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Analyse, evaluate theories and models related to hospitality management and operations and apply them to case studies to compare and examine what the main issues are for managers in the hospitality industry.

INTRODUCTION:

By looking at multiple case studies, models and theories, this essay will set out to raise a number of key issues that can and have occurred within the hospitality/tourism industry for managers, regarding both tangible and intangible aspects. After identifying the issues discovered, the essay will go on to critically analyse and assess how the issues were addressed through specific case studies; whether the managers either overcame the situation, or in some cases succumbed to them. Some models and theories which may appear to have been applied to successfully overcome certain issues will be further explored and evaluated. In the case that management fail to overcome any issues, other models and theories will also be contemplated in an attempt to demonstrate potential solutions.

In some areas of the essay, hypothetical issues that may not use case studies as an example will still be considered and explored by using models and theories. Throughout the essay, common issues that have been approached differently and have contrasting outcomes will be compared to reinforce why particular models are better suited to achieve the best results. Finally, the essay will conclude by recapping on previous discussions which will enable us to determine what can be assumed as the most effective models and theories for managers within hospitality industry to consider, so that the business can be in control of any issues that may arise and continue progressing.

COMPETITION:

In an ever-changing environment, a common issue that every business in the hospitality industry has to contemplate at one point or another; is keeping ahead of it’s competitors to ensure a satisfactory amount of costumer revenue (Cousins, et al, 2011). An obvious way of doing this is to first of all do a basic SWOT analysis, which looks at the organisations strengths, weaknesses, opportunities and threats (Helms and Nixon, 2010). Although to get a more in depth understanding, there are models such as the “Five Competitive Forces” Model (Porter, 2004), shown in figure 1. By using this model, we can establish what pressures or “forces” a business will have to take into consideration when dealing with competition. One example of what would be considered as a threat in a SWOT analysis that is also displayed in figure 1, are the “new entrants”, as customers

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U1435976are now provided with a wider range of variety to choose from and may also be intrigued to try something new. As a result of the new entrants whom may choose to sell cheaper products in an attempt to win over customers, allows the customers or “buyers” a certain degree of power to force down prices (Cousins, et al, 2011), which becomes a weakness for existing organisations. Another weakness would be suppliers, whom can also have their own bargaining power if they choose to work as a cartel or their groups of products are integrated.

Figure 1| Five Forces Of Competition (Cousins, et al, 2011. p.20)

In one case study carried out by Casado (2008), the founder of the family run company; Ponderosa Inc., noticed that one of the three restaurants they owned was experiencing a drop in business over the past five years due to much competition from newer restaurants in town. However, the manager insisted on continuing to run the restaurant the same we he always had and disregarded any ideas of change in order to maintain and potentially regain costumers.

Due to the unwillingness to adapt to change and compete with it’s new competitors, we can assume many possible reasons as to why the restaurant could be failing by referring to Porter’s model. The competition could have appealed to it’s customers by using price sensitivity and lowering the costs of it’s products (food and beverages), ultimately giving it’s demographic the incentive to choose them instead, which as discussed previously; can lead to many other problematic scenarios.

Another case study which focuses on the company Travelodge (businesscasestudies.co.uk), came across the same issue of competitors but instead chose to develop it’s internet presence as a strategy to retain and increase it’s market share. Not only did this strategy enhance its brand name, but the use of internet presence can also be seen as a tool for advertisement.

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Seeing as society has become more and more acquainted with using technology to make bookings or read reviews on, it makes sense that businesses should use promotional tools which

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U1435976compliment this, such as Travelodge has. In addition, it would make it easier to source data on costumer revenue as they can track how many times their website is visited and how many of those are converted into sales. Identifying weaknesses would also become easier this way, which gives business’ a chance to work and improve on them.

Another motivator to enhance internet presence is for the sake of electronic word of mouth (eWOM) which is potentially accessible to a wider audience than organic word of mouth would be, as it maximises it’s opportunities and allows for “organisations to use social networks to communicate directly with clients” (Pietro and Pantano, 2013, p.5).

The owner of Ponderosa Inc. has his three restaurants advertised separately, of which none are using the internet as a promotional tool, but instead are using traditional promotional tools such as brochures and newspapers (Casado,2008). This is not only a more costly promotional tool, but it also limits them to the local demographic and loses out on targeting a wider audience. Failing to acknowledge the advantages of social media and the importance of developing internet presence, may be one of the contributing factors as to why the restaurant is losing customers to the competition.

LIFE CYCLE DECLINE:

Another potential reason why the restaurant from the Ponderosa Inc. company could be experiencing a drop in business, is simply due to it reaching it’s declining stage within the restaurant life model shown in figure 2:

Figure 2 | The Product Life Cycle (Barrows, et al, 2012. p.174)

However, this could be overcome by adapting to macro environmental changes and by conducting a PESTEL analyses (Yüksel, 2012) which involves the following attributes; • Political • Environmental • Social• Technological• Economic • Legal

Adapting to change means having to change the product / organisation itself, enough to make it seem somewhat new. The Chi Chi’s chain from another case study (Barrows, et al, 2012), was an organisation which worked in the exact same way for 21 years, until they noticed business started

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U1435976to decline. So in 1997 they decided to redevelop in order to keep up to date with external trends, which lead them to the rejuvenation stage rather than the decline stage, as shown in figure 3:

Figure 3 | Restaurant Concept life (Barrows, et al, 2012. p.175)

BALANCING CUSTOMER SERVICE AND RESOURCE PRODUCTIVITY:

The purpose of service blueprinting is to analyse service efficiency: A foodservice operation has two objectives; to provide quality customer service and also to gain the most achievement and profit. According to Cousins, et al, (2011), rather than customer service being described as one generic role, it can be described as a “combination of five characteristics”: • Service level: The intensity/limitation of personal attention for customers.• Availability of service: opening times, variation within menus e.t.c • Level of standards: Food quality, decor, staffing e.t.c • Reliability of the service: Consistency • Flexibility of the services: alternatives and variations available.

And the resources used in foodservice operations:• Materials: equipment and commodities• Labour: Staffing• Facilities: Premises and the volume of business the premises can supportThese characteristics and resources are summarised below in Figure 4:

Figure 4 | “Customer Service Versus Resource Productivity”(Cousins, et al, 2011. p 56)

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U1435976Cousins, et al (2011) state that if the personal services levels are increased, mealtimes are more likely to last for a longer duration and as a result, the potential capacity of the operation will reduce.

It can be assumed that Hummel and Murphy (2011) may have put this model into practise for their case study, to observe if a particular blueprint method could help increase revenue per available seat hour (RevPASH). This is because they suggest that during slow and quite hours, it’s best that staff attempt to increase sales by using suggestive selling tactics e.g offering the desert menu. Whereas during peak hours when the business is fairly busy, staff should skip the suggestive selling routine, which although may reduce check averages, increases table turnover (ibid). However Noone et al (2007) warn of the importance to finding the correct amount of balance between the two, in order to avoid diminishing customer satisfaction as a result of trying to reduce meal durations in an attempt to gain table turnover. Additional warning include negative repercussions of poor suggestive selling strategies, where intentions of achieving add-on sales may be made too obvious to the customer (Leidner, 1993).

LIMITATIONS/ DEPENDANCY:

To independently attract customers proves a difficult task if for instance an organisation is located by or within a tourist resort, e.g a restaurant or an excursion company, as locals are unlikely to visit such areas, meaning that their options for advertisement are limited. Thus an organisation located by a resort would rely on tourists as their main demographic. Although tourists may be the main demographic for these types of organisations, the tourists would not have any prior knowledge of their chosen destination’s local attractions, activities or restaurants. This is where electronic distribution comes in, via global distribution system (GDS) or internet distribution systems (IDS).

A large hospitality provider such as a famous entertainment park, can afford to pay an expensive fee to be connected to each GDS via a link or interface. A small hospitality provider who may not be able to afford the fee can connect to the GDS through a switch, which is described as an “electronic connection though which a hospitality provider must pass first before being connected to the GDS” (Tranter, et al, 2009, pp.104).

Once connected to the GDS a travel agent can access the organisations inventory directly, as shown in figure 5 below:

Figure 5 | Global Distribution Network—View of One Sample Path (Tranter, et al, 2009. p. 104)

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U1435976This could help broaden a resort organisation’s market reach as it can persuade and give customers more incentive to travel to a destination they know more about and are aware of what facilities are available to them.

However, this would mean that these restaurants and other organisations nearly completely rely on travel agencies to bring in potential customers. This could become an issue if the surrounding hotels aren’t performing very well and have given themselves a bad reputation on websites that provide eWOM such as Tripadvisor, making it less likely for a travel agent to sell, as it would make it much harder than selling a different hotel with a good reputation.

MEETING CUSTOMER EXPECTATIONS:

One of the main challenges managers face on a day-to-day basis is trying to meet customer expectation. This can be extremely difficult as, proven in a study produced by Alonso and O’Neill (2010), customers have many different and very contrasting ideas of ideal eating out experiences. The results showed that as some customers would prefer quite restaurants, others said they prefer busy ones as they believe it creates an atmosphere. When it came to decor, a divide of customers said they preferred rustic where others preferred modern and some even stated they liked a mixture of both (ibid). In this sense it may be out of the manager’s control to meet this criteria, however there are some things that can be controlled, like reliability, assurance, tangibles, empathy and responsiveness as shown in figure 6:

Figure 6 | Determinants of Service Quality(Jones, M. 2015 slide. 8)

Depending on the type of operation being managed, different levels of the determinants of service quality are expected. For example; McDonalds shown in the positioning map in figure 7, is located on the higher scale of product level, presumably because they may have a higher amount of Revpash/ table turnover rate and alas, require a higher volume of product available. Then on the service level scale McDonalds is placed quite low, we can assume here that this is because McDonalds is a fast food service whom also provide a drive-through option for customers on the go. There is clearly less employee-customer interaction here than there would be in a five-star restaurant, therefore it is safe to assume that the customer is less likely to need or expect empathy or quality tangibles if they are on the go, and would more likely value and expect other qualities such as responsiveness and reliability.

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Figure 7 | Positioning Map (Olsen et al, 2008, p.17)

PERISHABILITY:

Food has always been a highly perishable product, and in a consumer marketplace where consumer demands shift on a regular basis, it can be a difficult challenge for the hospitality industry to have under control as it is almost impossible to be able to predict how many products a service provider will sell over a specific planning period (Olsen et al, 2008). The “supply and demand curve” shown in figure 8 shows us that the more expensive the product is, the less demand there will be for it (Barrows, et al, 2012). If the supply and demand curve were to be paired up with the positioning map in figure 7, the manager is given some intuition of how to asses the product and the quantity they should have available. This could make for a basic guide, but only to a certain extent as it doesn’t allow for exceptions like special events:

Figure 8 | Supply and Demand Curve (Barrows, et al, 2012)

For instance, if a there were to be an event being held nearby, the local, surrounding restaurants would anticipate a higher volume of guests than they normally would on an average day and therefore would prepare to hold enough stock to fulfil their customers.

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Additionally, there are many other environmental forces of change and even economic conditions such as the weather, which could disrupt the anticipated curve of demand, for example: A rainy day could potentially deter people from coming out, even to eat, however it could persuade them to order a take away in an attempt to avoid going out. However, if an organisation is able to anticipate these disadvantages, they can strategically use them to their own advantage. Many chain restaurants such as Pizza Express now have the option of eating in or ordering for delivery available to their customers.

Figure 9 | Pizza Express Delivery (Pizza Express Delivery Website, 2015)

One obvious way to estimate how much stock an organisation would need is to look at previous demand, changing demographics and competing products. Although, as mentioned earlier; working within an industry of ever-changing consumer demand, looking back at past revenue and sales can be of little use as it doesn’t hold any certainty for the future.

In order to be efficient when it comes to managing stock, organisations can save a lot by having their products produced in a manufacturing facility which is “strategically located to take advantage of… transportation systems and nearness to market” (Olsen, et al, 2008, p.15).

If products aren’t sold immediately they can be inventoried, but when they have minimal shelf life, the best option could be to alter prices. This can be problematic if an organisation has a set menu, however good use of promotional strategies can resolve this issue by having a “specials” option on the menu at a reduced price, having a 2 for 1 selection within the menu or use “happy hour” as their advantage to use up and get rid of excess stock.

A case study of Prêt à Manger (Bowie and Buttle, 2004) shows a unique societal market approach to their use of excess product, in that they give their unsold sandwiches to the homeless. This ultimately makes them more likeable among their demographic and additionally gains them positive publicity (ibid).

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CONCLUSION:

Recapping on all the issues explored above, competition, meeting customer expectations and perishability are presumably the three most common, most challenging and unavoidable issues managers have to deal with within the hospitality industry. Where some models, such as Porter’s “five forces” model, demonstrated a clear strategy on how to asses, analyse and approach the situation when faced with competition, other models are not as helpful: Using both the positioning map and the supply and demand curve gives the manager something basic to work with when presuming how much stock is needed. However as discussed repeatedly throughout this essay, there is constant change within many aspects of the hospitality industry, rendering the supply and demand curve useless when trying to predict how much of a product is enough, in an attempt to avoid overstocking. Instead, precautions should be taken, and when faced with an unavoidable issue, improvisations should be made for an alternative solution.

After looking at the models and strategies for the other issues mentioned, it would seem that regularly adapting to change is the solution for most. Whether it’s switching from using traditional promotional tools such as billboards, to using social media, using a global distribution system or changing the brand name for a chance of rejuvenation, they all require self-analysis and innovation.

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U1435976REFERENCES:

Alonso, A.D. and O’Neill, M.A. (2010) ‘Consumer’s Ideal Eating Out Experience as it Refers to Restaurant Style: A Case Study’, Journal of Retail & Leisure Property, 9(4), pp. 263-276.

Barrows, C.W., Powers, T. and Reynolds, D. (2012). Introduction to the Hospitality Industry. 8th edn. United States of America: John Wiley & Sons, Inc.

Bowie, D., Buttle, F. (2004) Hospitality Marketing: An Introduction. Available at: http://uel.eblib.com/patron/FullRecord.aspx?p=288843. (Downloaded: 15 December 2015)

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Casado, M.A. (2008) ‘Hospitality Case Study on Operations, Strategic Planning and Organisational Behaviour’, International Journal of Case Method Research & Application, 20(2), pp. 359-363.

Cousins, J., Foskett, D. and Pennington, A. (2011). Food & Beverage Management. 3rd edn. Oxford: Goodfellow Publishers Limited.

Helms, M.M. and Nixon, J. (2010). ‘Exploring SWOT analysis – where are we now?: A review of academic research from the last decade’, Journal of Strategy and Management, 3(3), pp. 215-251. doi: 10.1108/17554251011064837

Hummel, E. and Murphy, K.S. (2011). ‘Using Blueprinting to Analyse Restaurant Service Efficiency’, Cornell Hospitality Quarterly, 52(3), pp. 265-272, doi: 10.1177/1938965511410687

Jones, M. (2015) ‘Service Quality and Delivery' [PowerPoint presentation]. TM5004: Hospitality Organisation and Management. Available at: https://moodle.uel.ac.uk/course/view.php?id=13837 (Accessed:14 December 2015).

Lender, R. (1993) Fast Food, Fast Talk: Service Work and The Routinisation of Everyday Life. Berkeley: University of California Press.

Noone, B.M., Kimes, S.E., Mattila, A.S. and Writz, J. (2007). ‘The Effect of Meal Pace on Customer Satisfaction: Analysis of Restaurant Management’, Cornell Hotel and Restaurant Administration Quarterly, 48(3), pp. 231-44

Olsen, M.D., West, J.J. and Tse, E.C.Y. (2008). Strategic Management in the Hospitality Industry. 3rd edn. New Jersey: Pearson Prentice Hall.

Pietro, L. and Pantano, E. (2013). ‘Social Network Influence on Young Tourists: An Exploratory Analysis of Determinants of The Purchasing Intention’, Journal of Direct, Data and Digital Marketing Practice, 15(1), pp. 4-19. doi: 10.1057/dddmp

Pizza Express. (2015) Screenshot. Available at: takeaway.pizzaexpress.com (Accessed 15 December 2015).

Tranter, A., Stuart-Hill, T. and Parker, J. (2009). An Introduction to Revenue Management for the Hospitality Industry. New Jersey: Pearson Prentice Hall.

Yüksel, I. (2012). ‘Developing a Multi-Criteria Decision Making Model for PESTELAnalysis’, International Journal of Business and Management, 7(24), pp. 52-66, doi:10.5539/ijbm.v7n24p52

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