Hotel Outsourcing: Can it reduce your overall strength?

During tough economic times, it’s understandable that a hotelier’s initial inclination would be to adopt practices that generate the quickest increase in RevPAR and occupancy rates. The growing trend towards outsourcing appears beneficial as it introduces competitive bidding among suppliers while alleviating some of the hotel owner’s risk.

Nearly every aspect of running a hotel can be parceled out, from the property management and reservations system to front desk and housekeeping staff to conference, gift shop, spa and restaurant administration. As The Economist recently reported, flags such as InterContinental are moving towards an “asset-light” business model where only 16 of its 4,186 hotels are actually owned by the brand, with the remaining operated as licensed franchises. Will this strategy weaken the longevity and quality of InterContinental’s brand value?

We’ll be taking a three-part look at when outsourcing makes sense – and when it jeopardizes a hotel’s service delivery promise. While the immediate financial benefits are well-known, making an informed choice that addresses the potential pitfalls might allow outsourcing to be a robust solution.

Critics argue that outsourcing is short-sighted as it sacrifices long-term success for short-term growth. Following are some red flags to consider as to how uninformed outsourcing might reduce a hotel’s overall strength:

A. Lessens a hotel’s flexibility to respond to unique tasks & surges in workloads

B. Lessens consistency in the property’s message and customer service quality control

C. Reduces creativity in management decisions, as the key players must stick to their defined roles

D. Reduces personal pride and ownership among staff

E. As noncore services become noncritical they tend to be neglected or left behind

Clearly it is essential that a hotel selects outsourcing partners that share similar brand values while promoting open channels of communication. In Part II of our look at outsourcing we’ll explore the potential conflicts in priorities between owners and outsourced providers, as well as provide some strategies for avoiding these risks before they have the chance to occur.