The Outsourced Hotel: Efficiency Boost or Guest Experience Bust?
08 June 2023
Peter Drucker's theory is centered around the idea that the purpose of a business is to create and keep a customer, which is certainly true for the hotel industry as well. In this context, creating a customer means attracting guests and providing an experience that meets their needs and wants so well that they become repeat customers and advocates for your brand. To do this effectively, hotels must have a deep understanding of their customers and be able to control and manage the entire guest experience. This includes everything from when a guest first hears about the hotel or visits its website to the booking process, their stay at the hotel, and even their experiences after they leave.
However, it's important to note that having control over the guest experience doesn't necessarily mean that the hotel has to perform every service itself. Outsourcing can still be valuable if the hotel maintains strict quality control and ensures all outsourced services align with its brand and customer expectations. For example, a hotel might outsource its restaurant services to a well-known chef or restaurant group. If done correctly, this can enhance the guest experience by offering high-quality dining options that the hotel might not be able to provide alone. However, the hotel would still need to work closely with the restaurant to ensure that the service, ambiance, pricing, etc., align with the hotel's brand and guest expectations.
The key is finding the right balance. Hotels must control the guest experience and ensure all services meet their standards. But they can also leverage the expertise of others to enhance their offerings and create a better experience for their guests. Ultimately, the goal is to create a guest experience that meets and exceeds customer expectations, leading to customer loyalty and advocacy. So where is the best balance between in-house and outsourcing? Here are a few examples and a comprehensive list of pros and cons for every step in the guest journey. A good starting point is the core business of a hotel.
The core business of a hotel
The core business of a hotel is to provide accommodation services to guests. This entails offering comfortable and secure places for people to stay, often on a short-term basis. These services often include.
- Accommodations: This is the primary service. Hotels provide different types of rooms based on the guests' needs, such as single rooms, double rooms, suites, etc. These rooms typically have furniture, a bathroom, and sometimes additional amenities like a television, mini fridge, etc.
- Food and Beverage Services: Many hotels have restaurants and bars to cater to the dining needs of their guests. They may also provide room service, where guests can order food to be delivered to their rooms.
- Customer Service: Hotels are expected to offer high-quality customer service. This can include front desk service where guests check in and out, concierge services to help guests with various needs (like booking tours or getting tickets to shows), and housekeeping services to keep rooms clean.
- Additional Services and Amenities: Depending on the type of hotel, they may also offer other services such as spa treatments, fitness centers, swimming pools, business centers, event spaces (like banquet halls or conference rooms), and more.
It's important to note that while these are the core businesses of most hotels, the specifics can vary widely depending on the type of hotel (for example, a budget hotel versus a luxury resort), its location, its target market, and other factors.
Sign a hotel management contract
When a hotel owner signs a hotel management contract with a hotel management company, they essentially outsource the day-to-day operations and management of the hotel to that company. This type of arrangement is common, especially with larger hotel chains.
The hotel management company typically handles many aspects of the hotel's operations.
- Operations Management: This includes the daily running of the hotel, such as overseeing staff, maintaining facilities, and ensuring that services are efficiently provided to guests.
- Marketing and Sales: The management company usually handles marketing efforts, including advertising and promotions, sales strategies, and public relations.
- Revenue Management: This involves strategies to maximize the hotel's revenue, such as pricing strategies, managing online bookings, and optimizing occupancy rates.
- Human Resources: The management company may handle recruitment, training, and other HR functions.
- Financial Management: This can include budgeting, financial reporting, and other financial tasks.
However, even in this arrangement, the hotel owner retains some control and oversight. The specifics will depend on the terms of the management contract, but the owner usually retains the ultimate decision-making power, especially on strategic issues. The owner also typically has the right to review and approve the hotel's budget and major expenses and to monitor the management company's performance.
It's also worth noting that while a management contract involves outsourcing many functions, it doesn't necessarily mean that the owner is completely hands-off. Many hotel owners stay involved in their properties to some extent, even just overseeing the management company and making high-level strategic decisions.
So while a management contract involves a high degree of outsourcing, it's not the same as completely giving up control over the hotel. The owner still has a crucial role in ensuring the hotel succeeds and meets its guests' needs.
What can the management company outsource?
Parts of a hotel's core business can be outsourced. Outsourcing involves hiring external companies or individuals to manage certain aspects of the business. This can be beneficial for various reasons, including cost savings, access to specialized expertise, and the ability to focus on other business areas. Here are examples of areas that hotels often outsource.
- Housekeeping: Some hotels outsource their cleaning services to specialized companies. These companies often have their own staff and cleaning equipment, and they may be more efficient or cost-effective than maintaining an in-house housekeeping team.
- Food and Beverage: Hotels may outsource their restaurant or catering services. This is especially common if the hotel wants to offer high-quality food and beverage options but lacks the expertise.
- IT Services: IT services are crucial to modern hotels, from maintaining a booking system to managing a website. Many choose to outsource these services to companies that specialize in hospitality technology.
- Maintenance and Repair: Hotels often need regular maintenance and repair work, and it can be more cost-effective to contract this work out rather than having a full-time maintenance staff.
While outsourcing can have many benefits, it's important for hotels to maintain a high standard of service. Guests expect consistent quality whether a service is provided in-house or by a third party. Therefore, if a hotel chooses to outsource, it must select its partners carefully and maintain strong oversight to meet guests' expectations.
Furthermore, some aspects of the hotel business, such as overall strategy and management, are typically not outsourced. These are areas where the hotel needs to have its own expertise and control. The hotel's brand, unique selling proposition, and overall guest experience are typically managed in-house.
What cannot be outsourced?
Certain aspects of the hotel business are typically not outsourced because they are too integral to its brand, customer experience, or operations. These can include.
- Strategic Management and Decision Making: This includes setting the hotel's overall strategy, making key decisions, and overseeing operations. These activities require a deep understanding of the hotel's business and brand and are typically handled by the hotel's executive team.
- Brand Management: The hotel's brand, unique selling proposition, and overall guest experience are typically managed in-house. This is because these elements are unique to the hotel and cannot easily be replicated by an outsourcing partner.
- Guest Experience and Quality Control: While individual services (like housekeeping or food service) can be outsourced, the hotel usually manages the overall guest experience and quality control. This ensures that all services meet the hotel's standards and are consistent with its brand.
- Financial Management: The hotel's finances, including budgeting, financial reporting, and risk management, are usually managed in-house. This is a critical function that requires a high level of trust and control.
- Staff Management: While some HR functions can be outsourced, the hotel usually handles staff management (especially those who interact directly with guests). This ensures that staff are properly trained, understand the hotel's brand and standards, and can provide a high-quality guest experience.
These are general guidelines, and the specifics can vary depending on the hotel and its circumstances. For example, a small independent hotel might choose to outsource more functions than a large hotel chain. Any hotel considering outsourcing must carefully weigh the potential benefits against the risks and consider the potential impact on their brand and guest experience.
Can part of the guest journey be outsourced?
The overall guest experience and quality control are crucial aspects of hotel management, and they significantly impact the guest's perception of the hotel. Even though individual services can be outsourced, the hotel must maintain stringent quality control over the entire guest journey to ensure that each touchpoint meets its high standards and is consistent with its brand.
This is particularly important because the guest journey is unique for each hotel. From the moment a guest learns about the hotel through their booking, stay, and post-stay experiences, each interaction contributes to their overall impression of the hotel. If any of these touchpoints fails to meet guests' expectations, it could negatively impact their overall experience and perception of the hotel brand.
Therefore, whether a service is outsourced or managed in-house, the hotel must maintain 100% quality control over the entire guest journey. They must ensure that all service providers, internal employees, or external contractors understand and deliver on the hotel's brand promise. This requires clear communication of expectations, regular monitoring and feedback, and a commitment to continuous improvement.
Outsourcing can offer benefits such as cost savings and access to specialized expertise, but it should never compromise the quality of the guest experience. After all, the goal of every hotel is to create satisfied guests who will return in the future and recommend the hotel to others. Achieving this goal requires a consistent focus on quality control across all aspects of the guest journey.
Here's a comprehensive list of each step in the guest journey, the potential for outsourcing, and its pros and cons.
- Awareness/Discovery: This is when a potential guest first learns about the hotel. This could happen through various channels, such as online search, social media, word of mouth, or traditional advertising.
- Outsourcing Potential: Marketing and advertising can be outsourced to specialized agencies.
- Pros: Access to specialized expertise, potentially better results.
- Cons: Less control over messaging, a potential disconnect between advertising and actual guest experience.
- Research and Decision Making: After discovering the hotel, potential guests typically research to decide if it's the right fit for them. They might visit the hotel's website, read reviews, compare prices and amenities, etc.
- Outsourcing Potential: Partially. Website design and maintenance, SEO, and review management can be outsourced.
- Pros: Access to specialized expertise, better online presence.
- Cons: Less control over online representation, a potential disconnect between online representation and actual guest experience.
- Booking: After deciding to stay at the hotel, the guest makes a reservation. This could be done through the hotel's website, a third-party booking site, or over the phone.
- Outsourcing Potential: Yes, reservation systems can be managed by third-party platforms.
- Pros: Easier for guests to book, potential for increased visibility and bookings.
- Cons: Less control over the booking process and fees associated with third-party platforms.
- Pre-Arrival Communication: After booking, the guest may receive communication from the hotel confirming their reservation and providing useful information about their stay.
- Outsourcing Potential: Yes, email marketing and communication can be managed by external agencies.
- Pros: More professional and consistent communication, the potential for better guest engagement.
- Cons: Less personal touch, potential for miscommunication.
- Arrival and Check-In: The guest arrives at the hotel and checks in. This is a key touchpoint, as it's often the guest's first in-person interaction with the hotel staff.
- Outsourcing Potential: Not typically, as this key touchpoint is usually managed by the hotel staff.
- Pros of keeping in-house: Greater control over guests' first impressions and the opportunity to provide a personalized welcome.
- Cons of outsourcing: Potential for a less personal touch, miscommunication, or inconsistency in guest experience.
- Stay: This is the main part of the guest's journey, where the guest uses the hotel's services and amenities. This can include everything from using the room and housekeeping services to dining in the hotel's restaurant, using the fitness center or spa, and so on.
- Outsourcing Potential: Partially. Some services, such as housekeeping, food and beverage, and recreational facilities, can be outsourced.
- Pros: Access to specialized services, the potential for cost savings.
- Cons: Less control over the guest experience, potential for inconsistency in service quality.
- Check-Out and Departure: The guest checks out and departs from the hotel at the end of their stay.
- Outsourcing Potential: Not typically. Like check-in, this is usually managed by the hotel staff.
- Pros of keeping in-house: Opportunity to gather feedback directly from guests, a chance to resolve any issues before the guest departs.
- Cons of outsourcing: Potential for less personal touch, miscommunication, or inconsistency in guest experience.
- Post-Stay Communication: After the guest departs, the hotel may continue communicating with them. This could involve sending a satisfaction survey, thanking the guest for their stay, or offering promotions to encourage future bookings.
- Outsourcing Potential: Yes, email marketing and communication can be managed by external agencies.
- Pros: More professional and consistent communication, the potential for better guest engagement.
- Cons: Less personal touch, potential for miscommunication.
- Repeat Booking and Advocacy: The final stage of the guest journey involves encouraging the guest to book again and advocate for the hotel by leaving positive reviews and recommending it to others.
- Outsourcing Potential: Partially. Marketing efforts to encourage repeat bookings can be outsourced, but the ultimate decision to book again is up to the guest.
- Pros: Access to specialized marketing expertise, the potential for increased repeat bookings.
- Cons: Less control over messaging, the potential disconnect between marketing and actual guest experience.
In summary, while there are potential benefits to outsourcing at various stages of the guest journey, such as access to specialized expertise and potential cost savings, it also often involves giving up some control over the guest experience. Therefore, hotels must carefully weigh these considerations when deciding whether to outsource aspects of the guest journey.
Conclusions
Outsourcing in the hotel industry can be a strategic move to improve efficiency, reduce costs, and leverage specialized expertise. However, as our discussion suggests, it also comes with significant considerations around quality control, consistency, and the overall guest experience. Here are some key conclusions.
- Quality Control is Crucial: Whether a service is outsourced or kept in-house, the hotel must maintain stringent quality control over the entire guest journey. This requires clear communication of expectations, regular monitoring and feedback, and a commitment to continuous improvement.
- Consistency is Key: Ensuring consistency across all touchpoints of the guest journey is essential. Inconsistencies, especially between the promised and delivered experience, can lead to customer dissatisfaction and damage the hotel's reputation.
- Outsourcing is Not a Panacea: While outsourcing can offer benefits such as cost savings and access to specialized expertise, it's not a cure-all. Careful consideration must be given to the potential impact on the guest experience, and not all aspects of the hotel's operations are suitable for outsourcing.
- In-House vs. Outsourcing is a Strategic Decision: The decision to keep a service in-house or to outsource it should be made strategically, taking into account factors like the hotel's brand, target market, operational capabilities, and financial considerations.
- The Role of the Hotel is Evolving: With the possibility to outsource many aspects of operations, the role of the hotel is increasingly becoming that of a manager of guest experiences rather than a provider of all services. This shift requires new skills and capabilities, including effectively managing relationships with various service providers.
In summary, while outsourcing can be a valuable tool for hotels, it's not without challenges. It requires careful planning, effective management, and a relentless focus on quality control and the guest experience. Ultimately, the goal is to create satisfied guests who will return in the future and advocate for the hotel, and every decision around outsourcing should be made with this goal in mind.