Discuss about the Outsourcing Entire Reservation Department.
Over the past decade, outsourcing of the human resources has become a major trend. Outsourcing refers to the practice of contracting another organisation to perform some of organisation functions instead of maintaining an in-house department to perform those functions (Kubr 2002, p. 509). According to Heywood (2001), organisations are motivated by different factors to outsource their functions. For example, organisation A can outsource its functions because of lack of qualified personnel while organisation B can outsource its services to reduce its operational costs. Outsourcing in the hotel industry is increasingly becoming common although the practice is not widespread (Lamminmaki 2007, p. 88). Lamminmaki further argues that the practice is common especially among the hotels and resorts operating in regional areas because of the difficulties they face in attracting competent staff. This paper will provide a literature review on whether a hotel can outsource its entire reservation department.
The hotel industry is quite competitive because of a large number of players operating in the industry. The industry competitiveness calls for the hotels to be more innovative in their operations. Therefore, it is important for the hotels to develop and implement policies that act as a source of competitive advantage. Outsourcing can be used by hotels to gain a competitive advantage. Outsourcing helps a hotel grow while restraining its payroll costs (Espino-Rodriguez & Robaina 2005, p. 703).
According to Hospitality Management (2012), the reservation department is one of the most important departments because it’s the first contact point with customers making reservations. Providing poor services at this point can lead to loss of customers. To objective of the hotel is to sell all the rooms and ensure customer satisfaction. To achieve this objective, the hotel should emphasise on its advantages and ensure competent and qualified personnel in the reservation department. The hotel can either invest in maintaining an in-house reservation department or consider outsourcing the department to an independent firm.
Outsourcing the reservation department will have the following advantages;
Lamminmaki (2011, p. 968) argue that the outsourced firms are professional firms in their areas of operation. As such, these firms invest significant resources to ensure they have competent and qualified personnel as well as the right types of equipment. The outsourced firms better perform the outsourced functions because they are professionals and have more expertise. Therefore, outsourcing the reservation department would improve the quality of services offered to the customers.
According to Chatzoglou and Sarigiannidis (2009, p. 112), outsourced firms are independent contractors and are responsible for their actions. Outsourcing the reservation department functions helps the hotel shift responsibilities to the outsourced firms. Additionally, the outsourced firms can better plan the risk-mitigating actions. Outsourcing helps the hotel concentrate on essential operations without worrying about the reservation department’s risks.
Outsourcing eliminates the need to hire and train staff and also the need to provide space within the company. Thus, outsourcing the reservation department would help save costs associated with the recruitment of staff as well as other costs of maintaining an in-house department. Cost saving is one of the prime advantages of outsourcing (Asefeso 2012, p. 46).
According to Chatzoglou and Sarigiannidis (2009, p. 123) outsourcing provides an opportunity for the organisation to concentrate on its core business rather than concentrating on the supporting operations. When business concentrates on operations, not their expertise, they are likely to implement inappropriate policies leading to loss of customers and reduced profitability. Outsourcing the reservation department would enable the hotel management to concentrate on the core hotel business. Concentrating on core hotel operations could lead to the provision of better services and increased profitability.
The outsourced firms are independent contractors and are bound by contract to offer certain levels of quality and service (Leeman & Reynolds 2012). Leeman and Reynolds (2012) claim that it is unlikely for the outsourced firms to offer poor services or fail to meet customer needs. These firms have specialised equipment and qualified personnel. Therefore, outsourced firms usually offer high-quality services hence increasing customer satisfaction.
According to Leeman and Reynolds (2012) outsourcing a function exposes an organisation to competent and qualified staff as well as specialised equipment. Thus, outsourcing allows for quick service delivery and provision of high-quality services. The outsourced departments are more efficient compared to the in-house organisation departments. Therefore, outsourcing the hotel reservation department increases efficiency in service delivery.
Outsourcing the reservation department would also have some disadvantages. Some of these disadvantages include the following;
Whiteman (2009) argues that the outsourced firms are likely to have more than one client. Therefore, it is likely that the outsourced firm will lack complete focus on the organisation tasks. Thus, outsourcing the reservation department could result in delivery of poor quality services. If so, the hotel could lose its customers, especially, considering the importance of the reservation department because it is the first position of contact with customers.
At the reservation point, the company is likely to acquire confidential customer information. The hotel has a duty to ensure such information is not disclosed to any third party. The breach of this duty could result in increased litigations against the hotel and loss of customer confidence. Outsourcing the reservation department involves a risk of exposing customer’s confidential information.
According to Whiteman (2009), outsourcing could expose an organisation to the provision of poor services unless the contract specifically identifies parameters to measure the quality of services provided. As such, outsourcing the reservation department could lead to the provision of poor services resulting in customer dissatisfaction.
According to Tavana (2014, p. 128) it is likely that the outsourced employee will not be as passionate and knowledgeable about the organisation as regular employees, resulting in negative customer experience. The reservation department is the first point of interaction between the hotel and its customers. A negative customer experience at this point would create a bad image of the hotel to the customer. According to research, a majority of customers who have a negative experience at the first point of interaction are unlikely to visit the hotel in future or even recommend someone to the hotel (Lamminmaki 2007). Therefore, outsourcing the reservation department could lead to loss of customers because of negative customer experience.
Signing the contract to have another firm perform the functions of the entire company department turns the control and management of that function to the outsourced firm (Hunter 2006, p. 58). As such, the outsourced department is under the control and management of the contracted firm. Hunter (2006, p.59) further claim that the outsourced firm is driven by different standards and mission. The mission of the outsourced firm is to make a profit from the services they are offering. The conflicting objectives can lead to the provision of poor quality services. In such a situation the hotel management cannot be able to influence the quality of services because they don’t have control of the outsourced department.
According to Whiteman (2009) the contract between the outsourced firm and the company clearly spell out the services to be offered by the outsourced firm. Therefore, the hotel would be expected to meet the costs of additional services not covered in the contract. Additionally, the hotel will be required to meet additional costs like legal fees for hiring a lawyer to review the contract.
Donada and Nogatchewsky (2009, p. 369) argue that outsourcing has a different meaning to different people. Some people argue that outsourcing result in loss of jobs and provision of poor quality services while other people argue, outsourcing result in delivery of high-quality services. Therefore, outsourcing could result in bad publicity for the hotel.
Chatzoglou and Sarigiannidis (2009, p. 125) argue that efficiency is influenced by factors like the management ability to motivate employees and the level of resources of the outsourced firm. When the entire department is outsourced, there is the risk of the department becoming inefficient. For example, if the outsourced firm is financially unstable, it is likely that the outsourced function will become inefficient over time.
There are various advantages as well as disadvantages of Outsourcing an entire department of an organisation. Therefore, the decision to outsource or not to outsource requires careful evaluation by the management. Prior to outsourcing the entire reservation department the hotel management should conduct a cost-benefit analysis. The outsourcing cost-benefit analysis should consider the following factors;
According to Kremic, Icmeli Tukel and Rom (2006, p. 476), the aim of outsourcing is to reduce the operation expenses and increase profits. The hotel management should thus consider whether outsourcing will result in cost reduction and provision of high-quality services. Tavana (2014, p. 132) outsourcing should not result in the provision of poor quality services despite the cost reduction. Therefore, if outsourcing would result in the provision of poor quality services, then the services should not be outsourced.
The quality of services depends on the level of resources of the outsourced firm (Kremic, et al., 2006, p. 476). For example, if the outsourced firm is financially unstable, it is likely that it will provide poor services. Therefore, the decision to outsource should carefully consider the level of resources of the vendor, especially the human and technology resources. The purpose of outsourcing would be defeated if the human and technology resources cannot successfully hand the operations of the outsourced department.
According to Heywood (2001, p. 89) organisation competitiveness depends on the provision of quality and timely services. The hotel management should enquire about the quality of services provided by the vendor. The management should outsource the entire department only if there is a guarantee that the vendor will provide timely high-quality services.
Outsourcing should be targeted at creating a competitive advantage for the hotel. The outsourced firm should be more of a partner rather than being just a vendor. To ensure a competitive advantage in the market, the vendor should be reliable and willing to maximise resources for the client’s interest (Heywood 2001, p. 90).
Outsourcing results in the management loss of the control over that department. Therefore, it is important for the hotel management to consider the competence of the vendor’s management. If the vendor’s management is incompetent, it is likely that the department will be inefficient (Heywood 2001, p. 90).
According to Kremic, et al., (2006) outsourcing exposes the hotel to the potential danger of disclosure of confidential client information by the outsourced firm. Signing a confidentiality agreement restrict the outsourced firm to disclose any client information and imposes liability on the vendor in the event of disclosure of information. The hotel should only be willing to contract a vendor who is willing to sign the confidentiality agreement.
A hotel can outsource its entire reservation department. However, the hotel management should conduct a cost- benefit analysis to ascertain the costs versus the benefits of outsourcing. Outsourcing the entire reservation department should only be acceptable in circumstances where the benefits are more than the cost. Therefore, the question of whether a hotel can outsource its entire reservation department depends on the outsourcing cost-benefit analysis results.
Conclusion
The hotel industry is quite competitive because of a large number of players in the industry. To successfully compete, hotels need to develop and implement appropriate strategies. One of the strategies adopted by hotels is outsourcing some of its functions. Outsourcing enables the hotel management to concentrate on core activities. However, a careful cost-benefit analysis will help the management make an informed decision. Therefore, before making the decision to outsource the entire reservation department, the management need to evaluate the advantages and disadvantages as well as other factors that would influence their decision to outsource or not to outsource.
Reference List
Asefeso, A. (2012). Outsourcing: the competitive advantage. Lexington, KY, [publisher not identified].
Chatzoglou, P.D. & Sarigiannidis, L. (2009). Business outsourcing and organisational performance: The case of the Greek hotel industry. International Journal of Services Technology and Management, 11(2), pp.105-127.
Donada, C. & Nogatchewsky, G. (2009). Emotions in outsourcing. An empirical study in the hotel industry. International Journal of Hospitality Management, 28(3), pp.367-373.
Espino-Rodriguez, T.F. & Robaina, V.P. (2005). The management perception of the strategic outsourcing of services: An empirical examination in the hotel sector. The Service Industries Journal, 25(5), pp.689-708.
Heywood, J. (2001). Outsourcing dilemma: the search for competitiveness, the. FT Press.
Hospitality Management. (2012). Hotel departments and their functions in room division.
Hunter, I. (2006). HR business partners: emerging service delivery models for the HR function. Aldershot, Eng, Gower Pub.
Kremic, T., Icmeli Tukel, O. & Rom, W.O. (2006). Outsourcing decision support: a survey of benefits, risks, and decision factors. Supply Chain Management: an international journal, 11(6), pp.467-482.
Kubr, M. (2002). Management consulting: a guide to the profession. Geneva, International Labour Office.
Lamminmaki, D. (2007). Outsourcing in Australian hotels: a transaction cost economics perspective. Journal of Hospitality & Tourism Research, 31(1), pp.73-110.
Lamminmaki, D. (2011). An examination of factors motivating hotel outsourcing. International Journal of Hospitality Management, 30(4), pp.963-973.
Leeman, D. & Reynolds, D. (2012). Trust and outsourcing: Do perceptions of trust influence the retention of outsourcing providers in the hospitality industry?. International Journal of Hospitality Management, 31(2), pp.601-608.
Tavana, M. (2014). Developing business strategies and identifying risk factors in modern organizations.
Whiteman, H. (2009). Outsourcing: a study of the advantages and disadvantages of outsourcing.
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