Hospitality Management 18 (1999) 427}442 Operational issues and trends in the hospitality industry Peter Jones School of Management Studies for the Service Sector, University of Surrey, Guildford, Surrey, UK Abstract This article makes some predictions about the future by considering operational issues in the “rst part of the next century. Hospitality operations management is considered at two levels * the “rm level at which strategic operations management takes place; and the unit level.

It is proposed, using a model developed by Jones (1999, International Journal of Contemporary Hospitality management), there are seven strategic concerns: location, integration, a$liation, con”guration, organisation, implementation and adaptation. For unit operations management the framework of analysis is based on Lockwood and Jones (1989, The Management of Hotel Operations). This identi”es seven key result areas: assets, employees, capacity (or customers), productivity, service, income (or control), and quality.

Using these frameworks an assessment is made of current issues and trends in hospitality operations management, leading to a prioritisation of possible future outcomes. 1999 Published by Elsevier Science Ltd. All rights reserved. Keywords: Operations management; Assets; Employees; Capacity; Productivity; Service; Quality 1. Introduction Have you ever looked at an impressionist painting? From a distance one is able to see the picture, appreciate its composition and enjoy its subtle realism. Move closer and it becomes apparent that it is made up of thousands of tiny dots, each of which is di! erent.

And really close up, there is no clear picture * just a chaotic jumble of colour. The global hospitality industry is like that. It is easy to assume that the industry is homogeneous and there are clear worldwide trends of relevance to hospitality operators everywhere. In reality, the industry is incredibly diverse and complex, which makes identifying common issues and future trends extremely di$cult. For instance, there is the development of global brands such as McDonalds. But this chain’s 18,000 restaurants needs to be placed in the context of the 8 million 0278-4319/99/$ – see front matter 1999 Published by Elsevier Science Ltd.

All rights reserved. PII: S 0 2 7 8 – 4 3 1 9 ( 9 9 ) 0 0 0 4 7 – X 428 P. Jones / Hospitality Management 18 (1999) 427}442 restaurants world-wide (IH;RA, 1999), of which 206 thousand are in one country * China. There is also the world-wide growth of international hotels chains, but this is varies widely from region to region, and even within regions. For instance, `some 70% of new hotel development (approximately 27,000 new rooms) in Latin America over the next few years is concentrated in two countries * Mexico and Brazila and `the number of hotels in Dubai (a tiny Gulf state) has grown from 48 in 1988 to 255 by mid-1998.

This is estimated to represent around 40% of the total hotel supply of the Gulf states (Saudi Arabia, Kuwait, Bahrain, Qatar, UAE and Oman)a (BDO Hospitality Consulting, 1998). 2. Analytical framework In order to cope with such diversity and complexity, this article is structured around two analytical frameworks developed by Jones and Lockwood (1996) illustrated in Fig. 1. This comprises two systems, the management system and the technological system, con”gured as a hierarchy of three levels.

The discipline of management is well established, but continues to evolve; whilst the technological system is in continuous adaptation as it responds to changes in consumer taste and Fig. 1. Model of Operations Managem (Jones and Lockwood, 1996). P. Jones / Hospitality Management 18 (1999) 427}442 429 demand, new product development, direct and indirect competition, advances in technology, and the many other factors which in#uence the growth and sustainability of any business concept. This review of issues and trends is concerned with two levels * the strategic (or “rm) level, and the unit (i. . hotel, restaurant or operations) level. Jones (1999) has proposed that strategic operations (not to be confused with business strategy) can be considered as seven inter-related activities. These are: location, integration, a$liation, con”guration, organisation, implementation and adaptation. Location is a key strategic decision with operational implications, long recognised within the industry and immortalised by Conrad Hilton’s famous quote. Integration refers to the extent to which the hospitality “rm owns and controls some or all of the resources it needs to operate its business.

Some sectors, in some countries, have historically been highly integrated, such as pubs in the UK. Azliation relates to the choice of business format (direct ownership, franchising, management contracts, consortia) adopted by the hospitality “rm. In the hotel sector, there are signi”cant di! erences with regards to format from one region to another. In the USA, 65% of hotels are franchised, in the UK 85% are directly owned and managed, whilst in Asia 65% are on management contracts (Kleinwort Benson, 1996). In foodservice, franchising in the restaurant industry and management contracting in employee feeding are highly signi”cant.

Conxguration refers to how the “rm designs or conxgures its product, technology and `hard systemsa; whilst organisation applies to the human activity or `softa systems within the “rm, especially in relation to the operations function. Key strategic decisions in the “rst of these relate to product and process choice, the degree of automation, and role of I. T. ; and in the second to issues of authority, formalisation, centralisation of function and so on. Implementation relates to how “rms develop and operate systems designed to give them feedback on operational performance, such as “nancial control systems and quality management systems.

Finally, adaptation identi”es that “rms need to respond to changes in their environment and they need ways in which they can adapt, speci”cally how “rms conduct research and development and innovate. At the operations management (OM) level, i. e. unit level, an output-based model of seven key result areas (KRAs) for the management of the ;service delivery system’ is used as the analytical framework, derived from Lockwood and Jones (1989) and Jones and Merricks (1986). The KRAs that have to be managed are assets, employees, capacity (or customers), productivity, service, income (or control), and quality.

This model proposes the concept that within each area there are a range of alternative operational policies and procedures that might be adopted to re#ect the type of hospitality business, its size, and its technology. For instance, yield management is an approach to managing capacity in hotels, especially large, chain properties (Jarvis et al. , 1998); quality control is applied largely in quick service restaurants, whereas total quality management has been applied to a few hotels, such as Ritz Carlton. In the context of this article therefore there are two major OM issues.

First, will hospitality “rms switch from their existing, traditional approaches to managing the KRAs to other more contemporary approaches? Second, will any completely new ways for managing these KRAs emerge in the future? 430 P. Jones / Hospitality Management 18 (1999) 427}442 3. The international hospitality industry It has been argued that the hospitality industry, i. e. a single entity, does not exist. There are, and will continue to be, signi”cant structural di! erences between the hospitality industries in di! erent countries. Such structural di! erences are legal, “nancial and economic. A country’s laws a! ct the ownership, size and operation of hospitality businesses. For instance, the German legal framework is the main reason that hotels are operated on leases, more than in any other European country (Kleinwort Benson, 1996). Finance a! ects the hospitality business in terms of the availability of capital for investment, the relative return from hospitality operations within a country’s economy, implications of taxation and other overheads, and so on. Whilst the USA throughout the 1990s has experienced unprecedented economic growth, the UK had a recession in the early 1990s, and the signs in Euroland for 1999 are very mixed.

Finally, the structure of a country’s economy a! ects the size and scope of di! erent types of hospitality business. Slattery and Johnson (1993) have suggested that hotel infrastructure development is directly linked to the structure of an economy * as service overtakes manufacturing, growing business demand stimulates hotel development. But there are other factors too, related to demand and supply. For instance, Mediterranean countries have coastal, resort hotels designed and operated for longstay (one week plus) tourists.

This is now changing * `Spanish hotels are experiencing signi”cant changes in both demand and supply.. [so that] there is a transition towards a more diversi”ed tourism producta (BDO Hospitality Consulting, 1999). Likewise brand penetration by the industry’s high pro”le global players may be international, but with a highly regional orientation. Cendant is currently the world’s largest hotel chain, but over 90% of its properties are in North America. ACCOR too is a global chain, but a high proportion of its operations are in France and Europe. In the future such structural di! erences between countries will be reduced.

Within Europe the creation of a single monetary area will systematically remove wage and price di! erentials. Similar political and monetary alignments may appear in other regions of the world. European Monetary Union and competitive pressures may also stimulate a great deal of merger and acquisition activity as companies seek to achieve regional scale economies and drive out competitors. The following discussion of trends in strategic and unit-level operations management must be placed in this context. Change will not the same in all sectors and in all parts of the world. 4. Strategic operations management 4. 1.

Location The strategic issue of location can be divided into two main aspects, that of where generally to locate a hospitality operation and then the speci”c issue of selecting suitable sites. In the hospitality industry, the key factor in the location decision is demand. In simple terms, operations are located where demand is highest, and sited so P. Jones / Hospitality Management 18 (1999) 427}442 431 that such demand can easily access the provision. Strategic success derives from matching the type and size of the business with the site available. The factors that in#uence location in the accommodation and foodservice sectors re di! erent. Hotels are primarily located near where people are travelling or at destinations, which requires them to stay away from home. In the days of horse-drawn vehicles or stage-coaches, inns developed near main routes; with the railways came station hotels and resort hotels; with paved highways and the motor car came motels and business hotels; and with air travel the airport hotel. Foodservice operations feed the traveller, but they also exist in locations where people congregate for a variety of reasons * to shop (shopping malls and centres), work (employee feeding), learn (schools and universities), and so on.

In mature markets, all locations have been penetrated by the major brands and suitable sites are di$cult to acquire. There is some evidence that consumer demand in such markets is driven less by &situation’ but by &destination’ or &experience’. For instance, Club Med has kept their existing locations but transformed their concept to appeal less to couples and more to families with young children. The shift to all-inclusive provision, especially in resort properties with extensive sporting facilities and linked to time share, has made these hotels destinations in their own right.

In the hotel sector, another trend is for sites to have a multiple use, i. e. more than one brand is colocated on the same site. For instance, ACCOR have developed a property in Paris which is shared by a Novotel, their mid-market brand, and a budget Formula 1 hotel. Whitbread Hotels in converting London’s County Hall, the former administrative centre of the capital, has created a Marriott “ve-star property on the side of the building which overlooks the Thames, and a budget Travel Inn on the non-river side.

In the foodservice sector, the trends is towards `micro-unitsa and sites in `host environmentsa. Because conventional, high tra$c sites have been “lled, operators have developed smaller units, such as carts and kiosks, designed to go in secondary locations. Often, such units are sited not as stand alone operations, but within another operating business, such as a sports arena, cinema, “lling station, supermarket, or any other venue with high customer throughput. In the USA, a signi”cant proportion of restaurant sales are take-out or home delivery meals.

This is a growing trend in Europe. The &rules of the game’ in this sector are also likely to change, with major pizza chains in concentrated urban areas attempting to reduce delivery times from what was the industry standard of 30 min down to less than ten by creating mobile hot storage or even hot production vehicles. In developing markets, locational decisions are di! erent between hotels and restaurants. Hotels tend to be developed in major urban or resort areas, irrespective of their geographic dispersion.

Restaurant development tends to be regionlised, with one area being developed before moving on to the next. This is because hotel chains advertise nationally and internationally, whilst restaurant chains, especially the quick This is somewhat ironic. Ray Kroc writes in his autobiography that when a team of his executives suggested building small scale units, to be called MiniMacs he was `so damned mad I was ready to let those three guys have it with my canea. Their failing was to think small! 432 P. Jones / Hospitality Management 18 (1999) 427}442 ervice chains, use regional and national television promotions. This clearly has implications for the strategic issue of organisation (see below). 4. 2. Integration Integration is largely concerned with the management of the so-called supply or value chain. With regards to the supply chain, the accommodation sector and the foodservice sector have quite di! erent characteristics. Accommodation provision is largely an assembly operation (servicing of rooms) with most materials processing (laundering linen, etc. ) being carried out by a supplier.

Foodservice on the other hand can range from being largely an assembly operation (with meal items being largely prepared o! site) to a full-blown production facility in which meals are processed from raw ingredients. There is also a signi”cant di! erence in the relative cost structures of these two sectors with respect to such processed consumables * low in the accommodation sector (less than 10%), high in the foodservice sector (25}40%). In many industries and for many “rms, especially in manufacturing, supply chain management has been a key to success.

In the hotel sector, the focus has been on integration of the reservations process through a network of providers * in-unit, in-“rm central reservations, airlines, travel agencies and a number of other sources. The development of global distribution systems (GDS) which integrates these ;agents’ along with in-house management tools such as yield management and property management is likely to create competitive advantage for chains who harness the opportunities o! ered by both GDS and the disintermediation derived from the internet (Connolly et al. , 1998).

But in other respects the hospitality industry has largely been unconcerned with supply chain issues. This is because as a service based-business, in-bound supply logistics are relatively straight forward * a combination of accurate forecasting, sound purchasing practices and good supplier relationships; whilst out-bound logistics are non-existent, because the customer consumes the output on site. The exception to this is #ight catering, which has produced meals on a scale much greater than most foodservice operations * up to 20,000 meals a day. This kind of vertical integration is however growing in importance.

In hotels, there is an increase in outsourcing provision to specialist suppliers of services such as cleaning, in-room entertainment, and large-scale catering. One sector that has transformed itself through its e! ective harnessing of supply chain logistics is licensed retailing in the UK. The traditional pub, tied to a brewery, used to be largely concerned with &wet’ or drink sales. In the space of the last ten years, fuelled by increased competition resulting from deregulation, pubs have become sophisticated concepts providing drinks, meals and entertainment to clearly identi”ed market segments.

Appropriate menu items and consistent standards of food provision have been delivered through working with food manufacturers and developing logistic support, rather than in-house production. Something the fast food chains have been doing for many years. The other major form of integration in the industry is horizontal integration, operating a portfolio of similar businesses at the same stage of production. Marvin P. Jones / Hospitality Management 18 (1999) 427}442 433 Cetron (IH&RA 1999) argues that `in one industry after another, the big get bigger, or take over of other similar “rms. Such activity has been onsiderable since the 1970s, thanks to economies of scale. The small prosper by providing high levels of service in niche markets. The middle-size, lacking either advantage, are either squeezed out or taken over. [This trend] is particularly strong in the hotel industry, and is seen in restaurantsa. Thus early in 1999 in the UK alone Friendly Hotels had taken over Lyric Hotels, Regal Hotels had acquired County Hotels, Bass had acquired Stakis to reposition with its Hilton brand, and Whitbread (the Marriott corporate franchisee in the UK) was rumoured to be bidding for both Swallow Hotels and DeVere Hotels.

But all this activity pales into insigni”cance when compared with the C2 billion takeover of Inter-Continental Hotels by Bass. In Europe, there has been similar industry concentration in the contract foodservice sector. 4. 3. Azliation Potentially a more important concern for the hospitality industry is not control over inbound and outbound resource processes, but over the resource of physical infrastructure, that is the issue of a$liation.

Many hospitality “rms do not own the site or building in which `theira hotel or restaurant is operated. Instead they `owna the concept, the brand and the operational characteristics and procedures of that brand. In some cases they directly manage the delivery of that through a management contract; in others they assign to others the management through a franchise agreement. Those independent operators that are not large chains, in order to compete and achieve the same kind of scale economies, have banded together to form consortia.

Broadly speaking franchising has been very strong in chain restaurants and hotels in the US; management contracts are the foundation of the employee feeding sector, in#ight catering and hotels outside the USA and Europe; and consortia are mainly in the hotel sector. In the future, this will continue to be the case but we are likely to see an increase in hotel franchising; penetration of foodservice management contracts into hotels; the creation of restaurant consortia; and an increase in ;plural forms’ (Bradach, 1998), that is a combination of business formats within the same brand or organisation.

Increasing complexity will be a feature of this strategic area in the years to come. As studies of hotel management contracts (Eyster, 1993) have shown, as power has shifted within maturing markets from the brand operators to the owners, more complex forms of agreement which require operators sharing more of the risk have evolved. Today, it is possible for a hotel to be partly owned by a developer and by a management contract company, to be managed by that contractor, who is a franchisee of a hotel brand.

The same is true in the contract foodservice sector. Many contracts used to be based on the cost-plus concept, today most are performance related in some way. Contractors have also penetrated many more sectors than in the past. The current trend is for them to take over the food and beverage provision in the lodging sector; hotels having already experimented, during the 1990s, with inviting high pro”le restaurateurs to run their hotel restaurants, with greater or lesser degrees of success. 434 P. Jones / Hospitality Management 18 (1999) 427}442 . 4. Conxguration Over the last 30 years it has been argued that service operations in general (Levitt, 1976; Schmenner, 1986), and hospitality operations speci”cally (Jones, 1988), have been subject to three major trends * production-lining, decoupling, and increased customer participation. In e! ect these three trends are all aspects of con”guration. The traditional con”guration of a hospitality business has been an autonomous, stand-alone, low-tech operation * in other words, the typical independent hotel or restaurant.

It should be remembered that the chains, with their branded and standardised con”guration are a fairly recent phenomenon. Kemmons Wilson opened the “rst Holiday Inn in 1952 and when Ray Kroc bought out the McDonald brothers in 1961, that chain only had 200 `storesa. McDonalds is the classic example of production-lining, cited by Levitt (1976). In 1948 the McDonald brothers reduced their menu to seven items, standardised the hamburger and its ingredients, automated as many activities as possible, and broke down the production process into a series of separate, standardised tasks performed by di! rent people (just as Henry Ford had done for the motor car 35 years earlier). Since then, new technologies such as cook-freeze, cook-chill and sous-vide have further facilitated the industrialisation of processes. Such systems are often `decoupleda, that is back-of-house operations are separated from front-of-house, both in time and place. This has always been the case for #ight catering, with meals prepared on the ground and served in the air. It is how the British pub sector has most dramatically changed, it is now common in contract foodservice for this to be the case, and increasingly common in the restaurant sector. These three trends have been less prevalent in the hotel sector, as the nature of the core product * an overnight stay * is not easily automated. The most signi”cant change has been in the information-processing element of the hotel product (reservations, check-in and so on), which has been revolutionised by the computer.

This has enabled the decoupling of the reservations function into central reservations o$ces. Other aspects of hotel con”guration have changed and will continue to change. New build hotels, especially those in the budget sector, do not have restaurants. For instance, 40% of American hotels and 30% of French hotels have no restaurant compared with 10% in the UK (McKinsey Global Institute, 1998). On the other hand, leisure facilities are increasingly being added to hotel properties especially where there is a strong local market for leisure club membership.

Historically, hotel design has frequently seen common major design faults, which include underprovision of administrative space, too little bulk storage, misalignment of kitchen space with dining areas, poor relationships between accommodation (`drya) and leisure (`weta) space, and not enough operational space on accommoda- The very “rst long distance commercial passenger airline, Transcontinental Air Transport, was formed in 1929 in the USA. Even in its “rst year of operation it had #ight attendants, served meals and showed in #ight movies!

Meals were served despite the fact that planes were unpressurised and unventilated so that typically three quarters of passengers were airsick (Bryson, 1994). P. Jones / Hospitality Management 18 (1999) 427}442 435 tion #oors. Modern hotel design, such as the way Marriott developed the Courtyard concept, has overcome these problems and in the future new build hotels are more likely to be well designed from an operations perspective. New build hotels in mature markets are likely to be designed to “ll product/market niches that have not yet been exploited.

There are “ve basic criteria: location (see above), market segment, room design, grade, and type of stay. The Holiday Inn concept was originally designed as a roadside property, serving the travelling leisure segment, with a standard room, in the middle price range, used mainly for overnight stays. Since then a number of other con”gurations have been developed including city centre business hotels, budget hotels, country house or resort hotels, courtyard concepts, and most recently all suite properties. In the future, there may be entirely new con”gurations.

For instance, the “rst ever hotel designed exclusively for children has been opened in London; in Japan `capsule hotelsa have been built for budgetconscious commuters too tired to go home; &Sleepers’ is a hotel in Cambridge, UK, specially designed for back-packers; and hotels designed for the so-called ;grey panther’ market are being developed, designed for reasonably priced long stays in get away from it all locations. Within these basic product/market niches there is scope for enormous variation in the detailed design of facilities and services.

Marriott when conducting market research for the Courtyard concept identi”ed 48 di! erent elements, with a total of 160 di! erent variables. Elements included building shape, room size, vending service, type of check-in, and so on. An example of the variables within an element is laundry service: there could be none, client drop o! and pick-up, self-service, or valet pick-up and drop o!. As hotel chains develop internationally, they are likely to ensure that these basic elements are consistent across the world, but allow for di! rence in the speci”c variables to take account of local expectations. For instance, in the UK, American chains had to adjust full room service provision to re#ect the British practice of having tea making facilities in the room. Construction is also likely to be subject to a number of trends. Pre-fabricated building has been used in some countries for a number of years, notably for budget properties in France. However, in many countries it is little used. However, Cendant plans to construct 30 new properties over the next “ve years using this approach.

Although `relatively rare in the United States, [it] is gaining in popularity due to its ability to control both cost and qualitya (Lister, 1998a). ACCOR in Europe and Forte Posthouse in the UK have also used this technology. Posthouse have used it to extend existing properties since the unit cost is marginally lower, but more importantly there is less on-site disruption caused by adding `podsa i. e. bedrooms in their “nished state. Environmental issues will also a! ect construction.

Environmentally, friendly hotels and operating procedures are relatively common especially in Europe, for instance the ACCOR chain has a Director of Environment. Sources of capital, such as banks, encourage this practice through lower interest rates, especially in Scandinavia. The Intercontinental hotel chain incorporates environmental management as one of the ways in which its managers’ performance is assessed. In Australia the new Eco Beach property in Western Australia and the Eco-hotel under construction in Sydney, are leading examples of this kind of development.

It is claimed that the “rst `environ- 436 P. Jones / Hospitality Management 18 (1999) 427}442 mentally smarta hotel in the United States is the Sheraton Rittenhouse Square in Philadelphia (Lister, 1998b). It is likely that there will increasing pressure to meet environmental standards. A number of major international corporations, such as Nike, Volvo and BP, have instituted green purchasing policies which requires their suppliers * including hotel companies * to have environmental policies in place.

Currently, the International Hotels Environment Initiative (IHEI) in conjunction with the World Wildlife Fund (WWF) is working on a benchmarking scheme which will identify the hotels chains level of performance in this area. The United States Agency for International Development has sponsored &Green Globe’ certi”cation, designed to recognise environmentally sensitive hotels and Australia is about to launch the Green Gum Tree classi”cation scheme. In addition, the United Nations Commission on Sustainable Development in 1999 is focusing on the tourism industry. 4. 5.

Organisation If Cesar Ritz or any other famous hotelier of the nineteenth century were to be reincarnated, they could walk into any of the world’s top luxury hotels and recognise how work was organised, what jobs workers were engaged in, and the way hotel business was conducted. At a unit level, both in hotels and foodservice, organisational form and behaviour has changed little. The most signi”cant change has been the growth of large chains and the creation of the multi-unit manager. The challenge for senior management is how to manage large numbers of units geographically dispersed over a wide area, so-called multi-unit management.

Multiunit management has been described as a `late twentieth century phenomenona (Jones, 1998). A number of new corporate roles are emerging concerned with the operations function. These include environmental managers as discussed above; loss prevention management teams which aim to provide an integrated approach to a wide range of issues such as security, health and safety; procurement and logistics specialists; and special projects directors who are tasked to tackle long-term, complex issues such as quality, productivity or innovation across the chain.

Most large, international hospitality “rms have been organised as classic functional organisations. This means formal systems, a high level of centralisation, clear hierarchies and relatively small spans of control. But chains are making dynamic changes to their organisation. All kinds of organisational innovation are being introduced. Authority is being delegated down to unit level management and below through empowerment (in some hotel and restaurant chains); merger and acquisitions create organisational turmoil as di! rent cultures clash; organisations are being `downsizeda or delayered to create #at hierarchies; unit management is being reorganised to be replaced by GMs responsible for three or four properties (in Forte Hotels); area managers are changing from controllers of standards into business development advisors (especially in UK pub chains); and so on. Such change is also being in#uenced by the development of intranets which greatly facilitates administrative processes within the chain organisation. Radisson claim their intranet has improved productivity by 18%. P. Jones / Hospitality Management 18 (1999) 427}442 437

The organisational changes being taken by big companies has interesting implications for SMEs. Downsizing has resulted in large numbers of highly professional middle managers being made redundant. Many have used their lump sum redundancy payments to invest in their own hotel or foodservice business. This injection of professional expertise has resulted in considerable improvement in the provision made by small operators, which have traditionally lagged behind the major chains. 4. 6. Implementation The kind of organisational change and experimentation described above clearly has implications for how the operations strategy is implemented.

The traditional functional organisation means that strategy is implemented on a command and control basis. Operating policies, procedures and standards are set centrally, and the operations management team, of typically regional directors, area managers, and unit managers are required to ensure these are carried through. Management is supported by systems, such as the management information system which monitors “nancial performance and some kind of quality programme, usually based around mystery shopping, guest comment cards and customer surveys, which monitors customer satisfaction.

This model is similar whether the chain operates its own units or operates on a franchise basis (see a$liation above). But whilst systems are basically the same, the mechanisms of control are subtly di! erent. Managers can be hired and “red, but franchisees have to be negotiated with. Bradach (1998) argues that the most successful restaurant chains adopt what he calls the `plural forma, that is a combination of their own units and franchises. He believes this creates a number of synergies which enables better control over franchisees, but enabling better and quicker adaptation to local di! erences and changes in the market place.

For example, the Big Mac was developed in 1968 by a franchisee in Pittsburgh (named Jim Delligatti), as was the Filet-o-Fish in Cincinnati, and the Egg McMu$n in Santa Barbara. In the future, systems will become increasingly sophisticated. More data will be collected, but more will be screened and prioritised by smart agents so that managers are focused on the most signi”cant problem areas. Such sophistication will also enable pay and remuneration systems to be modelled more closely to re#ect operational performance, thereby emphasising and reinforcing the operations managers focus on outcomes. Sta! ostering and scheduling in hotels based on established work standards and employee availability will also be automated using sophisticated software, along with the monitoring of work hours and performance through employee smart cards. And as we move from delivering services towards creating experiences for consumers, the sophistication of customer satisfaction measurement will grow. The guest comment card will be used simply to identify system faults that need correction; satisfaction will be measured by telephone interviews or on-line enquiries with large samples of customers every month or even more frequently.

As more customers start to use web-based expert systems to advise them on their travel purchases in order to maximise their frequent #yer points whilst minimising their cost, customer behaviour will be more easily monitored and understood. 438 P. Jones / Hospitality Management 18 (1999) 427}442 4. 7. Adaptation Hospitality “rms and the products they sell have to adapt if they wish to survive. The industry has many examples of “rms that were the pioneers of original ideas that have been subsequently overtaken by “rms with better or newer ways of doing things.

For instance, the “rst chain of modern restaurant drive-ins in the USA was called the Pig Stand (Bryson, 1994) and the Berni Inn chain dominated the UK’s steakhouse trade in the 1970s, but few people have heard of them today. The discussion of the other six strategic areas above has illustrated the tremendous changes that are taking place within the industry. Despite this, the management of research, development and innovation has not been a high pro”le activity within the industry. In hotels and restaurants it has been almost entirely marketing, as opposed to operations led.

Only in large-scale catering, such as in-#ight and employee feeding, has technological development in#uenced process and product innovation. The concept of adaptation does not refer to what change will take place, but how it will be managed. It is clear that both process and product/service life cycles are generally getting shorter (Pine, 1993). But perhaps the key change is the shift from service to experience. 5. Unit operations management At unit level the key result areas are assets, employees, capacity (or customers), productivity, service, income (or ontrol), and quality (see above). But not all of these are experiencing major change, nor will they in the future. Asset protection is a major issue for the industry. The International Hotel & Restaurant Association (IH&RA) have identi”ed safety and security as one of its “ve global challenges. Throughout 1998 and 1999 it has conducted a series of international think tanks designed to address this issue. Terrorism, both political and issue-based, will pose an increasing threat.

For instance, there has been a threefold increase since the 1980s in the incidence of arson from incendiary devices in the USA, to more than one a day, whilst Athens in Greece has had over 150 bombings since 1990 (Cross, 1998). With speci”c reference to hotels, restaurants and tourism operations, the Arthur Anderson database (Cross, 1998) monitors incidences of bombing, assault, kidnapping and other serious criminal acts. Between 1995 and 1998 there were 781 such incidents in Asia, 544 in Latin America, and 344 in Africa.

In the UK a key area has been food standards and food safety due to a number of health scares including food poisoning outbreaks, salmonella infected eggs, and BSE in beef. This has resulted in caterers having to apply a greater duty of care within a tighter regulatory framework. A major issue in the UK is genetically modi”ed products (GMPs), especially soya bean. In mid-1999 all the major supermarket chains Sasser et al. (1978) have argued that in e! ect the service “rm and its &product’ are synonomous. Chain growth means that organisational and operational change are interlinked. P. Jones / Hospitality Management 18 (1999) 427}442 39 have agreed not to stock food items containing GMPs, and Unilever have announced they will cease using GMPs in their product range. This coincides with the European Union announcing a possible ban on the import of American beef due to the use of growth hormones in its production. As the food supply chain becomes more complex, it is likely that food safety issues will grow in importance throughout the world. Another key IH;RA challenge is in the area of employees or human resources. Mature markets in expanding economies throughout the world are “nding it extremely di$cult to recruit employees with the skills and experience required.

In the UK this has coincided with a signi”cant increase in regulation such as the introduction of a minimum wage, the EU working time directive, and industrial relations legislation. The acute shortage of skilled chefs has already seen a signi”cant increase in the use of cookchill and vacuum-packed menu items in hotel and contract foodservice restaurants. The area that has seen some of the most development in hotels is capacity and income management, with the introduction of yield management systems. In e! ect this means that `today’s hotelier has many di! rent room products, across a wide tari! range, which he (sic) can turn on or o! at will to encourage volume sales when demand dips, thereby protecting occupancies. We will see this management tool being increasingly employed2. a (BDO Hospitality Consulting, 1999). The current focus on REVPAR (revenue per available room) is already being replaced by REVPAC (revenue per available customer). Also based on I. T. developments, hotels have increasingly sophisticated property management systems designed to manage their physical assets. A major issue is the extent to which these I.

T systems are integrated with each other. Hospitality “rms have also been engaged in further developing service and quality. In 1994, Ritz Carlton became the “rst hospitality company to win the prestigious Malcolm Baldridge Award for quality. In the contract foodservice sector, clients are commonly requiring contractors to gain some form of external quality recognition, notably ISO9000. Whilst the quick service restaurant industry has adopted wholesale the mantra of McDonalds * quality (Q), service (S), consistency (C). It might be thought therefore that all was well on the quality front.

However, there is some evidence to suggest that hospitality “rms are better at talking about quality than delivering it. During four years of an annual study in the US by the American Society of Quality `service in general has been perceived by the public to have gotten better, while service in the US lodging industry has gradually worseneda (Hayward, 1998). 5. 1. Future trends In the area of asset management, further thought will need to be given to environmental issues. In 1998, 40% of hoteliers from around the world used quantitative performance measures to monitor energy nd water consumption, waste disposal and waste water volume. Such systems will become increasingly sophisticated, so that they will not only monitor performance but automatically control usage and emissions. In response to concerns about food, diet and health, caterers may have to provide consumers with information about their food sourcing (whether it is organic, or 440 P. Jones / Hospitality Management 18 (1999) 427}442 whether it includes genetically modi”ed products) and dish composition through menu labelling.

Technology also has the potential to add value to service in hotels, through the more e! ective use of database systems for customer pro”ling, guest recognition and loyalty programmes. The trend is for the centralisation of these systems to `reduce hardware and software costs, reduced manpower costs, reduce maintenance costs, and improve data securitya (IH;RA, 1998). The American Hotel and Motel Association is also sponsoring an initiative designed to integrate the many systems currently used across the industry, within chains and even within individual properties.

These Hospitality Industry Technology Integration Standards are being developed to facilitate integration not simply between front o$ce functions and property management systems, but also telephones, bar services, point of sale, in-house movies and accounting. In the future, hotels will need to reconsider yield management in the context of the internet and world wide web. Currently, less than 2% of advanced reservations are from this source, but are expected to be 35% in less than ten years (IH;RA, 1998).

Travel intermediaries and central reservations systems will be by-passed by this technology as it `graduates onto internet worked environments, and the tendency to do-it-yourself bookings and voice-interactive commands increasea (IH;RA, 1998). Internet bookings are estimated to cost 20% less than those through CRS. However, hotel chains are already actively working to develop interactive television to enable customers to place reservations from home using their remote control as, unlike the internet, such connectivity enables hotels “rms to know from whom and from where the booking has been made, thereby creating real ne-to-one marketing. Technology will also impact on the nature of the hotel guest experience and the nature of service. Many mechanical and electronic tasks will become computer controlled allowing voice activation. The technology currently exists (this is not science “ction) to implant a small computer `chipa the size of a grain of rice, under the skin perhaps in the neck area. This chip will store the individual’s personal details, security codes, and other preferences.

In the hotel context, it will enable the person to check-in electronically through a hand-held scanner, and through voice activation enter and leave their bedroom, control the television and telephone, select in-room entertainment, open and close the curtains and even run the bath to a precise level and desired temperature. It may well be that the age of the so-called &smart card’, in use in some hotels today, will be extremely short-lived! This hi-tech approach to guest self-service will clearly have implications for productivity. But similar technologies may also revolutionise employee tasks.

The “rst commercial robot vacuum cleaner is about to go on the market and self-clean bathrooms already exist. Flat screen televisions will be built-in to the hotel room, also simplifying cleaning. Customers in the future may also be able via virtual reality to pre-determine their room decor so that on check-in the room has been prepared to their personal taste. All sectors of the hospitality industry will have to address the issue of quality. The futurist Marvin Cetron argues that global chains “nd it di$cult to di! erentiate themselves from each other. He writes `increasingly, what distinguishes one provider

P. Jones / Hospitality Management 18 (1999) 427}442 441 from another is attention to detail. This is the battleground on which hotels and restaurants will “ght the competitive wars of the 21st centurya (IH&RA, 1998). 6. Conclusion The hospitality industry is made up of many di! erent sectors operating across the globe. Each business in each sector is subtly di! erent to its competitors and each market in which business is operated has distinctive characteristics. What may be new to one business in one place may not be new for other businesses in other places.

Hence identifying common issues and predicting future trends is highly problematic. This review of operations management at both the strategic and unit levels has identi”ed a wide range of potential developments. These can be summarised into four main areas. Firstly, the distinction between industry segments and industry sectors will become blurred. Operators are likely to have a portfolio of businesses spanning a wide range of sectors, forms of a$liation will become more complex, and the same restaurant brand will be seen in a shopping mall, in an o$ce block, or in a hotel.

Secondly, the manager at unit level will be less of an operations specialist and more generalist in orientation, especially with respect to marketing expertise; whilst at chain level specialist operations functions will develop further. Thirdly, technology, and especially information technology, will provide considerable opportunity for innovation and performance improvement, especially through systems integration and the information superhighway. Finally, the environment and environmental issues in their widest sense, will play an increasing role in operational decisions making.

To achieve long-term competitive advantage, drive costs down and increase value, industry chains will need to ensure the right mix of brands, management expertise, technology and environmental awareness. In this context, SMEs will need to create niche positions that enable them to compete on the basis of even greater di! erentiation. References BDO Hospitality Consulting, 1998. Business Review. Winter. Bradach, J. L. , 1998. Franchise Organisations. Harvard Business School Press, Boston. Bryson, Bill, 1994. Made in America. Martin Secker ; Warburg, New York.

Connolly, D. , Olsen, M. , Moore, R. , 1998. Competitive Advantage * Luxury Hotels and the Information Superhighway. IH;RA. Cross, L. C. , 1998. Managing life safety risk as hospitalty companies go global. Hospitality and Leisure Executive Report, 6 1, Winter, pp. 14}19. Eyster, J. J. , 1993. The revolution in domestic hotel management contracts. The Cornell Hotel and Restaurant Administration Quarterly 34, 16}33. Hayward, P. , 1998. Service, Please. Lodging, September 4. IH;RA, 1999. One to one: marketing in the interactice age, 36th Annual Congress Report.

Jones, P. , 1988. The impact of trends in service operations on food service delivery systems. International Journal of Operations and Production Management 8 (7), 23}30. Jones, P. , 1999. Multi-unit management in the hospitality industry: a late twentieth century phenomenon. International Journal of Contemporary Hospitality Management. 442 P. Jones / Hospitality Management 18 (1999) 427}442 Jones, P. , Lockwood, A. , 1996. Hospitality operations management. Hospitality Management: State of the Art. CHME Sponsored Global Internet Conference. Jones, P. Merricks, P. , 1986. The Management of Foodservice Operations. Cassell, London. Kleinwort Benson Securities, 1996. UK Quoted Hotel Companies. Levitt, T. , 1976. Industrialisation of Service. Harvard Business Review Sept/Oct. Jarvis, N. , Lindh, A. , Jones, P. , 1998. An investigation of the key criteria a! ecting the adoption of yield management in hotels. Progress in Tourism and Hospitality Research 4, 207}216. Lister, H. , 1998a. Modular Motel. Lodging, October 11. Lister, H. , 1998b. Going for the Green. Lodging, November 19. Lockwood, A. , Jones, P. , 1989.

The Management of Hotel Operations. Cassell, London. McKinsey Global Institute, 1998. Driving Productivity and Growth in the UK Economy. McKinsey Global Institute, London. Pine, B. J. , 1993. Mass Customisation. Harvard Business School Press, Boston. Sasser, W. E. , Olsen, M. R. , Wycko! , D. D. , 1978. The Management of Service. Operations Allyn ; Bacon, Boston. Schmenner, R. , 1986. How Are Service Businesses to Survive and Prosper? Sloan Management Review Spring 21}32. Slattery, P. , Johnson, S. M. , 1993. Hotel chains in Europe. Travel and Tourism Analyst 1, 65}80.

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