The Use of Hospitality Operations Management - Essay Example

Operations Management Summary: This is a 7 page paper that analyzes the use of operations management in the hospitality and tourism industry. It has 15 sources in Harvard Style. Statement Operation management must integrate thinking about the future as well as the effective operation of the present to provide a way of bringing together all the various management disciplines to help create a realistic strategy capable of effective implementation. During the 20th century, management was considered to be the domain of those at the top of the company making decisions and strategizing for the short and long term. With the emergence of the scientific management school of Frederick Taylor and Henry Ford, a new breed of managers became dominant in organizations. Over the years, the trend changed to give rise to a new school of management that would allow the top management to oversee the staffs while they are working as well as resolve problems and issues on the spot. The basic premise had been to allow decision makers to interact with staffs in their day to day activity and be able to fully realize the implication of their decisions. As a result of this new management school of thought, there emerged a series of management theories and practices. Among them operations management became prominent and gained significant importance in the management of floor routines as well as in planning, strategizing and implementation of management objectives (Gil et al 2001). Operations management can be defined as the "design, operation, and improvement of the systems that create and deliver the firm's primary products and services" [Chase 2001]. In this context operations management encompasses all those elements that allow managers or decision makers to plan, strategize, implement, monitor for control and possibly improve the system for enhanced productivity. Although initially this mode of operations was specifically targeting enterprise systems that engage in production or manufacturing of tangible products, whereas operations management in today's context has changed. Today operations management is applicable to both products and services. Services sector such as the tourism or hospitality industry too utilize operations management techniques for its enterprise increased efficiency. According to Gil et al (2001) operations management is beyond the implementation of certain techniques and methods; it is the proxy measure for improving front line services through the back end operations. Thus, tourism and the hospitality organizations which rely on back end operations for its efficient servicing to its clientele largely depend on the efficient back bone of the organization - operations. What constitute operations in such a service sector when most of the operations management concepts have been derived from production environments? A survey of the work environment at the different hotels indicate that operations constitute of management of occupancy; assessment of profitability based on current client traffic as well as from future traffic; it is about the management of the inventory through controlled monitoring; but most importantly it is about the management of the staffs who make the whole service process possible. Thus operations management in the hospitality industry put more emphasis on the relationship of the staff with the management and the clients. The correlation between is high as they are the variable that ultimately lead them to the achievement of organizational objectives. For example management can identify control variables such as length of stay with cost associated. The establishment of this relationship in hotel management, operations management enable managers to calculate the cost of servicing the client and the cost that the hotel incur while servicing him/her. Although, such calculations cannot be holistically based on per unit but nevertheless the average of servicing ten such individuals would likely offer the resultant cost per unit. With this average the manager can therefore establish the average per day cost for maintaining, say ten rooms, staff of five individuals, and material cost of $XYZ. In this light operations management offers a tangible picture of the position of the firm/hotel right then while servicing with the associated cost and profit margins (Heath 2003). Why operations management has become important in the field of the service industry, particularly the hospitality industry, has been due to the fact that organizations in this sector are largely dependent on per unit cost incurred and the resultant profit margins. The eventual profitability margin may not be huge but it does play a significant role in allowing the investors to revise their strategies for more cost effective measures (Scoviak 2003). These strategies may include reengineering processes, integration of better equipments, and installation of electronic means of operations, enterprise resource plans or simply revising the organizational operations strategy such as supply chain management. These strategies require extensive process analysis for servicing before investments can be put in for effective consolidation of the operations. The hospitality industry particularly requires management to observe the environment from all perspective before the manager can make any kind of proposal to the investors for more funds or reengineering (Scoviak, 2003). Since floor or departmental managers are involved in all aspects of the operations, they are in effect agents for the investors and upper management by facilitating them with ongoing trends and information prevailing in the operations of the hotels or resorts etc. Any kind of strategies that has to be implemented need to take into consideration of these factors. For example, in Asian and African countries where hotel management is about resource planning and resource management, external as well as internal, there is an acute requirement of managers being more observant of their environment to efficiently manage their institutions. Whereas, hotels in Europe and America, this is not the case. In Europe and other developed countries cost is considered to be equivalent to the profitability margin therefore most of the hotels believe in organizing financial resources by putting it in the most profitable department. The difference in the objectives of each of these environment indicate that operations managers must be vigilant of their environment as well as take into account of their internal resources before they can make efficient and effective decisions (Scoviak, 2003). Furthermore, it has also been observed that managers in hotels and resorts are often subjected to mass customization of their products and services. When dealing with operations decisions, effectiveness does not necessarily means efficient resource utilization. However, despite this fact, many hotels such as the Le Meridian, Marriott Hotel International, Inter Continental and Accor all have to take into account of the fact that clients wants customization and prefer those accommodations that offers them the maximum flexibility. This need however often does not conform to the operations objectives; the reason being that operations management of resources requires standardization so as to reduce in the average cost per unit whereas customization often results in high cost per unit. Thus, operations in hotels and the like hospitality organizations often pose challenges for the decision makers how to best utilize resources in order to drive cost down. These challenges are also complemented by the organizations' business objectives. Some hotels only are interested in the achievement of customer base while others are keen on sustaining growth as well as customer base. For them, therefore resource allocation is mandatory but it is not as important as in creating human resources for enhancing growth and profitability. To illustrate the above concepts the researcher takes into account the case of Marriott International. In the recent years with the events of September 11, 2001 and the consequential terrorist attacks on various tourist destinations have greatly affected the tourist business. Hotels and resorts have been forced to cut down on costs including its staffs, services, operation base. For this reason, many which have not been able to sustain the cost of reduction closed down while others have resorted to diversify or simply cut down on its marginal profits through costs. Such cost crunch has also affected Marriott International even though the organization sustains a strong front. The management at Marriott International realizes the importance of customers' demands for customization, flexibility and discounted packages. Yet at the same time the management also realizes that in order to sustain its business it will have to diversify its business in order to meet up with costs and reduce risks. To achieve this purpose, Marriott divided its business to food services and lodging services. This structure not only helps it to effectively achieve dual targets such as profitability as per demand of its shareholders but it has been also been able to cater to its direct consumers as well (Ruth 1998). The basis for this decision rests on the fact that Marriott International clearly depends on its lodgings for its business progress but it is the food service which would eventually support the mainstream of its business. Hence, reducing staffs and costs associated with lodgings would not affect the lodgings services but it would reduce the overhead costs; while the investment in the food services would only generate more profits because food services can cater to both the lodgings industry as well as the direct consumers. In streamlining its operations, thus Marriott International achieve its business objectives in that it would increase profitability in the short run while sustaining the hotel business in the long run. Eventually the two branches may not merge but may even diversify into other business sectors (www.marriott.com). Having adopted this strategy, Marriott in 2002 concentrated on brand marketing and offering packages that would appeal to the consumers. According to the Hotel's claims report "for the one-year period ending December 31, 2002, those hotels had an average occupancy rate of 64.6%, an average daily room rate of $115.77, and average revenue per available room (RevPAR) of $74.74. The occupancy rate ranged from a high of 84.0% to a low of 50.9%." During the same year with "7,862,324 inquiries, [which] resulted in 8,182,282 gross room nights for MHRS hotels." Discounts such marketing campaigns have resulted in $481,030,000 in gross sales. Yet these figures are under capacity utilization and have been the more reason for the hotel to resort to diversification of services (www.marriott.com) Thus, from the above analysis example one can understand that organizations have to have operations strategies in order to meet its business objectives. The challenge for these firms is to balance the environmental demands with internal resources in order to meet its long and short term goals. With operations management strategies, the organization is able to forecast losses, if any, and thereby take counteractive measures to ensure it does not occur. Furthermore, it also enables organizations like Marriott to protect itself from high risk level resulting from changing business environment. For this reason, the above statement is true in that it can be said that operations management utilizes organizational disciplines for the effective use of resources to achieve strategic business objectives. References 1. Official Web Site: www.marriott.com 2. Heath, E 2003, Towards a model to enhance destination competitiveness: a Southern African perspective. Journal of Hospitality and Tourism Management. 3. Gil et al 2001, An analysis of environmental management, organizational context and performance of Spanish hotels. Omega. 4. Scoviak, M. 2003, Management pressures: until the global economic picture improves, branded and third-party operators will be under pressure to find yet another year of solutions to the occupancy/rate dilemma. Hotels. 5. Ruth A. 1998, Marriott shareholders embrace spin-off plan. (Marriott International Inc.)Hotel & Motel Management. 6. Chase, AJ 2001, Operations Management for Competitive Advantage. McGraw Hill Irwin. Additional Readings 1. Kotler, P. 1999, Marketing management: Analysis, planning, implementation and control. New Jersey: Prentice-Hall. 2. McKercher, B. 1998, The effect of market access on destination choice. Journal of Travel Research, 37, 39-47. 3. Murphy, P.E. 1985, Tourism: A community approach. New York: Menthuen. 4. Murphy, P., Pritchard, M., & Smith, B. 2000, The destination product and its impact on traveller perceptions. Tourism Management, 21(1), 43-52. 5. Naisbitt, J. 1994, Global paradox. Warner Books: New York. 6. Poon, A. 1993, Tourism, technology, and competitive strategy. Walingford, UK: CAB International. 7. Porter, M.E. 1990, The competitive advantage of nations. The Free Press: New York. 8. Prentice, R. 1993, Heritage consumers in the leisure market: An application of the Manning-Haas demand hierarchy. Leisure Sciences, 273-290. 9. Prideaux, B. 2000, The role of the transport system in destination development. Tourism Management, 21(1), 53-64. 10. Ritchie, J.R., & Crouch, G.I. 1993, Competitiveness in international tourism: A framework for understanding and analysis. Proceedings of the 43rd congress of association internationale d'experts scientifique de tourisme (pp. 23-71). San Carlos de Bariloche, Argentina. Read More