A brief look at the wonderful world of hospitality, some challenges for the industry, and a few reasons why you might consider it as a career – by Andrew Lo

The word hospitality derives from the Latin verb hospitare, meaning “to receive as a guest.”  Hospitality may bring to mind the times your relatives stayed over at your home, or the times your family went on vacation and stayed at a resort or hotel. As a guest, what do you need? Traditionally, the requirements of a guest are food, drink, and shelter. If the word hospitality refers to the provision of these three necessities to travelers, then the industry consists of businesses that do this.  Some hosts, however, also provide entertainment for their guests, like on a cruise ship or a casino. The entertainment industry is far-reaching, including everything from theme parks to sports events.  Unlike hospitality, entertainment is not associated with the provision of a traveler’s basic needs, and is a whole separate industry altogether.  

The hospitality industry is, by itself, a giant 3.5 trillion dollar  service sector and comprises hotels, resorts, clubs, restaurants, catering, meeting and event planning. According to the International Hotel & Restaurant Association, the hospitality industry includes 300,000 hotels, 8 million restaurants, and employs 60 million people worldwide. 

HOTEL BABYLON

The hotel, arguably the most basic element of the hospitality industry, is a commercial establishment that offers lodging to travelers, usually on a short-term basis. The differing costs of a hotel room are indicative of the location of the property, quality of furnishings, and range of amenities and services available. We’re all familiar with the one to five star rating system, where more stars indicate greater luxury, and more amenities and personalized service. Instead of stars, the American Automobile Association (AAA) uses one to five diamonds to rate hotels.  However, the correlation between ratings and guest experience is loose at best. The market research company JD Power, has surveyed US hotel guest satisfaction since 1996. It ranks hotel chains in six segments: luxury, upscale, mid-scale full service, mid-scale limited service, economy/budget, and extended stay. The 2008 study found that satisfaction is down overall in the North American market as compared to 2007 levels, primarily due to guest issues with amenities and room features.  

From a JW Marriott to a Doubletree, there are a variety of hotels on the market with different price points to choose from. Most hotels are independently owned but are often managed by a subsidiary of a global giant like the InterContinental Hotels Group (IHG), which owns the Holiday Inn franchise,  or Starwood Hotels and Resorts, which is the parent company of world-renowned chains such as Sheraton and Westin.  In recent years, the boutique hotel concept has become increasingly popular. Typically used to describe independent establishments that are more intimate and quirky, larger hotel companies have created their own boutique brands, like Starwood’s W chain or Marriott’s Edition, in order to capture market share. Nevertheless, finding ultimate luxury often does not require looking further than the Four Seasons, while budget travelers might consider staying at a Microtel, which, according to the JD Power study, has ranked the highest in guest satisfaction in the budget segment every year since 2001.  In this world of lodging, however, there exists much more than standalone hotels and motels.

ISLAND IN THE SUN

Attach shopping and sport to a hotel and it can often be classified as a resort, which is a place for both recreation and vacation. Resorts are more often establishments operated by a single independent company, although resort chains like Aman Resorts or Club Med are common.  Not surprisingly, a hotel is frequently a central feature of a resort, like at the Atlantis in the Bahamas.  A self-contained resort, such as the one at Walt Disney World, attempts to provide everything a guest might want, so that guests need never leave the resort for any reason. Some resorts boast activities such as golf, watersports, winter sports, spa facilities, or luxury safaris. For example, within South Africa’s famous Sabi Sand Reserve, the Sabi Sabi Private Game Reserve offers a blend of luxury accommodation, personalized service, extraordinary wildlife encounters, and delectable cuisine.  In Las Vegas, casinos like Wynn and the Venetian are classified as destination resorts, which visitors flock to for a specific purpose, regardless of the other attractions in the same area. Their counterparts in Macau, China, offer the same experiences with a distinctive touch of Asian hospitality. 

HOME AWAY FROM HOME

When travelers stay for extended periods of time, they might opt for a serviced apartment, which is furnished to resemble a home, with the provision of cooking and dining facilities, more closet space and the like. Such apartments are often cheaper than hotel rooms, and are popular with families looking to “live” rather than “stay” somewhere, albeit for a short time. Many hotels have an apartment arm adjacent to it, like the Residences at the Ritz Carlton New York, Battery Park. The hotel staff is usually at the disposal of apartment residents, combining the flexibility of apartment living with the services of a hotel. Luxurious amenities like 42-inch plasma TVs and king-size beds with 400-count sheets are not unheard of.   Not your average dorm room! 

FOOD, GLORIOUS FOOD

The Food and Beverage (F&B) component of the hospitality industry involves a mix of different establishments, contrasted by menu type, dining style and pricing. The F&B industry includes everything from polish sausages and pretzels sold from a cart on a street corner, to delicatessens, to Mickey D’s and fine dining within or without hotels. The Michelin Guide is a contemporary restaurant reviewer that is popular in Europe; their incognito inspectors accord one to three stars to restaurants that they regard as having high culinary merit.  A good example of a three star Michelin restaurant is Restaurant Gordon Ramsay at Royal Hospital Road in London, which is frequently rated as one of the world’s best restaurants. Here in the US, Mobil rates restaurants on a 1-5 star scale, while the AAA uses 1-5 diamonds,  as stated previously. One interesting note is that at the one to three diamond/star levels, both Mobil and AAA dispatch checklist-wielding inspectors to evaluate establishments, leading some restaurants and hotels to improve by working to the checklist, rather than improving their product.  Students may be more familiar with the popular Zagat Survey, which compiles individual comments about restaurants and does ratings on a 30-point scale.  

IN PERSPECTIVE

Let’s look at some of the challenges of operating hotels in the current global market environment. Even after the economy recovers from the downturn, some aspects of the crisis will continue to linger. The factors that will most impact upon the hospitality industry include elevated food and fuel prices, troubled capital and credit markets, and excessive consumer debt levels.  Other issues include a shortage of skilled labor, changing demographics, and in certain parts of the world, security.

IT’S ALL ABOUT THE PEOPLE

The hospitality industry is service-oriented, and of necessity, labor-intensive. The problem of attracting and retaining qualified workers is increasingly becoming a global human resource challenge for hotels. The hospitality industry has long been criticized for offering compensation levels below those common in other lines of business. Robert Whitfield, general manager at the Four Seasons Hualalai in Hawaii, recognizes that the industry is notorious for long hours and night plus weekend shifts,  driving college students to seek other careers with better hours and/or better starting salaries, like banking. In this current economic turmoil, employee training continues to be important as hotel brands attempt to meet high customer expectations while exercising prudent fiscal responsibility.

CHANGING DEMOGRAPHICS

The impact of changing demographics on travel trends leaves no sector in the hospitality industry unaffected. Whether it is the gradual retirement of baby boomers, rampant globalization, or the newly rich Chinese entrepreneurs pouring out of China, the dramatic worldwide shift in demographics poses challenges for the industry. Hoteliers need to begin offering services and products that address multi-generational needs and desires. Hoteliers must cater to the special needs of aging consumers (like our parents), as well as younger travelers (students like us), who have very different expectations in regard to design and technology. The traditional practice of brand standardization goes out the window as hoteliers look for ways to enhance all guest experiences regardless of age. 

PROFITS

The current economic environment makes it increasingly difficult to sustain profit growth and improved return on investment for several reasons. First, the early months of the new year will see hoteliers experience drops in revenue per available room (RevPAR), a primary statistic reflecting the overall financial performance of a hotel, with PKF Hospitality Research forecasting as much as a 7.8% fall in RevPAR for the domestic lodging industry.  Second, there are a large number of fixed costs of operation that hotel owners have to pay regardless of occupancy levels. Industry analysts are predicting a decrease in 2009 occupancy levels, which does not bode well for hotel returns.  Third, in this culture of going green, higher energy costs can affect profits.  According to Donald Lim, vice president at the Hotel Equatorial Group in Malaysia, sustaining profitability has to come from controlling costs, and the single largest component of cost will be labor, followed by food costs in those properties where food & beverage accounts for a substantial part of revenues. 

SECURITY

With regard to security, the post 9/11 environment presents hoteliers with the difficult task of having to balance accessibility with increased levels of protection for guests. Governments have stepped up security at key locations such as airports and embassies. Therefore, hotels, with their relatively lax security, have become alternative targets for terrorists, as seen in the Marriott bombing in Pakistan last September, and the recent attacks at the Taj and Oberoi hotels in Mumbai. Not only must there be increased expenditure for equipment (e.g. CCTV, building access controls), but there has to be substantial investment in the training of all hotel staff to be more vigilant and security consciousness. Short of deploying armed guards and metal detectors outside lobby entrances, like many hotels in the Philippines and Indonesia have done,  it is crucial that hotels re-evaluate their security protocols, because only then can guests be assured of their personal safety and an enhanced customer experience.

CHECKING IN

I think that the hospitality industry provides all the usual challenges of running a business, along with perks like opportunities to travel and interact with people from different parts of the world, unpredictable experiences, and an interesting lifestyle in addition. It surprises me to find that there are relatively few future hoteliers, compared with future doctors, lawyers, bankers and engineers, in liberal arts colleges and universities.   

Perhaps this is due to the incorrect assumption that one needs to have a degree from a hotel school in order to break into the industry. While there are specialized hospitality-related skills that one is not likely to pick up from an Ivy League school, the truth is that a hotel is like any other commercial organization. It is a business that requires people skilled in management, accounting and finance, marketing, sales, and communications. The unfortunate reality is that many students in elite schools do not consider careers in hospitality, as other professional options are more attractive and obvious. As a result, there is a dearth of graduates from elite universities in the industry when in fact such talent is very much in demand. 

Another problem is that many college graduates look at the industry and think, “Well, there are food servers and housekeepers,” and forget that positions exist in senior management and corporate development as well.  Each hotel is a mini company, and each chain is a multinational corporation. According to Randy Goldberg, executive director of recruiting for the Hyatt chain, many students don’t realize that a job in hospitality can be a lucrative way to avoid that office cubicle. He says that a front-office manager at the Hyatt Regency Chicago can be making between $60,000 or $70,000 a year, and a general manager can expect an income in the six-figure range, depending on the size of the hotel.  At the Four Seasons, a recent graduate will likely start as an assistant manager making about $40,000 per year. It may not seem much to begin with, but there is a great deal of upside. It is not unusual for hotel general managers to live at the hotel with their families, in addition to receiving private school tuition for their children, and a personal chauffeur, among other benefits, in addition to salaries of $200,000 – $300,000.   

In the summer after my freshman year at Stanford University, I interned at the Four Seasons Hong Kong, spending time in both the rooms and finance departments. As an international relations major, I thought I would be at a disadvantage to the rest of my intern class who all hailed from different hotel schools all over the world. Over the course of my internship, I learned that the traits required to succeed in this industry are good interpersonal, problem-solving, teamwork and time management skills, combined with reliability, and the capacity to take initiative and work under pressure. These skills are really no different from those required in banking or consulting. Not surprisingly, many senior level executives in hotel holding companies have had experience in hospitality, travel and leisure consulting. Frits van Paasschen, Starwood CEO, spent eight years at consulting firms McKinsey and BCG before assuming his current position as leader of one of the world’s iconic hotel companies. 

So, imagine yourself in an occupation with all of the usual challenges, but that knows no geographical boundaries, and gives you the chance to meet people from all walks of life, from John Doe to leaders in business, politics, entertainment and sports. Is it saying too much to suggest that this sounds kind of fun? 

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About the Author: Andrew Lo is a junior at Stanford University, where he will graduate with a BA in International Relations in June 2010. Despite not being at hotel school, he has a real love for travel and hospitality, which started at a young age during annual vacations with his family to everywhere from New Zealand to England. Andrew has previously interned in the rooms and finance departments at Four Seasons Hong Kong and will be returning to the same hotel this summer in a marketing capacity. He is also a self-confessed foodie, and will never turn down the opportunity to dine.