Insourcing Versus Outsourcing of Hospitality Design

By Tammy S. Miller President, Alternate Resources | June 23, 2013

During economic booms when profits are rich, companies seek to internalize many functions. This insourcing of a business function is often made with the hopes of maintaining better control of critical competencies. In the hotel industry, especially among international chains, or "flag" hotels, the idea of possessing a team of highly creative interior designers working in-house is very alluring. However, when the economic cycle turns and profit margins are reduced, hotels, like any industry, look to outsourcing as a way to reduce fixed expenses such as payroll and benefits. It is at these times that it becomes clear that no matter how beguiling the idea of maintaining a design department, brimming with creative energy seems in theory, it is much more difficult and costly in practice. This difficulty, amplified by an extended economic downturn, may signal a shift in industry trends.

The truth is, money is not the only reason hotels should avoid the siren call of in-house design. By their very nature, big companies become a difficult place to stay on the cutting edge, to remain current and relevant from a design perspective, even those with the budget to hire upper echelon designers. If this sounds overly harsh, let us walk through the process. A large company seeks a top notch designer to lead the charge in creating the next "highly innovative" guest room, the next trend, the "best of the best". They want to brand their image and standardize the aesthetic for guest rooms across all locations. At large companies, an idea, no matter how brilliant, is rarely just implemented. In fact, its implementation comes at the end of a cumbersome, arduous process that begins with design concept, or concept boards. Every designer wants to lead the pack, pouring their all into these design ideas to knock the ball out of the park. Once conceptualized, submitted, and approved by upper management, input is sought from a wide array of sources. Guest feedback, franchisees, executives, owners, managers and designers all weigh in on the concept. And, of course, this is just the first in a series of dominoes about to tip. Once the design is complete and the perfect guest room created, the design idea will ultimately need to be carried through the corridors, public spaces, meeting rooms and lobbies. The project has now grown exponentially.

Once the design concepts and direction get formalized, the designers start to work with vendors to find the exact product, texture, consistency and specifications to create the actual "design" and color scheme which will be used to create this design idea. It is well known that the sampling process alone can take a very long time. After all the individual items are selected and the painstaking nuances are worked out, there are actual product specs to be finalized and written. But, during this extended process the clock has been steadily ticking and time passing.

The next of the many steps toward completion is for mock-up rooms to be created. To accommodate this, vendors have to produce small quantities of selected products to outfit the mock-ups. Time consuming, labor intensive and costly products are developed with the hope that they may be ultimately selected. Contractors are interviewed and hired, rooms are created for viewing.

Next are the focus groups, along with the aforementioned laundry list of people, who all want to see the mock up rooms and provide their feedback on what they like, what works and what they don't like. These rooms are tweaked, and sometimes tweaked again (and again). After a thoroughly exhausting and, as mentioned, time consuming process, a finished scheme is found that everyone likes, or at least can agree upon. There it is, a branding direction, a newly created image for the hotel flag and what it will look like. Marketing materials start to be developed, the branding "story" gets written, PR people start to place photos and articles appear in all the hotel trade journals. The purchasing team starts to "value engineer" the selected products and bring the price points to the appropriate level for a hotel room. Vendors start to get very annoyed that they put their resources forth to create this "next best thing" but they don't get the production run because someone "knocks it off" or reinterprets it and does it cheaper.

The next few hotels that come up for renovation or have Property Improvement Plans (PIP's) to contend with are strongly encouraged to buy these new schemes. Franchisees can begin to get frustrated because the purchasing process has not been fully implemented, keeping minimum requirements high and very costly, and vendors may not have the production ready. These front runners become "test cases" in their own right which can lead to frustration as the products are pricey and have long lead times.

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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.