Centralized or decentralized?
Both organizational models have pros and cons, so a combination is best for independent hotel groups. Let's examine the pluses and minuses of each model from how a few different perspectives impact the growth of total top-line revenue for a company operating twenty independent hotels.
Management and decision-making
Autonomy and innovation
Positive and negative impacts
Centralized Organization - positive impacts
Centralized Organization - negative impacts
Decentralized Organization - positive impacts
Decentralized Organization - negative impacts
Central or local revenue managers
Positive aspects of a centralized revenue manager
Challenges when the revenue manager sits centrally
Positive aspects of a local revenue manager
Challenges when the revenue manager is on-site
The best of both worlds
- Establish clear goals and objectives: Define the company’s overall goals and objectives, and align centralized and decentralized functions to support these goals. This will help ensure that all levels of the organization work together towards the same targets and maintain a cohesive strategy.
- Leverage core competencies: Identify core competencies and areas of expertise within the organization. Centralize functions that benefit from economies of scale, standardization, and strategic alignments, such as technology, distribution, loyalty programs, travel trade sales, and marketing. Decentralize functions that require local knowledge, adaptability, and customization, such as analyzing demand from destination events, local sales and marketing, and operations of restaurants and other facilities attracting a local audience.
- Foster communication and collaboration: Encourage open communication and cooperation between centralized and decentralized teams. This can be achieved through regular meetings, progress updates, and knowledge-sharing platforms. This will help bridge gaps between the two structures, facilitate coordination, and promote sharing of best practices and innovative ideas.
- Implement a clear decision-making framework: Establish a clear decision-making framework defining centralized and decentralized teams' roles, responsibilities, and authority levels. This will help avoid confusion and duplication of efforts and ensure that decisions are made by the most suitable people within the organization.
- Monitor and evaluate performance: Regularly monitor and assess the performance of centralized and decentralized functions. Use key performance indicators (KPIs) to measure their effectiveness in achieving the organization’s goals. This can help identify areas for improvement and optimize the balance between centralization and decentralization.
- Adapt and adjust as needed: Continuously assess the effectiveness of the hybrid organizational structure and be prepared to adapt and adjust as needed. For example, market conditions, customer preferences, and internal factors may change over time, requiring adjustments to the balance between centralized and decentralized functions.
- Invest in training and development: Provide training and development opportunities for employees at all levels of the organization. This will help enhance their skills and enable them to perform effectively in centralized and decentralized roles.
- Empower local teams: While maintaining strategic alignment, give local teams some autonomy to make decisions and implement strategies that cater to their specific market conditions and customer needs. This can help harness the benefits of decentralization while maintaining the overall coherence of the organization.
Build a solid framework
- Define the overall objectives and goals: Establish the company’s overall goals and objectives, focusing on revenue growth and profitability for each hotel. Make sure these objectives are communicated to all hotel managers and staff.
- Empower local management: Give each hotel manager the autonomy and authority to make decisions related to pricing, marketing, promotions, and guest experience. Encourage local managers to develop strategies tailored to their specific market conditions, customer preferences, and competition.
- Implement local revenue management systems: Provide each hotel access to a revenue management system that allows them to track demand, monitor performance, and optimize pricing and inventory based on local market dynamics.
- Establish a robust reporting and analytics system: Implement a reporting and analytics system that collects and consolidates data from each hotel to enable performance tracking, benchmarking, and the identification of best practices.
- Foster collaboration and knowledge sharing: Encourage hotel managers and staff to share best practices, experiences, and successful strategies with one another. This can be done through regular meetings, workshops, online platforms, or company-wide communication channels.
- Maintain strong brand identity and centralized marketing support: Ensure each hotel adheres to the company’s overall brand identity, positioning, and marketing strategy. In addition, provide centralized marketing support to help hotels create effective marketing campaigns tailored to their local markets.
- Develop a centralized loyalty program: Implement a company-wide loyalty program that incentivizes guests to stay at any of the company’s hotels, fostering customer loyalty and driving repeat business.
- Offer training and development opportunities: Invest in the professional development of hotel managers and staff, equipping them with the skills and knowledge necessary to manage revenue effectively and make informed decisions that support the company’s objectives.
- Monitor performance and adjust strategies as needed: Regularly evaluate the performance of each hotel against the company’s overall objectives and goals. Use this information to adapt local strategy, identify opportunities for improvement, and optimize resource allocation.
- Encourage innovation and experimentation: Foster a culture that empowers hotel managers and staff to explore new ideas and strategies that may drive revenue growth and enhance guest satisfaction.
Clarify central and local roles
Centralized organization responsibilities and tasks
- Strategic direction: Define the company’s overall goals, objectives, and strategic direction, focusing on revenue growth and profitability.
- Branding: Establish and maintain a strong brand identity and ensure that all hotels adhere to brand standards.
- Centralized marketing support: Develop and manage centralized marketing campaigns and provide marketing support to local hotels, helping them create tailored marketing initiatives for their specific markets.
- Centralized procurement and resource allocation: Coordinate procurement, contracts, and resource allocation across all hotels to achieve economies of scale and cost savings.
- Technology and systems: Implement and maintain centralized technology systems, such as reservation systems, revenue management systems, customer relationship management (CRM) systems, and reporting systems.
- Centralized loyalty program: Develop and manage a company-wide loyalty program that incentivizes guests to stay at any hotel.
- Training and development: Provide hotel managers and staff with opportunities to enhance their skills and knowledge.
- Performance monitoring and benchmarking: Monitor and evaluate the performance of each hotel and identify opportunities for improvement and resource optimization.
- Compliance and risk management: Ensure compliance with legal, financial, and regulatory requirements and manage potential risks.
Local hotel responsibilities and tasks
- Local revenue management: Develop and implement pricing, promotion, and inventory management strategies tailored to local market conditions, customer preferences, and competition.
- Local marketing initiatives: Develop and execute localized marketing campaigns, leveraging the support and resources provided by the centralized marketing team.
- Guest experience management: Enhance guest satisfaction and loyalty by offering personalized services and unique experiences and addressing guest feedback.
- Operational efficiency: Optimize operational processes, such as housekeeping, food and beverage, and maintenance, to maximize profitability.
- Local partnerships and alliances: Establish partnerships with local businesses, attractions, and event organizers to create additional revenue opportunities and enhance the guest experience.
- Local market intelligence: Monitor local market trends, competition, and customer preferences to identify new opportunities and adjust strategies accordingly.
- Staff management: Recruit, train, and manage hotel staff to ensure the delivery of high-quality service and guest satisfaction.
- Financial management: Manage hotel budgets, costs, and financial performance to maximize profitability.
Ideal support from a centralized team
- Access to centralized marketing resources and expertise to help them develop and execute effective marketing campaigns.
- Access to centralized technology systems, such as reservation, revenue management, and CRM systems, enables them to efficiently manage their operations and make data-driven decisions.
- Consistent brand guidelines and support to ensure that their offerings and customer experiences align with the company’s overall brand identity.
- Training and development resources to enhance their staff’s skills and knowledge in revenue management, customer service, and other critical areas.
- Regular performance monitoring and benchmarking help them identify improvement areas and optimize their strategies and resource allocation.
- Support with compliance and risk management to ensure that they meet legal, financial, and regulatory requirements and minimize potential risks.