School of Hotel Administration Collection

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2005 Best Paper Award
Sturman, Michael C. (2005-08-01)
[Excerpt] I would like to use my August editorial to recognize the many contributors to the Cornell Quarterly's content and, in particular, highlight some of the best content from 2004.
A Brief Tutorial on the Development of Measures for Use in Survey Questionnaires
Hinkin, Timothy R. (1998-01-01)
The adequate measurement of abstract constructs is perhaps the greatest challenge to understanding the behavior of people in organizations. Problems with the reliability and validity of measures used on survey questionnaires continue to lead to difficulties in interpreting the results of field research. Price and Mueller suggest that measurement problems may be due to the lack of a well-established framework to guide researchers through the various stages of scale development. This article provides a conceptual framework and a straightforward guide for the development of scales in accordance with established psychometric principles for use in field studies.
A Call for Special-focus Issues
Sturman, Michael C. (2003-06-01)
[Excerpt] In our efforts to deliver high-quality content to our audience, Cornell Quarterly usually publishes articles on a variety of topics. We seek not only to cover issues in depth, but we try to ensure that our issues include a variety of content areas (e.g., marketing, strategy, human resources, operations, finance). Most issues of the journal, like this one, cover diverse topics, but we sometimes publish special-focus editions that carry several articles on a specific theme (e.g., the October 2001 Cornell Quarterly focused on hospitality law). The purpose of this editorial is to call for ideas for future special-focus issues. Specifically, I want to solicit proposals from our readers and potential authors for specific themes that they would like to see addressed in future Cornell Quarterly issues.
A Caution and a Call: A Need to Examine the Relationship between Intent and Actions
Sturman, Michael C. (2004-08-01)
[Excerpt] Three birds sit on a wire; two of them decide that they intend to leave. How many are left? The answer: three, because until the intent turns into action, nothing has happened.
A Choice-Based Dynamic Programming Approach for Setting Opaque Prices
Anderson, Chris K.; Xie, Xiaoqing (2012-01-01)
Opaque pricing is a form of pricing where certain characteristics of the product or service are hidden from the consumer until after purchase. In essence, opaque selling transforms a differentiated good into a commodity. Opaque pricing has become popular in service pricing as it allows firms to sell their differentiated product at higher prices to regular brand loyal customers while simultaneously selling to non-brand loyal customers at discounted prices. We use a nested logit model in combination with logistic regression and dynamic programming to illustrate how a service firm can optimally set prices on an opaque sales channel. The choice model allows the characterization of consumer trade-offs when purchasing opaque products while the dynamic programming approach allows the characterization of the optimal pricing policy as a function of inventory and time remaining. We compare optimal prices and expected revenues when dynamic pricing is restricted to daily price changes. We provide an illustrative example using data from an opaque selling mechanism (Hotwire.com) and a Washington DC-based hotel.
A Commentary on “Leading Change with the 5-P Model: 'Complexing' the Swan and Dolphin Hotels at Walt Disney World”
Brownell, Judi (2008-05-01)
The management of the Swan and Dolphin Hotels found value in using the 5-P Model for implementing planned change. While such clearly defined methods can achieve desired outcomes, this commentary suggests that a symbolic lens is also useful in capturing and addressing important features of the change process. The success of a symbolic perspective depends in large measure on the leader's ability to listen and to understand how organizational members make sense of the changes taking place. Each stage in the 5-P process is discussed in light of insights gained from a leader who listens and recognizes.
A Comparison of Asians’, Hispanics’, and Whites’ Restaurant Tipping
Lynn, Michael (2013-01-01)
Asians and Hispanics are perceived by many restaurant servers as poor tippers. This study tests the validity of those perceptions using data from a large restaurant chain’s online customer satisfaction survey. Findings partially support servers’ perceptions – Hispanics but not Asians tipped less on average than Whites after controlling for bill size, the customer’s own ratings of service quality and other variables. Discussion centers around the differences between these findings and those of a previous study and on the practical implications of the findings for restaurant managers.
A Comparison of Different Demand Models for Joint Inventory-Pricing Decisions
Wilson, John G.; MacDonald, Leo; Anderson, Chris K. (2011-01-01)
Pricing and inventory research often focuses on stylized models to illustrate pricing and ordering decision dynamics. Although decision insight is useful, the individual retailer faces tougher decisions on actually modeling demand. In an effort to understand the impact of demand modeling choices on inventory and pricing decisions, we evaluated different price-dependent demand models and the resulting profit produced through their implementation. To avoid complications created by other demand drivers, for example promotional and advertising activities, we illustrate the impacts with data from a name-your-price retailer selling a commoditized product where price is the key driver. As our data are provided by a third-party intermediary, we capture all demand requests in the marketplace versus obtaining sales only from a single retailer, enabling us to truly evaluate the profit impacts of price modeling decisions. Our choice of data set also obviates the censoring issues often associated with the evaluation of inventory and pricing decisions. A goal of the article is to provide a practitioner with helpful advice on choosing a modeling approach for joint pricing and inventory decisions.
A Comparison of Forecasting Methods for Hotel Revenue Management
Weatherford, Larry R.; Kimes, Sheryl E. (2003-09-01)
The arrivals forecast is one of the key inputs for a successful hotel revenue management system, but no research on the best forecasting method has been conducted. In this research, we used data from Choice Hotels and Marriott Hotels to test a variety of forecasting methods and to determine the most accurate method. Preliminary results using the Choice Hotel data show that pickup methods and regression produced the lowest error, while the booking curve and combination forecasts produced fairly inaccurate results. The more in-depth study using the Marriott Hotel data showed that exponential smoothing, pickup, and moving average models were the most robust.
A Comparison of Heuristics for Assigning Individual Employees to Labor Tour Schedules
Goodale, John C.; Thompson, Gary (2004-01-01)
The labor tour scheduling literature has focused on the development of schedules, and with a few exceptions, employees were assumed to have identical cost and productivity. Even the few exceptions in the literature that solved tour problems considered employees within a work group to have identical cost and productivity. In this paper we evaluated heuristics for assigning individual employees – who differed in cost and productivity – to labor tour schedules. Our results showed that considering productivity levels when assigning individuals to tours increased profitability. We found that a simple managerial heuristic of assigning individuals in descending order of their productivity to cost ratio was both fast and effective over a broad range of service environmental scenarios.
A Comparison of Static Measures of Liquidity to Integrative Measures of Financial and Operating Liquidity: An Application to Restaurant Operators and Restaurant Franchisors
Canina, Linda; Carvell, Steven A. (2008-01-01)
The results presented in this paper show that integrative financial and operating measures of liquidity provide investors and creditors with information beyond that provided by static measures of short-term liquidity such as the current and quick ratios. Using a sample of restaurant firms over the period 1994–2003, our analysis shows dynamic measures of liquidity provide a drastically different view of short-term solvency than those produced from the static measures. Static measures of liquidity imply that restaurant companies are not liquid. However, when evaluated under this integrative framework, restaurant companies were shown to be more liquid than their current and quick ratios implied. Thus, financial analysts, creditors, and managers should evaluate both static and dynamic liquidity measures when evaluating the short-term financial liquidity and short-term credit worthiness of firms. In addition, careful attention should be paid to both financial and operating measures of liquidity to establish what changes, if any, have occurred in a company's liquidity position over time. This is an important finding for managers and investors in all industries, since short-term illiquidity implies a high risk of default if the banks refuse to refinance all or part of the debt. This in turn may affect the cost of short-term financing and result in an impact on their overall financing costs and required returns from equity investors.
A Comparison of the Performance of Brand-Affiliated and Unaffiliated Hotel Properties
Carvell, Steven A.; Canina, Linda; Sturman, Michael C. (2016-05-01)
Research has shown that performance differences exist between brand-affiliated hotels and unaffiliated properties. However, the extant empirical results are mixed. Some research has shown that brands outperform unaffiliated hotels on various metrics, whereas other research has shown the opposite. This article analyzes this issue using a matched-pair approach where we compare the performance differences of brand-affiliated and unaffiliated properties between 1998 and 2010. The matched-pair approach ensures that local competitive conditions as well as hotel characteristics are the same across the comparison pair. In addition, all potential omitted-variable bias and model misspecifications are avoided. Thus, to address our research question, we compare branded hotels with unaffiliated properties that are identical in age, market segment, location, and duration of operation, as well as having a similar number of rooms. Our analysis shows that performance differentials are present, albeit not systematic. We found no consistent advantages in all segments for either the affiliated hotels or the comparable unaffiliated properties, taking into account our comparison factors. That said, the methodology of our approach yields results that are more informative to the affiliation choice of owners and to the growth strategies of hotel brand–owner companies than those of previous empirical studies.
A Comprehensive Model of Customer Trust in Two Retail Stores
Guenzi, Paolo; Johnson, Michael D.; Castaldo, Sandro (2009-01-01)
Purpose – The purpose of this paper is to develop and test a comprehensive model of customer trust in a retail service setting. Three levels of the customer‐to‐store relationship are simultaneously taken into account: customer to sales associates, customer to store branded products, and customer to the store itself. Design/methodology/approach – Using partial least square (PLS) on a sample of 393 customers of an Italian supermarket retailer, a model linking customer trust (in the store, in store branded products and in sales associates) to overall perceived value and store loyalty intentions and behaviors is tested. Subsequently an expanded model to determine the influence of managerially controlled antecedent variables (salespeople's trustworthiness, store environment, store assortment, and communications) is estimated on the various trust levels. Findings – Trust in the salesperson and trust in store branded products have positive effects on overall store trust. Store trust, in turn, increases perceived value and loyalty intentions. Looking at the drivers of the three levels of customer trust, salesperson trustworthiness positively affects only trust in the salesperson. Store environment has a positive impact only on overall trust in the store. Store communication fosters all three levels of customer trust, while store assortment increases both overall trust and trust in store branded products. Practical implications – Findings of the study suggest an alternative perspective to the dominant strategies in grocery retailing services. To foster store patronage, retailers have typically invested in price cuts, promotions and loyalty schemes. Store managers may rather use sales associates, the store environment, store assortment, store branded products, and communication to foster customer trust and increase customer loyalty. Managing store brands with the goal to build trust, as opposed to increase immediate profit margins, may call for a completely different approach to private labels. Similarly, the potential relevance of interpersonal trust may suggest retailers to devote more resources to selection, recruitment and training of sales associates, and may stimulate changes in evaluation criteria, incentive schemes and reward systems. Originality/value – The study aims at filling two important gaps in the literature: the scarcity of comprehensive store patronage models and the lack of exploration of the operational means of improving customer trust in retail services.
A Content Analysis of Consumer Complaints, Remedies, and Repatronage Intentions Regarding Dissatisfying Service Experiences
Susskind, Alex M. (2004-07-27)
Building on existing research examining customers’ complaints about service experiences, this study examined restaurant consumers’ episode-specific reactions to service failures. In the first stage of this work, restaurant patrons were asked to describe a recent service experience where they complained about some element of the service they received. From these statements a coding scheme was developed to classify the consumers’ qualitative descriptions of the service episodes where they experienced a service failure and remedy. The consumers’ reports addressed three issues:(a) the issue that triggered the complaint, (b) the complaint remedy further broken down on two dimensions based upon the degree of correction and whether the remedy produced a positive or negative outcome, and (c) how (and if) the service failure and remedy influenced repatronage intentions. Following the content analysis and the coding of the critical incidents, logistic-regression analyses revealed that the extent to which a service failure is corrected is important to customer satisfaction and satisfaction with a specific service remedy is connected to a consumer’s desire to return to the restaurant.
A Contextual, Flexibility-Based Model of the HR-Firm Performance Relationship
Tracey, J. Bruce (2012-01-01)
Purpose - The purpose of this paper is to present a more refined and comprehensive explanation of the HR-firm performance relationship. Based on the recent conceptual and empirical research that is grounded in attribution theory, the model posits that flexibility regarding firm’s HR system is a key mediator in the focal relationship, and that environmental dynamism determines the extent to which flexibility may be required. Specifically, the model specifies that a firm’s high commitment work system will have a direct influence on the flexibility of the HR system, as well as climate perceptions about commitment and performance. HR flexibility and climate will in turn influence employees’ evaluative attributions regarding the effectiveness of the firm’s HR system, which will in turn affect employee commitment and performance and ultimately, firm-level performance outcomes. And finally, the model specifies that environmental dynamism will have a direct influence on HR flexibility and the resulting employee- and firm-level outcomes. This explanation is designed to have broad utility in light of the adaptive requirements for firms that operate in rapidly changing and highly competitive conditions. Design/methodology/approach - This is a conceptual paper. Findings - The proposed model provides a more comprehensive explanation of the mechanisms by which a firm’s high commitment work practices may influence firm performance, and as such, offers both a diagnostic and prescriptive basis for improving and enhancing the firm’s competitive position. Originality/value - The analysis and discussion presented in this paper demonstrates the need for a broader perspective on the internal and external contingencies that influence the HR-firm performance relationship. The proposed model addresses this need and offers a more detailed, flexibility-based explanation of how HCWS affect individual and organizational performance outcomes. It is hoped that this expanded framework offers new insights that will help scholars and practitioners to consider the ways in which HR practices can be leveraged to promote committed, high-performing employees that help organizations achieve sustained levels of superior performance.
A Different Kind of Pain & Gain for Hotel Investors during This Cycle
Corgel, John B. (2001-07-01)
[Excerpt] The performance of hotel markets during the 1980s was unique and in violation of the economic principles that govern these markets. The most direct evidence of this period-specific behavior comes from the fact that hotel occupancy rates noticeably and persistently declined during the decade while the supply of hotel rooms sky rocketed. Exhibit 1 contains information on hotel market indicators from the database of thousands of hotels that my firm manages. The average hotel occupancy rate in the U.S. began the decade in 1980 at 73.5 percent and ended at 65.2 percent. In direct contradiction with how supply should have behaved in response to falling occupancy, the number of available hotel rooms increased every year of the 1980s and ended up 48 percent higher in 1990 than in 1980. In addition, real average daily room rates by 1993 ($57.69) about equaled the 1983 ($59.99) level. And by 1994, astute investors were able to pay a mere 30 to 40 cents of replacement cost dollar for quality, full-service hotel assets.
A Field Study of New Employee Training Programs: Industry Practices and Strategic Insights
Tracey, J. Bruce; Hinkin, Timothy R.; Tran, Thao Li Bui; Kingra, Michael; Taylor, Jonathan; Thorek, David (2015-11-01)
Given the importance of well-designed and well-executed training programs, it is important to learn more about the content and design of effective training programs for new employees, particularly those that have been implemented in the hospitality industry. Through a field study assessment of pre-opening training programs that have been implemented by fifteen hotel firms and sixteen restaurant companies, we found that hotels and restaurants spend approximately the same time on pre-opening training for new staff, with the exception of restaurant managers, who receive significantly more days of training than do their hotel counterparts. In addition, there were substantive differences in the amount of pre-opening training based on firm size and whether the company was publicly traded or privately held. We also found that the majority of pre-opening training is designed and delivered by corporate staff, and a balance of active and passive training methods are used for facilitation. Finally, although our survey methodology did not allow us to determine the costs associated with pre-opening training (and therefore the return on these efforts), we noted that the firms used guest satisfaction measures and measured the employees’ content mastery, among other metrics.
A Field Study of the Impact of a Performance-Based Incentive Plan
Banker, Rajiv D.; Lee, Seok-Young; Potter, Gordon S. (1996-01-01)
Much management accounting research focuses on design of incentive compensation contracts. A basic assumption in these contracts is that performance-based incentives improve employee performance. This paper reports on a field test of the multi-period incentive effects of a performance-based compensation plan on the sales of a retail establishment. Analysis of panel data for 15 retail outlets over 66 months indicates a sales increase when the plan is implemented, an effect that persists and increases over time. Sales gains are significantly lower in the peak selling season when more temporary workers are employed.
A Flow-Through Analysis of the US Lodging Industry During the Great Recession
Singh, Amrik; Dev, Chekitan; Mandelbaum, Robert (2014-01-01)
Purpose – The objective of this exploratory study is to investigate the “flow-through” or relationship between top-line measures of hotel operating performance (occupancy, average daily rate and revenue per available room) and bottom-line measures of profitability (gross operating profit and net operating income), before and during the recent great recession. Design/methodology/approach – This study uses data provided by PKF Hospitality Research for the period from 2007-2009. A total of 714 hotels were analyzed and various top-line and bottom-line profitability changes were computed using both absolute levels and percentages. Multiple regression analysis was used to examine the relationship between top and bottom line measures, and to derive flow-through ratios. Findings – The results show that average daily rate (ADR) and occupancy are significantly and positively related to gross operating profit per available room (GOPPAR) and net operating income per available room (NOIPAR). The evidence indicates that ADR, rather than occupancy, appears to be the stronger predictor and better measure of RevPAR growth and bottom-line profitability. The correlations and explained variances are also higher than those reported in prior research. Flow-through ratios range between 1.83 and 1.91 for NOIPAR, and between 1.55 and 1.65 for GOPPAR, across all chain-scales. Research limitations/implications – Limitations of this study include the limited number of years in the study period, limited number of hotels in a competitive set, and self-selection of hotels by the researchers. Practical implications – While ADR and occupancy work in combination to drive profitability, the authors' study shows that ADR is the stronger predictor of profitability. Hotel managers can use flow-through ratios to make financial forecasts, or use them as inputs in valuation models, to forecast future profitability. Originality/value – This paper extends prior research on the relationship between top-line measures and bottom-line profitability and serves to inform lodging owners, operators and asset managers about flow-through ratios, and how these ratios impact hotel profitability.
A Forward-Looking Factor Model for Volatility: Estimation and Implications for Predicting Disasters
Kadan, Ohad; Liu, Fang Ph.D; Tang, Xiaoxiao (2017-10-01)
We show that any factor structure for stock returns can be naturally translated into a factor structure for return volatility. We use this structure to propose a methodology for estimating forward-looking variances and covariances of both factors and individual assets from option prices at a high frequency. We implement the model empirically and show that our forward-looking volatility estimates provide useful predictions of rare disasters for both factors and individual stocks.

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