Drivers of Productivity in Tourism and Hospitality

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Drivers of Productivity in Tourism and
Hospitality

• Industry practice, research evidence
• and implications for teaching
• Prof. Peter Jones
• University of Surrey

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Outline of Presentation

• The issue of industry productivity
• What we know already
• Multi-skilling research
• Impact of I.T.
• What we are currently researching
• Web-based labour scheduling
• So what? Implications for education

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Importance of productivity

• Over the long-term productivity is a key
  determinant of corporate health. As the old adage
  says "productivity isn't everything, but in the
  long run it's almost everything."
• Hence has been the focus of the Blair government
  for 10 years
• BUT.

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UK performance

• There is an enormous productivity gap between
  Britain and other developed economies. Output per
  hour worked is 13 lower than Germany, 18 below
  America and 20 below France.
• Centre for Economic Performance
• London School of Economics
• July 2007

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Productivity in hospitality

• how efficient are hotels?
• how efficient might they be?
• how and why labour cost varies
• across countries
• within countries

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Productivity benchmarking
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2005 Labour percentage

Income before fixed charges per available room
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Trend
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McKinsey study 1998

• UK hotel sector has labour productivity 53 of
  the US and 60 of France
• Little has changed in ten years?

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McKinsey study

• reasons
• age of hotel stock - 75 more than 40 years old
• low chain penetration
• service mix
• hotel size
• organisational learning

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Productivity Issues 2

• how labour cost varies over time and what drives
  this change?
• which approaches to productivity improvement
  work?
• what impact these have on bottom line?

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UK Hotel Labour Cost Trends

• UK hotel data 1980 - 1997
• labour to sales ratio stable
• except lag during times of transition
• labour cost percentage from 35 to 27, but
• some efficiency gains in London
• wage levels in provincial hotels not increased in
  real terms at all

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Worsening problem

• growth in the industry
• increased competition
• decline in of working population
• demographic change in profile of population

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EU accession workforce
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Whos fault?

• Everyone bears some responsibility for this
• Hospitality industry appears to be unable to
  solve the problem
• Hospitality educators have not produced
  managers/employees that have resolved the problem
• Hospitality researchers appear to have provided
  no insights, nor solutions
• Maybe.

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Industry solutions?

• redesigning work processes (Ritz Carlton,
  LSGskychefs)
• deploying staff more efficiently by increasing
  their functional flexibility through
  multi-skilling (Stakis, Center Parcs)

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• introduction of new technology, especially I.T.
  (J.D. Wetherspoons, hotel chains)
• increasing employee output through training,
  recognition remuneration schemes, empowerment,
  coaching (McDonalds, TGIFridays)

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PtP research evidence?
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Supporting evidence?

• Surrey research
• impact of multi-skilling on industry productivity
• workforce flexibility in UK hotels
• impact of I.T.
• Web-based labour scheduling

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Case study 1 multi-skilling

• HtF Multi-skilling Project
• Funded by Department for Education and Employment
  through Htf (UK hospitality industry lead body)

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Overview of Multi-Skilling

• Multi-skilling is the selection and training of
  staff so that they are able to work in more than
  one job position within the operation.

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Multi-skilling cases

• Number One the Aldwych, London
• York House Hotel, Eastbourne
• Hilton Hotel, Sheffield
• Center Parcs, Elveden Forest Resort
• The White Hart Inn, Derbyshire

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Multi-skilling methodology

• face-to-face interviews with
• instigator of policy
• human resource and personnel managers
• line managers
• multi-skilled employees
• company documentation

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Reasons for multi-skilled working

• More efficiently schedule staff, especially
  during relatively quite periods of operation.
• Increase staff retention, especially amongst
  part-time employees.
• Improve team working.

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Policy Choice

• Breadth - operation-wide or just some depts.?
• Depth - part or fully multi-skill?
• Flexibility - ad hoc or scheduled movement?
• Pay - same or enhanced for multi-skilled staff?
• Resource allocation - how to assign hours/cost?

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Factors Affecting Choice

• Nature of demand - seasonal, weekly, daily
  fluctuations
• Size of operation
• Range of activities
• History of business
• Employees

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Implementation Requirements

• Structures to avoid conflict
• generic job categories
• equitable reward system
• HoDs negotiation mechanism
• Flexible employees - voluntary scheme
• Training - build competence and confidence

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Potential Pitfalls

• Stress - amongst multi-skilled staff, especially
  if moved within shift
• Status and identity
• Initial resistance from staff through lack of
  confidence
• Management resistance through lack of control
• Conflict over cost allocation to Depts.

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Multi-skilling outcomes

• Cost reduction
• fewer staff per shift
• fewer in low season
• avoidance of paid overtime
• lower total training (induction) costs
• Teamwork
• barriers broken down
• process improvement

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More Outcomes

• Staff motivation
• job satisfaction
• more variety
• development opportunity
• more secure employment
• lower staff turnover
• Quality
• staff more knowledgeable confident
• more effective staff meetings

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Virtuous Circle
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Report Recommendations

• Define breadth depth of scheme
• Take into account nature of demand, size of
  operation, and range of operational activities
• Make the scheme voluntary
• Support with appropriate training, especially to
  build confidence

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• Gain management commitment
• Ensure supervisors buy into the concept
• Use business forecasts as basis for
  inter-departmental negotiation
• Review scheme regularly
• Measure performance of scheme against objectives

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Case study 2 Impact of I.T.

• Survey of 94 UK three star hotels
• Data envelopment analysis used to establish
  relative levels of productivity
• Detailed questions on hardware, software and
  usage of this

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Sample three star hotels
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General factors

• Hotel design
• Older hotels less productive
• Ownership
• Chain operations more productive
• Location
• Rural properties had greater demand variability

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Results
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Specific factors

• Market productivity
• effectiveness and implementation of the yield
  management practices, distribution and marketing
  strategies
• Operational productivity
• staff scheduling, information technology
  applications and paperless office strategies

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Role of I.T. in productivity
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I.T. implications

• Most hotels had I.T. infrastructure
• For majority this automated existing processes
• Only some (in cluster 4) were fully exploiting
  its capabilities
• Transforming processes
• Integrating of systems
• Utilising functions
• Understanding and using outputs

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Case study 3 Web scheduling
ACTUALS
SCHEDULING
HoD / Super User

EMPLOYEE DETAILS
BUDGETS FORECASTS RE-FORECASTS
Finance Manager
Payroll System
PAYROLL HOURS INFORMATION
REAL-TIME REPORTS
HR Manager
HoD / Super User
General Manager
Cluster Manager
HR / Payroll Manager
Finance Manager
Head Office Payroll Manager
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Business Forecasting Weekly focus
View of Forecast and Actuals by day
Variances clearly shown
Auto calculation of ASPH / other key data Trend
analysis via Forecast Accuracy Report
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FB Benchmark KPIs
Views at Forecast and Re-forecast level ensures a
match to changing business levels
View of key KPIs at the point of scheduling
Display of performance in simple excess /
shortfall hours
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FB - Weekly Productivity

• View mode
• Forecast - next week
• Re-forecast - this week
• Actual - history

Analysis by day-part
Real time view of performance to benchmark
Focus on excess / shortfall hours
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Housekeeping - Productivity Cost
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Housekeeping - Productivity
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Housekeeping - Cost per Room Cleaned
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Research

• Why does productivity improve more in some hotels
  than others?
• Why does productivity improve more in some
  departments than others?
• What drives productivity improvement?

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Data

• 45 hotels
• Big small
• Urban rural
• Old new
• Hours worked by every employee in every
  department
• over a period of one year

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Lessons from case studies

• Multi-skilling
• Explain the why and when not just the how
• I.T.
• Explain how IT can transform processes not just
  automate them
• Labour scheduling
• Integrates the two areas above

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Lessons from research

• Industry practice is diverse
• So no such thing as best practice for everyone
• Research explains why
• Best practice is contingent
• eg if you have a large (urban, old) operations do
  X, but if you have a small (rural, new) operation
  do Y

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• Measurement of policy implementation is typically
  measured only financially
• soft effects not measured
• Industry knows what to do, but not how to do it
  well

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Role of hospitality education

• Only educators have the time and resources to
  research
• Industry operates on trial and error OR copycat
  basis
• Research must inform teaching
• Teaching, researching and practicing hospitality
  are the SAME thing
• Just different perspectives