Outsourcing in Hospitality Industry-Free-Samples for Students

Question: Write a report on Advantages and Disadvantages of Outsourcing in Hospitality Industry. Answer: Introduction Outsourcing can be defined as the practice in which the company performs tasks or manufactures products for another organization. Such business practice is usually applied in an organization to reduce cost or improve efficiency. The hospitality industry requires expertise in different disciplines. The outsourcing strategy provides an opportunity to carry on tasks more efficiently and effectively. The organizations may choose outsourcing strategy for lower operations and labour costs. The hotels usually outsource revenue collection, IT and other such services that are back office. However, in the new models adopted by hotels, they are also outsourcing catering to the external suppliers. This strategy places goodwill in the hands of third parties. It is crucial to monitor the extent of nature of business risk while outsourcing as it helps improve the company focus. They have technology and staff who are hundred percent dedicated to one type of work only and do that day in and day out. Outsourcing helps share the risks with a partner company. Outsourcing allows organizations to focus on their core business and can create a competitive advantage by reducing operational costs. One of the significant disadvantages of the hospitality industry is that the organization loses control. Usually, when the organizations have in-house services, there is full control over the quality of services. The guests visit the hotel to enjoy the experience for which the staffs need to be well-trained. Due to outsourcing, the hotels have absolutely no control over the employees. Advantages of Outsourcing in Hospitality Industry Outsourcing is the process or exercise of getting a specific done from outside the company. It is usually done to reduce fixed costs, time being invested and other resources of the company and to let experts take care of the task (Dolgui Proth, 2013). Hospitality itself comprises of basic sectors such as tourism, cruise, hotels, malls etc. Further, in each of the sectors or businesses there are variety of services which are provided to their customers. Being hospitality, the companies have to make sure that each service provided by them is of the highest possible quality which shall match with the standards set by each company to be delivered to their customers. As it is, there are a variety of fixed costs that every business in hospitality business has to incur such as capital expenses of setting the business which is usually very high, the rent to be paid, the salaries of the staff, and the various specialists they need to hire for specialized jobs such as cooking, cleaning, secur ity, management, etc (Espino-Rodrguez Lai, 2014). Also it is very difficult for a business to have all the experts on its board of management. Thus it becomes essential for the business in hospitality industry to outsource some of the jobs which require high level of specialization and may not be of recurring nature (Schniederjans, Schniederjans Schniederjans, 2015). By outsourcing, hotels and other hospitality businesses can save a huge amount. By outsourcing a business shifts his job to another. Thus any investment relating to that job shall be done by the company the work has been outsourced to. This saves the fixed costs, operational cost and also salaries to be paid to get that job done. All the expenses are born by the other company. The cost which has been saved at one particular service can be invested in other crucial areas as well. For instance, a hotel wants to start a laundry facility in its premises, it can easily outsource this job to some company specializing in this job. The laundry company would already have the set up installed to carry out this job and thus the only cost the hotel would have to bare is of getting the job done (Hiamey Amenumey, 2013). Outsourcing would also help maintain the competitive advantage over the competitors. This is also true for small businesses that do not have much budget and in-house skill and technology to provide latest services. By outsourcing tasks which the company cannot invest on, the company can still expand its operations and facilities by paying regular prices. The money saved here can then go on further expansion. This will also ensure that the company is able to maintain a competitive edge over others in the same level of business (Lahiri, 2015). For instance, many small hotels outsource their kitchen services to caterers specializing in this job. This gives the caterer more business and the hotel can offer its customers good food and beverages. By outsourcing to specialty businesses, the company can deliver better quality of products and services to its customers. These businesses specialize in the work or job they offer to do for the companies. They have technology and staff who are hundred percent dedicated to one type of work only and do that day in and day out. Thus it gives them specialization in a particular task. It is thus beneficial for the companies to get their job done by such expert and excel in the quality of services provided to their customers. Many hotels have spas run by specialist in their own premises. These spas provide world class facilities and services to the customers and the hotel gets the appreciation for the service provided by the company to which the work is being outsourced to (Leeman Reynolds, 2012). Outsourcing can also help increase the overall efficiency of the company. It is difficult for any company to do all the things by itself. When a company outsources, it reduces some of its work load and transfers it to some other company. With the reduced workload and existing work force, the company can do the limited work with greater efficiency. When the responsibility is well distributed and everybody is doing what they do better, the chances of getting better results are increased (Sukru Cetinkaya, Ergul Uysal, 2014). Every hospitality business requires a large number of mid-management and floor level employees. Thus, the salary being given to them is also huge. There are certain jobs for which the staff requirement is temporary or of occasional nature. For instance, during weddings and high-end conferences the hotel would require more security as well as service staff. Outsourcing the same would help the hotel with reducing cost and effort of hiring such temporary staff. Also it would be spared from keeping records, verifying the staffs identity and other such functions. The outsourcing firm would provide the hotel with trained and verified staff who would be working on the firms payroll (Taplin, 2012). When the hotel or cruise or any other such hospitality business has outsourced its functions and services, it get easier for them to plan expansion. They can start new projects easily with the help of outsourcing firms they are already in business with. It would help their business to branch out as well as to open new departments and services in the same premises. Like, outsourcing a particular cuisine, a hotel can provide specialized culinary experience to its customers and gain goodwill and publicity for the same (Yang, Wacker Sheu, 2012). It is also true that each organization has limited amount of funds and also limited managerial skills and time. So it is always essential to concentrate primarily on the core function of the business. Usually, getting that right takes up most of the time and efforts of the managers. By outsourcing, the management can put in their hundred percent efforts in taking care and improving the core function of the business (Boella Goss-Turner, 2013). Also in case, the service being outsourced to one of the outsourcing firms is not satisfactory, it is easy to terminate the contract with the outsourcing firm as per the terms set while signing one. The service can then be transferred to another outsourcing firm without much losses and difficulties (Butler Callahan, 2014). Further, when an organization invests in something, it also takes up certain risk involved with that investment. While certain risks are inevitable, outsourcing helps the business reduce their amount of risks. Nothing in the world is permanent. A business which is doing very good today may face certain setbacks tomorrow. If the business is carrying out all the services on its own, then it has invested a lot of money in form of fixed costs, operational costs, and the cost of maintenance and also on employee trainings. If due to some reason, a particular service or the entire business needs to be brought down, the losses faced by the organization would be very huge. However, if the services are outsourced to another firm, the organization can very easily withdraw the service contract after a period of time. Also if the entire company is to be brought down, the losses incurred would be lesser (Carnahan Somaya, 2013). Disadvantages of Outsourcing in Hospitality Industry In hospitality industry, guests enjoy the services provided by the hoteliers and other similar organizations. This is what differentiates the business from its competitors in hospitality industry. These services are created and delivered at the same time and place. Thus it becomes very difficult to separate the service provider from their services. In such scenario, it can become difficult for the management to let go the control on quality of the services to someone else. The companies need to be very cautious about the outsourcing company they select. The employees of these companies directly communicate and deal with the customers. The management would have no control over the outsourced employees (Zhang, Joglekar Verma, 2012). Every hospitality firm has their unique way of operating which differentiates them from their competitors. These are usually evolved as the result of better competitive strategy developed by the firm. The outsourcing company on the other hand may have different strategy which might be difficult to align with the firms strategy. To overcome this disadvantage, good communication between the two companies is very essential. With effective and continuous communication flow, the companies can keep track of their improved alignment. Miscommunication can prove to be a major setback to both of the firms. For instance, if a hotel has its values and vision based on that of the country it has started in, its operations would also be influenced by the same. If this hotel outsource to a company which belongs to a country having opposite values and follows the same, it might lead to clashes in the way the two companies operate. In such a case proper communication may help in bringing the two on sa me platform and align each others way of working in order to work together effectively (Gustavo, 2013). When a company outsources its important management functions to some other company, there is always certain degree of scepticism with regard to its security. While outsourcing important functions such as recruitment or hotel security, the company needs to provide the outsourcing company with certain data of the company so that the function can be performed effectively. In such cases, if the outsourcing firm indulges in fraudulent activities and leak the confidential data to the rival companies, it can prove to be very harmful for the company. For instance, if a shopping complex outsources the accounting function to some other firm and that firm leaks the important information regarding pricing, leasing policies etc to the competitor, the competitor would adopt better policies and would succeed in attracting all successful brands which would improve its business (Tjader et al, 2014). Usually while outsourcing, the companies keep in mind the quality of the service that would be delivered to the customers by the outsourcing company. However, there is a risk of degradation of quality which would be out of the hospitality companys control. If the service level of the outsourcing firm does not match that of the hospitality firm at any given point, it would lead to loss of business and might lead to permanent damage to the goodwill of the firm with respect to the particular service. in such industries, word of mouth is a great factor influencing the business of the firm. One bad experience can lead to loss of many existing and potential customers. Similarly another issue with outsourcing is making sure the service is delivered on time, to the customer and to the organization both. In case the outsourcing firm does not value timely and accurate deliveries and is very casual in its approach towards the job, it becomes problematic situation for the company to ensure that the service quality is maintained at all the times. For instance, if a cruise outsources its buying function to some other company, and the products are not delivered on time, it can lead to delay in starting the sail and the guests would become irritated waiting because of such an unprofessional reason and attitude. However, the cruise would get the bad name and not the outsourcing firm (Kandampully, Mok Sparks, 2013). One cannot always trust the people one has not employed. When a company employees people, they undergo certain identity verifications. These people are also trained by the company and thus can be trusted more than a new joiner or some other person. When a function is outsourced to some other company, usually the staff of that company shall work in the hospitality company. This sometimes leads to threat of security. It is difficult to trust people especially in case of luxury setups, where each merchandise and guest holds a huge value. For instance, A grand wedding is being organized at a cruise and the waiters have been outsourced from some other company. In such event, if any waiter indulges in theft then the companys name would be at stake. An outsourcing company is usually dealing with at least a few more companies. If the outsourcing company fails to provide a dedicated team of management and workers to the hospitality company, it can lead to generalization and confusion amongst the employees. Lack of complete focus towards the hospitality company would lead to lower standards of service being delivered and cause losses to the company. A change in outsourcing firm would lead to a change in the hospitality firm as well. If there is any kind of change, especially at the managerial level in the outsourcing firm, the outsourced company might have very difficult time managing with those changes. With the change in companys management, the rule and regulations of the company can also change. There can also be a situation of conflict between the management of the two firms. This might lead to dissolving the existing contract between the two. In such case, finding new outsourcing firm or finding people in the company to perform that function might lead to increase in cost and consume lots of time (Belcourt, 2013). With the change in time, the market trends also change. This shall lead to change in demand patterns of the customers as well. Changes are inevitable in any industry. Hospitality industry is also changing rapidly. Thus if a company has signed a contract with outsourcing company then the contract needs to have certain level of flexibility to accommodate certain changes according to the market requirement. Rigid contracts can prove to be a bad decision for the outsourced firm. To overcome this, the outsourced firm needs to take care of this aspect of contract before signing it. In certain cases, there can also be some hidden costs in the contract. Usually, outsourcing is a cost effective exercise. But in such case, it can prove to be a costly affair for the company. In worst possible scenarios, the outsourcing company can go out of business. This can happen due to variety of reasons. The competition has increased many folds in recent times. The company can go bankrupt due to fraudulent activities or insufficient business. The hospitality company might have to suffer loss because of such bankruptcy of outsourcing firm. In such case, the hospitality firm would have to look for a new company which would again lead to the increase in costs and loss of clientele for the time it does not provide the particular service. Conclusion Conclusively, the hotels are implementing outsourcing strategies. The outsourcing strategy provides an opportunity to carry on tasks more efficiently and effectively. Outsourcing helps share the risks with a partner company. Outsourcing allows organizations to focus on their core business and can create a competitive advantage by reducing operational costs. Hospitality itself comprises of basic sectors such as tourism, cruise, hotels, malls etc. As it is, there are a variety of fixed costs that every business in hospitality business has to incur such as capital expenses of setting the business which is usually very high, the rent to be paid, the salaries of the staff, and the various specialists they need to hire for specialized jobs such as cooking, cleaning, security, management, etc. All the expenses are born by the other company. The cost which has been saved at one particular service can be invested in other crucial areas as well. For instance, a hotel wants to start a laundry f acility in its premises, it can easily outsource this job to some company specializing in this job. 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