The Future is Hospitality

Date: August 30, 2013

The Future is Hospitality

As competition mounts in the hospitality sector, industry players should evaluate the need to streamline sectors of their operations by outsourcing.

Who needs outsourcing when the good times are back? A June 2013 release by PwC (‘US Lodging Sector Recovery Continues Cautiously’) says US lodging demand is increasing and occupancy levels are anticipated to hit 62.2% this year, the highest since 2007. “Recent performance of the lodging sector has exceeded industry expectations, even as fiscal challenges encourage near-term caution,” said Scott Berman, principal and US industry leader, hospitality and leisure, PwC, in the report.

Caution is indeed necessary, and boosting your company’s innovation should be at the top of the list, according to Ernest & Young “Global Hospitality Insights: Top Thoughts for 2013.” The insights say that while the global economic pickup will provide recovery, the industry as a whole must approach business with a fresh eye.

“In today’s business environment, traditional operating agreements do not always meet the changing needs of the owning and operating parties. The hybrid contract has emerged in response, offering elements of leasing, ownership, franchising and management contracts to properties globally to enhance the flexibility of contracts,” the report says.

Clement Odoom, author of the 2012 thesis “Logistics and Supply Chain Management in the Hotel Industry: Impact on Hotel Performance In Service Delivery” for the University of Nevada, Las Vegas, points out several reasons why hospitality professionals might push back against outsourcing when considering hotel supply-chain logistics. 


The process is complex, especially when accounting for logistics and supply-chain management practices, with multiple variables to monitor and control, inventory levels, vendors and revenue to consider

Managers do not have enough people with capabilities to lead successful logistics and supply-chain projects 

They may also not have the technical know-how to handle technology selection, execution, and application, with little knowledge of using different systems for purchasing, inventory and warehouse management 

New logistics and supply-chain practices take time and money, especially in implementation, set-up, training and going live 

There is thus resistance to change, especially if staff and management feel threatened. Managers may be unable to embrace change and new processes 


Adam Weissenberg, vice chairman and US THL (Tourism, Hospitality and Leisure) leader, Deloitte, cites a range of reasons why the industry must evolve, including more competition from global players and greater ease of entrance to the market, price pressures, along with the need to invest in online branding and marketing.

“Heightened competition in a multi-channel environment, the pressing need for brand differentiation, and emerging market opportunities and challenges highlight strategic considerations that companies in the THL sector face in the evolving marketplace,” said Weissenberg in an interview at

In the interview, Weissenberg said players in the market must tackle business complexity and improve their cost structure: “Many companies have reduced their operational costs through a combination of shared services, offshoring and outsourcing. But to cut costs further, THL companies should also consider simplifying the underlying organizational, portfolio, process and information infrastructure complexities,” he adds.

Could outsourcing provide the answer to this challenge?

“The pace of change in operations and distribution strategies requires hoteliers to use systems that can grow with them to remain competitive,” said Tom Klein, President of travel-technology company Sabre in April at the World Travel & Tourism Council (WTTC) Global Summit in Abu Dhabi.

Accommodation publication Accomnews outlined the advantages of outsourcing in a May article as:  

Enhancing quality through outside expertise 

Gaining knowledge and best practices that otherwise would not be available or hard to develop 

Leveraging talent that was previously hard to access or not available 

Utilising external knowledge to add in-house innovation 

Cutting down time to market or enhancing capabilities with a supplier’s knowledge 

Reducing business overheads 

Allowing the organization to focus on their core business 

So when is outsourcing a bad idea? “The rule is if you can touch it, it has to be real, such as never put a fake plant within reach of the guest”… “You need to have consistency in the guest experience,” said Thomas Morone, a principal with advisory firm Warnick + Company, in a article from 2010. The article sites bell staff, housekeeping, front desk, switchboard operations, concierge and front-office functions as least likely to be outsourced. Meanwhile, finance, accounts, public relations, marketing, and information technology were among the most likely to be outsourced.

Sabre’s Klein cited the example of IT as an area that outsourcing can thrive on in his speech at the WTTC. “Brands are reconsidering the level of investment required to adapt to changing market conditions and are now willing to entrust their intellectual property to an external party. The realization that building and maintaining software products is not their core competency is driving a key decision point in their strategy for a future-state technology platform,” he said. 

Klein added that newly developed Software as a Service (SaaS) platforms are evolving to meet the needs of the hospitality industry. “Hoteliers are starting to examine their real source of advantage – their brand and service strategy and their ability to enable their services by being a great user of technology as opposed to being responsible for their end-to-end technology,” he commented in the WTTC speech.

In terms of outsourcing, an all or nothing approach is not the way to go. As long as hospitality industry leaders can identify their strengths, and qualities that attract customers, the functions that they are least capable of or less passionate about (cleaning or IT for example) can be taken care of by someone else, without the long-term contracts, commitments, or cost.


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