Benefiting from the Franchise.
Although they spend a remarkable amount of money on their franchise, many franchisees do not use the services of their franchisor effectively. It’s relatively easy to buy a franchise. Learning the ins and outs of the franchise organization, identifying the programs that will be most beneficial to a specific hotel, and identifying the person within the franchise company who can provide a service, takes effort. The franchisees that benefit most from a system maintain good contacts within the franchisor organization and are knowledgeable about each of the various programs offered.
Understanding the reservation system is probably the most complicated task. Each hotel company has a unique system. Even companies that use a similar software platform develop their own approach to reservation generation. It is worth sitting in a room at the reservation center, watching a reservation screen, and listening to the reservationists work. Key items to understand are:
Approach to pricing– some chains sell by discounting and others sell on standardized value (eg. consistent pricing). For instance, if you have a Comfort Inn, your pricing should be high enough to permit discounting to a high proportion of guests. If you have a Hampton Inn, you can expect relatively little discounting, and price accordingly. Chains change their approach to pricing periodically in order to optimize rate. When a reservation system changes its approach to pricing, it becomes harder to guests to find the lowest available rate, at least temporarily. Hilton has been particularly successful at managing the pricing structure used by the reservation system. Days Inn moved from top-down selling (quoting high rates first, and then bargaining down with the customer) to best available rate selling (the customer could count on getting the lowest possible rate on the first try). Later, they moved back to quoting higher rates first. When the chain’s approach to pricing changes, the hotels in the system also have to change, so management has to be aware of pricing strategy and be prepared to react.
Guest loyalty programs– many chains now have specific guest loyalty programs. If your hotel participates in a guest program, it is important to understand the way it functions so you can position your hotel effectively. The most effective guest loyalty programs have been Holiday Inn’s Priority Club and Marriott’s Honored Guest. A hotel can derive less than 10 percent or more than 50 percent of its business through loyalty programs, depending on the brand, and the skill of the operator at managing the program.
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Reservationist screens – the reservationist’s computer monitor is the franchisee’s primary means of explaining a hotel to this sales person. Accordingly, it is important to understand the reservation screens and make sure that the appropriate information is displayed for your hotel. In some systems this can only be changed with difficulty. In others, it can be modified from the hotel’s computer.
Specials – chains offer special promotions such as summer sales. Some may benefit your hotel, others may not. For instance, if the summer promotion is based on a deep discount and your hotel will be full anyway, you may not chose to participate. On the other hand, if your hotel could use the business, you need to understand the special well enough to present your hotel effectively.
One way versus two-way communication– in some reservation systems, the hotel operator designates a certain number of rooms of each type as “available” and reservationists sell from that inventory. Reservation communication is one way, eg. the reservation system sends reservations to the hotel. In this type of system, inventory has to be monitored. In markets like Orlando, where there may be several hotels in a chain competing for the same guest, good managers are on the reservation computer constantly, adjusting inventory and pricing to control the flow of bookings. In chains with two-way communication, the reservation system is on-line with the front desk computer and is constantly updated as to the availability of rooms of each type. In this type of system, a manager who wants to keep rooms available for regular customers and walk-in guests has to monitor activity and hold rooms as needed. Increasingly, two-way reservation systems are tied to property management systems and hotel history data files. At Holiday Inn, for instance, the system advises management about inventory and pricing based on fill patterns from prior years and future bookings. That system is also designed to optimize by length of stay and fill patterns across the week. (For instance, if a hotel fills on Saturday nights, but not Friday, the System will show a preference for Saturday bookings that include a Friday or Sunday).
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Franchisors can market hotels more effectively when they have detailed up-to-the-minute information. In any given system, the hotel may be asked to submit information over the computer, via the internet, over the fax, and by mail. Deciphering the forms, and meeting deadlines for the information, is an unending task. However, if it isn’t done, the franchise system won’t work effectively for the hotel.
As a franchisee, the best surprise is truly no surprise. If you are ever surprised by the existence of a specific marketing program, it will probably be too late to participate. If you are ever surprised by a chain requirement to add amenities or make physical plant changes, it will cause havoc with your capital budget for the year. The way to avoid surprises is to maintain communication with the franchisor, to attend franchise meetings, and to talk to other franchisees in the system. If you handle a franchisor well, you should avoid most surprises.
Organizing and organizations
By its very nature tourism is an activity that requires the coordination of a large number of separate activities – travel, accommodation, catering, financial services and so on. In a developed economy and society we take this for granted: the huge range of goods and services we have available to us not from the genius or extraordinary efforts of individuals, but from the coordinated activities of many different people.
However, it is worth noting that this coordination can come about in a number of ways. Compare, for example, travel agents and tour operators. As far as the holidaymaker is concerned, the ‘package’ that they buy from either may appear identical, but whereas a travel agent may ‘organise’ a holiday for a client by dealing with separate airlines, hotels, car hire firms, and so on – work that the final customers could, and, especially in these days of internet access, increasingly do, take on for themselves, the tour operator organises and offers a complete package to the customer. The tour operator typically ‘bulk buys’ flights, hotel spaces, and so on from providers, and then organises these into attractive retail packages. Some of the larger operators go further still and operate their own hotels or even airlines. More and more of the final product is actually produced ‘in-house’ rather than being bought in from outside and independent suppliers.
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This is essentially a variation on the ‘make/buy’ decision which is as old as business(any business) itself. As soon as people began to trade, a decision had to be made: what things do you do for yourself, and what things do you buy in from the market – or in modern jargon, ‘outsource’? This is not an ‘either-or’ question, but one of degree. No commercial organisation does everything for itself, no matter how self-sufficient it attempts to be. For example, you could run your own generators, to avoid reliance on an intermittent power supply – but then you would need to buy in the oil.
So organising can take place in a number of ways:
■ by trading – buying and selling – through markets;
■ by conscious planning, coordination and control within an organisation.
There are various other ways in which human activity is organised – for example, by laws, traditions, culture, and self-organisation. We shall refer to some of these later, but for now let us concentrate on the distinction between ‘markets’ and ‘organisations’. There are crucial differences between organising through markets and organizing through organisations, and two of these are the ways that people behave, and why.
Here is a simple example: a tourist attraction, such as a theme park, might alternatively hire in contractors to undertake cleaning (outsourcing: coordination through the market) or have cleaners on its own payroll. You may want to stop reading for a moment and reflect upon what the differences would be between these two arrangements, especially for the way in which the managers of the theme park manage the cleaning operation.
When outside contractors are employed, it will rapidly become clear that what is required is a ‘service-level agreement’, setting out in detail what is to be cleaned, and to what degree, and how frequently. In the event of a disagreement, there will probably be some sort of dispute-management procedure, either formal or informal. If this does not work, either side might take recourse to law, and/or they would simply cease to trade with each other – the theme park would hire new contractors, and the original contractors move to new customers. In all this, the theme-park managers would find themselves negotiating with the contractors, rather than simply directing them what to do.
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Contrast this with the position of cleaners directly employed by the theme park, and the managers responsible for them. It is rare to find any contract of employment which would spell out in as much detail as a service-level agreement precisely what is expected from the employee, or the obligations of the employer. Employment contracts are, by their nature, deliberately ‘fuzzy’. At one extreme, employees cannot do what they like, but at the other an employment relationship is not one (and in most countries, by law, cannot be) of voluntary slavery, where the employee undertakes to do anything that the employer requires. Most people find that the nature of their job changes over time without a formal change in their contract of employment, and would also accept that from time to time it is reasonable for their manager to direct them what to do – e.g. stop doing one task and move to another – rather than negotiate with them about it.
Again, consider the ‘motivation’ of people who are contractors, compared with employees. It is often taken for granted that ‘you get what you pay for’. If we buy something, we accept that, in general terms, if we want better quality or quantity, we have to pay more for it. So, we reason, if we are paying people to do a job, then the best way to get better performance is to offer more money – for example a bonus – for successful completion. The prospect of more money is the best way of influencing people’s behaviour.
Now this is very likely to be true when dealing with contractors. Again, both sides will carefully agree what is to be done: the more challenging or arduous the task the higher is likely to be the agreed contract price. And again, both sides will probably want the terms of what is required, and what is to be paid, set out in unambiguous terms. But we have already seen that this is unlikely to be the case with employees, and their ‘fuzzy’ contracts. And look what would happen if a manager tried to ‘incentivise’ better performance from employees by simply offering more money.
If the employee is told simply ‘Do a better job and you’ll get more money’, they may reasonably ask (themselves, if not their manager) ‘What does “better” mean?. If they don’t know, then it is difficult for them to improve. And if they do know, or think they know, and want the money, then they will quite reasonably concentrate on the aspects of the job that they think will be noticed, and therefore rewarded, and ignore the others. Managers may find that what started as an apparently simple idea – to offer a bonus for good performance – starts distorting the way people work. They in turn may have to increase their supervision to correct this.
And who is to judge if the job has been done ‘better’? With a contractor, and a service-level agreement, this should be fairly clear, but an employee will probably depend upon the judgement of a manager. Will the manager be trusted? Furthermore, if I am a contractor, and undertake to do a job on the basis of payment by results, if I can’t deliver due to circumstances beyond my control, I can hardly expect the customer still to pay up – unless that’s written into the contract. But most employees are in just this position – all they can offer is increased effort; they can’t guarantee increased performance. If they fear that they won’t actually be able to deliver – for example because other people in the organisation may let them down – they won’t be incentivised by the bonus.
All this means that effort by employees is likely to be affected by factors other than simply the amount of money on offer. This specific issue is explored in more detail in Chapter 5 on Human Resource Management, but the point here is that people’s behaviour inside organisations is likely to be affected, and different, precisely because they are inside organisations. So managers need to understand some of the key features of what organisations are, how they function, and how they affect the people inside them.
What is an organization?
We have seen that human activity can be organised in many ways, of which formal organisations are only one. So what are the features of organisations – what sets them apart?
■ People
It may seem obvious, but managers need to remember that, first and foremost, organisations comprise people. So much emphasis can be placed on systems and structures that this simple fact can be overlooked. Organisations are made up of people, and managers only achieve their ends by working through other people. Furthermore, these people can in some sense be said to be members of the organisation – whether as managers, workers, shareholders, or whatever. An organisation is more than simply a collection of people, even if they have a common purpose. People visiting a theme park, or staying in a holiday hotel, or flying on a charter air flight share a common purpose, but they are not ‘members’ of the theme park, hotel, or airline. Membership of the organization implies that to some extent at least your behaviour is governed by its rules.
■ Rules
By ‘rules’ we mean all the structures, systems and procedures that govern the way the people within the organisation interact with each other – who does what when, how, and so on.
Sometimes these may be laid down formally, for example in job descriptions and ‘reporting lines’; sometimes they emerge informally. Either way they determine, among other things:
■ the tasks, responsibilities and roles to be undertaken by each member. In all organised human activity, the key to efficient and productive activity is specialisation, rather than everyone trying to do everything for themselves. Sometimes this specialisation emerges in response to ‘market forces’, sometimes as a result of custom and tradition. In an organisation it is planned out among the members – often by way of formal job descriptions.
■ how people communicate with each other – for example, verbally or in writing – or whether everyone can communicate with each other, or must go ‘through channels’.
This may be associated with:
■ patterns of authority – in simple terms, who can give orders to whom – who is whose superior or subordinate. It is related to communication channels as we often refer to ‘reporting lines’. In some, very ‘tall’ organisations there may be many layers of authority, with information having to pass through many levels to go from top to bottom of the organisation (or vice versa) while in other, very ‘flat’ structures one manager may be responsible for many subordinates (there is a large ‘span of control’) and few layers of authority. In a flat organisation there is typically much more lateral communication between people, and managers must delegate more, as it is more difficult to directly supervise the work of many people, rather than few.
The ‘boundaries’ of an organisation may be seen as between the people who are members and those who are non-members. Members are those who accept the ‘rules’, as defined here, and operate within their framework. Members do; non-members don’t. One very practical implication of this distinction for managers is that they should remember that the rules don’t bind non-members. We have already seen that, when(if) dealing with contractors rather than employees, managers will have to negotiate their requirements rather than direct people what to do. Similarly, customers are not bound by the rules of the organisation. They feel they are due what they think they have paid for, and there are few more effective ways of antagonising, and therefore losing, customers than to insist, for example, that they must stand in line, or go to another department, or do anything else that is really for the benefit of the internal workings of the firm rather than the customer.
Acceptance of the ‘rules’ of the organisation is one of the most striking ways in which people’s behaviour is affected by being in an organisation. They do things that can only be explained by their membership. For example, in our private lives many if not most of us would, as responsible adults, resent being told what to do by someone else; in an organisation we take it for granted. So why do we accept this, and behave this way? One reason is that to some extent we share, or at least are prepared to cooperate with, the purpose of the organisation.
■ Purpose
Organisations exist to achieve something. All these rules and structures exist for a purpose, and it is the responsibility of managers to ensure that the efforts of all the members contribute to the achievement of that purpose. The members do not necessarily have to share that purpose, but are prepared to ‘go along with it’ – for example, because they are paid enough, or can satisfy their own objectives through the organisation. A travel company may have objectives of corporate growth, or of becoming a major international supplier of tourism services, or quite simply of making profits. Some of its employees may not share these lofty aims, but are happy to work within the firm because of the pay on offer, or because the job offers opportunities for travel. Remembering that they can only achieve the ends of the company through other people, managers must ensure that the aims of every member of the organisation are satisfied. If people’s own aims are not satisfied by their membership, they will leave; and, as already noted, an organisation without people is meaningless.
So people’s behaviour in organisations is also affected by the extent to which they share the purposes of the organisation, or at least are prepared to cooperate in the achievement of those purposes, and are therefore prepared to compromise their own aims and purposes to achieve it.
■ Continuity
Most organisations, certainly commercial ones, do not exist for a purpose that can be completed in a given time frame – their purpose, and therefore the organisation, is ongoing. Take the most simple and stark of corporate objectives – to make profits. This usually means to make profits continually over an indefinite period ahead. Only a small minority of organisations is set up to pursue and complete a particular venture, and then disbanded. This is also likely to affect the behaviour of organisational members, as they may have an expectation that they will be associated with the organisation for a considerable period ahead – perhaps indefinitely – and therefore adjust their current behavior accordingly. (As a crude example, your attitudes towards your work, your co-workers, your managers (and their ‘authority’) and the organisation itself are likely to be very different if you are employed on a very short-term contract, as compared with a permanent appointment with the prospect of working with the firm for years to come.)
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