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Thursday, July 03, 2008

Expertise to Go - The Great Outsourcing Debate


It’s no longer headline news that many hotels, chains and even humble guest houses are outsourcing many of their non-core activities.

Sometimes it’s as simple as house-keeping and maintenance, in some cases entire hotels are sold with the management company simply retaining operating rights under an agreement with the new owners, usually a large funds management company.

Regardless, it’s a long, sometimes hard, self-analysis that requires identification of core competencies and a commitment to performing those to optimum efficiency.

The criticisms of outsourcing are many, especially when they involve job losses to overseas contractors; airline maintenance and call centres being just two that spring to mind. The overriding issues here are loss of employment opportunities to locals and questions about service quality and control. That said, there are times when outsourcing makes good sense and creates winners all around.

Here at HM Magazine, outsourced public relations is one of the commonest disciplines we encounter. Luke Starr of Starr PR is one of dozens of independent practitioners serving the hospitality industry.

“My clients hire me because I’m a specialist,” says Starr, “my contacts and expertise extend beyond their company and they rightly expect those contacts to yield opportunities that they may not otherwise encounter as a large hotel brand.”

Another simple and obvious example is housekeeping. For many years AHS Hospitality has provided outsourced housekeeping services to the accommodation industry.

However, AHS work in partnership with hotels to provide more than just housekeeping services. Apart from temporary and permanent staff placement, AHS provide linen and laundry management, manage and design OHS systems within the hotel, provide hotel safety checks, train staff in service and procedures plus conduct departmental assessments. Third party assessments have obvious benefits in being able to compare industry-wide standards isolated from any internal culture.

Additionally, the selection of staff and their suitability to a particular property is crucial. AHS recognise this and have proven it to be achievable.

“Outsourcing is fundamental to our business and has been for many years. Our guests are extremely demanding and we need to maintain the highest standards possible,” says Sarah Henderson General Manager, The Como Hotel, Melbourne, “Our housekeeping department is an important part of keeping our guests satisfied. Recently we had a change of senior personnel in our housekeeping operation and AHS handled this with utmost care and professionalism. They have retained top talent in our hotel and we see the benefits of this every day. I very much treat the team like I would if they were employed by me, we are all one team with a common goal.”
Just when you think it’s all getting you down, recruitment, training, human resources, and OHS tasks can be handled by AHS in a timely, sympathetic and efficient manner.

“I outsourced the housekeeping department over 12 months ago to AHS, “ says Tish Nyar, General Manager at Rydges World Square. “We needed to make substantial change - both cultural and operational - and partnering with AHS meant I was able to focus on my revenue generating departments during a particularly challenging time. The benefits for my team have included the additional support from the AHS operational team. With the recently improved quality process AHS has in place we are seeing a continuous lift in standards.”

‘Quality’, to state the obvious, is a fundamental factor in the running of any hotel and from the front desk to the humblest housekeeping tasks, can make or break a property’s reputation.

[ Steve Tochner Quote ]


An area commonly sought for outsourcing is HR. Sydney-based Hostec was formed in 1997 and specialises in executive search, training, and Australian traineeships targeted at international hotels, resorts and associated premier tourism, hospitality and leisure service providers.

“At Hostec, there are plenty of benefits in outsourcing training and recruitment services. People are our business and hospitality and tourism is our passion,” says Ian Wilson, CEO.

“Critically important is understanding people culture and business needs; What is the company looking to achieve in the next three to five years? What strategies to achieve maximum results for shareholders? How do you maintain successful and positive people culture with longevity to the business and brand? After all, it’s our business to be leaders in benchmarking global trends in identifying, developing and retaining better people.”

Wilson says Hostec’s outsourcing success is based on long-term, strategic relationships with growing world-class tourism, hospitality and leisure groups. Critical innovations include technology, workforce efficiencies, consistency and risk minimisation for shareholders. Other benefits include a strategic approach in maximising the Australian Government incentives nationally.

Hostec’s clients include Fairmont, Hilton, Hyatt, Jumeirah, Mirvac, Peninsula, Sofitel and Shangri-la.

If your hotel or chain is considering outsourcing any of your current in-house services, a simple, no-obligation call to any of the qualified hospitality operators will help you decide – one way or the other.

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Reasons for outsourcing. Are you ready?

Organisations that outsource are seeking to realise benefits or address the following issues:

* Cost savings. The lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, re-pricing, re-negotiation, cost re-structuring. Access to lower cost economies through offshoring called "labor arbitrage" generated by the wage gap between industrialised and developing nations.
* Cost restructuring. Operating leverage is a measure that compares fixed costs to variable costs. Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also by making variable costs more predictable.
* Improve quality. Achieve a step change in quality through contracting out the service with a new service level agreement.
* Knowledge. Access to intellectual property and wider experience and knowledge.
* Contract. Services will be provided to a legally binding contract with financial penalties and legal redress. This is not the case with internal services.
* Operational expertise. Access to operational best practice that would be too difficult or time consuming to develop in-house.
* Staffing issues. Access to a larger talent pool and a sustainable source of skills.
* Capacity management. An improved method of capacity management of services and technology where the risk in providing the excess capacity is borne by the supplier.
* Catalyst for change. An organisation can use an outsourcing agreement as a catalyst for major step change that can not be achieved alone. The outsourcer becomes a Change agent in the process.
* Reduce time to market. The acceleration of the development or production of a product through the additional capability brought by the supplier.
* Commodification. The trend of standardising business processes, IT Services and application services enabling businesses to intelligently buy at the right price. Allows a wide range of businesses access to services previously only available to large corporations.
* Risk management. An approach to risk management for some types of risks is to partner with an outsourcer who is better able to provide the mitigation.
* Time zone. A sequential task can be done during normal day shift in different time zones - to make it seamlessly available 24x7. Same/similar can be done on a longer term between earth's hemispheres of summer/winter.
* Customer Pressure. Customers may see benefits in dealing with your company, but are not happy with the performance of certain elements of the business, which they may not see a solution to except through outsourcing.

[Source: Wikipedia]

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