practice Suggested Practice Under the New Model
Recruitment
HR departments have As part of the strategic planning and budgeting process, departments should be
become gatekeepers for responsible for determining and justifying staffing levels. Once identified, decisions
whom and how many to hire. on whether to fill positions, and with whom, should be left to the department. The
role of HR should be to establish suggested sources for obtaining applicants (both
internal and external), designing methods for communicating with applicants using
those sources, and developing an applicant tracking system. HR should also assist
line managers in developing appropriate interviewing methods and materials, train
the managers to use them, and monitor the process for legal and policy compliance.
Information technology now exists to provide managers with self-service capabilities
to find and track applicants. At Bellagio, for example, HR designed a self-service
system for applicants, which eliminated the need for data input by HR staff and
allowed applicants (both internal and external) to update and monitor their
application information and status. These systems are always available and can help
reduce the workload of the HR staff.
Compensation
HR departments control Salary administration can be managed by line departments through technology,
both the design and such as the web-based models developed by Melon’s HR Solutions group, that
administration of the provides managers with the data and analytical tools that they need. This gives the
compensation program. responsibility and accountability for these decisions to the departments; HR’s role is
to provide advice and establish proper control mechanisms to prevent the inexpert
(non-specialist) manager from making inappropriate decisions. In this role, HR
facilitates the gathering of competitive data and then provides it directly to line
managers so they can do their own payroll modeling.
Job Training
New hires attend an All new employees attend a general company orientation that is designed by HR
orientation conducted by and presented by fellow employees. This will give the new hires a peer perspective
HR, and then they are and help them to develop relationships with other employees. Department and job
given some form of training should be conducted by a trained trainer from the new employee’s
on-the-job training. department or job. This trainer should have the added responsibility of evaluating
the new employee’s performance and conducting any retraining that may be
required. HR’s role should be helping to create the training materials, training the
trainers, and implementing a tracking system to allow managers to monitor course
attendance and related performance. Park Place Entertainment, for instance, has
developed this type of employee development system. The HR department has
developed scripts and protocols that serve as templates for all training and
development efforts. Line managers are primarily responsible for content, giving
them more control over the job- and department-specific training needs. An
example of this decentralized approach to development is PricewaterhouseCoopers,
which has developed online knowledge management systems that give consultants
access to problem solutions that have been identified from prior projects and that
may have relevance for current client needs. This type of real-time learning
enhances the quality and efficiency of project work.
1327.ch09 12/19/05 9:35 AM Page 453
Table 9.2 (Continued)
Traditional Practice Suggested Practice Under the New Model
Record Maintenance
Managers fill out work-
action documents (e.g., wage
and job changes, disciplinary
notices, and performance
reviews) and submit them to
HR. These are then checked
for accuracy and keyed into
a database, and the originals
are placed in file folders.
Employees also submit
information that initiates
actions such as vacation
requests, address changes,
and other general requests.
These are routed through
MR in a similar manner as
the management documents.
Using self-service technology, managers and employees fill out and submit
transaction data directly to HR or the database, where they are ultimately stored
and used. Starwood’s online “executive dashboard,” for example, provides the
corporate office with continuous information about a wide range of property-level
data that are directly related to strategic goals—from employee and guest
satisfaction data to occupancy and rate information. In addition, operations
managers have direct access to the data, thus freeing HR from the responsibility of
facilitating access requests and generating reports. HR should learn about
technology and actively participate in the development of these self-service tools,
and then train managers how to use them. Many organizations today are
outsourcing HR, payroll, and benefits administration, and are using Internet
connectivity to facilitate transactions and maintain access to their data. Many are
also adopting shared-service approaches that are designed to bring more
functionality and service capabilities to line managers and employees.
Management Policies
Most companies have
handbooks and policy
manuals that strictly define
legal concerns and consistent
policies and processes. These
materials are often printed
and distributed in hopes that
employees will keep them in
an accessible place and read
them when needed. They
seek to cover every
conceivable circumstance
with carefully written rules,
policies, and practices.
Replace companywide rules with concepts that are consistent with local and
departmental concerns. Involve line managers in the process of determining these
concepts to ensure that they are applicable to the department’s needs and concerns.
Base the concepts on values and principles rather than rules. Policies and practices
should focus on being fair rather than merely consistent. Workers in the 21st
century expect to be treated as individuals, and when presented properly these
practices have greater acceptance than those that treat everyone identically in every
circumstance. Practices of this kind will be easiest for managers to understand, use,
defend, and enforce. For example, Le Parker Meridien in New York City has a long
history of focusing on values—from “frank and fearless feedback” to “happy but
never satisfied”—which are the primary drivers for individual behavior and set
standards for accountability and performance. HR should also monitor competitive
practices and provide this information to managers. In some cases, this
benchmarking information is also available online.
Organizational Structure
Most companies have a
hierarchical design in which
decisions are made at the
top and then implemented at
the bottom of the
supervisory structure. While
empowerment as a practice
has been widely debated,
most organizations still
maintain practices where
authority is vested at the
highest levels of this
hierarchy.
Companies such as Winegardner & Hammons are flattening their organizational
structures and giving line managers the flexibility and authority to make decisions.
In other organizations, such as The Boulders in Carefree, Arizona, self-managed
work teams are obviating the need for supervisory interventions and allowing
trained employees to set the tone and monitor the behavior of their teams. Within
both structures, decisions are made in context, with a focus on what is most relevant
and important to those involved.
1327.ch09 12/19/05 9:35 AM Page 454
more focused on its core responsibilities of
production and service.
?
ENABLING
TECHNOLOGY
Public and private companies alike are
driven to make effective decisions and to im-
prove performance through expense control
and revenue improvement. Over the past 20
years, tools have been developed to help or-
ganizations achieve these goals. This trend be-
gan when financial departments discovered
online analytical processing (OLAP) tools
that allowed them to collate and query infor-
mation from all of the disparate files in their
databases and develop queries therefrom.
This ad hoc interactive querying capability al-
lowed them to conduct complex multidimen-
sional analyses and more rapidly discern
issues that needed to be addressed. This prac-
tice provided a means for organizations to
control expenses more effectively and thus
improve their bottom lines.
The next challenge involved improving
revenues beyond the normal realm of sales
and marketing. Those same OLAP tools,
when applied to complex and disparate cus-
tomer databases, allowed companies to tar-
get their efforts and dollars in ways that
maximized revenue opportunities. Today,
customer-relationship-management (CRM)
systems are helping these companies to better
use their resources to satisfy their customers
and increase revenues. Much has been written
about these practices. For example:
The new cross-departmental imperative for
companies in virtually all industries is to em-
power decision makers to obtain quick answers
to their business questions by immediately ac-
Section 9.5 ? The Strategic and Operational Roles of Human Resources—An Emerging Model 455
quiring the information they need. The effective
sharing, distillation, and analysis of information
among such an array of departments—cus-
tomer relationship, sales, product planning,
marketing, and finance, for example—coalesces
into an enterprise-wide intelligence that is
greater than the sum of its informational parts
(Liautaud and Hammond, 2001, 5).
As these practices become perfected, or-
ganizations will look for additional ways to
improve performance, and we suggest that
HR is the next area to which these might be
applied. Adding employee-activity data to the
practice of interactive and multidimensional
analyses will help organizations to truly get
the most out of their human resources. To
gain this capability, human-resources depart-
ments in highly successful organizations “will
understand how to use systems and software
to solve business problems and will exploit
technologies to achieve their business goals”
(Boyett, Boyett, Henson, and Spirgi-Hebert,
2001, 28). The decision makers in this instance
are the line managers, and the decisions are
related to the management of their employ-
ees; giving line managers the use of a system
like this will increase their access to data and
give them the ability to make better decisions.
This technology will assist them in converting
those data into intelligence. It is expensive to
store and maintain all of these data, and “un-
til it is put in the hands of business users and
brings real value to these business users, the
value obtained from that information does
not compensate for the cost of maintaining
that data” (Liautaud and Hammond, 2001,
38). While the initial capital investments re-
quired to develop and implement decision-
support technology may be high, the
operational savings
8
and improved decision
quality more than justify the investment.
1327.ch09 12/19/05 9:35 AM Page 455
The appropriate use of technology is crit-
ical to the successful transfer of responsibility
from HR to the line managers and depart-
ments. The use of business-intelligence tech-
nology and tools will enhance line managers’
skills and decision-making capabilities by giv-
ing them the same view that was once re-
served for HR staff. Again, the key to this will
be the training and support provided by the
HR staff.
?
SOME ADDITIONAL
THOUGHTS
We would be remiss if we didn’t offer some
thoughts related to the tragic events of Sep-
tember 11, 2001, which occurred during the
conceptualization and writing of early drafts
of this manuscript. The pressure on manage-
ment to react to the terrorist acts and their ef-
fect on the hospitality industry has been
intense. The range of responses to the plunge
in business levels was varied and is not ger-
mane to our discussion. What is important to
note is that swift, intelligent, and decisive ac-
tions were required in the wake of the attack.
That supports the need to adopt new roles for
HR and line managers.
A company’s ability to adapt to changing
conditions depends not only on its policies,
but also on the tools that it provides to those
responsible for deciding and implementing its
strategies. HR departments worked with their
management teams to define the strategies to
address issues relevant to the attacks and then
helped to implement them. Line managers
needed accurate information about business
and staffing levels, staff skills and abilities, and
financial-modeling capabilities. Having HR
and line managers in possession of and
456 Chapter 9 ? Human Resources Policy Management
trained to use the most effective tools avail-
able will ensure the organization’s capacity to
meet its needs. This enlightened division of re-
sponsibilities will result in the most orderly
and informed execution of each group’s tasks,
and promote teamwork.
It seems to us that the best part of a line
manager’s job is having the ability to make
decisions that are most critical for a depart-
ment’s success. Conversely, the things that
managers dislike have to do with the HR de-
partment’s always telling them what to do. In
truth, there are probably times when it would
be convenient to pass certain responsibilities
to HR, so that line managers don’t have to
make those decisions or would at least have
someone to point to as the culprits. In the end,
however, the role of a manager is about re-
sponsibility and accountability, and the adage
that “the buck stops here” seems to have been
written with that in mind. The following re-
quirements will help line managers feel most
comfortable in this role:
a. They have some say in the development
of a company’s policies and practices;
b. The company provides them with the
tools and training to perform at this level;
c. There is a clear definition of HR’s and
line managers’ responsibilities;
d. They are recognized and rewarded for
good performance relative to these issues;
and
e. There are programs in place to help when
mistakes are made.
If it is true that our future success both at
the business level and as HR practitioners lies
in the adoption of new ideas and technolo-
gies, and that leaner, more focused organiza-
tions are the ones that succeed, it is
imperative that this transition to a new HR
1327.ch09 12/19/05 9:35 AM Page 456
model occur. To assure that the transition is
smooth, we will need to learn from others’ er-
rors as well as our own mistakes, and we will
Section 9.5 ? The Strategic and Operational Roles of Human Resources—An Emerging Model 457
need the steadfast support of the organization
in maintaining this new set of roles and
responsibilities.
C H A P T E R 9 ? E N D N O T E S
1. Statement made by the CEO and chairman of
a medium-size management company of mid-
price hotels.
2. For example, Paauwe and Richardson re-
viewed nine studies that yielded 22 significant
empirical relationships between various HR
policies, practices, and procedures, and several
measures of firm performance. See: J. Paauwe
and R. Richardson, “Strategic Human Re-
source Management and Performance,” In-
ternational Journal of Human Resource
Management, Introduction to the Special Is-
sue, Vol. 8, No. 3, pp. 257–262.
3. Youndt, Snell, Dean, and Lepak, for instance,
found that different types of organizational
strategy moderated the relationship between
two types of HR systems and firm perfor-
mance. Specifically, Youndt et al. found that a
“human capital enhancing” HR system (e.g.,
selectivity in hiring) was most effective in or-
ganizations that incorporated a quality-based
strategy (versus other strategies). They also
found that an “administrative” HR system
(e.g., policies and procedures training) was
most effective in organizations that employed
a cost-based strategy. Thus, this study provided
convincing evidence that organizational effec-
tiveness is contingent on the proper alignment
of HR systems and overall business strategy.
See: M.A. Youndt, S.A. Snell, J.W. Dean, and
D.P. Lepak, “Human-Resources Management,
Manufacturing Strategy, and Firm Perfor-
mance,” Academy of Management Journal,
Vol. 39, No. 4, pp. 836–866.
4. All significant at p ? .05.
5. Overall F ? 44.32, df1 ? 123, df2 ? 1085;
R2 ? 0.82, p ? .01; standardized beta weights
for training and turnover were 0.031 and
0.032, respectively, p ? .01. These and related
results were presented by J. Bruce Tracey and
Michael J. Tews at the 2002 Meeting of the So-
ciety for Industrial and Organizational Psy-
chology, Toronto, Canada.
6. As related by Andrew Geller, principal, orga-
nizational development, Unifi Network, a for-
mer subsidiary of PricewaterhouseCoopers
LLP, Teaneck, New Jersey, April 26, 2001.
7. These are defined as disciplinary actions, com-
mendations, granting of leaves, and the com-
pletion of related paperwork.
8. Alanna Klaussen, senior analyst with Radiant
Systems, Inc., has demonstrated that a 2-per-
cent to 10-percent savings in payroll expenses
can be realized by adopting decision-support
technology.
R E F E R E N C E S
Barney, J.B. 1997. Gaining and Sustaining Compet-
itive Advantage. Reading, MA: Addison-
Wesley.
Bluedorn, Allen C. 1982. “Theories of Turnover:
Causes, Effects and Meaning.” In Research in
Sociology of Organizations, S.E. Bacharach
1327.ch09 12/19/05 9:35 AM Page 457
and E.J. Lawler (eds.). Greenwich, CT: JAI
Press, pp. 75–128.
Boyett, Joseph H., Jimmie T. Boyett, Row Henson,
and Heidi Spirgi-Hebert. 2001. HR in the New
Economy: Trends and Leading Practices in
Human Resources Management. Pleasanton,
CA: PeopleSoft, p. 28.
Enz, Cathy A. 2001. “What Keeps You Up at
Night? Key Issues of Concern for Lodging
Managers.” Cornell Hotel and Restaurant Ad-
ministration Quarterly 42(2):38–45.
Flynn, G. 2000. “Predictions About the Future of
Employment Law.” Workforce 79(1):78–80.
Goldberg, A.C. 1998. “Top Employment Law Is-
sues for 1999.” HR Focus 75(12):1–3.
Herzberg, Frederick. 1976. The Managerial Choice:
To Be Efficient and To Be Human. Home-
wood, IL: Dow Jones–Irwin.
Heskett, J.L., T.O. Jones, G.W. Loveman, W.E.
Sasser, and L.A. Schlessinger. 1984. “Putting
the Service-Profit Chain to Work.” Harvard
Business Review (March–April).
Hinkin, T.R., and J.B. Tracey. 2000. “The Cost of
Turnover: Putting a Price on the Learning
Curve.” Cornell Hotel and Restaurant Admin-
istration Quarterly 41(3):14–21.
Jackson, S.E., and R.S. Schuler. 2000. Managing
Human Resources: A Partnership Perspective.
Cincinnati, OH: South-Western College
Publishing.
Liautaud, B., with M. Hammond. 2001. e-Business
Intelligence: Turning Information into Knowl-
edge into Profit. New York: McGraw-Hill, p. 5.
Mack, T. 2005. “Forecasts for the Next 25 Years.”
World Future Society Special Report (Win-
ter):2.
March, J.G., and H. Simon. 1958. Organizations.
New York: John Wiley.
458 Chapter 9 ? Human Resources Policy Management
McFillen, James M., Carl D. Riegel, and Cathy A.
Enz. 1986. “Why Restaurant Managers Quit
(and How to Keep Them).” Cornell Hotel and
Restaurant Administration Quarterly 27(3):
36–43.
Phillips, J.A., and D.S. Massey. 1999. “The New La-
bor Market: Immigrants and Wages after
IRCA.” Demography 36(2):233–246.
Porter, L.W., and R.W. Steers. 1973. “Orga-
nizational Work and Personal Factors in
Employee Turnover and Absenteeism.”
Psychological Bulletin 80:151–176.
Price, J.L. 1977. The Study of Turnover. Ames: Uni-
versity of Iowa Press.
Reichheld, Frederick F. 1996. “Learning from Cus-
tomer Defections.” Harvard Business Review
74(2):56–67.
Shea, R.E. 2000. “The Dirty Dozen.” HR Magazine
45(1):52–56.
Sherwyn, D., Z.J. Eigen, and A.A. Klausner. 2000.
“Interpreting the ADA and Civil Rights Law.”
Cornell Hotel and Restaurant Administration
Quarterly 41(1):85–93.
Simons, T., and C.A. Enz. 1995. “Motivating Hotel
Employees: Beyond the Carrot and the Stick.”
Cornell Hotel and Restaurant Administration
Quarterly 36(1):20–27.
Simons, T., and T.R. Hinkin. 2001. “The Effects of
Employee Turnover on Hotel Profits.” Cornell
Hotel and Restaurant Administration Quar-
terly 42(4):65–69.
Sovereign, K.L. 1999. Personnel Law, 4th ed. Up-
per Saddle River, NJ: Prentice-Hall.
Woods, Robert H. 1999. “Predicting Is Difficult,
Especially About the Future: Human Re-
sources in the New Millennium.” International
Journal of Hospitality Management 18(4):
443–456.
1327.ch09 12/19/05 9:35 AM Page 458
Chapter 9.2, “Driving Hospitality Into the Future,”
by Christian Hardigree, Ellis Norman, Gail
Sammons, Vince Eade, William Werner,
Robert H. Woods, and Cheri Young.
Chapter 9.3, “The Causes and Consequences of
Turnover in the Hospitality Industry,” by Carl
D. Riegel.
Chapter 9.4, “Current Issues in Hospitality Em-
ployment Law,” by Suzanne K. Murrmann and
Cherylynn Becker.
Section 9.5 ? The Strategic and Operational Roles of Human Resources—An Emerging Model 459
Chapter 9.5, “The Strategic and Operational Roles
of Human Resources—An Emerging Model,”
by J. Bruce Tracey and Arthur E. Nathan, is
reprinted from the August 2002 issue of Cor-
nell Hotel and Restaurant Administration
Quarterly. © Cornell University. Used by per-
mission. All rights reserved.
S U G G E S T E D R E A D I N G S
Books
Jerris, L.A. 1999. Human Resource Management
for Hospitality. Upper Saddle River, NJ:
Prentice-Hall.
Sovereign, K.L. 1999. Personnel Law, 4th ed. Up-
per Saddle River, NJ: Prentice-Hall.
Tanke, Mary L. 2000. Resources Management for
the Hospitality Industry, 2nd ed. Albany, NY:
Delmar.
Ulrich, D., M.R. Losey, and G. Lake (eds). 1997. To-
morrow’s HR Management. New York: John
Wiley and Sons.
Woods, Robert H. 1992. Managing Hospitality Hu-
man Resources. East Lansing, MI: Educational
Institute of American Hotel and Motel
Association.
Articles
Knicely, H.V. 1997. “The Future of Human Re-
sources: Superhuman Resource Leadership in
the Twenty-first Century.” In Tomorrow’s HR
Management, D. Ulrich, M.R. Losey, and
G. Lake (eds.). New York: John Wiley and
Sons, pp. 111–118.
Sherwyn, D., Z.J. Eigen, and A.A. Klausner. 2000.
“Interpreting the ADA and Civil Rights Law.”
Cornell Hotel and Restaurant Administration
Quarterly 41(1):85–93.
Woods, R.H. 2000. “Predicting Is Difficult, Espe-
cially About the Future: The Future of Human
Resources in Hospitality Management.” In
Hotel Management and Operations, Denney
G. Rutherford (ed.). New York: John Wiley
and Sons, pp 459–469.
S O U R C E N O T E S
1327.ch09 12/19/05 9:35 AM Page 459
1327.ch09 12/19/05 9:35 AM Page 460
Assaulted Staff Action Program
(ASAP), 230
Assimilation, 421
Assistant banquet manager, 283
Assistant catering director, 282
Associates, employees as, 86–88
Association rules (in data mining),
401
Associations, national meetings of,
354–355
Attitude of customers, 321–322, 329
Attractive nuisance doctrine, 209
Attribute evaluations, 329
Authoritative management style, 170
Authority:
of chief financial executive, 374,
375
in organizations, 74
Average check, 247
Average daily rate (ADR), 306
Average length of stay, 136, 137
Average room-night contribution,
16–17
Awareness, creating, 311–314
Baby boomers:
impact of, 1–2, 423–424
and spas, 58
I N D E X
Alcohol. See also Food and beverage
department
blood levels, 297
legal issues involving, 209
management, 224
Prohibition, 235
ALHI, business structure of, 18
Aliens, employment rights of, 445
Alliances, strategic, see Strategic
alliances
Allie’s American Grill, 279
Alternative Cuisine, 259–260
Alternative medicine, 52–54, 56
Amenity spas, see Resort spas
Americans with Disabilities Act
(ADA) of 1990:
legal issues involving the, 212,
439–442
signage compliance with the, 22, 25
Anglo-Saxon motivation model, 421
Anti-aging treatments, 63
Application service provider (ASP)
model, 42
Architects, select of, 8
ASAP (Assaulted Staff Action
Program), 230
ASP (application service provider)
model, 42
Access control, 221, 223
Accessibility, 441
Accor brands:
business structure of, 18
cost savings figures of, 28
Accounting, 80–81. See also Chief
financial executive; Financial
control
Active design concepts, 223
ADA, see Americans with Disabilities
Act
Administrative law, 206
ADR (average daily rate), 306
The Advanced Seafood Handbook,
398
Advertising:
and attribute evaluations, 329
complimentary, 358
and selling, 349
Affiliation and budgeting, 384, 385.
See also Chains; Independent
hotel(s)
Affiliative management style, 170,
171
Affinium software, 402
Age Discrimination Act of 1967, 212
Airport properties, foodservice at,
242
461
1327.chind 12/19/05 12:29 PM Page 461
Bacteria in food, 208
Banks, Robert, 220
Banks v. Hyatt Corporation, 220
Banquet business, 240
Banquet manager, 282–283
Banquet set-up manager, 283
BAR (best available rates), 342
Bar manager, see Beverage manager
Bar operations, trends in, 248–249
Bartenders:
role of, 283
turnover ratio of, 297
Bass brands, 18
Bearman v. University of Notre Dame,
219
Beckert, John, 270, 274
Bellagio, 453
Bell stand/staff:
in front office operations, 150–152
function of, 78
and guest information, 150
Benchstrength Management System,
111
Benihana, 266, 269
Bennigans, 279
Bergen, Victor, 266
Best available rates (BAR), 342
Best practices (for food and
beverage), 253–264
cases/descriptions/implementation
of, 255–258
champions in, 254, 264
and controlling costs, 261–262
and focus on product quality,
258–260
in restaurant
design/conceptualization,
260–261
success of, 262–264
Best Western:
business structure of, 18
focus of, 19
Beverage clerk, 395–396
Beverage manager:
and employee relations, 296, 297
roles/responsibilities of, 236–237,
294–295
Beverage operations:
history of, 291–292
marketing/merchandising of, 295
organization/management of,
291–298
462 Index
overview of, 292–294
and personnel management, 296,
297
trends in, 248–249, 296–297
Beverly Hilton, 268
BFOQ (bona fide occupational
qualification), 212
Bice Ristorante, 266, 269
Birth certificate, 444, 445
Bishop v. Fair Lanes Georgia
Bowling, 219
Black, Morgan, 297–298
Blimpies, 266
Blood alcohol levels, 297
Bloodborne pathogens, 187
Blueprints (architectural), 21–22
Boca Raton Resort and Club, 383
Bona fide occupational qualification
(BFOQ), 212
Booking:
by director of catering, 288
group, 138–139
Internet, 339
and overbooking, 210
The Bottomline, 367
Boudouris, Inger, 145, 147–148
The Boulders:
best-practices at, 253–255, 258
food forager at, 243, 262
HR at, 454
Brand(s). See also Franchise(s)
composition of major U.S., 44
consolidation of major, 14
and CRM, 42, 46, 48, 50
examples of, 18
growth of global, 14
and independent hotels, 15–16
and Internet competition, 339
and marketing, 319
on-line reservations at top
international, 29–36
portfolio composition of U.S., 44
selection of, 7
specific belief ratings for, 329
as stake holders, 43
strategic alliances between,
265–267
Branded distribution company:
benefits of using a, 19–20
characteristics of, 17–19
competitive advantage of, 20–21
drawbacks of using a, 20
Branding:
in food and beverage service, 248
increasing importance of, 16
and reservations organizations, 17
and spas, 51–52
Brand loyalty, 36, 41, 47
The Breakers Hotel:
best-practices at, 253–255, 262
cross-training at, 243
food and beverage trends at, 248
restaurant design at, 260–261
Breakfast (free), 240
Bristol Bar and Grill, 271, 274
Bristol Hotel Company:
and contractual relationship, 278
and finance, 280–281
and Good Eats Grill, 267–275,
278
marketing of, 278–279
operating strategies of, 270, 274
and operations, 279–280
own restaurant brands, 270, 271
profit-loss comparison for, 280
in strategic alliance, 267–275
Bristol Suites, 268
British Columbia Telecom, 403
Budget(s):
chief financial executive and, 389
director of catering and, 290
engineering department and, 203,
204
for OS&E, 23
pre-opening, 23
reliable data for, 382
Budgeting and forecasting, 377–387
actual vs. budgeted costs, 380, 381
budgetary control in, 380, 381
difference between, 377–378
effects of affiliation, sales, and
profitability in, 384–386
forecasting techniques in, 381, 384,
386
goal setting in, 379
literature review for, 382–383
Building operations, director of, see
Chief engineer(s)
Building superintendent, see Chief
engineer(s)
Burlington Industries v. Ellerth, 437
Business maintainer, GM as, 97–100
Business problem analysis (for Spa
Mystique), 65–67
1327.chind 12/19/05 12:29 PM Page 462
Business structure(s). See also
Franchise(s); Management
contracts
benefits of branded distribution
company, 19–20
choice of, 7
new, 15
types of, 18
Buzz, cost savings of, 28
ByRequest initiative (Wyndham
International), 48, 49
Canyon Ranch, 51, 54
Capitol Hilton, 148
Captain, 283
Capture rate, 240
Career development, 103
Carlson, 259
Carlson brands:
business structure of, 18
strategic alliances of, 266
Carlson Hospitality Worldwide, 269
Case-based reasoning (in data
mining), 401
Case law, 205
Case studies:
Coug Inn front desk, 162–163
CRM at Wyndham International,
49
Disney Orlando resort hotels,
139–141
extended-stay hotel development,
11–13
food court crisis, 298–299
interdisciplinary security plan,
230–231
market research department
revamping, 360–361
new FOM, 161
Seattle Sheraton Hotel and Towers,
353–360
Spa Mystique business problem
analysis, 65–67
SunRise Hospitality outside the
box thinking, 299–300
Sunset Hotels and Suites, 118
Casinos:
card-dealer training in, 422
food and beverage operations at,
244–245
Native American, 419–420
Riviera Hotel and Casino, 242, 248
Index 463
Catering, executive director of,
287–291
Catering department, 282–300
future issues for, 286–287
organization of, 282–284
sales/service process for, 284–286
as subunit, 80
Catering director (assistant), 282
Catering sales manager, 282
CBD (central business district), 2
Celebrity chef, 243
Cendant Corporation:
business structure of, 18
portfolio composition of, 44
Central business district (CBD), 2
Central reservations service (CRS):
brands’ usage of, 31
in online pricing study, 30, 31
rates available on, 32–34
Certified Hospitality Accountant
Executive (CHAE), 368–369,
371
Certified Hospitality Technology
Professional (CHTP), 368
CHAE, see Certified Hospitality
Accountant Executive
Chains. See also Franchise(s)
affiliation with, 385
competition of independent hotels
and, 16
influence of, 42
and marketing, 319
and revenue management, 316
Chain of command, 76
Chalmers, Irena, 398
Champions (food and beverage):
best-practice, 254
insights from, 264
and profit, 264
Change management, 103
Check-in/check-out procedures, 126,
152–156
Chef(s):
celebrity, 243
changing role of, 237
in classic hotel organization, 69
education of, 244
executive, 243, 393
Chief engineer(s), 169–171, 193–195
characteristics of typical, 200–202
demographics of, 194
evolving job of, 199
Chief financial executive (controller),
365–366, 368–377
and accounting, 388, 390
authority of, 374–376
and budgets, 389
certification of, 371
committee involvement of, 376
demographics of, 369–371
roles/responsibilities of, 374–376,
387–391
skills/knowledge of, 372–374
Child labor laws, 213–214
Children and swimming pools, 209
Chili’s, 269
Choice, optimization of, 322
Choice brands:
business structure of, 18
Choice Hotels:
strategic alliances of, 266
Choice Hotels International:
competency models at, 102, 111
CHTP (Certified Hospitality
Technology Professional), 368
Church’s, 269
Citizenship, 445
City Development Commission (in
Pacific Northwest), 11–13
Civil liability of landowners,
218–221
Civil suits, 206–207
CK’s, 279
Clarion Suites, 268
Clerk, 283
Club spas, 57
Coaching:
and competency models, 103
management style, 171
Coercive management style, 170
Coffee:
hot, 208
shop, 249, 292
Colombo, Patrick, 257
Comastro v. Village of Rosemont,
219
Comfort Inn Suites, 230
Command in organizations, 76–77
Committees:
and chief financial executives, 376
Executive Operating Committee,
83–85
and hotel organization, 83–85
Common law, 205, 206
1327.chind 12/19/05 12:29 PM Page 463
Communication and communication
skills:
as a competency factor, 108, 109
and FOMs, 121–122, 125, 127, 151,
152
and GMs, 95, 100–101
and purchasing, 399
skills needed for promotions, 314
tips for, 312
Community involvement, 117
Compensation:
of financial executives, 371, 372
of salespeople, 312
suggested HR practices for, 453
and turnover, 449
Compensatory damages, 206, 208
Compensatory decision rule, 323–325
Competency model(s), 101–111
description of, 101–102
developing a lodging specific, 101,
110–111
key competencies, 108–110
using, 102–103
Competition:
and the engineering department,
192
between independent hotels and
chains, 16
and the Internet, 339
in pricing, 334
Computer technology. See also
Internet
in bell stand, 150–151
engineering management of, 197
and financial information, 203
Concern for community, 110
Concierge, 123, 143–150
Concorde, 18
Conference services, 316
Conjunctive decision rules, 328
Consistency in service delivery, 157
Constitutional law, 206
Construction financing, 9, 12–13
Consumer(s). See also Guest(s)
implications of decisions by,
328–331
online purchases by, 26–27
web site visits of, 29
Consumer decision rules, 321–334
compensatory decision rule,
323–325
conjunctive decision rules, 328
464 Index
elimination-by-aspects decision
rule, 327–328
exercise for, 331–334
lexicographic decision rules,
326–327
marketing implications of, 328–331
noncompensatory decision rules,
325–328
Consumer market (global), 14
Continuing treatment, 442–443
Contract(s):
franchise, 15
management, 15, 50, 278
negotiations, 406
to protect against losses, 226
and strategic alliances, 278
terms, 19
Controller, see Chief financial
executive
Convenience Courts, 266
Conventions, 80
Convention service, 282
Coordination of activities:
and meetings, 82–86
in organizations, 75
Core values, 115–116
Cornell University, 297
Corporate accounts, 339, 342
Corporate headquarters (HQ), 336,
341
Corporate-level purchasing function,
398
Corporate pricing structure, 341–343
Cosponsorship of events, 359–360
Cost(s):
of acquiring new customers, 38,
319
actual vs. budgeted, 380, 381
best practices for controlling,
261–262
of branded distribution company,
19
energy, 199
and engineering department, 203,
204
food cost percentage, 247
of general contractor, 9
labor cost percentage, 247
marketing, 306
in pricing, 310, 334
savings of, 28
of spa construction, 61
trends in marketing, 306
of turnover, 430
Counseling, 103
Country Inns and Suites:
best-practices at, 253–255, 259, 263
food and beverage trends at, 248
Country Kitchen, 266, 269
Courage, 113
Courtyard by Marriott:
foodservice at, 242
as middle market brand, 268
portfolio composition of, 44, 45
CPTED, see Crime Prevention
through Environmental Design
Creativity in pricing, 340
Crime:
and alcohol management, 224
crime-prevention program, 220
and criminal prosecution, 207
and environmental design, 221–224
interdisciplinary security plan case
study, 230–231
key control and, 214
and parking facilities, 214, 217–218
and security, 214
Crime Prevention through
Environmental Design
(CPTED), 221–224, 226
Crisis management theory, 228
Critical thinking, 108, 109
CRM, see Customer relationship
management
Cross-training of staff:
and the chief financial executive,
389–390
and foodservice, 243
Crowd management, 225
Crowne Plaza, 44, 45
CRS, see Central reservations service
CST, see Customer service training
Culinary arts degree, 244
Cultural diversity, see Diversity
Culture of the workforce. See also
Diversity
and executive housekeeper,
189–190
as HR issue, 420–423, 426
information on, 286
Native American, 422
Customer(s):
attitude of, 321–322, 329
costs of acquiring, 38, 319
1327.chind 12/19/05 12:29 PM Page 464
determining the best, 131
incentives for, 403
and incidents, 157–158
loyalty of, 38, 434
preferences of, 38, 39
requests of, 157
retaining, 317
specific preferences of, 156–157
targeting the wrong, 132
Customer relationship management
(CRM), 36–50
basics of, 37–40
brand loyalty vs., 41
changes needed to implement, 48,
50
”data-ownership dilemma” in, 37,
46–48
at Hilton Hotel Corporation,
113–114
and HR, 455
the potential of, 40–42
and structure of the lodging
industry, 42–46
at Wyndham International, 49
Customer satisfaction:
and CRM, 38, 40
and marketing, 316–318, 337
and pricing, 337–338
rising, 319
Customer service training (CST),
59–60
Daily life:
of director of rooms, 173–174
of executive director of catering,
287–291
of the FOM, 127–131, 158–161
of the GM, 111–117
of the purchasing manager, 397
of revenue manager, 345–348
Damon’s, 266, 269
Data mining, 399–412
boundaries/limitations of, 410–411
examples of marketing use of, 402
guidelines for, 404–410
at Harrah’s, 402–403
industry applications for, 403–404
managerial implications of, 411–412
statistical modeling vs., 400–402
toolkit for, 401
”Data-ownership dilemma” (in
CRM), 37, 46–48
Index 465
Data sharing, 46
Data warehousing, 41
Dates (for group bookings), 138
David Green, 18
Davis, Pam, 149
Days Inns, 44, 259, 268
Day spas, 56, 62, 64
Decentralization of HR, 451–455
Decision rules, see Consumer
decision rules
Decision trees (in data mining), 401,
408
Delegation:
to EOC, 83
and executive housekeeper, 177,
178
in housekeeping, 183
in organizations, 77
Del Frisco’s, 269
Delivery (of OS&E), 24–25
Delucchi, Annie, 144
Demand:
and length-of-stay, 136, 137, 140
in pricing, 334
and promotions, 313, 314
psychological determinants of, 411
for spas, 51–52, 58, 63
stimulating, 311–314
Democratic management style, 170
Demographics:
for data mining, 407
effects of, 1–2
of spa demand, 51, 58, 63
Denny’s, 266
Departmentalization in organizations,
74
Department of Labor (DOL), 442
Department Staffing Guide for
housekeeping, 181–182
Descriptive statistics (in data
mining), 401
Destination spas, 54, 55, 64
Developer(s):
for extended-stay hotel
development project, 11–13
and offering solicitation document,
10
at risk dollars of, 11
role of, 6
Development agreement, 8
Differentiation, strategy of, 329–330,
345
Direct marketing, 313
Director of building operations, see
Chief engineer(s)
Director of catering, see Catering,
executive director of
Director of engineering, see Chief
engineer(s)
Director of food and beverage, see
Food and beverage, director of
Director of housekeeping, see
Housekeeping, director of
Director of purchasing, see
Purchasing director
Director of rooms, see Rooms,
director of
Director of services, 167. See also
Executive housekeeper
Direct selling, 311
Disabilities:
the ADA, 22, 25, 212, 439–442
and discrimination, 212
as HR issue, 426
Discrimination:
as HR issue, 425–426
legal issues for, 211–213
and preemployment medical tests,
440
Distribution channels:
central reservations service, 30–34
Expedia, 30–34, 36, 314, 339
Global Distribution Systems, 16,
26, 30, 314
hotel companies’ web sites, 32–36
Internet/online, 26–36, 314, 343,
344. See also Internet
managing, 314–315
rates offered on electronic, 31–34
and reservation affiliations, 16
reservation cost by, 28
and revenue manager, 347
Travelocity, 30–34, 36, 314
Travelweb, 30–34
types of electronic, 30
WorldRes, 30–34
Diversification and price setting,
340–341
Diversity. See also Culture of the
workforce
as HR issue, 421, 422, 425
management of, 189–190
role played by cultural, 3–4
Dobscha, Susan, 403
1327.chind 12/19/05 12:29 PM Page 465
Documentation (and sexual
harassment), 437–439
Doi, Mike, 146
DOL (Department of Labor), 442
Donations (charitable), 353–360
Doubletree:
food and beverage trends at, 248
portfolio composition of, 44, 45
strategic alliances of, 266
Downsizing, 70
Dram shop laws, 209
Driving under the influence (DUI),
297
Drucker, Peter, 307, 310
DUI (driving under the influence),
297
E. coli, 208
Eade, Vince, 418, 419, 425, 426, 428
EasyJet, 28
e-commerce technology:
and branded distribution company,
19
consumer use of, 26–27
and distribution channels, 16
Economy:
local, 6–7
national, 2, 3
Economy properties:
brand examples of, 268
foodservice at, 242
Education. See also Training
in beverage management, 297
of financial executives, 369–371
EEOC, see Equal Employment
Opportunity Commission
Eisenberg, David, 53
Elasticity (price), 344–345
Eldercare, 424
Electrical systems, 196–197
Elevators:
design of, 223
systems, 197
Elimination-by-aspects decision rule,
327–328
Ellis, Susan, 64
Embassy Suites, 44, 45, 268
Employee(s):
as associates, 86–88
empowerment of, 60, 87, 126–127,
425
exempt, 213
466 Index
hourly, 184–187
and increased profits, 132
relations with, 296, 297
satisfaction of, 430
spa, 60
Employment-at-will doctrine, 211
Employment law, 436–446
Age Discrimination Act, 212
Americans with Disabilities Act,
22, 25, 212, 439–442
Family and Medical Leave Act,
442–444
Federal Labor Standards Act,
213–214
Immigration Reform and Control
Act, 444–446
Pregnancy Discrimination Act, 212
sexual harassment, 212–213,
436–439
Empowerment (of employees), 60,
87, 126–127, 425
The Encyclopedia of Fish Cookery,
398
Energy, 192–193, 198, 199
Engineering, director of, see Chief
engineer(s)
Engineering department, 169–171,
191–205
chief engineer, 169–171, 193–195,
199–202
and financial information, 199–205
function of, 79
history of, 191–192
interdisciplinary security plan case
study, 230–231
issues in, 197–199
legal issues for, 209
organization chart for, 194
personnel in, 193–197
as staff function, 72
stimulus for change in, 192–193
”English-only” cases, 421
Entrepreneurs, GM as, 98, 100
Environmental design, 221–224
EOC, see Executive Operating
Committee
E.piphany E.4 software, 402
Equal Employment Opportunity
Commission (EEOC), 229, 439,
441
Equal-pay-for-equal work, 213
Equipment, 197–199
Equity investment funds, 9–10
European hotels, 16
Events, 359–360
Executive chef, 243, 393
Executive director of catering, see
Catering, executive director of
Executive housekeeper, 183
organizational position of, 177, 178
personal account of, 188–191
reporting of, 425
role of the, 176–177
Executive Operating Committee
(EOC), 83–85
Exempt employees, 213
Expedia, 314
and brand loyalty, 36
brands’ usage of, 30, 31
and controlling of rates, 339
as distribution channel, 30
rates available on, 31–34
Express check-out, 155–156
Extended-stay hotel development
case study, 11–13
Fairfield Inn, 44, 45
Fairmont Hotels and Resorts, 336,
339, 342, 344
Fairness in the workplace, 436
Family and Medical Leave Act
(FMLA) of 1993, 442–444
Faragher v. Boca Raton, 437
Farrell, Scott, 336, 344
FDA (Food and Drug
Administration), 208
Feasibility study:
in extended-stay hotel
development project case study,
11
and franchise selection, 8
for hotel development, 6–7
Federal Labor Standards Act
(FLSA), 213–214
Fee(s):
architects, 8
franchise, 8
management companies, 10
Feldott, Mike, 267
Ferguson, Gray, 255
FF&E (furniture, fixtures, and
equipment), 23
Financial control, 365–399
and budgeting/forecasting, 377–387
1327.chind 12/19/05 12:29 PM Page 466
and the chief financial executive,
365–366, 368–377, 387–391
effects of
affiliation/sales/profitability on
budgeting, 384–386
and the purchasing function,
391–399
Financial executive, see Chief
financial executive
Financial information:
and computer technology, 203
and engineering department,
199–205
importance of, to engineering
department, 202
Financing:
and brands, 16
of hotel development, 9
Fishbein linear compensatory model,
see Multi-attribute attitude
model
Flinn, Joanne, 409
Floor supervisor, 185
FLSA, see Federal Labor Standards
Act
FMLA, see Family and Medical
Leave Act
Follow-the-Leader pricing method,
335
FOM, see Front office manager
Food and beverage, director of:
and purchasing, 393
roles/responsibilities of, 251–253
Food and beverage cashiers, 81
Food and beverage controller, 81
Food and beverage department,
235–300. See also Strategic
alliances
best practices for, 253–264
beverage manager, 236–237,
294–297
catering department, 282–300
controlling costs in, 261–262
and director of food and beverage,
251–253
equipment/supplies required for,
23–24
focus on product quality in,
258–260
food court crisis case study,
298–299
functional organization of, 79–80
Index 467
historical background for, 235–236,
291–292
and interactions with other
departments, 244–246
legal environment for, 207–209
legal issues in, 207–209
as line operation, 71
managing operations for, 239–250
mission/goals of, 239–241
and operating ratios, 246–247
organizational considerations,
241–242
and organization/management of
beverage operations, 291–298
personnel for, 243–244
profits in, 264
and restaurant
design/conceptualization,
260–261
successes in, 262–264
SunRise Hospitality outside the
box thinking case study, 299–300
trends in, 247–250
in typical hotel organization, 70
and Walt Disney World awards, 263
Food and beverage manager, 245
Food and beverage occupancy, 246
Food and beverage sales per
available room, 246
Food and Drug Administration
(FDA), 208
Food cost percentage, 247
Food court crisis case study, 298–299
Food forager, 243, 262
Food production equipment, 197
The Food Professionals Guide, 398
Food servers, 283
Forecasting. See also Budgeting and
forecasting
and data mining, 404–405
and revenue management, 315
by revenue manager, 346–347
Foreseeability, 219–221, 227
Four Points, 44
Four Seasons Hotels and Resorts, 268
best-practices at, 253, 254, 256,
259
business structure of, 18
director of rooms at, 172–173
food and beverage trends at, 248
goals of, 240
strategic alliances of, 266
Franchise(s). See also Chains
for extended-stay hotel
development project, 12
and hotel/restaurant relationships,
278
and independent hotels, 15
management contract vs., 15
and management services, 10
and marketing, 319
selection for hotel development, 8
Francis, Connie, 214
Free breakfast, 240
Frequency of interaction, 74
Frequent-stay programs, 153–154, 317
Fresh Produce Manual, 398
Front desk:
Coug Inn case study, 162–163
in front office operations, 152–156
in rooms department, 176
Front office. See also Rooms
operations/department
function of, 78
legal issues for, 210–211
in rooms department, 176
Front office manager (FOM):
daily life of the, 127–131, 158–161
new manager case study, 161
roles/responsibilities of, 124–127
Front Row Sports Grille, 269
Functional organizational design,
77–82
Fund-raisers, 355–356
Furniture, fixtures, and equipment
(FF&E), 23
Game for revenue management,
141–143
Garages, see Parking facilities
GDS, see Global Distribution
Systems
Geddes, Jack, 27
General contractor(s):
for extended-stay hotel
development project, 12–13
selection of, for hotel development,
9
General manager(s) (GM), 89–118.
See also Leadership-competency
model
as business maintainer, 98–100
as central management figure, 90
and chain of command, 76
1327.chind 12/19/05 12:29 PM Page 467
General manager(s) (GM)
(Continued)
contextual framework for the job
of, 91–101
and courage, 113
daily life of, 111–117
and EOC, 83
and job demands, 93–95, 97
as leader of marketing, 320
leadership of, 98, 99, 111–112
managerial work roles of, 96–100
as operational controller, 98–99
as organizational developer, 98–100
and pricing, 310
and purchasing, 393
and relationship issues, 93
and respect, 112
in reverse organizational chart, 87
skills/characteristics of, 111–113
Sunset Hotels and Suites case
study, 118
as top of field, 89
in typical hotel organization, 70
Generation X, 422
Genetic algorithms (in data mining),
401, 408–409
Gift card sales, 63
Global Distribution Systems (GDS),
314
and competitive advantage, 16
hotels’ use of, 26
as type of distribution channel, 30
Global industry, 64
Global market:
and branded distribution
companies, 21
for hospitality, 14–15
GM, see General manager(s)
GoConcierge software program, 146
Golden Tulip, 18
Good Eats Grill, 269
contractual relationship with, 278
and finance, 280–281
menu for, 272
operating strategies of, 274
and operations, 279–280
profit-loss comparison for, 280
selection process for, 276, 278
and strategic alliance with Bristol
Hotel, 267–275
Gouge ‘Em pricing method, 335
GRA (guest room attendant), 184
468 Index
Grace Services, 266
Grand Cargo Cafe, 273
The Greenbrier, 264
apprentice program at, 243
best-practices at, 253, 254, 256, 260,
263
The Greenbrier Cookbook, 260
Group business, 134, 138–139
Growth goals, 17
Guarantees for reservations, 154
Guest(s). See also Consumer(s)
and increased profits, 132
stays, 126
surveys, 247, 317–318
Guest information:
and bell staff, 150
sources of, 124–125
Guest Quarters, 268
Guest relations:
and bell staff, 151
and director of food and beverage,
252–253
in front office operations,
156–158
and room attendants, 189
Guest room attendant (GRA), 184
Guest service cycle, 125–126
Habits (wasteful), 193
Halekulani Hotel, 146
Hampton Inns, 268
foodservice at, 242
portfolio composition of, 44, 45
Hannig, Dieter, 257, 261
Hardigree, Christian, 420, 421,
423–427
Hard Rock Café, 269
Harrah College of Hotel
Administration, 244, 297
Harrah’s, 402–403
HBV (Hepatitis B virus), 187
Head houseman, see Senior
housekeeping aid
Health care, 417–419
Health condition (serious), 442
Heating, ventilating, and air
conditioning (HVAC), 196
Helms Brisco, 18
Hepatitis B virus (HBV), 187
Herzberg, Frederick, 435
Heterogeneity, 350
Heuristics, 322
HFTP, see Hospitality Financial and
Technology Professionals
Hiding places, 223
Hilton:
Capitol Hilton, 148
as middle market brand, 268
Hilton brands:
business structure of, 18
portfolio composition of, 45
Hilton Corporation:
data mining at, 402, 405, 409
Hilton HHonors database, 405
Hilton Hotel Corporation:
customer relationship management
at, 113–114
Hilton Hotels Corporation:
portfolio composition of, 44
Vacation Station program at,
247–248
Hilton Inns/Hotels:
portfolio composition of, 44, 45
Hinton/Grusich, 18
Hiring, 102
Historic Hotels, 18
Hit or Miss pricing method, 335
HIV/AIDS, 187
Holiday card program, 356
Holiday Inn Express, 44
Holiday Inn Hotels, 268
food and beverage trends at, 248
and Good Eats Grill, 267
portfolio composition of, 44, 45
Holiday Inn Intercontinental, 272,
273, 278–281
Holiday Inn Worldwide:
strategic alliances of, 266
Holzer, Charles, 147
Homewood Suites, 44, 45, 268
Homicide, 228
Honor bar, 238
Hospitality, definition of, 175
Hospitality Financial and Technology
Professionals (HFTP), 368–369
Hostile work environment
harassment, 212, 436–438
Hotel administration degree, 244
Hotel choice, 321–334
Hotel company web sites, 30–36
Hotel design, 7
Hotel development process, 5–13
and architect selection, 8
and the development agreement, 8
1327.chind 12/19/05 12:29 PM Page 468
and equity investment funds, 9–10
extended-stay case study, 11–13
and the feasibility study, 6–7
and financing the project, 9
and franchise selection, 8
and general contractor selection, 9
and management company
selection, 10
and ownership entity creation, 7–8
role of the developer in the, 6
The Hotel Industry Switching
Company (THISCO), 31
Hotel market, 7
Hotel Reservation Network (HRN),
339
Hound Doggies, 248
Hourly employees, 184–187
Housekeeping, 167–169, 175–188
and bloodborne pathogens, 187
equipment/supplies required for, 23
and the executive housekeeper,
176–178, 183, 188–191, 425
formula for computing staff for,
180
function of, 78–79
interdisciplinary security plan case
study, 230–231
legal issues for, 209–210
organization of, 177–183
origins of, 175–176
personnel/jobs in, 183–187
and the rooms department, 176
in rooms department, 176
and safety, 187
staffing/scheduling concerns for,
180–183
women in, 425
Housekeeping, director of, 393, 396
Housekeeping manager, 178, 183–184
Housemen, 283
Howard Johnson, 44
HQ, see Corporate headquarters
HR, see Human resources
HRN (Hotel Reservation Network),
339
Hubsch, Allen, 236
Human capital, 424–425, 427
Human resources (HR):
and beverage operations, 296
and competency models, 102–103
and culture of the workforce,
420–423, 426
Index 469
and discrimination, 425–426
and diversity, 421, 422, 425
and employment law, 436–446
functional organization of, 80
future trends in, 417–428
and gender issues, 425, 426
legal issues for, 211–214
a new model for, 450–455
and older workers, 423–424
and opening a hotel, 26
and outsourcing, 419, 426–428
role of, in pricing, 340–341
and September 11, 2001 terrorists
attacks, 456
and sexual orientation, 426
strategic importance/function of,
415, 416, 447–450
and technology, 455–456
and turnover, 429–435
and unions, 417–419, 422
HVAC (heating, ventilating, and air
conditioning), 196
Hyatt, 268, 279
Hyatt Arlington Hotel:
best-practices at, 253, 254, 256, 262
restaurant design at, 261
Hyatt brands:
business structure of, 18
Hyatt Corporation:
Banks v. Hyatt Corporation, 220
Hyatt Hotel Corporation:
portfolio composition of, 44
Hyatt Hotels and Resorts:
portfolio composition of, 44
”Hygiene factors,” 435
I-9 forms, 444, 445
IBM PC, 203
Immigrants, 419
Immigration and Naturalization
Service (INS), 444
Immigration Reform and Control Act
(IRCA) of 1986, 444–446
Impact study, 8
Implementation, 108, 109
Incentives, 315–316
Incident reports (guest), 157–158
Independent hotel(s):
and brand development, 15–16
and branded distribution
companies, 17–21
and competition with chains, 14–21
conflicts of owners of, 20
ensuring competitive advantage of,
20–21
and franchise contracts, 15
and management companies, 15
and marketing, 319, 320
new market model for, 14–15
and reservation affiliations,
16–17
and technological change, 15
Industry consortium, 50
Industry knowledge, 108, 109
Information management and
technology, 365–366. See also
Technology
and data mining, 399–412
developments in, 367
and director of systems, 81
and purchasing, 399
and swift developments, 367
Injuries, 209
In-room bar, 238
INS (Immigration and Naturalization
Service), 444
Inspection/repair, 209
Inspectress (inspector), see Floor
supervisor
Installations (of OS&E), 25
Intangibility, 350
Intention to leave, 431, 432
Interdependence:
and cooperation, 83
in food and beverage operations,
244–246
pooled, 75
reciprocal, 75–76
sequential, 75
between subunits of rooms
department, 79
Interdisciplinary security plan case
study, 230–231
Interior graphics package, 25
Intermediate run job demands (on
GM), 94–95, 97
International hotel industry, 42, 43
International law, 207
Internet. See also Web sites
consumer adoption of the, 26–27
as distribution channel, 26–36, 314,
343, 344
e-commerce, 16, 19, 26–27
effects of, 15
1327.chind 12/19/05 12:29 PM Page 469
Internet (Continued)
and marketing, 313, 319, 339–340,
343, 344
online-pricing analysis, 26–36
and pricing, 26–36, 338–340,
343–344
and rates by market segment, 32,
33
and reservations organizations, 17
training with the, 428
Interpersonal skills:
as a competency factor, 108, 109
of GMs, 112
Interviews, 25
Intuition, 336–337
Investigation of sexual harassment,
438–439
Investment:
effects of new, 2–3
sources of capital for, 10
Investors, 132
IRCA, see Immigration Reform and
Control Act
Isrow, Adam, 146
Issuing (product), 393
Italianis, 259, 269
Job demands (on GMs), 93–95, 97
Job descriptions, 394–396
Job satisfaction, 432
Jockey boxes, 294
Johnson, Andre, 118
Jordan, Andrew, 49
Jucha, Mitch, 65
Jupiter Media Metrix:
on on-line travels sales, 27
on web site visits, 29
Kem’s Cafe, 248
Kettle Restaurant, 279
Key control:
and crime, 214
legal issues and, 210–211
KFC, 269
Khan, Shujaat, 148
Kirwin, Paul, 255
Kitchen, 24
Klampfer, Franz, 257
Knights Inn, 44
Konrad, Alfons, 256
Kotschevar, Lendal H., 398
Krisam, 18
470 Index
Labor cost percentage, 247
Landowners, 218–221
Languages (spoken by workforce),
420–421
La Quinta, 268
Larson, Bruce, Jr., 227
Laundry department, 78, 178, 179
Laundry manager, 184
Laundry supervisor, 186
Law(s). See also Employment law;
Legal issues
child labor, 213–214
classifications of, 206–207
dram shop, 209
sources of, 205–206
LCD USA, see Les Clefs d’Or USA
Leach, Robin, 145
Leadership:
of chief financial executive, 373,
374
as a competency factor, 105, 109
of GMs, 98, 99, 111–112
Leadership-competency model,
101–111
background for, 101–103
developing an industry-specific,
104–111
and guidance for HR, 102–103
and key competencies, 108–110
lodging competencies list for,
105–107, 109
using industry-wide, 110–111
Leading Hotels of the World, 18
Le Chatton, Christophe, 257
Legal issues, 205–214
Age Discrimination Act, 212
Americans with Disabilities Act,
22, 25, 212, 439–442
and civil liability of landowners,
218–221
and classifications of law,
206–207
and employment law, 436–446
Family and Medical Leave Act,
442–444
Federal Labor Standards Act,
213–214
for food and beverage, 207–209
for housekeeping/maintenance,
209–210
how the law works, 205–207
for human resources, 211–214
Immigration Reform and Control
Act, 444–446
and the lodging industry, 207–214
Pregnancy Discrimination Act, 212
and sales, 211
and security, 214
and sexual harassment, 212–213,
436–439
and sources of law, 205–206
Leisure market, 15
Lending institution, 9
Length of stay, 153
Le Parker Meridien, 454
Les Clefs d’Or (LCD) USA, 146–149
Lettuce Entertain You, 269
Level of Service (LOS) approach, 222
Lexicographic decision rules, 326–327
Lexington, 18
Liability:
and overbooking, 210
premise, 218–221
record of general contractor, 9
for sexual harassment, 437
and stolen property, 210
for workplace violence, 227
Liebeck, Stella, 208
Lighting, 214, 222
Line functions, 71
Line managers/executives:
authority of, 74
and HR functions, 451, 452, 455
Linen room supervisor, 186
Little Caesars, 266
Loans:
in extended-stay hotel
development project, 12–13
for hotel construction, 9, 10
Local economy, 6–7
Lodging industry, structure of, 42–46
Logos, 20
Long run job demands (on GM), 94,
95, 97
LOS (Level of Service) approach, 222
Lost/stolen guest property, 209–210
Loyalty:
brand, 36, 41, 47
customer, 38, 434
and frequent-stay programs, 317
as HR issue, 422–423
program at Harrahs, 402–403
rewards for, 339
and room selection, 153–154
1327.chind 12/19/05 12:29 PM Page 470
”Total Rewards” loyalty program,
402–403
and turnovers, 434
Luggage, 151
Luxury properties, 268
Maid, see Guest room attendant
Maintenance and repair, see
Engineering department
Maîte d’hôtel, 243
and catering, 283
in classic hotel organization, 69
Management:
and data mining, 411–412
and increased profits, 132
policies, 454
relations and engineering,
197–198
of stress, 63
styles of, 170–171
Management company(-ies):
and CRM, 46–47
examples of, 18
for extended-stay hotel
development project case study,
12
and independent hotels, 15
portfolio composition of, 45
selection of, for hotel development,
10
as stake holders, 43
Management contracts:
and CRM, 50
franchise vs., 15
and hotel/restaurant relationships,
278
proliferation of, 15
Managerial work roles (of GMs),
96–100
Managing:
distribution channels, 314–315
food and beverage operations,
239–250
marketing, 319
revenue, 315–316
workplace violence, 228–229
Managing Hotels Effectively, 72
Mandarin, 18
Marital status, 213
Market(s):
global, 14–15, 21
hotel, 7
Index 471
leisure, 15
target, 309
Market-driven pricing, 336
Marketing, 304–348, 353–361. See also
Pricing; Sales
of beverage operations, 295
and branded distribution company,
19
the Bristol Hotel Company,
278–279
centralized function for, 319
as circular process, 318, 320–321
and consumer decision rules,
321–334
costs, 306
creating awareness/stimulating
demand in, 311–314
and customer satisfaction, 316–318,
337
and data mining, 402, 410–411
and defining identity, 308–309
definition of, 305–307
direct, 313
and evaluating performance,
317–318
functional organization of, 80
and GM, 320
in the guest service cycle, 126
historical background for, 304
implications of consumer decisions,
328–331
independent hotels, 319, 320
individual properties, 320
and the Internet, 313, 319, 339–340,
343, 344
management of, 319
and managing distribution
channels, 314–315
managing revenue, 315–316
market research department
revamping case study, 360–361
measures of, 318–319
and nonprofit organizations,
353–360
and pricing, 310, 334–345
as problem-solving tool, 320–321
as process, 305–321
and the revenue manager, 345–348
sales vs., 303, 313, 348–249, 353
Seattle Sheraton Hotel and Towers
case study, 353–360
situation, 309
and speed of Internet, 344
and strategic alliances, 278–279
tips for, 309, 312
Market research department
revamping case study, 360–361
Market segments (segmentation):
and data mining, 404, 406–407, 411
effects of, 2
hotel-guest, 407
marketing programs for, 317
and new hotel development, 7
online rates broken out by, 32, 33
and positioning, 311
and pricing, 342, 343
and reservations organizations, 17
for spas, 55–57
Market share, 319
Marriott:
associates opinions of, 88
competency models at, 111
core belief at, 86
focus of, 19
guest relations at, 156
portfolio composition of, 45
and separation of
ownership/operations, 20
Marriott, J. W. “Bill,” 133
Marriott brands:
business structure of, 18
restaurant brands at, 278–279
Marriott Corporation:
early yield management at, 133
and food and beverage operations,
266
restaurant brands at, 269
Marriott Hotels:
portfolio composition of, 44, 45
strategic alliances of, 266
Marriott International:
portfolio composition of, 44
Marriott International, Inc.:
management services of, 10
Marriott Marquis, 268
Marriott Suites, 268
Massage, 62, 63
Massagli, Don, 148
Mass hire, 25
McClane, A. J., 398
McClelland, David, 101
McDonald’s, 269
lawsuit against, 208
marketing of, 348
1327.chind 12/19/05 12:29 PM Page 471
McKeever, David, 242
The Meat Buyers Guide, 398
Media, 359–360
Medical certification, 443
Medical leave, 442–444
Medical spas, 56–57, 62, 64
Medical tests, 440–442
Meetings:
and coordination of hotel activities,
82–86
example of regular, 251
of national associations, 354–355
pre-shift, 127–128
typical structure of, 85
Melon’s HR Solutions group, 453
Mentoring:
and the chief financial executive,
388–390
and competency models, 103
by director of catering, 290–291
Menu(s):
creation of, 289
wireless electronic, 248
Mergers of unions, 416, 417
Middle market properties, 268
Mineral springs spas, 57
Mini-bar, 238
Minimum wage, 213
Miraval’s Life-in-Balance, 54
Mission statements:
and GMs, 115–116
Rancho Bernardo Inn, 115
Mississippi Region Affiliated Resorts
(MRAS), 360
MOA Hospitality, 227
Mobil Travel Guide, 148
Model of turnover, 431, 432
Model room, 22
Modifications for disability, 441
Morris, Anna, 146
Motel 6, 268
Motivation, 421, 422
”Motivators,” 435
MRAS (Mississippi Region Affiliated
Resorts), 360
Mrs. Fields, 266
Mrs. Parks Café, 266, 269
Multi-attribute attitude model,
323–325
NACE (National Association of
Catering Executives), 290
472 Index
National Association of Catering
Executives (NACE), 290
National Association of Meat
Purveyors, 398
National economy:
cyclical nature of, 3
effects of, 2
National Executive Housekeeper’s
Association (NEHA), 187
Native American:
casinos, 419–420
culture, 422
Natural surveillance, 221, 222–223
Nebel, Eddystone C., III, 72
Negligence:
and alcohol service, 209
in civil lawsuits, 206–207
and key control, 210–211
NEHA (National Executive
Housekeeper’s Association), 187
Neural networks (in data mining),
401, 408, 409
New York Restaurant Group, 266,
269
Night supervisor, 185–186
Nishi, Dave, 146, 147
Nonalcoholic beverages, 292
Noncompensatory decision rules,
325–328
Nonprofit organizations, 353–360
classification of, 357
control of donations to, 356–357
Nonsmoking rooms, 340
Norman, Ellis, 418–425
OLAP (online analytical processing)
tools, 455
Older workers, 423–424
Olive Garden, 266, 269
On-call personnel, 428
Online analytical processing (OLAP)
tools, 455
Online monitoring of room inventory,
338
Online-pricing analysis, 26–36
of available rates, 31–34
methodology/limitations of, 29–30
recommendations based on,
34–36
and results of previous studies,
27–29
summary of findings of, 30–31
Opening a hotel, 21–26
and architectural blueprints, 21–22
and human resources, 26
and interior graphics package, 25
and the model room, 22
and opening day, 26
and operational supplies and
equipment, 23–25
pre-opening budget, 23
and pre-opening staff plan, 22–23
and third-party vendors, 25
Operating ratios, 246–247
Operational controller (GM as), 93,
94, 97–99
Operational supplies and equipment
(OS&E):
during opening of a hotel, 23–25
purchasing/warehousing/
delivery/installation of, 24–25
and the role of the OPM, 21
Operations. See also Engineering
department; Food and beverage
department; Housekeeping;
Rooms operations/department
at Bristol Hotel Company,
279–280
food and beverage, 71, 239–250,
291–298
front office, 152–156
GM as operational controller,
98–99
managing food and beverage,
239–250
sales link to, 349–350
separation of
ownership/operations, 20
spa, 57–61
and strategic alliances, 279–280
trends in bar, 248–249
Operations project manager (OPM),
21–26
OPM, see Operations project
manager
Orchard Inn, 227
Organization(s), 69–88
authority in, 74
of beverage operations, 291–298
of catering department, 282–284
charts for, 70, 78, 86–88, 178, 194,
293, 352
classic, 69–72
command in, 76–77
1327.chind 12/19/05 12:29 PM Page 472
committees and hotel, 83–85
delegation in, 77
for food and beverage, 241–242
hotel, 177–178
modern, 72–73
for purchasing, 393
and reverse organizational chart,
86–88
and rooms operations, 70, 77–79
sales, 351–353
structure of, 73–76, 86–88
Organizational design, 73–86
functional, 77–82
and meetings, 82–86
and organizational structure, 73–76
static principles of, 76–77
Organizational developer (GM as),
97–100
Organizational stability, 95, 99
Organizational structure, 73–76, 454
Organization chart(s):
for beverage department, 293
for engineering department, 194
hotel, 70, 78, 178
reverse, 86–88
of a sales department, 352
OS&E, see Operational supplies and
equipment
OSHA standards, 187
Outrigger Hotel, 146
Outside the box thinking, 299–300
Outsourcing:
and food service, 237
of HR function, 426–428
as HR issue, 419
Overbooking:
legal issues and, 210
and legal liability, 210
Overtime wages, 213
Owners:
and CRM, 47
as stake holders, 43
Ownership:
and branded distribution
companies, 17, 19
and CRM, 48
and REITs, 43
Ownership entity:
creation, 7–8
for extended-stay hotel
development project case study,
12
Index 473
Pacesetting management style, 171
The Packer 1990, 398
The Palm, 248
Palm Restaurant, 269
Paris Convention of 1883, 207
Park Avenue Café, 266
Parking facilities:
and civil liability, 218–221
and crime, 214, 217–218
and environmental design,
221–224
restrooms in, 223
risk management solutions for,
217–227
security of, 217–218, 220, 226
and signs, 225–226
Park Place Entertainment, 453
Part-time workers, 428
Passport, U.S., 444
Payment for rooms, 154–155
Peacock Alley, 248
Pegasus/Rezsolutions, 18
Percentage Increase pricing method,
335
Performance:
appraisals, 103
evaluating, 317–318
as HR issue, 425, 427
Perishability, 349–350
Personalization:
and CRM, 41
in CRM, 40
at Wyndham International, 49
Personnel:
in beverage operations, 296, 297
in engineering, 193–197
food and beverage, 243–244
in housekeeping, 183–187
management, 296, 297
Personnel department, see Human
resources
Phillips, Gregg P., 230
Physical dispersion, 75
Picks Food Courts, 266
Pied Piper pricing method, 335
The Pierre:
best-practices at, 253, 254, 257,
263–264
controlling costs at, 261–262
purchasing at, 243
Pizza Hut, 266, 269, 279
Planet Hollywood, 269
Planning, strategic, see Strategic
planning
Plumbing system, 196
Policy (well-written), 438
Pooled interdependence, 75
Portable bars, 238
Porters, 283
Positioning, 108, 109, 311
Post-traumatic stress disorder
(PTSD), 230
Preemployment medical tests,
440–442
Preferences (customer), 38, 39
Preferred Hotels and Resorts
Worldwide, 18
Pregnancy, 212
Pregnancy Discrimination Act of
1978, 212
Premise liability, 218–221
Priceline.com, 30, 314
Pricing, 334–345
as art, science and intuition,
336–337
comparison of online rates, 29, 31–34
consistent, 35, 36
creativity in, 340
current criteria for, 336
and diversification, 341
elasticity in, 344–345
human resources in, 340–341
Internet, 26–36, 338–340, 343–344
market-driven, 336
online, analysis of, 26–36
ownership of, 336
and quality, 343–344
role of technology in, 338–339
setting, 310
supporting/protecting, 341–343
three forces of, 334
traditional approach to, 334–336
and yield management, 337, 344,
345
Privacy, 209
Private placement memorandum, 12
Problem-solving tool, 320–321
Produce Marketing Association, 398
Product brandings, 268, 269, 277. See
also Branding
Productivity:
distribution, 315
sales, 312
tips for marketing, 316
1327.chind 12/19/05 12:29 PM Page 473
Product quality, 258–260
Profits:
benefits of enhanced, 132
and food and beverage best
practices, 264
service-profit chain, 434
Profitability:
and budgeting, 384–386
changing expectations of, 391
and employee satisfaction, 430
of hotel/restaurant strategic
alliances, 280–281
of spas, 57
and turnover, 434
Profit centers, 131
Prohibition, 235
Projection (ten-year), 7, 9
Project Management Institute, 345
Promotions:
and demand, 313, 314
nonprofit, 359–360
and selling, 349
Promus Corporation, 266
Protea, 344
Psychological determinants of
demand, 411
PTSD (post-traumatic stress
disorder), 230
Public accommodation, 212
Public relations:
and GMs, 117
and nonprofit organizations,
353–360
and selling, 349
Punitive damage, 206
Purchasing:
and corporate
direction/interaction, 397, 398
the function of, 391–399
independent consultant for, 243
and interdepartmental
relationships, 393, 396
organization of, 393
of OS&E, 24–25
sample job descriptions for,
394–396
sources for, 397, 398
Purchasing director, 366–367
Purchasing manager, 391
and criteria for decisions, 396
daily life of, 397
knowledge of the, 366
sample job description for the, 394
474 Index
Quality:
in food and beverage department,
258–260
in food and beverage operations,
245
of lighting, 222
and pricing, 343–344
record of general contractor, 9
standards, 20
of water service, 196
Quality assurance training, 126–127
Quantity Food Purchasing, 398
Query tools (in data mining), 401
Quid pro quo sexual harassment, 212,
436–438
Quinn, Dennis, 141
Quintessentially, 145
Radio station, 359–360
Radisson, 268
Radisson Hospitality Worldwide:
strategic alliances of, 266
Radisson Hotels Worldwide, 269
food and beverage trends at, 248
Jack Geddes, 27
Ramada Inn, 268
foodservice at, 242
portfolio composition of, 44
Rancho Bernardo Inn, 115–116
Randall, John, 266
Rate(s) (room):
active management of, 35
average daily rate, 306
best available rates, 342
category controls for, 134–136
clustering, 133–134
and group bookings, 138
length-of-stay controls for,
136–137, 140, 141
methods of setting, 335
online, 29, 31–34
and room selection, 153
verifying at check-in, 153
Ratio of beverage sales to food sales,
247
Real Estate Investment Trusts
(REITs), 43
Reasonable accommodation, 439–442
”Reasonable duty of care,” 437–438
Receiving, categories of, 393
Reciprocal interdependence, 75–76
Record maintenance, 454
Recreation supervisor, 186–187
Recruitment:
and competency models, 102
suggested new HR practice for,
453
Red Lobster, 269
Reengineering, 70, 71
Refrigeration, 197
Regent Hotels and Resorts, 253, 254
Regional organizations, 360
Registration, 126
Regression-type models (in data
mining), 401
REITs (Real Estate Investment
Trusts), 43
Relais and Chateaux, 18
Relationship building, 128, 130
Relationship issues, 93–95, 97
Relationship management, customer,
see Customer relationship
management
Remmington’s, 271, 273, 274
Renaissance:
portfolio composition of, 44, 45
Renaissance Sea World Resort:
foodservice at, 242
Request for Proposal (RFP), 284
Requests (customer), 157
Reservation(s):
affiliations, 16–17
analysis of online, 26–36
and available rates, 31–34
function of, 78
guarantees for, 154
in the guest service cycle, 126
legal issues and, 210
and legal liability, 210
and revenue manager, 347
Residence Inn, 44, 45, 268
Resort spas, 55–56, 61–62, 64
Resource allocator (GM as), 98, 99
Respect, 112
Respondeat superior, 207
Restaurant:
brands, 269
design/conceptualization,
260–261
increasing revenues at, 131–132
Restrooms, 223
Retaliation:
fear of, 438
and sexual harassment, 439
Retention rates, 319
Retirement, 424
1327.chind 12/19/05 12:29 PM Page 474
Return on investment:
attention focused on, 2, 3
and engineering department, 192
and food service, 236
Revenues:
from food and beverage sales,
245–246
increasing restaurant, 131–132
managing, 315–316
maximizing customer, 37
revenue management game,
141–143
rising room, 319
spa, 50–51
of spas, 57–59
spa treatment type vs., 62–63
Revenue management, 337
Revenue manager, 345–348
Reverse organizational chart, 86–88
Reward systems, 103
RFP (Request for Proposal), 284
Risk management:
additional strategies for, 224–227
and alcohol management, 224
and civil liability, 218–221
and contractual provisions against
loss, 226
and crime-prevention program, 220
and environmental design, 221–224
for public safety, 217–227
and security audit, 226
Risks of hotel developer, 13
Ritz-Carlton, 268
advertising at, 349
guest-histories at, 41
Riviera Hotel and Casino (Las
Vegas):
food and beverage trends at, 248
foodservice at, 242
Roman Catholic Church, 72
Ronald McDonald, 348
Room(s):
nonsmoking, 340
selection of, 153–154
Room attendants, 283
guest contact skills of, 189
number needed, 180
standard for number of rooms
cleaned by, 180
standard operating procedures for,
184
Room availability, 314–315
Room rates, see Rate(s) (room)
Index 475
Rooms, director of, 173–174
Room service:
and Good Eats Grill, 279–280
as subunit, 80
trends in, 249–250
Rooms operations/department,
121–163, 176–177
bell stand’s role in, 150–152
concierge’s role in, 143–149
Coug Inn front desk case study,
162–163
daily life of the FOM, 127–131
director of rooms, 173–174
Disney Orlando resort hotels case
study, 139–141
and engineering, 72
front desk’s role in, 152–156
functional organization of, 77–79
and group bookings, 138–139
guest relations, 156–158
legal issues for, 210–211
and length-of-stay controls,
136–137, 140, 141
as line operation, 71
new FOM case study, 161
personal experience in, 149–161
and rate category controls, 134–136
roles/responsibilities of the FOM,
124–127
the rooms department, 176–177
in typical hotel organization, 70
and yield management, 131–143
Roquefort, Guy de, 143–144
Ruth’s Chris Steakhouses, 266, 269
RyanAir, 28
Safes (hotel), 210
Safety:
additional strategies for, 224–227
and environmental design, 221–224
in housekeeping, 187
in parking facilities, 217–218
and violence in the workplace,
227–231
Sales, 348–253
and budgeting, 384, 385
for catering department, 284–286
compensation for, 312
from food and beverages, 245–246
of food and beverages, 245, 296
foodservice, 241
functional organization of, 80
legal issues for, 211
and link with operations, 349–350
management of, 351
marketing vs, 303, 313, 348–249, 353
online, 27
organization, 351–353
productivity tips, 312
and room models, 22
skills for, 311, 312, 314
and support staff, 349
training/turnover/sales analysis,
449–450
Sales per available seat, 247
Salmonella, 208
Sammons, Gail, 419–420, 426–428
Sara Lee, 266
Savoy group, 41
Scheduling:
concerns for housekeeping,
180–183
of meetings, 83–86
Schultz, Joanne, 255
Scoops Diner, 271, 273, 274
Seafood Business Magazine, 398
Seattle Sheraton Hotel and Towers
case study, 353–360
Seattle Symphony, 359
Section housekeeper, see Guest room
attendant
Section housekeeping aid, 184–185
Security, 171–173
audit for, 226
function of, 79
interdisciplinary security plan case
study, 230–231
legal issues and, 214
location of personnel for, 223
patrols, 224–225
risk in parking facilities, 217–218,
220, 226
Security manager, 172
Segments, see Market segments
(segmentation)
Self-management, 104, 105, 108–109
Senior housekeeper, see Floor
supervisor
Senior housekeeping aid, 185
September 11, 2001 terrorist attacks,
391
effects of, 3, 13, 456
and HR, 456
Sequential interdependence, 75
Serious health condition, 442
Service business, 349–350
1327.chind 12/19/05 12:29 PM Page 475
Service expectations, 116
Service process (for catering),
284–286
Service-profit chain, 434
Service vision (strategic), 95
Sexual harassment, 212–213,
436–439
Sexual orientation, 213, 426
Shareholders, 132
Sheraton, 268, 279, 336, 342
food and beverage trends at, 248
portfolio composition of, 44, 45
Sheraton Hotels:
foodservice sales at, 241
Shin, Caroline, 336, 337, 339–342
Short run job demands (on GM),
93–94, 97
Shula’s Steak House, 248
Sight lines, 218
Signage:
importance of in public safety,
225–226
and interior graphics package,
25
and opening a hotel, 22
at swimming pools, 186
Simultaneity, 350
Site for new hotel, 6
Six Continents, 44, 45
Sizing of spas, 61–63
Sleep Inn, 268
Small Luxury Hotels, 18
Smith, Mary S., 222
Social events, 355–356
Social Security card, 444, 445
Software:
Affinium, 402
data mining, 402, 406
E.piphany E.4, 402
GoConcierge, 146
for yield management, 338
Sold-out dates, 134–136
Sommelier, 283
SOPs (standard operating
procedures), 184
Spa(s), 50–67
classification of, 54–57
demand for, 51–52, 58, 63
determining size of, 61–63
and the importance of health
issues, 52–54
operations, 57–61
476 Index
and revenue vs. treatment type,
62–63
segments in, 55–57
Spa Mystique business problem
analysis, 65–67
trends in, 63–64
Space (and group bookings), 138
Spa Mystique business problem
analysis, 65–67
Span of control, 74–75
Specialization of jobs, 73–74, 81, 82
Speed racks, 294–295
Spirituality, 426
SRS Hotels, 18
Stability (organizational), see
Organizational stability
Staff functions, 74, 194
Staffing:
of beverage operations, 297
concerns for housekeeping,
180–183
formula for computing, 180
Staff plan (pre-opening), 22–23
Stair towers, 223
Standardized information systems, 46,
48
Standard operating procedures
(SOPs), 184
Starwood brands, 339
business structure of, 18
food and beverage trends at, 249
portfolio composition of, 45
Starwood Corporation:
data mining at, 402
Starwood Hotels and Resorts
Worldwide, 336
portfolio composition of, 44
Starwood W Hotels, 336
guest relations at, 156
lifestyle focus of, 309
and positioning, 311
State decisis, 205
Statistical modeling, 400–402
Statutory law, 206
Steigenberger, 18
Sterling, 18
Stewards, 283–284
Stock prices, 3
Stolen property, 210
Stoner, Rod, 256, 264
Storeroom clerk, 395–396
Storeroom supervisor, 394–395
Strategic alliances, 265–281
Bristol Hotel/Good Eats Grill
example of, 267–275, 278–281
and contract relationships, 278
critical elements to consider for,
277
and finance, 280–281
and marketing, 278–279
and operations, 279–280
and product brandings, 268, 269
and profit centers, 131
selection process for, 275–278
table of, 266
value of, 265–267
Strategic planning:
by HR, 447–448
and long-range budgeting, 378
Strategic positioning, 108, 109
Strategic service vision, 95
Street, Gene, 267
Strength, weakness, opportunity, and
threat (SWOT) model, 445
Stress management, 63
Structure:
business, 7, 15, 18, 19–20
of lodging industry, 42–46
organizational, 73–76, 454
Studebakers, 266
Study. See also Case studies
of budgeting/forecasting, 378,
384–387
of turnover, 434–435
Subcontracting, 286–287, 428
Succession planning, 103
Suites, 268
Summerfield Suites by Wyndham,
44
Summit, 18
SunRise Hospitality outside the box
thinking case study, 299–300
Sunset Hotels and Suites case study,
118
Super 8, 44
Supply-chain management, 399
Supranational, 18
Survey(s):
of engineering department,
199–205
of financial/technology
professionals, 368–377
guest, 247, 317–318
of lodging competencies, 106–107
1327.chind 12/19/05 12:29 PM Page 476
Swimming pool(s):
attendants, 186–187
and civil suits, 209
SWOT (strength, weakness,
opportunity, and threat) model,
445
Systems, director of, 81
Taco Bell, 269
Taco John’s, 266
Target markets, 309
Task certainty, 74
Task integration, 74–75
Task similarity, 74
Technical specialists, 196–197
Technology. See also Data mining;
Information management and
technology
in bell stand, 150–151
and budgeting, 383
and changes in the global market,
14–15
and chief financial executives,
376
and the concierge, 146
and CRM, 39–42, 46
e-commerce, 16, 19, 26–27
effects of, 2
and engineering department, 203,
204
engineering management of, 197
and financial information, 203
and HR, 455–456
role of, in pricing, 338–339
video conferencing, 146
Telephone, 150
Tenure/performance philosophy,
431
Testing of products, 396
Texas Instruments (TI), 348
T.G.I. Friday’s, 259, 266, 269, 279
Third-party vendors, 25
THISCO (The Hotel Industry
Switching Company), 31
360-degree feedback, 103
Thurston, Robert, 144
TI (Texas Instruments), 348
TIAA (Travel Industry Association
of America), 27
Tips:
for communication/promotion,
312
Index 477
for distribution productivity, 315
for marketing, 309, 316
for pricing, 310
for sales productivity, 312
Title VII of the Civil Rights Act of
1964, 212
Tomes, Denise, 230–231
”Total Rewards” loyalty program,
402–403
Trademark protection, 207
Trader Vic’s, 266, 269
Training. See also Education
for bell staff, 151
for beverage operations, 297
card-dealer, 422
and competency models, 102
cross-training, 243, 389–390
customer service, for spas, 59–60
and data mining, 409
for front desk, 155, 156
Internet, 428
at Marriott, 87
for new hotel hires, 25
outsourcing of, 426–428
and quality assurance, 126–127
and sexual harassment, 437, 438
and span of control, 74
suggested new HR practice for,
453
training/turnover/sales analysis,
449–450
and workplace violence, 228, 229
Transient rate categories, 134
Travel Industry Association of
America (TIAA), 27
Travelocity, 314
and brand loyalty, 36
brands’ usage of, 30, 31
as distribution channel, 30
rates available on, 32–34
Travelodge, 44, 268
Travel patterns, 2
Travelweb:
brands’ usage of, 30, 31
as distribution channel, 30
rates available on, 32–34
Treatment type (spa), 62–63
Trends:
in bar operations, 248–249
in beverage operations, 295–296
in catering, 286–287
in HR, 417–428
in marketing costs, 306
in spas, 63–64
TRUST, 18
Turnover, 429–435
of beverage operations, 297
causes of, 431, 432, 434–435
and compensation, 449
effects of, 433
as HR challenge, 416
negative outcomes of, 432–433
training/turnover/sales analysis,
449–450
UCC (Uniform Commercial Code),
208
Unemployment, 429
Unica Corp., 402
Uniforms, 24
Uniform Commercial Code (UCC),
208
Unions, 417–419, 422
Unity of command, 76–77
University of Nevada, 244, 297
Utell Flag International, 18
Vacation resorts, 2
Vacation Station program, 247–248
Value of spas, 61
Variance analysis, 203
Video conferencing, 146
Villager Lodge, 44
Violence in the workplace, 227–231
VIP levels, 154
Visualization tools (in data mining),
401
Vizer, George, 256
Voice distribution channels, see
Central reservations service
VRIO analysis, 445
Wages, 213–214
Waldorf-Astoria:
best-practices at, 253, 254, 257,
264
controlling costs at, 262
food and beverage trends at, 248
quality assurance training at,
126–127
Wall Street, 3
Wal-Mart, 225
Walt Disney Orlando resort hotels
case study, 139–141
1327.chind 12/19/05 12:29 PM Page 477
Walt Disney World Marathon, 140
Walt Disney World Resorts and
Theme Parks:
best-practices at, 253, 254, 257,
263
food and beverage awards at,
263
restaurant design at, 261
Wasteful habits, 193
Water service, 196
Web sites. See also Internet
for catering information, 287
consumer visits to, 29
hotel company, 30–36
Weighted additive model, see Multi-
attribute attitude model
Wellness, 51–53, 55
Wentzell, Lloyd, 242
Werner, William, 417–419, 421, 424,
426, 428
Western Hotels, 266
Westin, 268
focus of, 19
food and beverage trends at, 248
guest relations at, 156
portfolio composition of, 44, 45
Trader Vic’s, 266
478 Index
Westin Century Plaza:
Spa Mystique business problem
analysis, 65–67
Westin Santa Carra:
video conferencing at, 146
Wilbert v. Metro Park Dist. of
Tacoma, 227
Wilson, Kemmons, 248
Winegardner & Hammons, 454
Wine steward, 283
WINet system, 402–403
Wireless electronic menus, 248
Wisniewski, Sandra, 230
Witnesses, 226
Women:
as HR issue, 425, 426
and spas, 51
Woods, Robert H., 419–427
Work performance, 425
Workplace violence, 227–231
Work roles, 96–99
Workstations, 152
WorldRes:
brands’ usage of, 30–31
as distribution channel, 30
rates available on, 31–34
Wrongful discharge, 211
Wyndham:
best-practices at, 253, 254, 257–259,
262
business structure of, 18
portfolio composition of, 45
Wyndham Hotels and Resorts, 44
Wyndham International, 44, 48, 49
Wyndham Luxury Resorts, 44
Yates, Sally, 146–147
Yield management, 131–143
concepts of, 133
Disney Orlando resort hotels case
study, 139–141
and financial health, 315
goal of, 133–134
and group bookings, 134, 138–139
history of, 133
and length-of-stay controls,
136–137, 140, 141
obstacles to implementing, 132
and pricing, 337, 344, 345
and rate category controls, 134–136
and revenue management game,
141–143
software packages for, 338
Young, Cheri, 418–428
1327.chind 12/19/05 12:29 PM Page 478

doc_491777392.pdf