Why Hotels Should Consider Outsourcing

By Derek Olsen Senior Vice President, CHMWarnick | October 22, 2017

Co-authored by Sean Kreiman, Manager, CHMWarnick

As the industry sits at the top of the hotel cycle, one of increasing supply, rising labor costs, peak occupancy, marginal rate growth, and growing customer acquisition costs, hoteliers and asset managers need to evaluate all cost containment opportunities to improve profits and enhance asset values. As is evident when reviewing the large amount of expense attributable to the Contract Services lines in most hotel P&Ls, many hotels are already outsourcing various components of their operations, including public area cleaning, maintenance, pest control, and landscaping, to name a few. While these functions may be considered routine, there are more profitable (yet riskier) areas of the operation that can be outsourced, particularly those related to labor, which currently accounts for more than 50% of a hotel’s total operating expenses.

Outsourcing by Department


The most profitable department in most hotels (typically between 70-80% of Revenue), has additional opportunity to enhance margins through the outsourcing of key functions including housekeeping, laundry, and reservations. However, this department also comes with the most challenge given the high-levels of guest interaction. A lack of control in this area of the operation can most adversely impact the entire operation. It is important to consider a hotel’s market and positioning when considering making changes to any of these Rooms Department functions.

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Guest Service: Empowering People

Excellent customer service is vitally important in all businesses but it is especially important for hotels where customer service is the lifeblood of the business. Outstanding customer service is essential in creating new customers, retaining existing customers, and cultivating referrals for future customers. Employees who meet and exceed guest expectations are critical to a hotel's success, and it begins with the hiring process. It is imperative for HR personnel to screen for and hire people who inherently possess customer-friendly traits - empathy, warmth and conscientiousness - which allow them to serve guests naturally and authentically. Trait-based hiring means considering more than just a candidate's technical skills and background; it means looking for and selecting employees who naturally desire to take care of people, who derive satisfaction and pleasure from fulfilling guests' needs, and who don't consider customer service to be a chore. Without the presence of these specific traits and attributes, it is difficult for an employee to provide genuine hospitality. Once that kind of employee has been hired, it is necessary to empower them. Some forward-thinking hotels empower their employees to proactively fix customer problems without having to wait for management approval. This employee empowerment—the permission to be creative, and even having the authority to spend money on a customer's behalf - is a resourceful way to resolve guest problems quickly and efficiently. When management places their faith in an employee's good judgment, it inspires a sense of trust and provides a sense of higher purpose beyond a simple paycheck. The April issue of the Hotel Business Review will document what some leading hotels are doing to cultivate and manage guest satisfaction in their operations.