The Hotel Industry: Everything is Changing, But What Exactly is Changing?

By Sara Fedele Marketing Communications Manager , USI Università Della Svizzera Italiana | December 18, 2011

Co-authored by Sandro Formica, Associate Professor of Strategic Management, Florida International University

What will be changing the hospitality business? How can we create effective business strategies? We all agree that running a business today is more complicated and requires more resources (financial, human, technological, etc.) than in the past. Have we ever asked ourselves why and what exactly it is that has really changed? The feedback that we receive from senior managers of international hotel corporations during think tanks and interactive workshops is always the same: "Everything is changing!"But what are the elements representing this "change"?

We all agree that running a business today is more complicated and requires more resources (financial, human, technological, etc.) than in the past. Have we ever asked ourselves why and what exactly is that has really changed? The feedback that we receive from senior managers of international hotel corporations during think tanks and interactive workshops is always the same: "Everything is changing!"But what are the elements representing this "change"?

Perhaps the easiest way to understand what has changed is to take a look at the shift in roles and competencies of the new vice-presidents of multinational hotels over the years: for nearly a century, Vice Presidents were in charge of managing the so-called "functional areas" of a hotel such as marketing, human resources, finance, operations, administration, and, at times, research & development. These areas are essential to the smooth functioning of hotel operations; however, everything else happening outside the hotel facility was not relevant to hospitality managers, who devoted 100% of their resources internally. Even the curricula of graduate and undergraduate programs in hospitality management would emphasize exclusively the six functional areas, assuming that hotels operate in a vacuum and are resilient to anything happening in the external environment.

Let's take a step forward and see what is happening today. Hilton has a Vice-President of Sustainability, Le Meridien has a Vice-President of Technology, while Intercontinental has a Vice-President of Social Responsibility. We could keep listing appointed top-management executives who deal with issues entirely unrelated to the traditional functional areas. So, what happened in the past ten years? What was the driving force behind the shift from internal to external focus?

A variety of value drivers have affected this change, however there is a common thread that links them all: a new awareness that a hotel's success increasingly depends on external other than internal factors. An era of transformation has begun, which will lead to instability and profound management changes. Put it differently, we are currently facing a period of transition, coupled by a business identity crisis.

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Eco-Friendly Practices: Corporate Social Responsibility

The hotel industry has undertaken a long-term effort to build more responsible and socially conscious businesses. What began with small efforts to reduce waste - such as paperless checkouts and refillable soap dispensers - has evolved into an international movement toward implementing sustainable development practices. In addition to establishing themselves as good corporate citizens, adopting eco-friendly practices is sound business for hotels. According to a recent report from Deloitte, 95% of business travelers believe the hotel industry should be undertaking “green” initiatives, and Millennials are twice as likely to support brands with strong management of environmental and social issues. Given these conclusions, hotels are continuing to innovate in the areas of environmental sustainability. For example, one leading hotel chain has designed special elevators that collect kinetic energy from the moving lift and in the process, they have reduced their energy consumption by 50%  over conventional elevators. Also, they installed an advanced air conditioning system which employs a magnetic mechanical system that makes them more energy efficient. Other hotels are installing Intelligent Building Systems which monitor and control temperatures in rooms, common areas and swimming pools, as well as ventilation and cold water systems. Some hotels are installing Electric Vehicle charging stations, planting rooftop gardens, implementing stringent recycling programs, and insisting on the use of biodegradable materials. Another trend is the creation of Green Teams within a hotel's operation that are tasked to implement earth-friendly practices and manage budgets for green projects. Some hotels have even gone so far as to curtail or eliminate room service, believing that keeping the kitchen open 24/7 isn't terribly sustainable. The May issue of the Hotel Business Review will document what some hotels are doing to integrate sustainable practices into their operations and how they are benefiting from them.