Individual Written Assignment
Semester 1, 2009
Food and Beverage Management within the hotel industry has changed dramatically over the years. This can be seen through a number of measures, although only in more recent years, particularly in outsourcing. This essay will discuss the implications of outsourcing various elements of hotels’ food and beverage operations. It will go into further detail on the certain theories based around the decision making for whether to outsource or to produce goods and services on one’s own. It will then discuss past research and implications outsourcing has on the hotel industry.
At the current period of time, there has been a reduction of economic activity all over the world. Having just entered recession in Australia, with unlikely expectancy to climb out of recession until mid 2010. This will and is having as impact on jobs, retail, business and the industry that can be seen in a light of luxury, hospitality and tourism. In fact it has been said by BNET Industries that ‘outsourcing helps close the financial gap’ (Gordon, P 2003, p.1). With tough economic times the hotel industry has to do something more, to improve the financial flow or lack there of, in which means changing how the industry operates.
Within this essay outsourcing is defined “as the process whereby activities traditionally carried out internally are contracted out to external providers” (Wood, RC 2007). It can be seen in many different forms of inter-firm relationship such as joint ventures, alliances, partnerships, shared service arrangements, franchising and virtual organisation. It has been said that many hotel operators have one key focus; hotel rooms and therefore lack of attention on the element of food and beverage. The restaurant can be seen as an undervalued asset by a lot of hoteliers. Without the realisation that food and beverage can have the ability to complete the whole package and takes the entire hotel experience to a higher level, including a higher room rate. Outsourcing has the capability to put a specialised serviced into the hands of a specialist. Allowing you to pass on the day-to-day worry and hectic schedule of a busy restaurant. However logistics of outsourcing can be difficult when dealing with room service and or catering (Bolat, T & Yilmaz, O 2008).
Pasted research shows that the decision for going into outsourcing usually comes from transactional cost theory (Espino-Rodriguez, TF & Padron-Robaina, V 2004). Which is a theory developed by Ronald Coase in 1932 that looks at a company when trying to determine whether to outsource or to produce goods and services on its own. Market price is not the solo factor. There are also significant transaction costs, search costs, contracting costs and coordination costs. Those costs frequently determine whether a company uses internal or external resources for products or services. Although it is essential to focus on an economical approach, this can ignore other aspects of organisational behaviour that may have a significant influence on the outsourcing decision.
Past research can illustrate that within Shanghai, China many hotel operations are trying to adopt outsourcing approaches. However it has become visible that (in general) hotels are struggling to implement the changes and outsourcing is seen to still be immature (Lam, T & Han, MXJ 2005). The hotel industry within China has been climbing in leaps and bounds of more recent years, with such events as the world trade organization, 2008 Olympic games and the world expo to come in 2010. A survey was conducted and directed at managers and senior executives of four and five star hotels within Shanghai. Out of the 200 surveys sent out, they received 164 in return, of which were then used for the study. The table below shows a section of the purpose of outsourcing...