Outsourcing and Hotels

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Introduction
What is Outsourcing?
Outsourcing can be defined as a business relationship in which two or more companies work together to achieve a collective advantage. Rugman et al (2003)

If you look back ten – fifteen years ago outsourcing in hotels was not a popular concept but more recently with the downturn in the economy in the nineteen nineties more and more hotels are turning to outsourcing to help increase their revenues and maximize their profit potential. The use of outsourcing enables firms to maximize their resources and to reinforce their competitive advantage. One of the most popular areas for outsourcing in hotels would have to be the Food and Beverage sector. The decision to outsource by many hotels has been traditionally based on cost reduction rather than on any type of strategic motives.

While many hotel companies have experienced success with outsourcing of many support services such as security, maintenance and laundry; the delivery of a core dimension of a hotel product in association with a partner is somewhat likely to be more intricate and can be potentially dangerous to the hotels image and brand identity.

Outsourcing is a new concept which partially substitutes the more traditional term of ‘subcontracting’. Van Mighem (1999) defines subcontracting as the acquisition of an item i.e. a product or a service, which the hotel is capable of developing whereas outsourcing involves the acquisition of an item which the hotel is not capable of producing internally to a satisfactory level. According to many authors such as Gildrion and Rueck (1998) and Mc Ivor (2000) the motivation to outsource is adopting an increasingly tactical profile as a search for the short term achievement of results in particular the terms of cost reduction.

The decision to outsource
A survey was conducted by Elmuti and Kathewala and it was found that outsourcing projects are conducted for the following reasons: Cost reduction, quality improvement,



References: Hemmington, N (2000) Key dimensions of outsourcing hotel food and beverage services International Journal of Contemporary Hospitality Management 12(4), 256-257 Rowe, M (1993) If you can’t beat ‘em, join ‘em Lodging Hospitality 67-69 www.hospitalitynet.org Thesis Fox, N (2005) Outsourcing is it a viable option in the hotel industry (2005) The management perception of strategic outsourcing of services: an empirical examination in the hotel sector The service industries journal 25(5) 689-708

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