By: Edwin Fuller
Founder and President of Laguna Strategic Advisors
Today’s educational community is often accused by the industry of not keeping up with the changing needs of the workplace and of churning out graduates who are ill prepared. The fact is, however, that today’s academic community holds the key to developing our future leaders–whatever the industry.
Nowhere is this perception gap clearer than in the hospitality industry. Time was, not too long ago, when our employers offered unbeatable opportunities to focused individuals who welcomed the chance to work their way up the proverbial ladder–from doorman to general manager, housekeeper to chief operations officer, lifeguard to president.
But times have changed and the U.S. hospitality industry has been undergoing a massive structural change. The lucrative opportunities it once offered the eager and willing are not available without proper and adequate educational preparation at all levels of the enterprise. And considering that our industry last year created 38,000 new jobs every month, the gap between its needs and the perceived level of preparation its future leaders receive at all levels must be bridged with alacrity.
Consider today’s operational shift from a focus on property ownership and management to an emphasis on franchising. This business model change has turned the old order upside-down. It has created new ownership groups such as Asian-American franchisors–almost half of all U.S. motel franchisees now are Indian-Americans. They have led the growth in the select service sector and continue to expand the franchising model of the largest brand companies.
Today’s franchise operating companies simultaneously run portfolios of hotels for a number of major hotel brand management companies like Hilton, Starwood, Marriott and InterContinental, and have been instrumental in developing successful prototypes for these brand companies. Coupled with the new ownership structures such as the Sovereign Funds from the Middle East and China, this structural shift is resulting in the reduction in management responsibilities of the major brand companies.
Then, there’s technology. It seems like we’ve been talking about technology and its impact on our industry for almost two decades now. In the past few years, however, the impact has been so dramatic that it has influenced operating systems, source market marketing and distribution channel development.
Technological breakthroughs have also served as the foundation for leveraging operational services such as accounting and reservations, for the development of operating structures such as the ability to leverage multiple brands with one operating team, as well as for creating service centers. Sophisticated systems require sophisticated management to maximize the system’s value. Developing these systems requires new skills and highly-educated experts with an understanding of our industry.
Our global source markets are also undergoing a sea of change. Global markets have been the driving force behind the U.S. economic recovery. In the past, these markets traditionally were our neighbors (Canada and Mexico) and long haul, developed markets such as Japan, the United Kingdom, Germany and France. Today, visitors from emerging markets like Brazil, Russia, Korea, India and China are making their mark. By 2020, China will be the largest traveling public in the world, generating more than 200 million travelers. We must develop services and products that appeal to these new visitors and be flexible in our offerings to gain market share.
Labor and related costs are the single largest growth expense category in hotel operations. Last year, these costs accounted for 45 percent of all dollars spent operating a hotel. Add in turnover costs that AH&LA estimates can run from between 25 percent to 50 percent of annual salary for each exiting employee and it quickly becomes clear that these costs are formidable under any circumstances. So much so that they are now influencing staffing levels and the brand design as well as the products and services. In years to come, these costs will challenge our industry to find new incentives, labor models and technology to compensate for labor.
Significantly, today the most visible impact of these operational and structural changes is the demand that existing brands remain relevant and the demand for new brands to enable the brand companies to expand and seek new market segments. Branding carries the responsibility, as never before, to define product development, design and positioning. Brands must ensure operations can deliver the brand promise. The growing complexity of managing the branding is paramount.
But it falls to marketing and sales to meet some of the biggest changes–constantly evolving technology and the way today’s consumer wants to shop; the dramatic, global cultural changes; and the emergence of new generations of consumers. These and other business channel alterations have resulted in tremendous changes in the group, transient, MICE markets and emerging source markets. The primary media has switched to digital and social media while revenue management dominates marketing and sales strategy. Leaders today need to be prepared for the evolving global influence because consumer needs across the board won’t be the same and the marketplace will be ever shifting.
What all this means for hospitality education remains the biggest challenge. Undergraduate degrees will continue to provide operators for the industry, but placement will be more difficult since it will be the franchise companies who will be doing the bulk of the recruiting rather than the brand companies.
The challenge for the university is the same as for the hotel brand executives–to ensure that their graduates are perceived as having the most cutting-edge preparation which exceeds that of the competition. More importantly, hospitality educators need to ensure their graduates are prepared to perform successfully in one of the most complex industries around.
For their part, students need a desire to learn, a focus on business in general and a great deal of preparation for “leadership” in the broadest sense of the word. The graduate can’t count on receiving the “on-the-job” training previously provided by the brand companies to fill in the gaps. They will find themselves in a supervisor/management role sooner than they think. Along the way in their careers, they will have to be quick, perceptive and responsive to the many changes coming their way. Constant learning will be the order of the day and there may not be any opportunities for second chances.
Students will also face another big decision–executive leadership in the brand companies as well as the operating companies will require an MBA. This industry is no longer an operations driven enterprise. The major brand companies today are almost all led by non-operational executives who have advanced degrees. The combination of a hospitality degree and an MBA will be the future and that future is now.