Chapter 2 emphasizes three major aspects: First of all, the hotel industry with its specifics and model-determining characteristics is introduced. In a next step, theoretical foundations of corporate crisis management and stakeholder relationship management – as discussed in chapter 1 - are applied to the hotel industry. And finally, the need for an integrated crisis management model for the hotel industry is displayed by determining essential premises. Based on the definition of “industry” as “a group of organisations that compete directly with one another to win customers or sales in the marketplace”159, the hospitality industry is defined as
“a group of businesses that welcome travellers and guests by providing accommodation, food and/or beverages”160. Most prominent representatives are hotels, motels, resorts, inns and
related businesses. Commonly, these organisations are bundled under the expression “hotel industry”. Further hospitality industry branches such as private accommodations, camping, cruise ships, leisure businesses and attractions will not be considered in this context. Two major operational conceptions – chain vs. privately-owned hotels – with regional focus areas exist. For example, while the American hotel industry is dominated by chain hotels, for the European hotel industry a majority of privately-owned hotels can be noted.
The coloured elements within fig. 2.1. mark the structure of chapter 2 as described above – outlining the progression within this doctoral thesis:
159 Enz, C. A., Hospitality Strategic management - Concepts and Cases, 2nd ed. (Hoboken, New Jersey: John Wiley & Sons, 2010), p. 650. 160 ibid., p. 650.
Source: pepared by author
Fig. 2.1. Doctoral Thesis Structure – Step III
The privately-owned hotel sector is characterized by consisting predominantly of SMEs (micro, small, and medium-sized enterprises).161 The European Commission defines SME as organisations with less than 250 employees and max. € 50 million annual turnover or max. € 43 million annual balance sheet total162 – as introduced in fig. 2.2.
161cf. Hwang, L. J., Lockwood, A., “Understanding the Challenges of Implementing Best Practices in Hospitality and Tourism SMEs,”
Benchmarking: An International Journal, 13 (2006), 337–354, pp. 337-338.
Source: European Commission163
Fig. 2.2. SME Definition
For instance, the UK hotel and restaurant sector counts approx. 98.3 per cent businesses which have less than 50 employees.164 Owed to recurrent shortage of labour, lack of skilled labour and limited resources, hotel organisations often rely on “hard” financial information as opposed to holistic competitive benchmarking when forming performance measurement strategies.165 E.g. hotels compare room rates of perceived competitors without considering who their competitors really are in terms of geographical and services scope. Great part of small business owners do not see how and why they should build up partnerships with stakeholders or join organisations and networks. In addition they may pay less attention to international customers and suppliers.166 Generally spoken, at the most active involvement of the owner decides on strategic success or failure of the SME. Vice versa, “membership of a hotel chain may alter the competitive strengths of an organisation, in that such membership may provide the affiliates with resources of knowledge, reputation and market power”167.
163 European Commission, The New SME Definition - User Guide and Model Declaration, Enterprise and Industry Publications, 2005, p. 14. 164 cf. Hwang, L. J., Lockwood, A., “Understanding the Challenges of Implementing Best Practices in Hospitality and Tourism SMEs,” Benchmarking: An International Journal, 13 (2006), 337–354, pp. 337-338.
165 cf. ibid., p. 346.
166 cf. Buysse, K., Verbeke, A., “Proactive Environmental Strategies: A Stakeholder management Perspective,” Strategic management Journal, 24 (2003), 453–570, p. 463.
167 Céspedes-Lorente, J., de Burgos-Jiménez, J., Àlvarez-Gil, M. J., “Stakeholder’s Environemental Influence. An Empirical analysis in the
Hotel management is generally characterized by the following features: intangibility of the products offered,
impossibility of storage of the products - production at the time of consumption,
high allocation cost,
high labour cost and fluctuation,
determining seasonality – common business fluctuation last-minute, vulnerability to crises.
This last feature “vulnerability to crises” will be the basic feature for the subsequent research. However, all other feature may not be left unobserved as they all influence hotel operation in an unstable environment to a varying extent. Also, the fact of the hotel industry being part of the service industry gives another hint for the necessity of a structured crisis management: “Organisations within the service sector are faced with a wide array of potential crisis issues and this is due to both the nature of the service sector itself and the extent of interactions between elements of the industry.”168 Taking all the features into consideration, it becomes obvious that professional hotel management needs adaption to generally accepted managerial concepts. These adaptions will be discussed in detail. Furthermore, leadership approaches need to be adjusted to the characteristics. Whereas numerous definitions and broad scientific research can be listed for “leadership” in general and managers consider leadership skills being important, there exist only a few research studies on “hotel leadership” in specific.169 This obvious lack of leadership research in the hotel industry appears even more severe in the context of being a part of the service industry. On the one hand, the product sold is a very emotional one including subjective perception of the hotel guest which is mainly based on genuine hotel by the staff. On the other hand, employees are performing a mostly hard (manual) work with flexible working hours for comparatively low money.170 In addition, the hotel industry is constantly facing short-term challenges such as booking amendments, staff alterations or internal and external crises. Therefore excellent leadership skills appear being fundamental for offering excellent hotel services and creating a satisfying and motivating working environment.
168 cf. Smith, D., “Business (not) as Usual: Crisis management, Service Recovery and the Vulnerability of Organisations,” Journal of Services Marketing, 19 (2005), 309–320, p. 310.
169 cf. Chell, E., Carmouche, R., Pittaway, L.A., “The Way Forward: Leadership Research in the Hospitality Industry,” International Journal of Hospitality management, 17 (1998), 407–426, p. 423.
170 cf. Nebel III, E. C., Stearns, G. K., “Leadership in the Hospitality Industry,” Cornell Hotel and Restaurant Administration Quarterly, 18
Another decisive characteristic of the hotel industry is the predominant structure of small- and medium-sized firms as introduced. This indicates that the ability of hotel leaders to maintain direct contact with the staff. Further on, their talent in developing relationships influences the direction and growth of a company.171
Brownell describes a change from the focus on the leader’s characteristics and competencies (“a leader is born, not made”) to a broader view that “considers both the dynamics created between the leader and his or her followers as well as the context and features of the particular environment”172. This might be an indication for the situational approach in general.
The general concepts based on situational leadership II model have been used by the following hotel companies including Fairmont Hotels & Resorts, Hilton Hotels Corporation, Hyatt Corporation, Marriott International and The Ritz Carlton Company.173
2.1.2 The Tourism Industry in general and DMOs in specific as a determining