Enhancing Performance and Competitiveness in Hospitality Organizations

INTRODUCTION

The tourism industry is highly volatile, competitive and easily susceptible to many economic, political, and social forces. The World Tourism Organization lists electronic technology, globalization vis-à-vis localization, fast track travel, polarization of tourist tastes and the 'shrinking world' of tourists as prevailing mega-trends that will continue to influence the global tourism industry (Fiji Ministry of Tourism, 2003). It is within this dynamic context that hospitality management practices have to incorporate various strategies in order to enhance performance and competitiveness (PAC).

PAC enhancing hospitality organization strategies and their development continue to be an important part of hospitality and management literature (Okumus, 2002; Olsen & Roper, 1998). However, whilst hospitality management practitioners are continually addressing this issue proactively current literature have called for more research on determining decision-making strategies, strategic options, strategy formulation, and competitive processes particularly in multinational corporations including multinational hotels (Werner, 2002; Caves, 1998; Schollhammer, 1994). Hence, it is important to undertake a study that will reveal the current real world PAC enhancing practices inherent in the hospitality sector.

Against this backdrop the current study attempts to make a contribution by answering one main question. Underpinning the resource and competence based theories, what resources and what related strategies are considered as key contributors to PAC enhancement in hospitality organizations that belong to multinational hotel (MNH) chains? It is crucial because it enlightens

Address correspondence to Peni Matararaba, University of Nagoya, Japan. E-mail: matararaba@yahoo.com

both management practitioners and researchers on where hospitality organizations currently place their efforts in as far as the enhancement of PAC is concerned.

The paper is divided into five sections. The first section presents the underpinning concept of the resource and competence based theories and defines the main question of this study. The methodology, which assumed the form of case studies, is presented in the second section, with the results presented in a descriptive format in section three. Section four qualitatively discusses the findings from the MNH cases and covers seven thematic areas including organizational culture and climate, total organizational approach, customers as participants, and multi-linkage promotional and distributive strategies. The final section follows next with concluding remarks.

Resource and Competence Based Theories

In management literature two major theories that have received great attention in explaining the enhancement of PAC, thus advancing a firm towards the attainment of sustainable competitive advantage (SCA), are the product-market explanations of Porter (1980) and the resource based theory (Conner, 1991; Dierickx & Cool, 1989; Grant, 1991; Mahoney & Pandion, 1992; Wernerfelt, 1984).

The resource based theory (RBT) postulates that SCA is generated by the unique combination or bundling of resources that are at the core of an organization or firm. To state otherwise, in order for SCA to be attained resources should uniquely possess the qualities of being rare, imperfectly imitable, and valuable (Barney, 1991). Furthermore, only some resources possessed by a firm qualify as having the potential to yield SCA whilst others are needed to conduct business and are incapable of providing SCA for the firm due to their common availability in an industry. Certain resources, however, may still be valuable as a source of SCA even if only a few firms are in possession of them.

In the realm of the RBT, resources have been generally categorized as physical, human, organizational, financial, technological, and reputational (Barney, 1991; Grant, 1991). Moreover, it has been suggested that out of these resource categories the most likely sources of genuine SCA permeate from the human and organizational resources (Barney, 1991; Fladmoe-Lindquist & Tallman, 1994). These resources, invisible assets (Itami, 1987), or core competencies (Prahalad & Hamel, 1990) are most likely sources because they are organizationally embedded, socially complex, and difficult to identify. Typical components of the human resource category encompass the areas of training, experience, and relationships. The organizational resource category may fairly include the formal reporting structures, control and co-ordination systems, and informal relationships.

The RBT, however, has also been met with criticism based on the argument that resources per se do not yield the strategic excellence of a firm (Sanchez & Heene, 1997; Haanes & Fjeldstad, 1998). Hence, in recognition of this, an extension of the RBT widely referred to as the competence based view (CBV) arose. This extension of the RBT posits that SCA, rather, is the outcome of particular activities, which propels and distinguishes a firm from its 'rivals' in ways that are valued by the marketplace. These activities enhance PAC, contribute to SCA, and include those that build competence and competence leveraging.

Competence building encompasses any process where a firm achieves qualitative changes to its assets, capabilities, and skills; whilst competence leveraging involves the application of existing competences to market opportunities in ways that require only quantitative changes to a firms assets and capabilities (Sanchez & Heene, 1997; Haanes & Fjeldstad, 1998). Some variations of competence building activities are new abilities to coordinate and deploy existing asset, the establishment of a new firm, the acquisition of new capabilities, and acquisition of qualitatively different assets that can be used in conjunction with the firms existing capabilities. Competence leveraging includes activities such as adding product features, increasing production capacity, and extending marketing reach.

The RBT and CBV collectively imply and emphasize that in order for a firm to achieve SCA it must, nonetheless, initially enhance PAC through focussing on both the notions of 'having' and of 'doing.' 'Having' connotes the tangible and intangible resources at the disposable of a firm, which it may own and tightly control or does not own nor tightly control but has the ability to access and utilize. These resources are respectively referred to as firm specific assets and firm addressable assets (Bellini, Capaldo, Raffa, & Zollo, 2000). 'Doing,' on the other hand, reflects the management processes and routines or the repeatable patterns of action in the use of resources that allow a firm to perform a certain set of activities better than competitors.

Based on the RBT and CBV reviewed in the preceding paragraphs, the current study is aimed at investigating what key resources 'having' and what key related strategies 'doing,' both internal and external, contribute the most to the enhancement of PAC in hospitality organizations that belong to MNH chains.

METHODOLOGY

The methodology adopted for this study involved the case studies of five MNHs. These MNHs were located in the Fiji Islands and represented the majority of multinational hotel chains operating there. Owned and operated by some of the top hotel corporations globally, these MNHs collectively possessed between 3.5 to 5 star property ratings and 1036 rooms in inventory. For privacy purposes, the names of these MNHs have not been cited in this paper.

In principle, the case study approach was chosen over other real world research methodologies because the real nature of concepts are best studied utilizing this method. The study of cases is a strategy for research that involves an empirical investigation of a particular contemporary phenomenon within its real life context using multiple sources of evidence (Robson, 1993; Yin, 1994). Hence, given the aim of the current study it was befitting to adopt the case study approach as the principle method of analysis.

The field activity, which was conducted during the Japanese summers of 2003 and 2004, then after with follow-up contacts, involved in-depth interviews with key personnel in the chosen MNH organizations, using a semi-structured interview questions guideline. These interviews contributed to the formation of separate case studies and enabled an empirical exploration of various key management practices (key resources and related strategies) geared towards enhancing PAC.

In total 18 key personnel were interviewed and they included resort managers, executive assistant managers, sales and marketing directors and assistants, human resources managers, and rooms' division managers. As a common characteristic of any interview, during the course of interviews, which were conducted and audio-recorded on site, other related issues that arose prompted the use of ad-lib questions.

Other data concerning the MNHs were collated indirectly from various sources of publicized information. Furthermore, from the MNHs printed materials such as brochures, pamphlets, prospectuses, organizational charts, staff newsletters or periodicals, and product disclosure statements were directly obtained.

Based on the RBT and CBV, the semi-structured interview questions guideline focused on determining which resources and related strategies, internal and external, the five MNHs considered most important as keys to enhance PAC. Moreover, due to that effective management of hotels requires the integration of the key functional areas of marketing, human resources, and operations (Lovelock, 1992), the interview questions were designed and structured according to specific data related to marketing, markets, and customers; human resources practices geared towards PAC enhancement; and operational aspects of hotel service.

The necessary data collected from the interviews, printed information directly from the MNHs and other publicized sources were developed into separate case studies for each MNH, and analysed using the CATA technique.

RESULT

In analysing the data, the results respectively showed that the key resources, which contribute the most to PAC enhancement in hospitality organizations belonging to MNH chains, are human, organization, technology, and reputation. These key resources and related key strategies encompass seven related themes, which are summarized in Table 1. These thematic areas form the basis for discussion in the next section and include the human element, paradigm shift – employees as partners, organizational culture and climate, total organizational approach, customers as participants, closeness and clarity - creating time through centralization and outsourcing, and multi-linkage promotional and distributive strategies.

In Table 1, the asterisk mark indicates the individual hotels' emphases on the respective PAC enhancing key resources and related strategies. Two asterisks are indicative of a stronger emphasis. Moreover, Arabic numerals have been used to indicate the type of resource and competence category, internal and external, that the MNHs considered as keys to PAC enhancement. '1' refers to human resources - internal specific resource and competence (ISRC), and '2' refers to human resources - external addressable resource and competence (EARC). '3' indicates organizational resource - ISRC, whilst '4' is for organizational resource - EARC. '5' is indicative of technological - ISRC and '6' refers to technological - EARC. It should be further noted that these referential numbers are non-mutually exclusive.

Table 1 shows that the MNHs strongly emphasized and supported the human resources aspects of employee welfare, culture and climate development, staff empowerment, providing skill development opportunities, and recognition and reward systems. In skill development opportunities emphasis was notably strong for Hotels A, B, and C, whose strategies also involved yearly sponsorship of chosen personnel to attend formal educational institutions such as hospitality vocational schools and universities. Likewise, their strategies regarding recognition and rewards were salient in that they included fully paid domestic and overseas travel for 'best employees of the month and year.' Moreover, in addition to daily and weekly departmental meetings, all the MNHs adopted monthly open forums that encouraged constructive dialogues between management and subordinates. An unusually notable finding was the strategy of Hotel A to centralize certain functions and highly incorporate concessionaires to accumulate time for focus on quality related matters. Hotels B, C, D, and E focussed on incorporating concessionaires rather than centralization strategies, and their efforts to enhance PAC by being 'close to the customer' were generally high, as in guest feedback systems. Additionally, there is a general tendency of the MNHs, in Table 1, to merge traditional systems of promotions and distribution with a growing reliance on electronic based systems, exemplified by the incorporation of the Internet, CRS, and electronic based strategic alliances. Regarded highly by the MNHs, customers are also seen to play an important role in strategies related to marketing. Hotels A and C were significant in that they adopted a weekly 'management and customer forum,' which involved formal presentations by management on performance and quality related issues particularly from returnees. The strategies of the other MNHs reflected norms such as weekly cocktails and other casual events with guests.

Table 1 PAC Enhancing Key Resources and Related Strategies of the Study MNHs

Discussion

The following section discusses the specific resources, internal and external, and related strategies that the MNHs considered as the most important key contributors to PAC enhancement in hospitality organizations. To reiterate, the key resources identified were human, organizational, technological, and reputational.

At this juncture, it is crucial to mention that although strategies related to reputational resources is not discussed herein, the MNHs upheld that their strategic efforts involving human and organizational resources indirectly encompass the importance of reputational resource as a requisite to PAC enhancement. They strongly believed that effective management of human and organizational resources resulting in superior customer perception of hotel service quality is simultaneous with superior reputation. Superior reputation in turn becomes an important contributor to PAC enhancement.

The Human Element

The MNHs strongly indicated that the most important firm-specific resource or asset, and key to success, is the human element of service business operations. This implies that that the enhancement of PAC derives from the successful management of employees. As one resort manager emphasized, "PAC can still be achieved, if not better, with good employee management rather than with expensive fancy chandeliers."

With customer satisfaction and enhancing PAC at the forefront of objectives, the MNHs heavily invested in employee welfare, accumulation of work-related skills, knowledge, and attitude, and particularly emphasized on the individual development of employees. These were supported by firmly established strategies for employee recognition and rewards.

Paradigm Shift – Employees as Partners

In enhancing PAC, the MNHs have actualised a paradigm shift where employees are regarded as participants or partners, who have a valued input in various decision-making situations and processes, rather than existing as mere workers of wage and security.

As opposed to an authoritarian type of leadership, the MNHs adopted a more autonomous approach for work-related freedom and flexibility. The MNHs upheld that authoritarian styles of leadership with strictly defined rules of management are not suitable for hotel operations given the array of customer needs and wants. Furthermore, the management of service 'moments of truth' requires a high level of flexibility, discretion, and staff empowerment in enabling decisionmaking at customer contact points. The strategies emphasized by the MNHs epitomize this conceptual point. For instance, ongoing constructive socializations or dialogue, both formal and informal, between management and subordinates were direct methods of obtaining feedback on customer and service quality related issues from staff. These were considered as important strategic requisites to the enhancement of PAC.

Organizational Culture and Climate

The MNHs indicated that focussing on employees requires a strong emphasis on organizational culture and climate. PAC was also enhanced by the instilment of strong core values and employee mindsets. Some strategies adopted by the MNHs were the creation of a 'barriers are non-existent' mindset and a 'stretch' environment, where continual challenges to exceed goals were pursued through professionalism, informality, trust, and the rewarding of results.

In building attitudes and competences, Hotel E capitalized on 'perfectionism' where it regarded current organizational and individual achievements as unsatisfactory. Value instilment of such kind resulted in the continuity of employee attitudes to excel in customer focus and service quality perfection.

Hotel B adopted the idea of creating a happy 'family' environment for employees and equated it with happy customers, customer loyalty, and customers as brand or destination ambassadors. Supporting this rationale for 'family' environment creation, Berry (1999), following a study of successful companies, highlighted that they shared a common characteristic of functioning as an extended family, which were achieved through providing the best possible benefits and best possible work environment for employees.

Hotel D, on the other hand, exercised the term 'patriotism' as means to enhancing organizational competence, and it adopted the term to mean the patriotic willingness of staff to defend service. In their context, 'defend' was simultaneous with the achievement and sustenance of optimum service quality. Hotel D emphasized that this newly adopted meaning of patriotism ought to be present or instilled in employees, since it has strong inclinations towards creating attitudes important in enhancing PAC.

Total Organizational Approach

The hotel firm and industry have evolved over the years. It was characterized by simplicity and uncomplicated service product offerings. This was followed by value seeking customer markets achieved through augmentation of various service products. Currently, the focus is on customers as vacation participants or loyal customers.

Hotel C notably exemplified the current importance of making customer loyalty the key driver of business. It implemented a total organizational customer-care three-stage process, which respectively involved superior customer care, customer loyalty, and recovery of loyalty. The total organizational approach required success in effective management of all employees, encompassing management staff, front-liners, back-of-the-house employees and indirect workers that belonged to concessionaires.

Hotel E emphasized three key qualities necessary for survival, growth, and service quality enhancement as being employee enthusiasm, energy, and expertise. Hotel D constantly emphasized their internal statement of "If you do not directly serve guests, you are serving those who do," and instilled it by equating guest satisfaction with increased business occupancies, stable and secured jobs, and further career options.

Further playing a significant role in rectifying service gaps, all these noted emphases indicate the important need for human resources development and total organizational approach in order to enhance PAC.

Customers as Participants

In addition to a shift in regard for employees the MNHs also strongly exemplified a paradigm shift in regard for customers, from the traditional meaning of the term to one incorporating a participant role. Their practices strongly emphasized customers as important marketing tools necessary for business generation, and all the MNHs had strong inclinations towards making customer loyalty the key driver of business.

Hotel A initiated a 'guest referral' program to achieve this. The program, which encouraged customers to refer friends and acquaintances, was considered profitable, an effective source of business generation, and contributed to customer loyalty. Hotel E utilized a 'guest satisfaction tracking system,' which involved the assessment of guest comment cards by an external and independent organization. Their strategy effectively allowed for organizational questioning on the grounds of hotel service quality, support activities such as employee welfare needs, and rectification programs for service quality gaps.

Complementing the feedback mechanisms of the MNHs were customer benefit or loyalty programs. Varying in terms of benefit levels, these programs included partnerships with other travel related companies and were aimed at 'winning and keeping' customers. It enabled market and customer base sustenance, and enhancement of PAC.

Closeness and Clarity – Creating Time Through Centralization and Outsourcing

The MNHs strongly regarded the notion that enhancing PAC is largely dependent on customer satisfaction. Due to this simple equation, their practices showed heavy inclinations towards customer-oriented approaches, which necessitated the two qualities of 'being close to the customer,' and clarity in service quality focus.

Hotel A adopted two salient strategies in order to increase availability of time to effectively focus on service quality. One of the strategies it adopted concerned the centralization of the reservations and financial function at the regional corporate level. This decreased the span of direct operational responsibilities and enabled more time for management to focus effectively on total quality issues.

The second was the incorporation of firm-addressable resources and capabilities for certain areas of the hotel. The case of hotel A was quite notable in that it incorporated concessionaires to manage and operate the entire food and beverage department, which is one of the two main revenue-generating areas of hotel operations. In addition to being cost effective and enabling more time accumulated for service quality focus, the strategy also allowed for hotel service product extension and an added inflow of financial resources, which was channelled to other facets of the hotel.

These strategies, centralization and incorporation, enabled organizational resource and capability building and enabled the hotel to become highly specialized in focus on service quality issues, given the decreased span of functional responsibilities and increased time allowance.

Multi-Linkage Promotional and Distributive Strategies

The hospitality sector is an export industry that does not involve the transfer and ownership of physical or tangible products. Its product is experiential, inseparable from its source, and consumed simultaneously with production. These characteristics have particularly important implications in terms of hospitality marketing.

For the MNHs, the recent advances in information technology seemed to have made marketing a less daunting task. Whilst maintaining traditional mechanisms of distribution, the incorporation of the Internet into promotional and distribution strategies has been substantially advantageous. Hotel E for instance, was linked to about 500 websites and, like the other MNHs, promotional and distributive strategies it adopted further included strategic alliances with travel agents and other providers of travel related service products.

Building Internet based alliances and capitalizing on the advantages seemed an important issue for the MNHs because a vast number of travel agents are linked to the global distribution system (GDS), which is accessed by approximately 600,000 travel agents worldwide to reserve travel related facilities.

Internet based alliances with external MNHs also took the form of affiliation or partnership programs such as 'reservation referral affiliate partnerships' that enabled cross promotion and reservation referrals. For the MNHs, these technologically reliant strategies were cost effective, enabled wider geographical and virtual corporate representation, and easily accessible for potential customers to engage in travel related research.

The incorporation of electronically based strategies, however, also presented various complexities as exemplified by the MNHs. The MNHs were substantially linked to the Internet through their respective corporate websites. In turn, these corporate websites were linked to Internet hosts, which were relied upon by many other MNH chains and travel related companies.

Instances of MNHs that rely on a number of travel agents, who themselves are linked to the GDS belonging to other tourism related multinational corporations or MNH chains do exist. The linkage of Hotel D to the 'X' GDS, which is a subsidiary of a global corporation to which Hotel A belonged, exemplified this.

The context brought about by such complicated technological distributive networks does present immense challenges for hospitality management and, as the cases imply, strategic collaboration seemed to be the key concept strongly embraced by the MNHs. Strategic collaboration has assumed various configurations and the preceding discussions have also emphasized examples such as out-sourcing, concessions, promotional partnerships and, loyalty and referral programs.

CONCLUSION

Reflecting the underpinnings of the RBT and CBV, the findings of this study indicate that the key resources most important and capable of enhancing PAC in hospitality organizations are human, organizational, technological, and reputational.

Moreover, as practiced and supported by the MNH cases in this study, we could generally propose that hospitality management practitioners, seeking the enhancement of PAC in their respective hospitality organizations, need foremost to focus on the preceding key resource categories with key related strategies that encompass:

• a. Equating customer satisfaction with proactive and heavy investments (not necessarily financial) in employee development, welfare, recognition, and a paradigm shift where employees are regarded as partners rather than as mere workers of wage and security.
• b. 'Being close to the customer' and clarity in service quality focus (arising from time creation through centralization of certain hotel functions at the regional headquarter level, outsourcing or incorporation of concessionaires).
• c. Actualising a paradigm shift of customers as participants from the traditional or plain meaning of the term, and making customer loyalty the key driver of business (through strong built-in formalized quality control and feedback systems, and customer loyalty programs).
• d. Multi-linkages or strategic alliances within distribution, and promotional networks (involving both traditional and electronic-based networks).

In broadening the perspective, the implications of this study can also serve as a guide for hotel management practitioners in independent hotels, whose organizations are particularly responsive to interest in development and growth. To reiterate the comment of one resort manager, "PAC can still be achieved, if not better, with good employee management rather than with expensive fancy chandeliers."