Outsourcing of Facilities Management

Outsourcing of Facilities Management Introduction Within the hospitality industry there are a number of departments that do not offer direct guest services but instead offer services in maintenance of the hotel property. Among these departments is the engineering department which many times plays the crucial role of operating the hotel heating and/or air conditioning, maintenance of refrigeration facilities, lighting and elevators and other transportation systems (Barrows and Powers 2009).Advertising We will write a custom case study sample on Outsourcing of Facilities Management specifically for you for only $16.05 $11/page Learn More In most establishments significant repair and maintenance work is carried out by external organizations but the hotel relies heavily on its internal staff to ensure smooth and efficient operation of its facilities. Given that utility costs have always been significant it would appear that efficient management of these facilities can play a major role in the overa ll performance of the establishment as a whole. This is evident based on reports by O’Fallon and Rutherford that indicate that energy costs could range between 4 to 6% of the property’s operation budget (2009). It has also been established that savings in these costs can be achieved by simply modification of staff behavior. In addition to behavior change it has been observed that recent technological advancements can make major improvements in the control of energy usage within the facility (Barrows and Powers 2009). This position leads to the conclusion that future managers need to be aware of changes in this area as they may offer a crucial competitive advantage. Background The position regarding the proper management of energy resources and outsourcing these services is crucial for a number of reasons. According to Sturman, Corgel and Verma it has been observed that in preparation for a career in the hospitality industry an individual is required to posses the corre ct human capital (2011). This is because despite of the effects of the recession, hospitality organizations are constantly in search of outstanding talent. This human capital is an intangible resource that plays a very vital role in whether or not the company will gain a competitive advantage within the industry (Sturman, Corgel and Verma 2011). Such individuals make the company profitable by applying their knowledge directly in concert with company assets. The company assets include buildings, equipment, furnishing and all are used to help the organization deliver value to its customers. By gaining knowledge on the most appropriate approaches to manage the company facilities an individual can gain insight that will save the company money and gain a competitive advantage.Advertising Looking for case study on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More In addition to the issue of careers in hospitality it has been noted that in recent years growth within the hospitality industry has become more apparent in chain operations or within the industry’s corporate segment (Reid and Bojanic 2010). Due to this major players such as Hyatt, Hilton, Marriott International to name a few continue to increase their market share at the expense of smaller chains and independent operators. While independent operators have continued to survive, the market has become much more competitive and suggests a much greater emphasis on marketing (Reid and Bojanic 2010). Whereas the large corporate chains can manage to control their pricing due to economies of scale, the same approach is not possible in the case of independent operators (Pizam 2010). An alternative approach to this challenge may require that independent operators increase their expenditure on marketing activities. This is a difficult task given that additional debt may weigh down heavily on the company. On the contrary these companies could resort to improving the management of their current expenditure to create funds to support activities such as marketing. It is for these reasons that deeper insight into the operation and management of facilities is considered important. Content It has already been established that energy costs normally run in the range of four to six percent of a hotel’s operation budget (Chen 2009). Unfortunately owing to the increased demand for energy in most urban areas the price of energy has risen and it is likely to continue rising in the near future. However, there have been a series of technological advancements in the field that can assure an establishment makes some savings in the expenditure on energy. Current statistics indicated that the cost of energy for the US hospitality industry is in the range of $ 3.7 billion. Based on this data it has been reported that energy costs is among the highest non staff items in any hotel’s profit and loss account (Chen 2009). Based on this conclusion it is easy to see why any reductions that can be made in this area are important for the hospitality industry. It has been observed that energy saving initiatives can be categorized in three chronological clusters namely, short term, midterm and long term (Chen 2009).Advertising We will write a custom case study sample on Outsourcing of Facilities Management specifically for you for only $16.05 $11/page Learn More Short term savings can be achieved without vast capital investment and result in payback in a short duration. These initiatives include actions such as switching off lights and heaters when floors are not in use. With the current advances in technology such short term benefits can be achieved fairly easily through the use of motion sensors and other similar devices (Chen 2009). In addition to the short term saving the organization can also utilize technological advances and know how to attain the mid and long term savings which may require more significant expenditure. Among some of the activities that can bring both mid and long term savings include changing all light fittings, installation of thermostats, ongoing staff training, installation of energy efficient refrigeration and vehicles, etc (Chen 2009). This simple information based on changes in technology can bring about significant reduction in organizational expenditure. Another essential aspect to consider in relation to the hospitality industry and management of resources is the current global trend in relation to eco friendly initiatives. This trend which is currently very popular involves the fusion of ecology with cool architecture to bring about buildings that are energy efficient. This is possible through approaches that allow such buildings to make use of naturally available sources to supplement its energy requirements (Conrady and Buck 2011). As a result of this ingenuity the cost of operating the building is significantly reduced thus allow ing the establishment to focus its expenditure on areas such as marketing that need additional funds. One of the first establishments that applied the green hospitality approach in an urban setting is the Boutiquehotel Stadhalle in Austria (Conrady ad Buck 2011). This establishment is the first in the world with a zero energy balance. The establishment relies on electric power that is produced by solar panels and wind turbines. In addition to that the building uses water that was drilled and uses this water for cooling, heating and general use within the establishment. The water used to flush toilets and water plants is purely rain water collected from the roofs within the establishment (Conrady and Buck 2011). The green lifestyle is currently considered a niche concept that may have considerable growth in the near future. If this proves true eco-leadership will be a major competitive factor for destinations in the future (Conrady and Buck 2011).Advertising Looking for case study on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More For this reason any establishment interested in creating a Green lifestyle brand will require a holistic and sustainable concept, green chic (interior decor), and an understanding of lighting products and branding. This is one of the reasons that facility management is a major concern. The aspect of giving adequate consideration to facilities management is very crucial for the long term survival of a company based current economic trends. There are several large players within the hospitality industry across the globe are paying attention to the communities that they serve. It has been noted that large industry players such as McDonald’s spend a significant amount of resources on community oriented efforts (Enz 2009). This company achieves this by carrying out a number of animal welfare audits annually and publishes the report of each audit. In addition to this it has established a charity dedicated to improving the welfare and health status of children (Enz 2009). As mention ed earlier in this report the growth within the hospitality industry in recent times has mainly been within the corporate circles (Reid and Bojanic 2010). Given that these players are able to take advantage of economies of scale to competitively price their products, smaller players need to make serious moves to ensure they can remain competitive within the market. This is further complicated by the fact the large industry players have a lot more money to spend on securing their place in the market. Fortunately it has been noted that it has become more apparent to people in society that issues such as climate change need to be addressed. Because of this concepts that support protection of the environment and reduction of pollution have become relatively popular (Zhou 2011). Several governments have also come on board and shown their support for such initiatives. This is seen in the case of countries such as China where government is making plans to adjust hotel rating to indicate th e environmental policy held by the establishment (Zhou 2011). This trend has seen more and more people around the world become concerned with their consumption behavior. In response to this, it has become apparent that organizations that are able to provide mechanisms that minimize the impact of their activity on environment are becoming increasingly popular (Zhou 2011). This has seen it become a widely acceptable practice to reside in a green hotel and provide green service. Taking an economic stand point it is possible to assume therefore that offering green service provides a vital avenue to expand market share (Zhou 2011). This comes about due to the ability to attract more clients, especially those with ec0-concerns. This assumption may prove to be true in the near future given that reports indicate that in China the brand economy has 8% of the market share while in Europe and America this figure stands a 70% (Zhou 2011). This indicates that the economy hotel has a huge potenti al in many parts of the world. In addition to this is the fact that energy costs have been increasing in recent years due to limited energy serving growing demands (Zhou 2011). Since a hotel requires plenty of energy to cover heating, lighting and storage costs adoption of advanced technology can bring about some drastic reduction in these costs. It is important to keep in mind the point earlier mentioned that indicated energy costs for a significant portion of the operating budget (O’Fallon and Rutherford 2009). This approach provides an effective way to reduce costs while bringing the benefit of assisting in handling a growing global concern. Given the position with regards to the growing global concern of climate change and environmental degradation one can assume that a green approach helps build the organizational image (Zhou 2011). Just as in the case of McDonald’s corporate social responsibility undertaking this approach allows guests build trust in the organiza tion (Enz 2009). Building a reputation of profits and responsible behavior appears crucial for survival in any industry in the future. Eco friendly business allows smaller or independent operators a fighting chance where the larger corporate players are involved. This is especially so given that even without the resources to market at the same level, independent operators can use ingenuity to produce an equally if not more attractive package. Conclusion In this report the discussion revolved around outsourcing facilities management within the hospitality industry. It was noted that the proper management of facilities is a complex task and can be used to create opportunities to save money within a hotel. It was realized that this approach is crucial given that expenditure on energy constitutes a significant portion of operating expenditure. In addition to that it was also established that there has been significant growth within the industry suggesting a need to improve competitive p osition of any hotel. For this reason it became apparent that anyone interested in a career in hotel management need to provide a unique set of skills to allow the organization to advance. For this reason a thorough knowledge of facility maintenance approaches is useful as this can help in saving money and even be used to provide much needed competitive advantage. In relation to cost reduction such knowledge will allow managers make the correct decisions with regard to running the organization. It was also established that recent concerns with the environment have even driven the need for such knowledge further owing to the potential of eco friendly establishments. This point is reiterated in the statement of Chon and Maier indicating the future of hospitality will reflect the changing face of the population (2009). As such those involved in the industry will require keeping an eye on the population and reacting to changes within the population. References Barrows, CW, and Powers, T . Introduction to the Hospitality Industry. New Jersey: John Wiley Sons, Inc.; 2009. Chen, J. Advances in Hospitality and Leisure, Volume 5. Bingley: Emerald Group Publishing Limited; 2009. Chon, KS and Maier, TA. Welcome to Hospitality: An Introduction. New York: Delmar Cengage Learning; 2009. Conrady, R, and Buck, M. Trends and Issues in Global Tourism 2011.Berlin: Springer; 2011. Enz, C. Hospitality Strategic Management: Concepts and Cases. New Jersey: John Wiley Sons, Inc.; 2009. Sturman, MC, Corgel, JB and Verma, R. Cornell School of Hotel Administration on Hospitality. New Jersey: John Wiley Sons, Inc; 2011. O’Fallon, MJ, and Rutherford, DG. Hotel Management and Operations. New Jersey: John Wiley Sons, Inc.; 2011. Pizam, A. International Encyclopedia of Hospitality Management. 2nd Edition. Kidlington: Butterworth-Heinemann; 2010. Reid, RD, and Bojanic, DC. Hospitality Marketing Management. New Jersey: John Wiley Sons, Inc.; 2010. Zhou, Q. Applied economics, Busines s and International Development Symposium, Part 1. New York: Springer; 2011.