Hotel management's response to globalization and generation Y

Hotel Management

hotels have entered the initial stages of one of the deepest and longest recessions in the history of the domestic lodging industry." (PKF predicts sharp drop in 2009 hotel revenue, 2008). The demand for lodging accommodations in the United States is forecast to decline by 2.5% fewer occupied rooms in 2009, followibg a 1% decline in demand for year-end 2008 (PKF predicts sharp drop in 2009 hotel revenue, 2008). News is not good for both leisure and business travellers. According to Deloitte's 2008 travel survey, 38% of respondents said they expect to spend less on vacation/leisure travel over the next 12 months, nearly twice the 21% who expect to spend more (2009 industry outlook: Tourism, hospitality & leisure, 2009). With regards to business travel, 26% of the 106 corporate travel buyers interviewed said they had implemented emergency travel cutbacks in the past weeks as a result of the financial crisis (2009 industry outlook: Tourism, hospitality & leisure, 2009).

Amidst the economic downturn, some hotels will do well and others will barely survive. There are always new opportunities and ways to operate more efficiently and effectively. The hotels that will thrive are those with managers who effectively exploit emerging opportunites presented by globalization and the Generation Y market segment and who focus on efficient and effective operations in terms of sustainability, advances in technology and improve talent management techniques. This paper focuses on why and how hotel management should respond to these new market imperatives.

Globalization

Hotels are increasingly viewing the expansion of their global footprint as an effective way to grow market share, build brand awareness and spread risk over the long-term.( 2009 industry outlook: Tourism, hospitality & leisure, 2009). In particular, emerging markets such as Russia, India, China and the Gulf offer significant opportunities for growth, but are far from homogenous market blocks (the future of the hotel industry, Amaddeus).

Therefore, to be successful in international business, hotels will have to operate differently in different areas of the world. According to Cline, a consultant with Arthur Andersen, "Those hospitality companies that believe that they can grow and retain a niche position without acknowledging the imperatives of globalization need to take another look. Put another way, most hospitality businesses will need to think "globally" if they are to survive." Specifically, this means that hotels will need: international expansion with common product and brand position; sales and marketing programs that fully capture global economies of scale; organizational structures that allow global delivery of services with local operational control, cross-border employee training to support operations, and the use se of the world capital markets as sources of funding (Cline).

Sustainability

Higher energy costs, increased regulatory pressures and growing consumer demand are driving sustainability efforts in the hotel industry (2009 industry outlook: Tourism, hospitality & leisure, 2009). According to this source, a Deloitte survey of more than 1,000 business travelers in April 2008 found that 95% of respondents think that lodging companies should be undertaking green initiatives. Also, 48% of respondents said they try to be green when they travel, an increase from 41% over 2007.

Hotels are building new hotels that are more sustainable using Gold LEED Leadership in Energy and Environmental Design (LEED) certification. This is a national standard for green design, construction, and operations from the United States Green Building Council providing third-party verification that a building or community was designed and built using strategies aimed at improving performance across all the most important sustainability metrics: energy savings, water efficiency, CO2 emissions reduction, improved indoor environmental quality, and stewardship of resources and sensitivity to their impacts (Intro -- What LEED is).

In addition to constructing LEED-certified buildings, hotels are making extensively retrofitting existing properties and practices. Hotels are conserving water and electricity with low-flow water fixtures, timed outdoor sprinklers, programmable thermostats, sensor-equipped and energy efficient lighting, energy-efficient washers and dryers and tinted windows; purchasing bulk supplies of food and amenities; installing energy-efficient fixtures, lighting, and appliances; and using low-VOC paints (which reduce the risks of off-gassing), and non-toxic cleaning supplies (Arieff, 2007). Hotels are also encouraging guests to conserve by developing linen and towel reuse programs and replacing individual amenity items with refillable amenity dispensers (Arieff, 2007).

Technology

The technology that hotels must invest in and use to meet the needs of increasingly demanding and educated consumers is constantly changing. In particular, the hotel of the future will need technology to capture and make use of customer information, support multiple touch points in an integrated fashion, accommodate globalization, offer personalized customer experiences, embrace online communities and social networks and meet the challenges of complex distribution, channel and content management (the future of the hotel industry, Amaddeus). This source recommends the following technology investments to meet the needs of consumers:

Centralized, comprehensive profiles with customer and loyalty integration so hotels can access customer information from the research stage through to the post-stay period

The development of customer-centric processes enabling personalized offers and services throughout all guest interaction phases

Embedded user-generated content collection, analysis and use in the search process

Comprehensive search capabilities and content, including destination information

Online booking of rooms, hotel and destination services

Talent Management

As an entirely service-based business, the ability to attract, motivate and promote great people is essential to success in the hotel industry. Yet, the industry is plagued by extraordinarily high turnover. One study of 229 full service hotels from ten hotel companies conducted by the Educational Institute, the American Hotel & Motel Association, and KPMG Peat Marwick found annual employee turnover rates to be 158% for line-level employees, 136% for supervisors, and 129% for managers (EI-AH&MA / KPMG study finds hotel industry turnover rates continue to climb). According to this study, the top reasons for voluntary turnover (i.e., the employee decided to leave on his or her own accord) were better pay elsewhere, better career advancement elsewhere, personal/family reasons, intracompany transfer/promotion, and preferred job outside the industry.

While the economic downturn in 2009 will most likely provide some reprieve from the employee retention problem, hotels need to create employee loyalty to reduce the costs of high turnover and its negative impacts on customer service. And talent management will become even more important as companies in the United States attempt to staff properties thousands of miles away from their headquarters (2009 industry outlook: Tourism, hospitality & leisure, 2009). To confront the high turn over challenge, hotel management must ensure that their benefits support their company's vision, mission and values (Cavallari, 2008). Hotels are also going to need to be more creative in their approach to benefits, concentrating not only on the basics such as health insurance, vacation policies, and 401K plans, but also considering training and development, quality of life support and other non-basic benefits (Cavallari, 2008).

Conclusion

True, 2008 was not a good year for the hotel industry and 2009 is expected to be even worse. However, brighter times are ahead if hotel management responds to consumer needs. On this front, the two most obvious opportunities are consumers in emerging global economies and the Generation Y market segment. For competitive advantage when pursuing these opportunities, companies must become more sustainable, leverage advantages in technology for demanding and educated consumers and learn to retain their valued employees. In these ways, the companies will thrive in bad and good times by delighting their customers in contrast to lagart competitors who can't keep up with market trends or who have to spend too much money to offer the same level of services as market leaders.