SERVICES MARKETING

People in Hospitality Industry: Issues and Challenges [May/2010 Marketing Mastermind]

-- Nagapavan Chintalapati 
Senior Faculty Member, 
The Federation of Universities, Hyderabad. 
The author can be reached at 
nagapavanc@gmail.com

-- M V Nagendra Kumar 
Teaching Associate, 
The Federation of Universities, Hyderabad. 
The author can be reached at 
nagendra.ncr@gmail.com

The hospitality industry comprising of travel and tourism, hotels and restaurants, is highly people-oriented. Despite the increased use of technology, the quality of services rendered is largely influenced by the personnel involved. This article focuses on the human resources dimension of the hospitality industry, and addresses the various challenges faced in managing the same.

Hospitality is defined by the Oxford Dictionary as "the friendly and generous reception and entertainment of guests or strangers." Any activity that entails treatment of customers as guests is a part of the hospitality industry. The term hospitality is derived from the Latin word "hospitalitem" meaning friendliness. Travel and tourism, hotels and restaurants constitute a major portion of the hospitality industry. The hotel industry is fairly well developed in India, and forms the pivot of the hospitality business in the country.

Types of Jobs in the Hospitality Industry

As an example, the various jobs in the hotel industry are listed in Exhibit 1. One common characteristic of all these positions is the requirement of skilled employees. The employee's skills are a key differentiator in the quality of service delivery. Even at the entry level, the work requires the employees to have both technical and people-related skills to a good degree. The need for people-related skills among the employees is much higher and far more important in the hospitality sector than in other industries.

Growth of the Hospitality Industry

The hospitality industry is considered as one of the important sectors in the Indian economy in terms of its contribution to GDP and employment generation. Stable political conditions, FDI inflow, growth of the services sector, infrastructure development and development of travel and tourism are the key drivers for the growth of the hospitality industry. Given the facilitating environment provided by the government, and the initiatives taken by the private sector, the hospitality industry in India is expected to grow at a compounded annual rate of 8% between the years 2007 and 2016.

Expectations from Hotel Services

The hotel industry primarily provides accommodation, food, entertainment and relaxation. In the Indian context, the famous adage "Atithi Devo Bhava" reflects that the guest needs to be respected and treated as God. Hence, all the services rendered need to be friendly, with warmth and affection.

People travel a lot these days. This generates increasing demand for a variety of professional hospitality services, which includes hotels and restaurants, banquets, healthcare centers, resorts, service apartments, pubs, bars, clubs, catering services, spas, mobile food-stands and so on. The challenge faced by the service providers is to ensure customer service at the expected level in a consistent fashion, and achieve customer satisfaction and retention. In essence, the challenge is to stand by the adage that customer is God.

The success of any business hinges on customer satisfaction. The services provided by the hospitality industry are more inclined towards the intangible, when considered on the tangible-intangible spectrum. However, some components such as food and beverage services include both tangible and intangible dimensions to nearly equal degrees.

Characteristics of Services and Challenges Faced

The hospitality industry faces the challenges faced by all service industries - arising out of intangibility, inseparability, perishability and heterogeneity to varying degrees. The problem is more pronounced in multi-location, multi-product, multi-price point companies operating in the hospitality sector.

The 7Ps approach can be adopted to seek solutions to the challenges faced by the hospitality business. The 7Ps are an extension of the traditional marketing mix of product, price, promotion and place, supplemented with Exhibit 2 lists the various elements of the marketing mix that can help the marketer overcome the service quality gaps arising due to unique characteristics of services.

Human resources are a very important factor in the handling of challenges arising out of inseparability and heterogeneity. The simultaneous production and consumption of services (inseparability) requires the organization to empower the contact personnel to plan, design, modify and alter production schedules, and also take action to increase the demand/consumption of service at the delivery stage. Heterogeneity refers to the variability of results in service delivery, which is influenced by many factors. The organizations can standardize the delivery process and the infrastructure, but cannot ensure consistency in service delivery from employees, especially when this is also influenced by customers.

The services rendered by the hospitality sector are personalized and therefore standardization of delivery quality is quite difficult. Also, the service is highly customized. Thus, it becomes imperative to ensure quality human resources for the delivery of better services and sustain business growth. The human resources should be qualified, competent and should be continuously trained to ensure delivery of efficient and high quality services to customers.

Effective service delivery is only possible when the employees have the capability to understand customer requirements, design appropriate services, execute the delivery process and carry out appropriate mid-course corrections based on the feedback received at the consumption stage from the customer. The employee should also have the capability to understand the impact of service delivery to a particular customer on other customers who may be present at the service location.

The perishable characteristic of services affects the ability of the firm to manage the demand and supply. A defective service cannot be returned, and hence the recourse to recall which can be done to remedy quality problems of manufactured goods is not possible in the services sector.

The location of the business establishment determines the demand and supply conditions significantly. Since this is a one-time and long-term decision, a firm has to depend on other marketing mix elements for subsequent control of demand and supply. The employees should therefore be capable and empowered to take appropriate decisions in this regard.

For example, the hospitality industry has to decide on the configuration of hotel rooms, tariff, facilities, etc. The hotel managers and staff should be empowered to vary the offers, by adding complementary services and supplementary features to ensure a demand and supply match. The characteristic of being perishable and inseparable also preclude the possibility of mass production, which is a major tool for standardization of products.

Managing People

Hotels and restaurants serve the requirements of accommodation, food and entertainment, etc. They need to employ expert cooks, chefs and managers. Hotels also have banquet halls and other amenities, which require a large number of people to organize and manage the services effectively and efficiently. These offer employment opportunities in multiple areas and at various levels.

The challenges in managing the `People' element of marketing mix can be classified into three categories:

• Recruitment and Retention
• Training and Development
• Compensation and Motivation.

Recruitment and Retention

The increase in travel and tourism has resulted in the need for qualified and trained personnel for different functions in the hospitality industry. The primary challenge is therefore recruitment of suitable personnel, in the backdrop of limited availability of qualified human resources and high attrition levels in the industry. The high attrition rate also makes it important for managers to concentrate on retention as well.

The annual requirement of qualified personnel in the organized hotels sector is estimated at 29,000 in 2010, and this is expected to increase to 39,000 by the year 2020. In contrast, the actual output of government and private institutions offering courses in the hotels and hospitality sector is only around 5,000 and 10,000 per year respectively. As a result, there is a huge shortfall in the number of personnel who are specifically trained for hotel management and catering professions. Though the industry offers the most energizing and challenging opportunities when compared to other industries, lack of awareness is one of the reasons for people showing less interest towards this industry. Thus, both the industry players and educational and training institutions need to develop strategies for attracting people towards the industry.

The employee attrition levels pose another threat to the hospitality sector. The attrition rate in India is currently around 30%. Many of those who leave, opt for careers in other industries that offer better remuneration. It is reported that around 40% of those who undergo various undergraduate, postgraduate and certified diploma courses in hotel management, are not opting for jobs in the industry. Instead they are heading for careers in other emerging service sectors like call centers, BPOs, etc. According to the Market Pulse Report (2004) published by the Department of Tourism, Government of India, the major reason for high level of attrition is the attractive salary packages in some other sectors and the poor perceived image of the hospitality sector. Thus, it is a challenge for firms in the hospitality industry to attract and retain human resources. This can be overcome through attractive salary packages and by creating a better work environment and a feeling of self-respect among those employed in the industry.

Training and Development

The nature of hospitality services demands that the employees possess strong theoretical as well as practical knowledge in their areas of work. Therefore, there is a need for training and educational institutes should develop standardized training packages to meet the practical requirements. Many a time, while trained people are available, the quality of training and their relevance to the industry are not on par, thereby leading to problems in their performance.

Compensation and Motivation

Provision of better working conditions and improved work culture is an important aspect for motivating and retaining employees. Most of the services are executed in direct contact with the customers, where they would receive immediate feedback on the quality of service rendered. In the case of negative feedback, it becomes important to protect the employee's morale, while at the same time prompting corrective measures.

The companies in this industry need to compensate well if they are to compete in the global market for trained human resources. Attrition and financial compensation are closely interlinked and due care should be taken to address this issue.

Employers in the hospitality industry should not wait for things to happen. They on their own have to take the initiatives needed to attract, retain and develop human resources. Both government and private sectors should work together for the development of standard education and training systems as well as standardized working conditions.

Conclusion

Well-trained and experienced personnel are extremely important for ensuring delivery of high quality professional services to the guests, which is a major prerequisite for success of the hospitality industry. The industry can ensure customer satisfaction and business growth by concentrating on increasing the resource pool of qualified manpower through industry-institute interface, continuous training and development, and appropriate recruitment, retention, compensation and motivation policies.

Reference # 10M-2010-05-07-01.