Operations Management in the Hospitality Industry

This chapter covers four main concepts: (a) providing an understanding of service; (b) organizing hospitality decisions and processes; (c) defining strategic service visions; and (d) dissecting operations strategies for hospitality services. In the first section, the definition of service, the five service dimensions, and the service package are covered. In the second section, hospitality decisions and processes are framed by service concepts and the service-profit chain. A service concept is the starting point for developing hospitality operations strategies, while the service-profit chain explains the link from customer satisfaction and customer loyalty to a service firm’s growth and profitability. In the third section, the strategic service vision is explored. Successful service firms all have a strategic service vision, which includes a set of ideas and actions organized in a systematic way to maximize a firm’s performance. In the fourth and final section, the operations strategy for hospitality services is covered. Successful service operations occur when management defines and adheres to a competitive operations strategy.

Hospitality services are among the most robust experiences enjoyed by consumers. To deliver them successfully, careful attention to detail is first needed for the design and development of those experiences. This chapter begins by exploring the array of elements that holistically construct an experience, from process to people to physical environments. Then, the customer experience management framework is used to outline a recommended technique for approaching experience design. Finally, a brief survey of visualization techniques shows how experiences can be modeled for assessment and improvement.

Operations management involves utilizing given resources as efficiently as possible to deliver services to customers and meet business goals. Developing efficient business operations requires a hospitality organization to design efficient service environments, as part of its mission. This chapter articulates the key design and planning strategies for the development of a successful hospitality organization. The first section covers the process of location selection, as the most important factor leading to the success of a hospitality organization. The second section discusses strategies for estimating the number of users (service employees and customers) during peak and idle times to justify a costly financial investment. The third section concerns the readers with the topic of layout planning, with the goal of service optimization for a targeted number of customers. The fourth section deliberates workflow conditions, and finally, the last section addresses the ambience and design of the physical hospitality environment, which is crucial for customer evaluation of a hospitality organization as it creates a first impression.

Forecasting is a vital part of hospitality operations because it allows businesses to make imperative decisions, such as pricing, promotions, distribution, scheduling, and arranging facilities, based on the predicted demand and supply. This chapter covers three main concepts related to forecasting: it provides an understanding of hospitality demand and supply, it introduces several forecasting methods for practical application, and it explains yield management as a function of forecasting. In the first section, characteristics of hospitality demand and supply are described and several techniques for managing demand and supply are addressed. In the second section, several forecasting methods for practical application are explored. In the third section, yield management is covered. Additionally, examples of yield management applications from airlines, hotels, and restaurants are presented.

Unlike manufacturing firms where the production of goods can be adjusted according to the demand of customers, hospitality firms do not have the ability to alter the capacity of the changing demand of guests in a short period of time. Given the relatively fixed capacity or supply, maximizing revenue through inventory control is essential for hospitality operations. This chapter covers operations inventory control extracted from the field of revenue management. First, the concept of capacity management and planning is enclosed and various capacity management tactics and inventory control strategies are explored. Next, the management and principles of space inventory through inventory-based restrictions, strategic pricing, displacement analysis, and distribution channel management are addressed. Finally, the respective applications of these principles, strategies, and tactics in several hospitality sectors are discussed.

This chapter covers three main concepts: it provides an overview of supply chain management (SCM), introduces the concepts of procurement and what is entailed within this function, and explains how inventory is managed. In the first section, SCM is considered broadly but also in the context of hospitality. The key roles and objectives of SCM as well as the significance of supply chain risk and disruption are considered. In the second section, the concept of sourcing is discussed. Sourcing is a critical function in any organization: without this, an organization would cease to operate. The importance of supplier selection is explored, with methods to make the most appropriate selection and for subsequently managing suppliers. Finally, the third section focuses on how inventory management can be optimized. Concepts such as economic order quantity (EOQ) and ABC analysis are explored, along with alternatives to traditional inventory management methods.

This chapter discusses techniques for scheduling and organizing staff to meet guest demands and financial obligations. Key building blocks relevant to labor management are explained, such as productivity, fixed and variable labor hours, and the development of realistic performance standards to help organizations optimize productivity. As a next step, this chapter illuminates the importance of providing management labor standards and staffing models, which are key management tools. Lodging and food and beverage labor strategies are presented. Finally, effective planning of labor scheduling is also discussed.

Service experiences and waiting lines are often – unfortunately – seen to go hand in hand. This chapter explains why this is the case. Beginning with an exploration of capacity and operating constraints, discussion then delves into both the mathematical origins and psychological implications of waiting lines. The final section offers hope to managers and guests alike, with a survey of different operations strategies and tactics that can eliminate or abate the need to wait.

This chapter covers four main concepts: service quality, quality assurance for measurement, quality assurance for management, and service failure and recovery. The first section mainly discusses the fundamentals of service quality. The service quality gap model is also highlighted to identify the gaps between customer expectations and the actual perceptions of service at different stages of service delivery. In the second section, different measurement methods for quality assurance are demonstrated. Examples of qualitative and quantitative methods are included. In the third section, the important management objectives of quality assurance, improvement, and control are covered. By using a combination of the quality assurance methods from the second section, hospitality operators can accomplish internal accountability, external accountability, performance improvement, and innovation. In the fourth and final section, causes and consequences of service failures are covered together with the service recovery paradox to express the implications of poor quality.

This chapter covers total quality management (TQM) with respect to the Lean and Six Sigma methods used to improve the effectiveness and efficiency of hospitality operations. In the first section, TQM is discussed. In the second section, Lean and Six Sigma techniques are examined individually. Then, Lean and Six Sigma are connected with an example of a housekeeping case study that applies both methodologies. In the third section, business analytics are explored and statistical process control analysis is demonstrated using a hotel room cleanliness example. The fourth section summarizes the concepts of change management, which is critical for embracing the philosophies of TQM. Finally, project management is discussed in the fifth and last section.