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ItemA“4-C” Strategy for Yield ManagementWithiam, Glenn (2001-01-01)Yield management is the umbrella term for a set of strategies that enable capacity-constrained service industries to realize optimum revenue from operations. The core concept of yield management is to provide the right service to the right customer at the right time for the right price. That concept involves careful definition of service, customer, time, and price. The service can be defined according to the dimensions of the service, how and when it is delivered, and how, when, and whether it is reserved. Timing involves both the timing of the service delivery and the timing of when the customer makes known the desire for the service, whether by reservation or by walking in to the business. Price can be set according to the timing of the service, the timing of the reservation, the type of service, or according to other rules that seem appropriate. Finally, the customer can be defined according to demand characteristics relating to the service, the timing, and the price. The ideal outcome of a revenue management strategy is to match customers' time and service characteristics to their willingness to pay-ensuring that the customer acquires the desired service at the desired time at an acceptable price, while the organization gains the maximum revenue possible given the customer and business characteristics. The strategic levers of yield management can be summarized as four Cs: namely, calendar, clock, capacity, and cost. They are bound together by a fifth C: the customer. The strategic levers of yield management are geared to matching service timing and pricing to customers' willingness to pay for service in relation to its timing. Based on customers' demand levels and characteristics, management can shift the demand of those customers who are relatively price sensitive but time insensitive to off-peak times. Shifting that demand clears prime times for customers who are relatively time sensitive but price insensitive. ItemWord-of-Mouth Communication in the Hospitality IndustryLindberg-Repo, Kirsti (2001-01-02)This article presents the results of an exploratory study in the hospitality industry that aimed to develop a new framework for understanding post-purchase word-of-mouth in the relationship context. New insights into word-of-mouth communication were also attempted by applying the concept of post-purchase cognitive dissonance to this framework. The empirical focus of the research was on high-involvement hospitality service processes, because purchase of these services are influenced by word-of-mouth communication and cognitive dissonance. The dual objectives of this study were developing a new framework for studying word-of-mouth communication of loyal customers, and to find out whether post-purchase cognitive dissonance is reflected in the word-of-mouth communication once the relationship with the service provider is established. ItemStrengthening the Purchaser-Supplier PartnershipBrownell, Judi; Reynolds, Dennis (2002-01-01)A survey of 73 food-service purchasing agents, representing several segments of the food-service industry, was jointly conducted by The Center for Hospitality Research and Richmond Events. The study found that trust and communication are key elements in developing a strong partnership between purchasers and suppliers. Partnerships have come to be viewed as a competitive advantage for food and beverage purchasers who are looking for long-term economic success. The food-service purchasers agreed that the most essential characteristic for establishing a strong relationship was trust. Trusted suppliers were described as communicating effectively, listening well, and demonstrating a willingness to work collaboratively to anticipate and solve problems. Also important to purchasers is the supplier's willingness to help solve the purchaser's problems in a timely and proactive manner. Communication is another important factor. Suppliers who communicate clearly and directly, and who listen well, are judged to be more effective than their peers. One intriguing finding is that personal connections with the supplier's representative remains an important element of the purchasersupplier relationship despite the increasing use of electronic communications of all kinds. Due to the importance of these personal relationships, turnover in supplier representatives continues to be one of the most troublesome challenges that purchasers face in cementing partnerships. ItemThe Influence of Gasoline-price Fluctuations on U.S. Lodging Demand: A Study of Branded Hotels from 1988 through 2000Canina, Linda Ph.D; Walsh, Kate; Enz, Cathy A. (2002-01-02)A 13-year analysis of the relationship between gasoline prices and lodging demand found that a 1-percent increase in gasoline prices results in a drop of rooms demand of 1.74 percent. The study, which is based on brand-name hotels in the United States, was done at The Center for Hospitality Research. The researchers examined monthly room-night data from 1988 through 2000 from the Smith Travel Research database. The researchers also factored gross domestic product into their analysis and included a trend factor as an additional control. All room rates were adjusted to year-2000 dollars using the consumer price index (CPI). Examining the effects of gasoline price increases on various lodging segments, the researchers determined that the effects of rising gasoline prices fall most heavily on midscale and economy hotels, with a lesser effect on upscale properties. For example, a 1-percent increase in gas prices would reduce annual economy-hotel demand by 2.89 percent. Midscale properties with F&B would see a demand reduction of 4.12 percent and limited-service midscale properties would have a reduction of 2.89 percent with every 1-percent increase in gasoline prices. The combined effects of hotel location and market segment clarify the effect of gasoline-price increases on hotels operating in various segments in different locations. The effects of gasoline-price changes are magnified in hotels located along highway that is, those that depend chiefly on automobile access. The most gasoline-price-sensitive group comprises midscale and economy hotels located in highway and suburban locations. The following demonstrates that effect. A 1-percent increase in gasoline prices reduces demand for full-service midscale urban hotels by a little over 2 percent, but for highway properties in the same segment, the loss is nearly 4 percent. Ironically, gasoline-price increases are associated with an increase in demand for resorts in mid- to upscale segments, but resorts in the economy segment see a reduction in demand. ItemDeveloping the Full Picture on Hotel Industry AveragesEnz, Cathy A. Ph.D; Canina, Linda; Walsh, Kate (2002-01-03)Hotel operators and observers often employ industry-wide averages as key points of comparison and analysis for room rates, occupancy, and revenues. The use of simple averages, however, can be misleading if one does not take into account the possibility that a mean will be pulled in one direction or another by extreme values. This analysis of three industry averages shows that those averages are, indeed, subject to distortion, or skew. The analysis, which examines figures for virtually all brand-name hotels in the United States, determined that the means for average daily rate (ADR) and revenue per available room (RevPAR) are skewed in a positive direction by hotels with extremely high rates. On the other hand, occupancy is skewed in a negative direction by a group of hotels with inordinately low occupancy levels. A more complete picture of the industry’s ADR, RevPAR, and occupancy is gained by examining two other measures: the median, which is a measure of the data’s middle value, and the mode, which states the most common data point. By comparing the mean with the median and the mode, one can determine the extent to which the mean overstates the industry’s ADR and RevPAR and understates the typical occupancy. Specifically, 61 percent of U.S. hotels recorded a RevPAR below the overall mean and 63 percent saw an ADR below the mean, but only 48 percent reported occupancy below the mean. Many of the extreme values are found in the top-25 markets, which have hotels with inordinately high ADRs. Analysis of those markets shows that, once again, the overall statistics are distorted by a relatively small set of hotels with exceptional ADRs and occupancies. However, each of the top markets shows a distinctive rate and occupancy pattern. The pattern of skewed operating statistics carries over into individual lodging segments. The greatest distortions arise in the luxury and upscale segments, while economy and budget hotels record more consistent (normally distributed) statistics. Finally, the analysis shows that although the events of September 11, 2001, created much turmoil for the industry, the hotel business had already cooled substantially from its record pace of a year earlier. In conclusion, managers must be careful in applying overall industry statistics to their own situation and should take into account the factors that distort operating statistics. ItemThe Safety and Security of U.S. Hotels: A Post-September-11 ReportEnz, Cathy A.; Taylor, Masako S. (2002-01-04)An inventory of the safety and security features of 2,123 U.S. hotels found an uneven distribution of these key amenities in various hotel types, with differences relating to such factors as hotel size, age, price segment, hotel type and location. Although safety features are essentially a subset of security features, the two can be distinguished from each other. Safety considerations involve protecting people, while security factors embrace protecting the hotel property and guests’ possessions, in addition to ensuring employees and guests’ personal safety. Safety equipment includes items such as sprinklers and smoke detectors, while security features include electronic locks and security cameras. By assigning weights to the two sets of items, the authors created two indexes, one for safety equipment and one for security equipment. The higher the hotel’s score on each index, the greater the level of its safety and security equipment. Analyzing the hotels’ scores on those indexes across several different categories, the authors found considerable diversity in safety and security index scores for various types of hotel. About one-third of all hotels scored relatively high on both scales (85 or higher out of 100), but 16 percent scored 25 or less on the security scale. Luxury and upscale hotels recorded the highest scores for safety and security, while economy and midprice full-service hotels scored lower than most segments on the safety scale-even though a large proportion have sprinklers. The age of the property has a strong influence on its safety and security scores. In general, the newer the hotel, the higher its safety and security scores. This is because electronic locks, sprinklers, and interior corridors are relatively less common in old hotels (over 29 years) than in hotels built in the last decade. The exception to that rule occurs in luxury hotels, which are renovated frequently regardless of their age. A hotel’s location type has considerable influence. Airport hotels earned the highest safety and security scores (because they tended to have a full panoply of safety and security devices), while resorts were one of the lowest scoring sectors (chiefly because so many of them lack sprinklers and electronic door locks). While hotels’ safety and security indexes differed only slightly by geographic region, one area that did record relatively low security (but not safety) scores is New England. This may be a function of the many small inns and B&Bs in this region, properties that typically score low on security equipment. The survey turned up marked differences in the safety and security indexes by property type. All-suite properties, conference and convention hotels, and standard full-service hotels tended to score high on the indexes. On the other hand, motels as a group had the lowest safety and security scores, and condos and (as mentioned) B&Bs also scored low. A parallel finding is that large hotels generally scored higher than small hotels on both indexes. ItemMulti-unit Restaurant-productivity Assessment: A Test of Data-envelopment AnalysisReynolds, Dennis; Thompson, Gary M. (2002-01-05)This report describes a three-step process for performing a data envelopment analysis (DEA) to compare restaurants’ efficiency and to examine their best practices. To start with, prospective efficiency factors must be analyzed to ensure that they are relevant. Secondly, to put restaurants on an equal footing the first DEA should consider only managerially uncontrollable (nondiscretionary) factors as inputs. With uncontrollable factors accounted for, managerially controllable factors can then be assessed in terms of their effect on productivity. Best practices can be isolated and assessed in this manner. To illustrate this three-step approach, data from 60 full-service restaurants are analyzed. From a large number of prospective input factors, the analysis considers a short list of uncontrollable inputs namely, hourly server wage, number of restaurant seats, and a coding variable representing whether the restaurant is a stand-alone facility. The output variables for this analysis were daily sales and tip percentage. Just over 20 percent of the restaurants operated with maximum efficiency, with the chain’s average efficiency hitting 82 percent-good, but leaving room for improvement. However, the two discretionary factors that were proposed as differentiating the restaurants’ efficiency-server hours and number of servers-proved not to be significant factors, inviting further analysis of the efficiency effects of additional discretionary factors. ItemA Contemporary Model for Human ResourcesTracey, J. Bruce; Nathan, Artur (2002-01-07)The human-resources model used by many hospitality firms centralizes HR functions in the human-resources department. One consequence of such centralization is that inefficiencies arise because HR decisions are being made by distant third parties who may not be familiar with the specifics of each situation. Rather than centralize HR-related decisions, the most effective model of a human-resources function is to support line managers in their own execution of personnel functions. The model of HR department-asconsultant puts decision making in its most effective location-with the manager on the job. The HR function then becomes one of supporting the managers by providing training and information. The following are examples of how this model works in various HR functions. ItemHow to Compare Apples to Oranges Balancing Internal Candidates’ Job-performance Data with External Candidates’ Selection-test ResultsSturman, Michael C.; Cheramie, Robin A.; Cashen, Luke H. (2002-01-16)It has been widely accepted that past performance is a good predictor of future performance. The exact strength of that relationship, however, has been unclear. Knowing the predictive power of past performance on future performance is particularly important for employers who make hiring decisions based in part on internal candidates’ performance record. Generally, some of the internal candidates’ performance would be measured at different points of time (e.g., 6 months, 12 months, and 24 months ago). Others under consideration will be external candidates, whose employment information is derived from selection devices such as structured interviews and intelligence tests. This paper uses a meta-analysis to examine 20 previously published studies on the stability of job performance over time. It provides an estimate of the relationship between existing performance measures and future performance, and models the nature of this relationship as a function of the elapsed time between measures. The findings show conclusively that, in general, past performance is, indeed, a good predictor of future performance for a variety of job types (i.e., exempt, nonexempt, and those that are evaluated subjectively). Using a hypothetical selection scenario, this report also demonstrates how that information can be used to compare multiple internal and external candidates. ItemDedicated or Combinable? A Simulation to Determine Optimal Restaurant Table ConfigurationThompson, Gary M. (2003-01-01)Using a computer simulation, one can determine what the optimum table arrangement would be for restaurants of various sizes that accept walk-in customers only and take no reservations. At issue is whether the restaurateur can gain more revenue when its tables are dedicated to seating parties of specific sizes (for example, parties of one and two people would be served at 2-tops, while parties of one to four people would be served at 4-tops) or whether the restaurant should use tables that can be combined as needed according to party size. The simulation predicted that combinable tables would prove most useful in a small restaurant with a small average party size. Combining tables in that situation increased revenue per available seat hour by about 2 percent compared to having only dedicated tables. In a large restaurant or any restaurant with a large average party size, the simulation found that dedicated tables were superior to combinable tables. A loss in productivity occurs when some number of tables are held out of service until adjacent tables become available (so that the tables can be combined to seat a large party). The simulation found that the most efficient approach is for a restaurant’s table-size mix to match its customer party size mix, since doing so increases the restaurant’s effective customer-service capacity. However, that customer mix cannot always be known before a restaurant is constructed, and that mix might change during different dayparts. Moreover, the simulation makes certain assumptions that may need further examination, and it does not take into account such aesthetic factors as customers’ reactions to a particular restaurant layout. ItemMega Tips: Scientifically Tested Techniques to Increase Your TipsLynn, Michael (2003-01-01)This booklet for servers provides instruction in the psychology of tipping as well as specific techniques that can be used to earn larger tips. All the suggested techniques have been scientifically tested and the evidence of their effectiveness is described along with the techniques. Using even a few of these techniques should increase servers' tips by 10 to 30%. Managers are free to download the file, print out the manual, make hard copies of it, and either post it on employee bulletin boards or distribute copies directly to their servers. Managers who distribute the manual to their servers should benefit from: Increased sales Greater Customer Satisfaction Lower labor costs due to reduced server turnover ItemKey Issues of Concern for Food-service ManagersEnz, Cathy A. Ph.D (2003-01-02)In a time of economic stagnation and international turbulence, the United States food-service industry finds itself struggling with long-term problems that can only be magnified by the current environment. While it would be an overstatement to say that the industry is in crisis, such issues as dealing with government regulations and finding and keeping skilled employees seem critical after three years without economic growth. As explained in this report, the human resources challenge seems particularly thorny. ItemLodging Demand for Urban Hotels in Major Metropolitan MarketsCanina, Linda; Carvell, Steve (2003-01-03)Hotel demand in large urban markets does respond to changes in income, but that demand is relatively inelastic, according to an analysis of 22 top metropolitan areas in the United States. The analysis, made possible through Smith Travel Research, examined room-night demand for 480 individual hotels from 1989 through 2000 and compared that demand to a set of economic measures, including gross domestic product (GDP) and the consumer- confidence index (CCI). Rather than examine aggregate demand against GDP, for instance, the study took the unusual approach of examining the effects of income on each hotel’s demand and then aggregated the individual results. The analysis found that every 1-percent increase in GDP was associated with a .44-percent increase in demand at the urban hotels in the 22 large markets showing that hotel rooms demand is relatively income inelastic. The study further examined income effects using a novel approach-by separating GDP into personal income and business income. This additional analysis confirmed the income inelasticity of hotel demand but also found that personal income changes have twice as great an effect on hotel demand than do changes in business income. Furthermore, the combined elasticity coefficients for personal income and business income approximate the coefficient for GDP. The analysis of the effect of consumer confidence provided the first known connection between consumers future expectations for income. While the effect is relatively small, it is significant with a .03-percent change in hotel demand for every 1-point change in the CCI. The study also examined price-related elasticity, examining changes in demand both when a hotel changes its own price (ADR) and the substitution effect that occurs competitors prices change (market ADR, or MADR). Separating the study sample according to STR’s market segments also yielded further insights about the income elasticity of demand for different hotel price points. ItemChanges in U.S Hotel Safety and Security Staffing and Procedures during 2001 and 2002Enz, Cathy A. Ph.D (2003-01-04)Surveys of hotel general managers conducted in 2001 and in 2002 found some but not many hotels making changes in their safety and security arrangements. When asked to respond on a five-point scale whether they were doing nothing (1) or much (5) managers generally answered in the middle, indicating that they were making some changes, either by adding security staff or updating security policies. On balance, the hotels made more changes in 2002 than in 2001. When the sample was broken down into segments, the study found that extended-stay hotels reported the greatest change in safety and security procedures, while luxury hotels were most likely to add security staff, followed by extended-stay properties. Examining the hotels by their geographic location revealed little differences in the plans to add security employees, but certain areas stood out with regard to making changes in safety and security procedures. Hotels in the west-south-central region (including Oklahoma and Texas) were most likely to make procedural changes, followed by those in the populous middle-Atlantic region (New Jersey and New York) and the east-north-central region (Illinois and Michigan). One factor that is undoubtedly influencing the findings is the probability that many hotels already had effective safety and security systems in place before the September 11 attacks. ItemEvolution in Electronic Distribution: Effects on Hotels and IntermediariesCarroll, Bill Ph.D; Siguaw, Judy (2003-01-05)With the migration of hotel–room distribution to the internet, a host of players old and new are vying to gain (or retain) control of distribution channels. In addition to the hotels and chains themselves, the operations that distribute hotel rooms include global distribution systems (GDSs), distribution service providers (DSPs), third-party websites (e.g., Expedia, priceline.com), and traditional travel agencies. Many of these channels use price as a principal parameter. Hence, a strategic problem for hotels is to avoid having price be customers’ main (or only) consideration for a room booking. One chief way to offset the trend toward commoditization is to provide customers with considerable information to distinguish properties based on their provision of services. While hoteliers seek to drive bookings to their own proprietary websites, the third-party sites (notably, Expedia) have created strategic approaches to encourage hoteliers to distribute rooms on their sites. As a practical matter, hoteliers almost always use some kind of discounted distribution to clear their inventory of unsold rooms. To gain hotel-room listings, some intermediaries, such as travel agents and GDSs, have developed a value-added strategy of providing additional services to their customers and packaging hotel rooms as part of travel packages. One reason that travel agencies have become so interested in distributing hotel rooms is the demise of airline commissions. All intermediaries are attempting to provide services or incentives to encourage customers to book through their channel. One competitive advantage that third-party intermediaries can provide is to shift market share toward a particular hotel or chain. ItemUnderstanding Switchers and Stayers in the Lodging IndustrySkogland, Iselin; Siguaw, Judy A. (2004-01-01)Service companies worldwide spend billions every year on customer-loyalty programs and other preferred-guest programs aimed at getting their guests to continue their patronage, although it’s clear that many customers defect to competitors. One way to improve customer retention is to analyze guests’ behavior according to four distinct guest segments, which are based on their staying or switching behavior. The four groups are satisfied switchers, dissatisfied stayers, satisfied stayers, and dissatisfied switchers. Two groups, satisfied stayers and dissatisfied switchers, generally behave as one might expect—either staying or defecting based on their level of satisfaction. The other two groups, satisfied switchers and dissatisfied stayers, do not conform to expectations. Most confounding are satisfied switchers, who report being satisfied but then choose alternative hotels, rather than routinely choosing the hotel with which they have expressed high levels of satisfaction. Thus, although marketers have long advanced the presence of guest satisfaction as instrumental in ensuring repeat business, satisfaction does not appear to drive repeat purchases for all consumers, as previously had been assumed. Also intriguing, dissatisfied stayers are unwilling or unable to exert the effort to identify and use alternative hotels, even though they are unhappy with the elements of the hotel at which they stay. Looking at demographic differences, older guests and women selected the hotel for familiarity and self-image needs. Older guests were more likely to be satisfied stayers, while younger respondents were more inclined to be satisfied switchers. Hence, while the respondents in this study reported equivalent levels of satisfaction with the hotel regardless of age, they demonstrated different switching behavior. Respondents’ educational level did not affect satisfaction or loyalty, but purpose of travel differentiated the respondents. Business travelers were the least satisfied, least loyal, and least involved of the guest segments. Additionally, business travelers were more likely to be dissatisfied switchers than other types of travelers. Hotel managers can use this information to better define those groups in which they want to develop strategic investments and from which they are most likely to obtain the greatest long-term value. The findings suggest that hotel companies should reexamine the target markets for their customer-retention programs to aim at customers groups that are most likely to respond to those programs. ItemRestaurant Revenue ManagementKimes, Sheryl E. (2004-02-01)Research in revenue management has traditionally addressed the theoretical and practical strategic problems facing airlines and hotels, among other industries, but it has given little consideration to the restaurant industry. The restaurant business is similar enough to hotel and airline operations that restaurants should be able to apply revenue-management-type practices in a strategic fashion, but the applications have so far been mostly tactical. A broad theory of revenue management would permit restaurant operators to gain the benefits of strategic revenue management that they currently lack. ItemCHR Reports Compendium 2004Center for Hospitality Research (2004-02-01)A compilation of summaries from CHR Reports, articles from Cornell Hotel and Restaurant Administration Quarterly and working papers published in 2003 by the faculty of the Cornell University School of Hotel Administration.