Element 1:

Update and improve hospitality industry knowledge

1.1 Understanding the Nature of the Hospitality Industry

Broadly speaking, Hospitality is the act of kindness in welcoming and looking

after the basic needs of customers or strangers, mainly in relation to food, drink
and accommodation. A contemporary explanation of Hospitality refers to the
relationship process between a customer and a host.

When we talk about the “Hospitality Industry” we are referring to the companies
or organizations which provide food and/or drinks and/or accommodations to
people who are “away from home.”

The hospitality industry is a broad category of fields within service industry that
includes lodging, event planning, theme parks, transportation, cruise line, food
and beverage service, and additional fields within the tourism industry.

Characteristics of the Hospitality Industry

The hospitality industry is unique in its nature which tends to be service-oriented

and has a strong emphasis on human exchange in the service delivery process.

1. Product-Service Mix

In the hospitality industry, customers rarely consume pure products but a mixture
of products and services. For example, one who dines in a restaurant will not only
pay for the food and drinks but the services provided by the servers. The bill has
covered both tangible and intangible experience. Tangible features – for
example – steak as the main course, a glass of wine, well-groomed staff and
décor of the restaurant. Intangible features – for example – a comfortable dining
atmosphere or friendly attitude of the staff.
A successful hospitality business does not only count on its products and services,
but also how they are delivered. The qualities of the staff and the way they
deliver the service are often more important than the tangible aspects in making
the experience satisfactory or unsatisfactory.

As products and tangible features can be easily imitated by competitors,

hospitality operations which aimed for high-end customers gradually spend more
and more resources in enhancing the service standard as a strategy of
differentiation.

2. Two-way Communication

In order to achieve service excellences in the industry, two-way communication

is one critical factor which requires the involvement and participation of both
customers and service staff in the service delivery process.

Through interactions with customers, important messages about their needs and
expectations can be received by the staff for their immediate actions to create
customer satisfaction.

3. Relationship Building

The industry depends on repeated customers for survival. Building long-term

relationship with customers can benefit the organizations for generating stable
revenues regardless of the instability of seasons and at the same time,
developing brand reputations through positive word-of-mouth of the repeated
customers.

In order to develop brand loyalty, different methods are currently applied by the
lodging and food service sectors, such as membership programmers which give
privileges and incentives to frequent customers.

4. Diversity in Culture

People who are involved in this sector, no matter customers or staff are
experiencing a diversity in culture through interacting with others. Staff who work
in the hospitality organization always have interactions with customers from
different regions or to work and corporate with other colleagues who may have
different backgrounds or cultures.

Due to their differences in religious beliefs and values, some conflicts and
misunderstandings can easily occur. Therefore, staff should be open-minded and
come up with solutions together in resolving problems in their duties.

Cultural diversity is the quality of diverse or different cultures.

5. Labor Intensive

Since the industry is service-oriented in nature, it requires a huge supply of labors

to create a memorable experience for the customers. This is especially true for
those enterprises which target for high-ended customers. For example, staff-to-
guest ratios are high in fine dining restaurants and 5-star hotels which aimed at
providing one-on-one services to their customers.

Although the advancement in technology do contribute to the replacement of

some simple tasks in the whole service process, customers who concern the
element of “care” generally expect high degree of human contacts and
personalized services in their consumption experiences.

1.2 Identifying the Structure of Commercial Hospitality

Commercial hospitality begins with the professional ability of inviting guests and
ends with just the professional ability of bidding them farewell. Between the
process of inviting and bidding guests farewell, there is the whole sphere of
tangible and intangible service elements which make the commercial hospitality
gain acceptable and satisfying to the client value.

The structure of commercial hospitality is based on four pillars:

 Inviting hospitality
 Welcoming hospitality
  Service hospitality
 Fare welling hospitality

Those four above-mentioned pillars are tightly integrated with each other and
that is why none of them can work separately. The weakness of one of them
affects the quality and durability of the construction of commercial hospitality as
a whole (commercial hospitality is the means for building an individual business
model for the hotel or restaurant company.)

Inviting hospitality – used at the stage of communicating the offer with the
market- is the whole of marketing activities undertaken to persuade the client
and guest as a customer to take the decision about choosing and ordering the
offer of a specific hotel or restaurant.

The inviting hospitality is among others, comprised of: PR and branding activities,
internet marketing, loyalty programmers designed for guests, as well as the
communication system which is used to maintain the relationship with guests.

Welcoming hospitality is comprised of all activities and behaviors of service

personnel and managerial team of the specific hotel or restaurant, which are
related to the service during the arrival and reception at the hotel or restaurant,
to the checking-in as well as on his way to the hotel room.

They will also be all the activities undertaken prior to the guest’s arrival, which
consists of giving him additional information and the provision of service known
as “personal concierge.”

Service hospitality is understood as complete and consistent with all standards

and procedures of guest service staying in the hotel or eating in the restaurant; it
is received by him in the place where the service is consumed.

Fare welling hospitality is comprised of all activities and behaviors of service

personnel and managerial team that close the process of guest service leaving
the hotel or restaurant. Those activities are also a smooth transition to re-inviting
the guest to return to the hotel or restaurant.
This set of activities plays an important role in guest service; it may become the
opportunity of “forgiving” minor mistakes that may have occurred during one’s
stay and sometimes to settle the client’s claim.

1.3 Understanding the key elements of commercial hospitality

The positive relationship and emotions between the host and guest are the
economic advantage and a value in itself. Therefore, commercial hospitality
management requires a process approach as the economic success of the
business is also based on the quality of the staff who is aware, understands and is
engaged in the service performance.

The quality of the staff, standards and procedures can be included in the
individual model of commercial hospitality, which may secure the conditions for
better, undisturbed and economically effective management of the hotel or
restaurant company.

A business model describes the rationale of how an organization creates,

delivers, and captures value, in economic, social, cultural or other contexts. It is
based on ten fundamental elements:
 Customer segments
 Value proposition
 Communication, distribution and sales channels
 The customer’s relationship
 Revenue streams
 Key resources
 Key activities
 Key partnerships
 The cost structure
 Ways of preserving the model
Customer Segments. In a modern, highly diversified hospitality business
considering the different categories and types of hotels, the key to the customer
segmentation is the classification of client which distinguishes two general
customer segments – the base client and the alternative client. The base client
through a continuous, repetitive use of the paid hotel services should secure the
profitability of the hotel company. Whereas the alternative client is a type of
client which will be reached by the hotel marketing in the periods of lower
activity of the base client in order to secure the projected occupancy levels as
well as the sales.

Customer segmentation according to key of base and alternative client

depends on the specificity and the service individuality of the hotel or restaurant.
Prior to the development of customer market analysis for the specific hotel, one
must know and understand the scope of the basic needs which should be met
to satisfy the base and alternative client.

Value Proposition. A hospitality company as a business organization tries to solve

customer problems and satisfy their needs using the value proposition which is
expressed in the price and service offer of specific hotel company. In hospitality
business, equally important are; 1) a guest who arrives and purchases the service
for the first time and 2) a satisfied guest who returns to the hotel and purchases its
services. In other words, gaining in the expected number the guests arriving for
the first time as well as returning guests will be the value for the hospitality
business.

Communication, distribution and sales channel. Comprise the company’s

interface with customers. Through these channels, hotel service offer reaches the
appropriate customer segment and gets directly to the client. It is important to
remember that they should allow to reach directly the appropriate segment of
the base client. Besides spreading information on the hotel offer on the market,
the communication channels serve several functions, e.g. they help provide
post-purchase customer relationship management.
Customer relationship. This element describes the relations at the stage of
gaining clients and guests, relations at the stage of maintaining the relationship
with guests and clients who used the services as well as the occasional relations
with the base and alternative client using to secure the additional sale of the
services provided by the hotel.

Revenue streams. It is important to select and combine revenue streams from the
chosen market segments of base and alternating client in order to achieve the
projected gross operating profit, which is the basis for calculating the profitability
of the hotel. Each revenue stream will be based on a different price mechanism
(fixed, seasonal, occasional, promotional and loyalty.) Revenue is the income
that a business has from its normal business activities usually from the sale of
goods and services to customers.

Key resources. It is important to establish or reconstruct the key resources

required for the proper functioning of the model as the process innovation. In
hospitality, very important are the material resources (tangible) and also the
intangible assets both human and intellectual. Commercial hospitality will not
work without people.

Key activities. Are those defined as a priority according to the schedule which
should be taken by the manager to ensure the efficient operating of the
implemented model of the business.

Key partnerships. Is the network of suppliers and partners that make the business
work efficiently. They should be aware whether the hotel has its own individual
model for hospitality and what the key segments of the base client are. Example
is a family hotel providing its services for families with young children must require
its key partner to put special attention to the quality and best-before dates of
the offered products. They should therefore eliminate all risks involved in
operating the business.
Cost structure. Includes all expenses of the hotel structure. It may be based on a
business model with low cost structure or may be based on cost concentration
and expenditures for the value generation and its maintenance.

Ways of preserving the model. Hospitality business is affected by permanent staff

fluctuation even at the managerial level, but the positive result of the proper
implementation of the business model is the building of a strong and permanent
team. Thus it should also support reducing outflow of the personnel.

1.4 Identifying the issues, challenges and trends facing the

hospitality industry

Sustainable development calls for Green Hospitality

People nowadays are beginning to look at sustainable solutions in the hospitality
industry. The basis of the sustainable hospitality operation is a three-part balance
expressed as “profits, people and planet.” By taking these elements into
account, a sustainable green hospitality program becomes economically viable
as well as beneficial to the community and environment.

Labor Cost Issues

Labor expenses remain the largest single expense in a hotel, accounting for
almost 40% of total operating costs. Thus any trend or issue that could potentially
impact labor costs must be taken seriously by the management. The cost of
labor is the biggest expense in all categories of the hotel industry, even with the
advancement of technology, hospitality developers cannot avoid the human
component of the operations. While managing labor expenses is important, the
human factor is equally as important in the success of the business. The
interaction between customers and employees has a dramatic impact on the
customer experience and the success of the business operation.
Multi-cultural Issues
With the development of globalization, multicultural issues are facing and
disturbing the operation of the hospitality industry. Bringing the far corners of the
world together is part and parcel of what the hospitality sector does. Blending
amenities to cater for the needs of the world’s different cultures is central to
success for large, international hotel chains. Cultural issues have never been such
a crucial determinant of how businesses in the hospitality operate.

Higher Education
Educators need to realize that teaching is not telling, that learning is not
absorbing and that knowledge is not static and in turn reflect these to their
instruction mechanisms and student appraisal systems. Educational systems must
take the challenges of the knowledge economy seriously since tremendous
changes are taking place in the industry which poses several challenges for
transforming the whole educational process.

Operating Issues
Labor shortages. Hospitality expansion is limited not only by capital but
rather by human resources. The problem of attracting and retaining qualified
workers is increasingly becoming a global challenge. Demography, wage levels,
failure to adequately address worker satisfaction and a reputation for long hours
and low pay are all cited for contributing factors.

Cost containment. Companies are challenged to find ways to reduce

costs without sacrificing the quality standards imposed to consistently meet guest
expectations. The idea of “doing more with less” requires the managers to think
about ways to operate more effectively.

Increased competition. Hotels everywhere indicate that their community

is overbuilt; there are too many available hospitality rooms relative to the guests
desiring to rent them. The resulting competition, which often involves price
cutting in efforts to provide greater value to guests, results in further profits
reduction. Rooms are now sold not only for less but also bundled with packages,
like breakfasts and airport transfers or even sightseeing.

Marketing Issues
Market segmentation and overlapping brands. Market segmentation is
increasing as lodging chains focus on a specific niche of travelers. Because of
this, brands overlap. Franchised companies are in direct competition among
themselves. As the number of brands increases, the ability of consumers to
differentiate between them decreases.

Increased guest satisfaction. Consumers have become more

sophisticated and as a result, so have the types of products and services that
they desire. Amenities, exercise and recreational facilities and guest room
innovations increase costs but if not carefully selected, may not appeal to many
guests being served.

Technological Issues
Interactive reservation systems. Guests can now use the internet’s
interactive reservation systems and hospitality companies are sometimes
criticized for the large number of keyboard clicks required to make a reservation.

Guest-room innovations. Multiple phone lines, interactive opportunities for

ordering room service and guest room checkouts are examples of amenities that
guests increasingly desire but are very expensive to operate and install.

Data mining. This technology allows marketing and sales personnel to find
new ways to use guest-related data. (data mining: using technology to analyze
guests and other related data to make better marketing decisions)
 Yield management. This process allows managers to match guest
demand with room rates (high demand means higher rates because of lessened
discounts). This is a system designed to maximize revenues by holding rates high
during times of high guest-room demand and by decreasing room rates during
times of low guest-room demand. Yield management is critical to maximizing a
hotel’s profitability.

Economic Issues
Dependence upon the economy. When the economy is good, business
travel generally increases. Occupancy rates and rack rates increase which
results in higher profit levels. Business travel slows when the economy slows down.

Globalization. Impacts the lodging industry dramatically because it

influences the extent of which people travel both within the country and around
the world. It is also the economies of other countries that play an increasingly
larger role in the financial success of lodging properties.

1.5 Identifying the career prospect of the hospitality industry

There are always some pros and cons for working in the hospitality industry. The
concern of whether a position suits you or not is mainly dependent on your own
character and personal interest.

Positive Views
a. Variety of career choices. Due to the booming development of the
hospitality and tourism industry, many new hotels and restaurants are
opened for catering the needs of both the visitors and locals. It facilitates
a huge demand of labor in the market especially in some developing
countries. The job natures are broad ranging from back of the house to
front of the house positions.
Accommodation Sector Food Service Sector Other related sectors
 FO associate  Waiter  Flight attendant
 Room attendant  Host/hostess  Tour guide
 Telephone operator  Cashier  Tour escort
 Reservations clerk  Food  Travel agent
 Concierge runner/busser  Theme park
 Bellman/doorman  Bartender crew
 Business center  Apprentice  Event organizer
associate  Commis  Customer
 Banquet server service

b. Opportunities to meet people with different backgrounds. The success of a

hospitality service highly depends on the human contact between the
staff and customers. Frontliners will have more opportunities to meet and
communicate with people with different backgrounds and cultures. The
job satisfaction through winning customer’s smiles and the interactive
nature make hospitality industry attractive to young people.
c. Long-term career development. Most people have to start their careers
from the entry-level. The career paths are always clear and there are
always opportunities for them to get promoted and proceed to
management levels based on experience and performance.
d. Fringe benefits. Staff working in hotels and food service operations usually
enjoy some other benefits in addition to the basic salaries and annual
bonuses. Some are provided with duty meals and are given discounted
rate for booking rooms and can even apply to hotel outlets under the
same brand in other parts of the world.
Negative Views
a. Long and non-regular working hours. Shift works are very common in the
hospitality sector. Some positions require staff to work overnights and
there are no such things of public holidays, staff are always required to
work on weekends or special days. Overtime works are also frequent.
b. Work under pressure. Staff are required to provide quick and high quality
services without keeping their customers from waiting. The pressure of
maintaining the service efficiency and consistency especially in peak
seasons could be tremendous. The need for frequent communications
with customers has especially created intense pressure to staff in frontline
positions.
c. Low starting salary. The industry offers many relatively low-skilled entry level
jobs. Staff with no experience generally have low starting salaries.
d. Perceptions of low job status. Some people would think their job status are
relatively lower when compared to other industries. The misperception of
being a servant to others are discouraging to some to stay in the industry.