Understanding of the Changes Affecting the Contemporary Hospitality Industry
As the global economy continues to change, so does the contemporary hospitality industry. Recent developments show that industry operators are keen to respond to growing competition in order to maintain their profit margins. This is a difficult undertaking that requires them to adapt to changes in demographics, international business environment, technology, sustainability levels, HRM practices, and legislative frameworks. The aim of this report is to evaluate the operational, managerial, and legislative issues that have resulted from recent developments within the hospitality industry. The report also provides a justification of predicted future trends and developments. Finally, it provides an impact analysis for the predicted trends and developments
3.1 An Analysis of Operational, Managerial and Legislative Issues Resulting From Recent Developments Affecting the Hospitality Industry
The most common operational issues that have emerged as part of recent developments in the hospitality include labor costs, technological dynamism, sustainable development, and multicultural issues. In literature, these issues are being examined at two levels: firm level and unit level (Jones, 1999). Firm level entails the management of strategic operations while the unit level encompasses aspects of the implementation process. To determine whether operational issues have been fully addresses, researchers focus on different areas of focus, including employees, customers, assets, control, service level, and quality (Jones, 1999).
The problem of labor cost is attributed to recent economic changes that exert pressure on investors in the hospitality industry. It is worthwhile to note that labor costs constitute the single largest expense item for managers of hospitality businesses (Jin-Zhao & Jing, 2009). This situation has triggered efforts to reduce the reliance on the human component through the introduction of self-service components. However, it is impossible to eliminate the human element in the hospitality industry. Moreover, efforts are being made to promote integration and globalization as well as the adoption of new management approaches. The challenge of cost containment has also led to growing calls for sustainable development, which have in return triggered a debate on the need to embrace the concept of ‘green hospitality’.
On the other hand, labor shortages also pose a serious threat to hospitality businesses. In many countries, the growth of the hospitality is being curtailed by human resources and not capital; it has become increasingly difficult to attract and retain highly qualified professionals in the industry. This problem is closely related to multicultural issues, whereby it becomes difficult to attract and retain multicultural talent. Preference for multicultural talent arises because it increases the prospects of extending hospitality companies’ operations into regions with diverse cultural backgrounds.
The issue of higher education is also important because the world is shifting towards the knowledge economy. Restaurant and hotel owners have not been left behind in the search for professionals with in-depth academic knowledge on how to gather and utilize information resources. Many employers in the industry are optimistic that these informational resources can be used to develop excellent cost-containment strategies. Nevertheless, this is a challenging task because it brings into perspective the importance of striking a balance between the maintenance of a reasonable margin of operational costs and the ability to meet the expectations of customers. At the same time, employers have to look at the increasing competition, which has been occasioned by a trend where investors are in a rush to maintain their existing profit margins in a global economy that is experiencing an economic slowdown.
The main managerial issues that have emerged in the industry include growing focus on entrepreneurship, dynamism of small firms, increased use of knowledge management practices, use of contextual knowledge in managerial contexts, and reliance on information technology by managers. Since small firms constitute the most common business type in the hospitality industry, it is hard to ignore the role that entrepreneurship will play in future industry growth. This explains why there is growing focus on entrepreneurship in the management of small firms in the hospitality industry (Morrison & Thomas, 1999). The dynamism of small firms is poised to act as a major driver of industry growth. In recent times, these firms have greatly contributed to the health of this industry; they are likely to continue doing so in future.
The issue of knowledge management has dominated hospitality literature in recent times (Hallin & Marnburg, 2008). A lot of focus is on the need for domain-specific knowledge in the industry. Contextual knowledge is also being pursued, with emphasis being on the ability by employees to store contextual knowledge in real time. Focus is also on ways of aligning knowledge vision with various knowledge activities in the managerial activities within the hospitality industry. With the growing use of information technology, most hospitality businesses have become knowledge-based and knowledge-intensive entities.
The hospitality industry depends a lot on information technology for service delivery. In many situations, interactions between employees and customers take place via information technology platforms. In this context, employees are expected to be thoroughly knowledgeable about the needs of customers. Failure to understand the customers’ needs is likely to lead to dissatisfaction. Knowledge management presents numerous opportunities for hospitality businesses. It also poses some challenges that may need to be addressed for it to contribute effectively to managerial excellence. A major shortcoming is that few large hotels and restaurants are utilizing knowledge management principles in an effective manner. Moreover, some climates for learning about knowledge management are good while others are bad. This situation can be exacerbated if there are serious differences in the way management and employees perceive their respective components of domain-specific knowledge.
A number of legislative changes have also occurred in the world of business and are bound to have an impact on the conduct of business in the contemporary hospitality industry. One such legislative change is the revision of guidelines governing the operations of multinational enterprises in OECD countries in 2000. In May 2000, OECD member governments expressed their commitment to provide standards and principles for use within the framework of all applicable laws. The objective was to make multinational enterprises more sustainable. The regulations also provide guidelines on how companies should addresses issues relating to human rights, industrial relations practices, combating corruption, information disclosure, competition, taxation, and protection of consumer interests. In another legislative development made in 2006, the International Labor Organization revised a declaration providing guidelines to governments, multinational enterprises, workers’ organizations, and employers’ organizations on how to deal with issues relating to training, industrial relations, work and life conditions, as well as employment. One international legal instrument that specifically targets hotels and restaurants was enacted in 1991 under the auspices of the ILO. The convention sets up minimum requirements in terms of working conditions, career prospects, and training needs of staff in restaurants and hotels.
The European Union has also been at the forefront in enacting conventions, policies, and regulations aimed at address various issues affecting the hospitality industry, such as corporate social responsibility and sustainability. In 2007, the EU adopted a policy position aimed at creating better jobs in the tourism sector with a view to promote sustainability. Earlier on, in 2000, tourism-related organizations in the EU had come up with a code of conduct aimed at protecting children from being exploited through activities relating to tourism and hospitality. This initiative has since been expanded into a global campaign. The UN has also been at the forefront in spearheading the enactment of conventions that promote adherence to international labor standards. New food laws are also being enacted in the industry. The EU has been at the forefront in embedding food laws into the existing regulatory framework for the industry. These laws fall within the realms of the environmental protection, consumer protection, and human health protection. In these laws, some of the responsibilities fall on the European Commission while others have been conferred on EU member states.
On a negative note, incoherence of food law in Europe is a major problem for the hospitality industry. Moreover, lack of flexibility in the way legislation is enacted hinders the operations of many hospitality businesses. Efforts relating to legislative simplification are being made, although this has proven to be a difficult task because of the over-growing EU membership (Knowles, 2002). The issue ofemployee compensation in the industry is also being subjected to review through legislation. Some of the issues being ironed out through amendments to applicable labor laws include minimum wage, equal pay, overtime pay, child labor, tips, uniform maintenance, compensation plans, the establishment of pay grades, and employee benefit programs. In many countries, the law requires hospitality companies to provide three types of employee benefits: social security, worker’s compensation, and unemployment insurance (Walker & Miller, 2010).
One future trend that will dominate the hospitality industry in future is the strong influence of the knowledge economy and information technology. More than ever before, hotel operators are reliant on information technology in the implementation of various business strategies. Communication with customers via social media has become the norm rather than exception. Moreover, customers are increasingly being requested to provide feedback and reviews of hotels and restaurants using online platforms. As information becomes more accessible, a growing number of customers are demanding higher service standards. New concepts also continue to emerge as entrepreneurs in the industry seek to identify new business opportunities for delivering unique value-added services to existing customers.
Through technological innovations, hospitality companies are shifting their focus to data-focused ideas derived from analyses of customer reviews, trends in hotel bookings, culinary preferences, and popularity of travel destinations. These future trends are a reflection of the wider process of globalization, which has already started affecting virtually all aspects of business operations. For example, issues relating to the safety and security of guests are now being discussed from the perspective of globalization. Similarly, many hotels and restaurant operators are keen on measuring the quality of their services based on best practices at the international level.
Another important future trend relates to the aging population. The aging of the population particularly in the developed world will have an impact on how price is correlated with value in the delivery of various hospitality services. According to Lago & Poffley (1993), the elderly population will continue to increase during the twenty first century, meaning that hospitality industry operators must prepare for the emergence of an aged society. The resulting changes in demographic characteristics will have far-reaching implications for hospitality business practices, opportunities, and needs. Some of the variables that hotel and restaurant operators will need to put into consideration include family structure, income levels, and health status of older customers. Since these customers are well educated and experienced in matters of travel and hospitality, they will often insist on “taking control” over service encounters in addition to embracing sophistication in terms of tastes and preferences.
According to Kapiki (2012), tourism lodgings are emerging as a viable investment path for operators who are keen on exploiting new business opportunities. The benefits of this investment opportunity are going to be maximized if these investors focus on retirees as potential customers and target them accordingly. Lodging operations will become highly streamlined because of the introduction of IT applications that area fully reliant on wireless infrastructure. This will lead to cost savings and increased efficiency. There will be a rapid growth in online purchases and other forms of cashless payments. Using remote monitoring algorithms, hotel and lodging operators will be able to meet and even exceed customers’ expectations through improvement in customer relationship management. For hotel owners, the technology will facilitate effectiveness in the management of utilities such as vehicles and surveillance systems (Singh & Kasavana, 2005).
Lastly, HRM practices will be revolutionized because of the increased use of technology by employees. The current, technology-savvy generation views work from a perspective that is slightly different from the one that has been conceptualized in traditional HRM literature. To align the HRM needs of hotel, restaurant, and travel companies with the emerging conceptions of work, it will be necessary for new approach to the management of human resources to be introduced. According to Davidson, McPhail & Barry (2011), this will lead to the emergence of outsourcing as a dominant method of employment. Moreover, HR managers of large international hotels will be compelled to evaluate local circumstances to ensure that the HR practices that they introduce resonate well with local employees.
Impact analysis is a crucial tool that facilitates the process of unearthing unexpected negative outcomes of new trends in an industry. Through a structured approach, impact analysis can provide a platform for identifying potential negative impacts and using the information as a basis for assessing the viability of alternative courses of action. In the hospitality industry, it is imperative for stakeholders to conduct an impact analysis of all predicted future trends and developments. In the context of this report, the main predicted future trends include the strong influence of the knowledge economy and information technology, globalization and security concerns, aging of the population, growth of tourism lodgings, and revolutionized HRM practices.
The strong influence of the knowledge economy and information technology is likely to have the negative effect of creating a situation where traditional business fundamentals are neglected. It would be wrong to abandon traditional business practices that have greatly contributed to the current growth of the industry. Instead, existing practices should be supplemented with new practices in order to optimize market performance. On the other hand, addressing security issues through the lens of globalization may easily sensationalize security threats, thereby scaring away tourists, international travelers, and other customers. Although it is necessary to highlight security issues from a global perspective, it is equally important for operators of hospitality businesses to choose only those solutions that resonate with local realities and day-to-day experiences. Regarding the aging of the population, it will be challenging for restaurant and hotel operators to adapt their services to the sophisticated needs of this new demographic group while at the same time seeking to retain younger customers. To avoid loss of business, operators will need to maintain a balance between new trends and existing practices. A similar balance should be maintained in regards to the pursuit of new business opportunities in the tourism lodgings industry as well as managerial responses to the forecasted changes in human resource management.
This report has investigated the changes affecting the contemporary hospitality industry. It has also provided a prediction of future trends in the industry based on these changes. The main operational changes that continue to shape the industry relate to labor costs, cost containment, the need for higher education and knowledge management, and labor shortages. In terms of managerial issues, focus is primarily on entrepreneurship, the dynamism of small firms, and dependence on information technology. A number of legislative changes have also occurred, such as the introduction of stringent food laws in the EU and the enactment of national legal frameworks that address aspects of employee compensation. The main predicted future trends identified in this report include the strong influence of the knowledge economy and information technology, globalization and security concerns, aging of the population, growth of tourism lodgings, and revolutionized HRM practices.
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