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The purpose of this report is to develop an understanding and expertise in the effective management of hotel service operations. Through the analysis of the article ‘Putting the service-profit chain to work’ and watching Joseph Pine TED talk ‘The experience economy', the report reflects on how these concepts are useful for any hospitality manager to use in the hotel industry. It provides an example of how to apply this knowledge to the hotel sector. The report is a reflective exercise that addresses the essential characteristics of the hotel industry and evaluates the changing nature of factors that influence the hotel industry. It gives detail on the metrics that a manager could use to measure the effectiveness of these concepts. It applies the principles of sustainability to accomplish success in the hotel industry.
A hospitality manager in food and beverage industry may face several challenges due to the complexities of the hotel industry. A new hospitality manager may lack understanding of the fundamental concepts of management of hospitality industry, and that might be the reason behind everything being chaotic in the beginning. Due to several glitches in their job, they need to upgrade their skills and analyze where they are lagging behind and what additional information they need to know. It is necessary for managers to get acquainted with the dynamics of hotel industry and upgrade themselves with necessary information for proper management of hotel operations.
Characteristics of hospitality industry
The hospitality industry is a field within service industry that provides facilities for lodging, event planning, food service and tourism. The success of this industry depends on satisfying customers and giving them unique experience through their service. This service relies entirely on keeping the customers happy and giving them value for their money. This service sector includes not only hotels and restaurant but also transportation service for tourists like airlines, cruise ships, and luxury trains. The primary role of a hospitality manager is to maintain an excellent level of service and promote consumer loyalty. One bad experience will never bring that customer back, so hospitality industry tries their best to provide world-class service. Food and beverage industries also rely a lot on themes. Many entrepreneurs looking to launch their hotels first select a unique theme that will attract more customers, and then they move ahead in planning all the activities related to opening such a hotel (Brotherton, 2012).
Hospitality managers need to understand that the main essence of this industry is customer satisfaction, brand loyalty image and providing an experience that each customer will cherish. Before designing any business strategy in the field of the hospitality industry, an in-depth knowledge of important features and key products of this industry is essential for hospitality managers. This will help them in designing the most appropriate strategy. They need to understand the characteristics of hospitality industry, and then only they will be able to work efficiently. The essential characteristics of hospitality industry are as follows:
Intangibility: Hotel or service industry is intangible that is it can be used but not possessed. It means the hospitality products cannot be transmitted or tested in advance. What shall be forwarded is their use which customers transfer by word of mouth praise or by giving positive reviews in online sites. That is why primary stress in on guest satisfaction by giving them a rich experience in hospitality. It is the basis for retaining and building customer loyalty. All hotel executives should try to implement these facets in their business so that the clients remember their service forever, and they wish to come to the hotel again and again for reliving the experience (Mok et al., 2013).
Limited lifespan: Limited life span is the biggest challenge of this industry. Due to this factor, hospitality industry face problem in choosing between the marketplace and selling in advance. Overbooking can also be problematic, so hospitality manager must know the skills to counterbalance these skills. If people with passion in hotel industry want to launch their new hotel, they need to estimate proper location and marketplace to gain success in their business (Boella & Goss-Turner, 2013).
Hospitality or service industry is dependent on goods. It is important for hospitality manager to know about the transition to the economy in different times. The market economy has evolved with time. In the beginning, economy relied on commodities. In those times it meant growing things like a vegetable, etc. and then extracting them out of the ground to sell in the market. It was the basis of the agrarian economy. But with the industrial revolution, goods became a source of the economic offering. With the transition from an agricultural economy to industrial economy in the time spans of 50-60 years, goods became commoditized, and the main focus was just on price. This relied on customization, and it turned goods into a service. It transformed into service because good were produced according to the demands of the customer. In this phase came the transition from an industrial economy to service-based economy. In this phase, services also became commoditized (Treisman, 2014).
In the event of customizing service according to individual demands, hospitality managers had the responsibility to turn goods and services into an experience for customers. This meant experience was an influential part of the economy. Experience means something that is unique to one particular service. For example, people coming to Disney land experience, a total fantasy world and they get immersed in that experience. They remember it forever, and this is the reason it has been famous with the tourist. There are many different sectors which offer the customers a world class experience and total new offering. But people need to be careful when they advertise their goods. Experience can never be fake, and so any wrong notion should never be given in advertisements. This practice made consumers more conscious of what is fake and what is real service and experience. Therefore authenticity then became the basis of the economy (Purohit & Purohit, 2013).
However whatever might be the basis for the economy at different times, each one of them matched with sensibilities of the consumer. During the agrarian economy, it was about supplying commodities, and it depended on supply and availability. People focused on ways to getting the economy to market. In the industrial economy, the major focus was on controlling cost and manager worked to offer minimum price to customers. With the advent of the service economy, market focused on improving quality. In the current phase of the experience economy, it is mainly about rendering authenticity. This means presenting authentic offerings to clients. So today's manager need to know about two dimensions of authenticity-one is be true to yourself and another be true to your client (Cantallops & Salvi, 2014). For example, Disneyland is wonderfully true to itself as it immerses people in it fantasy environment. One can maintain authenticity by realizing their worth in business. If the experience is good customers will definitely come even without advertisement. Starbucks is an appropriate example for this. They do advertise at all and claim that if the consumer wants to know who they are, they need to come and experience their service. Good experience automatically provides economic value to goods and services. Therefore now authenticity is now the new consumer sensibility. People spend time and money in the desire for authenticity. This knowledge is of enormous implications for today's hospitality manager. The focus of hospitality managers should be more on authenticity and giving a unique experience to their target customers through their hospitality service (Kandampully et al., 2015).
Top-level hospitality executives increase the chance of profitability in business by focusing not on market share or profit goals, but on understanding the needs of frontline workers and customers. Profitability in this sector is driven by investment in people, technology supporting hotel staffs, revamping hotel service and introducing compensation linked to performance at each level. A hospitality manager should know the impact of customer loyalty, employee satisfaction, and productivity on the value of products and services in the hotel industry. Loyal customers have lifetime value for hotel industry as they not only come back to experience the service again and again, but they aid in referrals of the service to other people (Jones et al., 2016).
The service-profit chain is the relationship between profitability, customer loyalty and employee satisfaction and productivity. All of these factors are interconnected, and when a hospitality manager understands this connection, they can surely succeed in their responsibilities. Firstly, profit and growth are stimulated by customer loyalty and loyalty is a direct consequence of customer satisfaction. Satisfaction is dependent on the quality of service given to client and value is created by satisfied and productive hotel employees. Therefore when a hotel manager understands this link, they can implement policies that enable employees to deliver the desired service to customers (Hong et al. 2013).
If these concepts are known by a hotel manager, then their hotel business will definitely prosper. As respecting customer value and giving a unique experience is the basis of the hotel industry, competent hotel managers quantify customer satisfaction levels. Today customers spend a lot in their quest for authentic service and experience. They are strongly value oriented, and so hospitality managers should ensure that they deliver what they actually claim. Many companies spend a fortune on attracting the new client to their hotel premise (Putting the Service-Profit Chain to Work, 2008).
If managers have a clue about the issues that can arise in hospitality operations, they can prepare themselves accordingly to minimize those matters. They can face the following challenges when undertaking their responsibility as a hotel manager:
Labor cost issues-Cost of labor is the biggest expense in all categories of hotels. This issue consumes a lot of time and energy of hospitality managers. The relation between guest and hotel staffs has a great impact on customer experience and success of hotel operations. So it will be necessary for the hotel manager to create a fine balance between cost control and customer satisfaction. It implies the use of metrics by managers to achieve specific goals (Pearlman & Schaffer, 2013).
Increases competition: People now have access too many hotels offering great dining experience along with reasonable cost. This has created steep competition in the hotel industry. It has put all managers on edge, and their success depends only on thinking out of the box. The increased competition calls for increased innovation in the hospitality industry (Yu et al., 2014).
Market segmentation- Market segmentation has increased because now hotel chains focus on the particular niche of customers. They may target tourist or a specific group of official people. Customers have also become more sophisticated, so the current situation is quite challenging for hotel executives. They need to have accurate knowledge of hotel service operations to excel in their work (Guo et al., 2013).
For example, productivity management is a major challenge in the hotel sector. One unique aspect of the hospitality industry is its diversity. The duties of hotel managers vary throughout different regions of the world. For example in areas like Western Europe and North America, the labor cost is high. This factor becomes a challenge for hotel managers working in this sector. They would require expertise both in quality and productivity management. Productivity does not mean just what service or goods a hotel is providing; it is a relation between input and output with a standard level of quality (Benavides-Velasco et al., 2014). A hospitality manager having detailed knowledge about hotel operations knows exactly how to calculate productivity for precise shifts, for the individual employee and particular department of the hotel. They know what factors they can monitor to judge productivity and what factors they can exclude (Gummesson, 2014).
For example, if a hotel manager takes working hours as a means to calculate productivity, the score may decline on days employees spent in training. Therefore an efficient manager filters them out from the calculation. It makes evaluation more practical, and manager can easily understand the internal links that will positively impact productivity in the hotel industry. With accurate knowledge of hospitality concepts, managers can efficiently introduce productivity management system in their hotel which everyone can understand. A Clear understanding of step-by-step process within the hospitality team helps in increasing the quality and productivity. Hospitality managers can manage productivity levels decreasing resource during lean season and increasing them in peak season. This would assist in maintaining both quality and profitability of business (Benavides-Chicón et al., 2014).
For hospitality manager like me, a detailed metric would be crucial for measuring the effectiveness of my hospitality concept. These marketing tools will help me whenever I implement a marketing plan in my hotel. The metric will consider every activity that I do for the success of my restaurant or hotel. It helps in retaining the important things and eliminating unwanted activities. Effective utilization of metrics helps a hospitality manager to turn their marketing plans into an investment rather than a cost for business. It will be the driving force for more profitability. Measurement of key metric helps in improvement of the service industry (Sainaghi et al., 2013).
Hospitality managers have different metrics in place to a better understanding of their business. In this industry, the main focus of executives is on building customer loyalty and generating more profit. Therefore the relevant marketing metric used by managers include the following:
Lifetime value of a customer (LTV): By this metrics, hospitality managers can determine the worth of individual customers over the lifetime of his or her link with the hotel and beverage chain. For example, lifetime revenue flow from a loyal pizza eater can be around 8000 dollars while for a corporate purchaser of commercial aircraft, the revenue translates to billion of dollars. Such is the worth of each loyal customer. This metric helps in identifying valuable customers and giving them high quality experience in hospitality service (Verhoef & Lemon, 2013).
Return on investment (ROI): These metrics calculate the performance and benefits of one investment about other investments. For example, hospitality industry spends a lot in attracting new customers. This requires creating good ambience in the hotel, revamp the environment of the hotel, doing promotional activities, introducing new themes to attract more customers. The expenditure on getting new customers is called Cost per Acquisition (CPA) in the service industry. This factor is also considered by managers to calculate profitability in business (Sainaghi et al., 2013).
Like this different hospitality, the manager can utilize different metric appropriate for their area of activity. When hotel executive keeps track of records, they can identify a factor that boosts or decreases sales. In this way, they can improve their selling rate. Similarly, if a company keeps a track record of feedback of customers and analyzing their complaints, it then helps in identification of issues within the hotel promise. Based on the complaints, adequate action can be taken not to repeat those mistakes again (Verhoef & Lemon, 2013).
The report gave a valuable reflection on the main concepts of hospitality operations and how this concept can be utilized by managers to succeed in business. It provided an idea about nature of this sector of business and what complexities exist in this sector. It also gave a valuable idea on the link between different factors in service-profit chain. An appropriate example of hospitality operation made clear about how hospitality managers can effectively use this concept in real situations. Besides this knowledge about different metrics in hospitality industry made clear how hospitality managers use these metrics to improve their performance.
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