Outsourcing Within Hotel Industry Essay Example

than the tactical part.
Overall, there are more questions than answers when it comes to why hotels outsource and what form of outsourcing is most attractive and forward-thinking.

1.3 Background Literature

According to Lankford and Parsa (1999), outsourcing refers to procuring products or services from external sources. This involves allowing outsiders to take responsibility for certain aspects of financial management (Winterton 2000). Outsourcing can be seen as similar to service and support services based on this definition but fundamentally differs from them according to previous explanations by other authors.Outsourcing is not a short-term service provided by one company to another at one time. Instead, it offers longer support and involves the transfer of specific processes or functions from one company to another. It is important for the receiving company to specialize in this area. From this perspective, a key principle of outsourcing is "I only keep to myself what I can do better than others, and I give to external agents what they can do better than others." The second chapter will further discuss principles, practical types, and forms of outsourcing.

In today's competitive business environment, outsourcing serves as a valuable strategic tool with both advantages and disadvantages. One advantage is that it allows existing staff to focus on core activities while achieving strategic goals. It also helps in reducing overhead costs to gain a competitive edge, responding flexibly to market changes, and reducing investment in high technology. These benefits are applicable not only to hotels and the hospitality industry but also any businesses in general.

Outsourcing provides companies with the opportunity to prioritize and allocate resources towards their core business while delegating non-core functions to foreign

companies. This creates a competitive advantage for the company and optimizes human resources. Additionally, there is a reduction in material input costs as another advantage of outsourcing.Often, outsourcing certain tasks to foreign contractors is more cost-effective than maintaining an in-house department for those tasks. This cost difference is because the outsourcer has specialized expertise in their specific field. Utilizing outsourcing allows companies to acquire higher quality engineering and determinations, which may be lacking in the administration. Additionally, specialized tasks that require expert execution can be utilized. It's also important to consider transferring all duties of assigned functions to the outsourcer.

However, along with these advantages, there are also disadvantages of outsourcing as summarized by Schniederjans and Zuckweiler (2004). These deficiencies can be divided into four groups: managerial implications, such as losing control over critical functions and suppliers; financial implications, such as failure to achieve cost savings; operational implications, such as dependence on providers and responsibility for the quality of their work; and human resource implications, such as lower morale among permanent employees.

Therefore, considering these disadvantages and evaluating the significance of the process, one of the most important criticisms of outsourcing is job loss opportunities.A company may release multiple positions and replace them with more professional or cost-effective employees from other companies as a result of this process. Workers often find themselves in unfavorable situations due to the lack of labor contracts or guarantees for future employment between them and their employer. To take advantage of outsourcing, hotels should consider the appropriate timing and business circumstances. According to William and Faramanz (1999), outsourcing should be considered when certain support functions can be performed faster, cheaper, or better

by an external administration. Non-core competencies of hotels such as human resources, payroll, benefits, information systems, and food service are suitable for outsourcing. Additionally, Blake (1997) identified three primary reasons why organizations turn to outsourcing: when others perform better, to focus on their core business activities, and to reduce costs. Therefore, instead of managing dining rooms, cleaners, or computer virus detection themselves, hotels should make use of outsourcing in order to concentrate on their main activities. The utilization of outsourcing in the hotel industry is influenced by factors such as the ability of external service providers to offer cost savings or improved services through specialization or cheaper labor. Outsourcing can help hotels save resources and learn from service providers. Understanding the reasons behind hotels' decision to outsource is crucial for success along with considerations regarding technology, cost, and demand.

Source:
William & Faramanz (1999).As stated by Kotler (1988), it is advantageous to delegate tasks to others that they can perform more efficiently and cost-effectively. This study aims to examine the factors influencing the decision of the hotel sector to outsource or keep business processes internally. While there are limited research studies on outsourcing in the hotel industry, existing general outsourcing studies can provide valuable insights. Furthermore, there is a scarcity of management accounting studies specifically focusing on the hotel sector (Collier and Gregory 1995). The research will also assess the advantages and disadvantages of utilizing outsourcing in hotels. This survey intends to evaluate the advanced aspect of outsourcing for hotels and identify the most effective internal business processes for them. The literature review will primarily focus on the hospitality sector while analyzing how outsourcing impacts customers and

their needs. Based on survey findings, solutions will be proposed for the hotel sector. The rationale behind this research includes: 1) The hospitality industry is rapidly expanding, with tourism being a leading industry in many countries driving development across other sectors; 2) Outsourcing is a relatively new concept but has already been implemented in various sectors including hospitality; 3) Hotels can reduce production costs by employing either outsourcing or internal business processes; 4) There is significant potential to enhance the quality of hotel services.
During financial crises, hotels often seek new ideas for development and risk reduction. One such option is outsourcing. The survey aims to answer three research questions regarding outsourcing in the hotel sector. Firstly, it seeks to define what is meant by "outsourcing procedure" in today's economy and whether it represents innovation or simply a variation of existing processes within the industry. Secondly, it explores the advantages and disadvantages of outsourcing for hotels, comparing both sides to determine its potential as an opportunity or a source of difficulties. Lastly, it examines the factors influencing the decision to outsource or keep business procedures internal within the hotel sector, including both internal and external influences on this decision-making process.Furthermore, the text will discuss the 'financial crisis' as one of the factors. Moreover, it will be possible to understand the main purposes and consequences of outsourcing in the hotel sector. Additionally, by analyzing interviews and questionnaires, we will be able to see the preferred types and specific benefits of outsourcing for hotels.

1.7 Definition of Terms

Core concern: Core concern refers to the commercial activity that generates most of the

company's profits (www.resourceconservation.mb.ca).According to Alexander and Yong (1996), 'core' activities can be defined by four main points:

- Activities traditionally performed in-house
- Activities critical to business performance
- Activities that create current or potential competitive advantage
- Activities that drive further growth, innovation, or sustainability

In relation to the financial crisis, there is no precise definition. However, a common perspective is that disruptions in financial markets reach crisis levels when the flow of credit to households and businesses is constrained and negatively impacts the real economy of goods and services (opencrs.com).

In the hotel sector, an outsourcer is responsible for providing contracted services, managing daily operational tasks, and handling requests and changes according to the contract. They may be an independent entity or a wholly owned subsidiary.

Outsourcing, as defined by Greaver (1999), involves transferring some of an organization's internal activities and decision-making rights to external suppliers through a contract.According to Beaumont and Sohal (2004), outsourcing refers to the transfer of work from internal departments to external organizations, known as sellers and clients.

1.7 Limitations

This research will focus on evaluating and interviewing hotels in Greece and Russia only. Therefore, it may not provide a comprehensive understanding of the European and global hotel industry. Furthermore, the findings may not represent all hotels even within these chosen countries due to sampling limitations. The use of convenience sampling restricts the generalizability of the results. It is important to note that this survey cannot be applied universally, but can be cautiously applicable in specific contexts. The study utilizes a mixed approach that combines quantitative and qualitative data analysis methods, which are dependent on sensitivity, reliability, and validity considerations.

However, there are advantages to this approach such as expansion opportunities and collaboration among researchers. Moreover, this study specifically focuses on outsourcing within the hotel sector while acknowledging that other factors may also influence business processes in hotels.In summary, this chapter introduces the thesis by providing an overview of the topic of study and stating the problem statement. It also discusses relevant literature, states the purpose and rationale of the study, presents research questions, defines terms, and specifies limitations.

The main focus of this study is to investigate the significance of outsourcing in the hotel sector. By critically examining its importance, advantages, and disadvantages, we aim to understand how outsourcing can impact or change the hotel industry. Ultimately, our goal is to identify the most recent and useful forms of outsourcing within hotels.

Chapter Two will then discuss theoretical models and conceptual frameworks related to factors influencing outsourcing or keeping business procedures within hotels. This analysis will be connected to four research questions.

Finally, Chapter Three will address specific gaps in existing literature that necessitate further investigation through this study.

Chapter 2: Literature Review

2.1 Introduction

The purpose of this chapter is to critically examine existing literature on outsourcing or keeping business procedures within hotels. Based on the research questions discussed in Chapter One, four general areas have been identified.This chapter provides a general description of related texts, gradually focusing on the specific areas that are the focus of this study. The research conducted in this study is based on studies in four major areas:
1. Consideration and account of outsourcing procedures within the hotel industry. This area addresses Research Question #1 - What is considered 'outsourcing procedure' within the hotel

sector?
2. Advantages and disadvantages of outsourcing for the hotel industry. This area is relevant to Research Question #2 - What are the advantages and disadvantages of outsourcing for the hotel sector? Additionally, factors and motivations for utilizing outsourcing procedures within the hotel industry are related to Research Question #3 - What are the factors for outsourcing or keeping internal procedures within the hotel sector? Furthermore, purposes and consequences of outsourcing for the hotel sector are related to Research Question #4 - What are the chief purposes of outsourcing within the hotel sector? The literature supports these countries directly related to this survey.The literature review aimed to gain a deeper understanding and thorough knowledge by critically analyzing all aspects related to the research questions. These questions can be achieved because the researcher has close and ongoing contact with the industry and has access to information in various hotels in Greece and Russia.

2.2 Review of General Area I: Consideration and account of outsourcing procedures within the hotel industry

This section provides the theoretical framework for Research Question #1. The hotel industry is a significant concern worldwide, but that does not mean they strictly implement business strategies (hypertext transfer protocol: //www.outsourcing-weblog.com). Additionally, financial accountants believe that departmental and general managers lack sufficient business skills, especially in finance, to optimize costs, revenues, and maintain profits according to Burgess (2007). Thus, outsourcing practices can be a useful and successful way to assist hotel owners now and in the future. According to Kakabadse, N. & Kakabadse A. (2000), outsourcing practices have been traced back to 18th-century England and continuously used in various industries. However, the term 'outsourcing' only appeared in American

dictionaries in the early 1980s as stated by Ostrovsy (2009). Since then, this expression has become firmly established in the business vocabulary worldwide across most languages.Traditionally, outsourcing has focused on activities that are not central or essential to the company. According to Brown (1997), outsourcing refers to transferring internal activities and decision rights to external providers through a contract. Outsourcing allows companies to focus on core competencies while benefiting from external provider expertise and resources, leading to cost savings, improved efficiency, and greater agility in responding to market changes (Greaver, 1999; 2009). As a result, outsourcing has become prevalent across industries and is increasingly supported over in-house operations (Beaumont and Sohal, 2004). This trend has led to rapid growth in the outsourcing market, specifically in specialized companies providing cleaning and hotel services. Within the hotel sector, outsourcing has contributed to the growth of certain professions such as low-paid jobs like tidying and cleaning or highly specialized trades like computer systems and IT services where maintaining necessary professional level or managing workload is challenging. Glickman et al. (2007) note that outsourcing is widely accepted among organizations for its significant cost-saving benefits, particularly within hotels.While certain activities such as water and electricity supply are always outsourced, other activities may be kept in-house (Beaumont and Sohal, 2004). Thus, the question arises: should hotels outsource their key business processes or non-core functions? Outsourcing is seen as a way to enhance company performance (Brown, 1997). The provider of outsourcing services offers financial expertise that would be costly and challenging for a company to develop internally (Winterton, 2000). By providing this expertise to multiple clients, the outsourcing supplier is able to

offer it at a lower cost compared to individual development efforts by each client (Winterton, 2000). Today, outsourcing is viewed as a business technology that involves transferring processes and functions from internal operations to external outsourcing companies. This arrangement establishes clear responsibility and accountability for the performance of these processes (Winterton, 2000).

According to most writers cited by Kakabadse and Kakabadse (2000), core activities should be retained in-house while non-core activities can be outsourced in order to preserve core competencies. Hence, the concept of outsourcing can be simplified as focusing all resources on core activities while entrusting other supporting functions to reliable and professional partners (Kakabadse and Kakabadse, 2000).Struebing (1996) argues that outsourcing is crucial for businesses to outsource key processes and financial functions. Lankford and Parsa (1999) add that companies should no longer assume that all services need to be provided internally, as outsourcing allows for the transfer of non-core processes to external providers, resulting in increased efficiency and effectiveness. By outsourcing, hotels can streamline their in-house procedures and focus solely on their core activities. Furthermore, outsourcing provides the opportunity to address internal issues by utilizing external resources. It can also be seen as a service sale to hotels, allowing them to concentrate on their main business while minimizing risks associated with non-core activities such as corporate meals, IT services, transportation, installations, and cleaning. While outsourcing has been traditionally used in operational tasks like cleaning within the hotel industry, there has been a recent trend towards outsourcing accounting functions following the example set by other industries (Burgess 2007). For instance, Holiday Inn established a separate entity for its hotel reservations business through its partnership with

IBM's ISSC to cater to the entire hotel and hospitality market (Venkatraman 1997).According to Winterton (2000), outsourcing in the hotel sector includes various activities such as cleaning, laundry service, human resource management, employees meal service, IT service and support, marketing, statistics, security service, website creation, and event management. Lamminmaki (2006) states that an activity will not be outsourced if it can harm the hotel's reputation. The outsourcing model is seen as a form of cooperation and has been present in the hotel industry for some time. Storey (2001, cited Glickman et al., 2007) examined military outsourcing in 1963 and highlighted its benefits. Outsourcing offers advantages such as higher quality and reduced costs due to skilled professionals with extensive experience in specific fields being available. Outsourcers accumulate substantial experience and develop solutions for completing tasks by having a large number of facilities in the industry. When work is outsourced, service providers become immersed in the market leading to reduced expenses and easier management processes. Additionally, Glickman et al.(2007) mention that outsourcers who offer the same services to multiple hotels can purchase larger quantities at lower prices.Outsourcing is a method of work that leads to lower expenses compared to independently performing the same tasks. Hiring highly paid professionals in the hotel industry does not allow for cost-effective operations, making running this process difficult. However, there have always been contract and subcontract work, specialization of workers and tasks, and strict selection of suppliers. With modern techniques and business, outsourcing has become quite useful.

It is also important to understand the role of outsourcing in quality management. The term 'outsourcing' is only mentioned once in point 4.1 of ISO 9000:2001

standards (http://ds1.twirpx.com). This makes it fitting to recall Lonsdale and Cox's (2000) statement that considers outsourcing as a replacement for previous trends like conglomeration, horizontal integration, vertical integration, and internal integration.

In conclusion, when considering outsourcing as a phenomenon in the modern business world, it is possible to assess its benefits and drawbacks.The text discusses the possibility of separating core services in hotels and recognizing their operating principles and outcomes, whether they result in profit or loss. It also mentions that analyzing outsourcing procedures in the hotel sector can determine the state of work environments, which may either increase unemployment or help hotels develop and grow faster to enhance their market presence.

Additionally, this section presents the theoretical framework for Research Question #2: the advantages and disadvantages of outsourcing for the hotel industry. According to Beaumont and Sohal (2004), organizations utilize outsourcing because it supposedly benefits them. These advantages and disadvantages can be categorized as strategic or tactical, long-term or short-term, and tangible or intangible.

Outsourcing offers operational, strategic, or both types of advantages. Operational advantages help avoid short-term issues while strategic advantages maximize long-term benefits by capitalizing on opportunities (Lankford and Parsa, 1999). Outsourcing also facilitates handling problematic situations by allowing direct communication with service providers instead of troubleshooting internally (Glickman et al., 2007).
Hotels can enjoy various advantages, such as cost reduction and the expansion of services and expertise. This leads to improved employee productivity, morale, and a more favorable corporate image (Lankford and Parsa, 1999). Moreover, hotels can also reduce staff, eliminate external recruitment expenses, and save on social benefits costs in order to increase their revenue.