Analysis of the Hospitality Sector of Italy and China - Report Example

Employment Condition Analysis Contents Literature Review 3 Analysis of the Hospitality Sector of Italy and China 7 Reference List: 11 Background of the Study Excelsia International Hotel and Leisure Group is a very renowned chain of hotels and restaurants in the United States of America. They have established themselves successfully in the US and have grown their customer base. However, the company has not yet applied the policy of expanding their business abroad (Boluk, 2015). The management is seriously looking into the strategy of progressive growth by planning to open its hotels in Italy and China. By targeting Italy and China, it aims at increasing its popularity in Europe and South East Asia. Italy has been a very popular holiday destination for tourists. Along with its picturesque scenic beauty, Italy is known for its exquisite cuisine, magnificent historic sites and branded shopping destinations (Various National Contributors, 2012). Throughout the year, China attracts large number of tourists. The main attractions are the Ancient Chinese Civilisation, Karst landscapes, majestic beauty of forests and giant Pandas. It is also known for its local markets which are high on fashion but low on costs. Since these two countries are extremely different in context of their culture, social and political environment, workplace organisation, etc. they create challenge for the Excelsia International Hotel. For that, the company needs to do an extensive research on gathering information regarding employment conditions, expectations and legislation within the leisure industry and hotels in other continents. Literature Review For effectively directing and managing human resources towards the achievement of organisational objectives, a set of organisational activities are planned known as the Human Resource Management (HRM). The functions of HRM staff includes selection, recruitment, performance appraisal, training and development, managing promotions, dismissal, etc. (Brewster and Wood, 2014). Multinational organisations always think of strategic expansion and they outsource not only physical capital but also human capital. Sometimes, human resources of the host nations are also employed. This calls for a very skilled group of HR managers who can monitor the proper functions of the subsidiaries in foreign countries. When a business attains internationalism; it needs more sophisticated set of activities which aim at management of HRM issues known as International HRM (IHRM). IHRM entails the process of acquiring, allocating and efficiently utilising human capital in a multinational corporation (Briscoe, Hall and Mayrhofer, 2011). Along with this, it also balances the differentiation and integration of HR activities in overseas locations, manages global skills, expatriate management, etc. It primarily manages three types of workers namely: Home country staff- IHRM manages the employees belonging to the home nation where headquarter of the company is located. Host Country Employees- Subsidiaries located abroad recruit employees from the host nation. So, IHRM manages the employees who belong to the host nations. Third Country Employees- However, subsidiaries also have employees who do not belong to the host nations. In such cases, the IHRM also handles employees belonging to a different nation that is to a third country (Brewster and Wood, 2014). Teerikangas, et al., (2014) highlighted the fact that IHRM had to manage people belonging to different nations, different cultures, different language, etc. So, IHRM is complicated as it is influenced heavily from the external factors like institutional factors and cultural distance. So, basic objectives of IHRM constitute the management of diversified human resources, to decrease the risk of International human resource, avoidance of regional differences and cultural risks. Figure: P. Morgans Model of IHRM (Source: Brewster and Wood, 2014) An expatriate is a worker who is temporarily working and residing in a foreign nation. They are also defined as the PCNs from operations of the parent country, TCNs relocated either to another subsidiary or Headquarter and HCNs relocated to the parent nation. Global movement of HR creates more complexity in performances and more connection with the employee’s lives (Israeli, 2014). Figure: Creation of Expatriates through International Assignments (Source: Brewster and Wood, 2014) Hence, Briscoe, Hall and Mayrhofer, (2011) focussed on the concept of multicultural management. Multiculturalism is defined as the process of continuous and regular interactions among the people from various backgrounds. It offers a number of benefits like greater level of creativity and rapid innovation, builds awareness regarding the need for sensitive dealing methods with the foreign workers; it enhances the possibility of recruiting talented pool of workers, constructs diverse organisational culture that incorporates the best pout of all the cultures. This theory of multiculturalism leads to the origin of HR practices and policies which are accepted worldwide (Brewster and Wood, 2014). IHRM also has to keep itself updated with the rules and regulations of the government of host nation. This also involves taxation, different labour laws and administrative services. Due to the cultural differences, it requires increased involvement of IHRM in employee’s personal life like voter registration, personal taxation, housing, health, children’s education, spouse employment and recreation (Lamare, Farndale and Gunnigle, 2014). The practise that should be incorporated by the IHRM to overcome cultural differences is to first develop the understanding of the worldwide business and learn about different cultures. IHRM are required to implement various interactive sessions among the employees to overcome the cultural gap and create a friendly environment for the employees from different backgrounds (Teerikangas, et al., 2014). Figure: Explanation the role and responsibilities of IHRM (Source: Israeli, 2014) Next step that it can consider is constructing cultural synergy and adapt to living in diverse cultures, apply cross-cultural skills regularly. However, the most vital step would be to equally treat foreign staff and to avoid practising discrimination. IHRM should also monitor that other employees and management are also following the principle of non-discrimination in the workplace. It can utilise foreign assignment as a tool of developing career. Equal Employment Opportunities (EEO) deletes all barriers so that all workers are considered for the employment of their will and choice and get the chance to deliver their best effort. Its objectives include equal opportunities to all the employees and elimination of discrimination, etc. Its practise involves maintaining fairness at work. So, the IHRM are recommended to implement EEO practices for the proper functioning of the organisation (Boluk, 2015). Analysis of the Hospitality Sector of Italy and China To get a better picture of the context differences in the two countries, it is essential to analyse the hospitality sector. Italy: Hotel and Restaurant Industry is a labour intensive industry which reflects the importance of its growth and the impact it creates on employment. This industry is governed by small businesses and symbolized by low levels of association between trade unions and employees. This sector has unique work conditions which differentiates it from other service industries. HRM can utilise this labour force by recruiting and providing proper training. The population of the European nations is ageing which indicates that the workforce needs young employees (People 1st, 2013). The sector is facing many problems like undeclared work and employment crisis. This industry sometimes faces excess demand of the customers and sometimes there is lack of demand depending on the holiday seasons. So, it is a seasonal work. As a result, working hours are not constant. It is highly correlated with the holiday seasons. Seasonal workers are also hired during peak seasons along with the permanent employees. Seasonal nature of the industry also has an impact on the revenue earnings of the hotels which tends to fluctuate according to holiday seasons. So, the strategy of providing incentives should be applied by the Excelsia Hotels to motivate workers (Ascoli, et al., 2008). The industry is dominated by women and young employees. They have short term job stability. They are not highly qualified and have low level of formal education. Concerns have been raised towards the level of health and safety of the workers at the workplace. The environment is not physically sound and safe and ergonomic risks have been observed in hotel sector. This sector is closely linked with the tourism sector. One of the important features is that, it is highly sensitive towards changes in political and economical fluctuations. Enst & Young (2013) pointed out that the demands of the customers are also changing like increase in healthy lifestyles. This factor should be given importance by the Excelsia Hotel and it should plan accordingly. They are also more enlightened to politics and environment. This indicates that the industry needs to employ professionals who can provide guidance. Even in restaurants and bars, people are becoming curious regarding the cuisines which implies that the staff needs to have the information about its menu. There has been a drift in the tastes of the people. They now demand more healthy foods rather than traditional dishes. This change has also affected this industry as now it is concentrating on developing healthy food items (Briscoe, Hall and Mayrhofer, 2011). According to the recent data of Enst & Young (2013), it has been cited out that the hospitality sector has suffered after 2004 due to slowdown of economy and has recovered in 2006. However, its performance has declined post downturn. There are high VAT and employment tax but a comparatively stable trade sector is accompanied by a reduced VAT rates on almost all sub sectors of hospitality Industry. The taxation system of Italy is strict with the hospitality sector. In 2011, Italy introduced a wide range of tourist taxes along with an increased VAT of 22% in 2013. Between 2000 and 2009, growth has been witnessed in hospitality sector by 29%. However, every week around 46 bars and 23 hotels got closed resulting in a decline in the growth of the sector in the final year. Higher unemployment and rising tax burden will keep the domestic demand under pressure. Since it is a global holiday destination, tourism plays a vital role as a contributor to the hotel and restaurant sector. It supports around 20% of this sector. Tourist tax and increasing VAT have augmented the cost of Italian trip. This sector is estimated to contribute 4.4% to the country’s total GDP. This also highlights the fact that many people are employed in this sector. Data shows that the employment level grew from 859,000 to 1.26m that is an increase of 47% as measured from the time range of 2000-2009 (Various National Contributors, 2012). Globalisation has created a positive impact on the income of the people as well as their tendency to spend. This also facilitates the demand of the customers towards more sophisticated, high quality and unique facilities in hotels. In Italy, restraint and hotel owners often face language barriers for international tourists. So, it requires new language skills and inter-cultural competencies. This is needed not only for the international customers but also because the workforce has been internationalised. Increasing demands for social competencies like team spirit, cooperation ability, entrepreneurship, innovativeness is the outcome of intercultural competencies (Enst & Young, 2013). In Italy, receiving guests are considered as a public duty. There are no specific pension rules for hotel industry. National federations of Labour Unions Pensions and Employer’s organisation are active participants in collective bargaining contracts. There are laws for the sustainability programme where the hotels have to follow laws to preserve nature and reduce pollution. A supplementary Health Assistance Plan was implemented for maintaining good health of the employees in this sector. Hotels, bar, restaurant are required to accept an internal HACCP auto-control system (Hazard Analysis and Critical Control Points) to maintain hygiene and meet the desired standards for food, drinks, storage and delivery facilities (Ascoli, et al., 2008). The local municipality is responsible for giving permission for the constructions of new hotel facilities. So, the Excelsia International Hotel and Leisure Group has to gather information regarding all the rules and regulations before setting up business here. China on the other hand is known for its communist policies. It has some stringent rules on the use of internet which gives the hint of strong rules and regulations in hotel industry as well. China’s Industry is different from other business scenarios because of special and unique nature of Chinese culture and its transition from centralised or socialist to market economy. Existence of hierarchical structure makes it different from others. The functioning of this sector is affected by the impact of Chinese social structure and its traditional culture (He, Li and Keung Lai, 2011). The value of the Chinese staff is also affected by the Confucian ethics which emphasises morality than expertise. Personal relations are the strength of the Chinese hospitality sector. The transition of Chinese economy has influenced the role of government. There has been the emergence of joint ventures (state ownership with foreign organisations) which have started attracting foreign investors. The hospitality industry was one of the first sectors to work under new structure. Chinese hotel industry is identified with a complex scenario of management systems, multiform ownership and geographically asymmetric distribution. Hotel ownership is believed to be critical in China. Due to emergence of China’s hotel and restaurant sector, focus of the research has shifted to the leadership skill required to manage the staff coming from different cultural backgrounds. The Chinese food industry gives high importance to leadership so that it can tackle future competition and create a dynamic environment (Qin, 2014). Before 1978, no international hotel was present in China. However, Beijing became the site of the first joint venture hotel in 1982. In 1989, China National Tourism Administration defined seven different categories of hotel ownership like foreign investment, state-owned, contractual agreement, joint venture, joint ownership, privately owned and collectively owned (Tsang, Lee and Qu, 2015). The complexity of the ownership arrangement makes it difficult for the managers or leaders to exercise their authority and influence their subordinates which results in origin of conflicts. Statistical data revealed that there were more male staff involved than the female staffs in Chinese food sector. This sector has employees who belong to the age range of 25-34 years and also 35-44 years. So, it can be said that it is not dominated by the presence of young employees like Italy. The employees are well educated and some of them have postgraduate degree. Data also revealed that the most of the employees have prior experience to this sector. The staff basically comprised of Asian expatriates from Singapore and Malaysia and there are few western expatriates mainly from Germany and Canada. The hotel and restaurant industry of China is also a labour intensive sector and thus it influences the employment level of the country. Research shows that the sector has direct involvement to China’s GDP. It contributes CNY 1.2 trillion to the economy that is around 9% of total GDP. China’s hospitality sector produces 62 million direct, induced and indirect jobs in China. There has been increase in the employment level in 2011 to a total of 32,377 people employed in the sector that is at the rate of 11.5%. The new research suggests that hotel industry is growing faster than other sectors in China and it is estimated to grow in the next ten years at a rate greater than 9% (Jurowski, 2015). These observations will prove to be helpful for the Excelsia International Hotel and Leisure Group to set up its business. Reference List: Ascoli, A., Scamoni, C., De Lezo, A., De Lezo, S., Lefebvre, F., McKenna Cameron, Busmann, D.S., Henrici, E., Sigle, H. and Hainz, R. R., 2008. Michigan: Summer. Boluk, K., 2015. Cross-Cultural Issues in Tourism and Hospitality. Tourism Planning & Development, 12(1), pp. 123-123. Brewster, C. and Wood, G. T., 2014. Comparative HRM and International HRM. The Routledge Companion to International Human Resource Management. London: Routledge. Briscoe, J. P., Hall, D. T. and Mayrhofer, W., 2011. Careers and Cultures: Individual and Contextual Perspectives. Lonodn: Routledge. Enst & Young, 2013, The Hospitality Sector in Europe: An assessment of the economic contribution of the hospitality sector across 31 countries. [pdf]. Ernst & Young. Available at: [Accessed on 12 June, 2015]. He, Y., Li, W. and Keung Lai, K., 2011. Service Climate, Employee Commitment and Customer Satisfaction: Evidence from the Hospitality Industry in China. International Journal of Contemporary Hospitality Management, 23(5), pp. 592-607. Israeli, A. A., 2014. An Inter-Paradigmatic Agenda for Research, Education and Practice in Hospitality Management. International Journal of Hospitality Management, 42(5), pp. 188-191. Jurowski, C., 2015. Tourism in China: Destinations, Planning and Experiences (aspects of tourism). Anatolia, 26(1), pp. 115-117. Lamare, J. R., Farndale, E. and Gunnigle, P., 2014. Employment Relations and IHRM. The Routledge Companion to International Human Resource Management. London: Routledge. People 1st, 2013. Will Recruiting Younger Workers soon become a thing of the past?. [pdf]. People’s 1st. Available at: [Accessed on 12 June, 2015]. Qin, Q., Wen, B., Ling, Q., Zhou, S. and Tong, M., 2014. How and When The Effect Of Ethical Leadership Occurs? A Multilevel Analysis in The Chinese Hospitality Industry. International Journal of Contemporary Hospitality Management, 26(6), pp. 974-1001. Teerikangas, S., Stahl, G. K., Björkman, I. and Mendenhall, M. E., 2014. IHRM Issues in Mergers and Acquisitions. The Routledge Companion to International Human Resource Management. London: Routledge. Tsang, N. K., Lee, L. Y. S. and Qu, H., 2015. Service Quality Research on China’s Hospitality and Tourism Industry. International Journal of Contemporary Hospitality Management, 27(3), pp. 473-497. Various National Contributors, 2012. Employment and Industrial Relations in the Hotels And Restaurants Sector. [Pdf]. European Foundation for the Improvement in Living and Working Conditions. Available at:   [Accessed on 12 June, 2015]. Read More