Intro Hospitality Business
Intro Hospitality Business HB 100
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This 133 page Class Notes was uploaded by Ms. Ambrose Hills on Saturday September 19, 2015. The Class Notes belongs to HB 100 at Michigan State University taught by Michael Sciarini in Fall. Since its upload, it has received 7 views. For similar materials see /class/207500/hb-100-michigan-state-university in OTHER at Michigan State University.
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Date Created: 09/19/15
bets You H Y 5 someone e se s busmess then understandmgthe fundamenta facts concepts future m anvvametvofpmiessmnsfrom engmeermgm hea th carem aw understandmg hospwtahw busmessprmmp es Yum he p You serve othersmore pauents or somemmg e se If You are thmkmg about afuture m educauon or 5 mo course Yum 5th prove useiuL frequemM spend Youmme and moneY m these sorts of busmessesifor Mk5 We h M um5 I he h I demdem or not and mavbethev You be ab e to hook You up m the near futureixt cou dha e x No matter what vourfuture hoxosms course You he p You deve op Your om busmessvocabu arv and denufvresourcesm keep up um what39sgomg on um the atest hospwtahw busmess news u You a so present You um a comprehenswe menu of patenua hospwtahw busmess careers and occupauons m a varwetv of semngs such as Foodsermce operauons odgmg casmos and prwate dubs As best as can be a Wage Jupnev mages commooon from m career menu Vou39H be ab em see and hear It s like your very own subscription to reality based hospitality cable TV Pretty much everything you ever wanted to know including what you were afraid to ask is included in this course and maybe even some things that once you know them may change your opinion about the appeal of careers in the field The interpretation and outcomes could be positive or negative you get to decide Either way the intent is not to hide from reality the idea is to get it all out there in the open so you can be well informed as you navigate along your life s journey It s likely that this is your first hospitality business course but chances are that you already know a fair bit about these sorts of businesses based on your experiences as a guest or customer You know good service when you come across it and probably have your fair share of stories about poor service when you ve encountered it too You likely know where to find the best prices and value at local hospitality establishments and which places to avoid In short over the course of your life you have already developed some level of expertise when it comes to being a consumer of hospitality products and services No matter how much you may already know about being a customer this course will prompt you to consider other perspectives and look at hospitality businesses through the eyes of a hospitality business professional to take the point of view of an owner or manager of one of Image 5 Up wages 0mm 390 these businesses rather than just a customer Instead of looking at the menu prices you pay at your favorite restaurant you ll be asked to think about the cost of the ingredients and labor needed to prepare and serve such items You ll be asked to think about how you would position a hotel or casino or private club in the minds of consumers so that they choose that business over the other options available to them You ll be invited to think about how to find and keep good people whether you call them employees associates crew members etc to help effectively manage for example a client s wedding special event or meeting You ll be encouraged to consider how to best keep score to track the money as it comes in and must be paid out to keep all these sorts of things going By the time you finish this course you should have at least a good start at building a hospitality business perspective Learning Ob39ect 11 as you come to better understand the countless decisions that must be made and the variety of problems and opportunities that hospitality professionals face as they attempt to meet the needs and exceed the expectations of those they intend to serve all while trying to squeeze out some profit You may be wondering about many things as you begin this course from basic questions such as How do I earn a 40 to more esoteric queries such as Is there a place for me in HE and a whole bunch in between It s the sincere belief of all who ve worked to put this digital publicationcourse together that if you ll bring some curiosity and an open mind you can find good answers to many questions here and the odds are very good that if you ll invest some time and effort you will find benefit in the experience no matter where you decide to go from here Even if you are not familiar with the cinematic adventures of 7716 Godfatberand his family you may have seen or heard some variation of the opening quote It s an example of one use and meaning of the word business But this word business like many others can mean different things to different people in different contexts In fact according to httpwwwdictionagcomf business has at least 13 definitionsill as a noun and 2 as an adjective It is also included in several contemporary American idiomsifor example one might be reminded to mind one s own business or may be encouraged to get down to business or be inclined to give someone tbe business or even experience the urgent need to do one s businesrmd depending on the context and intent of the author or speaker in each case a variety of different meanings may be conveyed To keep things straight in this course we ll go with the following definition Business any entity that provides goods andlor services intended to satisfy customers needs in an effort to earn a pro t Human communities need many goods and services that businesses can provideishelter food clothing transportation health care and the means to communicate to name just a few Businesses also provide people with paid employmentithe means by which each person may provide for his or her own needs as well as the needs of others Businesses may also contribute taxes to fund government provided services and infrastructure so 5 The catalyst for most businesses is the 0 Q 9 potential of earning a pro tiwhat s left after all expenses have been subtracted from the revenue brought in from the sale of the goods andor Juprler mages orporation services the business provides to its customers All of the potential good that comes from profits is only part of the motivation for businesses the possibility of a lossiwhen a business brings in less money than it needs to cover its expensesialso serves to motivate because if this condition persists for very long the business cannot continue to exist Not all goods and service providing organizations are motivated solely by seeking profits and avoiding losses The Internal Revenue Service IRS the bureau of the United States Treasury Department responsible for federal tax law enforcement and tax collection among other things may grant tax exempt status to certain nonpro t organizations which exist to achieve some other goals beyond the usual objective of profit Specifically the organization must have one or more exempt purposes stated in its organizing document Examples of exempt purposes include charitable educational religious scientific literary fostering national or international sports competition preventing cruelty to children or animals and testing for public safety Although nonprofit organizations such as churches schools libraries charities zoos government agencies political parties labor unions and even some private clubs we ll revisit private clubs in more detail later in the course do not have a profit motive they must operate efficiently and effectively to achieve their other goals The revenues for these organizations may come from a wider array of sources beyond the sale of goods and services including individual donations memberships government grants and special fund raising events Business fundamentalsiincluding marketing human resources and accountingiand all of the opportunities challenges and activities we will explore throughout this course apply to both profit seeking and nonprofit organizations saust customers39 needsm an effomo earn a promise wnan wno cares Tne in I m the ongomg performance and acuons ofanv pamomar busmess DwHerent stakeho ders nave dwh erent eve sofmterest needs and enpectauons wno cares and vendors Owners are the mdwwdua s or groups that provroe the ongomg resources needed to o nave ega m emthe Entrepreneurshwp and busmess ownersnrp as nan one owner the mvestment msk and prom mav be shared nnkhnldevs mvesmrs who purchase stock a cem cate represemmg a share or poruon orthe ownershrp h a rm are one tvpe m that busmess but not 3 stakeho ders are necessamw stockho ders net m are obvmus v essentmiwf a busmesscannm produce and cohvemehtw and cohsrstehtwprovroe products andor servrces atthequahw and pmcet at customers are Mng to pav rt cannot be expected to remam vwab efor one In a are wmmgto oHerfor sa e at dwh erem pmces usuaHv determme w at productsservmes wm be avarwaoxe and how much these er cost Emplnyees are the peop e who underthe threctroh or the busmessowner or ms or her agent the emp over performtasks andor ownermanager39s oerspectwe emp ovees mav ahwhhgrrom necessarvew s to bem erated at bestho va ued coworkers and team members who are we treated a thought or as abso ute vmtegra tothe success 5 lt of the business Employees are especially important to businesses that intend to provide personalized and high quality service to customers Creditors are entities or individuals that loan money to a business with an obligation of repayment For example a restaurant will typically have to be supplied with refrigeration and food preparation equipment and an inventory of food beverages and other materials before it opens for business The restaurant owners will need money to be able to make these purchases and may try to borrow the funds with a promise to repay the loan under terms length of time and interest rate agreeable to both the restaurant owners and the lending party Creditors can be financial institutions such as commercial banks or individuals such as friends or family of the borrower Vendors are suppliers of goods or services of a commercial nature Vendors come in a variety of sizes and forms including manufacturers importers retailers and wholesale distributors In the previous example of the new restaurant opening there may be several vendors that the restaurant owners would be involved with ranging from a foodservice equipment manufacturer to a wine importer to a wholesale inen distributor In each case the vendor is selling goods andor providing services to the restaurant that the restaurant will either resell or utilize in the process of providing goods and services to its customers As Learning Ob39ect 21 demonstrates stakeholders tend to be interrelated and the various transactions and relationships that result may be in conflict at times How these circumstances all get sorted out can be complicated and challenging And while these five stakeholder examples are the most common others exist that may or may not be considered as significant stakeholders as well For example local state and federal governments usually collect taxes from and provide some services to most businesses There are business owners who consider the broader society and local community within which they reside as key stakeholders concerns for environmental impact and social responsibilities may be given very high priority In other cases especially historically speaking these considerations have been virtually ignored depending on the owner s point of view Later modules of the course will provide opportunities for further exploration and examination of various stakeholder perspectives choices and decisions about stakeholder relationships and priorities reveal a great deal about any business Each of us has the right and responsibility to carefully consider these as we decide which businesses to patronize or seek employment with or to invest in so stay tuned So businesses usually need to make a profit and must work out which stakeholders matter most and all that but what makes a business a hospitality business It turns out that business is not the only word with more than one definition and when you put the word bospz39talz39tyin front of business it can seem even more rather than less confusing because there isn t necessarily long standing formal agreement about exactly which businesses should be included in this category Common use of the phrase bospzk abk y business appears to be relatively recent Colleges and universities in the United States started offering programs and degrees related to preparation for employment and careers in the management of hotels in the 1920s Cornell s School of Hotel Administration was probably the first founded in 1922 wwwhotelschoolcornelleduabout but European educational institutions offering formalized study of or training related to hotels and foodservice can be dated at least as early as EcoleHOteliere Lausanne httpwwwehlchb which was founded in 1893 in Lausanne Switzerland The original focus of most of these sorts of programs seems to have been hotel operations which included foodservice as well and most did and some still do refer to hotel in their names Since the mid 1990s contemporary educational programs a recent estimate put the total number of US 4 year college based programs at about 2001 have tended to name or rename themselves to include the word hospitality as in Department or 501200 ofHospz39taZJ39tjx followed by something like Management or Leadersnzp or Busznessz Hotels and restaurants seem to have been in the hospitality business category all along but these days more industries are included in the category and to make sense of which ones are in there now and why let s step back and consider that over the recent past the economy of the United States has undergone a profound transformation from being dominated by manufacturing to being dominated by services The service sector currently accounts for about four out every five jobs and about 70 percent of the economic output of the United Statesg and plays a significant role in the economies of many other regions of the world So one fundamental way to categorize businesses is as either goods producing or service businesses Goodsproducing businesses primarily turn out tangible products by engaging in activities such as manufacturing construction mining and agriculture Because they require large amounts of capitalithat is money equipment land and other resourcesito get started and operate Categorizing Businesses goalsPTO ducing businesse s are Goods Hospitality Service Often producing hybrid providing businesses businesses businesses called capitalint 9 ensive Lodging businesse Manufacturing Finance Conslilulion Cg geg Insurance Agriculture Privategcmbsg ealth care 5 mmg Meeting management Consult39ng Service Figure 21 businesses on the other hand don tmake at least not solely tangible stuff but perform activities for customers This category typically includes finance insurance utilities retail trade banking entertainment health care repairs and information Service businesses tend to be laborintensive businesses in that they usually depend more on humans than machines and buildings for satisfying customers and earning profits The distinction we ll make in this course is that hospitality businesses are most often bybn drproduct and service providing businesses that focus on treating their customers as more than just strangers to make money off of but rather as guests 13911 a warm r endIy and generous way so that relationships are formed and loyalties ensue and yes profits flowiideally lots of profits over really long periods of timelFigure 21 depicts the continuum of business categories Hospitality businesses HBs work to convince strangers to become customersicustomers who after experiencing the service and maybe a product or two as well provided by the hospitality business feel as though they are a guest When they leave the business not only do they want to return again they ideally become advocates for the businessithey tell friends relatives and even strangers how great it was and that they should try it too For our purposes we ll consider examples of hospitality businesses included in each of the segments shown in Learning Object 22iroll your cursor over each for a quick overview of that segment In future course modules you ll be able to explore the size and scope of each segment including a brief historycontext career resources and current trends Through text video and graphicsLearning Objects you will be able to better understand the key responsibilities of ownersmanagers in each segment and see how the business fundamentals as presented in Modules 2 8 are applied in the context of each segment Click here to read about how the pineapple became a symbol of the hospitality industry In addition to usually being a cross somewhere between pure service and pure product providers most hospitality businesses especially the various types of businesses that provide overnight accommodations for travelers also fit into another business categoryinamely the tourism businesses These are businesses that support the activities of persons Image Jupiterlmages Corp traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure business and other purposes 4 There are other examples of tourism businesses that will not be explored in detail in this course such as those that provide transportation planes trains automobiles ships etc recreational activities diving climbing biking fishing etc and travel coordination and consulting travel agents destination management companies convention and visitors bureaus etc Governments at all levels tend to like tourism businesses because when travelers visit they usually leave money behind when they departithis typically has some favorable economic consequences for the place that attracted the tourists Tourism spending has the potential to be a year round economic contributor Taxes paid by both tourists and the businesses they visit as well as by the employees of those businesses may be a substantial portion of government revenues for a given region or country Because of what s known as the multiplier effect it s not just that tourists spend their money and goiit also how that money gets re spentinvested locally that makes these types of businesses especially appealing The multiplier effect is calculated by adding measurable traveler expenditures direct benefits and multiplying by a factor which is an estimation of the number of times each dollar circulates through the local economy to estimate the indirect benefits Indirect benefits include for example HB jobs created HB salaries and taxes paid suppliers to HB profits and so on The multiplier effect continues until the money eventually leaks from the economy through the purchase of goodsservices from outside the local economy as shown in Learning Object Q The arguments in favor of the potential benefits of tourism are more than economicitourism can enhance understanding and promote peace and respect between cultures in ways that are tough to replicate Yet tourism may also result in economic challenges if a regional or national economy is solely dependent upon tourism and a disruption in travel natural or man made slows or stops tourist arrivals The destruction of physical and environmental resources has also occurred because of past tourism development in some regions of the world Recent trends toward sustainable tourism models sometimes called ecotourism which respect the sociocultural authenticity of host communities and attempt to conserve their built and living cultural heritage and traditional values are encouraging possibilities for ensuring viable long term economic benefits to all stakeholders The importance of each tourist related business doing its part to keep each traveler feeling like a valued guest cannot be overstated and even if a hospitality business doesn t attract or serve many or any travelers such as a neighborhood bar and grill or a private country club service is still critical to business success which is why its important to look more closely at the characteristics of service Assuming we all know good service when we experience it as customers what can we learn about service if we take the hospitality perspective That s what we ll do in the next module It s service for sure those activities performed for customers that HBs want to make into guests and not only is it intangible produced simultaneously and often face to face by the seller and the buyer and potentially different each time it is also extremely perishable That s a bit more to think about than just wherewhat to eat for dinner or where to gostay on the next vacation isn t it Intangibility Perishability Inseparability and Variability understanding the HB perspective requires careful consideration of each of these elemental characteristics of service Armed with this understanding owners or managers of hospitality businesses are better informed when making choices about where to apply effort and resources to increase the likelihood of maximizing profits andor whatever other outcomes the hospitality business is aiming to achieve What happens when someone purchases a product clothing or an iPod or a laptop computer for example They wear it or listen to it or playwork on it they experience multiple tangible sensations via sight touch hearing etc and often not only tell other people but will sometimes even let others try it to see or listen or playwork with the product If the other person is impressed enough to buy the product to have their own copy of the clothing or iPod or computer if the same brand color or model is purchased by both it is likely that neither would be able to tell the two products apart But what about when someone makes a service purchase specifically at a hospitality business Is there anything tangible that a guests take with them after an outstanding stay at a hotel Those logo towels don t count Yes guests do take some product portion of a restaurant purchaseexperience with them when they leave but whether they ingested it or brought it out in a to go container the product part of the hybrid productservice purchase is gone one way or another in a matter of days at most As a rule the more service we experience the less lasting physical evidence there is Most people have more faith and trust in what they can see touch hear smell or taste a lack of tangible physical stuff creates uncertainty and doubt There s pretty good evidence that humans are less likely to risk resources especially money and time when they are uncertain Understanding the intangibility of service is essential from the HB perspective We will explore the implications from marketing and other points of view in upcoming course modules Unoccupied hotel rooms from last night or empty restaurant seats at lunch yesterday represent lost revenue for the hospitality business that cannot be made up The opportunity for hospitality businesses to reap financial benefits comes and goes quickly and any one opportunity missed is gone permanently Product providing businesses can hold an inventory if the pair ofjeans or iPod or refrigerator that didn t sell today can still be sold tomorrow there s no real harm done But this isn t how it works in most hospitality businesses If a 100 room hotel sellsrents only 50 of its rooms on any given night it cannot realistically recover the revenue lost from each unsold room the next day And suppose that hotel is full by 800 pm on another night it doesn t do much good for the manager to tell the couple who come looking for a room at 830 to come back tomorrow Likewise a restaurant server could be overwhelmed by a lunch rush and be unable to serve all the guests seated in his section as well as he and the guests might like An hour or so later his section may be empty Guests who show up at that time may receive exceptionally attentive service or maybe they ll get rude treatment if the server is worn out from the rush and just wants to go tally up his tips Circumstances like these may happen on any given day in hospitality businesses and the costs and other implications are significant It is an on going challenge to predict and prepare for times of peak business activity without going broke when things slow down Again we will revisit these and other challenges and explore solutions to them when we look at applied operations and marketing fundamentals later in the course Service by definition is interaction between provider and purchaser oftentimes face to face and separating the simultaneous production and consumption of a service can t really be done Product producers can inspect out the defects before the purchaser gets access to the product The pair ofjeans or iPod or laptop computer can be physically examined and tested to ensure that quality standards are met sometimes while still in production but certainly before it is shipped or handed to the customer Customers need never know if production workers were having a bad day or were not well trained and took a long time to fabricate the product in question But the demeanor of the person providing a service matters what they look like smell like and sound like can make or break the customer s perception of the service Even if a restaurant server or hotel front desk agent performs prescribed actions in the correct sequence to take the guests lunch order or check them into the hotel for example if they do so in a robotic or disinterested manner the guest will still perceive the service as unsatisfactory Taking the HB perspective owners and managers must understand the implications of the inseparability of service when selecting training and rewarding employees Future course modules will revisit this topic with applied examples in a variety of hospitality settings w n opponumtv for somethmg enurew umquem happen There are a vanetv of om speoho emp ovees are on owquot can be swgmhcan 1 The envwronmentrthe semng m A I uuvv o m 5 o trave ers on vacauon who mav be seekmg a warm we come and even a bmef o to her 56 5 w 55 5 we professmna s app vmthe ohauenges ofserwce meow We39H exp ore other puonsmiuturecours mm the hnsprmrty busy1255 rder to deve op a rempefo showhg someone e se homo make m Check out this short video to see a few of the possibilitieslclick herel What may seem straightforward and obvious is not always simple just like making a good PBJ delivering high quality and consistent service is often more complicated and challenging than it seems Delighted customers and profits are always among the objectives HB professionals want to achieve a they may even serve PB s to help achieve these results Because of the variety that exists within and among hospitality businesses there are several versions of the recipe that may be used to satisfy guests and generate money i but service including the characteristics just described is an essential ingredient in nearly all cases Beyond this key ingredient of service what else needs to be considered when analyzing and concocting HB success recipes Marketing expertise sound human resources policies and timely and accurate accounting procedures cannot be overlooked and will be included in upcoming modules But another fundamental component of HB success is captured in an expression borrowed from the lexicon of bullfighting and popularized by I an Carlzon former CEO of Scandinavian Airlines back in the late 1980s The phrase is moments of truth which according to Carlzon and others occur an yume a customer comes 1nto contact Wit2 any aspect of a buszness no we ver remote and nas an opportunity to form an Impression If a moment of truth could happen any rm to any customer when shehe encounters any aspect of the business with the potential for an impression of the business to be formed what s an HB ownermanager to do Consider this case One afternoon your friend sends you a text message wanna try tnatneyv restaurant tnatjust opened do wnto yvn jr dznner You reply coo meet u there 6pm How many moments of truth MoTs would the restaurant ownermanager need to be aware of in order to manage them all so well that your dinner out becomes an experience that delights both you and your friend and generates profits for the HB We ve put together a short simulation to assist you in understanding some of the possible moments of truth you and your friend might experience during dinner a click here to view it Thencheck out Learning Object 31 i it provides you a chance to rate each moment of truth thumbs up or down etc during your simulated dining experience and then vote for what you would do after it was all over Feel free to take a couple of cycles around this simulation just like in real lifequot no two experiences are ever likely to be the same pep up learning Object 31 could happen during an actual dinner at a restaurant but from the EB perspective this represents only a fraction of the real possib ties We didn39 t even Th r w t a replicated but not exactly duplicated by hundreds of guests on any given day Which is open 360 days in the year We39 d soon be talking about the potential for millions of experience e EB perspective is further complicated when We recall the relatively high level of w Thir u mi is Why if an EB manager Wants to have a ghting chance at managing the myriad of What factors in uence guest expectations It39 39 r r expensive and today39 s consumers tend to be not only bombarded by and therefore likely to tune outquot but also pretty skeptical of these sorts of messages Previous experiences M hmta39 for mm meal at any competitive restath will be based in part on What they39 ye come to expect from Mickey D39 s While marketing messages and previous experiences may be in the persuasion mix for over atio an in uence This has been shown to be exceptionally importantfor hospitality businesses specifically restaurants and hotelsz So effectively converting a customer to a guest during any series of moments of truth isn t only just about that one individual customer guest and the associated revenues and potential profits it is much more because it is the start of the most efficient and effective process to shape the perspectives of and attract new customers The messages that current guests carry to new potential customers who ve never tried the HB s serviceproduct before are most often the best means to get them to overcome their reluctance to risk dollars on a previously untried service purchase and allow themselves to be converted to guests As powerful as word of mouth may be from the HB perspective it s also important to recognize that it can cut both ways customers who experience poor service aren t usually shy about telling others about it There is also research evidence that suggests that while people who have positive experiences tell lots of other people those who ve had bad experiences usually tell many more Contemporary and emerging technology will likely only magnify the importance of word of mouth It s already possible for users of a variety of social media and other tools egYelp BooRah Trip Advisor to share restaurant ratings and reviews with their network via the Internets Businesses may also try to use these emerging communication channels to explain situations and fill in the facts from their perspectives or at least to describe how they ve corrected problems that may have been shared via blogs or other public review channels But once the word is out it can be tough to counter perceptions Clearly getting it right when it comes to understanding and providing service that customers perceive positively is vitally important One way to better see this importance from the HB perspective is to try to quantify it To do this we can consider both the short and longer term implications of perceived service quality and word of mouth and then measure it in dollars It s possible for any hospitality business to estimate the lifetime value of a guest which is the amount of money a guest will generate over the life of their relationship with the business To do this the HB ownermanager needs to know or estimate several things The average purchase per guestvisit say a 20 average dinner check for a restaurant Average number of purchases a guest makes annually suppose they come in twice a month Average number of years a guest continues to purchase we ll plug in 15 years We end up with 20 x 24 visitslyear x 15 years for a total of 7200 others your customers tell about or persuade to try out your restaurant over those 15 years lfvve estimate that at the pretty oonservative rate of 10 people per year that39 s 150 more w least one average guest check a and it39 s likely some ofthem beoome regulars and tell o thousands of dollars over a period of years thers and so on a that 20 average dinner check per person can add up to many H t aw t feeling somewhere between disappointed and really upset about the service they experienced This Wouldn39 thave to be the same server every night behaving badly it could Just be random servers taking tums having ghts With their every night tell 10 people who then each tell six people people love sharing juicy bad servicequot stories V s 60 negadverefezrals per night lfyou39 re thinking that seems like a lot or too many think again about Yelp orFacebook or Twitter doesn39 t know or care about moments of truthquot or WOM he does nothing Now it39 s m m m w night x 3 nights per year x 20 average check Considering that restaurant pro t margins are usu y razor thin We39 ll look at this in more detail later in the and the dog only hangs out because it doesn39 t know What a gigantic failure he is and would likely scamper offin favor of a shoppng cart lled With bacon ifone We For What it39 s Worth similar estimates for other hospitality businesses such as hotels or livid r tannin MoTs and WOM is the 1asthope of parents everywhere 7 there isn39 tenoughbasement space to go around so we39 d better get this right There s even more to consider from the HE perspective when it comes to understanding service variability inseparability and the like i and the sheer number of moments of V t it39 achieve service perfection Someone is going to be disappointed sometimer It39 s inevitable or losing customers and ultimately staying in or going out of business r r W complaint behaviotsi For example Only about nalrorpeopie who experience a problem will complain to a customer contactlrrontllne employee An even smaller percentage 5 percent or less of people will take their complaint to a manager or lg er Willingness to complain varies by issue problems that involve poor tre ment or lnco ce result in comp 39 a or less clrcums an directnnancial loss lead to high complaint rates 50 75 Dosi ve What may be lessclea is What can be done about all this i but fearnot cuz there39 s a lot It starts with what matters most to the ownermanager a when service is at or near the top of the priorities the tone for the business is set How the business recruits selects trains coaches and rewards its employees is critical and we ll be looking at more specifics in this regard in later modules The level at which frontline service providers restaurant servers and front desk agents and others who interact directly with guests are provided with the authority and accountability for ensuring that the moments of truth they control are positive is the first manifestation of the service culture of a business L Because it s so difficult to always know when things EVALUMIDN aren t going perfectly from a service standpoint HE E Ulllstandln ownersmanagers employ different strategies to learn U Very Good El Salistaclury Ll Marginal Monitoring guest perceptions by paying attention to the El Ullsalislar mn more about how well service is being delivered public pronouncements they make via the technologies we discussed earlier is a good idea much better than waiting to see if someone will actually fill out those old fashioned comment cards Hiring others to anonymously pose as guests who test the service and report on what they experienced also known as mystery shoppers is also a commonly employed strategy Believe it or not this is big business there s an association for providers of these services the Mystery Shopping Providers Association lhttpwwwmysteryshoporg and it even includes a blog where those doing the work and hiring others for this sort of work may exchange views httpwww hopper mm m stei shoporgD Soliciting and collecting e mail addresses during check in or during point of sale transactions can provide a database for direct communication but the time delay inherent with this strategy limits its potential effectiveness Since the evidence shows it s unlikely that most customers will speak up the goal from the HB perspective is to encourage dialogue while the guest is still accessible to make it easy for customers to complain while they are still in the building Asking guests questions like how does everything taste or how are you enjoying your stay directly is wise but again it s tough to inquire of every guest every day The importance of training all employees and especially those observing and interacting with guests directly is again evident Consider the role of guestroom housekeepers in a hotel It may not be the most glamorous job in a hotel but there are probably no other employees who have a better chance of interacting with guests during their stay and seeing or hearing about problems which can then be solved but not if the housekeepers don t see service as part of their responsibilities In spite of recent efforts in the news media to educate customers about how to effectively complaing the best current evidence as we saw earlier is that most guests won tprotest directly Still it is important that hospitality businesses are ready to resolve matters when they do i that s when the skills of frontline employees those actually providing service will be tested And they need to know how to make things right First by understanding that complaints are not only inevitable but are in fact opportunities and ultimately marketing tools then they just need to LEARN to handle them by following the steps in the acronym below Listen Empathize Apologize React Notify We ll wrap up our look at service fundamentals with a blog entry from consultant and author Alexander Kjerulf click here to read it i it may prompt you to reconsider your opinion about whether or not the customer is always right In the next module we ll take a closer look at HB ownersmanagers especially the entrepreneurs those who start their own operations It turns out there are a whole lotta choices they have to make especially if they want to stay in business for any length of time This module is intended to help you better understand important stuff that entrepreneurs people who risk resources like their time and money to start and operate a business learn through experzbnce Experience has sometimes been described as that wonderful teacher that gives you the exam be jre the lesson The intent here is to circumvent pain and skip to the learning to the degree that can be done While the essential information we ll be exploring applies to hospitality businesses and examples will be drawn from them these fundamentals will be relevant to most any type of business And here s yet another example of content being valuable from a variety of perspectives obviously if you ve dreamed of or are intent upon startingowning your own business the ideaslessons that follow will sooner and later be useful But even if you don twant to startown your own business it s still probable that you ll work or otherwise be some sort of stakeholder in someone else s business So if you take what s here to heart and mind you ll better understand what the owners go through Not only will you be able to pass and even score well on any quizzes or tests you may take covering this subject matter it will be more evident how you can contribute to solving problems for those who actually own the entities you ll work forinvest infrequent as a customer This can keep you happier healthier and may even help you become wealthier In business as in other competitive activities such as sports or games there are no guarantees of success wealth or fame There are too many uncontrollable variables to remove all of the risks involved but that s part of the appeal it s never really certain who s gonna win or lose and even the losers know there s almost always a next time Each new business has the ln agu a u Samar 2m Usan Lamar licensa horn Shutmstotk Inc potential to succeed beyond the wildest dreams of its owner but then again things don t always work out as well as the new owner expected One way or the other this module should help anyone who s interested get at least some clue about what they d reaIbee getting themselves into if they decided to take a shot at entrepreneurship There s also more than one way to become a business owner For example it s possible either to buy an existing business from the current owner or to purchase a franchise i but we ll look first at what s involved in a new business start up because this process best illuminates the fundamentals We ll frame our analysis with these questions about entrepreneurs Who starts their own business and why 1 2 Where do they get their ideas and money 3 4 5 What legal forms do new businesses take and why How well do things usuaIIy go Starting a business 15mm scratch seems like it would be a boatload of work doesn tit why would anyone want to go through all that Anyone who could actually do such a thing must be more superhero than human right You ve probably been a guestcustomer or at least heard of companies like Marriott and Red Lobster well it may be hard to believe but each of these now massive organizations got started with one location by one or a just small handful of people Check out these links for background details 6 The Marriott Timeline Darden Restaurants After looking at these examples of hospitality entrepreneurship and also considering other entrepreneurs who receive the most press and notoriety most recently people like Larry Page and Sergey Brin who started Google or Mark Zuckerberg who started Facebook and many more before these folks it may be tempting to think that as a group people who start businesses really do possess qualities and motivations beyond those of most mere mortals But in his 2008 book 7716 11mm ofEn cprenembzp Scott Shane presents fact based research that refutes many of the well publicized explanations about and descriptions of entrepreneurs According to Shane most people who start their own businesses do not posses superior intellect will vision or values and it s not a desire for notoriety thrill seeking or the thought of huge financial returns that motivates the majority of them It turns out tratmost peopJe start tnle own businesses because they 0 strong y prefer Image n Cwmm not to rave a boss On the face of it this seems like a positive and probably admirable trait but Shane points to evidence that the most likely entrepreneurs are people who ve frequently worked part time and who ve been laid off i e and the longer they are unemployed the more likely they are to start a business There s even data that suggests that the less money people earn the more likely they are to start their own businesses A significant take away from Shane s book is this don t glorify the small handful of exceptionally successful entrepreneurs at the expense of reanty the differences between most entrepreneurs and the rest of the world aren t very significant This is good or bad news depending on one s perspective The good news is that most anyone may be able to start a business the bad news is that most who do will not last too long we ll look at evidence for that a bit later Wondering about who starts their own business and why leads to a variety of answers and some may actually be worthy of further evaluation and even emulation Let s see if we can tuse a bit of critical analysis to figure out what and who is worth paying attention to when it comes to really understanding entrepreneurs How about immigrants There are wonderful stories of those who ve come to the United States from other nations and achieved financial success by starting their own businesses sometimes poignant evidence that entrepreneurship may be the ticket to the American dream for immigrants Ethnic themed independent restaurants abound in many larger urban areas and maybe the best lodging related example is the compelling history of AAHOA the Asian American Hotel Owners Association Check out this link to learn more click here But as moving and inspiring as some examples may seem it s important to recall that we don t tend to celebrate or hear much about the countIess other immigrants who failed or who never tried39 Forgive this seeming cynicism s not that being inspired by success is bad or wrong but context matters so there must be more to it than immigrant status right7 Lfthe average person who starts a business isn39 treally that exceptional what are the longerrterm nanda y successful entiepreneurs like7 Scott Shane again provides researchrbacked facts in The Humans of b39epreneumhlp According to Shane those mostllkey to Succeed 7 edit a Contrary to the popular stories at quotquitting schoolquot to achieve success Shane points lp research that shows a e higherthe level nleducaiich achieved by the entrepreneur the higher lhe level of revenues nancial peridrmance by lheir company w while befar starring a ccmpan y The racls ravcr gaining experience walking lcr scmecne else getting to lrnpw the lndustly taking what they may have learned in schch about marketing linancial ccntrcls andt impcrtance of service tnot Just mice and actually putting these ideas into practice especially in the industry they plan to start a business In before they actually take the entrepreneurial plunge Have the rightmcm39ves That is they alen39t just trying in avoid lhe tcrmenis at a boss or unemployment They actually undersland typically because of the lirst two points mentioned above haw to establish realistic linancial goals and nize what lhe odds at lailln really are so they tend to p an conservatively enough to wealher the toughest limes which usually occur in the earliest days or the new business entrepreneurs even the nancially success il ones do not possess spemal traits or Qualities beyond what most of the rest of us have But even when there adequate levels of education experience and motivation entrepreneurs need a couple of other things too so 10 The range of sources for new business dreams is essentially limitless 7 but considering what makes entrepreneurs most apt to achieve nancial success the likelihood is that many of the ideas come from having had education andor 39 i i 39 Man restaurant entrepreneurs began by working in someone else39 s eatery Dave Thomas founder ofWendy39 s International is a famous example but they don39 t always come up with the big ideaquot themselves 7 sometimes it was someone else39 s ideathat they tum into something more Consider the McDonald brothers start up which provided milkshake machine salesperson Ray Kroc with the concept upon which he began the worldwide empire of the golden arches2 Even if we were only to think about food servicerestaurant concepts they still may evolve from a variety of starting points but a fire m the gut passion for the idea really seems to help A case in point how many aerospace engineers and medical supplies salespeople end up starting a successful bakery cafe chain There s at least one known pair so far that has pulled this off i the founders of Grand Traverse Pie Company Click on the link in the sidebar above to view the YouTube video Grand Ira verse Fire Company on the Food Network to learn more Sometimes the entrepreneur s own experiences as a customer especially unpleasant ones can provide insights and ideas We saw in an earlier module that most people won t complain about stuff they don t like but every now and then a disgruntled customer decides to start a new business to rectify productservice experiences they weren thappy with someone like Kemmons Wilson to learn the story of the Holiday Inn hotel chain and how it came into existence Maybe it s realizing that no one else is doing something a certain way or taking an idea concept or even menu item from one region to another Chicago style pizza or New York cheesecake possibly importing a culinary or service style tapas bars ethnic cuisines or even combining different possibilities ie fusion cuisines that may be the impetus for a new business start up Could be the feeling that I could do this better or sometimes it might be a suggestion from a friend relative or teacher you should start a Regular folks everywhere can take heart the proof is out there that starting a successful new business does not always require something entirely novel and uniquely different It does not necessarily call for some super level of spontaneous imagination It seems to be less like hoping for the proverbial light bulb to go off in your head and more like simply turning the light switch on e and then looking more closely at and wondering about all the surrounding stuff The ideas for a new or different business are pretty much infinite and may come from almost anywhere money on the other hand can be a bit tougher to come up with An idea even something astoundmgly brilliant won t get an entrepreneur very far without funding While one may consider several options to find or generate cash marry rich buylottery tickets or work on genetically modifying trees to grow dollars for example some will likely yield better outcomes than others m r t h a how much money is needed and how will it be used7quot Most new hospitality businesses require money for at least the following categories Lacallun rentmortgage Equipment Suppliestnvenlory Labovlbene ls Insurance uttmtes eleclnclty neat watett Mam erlance Mametmg austngss lIcensestpermIts mwmmmmmw 1L Once the wouldbe entrepreneur has completed this estimate startup costs can then be tallied up The collective wisdom of those with business startup experience suggests that most people underestimate at this early stage and this is o en the first step toward going under Again the first daysweeksmonths of any new business are frequently the most difficultt Time and again the folks who ve Conversations with successful entrepreneurs usually lead to admissions that they have been tumed down o en many times for financing It39 s a time w en perseverance may really be tested Startup funding for new businesses aka the seed money may come from s ownerts But what if there39 d and the entrepreneur doesn39 t want to wait until enough is saved7 Choices for nancing the business can be narrowed to either taking on debt or selling me combination thereof Again questions can help Clarify the best choices For example How much control of the new business is the entrepreneur willing to s are or omfortably give up7 And how much is too much to borrow Let39 s start With the borrow avings andor other personal resources of the ave ing question First recall from earlier modules that s stakeholders include at least an owner and maybe several and creditors lfthe ownerts Choose to start the business via debt sh he ey must find someone or some entity Creditor to obtain funds from in exchange for having lent the money th editor will expect over an agreedupon time period to be repaid the original amount borrowed the the s39 possibly an t em principal plus interest again at an agreedupon rater Obviously this means that the owner will repay more money than was originally borrowed So the answer to the how much is too much Question depends not only on the amount to be borrowed but also on how long the owner has to repay it and how much it costs to borrow Interestrate The second Question about control of the business can39 t be Since as was noted earlier many w mm a entrepreneurs start a business because they want to be their own bosses this can e t nancing somewhat attractive The obligation is clear the e is limited to the principal plus interest over the loan repayment period and once it s i 0 further cl ess impact on the credit rating of the owner andor business making it harder or loan the meditor may have the light to call the loan due require payment in fu refuse to make the loan entirely So who39 s lean Ikey to say no7 Friends family members and former coworkers are potential sources Personal relationships may be persuasive terms of which could be the difference between success and failure during those destroyed is very real The dynamics during events like holiday gettogethers may be forever changed and not for the better ifloans are made but not paid between ly me rs or friends Borrowing from banks or other commercial nance companies avoids this concern but the loan terms are not likely to be as generous The US Small Business Administration SBA and state and local governments have developed programs which may be useful depending on the region and type of business Check these out if you d like to explore more click here Another type of debt nancing that is often employed by hospitality entrepreneurs is known as iradeorvendor credit As stakeholders in a business vendors may allow entrepreneurs to purchase supplies and equipment directly and spread the payments over several months or years Depending on the types of products especially some types of equipment it is may be possible for entrepreneurs to negotiate a low down payment or no down payment and even to avoid interest charges Some vendors are willing to adjust the terms of payment to extend credit after several orders have been placed and paid in full Again a track record of success often gains more favorable loan terms When vendors are selling products services in highly competitive markets they offer terms intended to induce the entrepreneur to choose them over the competition Wait a minute what about the idea of equity financing Is that a better option Compared to debt financing equity financing entails no repayment but it does require the entrepreneur to sell at least a partial interest in the new business This essentially means the equity investor becomes a co owner of the business so the entrepreneur and any equity partners need to have a clear understanding of l who gets to decide what when it comes to operating the business Sources of equity financing may still include relatives friends coworkers and even customers In some industries equity funding may come from venture capitalists investors who usually specialize in one or a few closely related industries often cutting edge technologies and the like Venture capital doesn t often flow to most types of hospitality businesses because the potential returns on the investment are less attractive than may be found in other business segments 50 what s so great about equity financing Again the entrepreneur usually negotiates terms with equity investors that do not require repayment of the money invested by others at a specific point in time Given the challenges in the early phases of getting the business started when cash may be really hard to come by not having payments due can be pretty handy Equity investors typically take a longer term point of view and are usually banking on the growth and potential expansion of the business over time But that question of control still looms and can get pretty complicated so the advice of accountants and lawyers is usually sought out but that isn t free eitherl Debt financing especially for most types of hospitality businesses which usually start relatively small is common However if and when things do go well especially if the entrepreneur is determined to expand the business shehe may at some point combine some equity financing too It is very common for hospitality and other entrepreneurs seeking financing for a start up business to develop a business plan which is a sort of show and tell document which among other things may serve to persuade investors andor creditors to participate in funding the new business The business plan will literally spell out the operational details assumptions and predictions for the new business A well crafted business plan will also help the entrepreneur in systematically organizing for success but the most significant function of many business plans is to influence those with money to share some with the entrepreneur to help convert a dream into reality The SBA website includes links intended to assist in the creation of effective business plans check out this link if you are interested in learning more OK i so far we ve considered who and why and ideas and money a but wasn tthere another question or two we started this module with There was something about legal forms of new businesses wasn tthere Turns out that this question overlaps with the financing and control decisions that were just being considered And speaking of legal advisors selecting the legal form of ownership is a time when many of them can really earn their fees and save the entrepreneur headaches and money Why you may ask Mostly because there are several choices an entrepreneur has when it comes to legally structuring a new hospitality business The answer to which legal structure is best can be fairly complicated to figure out and depends a lot on answers to questions related to matters such as the relative difficulty in staf ng and tennznaHng the business the nanczng needs of the business who s in contra and gets to keep the profits or absorb the losses who s on the hook for what i in other words Inga 112nm and finally how to deal with taxes with the goal typically being to pay the lowest amount legally possible Now s the time when those old lawyers and accountants can be pretty helpful in getting all the issues and related questions properly sorted out So let s look at what s on the legal ownership structures menu and the relative advantages and disadvantages Who knows maybe you ll be the lawyer or accountant or entrepreneur sorting through these jrrca someday Here s the menuSole proprietorship Partnership Corporation Limited Liabili py Company one39 s mind around There s been much said and Written with some Wonderfully module about Marriott and Darden and Kroc and Wilson but there39 s more and some leaf in business for ve years and less than onethird last ten yearsquot Studies speci c to 39 r nwm min results to anyone it39 s been speculated that there may be many more startups that stayquot during any given time frame than there is con ning data So What can We make of this sort of stuff7 Well one consideration to keep in mind is mm mi m r a a a quotwimp tend to go out of business 1 nsumcientslart up capltallm nay 2 Managerial Incompetence a Paarhumanres Dumas practices 4 ne ective markeling 5 Poor cash management and expense cantmls This module h m i y r ma that address points 2 through 5 as already more or less dealt with What one may do to avoid number 1 on M charge ifit39 s not the owner then someone the owner Days This module will be devoted m mm w m We Will do this at a basicfundamental level and with homitality emphasis Which is Why franchises and management companies will be included in the mix because these Rm r t l t39 s boil amanager39 s Work down to its elemental components m a mith language arts classes7 Tums out metaphors can be pretty useful for the task athand Remember What they are7 Sure you do a s comparing two seemin y different thingsideas in a way that reveals what s common or similar about them Metaphors are particularly helpful When considering something like ospitality business managers Which most folks taking this course becoming and other Jobslife roles that are more familiar Since this digital publication is experiences Let 5 try a couple A manager is like amquot Th y ay no Athleticsports coach Especially of team sports the coach doesn39 tplay but an ml ideally it exceeds the efforts of any Opposing team they may be up against at y them Let39 5 look at that by considering EB examples Managers goals Attract and keep customers ro t for the owners Treat emplo ees in a fair an respectful manner Leave the worldearthsociety better off than it was before Means to achieve Time money people products equipment effort and operating systemsprocessesprocedures asZer39 s 50b is to nd and align available resources in the best possible way to achieve the desired results That stuffin the earlier modules comes into play again a for example Which stakeholders matter most and which goals are the highest priorities7 hut t P7 t th desired results whatever they may be hospitality managers have to be good at phnningr A A r e a r T gt gt gt more applied way in lodgingr food service casino private club and meeting a but for now let39 i Fundamentally plannlng ls answenng the who and what mattersquot duestlons l39n 39 la n should they be and how Wlll thls be accompllshed And lrleaylngthe phySlcal matters how can that be measured and achleved Dependlng on the hospitallty segment and the see and complenltv ofthe even thousands ofguestrooms may have several layers ofmanagement The a rare hote corporauon There are manv orrrereht wavs anv p an coma be mmememed The orgamzmg T h h h 39H do goestsThevrsoa representauon orthrs structure rs caHed an nvganixatinn than Here39swherethe nswersmquesuonsaboutwhoandwhatmattersmav H tr ct r4 F h Min svstem of contro Mow can fmmhne emp ovees errectweh conduct necessarv r mdmg howto orgamze arw hospwtahw busmess reqmres cohsroeratroh or severa ractors The examp e above pomts out that the sources or power 7 managmg dvnamwc servrce prowdmg ehvrrohmehts what about sue doesn39t rt matter How manv gmH meatsand rrom those who prepare pasmes A A a arge hotew How manv peop e shou d the hote in M accounts another to southern etc or bv market segmentcustomer tvpe z t t In addmon to power and sue cohsroeratrohsthere are 5th otherractors that Managers mdsuor examp e understand how much me rs needed to do spemhc A I k A h I based on thegoa sand comp emv or each tvpe or hospnahwbusmess weu ook at dam and app vfundamema concepts of orgamzmg m M W do u IA power We can ook at orgamzauon chartsfor does about power m anv spemhc h h rp r p r m omer wordsthe power orreword Thev can a sothreaten or do negatwe 5M hke cumng emp ovee hours or pav or even hrmgthem wmoh wou d be the use I mav exert referent power so we havmg a Me rm usuaHvenough to srgmrroamw mHuence behavmn and nothavmg awe on39t necessanw keep someone From wwe dmg I a Ii 9 w a I w m mp ovees domg onw what gets exphm v rewarded ow nothmg more nesmanoe and even comphance aren39t mew The managers who are most likely to succeed know they must elicit a sense of commitment from others To inspire this sort of loyalty effective managers wisely use a combination of power sources especially a mix of expert and referent power More than just a job title or box on an org chart it s often this combination of what ya know and who ya know that results in effective service management M hei to explore the types and sources of power available to managers in the delivery of hospitality services by completing Learning Object 51 Much has been written and said about leadership styles but there s no convincing evidence that there is one and only one best style one that works in all cases Some leaders are democratic some are autocratic and some are pretty laid back in approach Effective leaders do tend to be good listeners and communicators They generally don t give up easily they persevere and they inspire trust Communicating inspiring trust and not giving up easily this combination of leadership traits and behaviors tends to transcend specific circumstances And in any event situations will almost always vary over time The effectiveness of any specific approach to leadership taken by a hospitality manager tends to be related to their sources of power and other aspects such as the characteristics of the employees involved and the complexity of the situation Because of the challenges associated with managing moments of truth and the importance of service recovery and WOM which can result in some pretty complicated situations hospitality managers who foster an environment of empowerment for frontline service coworkers are generally well served A critical component of a hospitality manager s job is engaging in the process of measuring how well things are going to compare results to what was being aimed at to start with so that adjustments can be made as needed Closely monitoring the stuff that matters creates the chance to reset goals if appropriate or fix problems that may have come up unexpectedly Whether the results relate to profitability guest satisfaction and retention employee turnover or environmental impact there are strategies tools and technologies that hospitality managers utilize to maximize success Some are statistical some are financial and some are qualitative Consider the following examples may be adjusted accordingly Me engineering so ware built Into pointof sale systems to allow for changes in the Items andor pricing on a national urant chain39s menu Anonymous employee satisfaction surveying do a a casin m s employee how the members perceive the renovations to the club39s recreation facilities exploring each EB segment These are businesses that exist to operate someone else39 sbusiness a forafee of course 7 and they are common in the lodging and food service segments of homitality 39 Tn fad r 1 V a n mum in 39 hospitality empires up and running 7 tells of an entrepreneurial success of a high order But what about this idea of existing to run someone else39 s businessquot what39 up im tnai Isn39 tthatgiving upcontrol and since it s not free money as Well7 What39 s th trade0H7 Why would owners do such things7 Sometimes the owners do it all themselves even ifthat includes stuff that s sort of peripheral to the organization s primary goals D Why don Well it depends it39 s usually because the owners have one or more of the following concernsissues 771W lack expem39xe They may own or buy real estate land and determine that a hotel m m 39M company to assist They lackinterest 7 Organizations which exist to manufacture products fromcars to ttmt tum tr tadium 39 t have to They39 their core business Want to Savemoney 017556 other bene ts Sometimes even those who know the etter to hire a management company Consider the example ofWalt w 395 w provider of diversi ed outsourcing services to feed their cast membersquot DisneYV a part as Well Wait aminute WhatWas the Word doing up there in that last paragraph isn39 tthat abad thing7 Does that mean that management companies s meumes act services providers cause people to lose their JObs7 ot usu y sometimes the Word outsoun ngis misunderstood or confused with other words like offshoring for example Offshoring occurs when a company moves jobs from one country to another For example manufacturing jobs may be relocated from one country say the United States to another say Mexico because this allows the costs of production to be reduced The people who lose jobs in the more expensive country are upset but the people who now have the jobs in the less expensive country usually aren t Continuing with the previous example of Disney outsourcing its cast member feeding to ARAMARK the workjobs are still required in Orlando at the same physical location Disney World and therefore workers are still needed there Rates of pay and other conditions of employment may change but no jobs would have to be lost in the process The terms of the contract between the owner sometimes referred to as the client or front and the management company which may also be called the operator or contractor will vary based on the industry segment and other prevailing circumstances such as the locations the owners reasons for wanting to outsource and the volume and types of business they might provide to a management company But the owner and management company will need to agree on a whole lotta additional stuff3 This will include the length of time that the agreement is to remain in effect how it may be renewed or terminated and the fees the owner will pay the management company These payments may include a base fee andor an incentive fee based on some performance related measure such as a percentage of the profits earned Other issues such as how much input the owner gets and on which sorts of decisions and who s responsible for repairing equipment that breaks or replacing furnishings that get worn out will also need to be addressed Owners usually insist on including a noncompetecJanse to ensure that the management company doesn t simultaneously hire itself out to a direct competitor of the owner This clause as well as any other matter addressed in the contract is still subject to interpretation which may vary based on the differing perspectives of the owner and the management company That s why management contracts also include some language to address dispute resolution which is an understanding about what is to be done if the two parties disagree about something important This includes who they will call on to help sort things out arbitrate who will pay for it and if legal push came to shove where court proceedings would take place including which laws and legislation would take precedence We noted previously that there are companies that specialize in private club management but there also many companies that specialize in lodging management such as httpwww hitelod Ding com and httpwwwwhihotel comb many others that focus on food service management wwwsfm onlineorgabout sfmhtm and still others that take a comprehensive approach providing diversified outsourcing services for example WWW dela arenorth comWho We Areaspx httpwww aramark com and httpwwwcgnadcom There s even an association for management companies that run associations httpwww amcin lllH rP orcihde maincfm We ll explore associations and why they are so valuable as well as revisiting the prevalence and importance of management companies in the hospitality business in upcoming modules Hospitality businesses have been at the forefront of the rapid growth in franchising in recent history but precisely what is franchising anyway That s an important query to clarify before we go much further Turns out that it s a sort of hybrid way for a new entrepreneur to go into business for herhimself but to 110th it alone Franchising also enables experienced entrepreneurs to try to bottle their jmuda for success and sell it to others i and if all goes well they both make more money According to the International Franchise Association IPA Franchising is a method of distributing products or services At least two levels of people are involved in a franchise system 1 the franchisor who provides a trademark or trade name and a business system and 2 the franchisee who pays a royalty and often an initial fee for the right to do business under the franchisor s name and system Technically the contract binding the two parties is the franchise but that term is often used to mean the actual business that the franchisee operates 1 One way to understand franchising is to realize what it is not It is not a form of ownership the franchisee still has to decide on a legal structure for the business as described in the previous module So all franchise systems involve a franchisor some franchisees a business system and some fees and the definition above covers the distinction between franchisors and franchisees But what about the business system and fees what s included there The business system is the bottled success formula It s the best the hospitality business franchisor can offer in terms of how the franchisee should do business so it will include specifics about the following Products what items to include on the menu andor what types 0 lodging accommodations to include and also what cannot be included MStHOdS for providing service preparing food and co trolling food inventory processing n uest reservations selecting equipme and trainIng employees as we as marketing and accounting Standard for all ofthe above as well as signs facilities layouts furnishings and so on H uth latitude in adapting to local business conditions and circumstances as they arise The level of training and support the franchisor will provide is also spelled out It39 s common forthe franchisor39 s staff to conduct training at the new franchise location as it is prepared to Open for business its bottled successquot and these fees also Vary Hospitality franchisors typically charge 39 39 39 fee from the franchisee simply for the right to use the franchisor39 s brand and to T 39 mylltiu usually calculated as a percentage of the franchisees sales revenue The franchisor may also charge the franchisee for marketing or advertising pro v purchasng assistance and con ting r Om sul ed success obviously isn39 tfree and it sure isn39 tsimplelt39 sno Wonder that Th am Hnt f infmau m and substantial to say the least So let s break it down compared to a from scratchnonfranchised start up Whar s grearand What snorabout franchising I For the franchisor what s great Increased opportunity to expand franchisees incur most of the expansion costs Ongoing royalties while the franchisee handles actual daytoday operations And what39s not Loss of controllpro ts franchisees still own each locationbusiness Tough to inspectensure quality throughout entire system For the franchisee what s great Viable business modelestablished product lname recognition Help with choosing locationconstruction plansequipmentfurnishings Management training and ongoing assistancer39peer support network Marketing programs Quantity purchasing powerldiscounts via economies of scale Access to nancmg creditors may perceive reduced risks with franchises And what s not Loss of some control if goal is to be your own boss this ain t it Large startup costs and ongoing fees based on sales revenues not 5 pro ts 5 Coattail effectsimpact of any bad applesquot in the system 39 Potential for too many locationslcannibalization In the next few modules we ll look at how HB managers can and should do all this planning organizing leading and evaluating stuff as they take on challenges and opportunities in the realms of marketing human resources and accounting in hospitality businesses Remember that those are the areas from back at the end of Module 4 that are most likely to cause businesses to become no Jonger zn busznessl To check your understanding of the key concepts and terms associated with legal ownership formats and operating systems included in Modules 4 and 5 click here to deciding how to structure and operate their businesses mi mi mid ti vi l to create exchanges that satisfy individual and Organizational ob ct ives Let39 5 break this de nition down into its component parts Proeeocan be thought of as a series of steps or a course of action Plannmg is the research and homework necessary to intelligently decide Wbatto do e know that ereenn39on means to perform a tasic or baWto do it When we aanaez39ve of something we demonstrate creativity The price we set hopefully is what the customer is WWW 5mm dung to pay Ramadan is about spreading infounation Dixmbudan in this context is the actual delivery of the idea good or service Exchange is giving something in retum for receiving something In this context exchange requires two parties the individual customer and the arganl39zazt39an the hospitality business For the Mum21 the ab c ve is to satisfy a need or Want The abj m39ve of the hospitality business is to make apro t In a nutshell We can say that mazkerlklgixsauix lmg wstamemeedspza tablx titi iiiw mi mark tivi relatively longterm approach How do hospitality ownersmanagers do this7 Consider this as possible Lfyou Were to use an Intemetbased mapping program to get directions the rst Question you Would be asked is Your starting point In another Wordsv Where are you light noW What is Your current situation7 That39 s apretty strai itforward consideration most of the timeiyou would already know where you are But if you were a hospitality ownermanager who wanted to drive toward greater profitability you d need to drawn on research to really know your current situationito better understand your customers competitors and the strengths and weaknesses of your establishment or department For example financial statements may tell you hard facts like sales revenue net income etc but may reveal nothing of your customers perceptions of your business They may not describe the increasing market share of your competitors or the extent to which your IT may be outdated To better understand these sorts of circumstances an HB owner would need to work with key stakeholders employees customers andor analysts to fully understand the current starting point Returning to our road trip example after establishing a starting point you would be asked where it is that you want to end upiin other words what is your goal As a part of this you would have options to take the shortest route in miles the route that avoids expressways and so on Once you have a route with directions you have a decision to make on what method of transportation to use Then as you start the trip you would track your progress Finally you would know you had arrived at your destination when you saw the address of your original goal Along the way to your destination you would face many options and be required to make numerous Filmmages c 39p 39 decisions Hospitality ownersmanagers must do the same to be successful at marketing They must assess their current situation by asking various questions for example Who are my customers and what do those customers need and want What does my department or organization do well and maybe not so well Who competes with the business What is the state of the general and local economy Once you knew your starting location the mapping software asked you where you wanted to go You had to enter the name of a business or prominent landmark or a specific address We noted in an earlier module that being able to evaluate whether we ve been successful requires that we are aiming at something from the start Stating a specific measurable goal is likewise very important for effective hospitality marketing Stating a goal helps to suggest frowit will be accomplished along with a means to measure achievement For the hospitality ownermanager this could be increasing sales revenues increasing guest satisfaction keeping the same customers acquiring new customers or a combination of these or other objectives So in our mapping example since the goal was to travel 60 miles as quickly as possible a choice had to be made relative to the best means to i 39 Waiw M ii i w Painan The iilrlie options within eadl mode such as acommem39al airliner versus a Plivate 361i apersonal 39 amim iamirivvair ii walking Your decision is based on what is ofvalue or important to you andor others who might be impacted and can be undertaken in an ethical manner So owners vendors HimPr A 39 immvi awrimiviim 2r Ypical considerations when marketing decisions are being made chosen to rent ahnghperfoimance sports car Your mtegy then would be to drive via highway to achieve Your goal The tam would be to rent a sports car iii categories are known widely as the Ps ofmarketing as follows Productlservice what yuu Will pmvide Price what to charge the guest for the productservice rumotion includes advertising public relations persunai selling and merchandlsing Place andlDr distribution the locatlon of the buslness or what Internet sltes used will be used to sail the produeiiseniice tei example People employees impact same quality and thus the marketing ottlie business Packages combinations at productslservices and 39 may be pricing schemes a key element to hospitality marketing success used to attempt to reach it For example new products or services may be created prices l A A A m m i e39i ma ii in m m A 39 be assembled quotin k your progress to ensure you are getting there as fast as possible legal concerns and safety considerations probably ought to be included tool You check your map your watch mileage signs and the car s speedometer and compare your results to your original goal If you weren t getting to your destination as fast as you wanted say because of traffic or construction you might adjust the original route The hospitality manager uses accounting statements guest satisfaction surveys and other markctmg research methods to track progress toward marketing goals and will make changes based on circumstances such as what the competition is doing how the local economy is performing and whether customers are behaving as expected But what about when goals change or aren tmet Just like in travel it s not always a bad thing to end up in a different spot than was originally plaimed Consider a leisure trip You may be driving across country to see the Grand Canyon when you see a road sign for the Mammoth Caves After weighing your options and knowing the freedoms and constraints of your resources money for gas time to travel whether or not you d be able to make it to the Grand Canyon instead etc you decide to go to the caves instead of the canyon Does this mean that the trip was a failure Not necessarily Hospitality like all businesses is constantly changing and to be successful businesses need to be able to adapt Maybe your strategic goal was to add 10 new locations to your restaurant franchise within the next 5 years Along the way the economy shifts and you determine that your money would be better spent by investing in the locations you already have open This is not to say that goals should be set and then ignored Even if a company decides to change its strategy the original goal should be taken into consideration and it should be thoroughly noted as to why the company decided to make a change of plans Let s take a moment to explore marketing research in a bit more detail Marketing research helps ownersmanagers to answer questions in three different contexts 1 planning 2 problem solving and 3 control When planning for example the manager uses market research to identify what kinds of people use the hospitality product and service where they come from and how much they earn For that kind of information the manager might use information from the US Census Bureau In that case she or he would be using information collected by someone else for another purpose This is what we call secondary data On the other hand if the manager analyzed the information included in his or her company s database of past customers this would be primary research data Primary research involves using specific techniques to collect data that do not already exist and that will answer specific questions Secondary research is collected by others for other purposes but may still be used to answer the manager s question Primary research is often more 3 the speono ouestrons the manager wouro hhe to answer Combmmg these 15 have ouestrons rerateo to satrsraotron 3 g 3 3 5 z r i 3 wrth the oroouot or sennoe whether orroesare too hrgh or rowzr or what promotronar taotros wouro work best can coHect hrs mformatron It can be Jquot quotquotquot cn39w39 done through surveYs whethervra Internet tereohone or marr 0r rt oan be done through smaHrgroup mtervrews arso known asroousgrouos o urmemer r M ht nt rn thrs area mrght be the oeroentage or the market that usesthe manager39s oustomer oeroeotron orthe oomoanY Meanwhrre oaohto the road Hpi et39s assume You have amved at Your oestrnatron You hnow rt oeoause You oan see the address You entered rntothe maoorng sortware You rooh at Your watoh and seethatYou made rt wrthrn 10 u u rentrngthe soorts oar was worth rt nf e that the hosortahtY orgamzatron pmvrded vaue to the ouoomer anoor owners The road trro anarogY rnoruoesthe oasros orthe marketng orooess out reaves n A I r consideration that wasn t noted is the significance of ownersmanagers having an understanding and description of current and potential customers When we consider all current and potential customers for our productservice we have described our market Customers can be classified based on various criteria when we divide our current and potential customers into groups with common characteristics we define this as market segmentation Customers can be segmented in two ways 1 based on the benefits the market segment receives from the product or 2 based on some observable characteristics such as demographics age gender ethnicityrace income educational attainment home ownership employment status etc geography where they are coming from purpose why they are visiting and distribution buying from the Internet versus calling the hotel direct Once customers and potential customers have been segmented we must qualify the market segment to determine whether we should target that market segment Do they have a need for what we have to offer Do they have the authority to make the final purchase decision Can they afford our prices do they have the means to make the purchase Can we satisfy their needs at a price they are willing to pay Once we have identified those market segments we wish to target we must communicate a um39que benefit to that target market This is defined as posz39oomhg a concept developed by Al Ries and Jack Trout in 1972 To illustrate the concept think of your favorite restaurant What is the most important thing that makes it your favorite Now think of your second favorite restaurant What one thing makes it second favorite The things that made your choices first and second are their posz39oons 13911 yourmz39nd and the difference between the two is what we call the perms ofm erenoatzon Adding to our definition of marketing then we wish to divide our individuals markets into meaningful and understandable market segments and use a unique benefit to position our hospitality product and service in the collective minds of that segment Another element of marketing our trip did not address is the importance of peopJe in the hospitality marketing process You may have heard of the Ritz Carlton Hotel Company s Gold Standards which includes the motto We are Ladies and Gendemen serving Ladies and Gendemen Ritz Carlton cannot live up to these words unless it attracts and retains ladies and gentlemen to be employees Further it requires Intema marketing on the part of Ritz Carlton managers to communicate why it is important for employees to strive to achieve the Gold Standards Hospitality service fundamentalswe explored earlier include the notion that it s not only the tangible product and the intangible service but also the people providing that service that help the customer to experience real and perceived value To clarify then external marketzhgis all that we do to communicate value and influence customers to purchase our products and services ntem markea ng on the other hand is all that we do to attract and retain employees as part of our hospitality organization we ll explore the overlapping importance of external and internal marketingiaka human resources management policies and practicesiin an upcoming module There s one more main element of marketing to consider what is a brand What if every lodging establishment in the country wasjust named hotel how would you know which hotel you wanted to stay at How would you know if one was different from another How would you compare a hotel you stayed at before with a hotel you are planning to stay at Brands and brand names are a means to differentiate one product offering from another A brand is more than just a name however A brand name can communicate a benefit of doing business with that organization such as In and Out Burger a characteristic of the organization such as Comfort Inn or a memorable name or phrase such as The statement marketing is not advertising was included earlier in this module but what is the difference between marketing and advertising We hope that our discussion so far has helped you to distinguish between the two But let s spell it out now advertising is an element of marketing As we discussed earlier marketing requires plarming usually over a one to five year time span While advertising requires planning as well it is within a much shorter time span More to the point marketing is What to do or strategy and advertising is an example of bowit may or may not be done That how is what we call tactics For each of the strategies we looked at earlier the Ps there are tactics that may be employed for each To better illustrate strategies and tactics let s go back to our road trip LUCARELLI TEMIS TOCLE 2005 Use under Ilcansa from Shullersmuk Inc example Our primary goal was to get to our destination as fast as possible We drove strategy a rented sports car tactic to our destination and got there within 10 minutes of our targeted arrival time We could have pursued the same goal differentlyifor example we could have taken a motorcycle or even a helicopter The selection of tactics may be influenced by several factors such as the quality of the market research collected and the decision making ability of the manager But at the heart of this process we ll more times than not still find the owner s priorities Which stakeholders matter most will most often dictate choices when it comes to picking marketing strategies and tactics Let s say a restaurant ownermanager is faced with increasing competition and her or his goal is to maintain current sales levels also called retaining market share for the coming year The ownermanager could modify tactics related to any or even all of the strategy categories based on the answers to considerationsquestions such as Productservice should the menu be changed or the service style or bothior neither Price raise menu prices or lower themifor some items or all or none of them Placemethod of distribution should take out or delivery service or onlme ordering be added People do employees know the menu are they effective salespeople and do they enjoy service Package should current menu items be bundled combo meals etc andor should the restaurant team up with other outside businesses dinner and movie speciallive entertainment etc Promotional tacticsiwhich if any of the following Advertising paid messages via mass communication media TV radio billboards Web Personal selling hire someone to go out looking for banquetcatering business Mercnandrsrngsales promotion create coupons buy one get one free etccontests andor games to build short term traffic and sales Public relations PR unlike advertising which is paid for and usually intended to leadto direct sales PR consists of nonpaidnonsales messages traditionally spread via press releasesconferences but now more likely through Web based socialnetworks and blogs which provide opportunities for businesses to share good deedsnews such as sponsorships of community events or charities donations to scholarship funds etc the intent is to build long term positive impressions and goodwill for the business These are only a few of the possibilities the most effective strategies and tactics are usually based on market research the costs involved and the ownermanager s sense of the likelihood that these efforts will lead to achieving the goalim this case of retaining market share Check out this learning object to see if you can tell strategies from tactics Effective marketing is part science and part art It requires research to understand the customer and the marketplace But it also requires creativity in decision making and communication so that the hospitality businesses products and services are attractive to the consumer We39 11 look at further examples of the an and science of marketing as it is applied and praaiced in med c hospitality businesses in future modules customers and u umate v mm guests and advocatesror tne nosprtahtv busmess ans conversmn process reourresa who s otta errort and resourcesrthe quotHRquot I HR management can39t be overempnasrzeo1 e and rt won39t 3 nt m a mwSEpubhcauon rketnrs one so we39H hmrttnrs modu e to Fundamenta s management e hospitahw segment and tne srze and compxentv ortne busmess rnHuence now arge a partrauv outsource components sucn as pavroH processmg anoor oenents aomrnrstratron to anotner spemahzed nrm we39H ook at apphed modu es wnrcn Wm focus on operatrons m eacn HE segment HRfundamema s 3 50 over ap wrtn marketrng oasrcs etpxoreo m an earher back doorquot g h g m v No hev enter m turn dehverthe productsguest servrce tnat ead to prontaomtv viewed as expenses to be reduced OR as long term investments to ensure enhanced guest service and employee satisfaction for the long term Assuming the ownersmanagers have decided who matters and what work will actually be done time and effort must be invested in comprehending the demands of each position and what characteristics will be needed by the employees selected to do the work There are several methods employers may use to better understand the what why and how sorts of questions that should be asked about each job These include observing employees on the job interviewing them off the job and even asking them to keep work diaries Another option is to hire consultants Those familiar with the movie Office Space may recall the Bobs two characters who parody consultants hired to perform this function at the fictional software company nitech Check out this link to an excerpt from Office Space it includes some pretty biting and arguably very funny satire about the whole HR process No matter who actually does it the process of getting detailed information about the work activities required performance levels and behaviors equipment tools and context for each required position is called job analysis Click here to learn more about the purpose uses and methods ofjob analysis Once a job analysis is done a job description may be developed An effective job description includes details about the observable actions of someone doing the job well what essential duties they are expected to perform which specific tasks they must accomplish and what responsibilities they have The setup and level of formality ofjob email m descriptions Wquot W For examp39e39 franchisors and larger businesses typically develop detailed and consistent standards to handle the volume ofjobs and people they deal with sometimes spread over large distances Smaller less formal businesses may have little if anything actually written down but the sole proprietorowner will likely know each job intimately Click here to visit Hcareerscom Once you are linked to this site click the job title button for any of the positions listed there to explore real examples of hospitality job descriptions A good job description also includes a job specifications section which addresses the skills knowledge and any other characteristics needed by anyone doing the job as well as the physical and other demands the job places on the person doing it This section is sometimes called the job requirements section Mn n n updating are required Hospitahtv managers mustalso make predictions and F i present we and how mavthat quantitv as well asthe number of potentiai than aranbn or planning organizingdorecasting and evaluatingthathasto nappen Wm need to engage n Recruiting nding folks and getting them to appivthrow thequot name In the nai Selecting fishing out the Keepers persuading them to pom the team Trainin telling and shownng them how to do well an Improve Evaluating Idld hey do the right stuif what happens If they mo or didn t Compensating determining just rewards and prowdlng them In a fan fashion Separating because for good or bad veasons everyone leaves eventualv i 2 mm inn TM in m are roughly analogous to the restaurant owner faced with a make or buyquot decision when it comes to an item on the menu Say it39 s chicken soup should they make their own chicken soup7 Orbuy someone else39 5 63 afood suppliervendor39 s7 malmaui ig is the make our ownquot approach The goal is to nd current So What39 for a homitality business An alraady familiar candidate thlY if transferred or aromaied creates a positive return on the HHS past R investments A good authentic story to share with current quotyou too could be promoted just like h and external candidates yarn us and you ran could be considered for pmmatian jusr like sheha wasquot Encouragement of enhanced long term employee commitment to the business Internal reuniting has potential downsides 00 f0 example The H5 may not have a current quali ed employee to till an open ion and when a current employee does get transferred or promoted it leaves an open position where they came from which then needs to be titled The quotthis is how we39ve always done it herequot men breeding effect that may stille tality a sort o creativity and innovation Any internal applicant who is turned down lor transfer or promotion may be disappointed or even angry which may affect performance on their Curran Db If an EB doesn39 t have a currently Quali ed employee to ll an Open lob it must buy extemal recruiting includes Access to the healthy curiosity of an outsiders perspective a fresh pair of eyes that may notice stuffthat longterm employees overlook New employees with differentbetter knowledge ofthe competition Promotion ofthe HB to others beyond the candidates a broader form of public relations for the HB as it seeks to positively in uence its target markets Downside potential for external recruiting exists too for example The increased HR expenses associated with recruiting selecting training etc Quali ed external candidates may be hard to find and any internal candidates not selected may feel passed over and resentful Productivity impact time for new employee to get up to speedquot as well as coworkers adjusting to new person picking up the slack etc Click here to use Learning Object 71 to review the advantages and disadvantages associated with each type of recruiting While internal recruiting is limited to only those already employed by the HB the potential sources and means to reach external candidates is nearly unlimited especially given contemporary technologies Use of the Internetfor recruiting allows for automated tracking and prescreening of applicants very rapid response to applicant inquiries and links to other online resources Web based examples such as httpzlww mon ter com and httpwww careerhnilder com provide job listings across nearly all types of business Many companies also look to target those with specific professional and career interests through more narrowly focused sites You justvisited an example of a hospitality focused site when you looked at httpjwwwthcareerscom to explore examples of real HB job descriptions There are others for example httpww nrniol39mlate mm is food service oriented and wwwcasinojobscomabout usphp is not surprisingly focused on casino recruiting while the Club Managers Association of America provides a listing of private club related jobs at httpwwwclubcareersorg In addition blogs like httpwwwfohbohcomD and micro blogs like httpwwwtwittercom as well as networking sites such as Facebook and Linkedln provide the means for companies to target passive candidates qualified potential employees not actively seeking a new job in ways that were not possible in the recent past While much attention is paid to Intemet based recruiting the web is not the only and certainly not always the best way for HBs to attract qualified applicants One of the most tried and true recruiting methods remains employee referrals that is rewarding current employees usually with cash for each new employee they refer to the HB the new hire typically has to remain employed for a minimum time period before the bonus is paid Any employee who makes a referral generally provides the inside scoop so the applicant has a realistic sense for what the job will be like referring employees also tend to feel a sense of obligation to do what they can to help their recommended candidate succeed There are many other external recruiting examples and sources including traditional newspaper advertising and placing recruiting messages on signs in the front window of the business the old help wanted approach Managers may also try to steal employees of competing businesses manager has dirmer at competing restaurant enjoysappreciates the fine service i at the end of the meal when leaving credit card receiptgratuity includes business card with messageinvitation for the server to apply for a job at herhis restaurant or resort to the placement of fliers promoting job openings in nontraditional locations like the inside doors of bathroom stalls When recruiting for positions at or nearer the top of the organizational chart some HBs will pay for the services of an executive search consultant Sometimes referred to as head hunters these are folks who specialize in helping hospitality and other businesses find top level talent for a fee of course Click here if you are interested in learning more about how executive search consultants work and to see examples of firms that specialize in this type of recruiting One last thing about recruiting is the recommendation to keep it ea telling andor showing all applicants what it s really like to have a particular job both the good and the bad stufD may be accomplished through realistic job previews RIPS Realistic job previews can take the form of text descriptions video presentations and work simulationsResearch has shown several positive benefits of RJPs including improved employee job satisfaction and reduced voluntary turnover3 Realistic job previews can take the form of text descriptions video presentations and work simulations Click here to view examples of video RJPs Once the forecasting is done and the recruiting has occurred the selecting may commence Each ownermanager has the opportunity to decide how this ii mm ii a which case the re ned not a recommended strategy Something a bit more umii atthut a involves a series of stepshurdlesassessments to takecleaIcomplete 1 Application and initial screening who gets to keep going 2 Selec on tools to test or not to test 3 Interviews wha should be invaivadlwhat should they ask 4 Backgroundlreference checksdrug testing do you needlwant to know more 5 ng dacisions bailing It all down who gem an after and who doesn t 6 Evaluating results what s the cost per hire 14131de mdjzzz tz a Emming application Which may then be completed by each candidate so that prescreeninz may be W T39 potential negligent hin ng claims more on this later ZSelambn tool Again the Job description and speci cations can be used to develop nd tests and m physical ability tests personality assessments Work simulations virtual boxquot exercises o combinations of all or several of these 3Jnterv139ews Nearly all hospitality businesses use interviews as part of the selection process but not all of them maximize the results that can be taken from interviews Informal and inconsistent interviewing methods may lead to unfair and even illegal outcomes Again the job description and specifications should be the sources for the development of questions to be asked of candidates with the goal of providing objective evidence for why some candidates would be better choices than others For purposes of fairness and consistency as well as to stay away from legal problems hospitality managers are best served if they design structured interview formats for each specific job The format may vary from face to face to telephone or even videoweb hosted No matter the format each will typically include a set of standard job related questions to be asked of all who are interviewed To learn more about interviewing click on httppractice intervie tream comwebinar The company that offer this webinar Interview Stream has developed a system where you are able to webcarn yourself as you practice answering questions and then send a linkto others to get their feedback on how to improve If you d like to learn more click on httppracticeinterviewstreamcom 43ackgr0und reference checksdrug 651mg Even the best interviewer cannot always detect occasional outright lying much less the subtle truth stretching that can happen during the selection process For those aspects of a candidate s job related background that applications testing and interviewing carmot adequately expose and explore hospitality businesses may turn to other mum mag com on methods and strategies As noted earlier it is common for potential employers to ask for the applicant s permission to check the applicant s credit and criminal records as well as to verify past education and employment details Sources for this information may range from current and former employers to commercial credit ratings providers and even social networking sites To learn more about a jobseeker s rights when it comes to background and reference checking click here Employers face a difficult balance between respecting a candidate s right to privacy and protecting the business from the risk of a negligent 12mg lawsuit To some it may not seem all that horrible that an applicant claims more experience than he has or that she eained a college degree when she really didn t e if they can perform well on the job what real damage is done Others consider these untruthful statements as evidence of dishonesty that cannot be tolerated But suppose an HB hires someone who then gets into an argument with a co worker or even a customer on the job Now suppose that employee gets so angry during the argument that he punches the other person sending them to the emergency room with an injury As this incident is investigated it turns out that the employee had been fired from his last job for attacking a co worker and this record could have been found had the business checked The business may be held legally liable for the actual damages suffered by the individual medical expenses wages lost etc and may also be forced to pay additional punitive damages as punishment for not providing a reasonable standard of care for guests and employees Because of the importance of getting it right as well as the time and resources needed to perform adequate background screening and reference checking these functions are often outsourced that is businesses often hire others to perform these actions To leain more about companies that do this work visit the website for the National Association of Professional Background Screeners NAPBS by clicking here So while it may seem like employers ask for a lot of information during the selection process they have their reasons Not only do hospitality businesses have the right to reject an applicant for lying they also have the responsibility to protect their employees and customers from foreseeable harm that s why from the HB perspective they can and should ask for and check appropriate background information on anyone they intend to hire il hg decjszbns After carefully weighing the evidence from the selection process whether it was a pulse checking handshake or a carefully organized multiple step system the choice must be made who gets an offer of employment and who doesn t While more attention is typically paid to how to hook the hot prospect creative and personalized offer letters calls from top management etc wise HB managers also try to keep in mind that job applicants especially those who have invested time and effort in what may have been a lengthy process but who are turned down are 517 poten 39aZguests The process of informing someone that they will not be offered L Jupllurlmages C rpmallon employment may be a very significant moment ofmztfi and while a rejected applicant is bound to be disappointed if the situation is handled well they may still be made to feel encouraged to try again or at least as though they are still a valued guest of the HB who could recommend the business to others EvaILza 39ng results Whether they are viewed as expenses to be reduced or investments to be maximized the resources plowed into the selection process can be considerable and should be systematically measured and evaluated as to efficiency and effectiveness There are several levels of assessment that can be done starting with computing a yield ratio that is the percentage of applicants from a recruitment source that make it to the next stage of the process This entails counting the number of applicants generated from each recruiting method undertaken whether internal or external to see which if any lead to actual hires For example if an HB used any two or more of the previously mentioned recruiting methods each could be compared to the other like so sayan HB received X completed employment applications from one recruiting method and from those X applications Y candidates were interviewed and of those Y interviews Z hires occurred ZX yield for that recruiting method The yieldratio may then be compared to similar calculations done for each recruiting method undertaken to get a sense for which one most efficiently yields the most new hires But yield ratio doesn trepresent dollars spent so further analysis may be done to determine the actual cost per hire figure for each recruiting methodClick on these two websites below for an explanation of and example calculation of the costs associated with hiring httpWWWhIworld comcalculator lm therhire httpwwwhrworiri comcalculator lbarlhire This sort of analysis does provide more information but it s still only a preliminary evaluation because there s no assessment of the quality of the new employees or even how long it took to fill the open jobs or how long the new hire stuck around It s also important to realize that cost per hire figures will vary based on the level of employee being hired But it s clear that starting the HR process with an understanding of what s important and how it may be measured allows HB managers to improve efficiency and simultaneously enhance effectiveness throughout the process As with each of the other HB HR fundamentals each business gets to decide how wavs to vahdate a new emp ovee39sdemsmn to pdttnem at ease and make tnem Fee we come rstprtne HE to begm tnerrtrarnrngtnrpdgn aforma micmatinn program Omentauon ensdrestnat eacn new emp ovee dnderstands wnp and wnat reavaaners attnat HE and wnat penavprs Wm be expected ofmem on tne pp Onentauon rs a cnance Issacthe ded m tne same wavthauhe HE wantstptdrn cdstpmers mm guests pnentatpn rstne step m convemng strangers mm productSerums A standard pnentatrpn to actuaHv snpwtnem tne eve pr senncetnev MH be expected to prpvrde as r r H h M trammg goa s and prpgramsTnere are mvmad trammg metnpdsexectdres r tramees For examp e Start with an overview Here39s what you ll be learning and why it mattersquot Find out what they already know and adjust the training accordingly Organize the information so it can be presented and applied in logical pieces Use examples terms and concepts that are familiar and be sure to check for and define unfamiliar acronyms and jargon eg in a hotel PMS property management system These basic steps are especially important before using one of the most common HB training methods onthejob training OJT According to a recent study OJT is the most common training method used in hospitality businesses for training not only frontline hourly employees but also managers At best OJT is starting a new job under the watchful eye and with the expert coaching of an experienced and enthusiastic veteran co worker At worst this is the just follow Pat around approach and it can turn out that Pat is tired ornery having a bad life and has absolutely no interest in training anyone The advantages to OJT are its relatively low cost and the chance to learn by doing actual work with real and immediate feedback The disadvantages of OJT include the potential for a sort of sink or swim turnover churn new employees adapt quickly orjust as quickly quit The potential negative impact of unprepared trainees on the guest experience can also be a problem Much sophistication can be brought to training check out httpwwwchartorg and httpwwwastdorg to learn more about training in hospitality and other business settings Orientation and training should provide employees with the business s productservice standards deadlines and schedules and the specific performance goals they are expected to reach Employees then need to be informed about how well they are doing on the job and there s usually no one better than the HB s managers to provide regular and ongoing feedback At least some of this can and should be informal frequent simple and straightforward conversations featuring praise and constructive encouragement It is also common for managers to provide periodic formal feedback to employees every six months or annually through individual performance appraisal meetings that are used to discuss and compare performance expectations with the employee s actual performance and results for that time period Click here to view an example of a performance appraisal form for a restaurant manager Information collected for use in performance appraisals will vary based on the specific job being considered and may come from internal reports of sales expenses etc from supervisor rating scales and even from co workers at various levels vendors and guests through what s referred to as 360 degree feedback5 How much information is collected and how it is considered typically depends on the underlying purpose of the performance appraisal Performance appraisals may be done to help employees improve and develop at their current jobs and prepare for transfer andor promotion in which case there would likely be manager employee dialogue around not only current performance but also future goals and training needs and opportunities If on the other hand the performance appraisal is done primarily or exclusively to determine who gets to stay and who is let go or who gets a raise and a promotion and who doesn t then there may be little need for much conversation Either way the ownermanager s priorities are again evident f employees truly matter then performance appraisal does too and meaningful and timely feedback should be provided whether to grade current performance to develop for future success or both No matter how much any individual may love to work few will show up and consistently do their best without some form of acknowledgement and remuneration The level of employee commitment to any job may vary For some their work is their life and for others a job is simply an exchange they trade their behaviors in return for somethings they value How much and what kind of behaviors for what forms of recognition and valued items is broadly open to negotiation between employers and employees In any event the next step in the HR process includes administering all the things that employers trade to employees in exchange for their behaviors on the job i also known as a compensation package So what might be included in such a package That would be some blend of direct compensation indirect compensation and non 39nancia compensation Let s drill down and look at each of these starting with Direct commnsation cash paid as wages salaries bonuses and commissions Productivity and time calculations may be used to compute employee wages Wages are commonly based on a dollar amount to be paid per hour worked but they may also be based on some productivity measure number of units processedproduced or a combination of both time and productivity Federal state and sometimes even local laws establish minimum wage rates and also mandate if and when overtime pay is required Napexempt employees traditionally called blue collar workers are those employees who are eligible to be paid overtime usually 15 times the regular wage rate for any hours worked past 40 hours in a designated workweek again prevailing laws will apply Salaries are also based on time frames but rather than by the hour salaries are usually paid by the year month or even week to employees traditionally referred to as white collar workers Under US law employees who are eligible to be paid by salary are exempt employees and do not qualify for overtime pay no matter how many hours they might work in a week The US Department of Labor applies salary level standards and duties standards in determining which employees are considered exempt Hospitality employees at the executive or management level as well as outside salespersons are examples of salaried exempt workers A bopusis an extra payment made to an employee at the end of a specific time frame could be anything from a spot bonus paid to a restaurant cook at the end of a particularly busy dinner shift to an armual bonus paid to a hotel general manager for exceeding profit targets above an employee s regular base wage or salary Outside salespersons are often compensated at least in part with commissions which are extra payments based on meeting specific quantities or levels of sales during a pre agreed upon time frame Hotel sales examples The success of direct compensation programs often depends on how closely incentives are linked to actions within the employee s control achievements not just activities are made the basis for payment Additionally pay levels are also affected by several other considerations including What s legally required from the federal state and local perspective What does the competition pay not just other HBs but any that hire the same employees What s the perceived valueimportance of the job in question What is the cost of living in the region the business is located in What can the business af jm is this a payroll expense or an investment in people Indirect Commnsation Hospitality businesses are generally required by law to make payments into the Social Security httpwwwssagov and Medicare systems httpwwwmedicaregov as well as the Worker s Compensation and Unemployment Insurance programs each of which employees may benefit from at some point or not in their lives Beyond these compulsory benefits programs employers may choose to offer other noncash rewards and programs such as paid time off insurance retirement programs and employee assistance programs EAPs Because of confusion resulting from the traditional separating and sorting of vacation time from holidays and personal and sick days hospitality businesses may choose to combine these categories into one classification paid time off At the start of each year or whenever the business designates eligible employees are provided a quotbank39I of paid time off days to use often with advanced notice and prescheduled approval as they best see fit for vacations medical appointments or other personal matters Hospitality businesses may also choose to offer a range of insurance benefits to their employees Everything from insurance coverage for pets to health dental vision disability life and long term care insurance plans for the employees and their families may or may not be included Because of the rising expenses associated with these sorts of programs as well as the varying needs of different employees some hospitality businesses provide employees with a set dollar figure per year which the employee may then choose to spend on some or all of the various programs included on the benefits menu Programs of this type are known as cafetezia plans While both employees and the employer make payments into the US Social Security system which is intended to provide at least a partial income streamsafety net for people as they retire hospitality businesses may choose to also offer employees access to company sponsored retirement programs Historically employers offered plans that involved promises to pay de ned benefits to employees upon retirement usually based on the number of years the employee worked for the company their average earnings over the later years of employment and their age upon retirement Having proven to be relatively risky and expensive for companies to administer these plans are effectively extinct especially among hospitality employers in fact about the only place they still exist is government employment The retirement plans more commonly offered by contemporary hospitality businesses shift more and in many cases all of the riskscontributionscosts associated with the plan to the employee these are known as defined contribution plans These plans are sponsored by the employer the employer typically outsources the management of the plan to companies that specialize in such services De ned contribua39ozz plans provide no guaranteed benefit levels the amount of money available to any employee upon retirement is based on amounts the employee chose to save and invest over the years and what sort of return was earned on those invested funds after fees have been deducted by the companies that manage the accounts These plans may or may notinclude contributions from the hospitality employer The choices of defined contribution plans offered by employers may vary but a common option is named after the section of the Internal Revenue Service IRS code that established these plans the 401pan7 Hospitality employers may also choose to contract with companies that specialize in managing employee assistance programs EAPs These programs provide Ulllplk cm With confidential prof iUiial cuuii cling andor referral assistance in dealing with a variety of circumstances that may affect on the job performance such as drug or alcohol dependence family or marital difficulties legal or financial problems or other personal issues EAPs are intended to prevent crises and allow employees to work through tough times without necessarily losing their jobs Because of the nature of the products and services they provide hospitality businesses may also be able to offer other privileges beyond direct compensation payments and employee benefits Discounted or free products and services eg meals or hotel stays could be available to employees andor their families for example Others may provide tuition reimbursement for work related continuing education even free dry cleaning services or parking may be pos sibilities Non nancial compensation Direct and indirect compensation should not necessarily overshadow the potential satisfaction that an employee may receive from doing the job itself or from the people and the environment in and around which the person works For many employed in hospitality businesses this aspect of compensation exceeds the others Even if and when all the other steps in the HR process go smoothly all employment will come to an end i for whatever reason every employee leaves eventually There may be a retirement celebration after a long rewarding career or a firing for cause someone may quit because she is relocating to another area where there s no HB affiliated with the one she currently works for or maybe someone s time on earth is up and they are destined for that great resort in the sky or whatever may happen when life s journey is up Pick whatever metaphor or analogy you prefer the last note is played the curtain comes down or the clock runs out and separation happens The last stage in the HR process may come about for many different reasons but it s important for hospitality managers to know what happened and why especially if the employee voluntarily separates they up and quit If communication has been good between the employee and management the separation step while inevitable may not be particularly controversial However things aren t always perfect and sometimes employers try to gain one last measure of the true reasons for which an employee is quitting by conducting an exit interview Exit interviews much like employment interviews may be formatted in different ways depending on the rationale for doing them Often the primary goal is to draw out facts and information about actual working conditions with the intent of improving future practices When this is the case it is common for the exit interview to be conducted by someone other than the departing employee s direct supervisor such as an HR manager if the HB has a separate HR department or even by outsourcing the exit interviewing to another company Either way offers of confidential treatment of responses or even anonymity by conducting the exit interview via computeronlme may be used to try to increase the likelihood the soon to be former employee will tell the truth There is more than one perspective on exit interviewing while it is relatively common it is not universally accepted as a good idea Click here to read an article with a different take on exit interviews it may prompt you to reconsider your opinion of exit interviewing This and previous modules have continuously noted the need HB ownersmanagers have to know how well the stuff they are doing is working It s about time we took a closer look at how they may do scorekeeping for the business That s what we ll do in the next module To transition to a closer look at accounting let s revisit those earlier hospitality managerial metaphors If hospitality managers are like band conductors stage play directors and team sports coaches where does something like accounting fit in Well it s all about information Consider this how do conductors directors and coaches get the feedback they need to be well informed as they continuously guide their members casts and teams toward successful achievement of their goals Conductors JISt wmd compare what they hear to the standard they have in mind for the piece being played They might record rehearsals and concert performances even consider feedback from critics and audiences Are they playing to full houses Is there applausestandmg Writing7 And the musicians in the bandiwhat do they say7 Directors talkerrand again compare What they see and hear to the standard they have in feedback from others again audiences and mitics as Well as the actors r ah tile m imam h rewra39x especially when the competition is serious They o en deeply analer dataisuch mt t imw upon them especially ifthe results fell short of goals mum w frequently many perfmnances happening at the same time and managers can39 t HBit39 s i t rdlr ti ml 1in mm a it a my mt ui ng ing m a quotr m i nuil mmquot w dir r ml 2 u m and re ect and make adjustments but for most hospitality managers especially those operating lodging or casino businesses literally 247 operations there39 s not much time a le to adjustments It39 s true that not everything that matters can always be measured Well and simply With important What accounting adds to the process is the sdenti c rulesformatSsystems by Which hospitality managers make sense of the rest of the important stuff at least the parts that can be measured by numbersdollars Let s review andor establish a common vocabulary and understanding as we move foreword Accounting is identifying measuring recording and communicating financial data It s the rule keeping language and system for understanding and doing business Rules provide a sense of fairness guidelines for behaviors and a means for making sense of any gameiknowing who is winning and so forthiand this is what accounting does in great part for those engaged in the game of business Who the score is being kept for has implications for how it s best done and hospitality business accounting systems provide information that can be formatted in different ways so that the data are meaningful and understandable to various stakeholders Scorekeeping done for stakeholders that are external eg creditors investors and vendors as well as tax collecting governments at all levels and even competitors is called nancial accounting The scorekeeping that hospitality businesses do for internal stakeholders such as the employees and managers is called managerial accounting Managerial accounting delivers the necessary information so the internal stakeholders can make meaningful decisions to effectively manage their business operations Ithutd agreed on bv accountmg experts regu amrs and compames over manv veers The prpvrde an accurate and tar representauon of tsfmanma crrcdmstances The Us BoardFASB1 Other nauons have therr own srmdargovernrng boardsAtthetrnte IASJZ ntemauona accoummg standards currentw enst and are begmnmgm be IAS overume Expert groups from severa segments crthe processes as specrncaw apphed m therr segment h 6 process Larger hote s wrth hundreds or even thousands or guestrooms for examp e r p pr hernan ahother sbeoahzeo hrm weh ook at how accountmg termmo ogv aho pracuces mav varv at the mdustrv segment eve h upcommg course modu es knowm errectwew speak accoummgquot We39ve a readv estabhsheo what busmesses A H M HuuHumHHv the how to order a mea whroh wavmthe arrport and where39s the bathroomquot sort good gart h and and burbrhgs whatever amouhtsthe busmess owesto rts endersor u owner39s assetsiare caHed liahi lies what39s e arterthe habrhtres are subtracted fromthe assets rs known as nwnevs equity Assets Liabilities Ownevs equity Mav e even berore vou earheo about metaphors vou were taught basro u 5 hhth Ownevs equity 5o aH the assets h anv busmess are brovroeo bvthe owners or creators and both sroes of the equauon must a wavs be eouaL Thmk about mvested cabrtax or earhrhgstrom bushess operauons owners eourtw or mav have u ke ban as ets must a wavs equa the habrhtres pm the owners eouww We39ve a readvbeen ab e educauon by mcorporatmg the use or metaphors and we ust Lmhzed some abbheo algebra with the accounting equation restatement why not go for some history too Here we go turns out that the way businesses keep the accounting equation in balance is through use of a doubleentry system The history of this system goes back several centuriesl and arguably the most famous description of double entry accounting was published in about 1494 by a contemporary of Leonardo DaVinci Luca Pacioli Since there weren t many electronic calculators or computers around in those days the folks keeping score developed this system to reduce the errors that result when human beings record figures and do math by hand Here s how it works each accounting transaction for a business is recorded in the accounting system of the business as a journal entry Ajournal entry in the double entry system requires that equal amounts of what are known as debits and credits be used to record every transaction Typically a debit entry either increases an asset account reported on the balance sheet or an expense account reported on the income statement A credit entry on the other side usually increases a liability or an equity account on the balance sheet or records revenue on the income statement We will take a closer look at balance sheets and income statements and discuss journal entries in more detail later in the module if this seems a bit fuzzy at this point stay tuned just like understanding the rules when you learn a new and unfamiliar game this can take a bit of getting used to In addition to the double entry system hospitality business accounting fundamentals include several other important terms and concepts Heading this list is the matching principle which calls for all expenses accumulated in the process of obtaining revenue for a business to be matched with that is subtracted from that revenue during the same accounting time period This results in an accurate record of profits or losses for that time period Appropriately matching revenues with the expenses incurred to create them requires the use of the accrual basis for accounting Accrual accounting requires revenues to be recognized and recorded when a sale is made regardless of when payment is received and for expenses to be recorded when the gain from the expense happens not necessarily when payment is made for the expense Hospitality businesses also match expenses and revenues by applying a concept known as depreciation Depreciation is typically associated with purchases of assets such as buildings and equipment and what happens is the costs of the assets are recorded as an expense which is allocated in the scorekeeping system proportionally over the length of time the asset is estimated to be useful to the business For example if a restaurant owner bought 100000 worth of new kitchen equipment this year to allow for expanding the restaurant s menu and increasing the restaurant s capacity to provide catering andor carryout service to more guests the restaurant owner s financial results for this year may appear artificially disastrous 100000 is not exactly chump change to most restaurants and then miraculously strong in the following years as the kitchen equipment continues to contribute to the generation of revenues over the next 5 or 10 or 15 years Tax lawscodes those accounting rules again stipulate the number of years of useful life over which hospitality businesses may spread the expense for specific asset types to ensure consistency in reporting of financial results See how that would work to help businesses better match expenses and revenues Another way that businesses match revenues and expenses is by applying the concept of prepaid expenses this again allows for costs paid in one accounting period eg a month or a year to be allocated to the subsequent periods covered by the payment This practice is common for items such as the annual premiums paid for insurance policies that the hospitality business owner may decide to take out to protect the business against the risk of catastrophic losses in the event of a fire or weather related disaster etc Some sole proprietors operating small hospitality businesses may use a cash basis for accounting This is similar to how many people manage their personal finances via a checking account recording deposits revenue when money from the sale is actually received and recording checks payments for expenses at the time a purchase is made Businesses with more than one owner seldom use the cash basis for accounting because it can provide deceiving short term results for example it ignores uncollected revenue that is appropriately earned and expenses incurred to earn revenues that have not been paid for which makes it look like a business is profitable at a given point in time even if its not Click here to check for your understanding of the accrual basis for accounting and some of the key concepts we ve explored so far in this module by exploring Learning Object 81 Accounting provides vital information to HB managers as they go about their day to day work of planning organizing leading and evaluating For example since earning a profit matters and it pretty much always does for hospitality businesses accounting Image U Jupitarlmagas Corpurallon reveals where the money IS coming from and where it s going Since finding and keeping customers matters and it always does in the HB world accounting provides scorekeeping results to help managers decide which customers are most profitable and which are not and in a multi unit environment accounting provides the score for each unit and for all the units combined To the degree that employee satisfaction and development matters accounting again may contribute information that helps managers understand the financial expensesimplications associated with recruiting selecting training and rewarding employees And if leaving the physical environment or local community better off than it was before the business existed matters accounting helps managers understand how much solid waste management or energy savings and other various programs may cost and what financial benefits should result from the programs being implemented Managers can t effectively organize lead and measure how well some aspects of the business are going without the numbers So after the financial goals are set the bottom line and related statistics must be reported and analyzed again so that adjustments can be made as needed An earlier module used an example involving a decision as to whether to outsource or self op a choice usually driven by the information provided by the accounting system We considered Disney s decision to hire ARAMARK to provide employeecast member meals and you can be sure Disney ran the numbers provided by the accounting system to inform that decision And any potential franchisee considering whether to buy the franchisor s formula for success will likely consider a cost benefit analysis based on accounting projections to decide if all of those fees associated with a franchise are worth it or not Hospitality businesses and their various stakeholders continuously use the products of the accounting system specifically financial statements and budgets to identify problems and opportunities to make the call on questions such as outsourcing and franchising and whether to make or buy stuff and to understand not only the past and the present but to make predictions and plans for the future Another goal of analyzing and interpreting the accounting information is to determine whether a business is gaining or losing ground in the unending struggle for profitability to compare the current financial position with its position a year ago and to compare this year s earnings with prior years results To speak basic accounting it s important to understand three financial statements the balance sheet the income statement and the statement of cash flows We ll bust these out one at a time starting with the balance sheet A business picks a day it could be any day really but for consistency s sake it s typically the predetermined end of a month quarter or year and uses its accounting process to answer this compound question What assets do we own and how did we acquire them The result is good for that one day and that day only because starting the very next day things can and likely will change The fact that the ano espemaHv when rt can be compared to prevmus resu ts whetherthe va ue of Hvavi5 r w statement and the amounts rorthe haorhtres and owners eqmtvon the other sroe or the bottom t39 k ba ance sheet aooountthe foHowmg rs an examp e ofpurchasmg a oreoe or restaurant eqmpment on oreort General Journal December 2009 Date Account Name Debit Credit 121509 RestaurantEquipment 151568 Accounts Pavable 151568 To record purchase of Baking Oven ofme operatmg aotnntrestor a busmess the mcome statement r sta ement or srmphthe mu the busmess orohs aume frameicomd be hours davs weeks or months but agam Forfmanma accountmg purposes those om externa east everv quarter or veeriand answersthe queston how do we doquot Tlms m Bottom un u an that spot on an hcome statement sthe humenca answerto the how dwd wedsquot s u o a 3 a statement reca s the busmesses expenses 3mm it spent in the process of generating those revenues The expenses and whatever taxes may apply are then deducted from the revenues resulting in the dollar figure that represents the actual profit or loss aka the bottom line When there is a profit when revenues exceed expenses for a given period this positive bottom line increases the businesses equity recorded on the balance sheet Since revenues increase and expenses decrease equity the debit and credit rules for recording revenues and expenses go hand in hand with the rules for recording changes in a businesses equity As mentioned earlier increases in equity are recorded by credits and decreases to equity by debits therefore revenues are recorded in the accounting system by credits and expenses are recorded by debits Stakeholders of any hospitality business may want to know how much actual cash the business generates and where that cash goes again the time period is typically monthly quarterly andor annually and is the same period as the income statement One of the questions this statement helps external stakeholders especially investors lenders vendors and tax collectors answer is will we get paid on time This statement provides information about the cash receipts and cash payments of the business based on its operating investing and financing activities It recaps the increase andor decrease from each of these three sources and allows the reader to assess the solvency of a business and evaluate its ability to generate positive cash flows in future periods meet its obligations and finance its growth Overall this report lists the causes of the change in the amount of cash shown on the balance sheet at the beginning and end of the period the total cash on hand at the time the statement is prepared With accrual basis accounting just because your current assets are high you still might not have enough cash on hand to pay your upcoming billsdebts the statement of cash flows lets you take a better look at these sorts of issues so that spending plans can be adjusted andor loans secured etc Click here to view an example of a statement of cash flows Click here to see how well you understand the differences between the three financial statements included in this module by practicing with Learning Object 82 Ongoing and consistent business scorekeeping via these three statements provides stakeholders with the chance to review financial results from day to day month to month and year to year in other words it allows stakeholders to conduct a trend Image 39339 Jupalurlmagas Corpuraljon at39s not over crrcumstances mum nave an rmpact on anv nosprtahtv busmesses resuxtsimrn one u 5 v r r t 1 r M NH vweather mm proper account wnen ana vzmg busmessresu ts A oft e numbers reported tn tne major nanma staternents a so provrue an pp Hmm bvmanagersofa busmessm compare actua nanma resu tsm goa s past performance or botn nne rauos mav a so be compared totne resu ts oturrect u for a restaurant botn otwnrcn snoum be as nrgn as posswb e nne average guest checkteHs managersnow we each wan staff rs upseHrngtnerr products we In etther case course modu es ofhudgels Tnese aretne p ansior now a nosprtahtv busmess Wm use tsfmanma a franchwsor39s bott ed successfurmu aquot rs an understandmg of reahsuc budgetsiknov edge otwnat eve of sales revenues to expect and how much spending will be needed to get there is one of the key advantages a franchisee expects to gain when starting a franchised business A budget generally includes both financial and nonfinancial information Financial information includes budgeted income based on the planned number of customers a nonfinancial aspect of budgeting Budgets typically have a set period such as a month quarter year and so on The process of establishing budgets encourages communication and coordination among managers and employees in hospitality businesses large and small Budgets can also serve to motivate performance through the clarity they provide and performance bonuses for managers are commonly linked to achievement of goals presented in budgets To assess the success of operations the transactions recorded in the accounting system are summarized and compared to the budgets established Differences between budgets and actual results the budget to actual variances are used by managers to assess success or the failure to meet expectations Having a targeted financial result spelled out in a budget also provides the means to monitor progress whether it s toward sales expense or profitability objectives Each of the financial statements presented may be utilized to inform the creation of operating budgets again applied examples will be explored in future modules Fundamental fun d men39tl ad aOf or relating to the foundation or base elementary the fundamenta 1a ws 0f the universe bForming or serving as an essential component of a system or structure central ah exampie that was fundamenta t0 the argument cOf great significance or entailing major change a hook that uhderwehtfuhdamehta revzsibh The previous 8 modules have presented a broad view of business fundamentals such as profit and loss starting new ventures and forms of ownership and operating systems scorekeeping language and process accounting creating communicating and delivering value marketing to customersguests and employees human resources As this is an Introduction to Hospitality Business e text its time to more deeply examine these fundamentals in the context of various segments included in the hospitality industry By definition each of the fundamentals will apply in each segment but part of the value of an intro to hospitath business approach is beginning to understand the subtleties and nuances of each in context For example how do profit margins vary by segment ls starting a new hotel the same as a starting a new restaurant which legal forms of ownership tend to be used most Does the scorekeeping language and rules for private clubs differ from that used in casinos Do effective marketing strategies and tactics vary for casual dining franchise restaurants compared to events and meetings What about recruiting selecting and training employees are these dealt with similarly or differently across segments There are countless potential questions like those noted above and realistically they can t all be effectively dealt with here However what we can do is use the basic business fundamentals included in the lst 8 modules as a sort of lens that we can look through to more closely examine and make sense of contemporary hospitality business segments that s what we 11 do in the remaining modules v i i We noted in an earlier module that it s both P 7 Ma know and whoya know that 39 1 matters for business success so we ll commence this foodservice module with some I 2 what ya need to know information and a come back to some who ya need to know stuff a bit later on We ll start with what everybody in the foodservice biz has in common a mend No matter the concept theme location or service style what s on the 39 7 menu provides ownersmanagers with the basis for much of the planning organizing leading 39upit39erlmages Corporati and evaluating they 11 need to do to meet their objectives So whether it s a taste worth dying for at an American burger joint or a German approach to foodservice or a Japanese hot dog stand in Canada or an almost all chocolate restaurant or even foodservice in the sky the menu is at the heart of the operational process for any foodservice business When this process is well managed the odds that the food biz can satisfy guests and reach its financial andor other goals are greatly increased We looked at moments of truth MoTs from the guest perspective with a foodservice example in an earlier module now we 11 look in greater detail at what foodservice ownersmanagers must think about and do from an HB operations perspective to succeed One way to uncover some of the mysteries of foodservice success is to think about the essential questions that must be answered in order to move 190121 an ownermanager s dreams and ideas about what to serve to satiated and happy guests and maybe even some profits These essential questions arise simultaneously and the answers often overlap but for purposes of making sense of this we ll look at them sequentially Each question has implications for controlling expenses and since many foodservice businesses often only earn a nickel s vvorth of profit from each dollar of sales ownersmanagers must have good answers or risk going out of business So let s take a closer look at these fundamental menu questions starting with vvhat items to include What items to include What39s the score How to produce Make or undamental buy HOW will we QGt Menu Questions paid How many of each How will guests get the food How will we keep track of stuff 39til we need it For those interested in a bit of hospitality history click here to consider The Historical Perspective by Dr Carl Borchgrevink of Michigan State University s School of Hospitality Business a nice opportunity to provide additional context before moving ahead with a more contemporary point of vievv The range of potential answers to this question will be heavily influenced by many of the marketing factors we ve considered in earlier modules as well as the owner s priorities the business form or format scorekeepingaccounting information and even human resources related issues First let s consider the owners priorities In the third edition of their book The Menu and the Cycle of Cost Control Paul McVety Susan Marshall and Bradley Ware indentify two different philosophical approaches to foodservice business ownership and how the priorities associated with each approach affect the operation of the business including what ends up on the menu By definition all owners supply some resources money time etc seeking a return on their investment ROI McVety item will be needed and his coauthors categorize foodservice owners based on whether the owner is more financially oriented McVety et al refer to these individuals as Type A or operations oriented Type B according McVety et al in their business approach To keep things straight here we ll refer to the Type A financially oriented owners as financefalks and the Type B operations oriented owners as foodies Here s how the differences break down Financefalks are not completely indifferent to what s on the menu but they tend to start with profitability goals and then consider which concept and menu items would be best to achieve these goals They may have little foodservice expertise but usually relate more to the numbers therefore their level of day to day involvement in operations may be minimal or sometimes even nonexistent Before opening a new foodservice business finance folks would want to do extensive formal market research to determine what customers in the target market need and want as well as what they are willing to pay to get it Finance folks may not even personally like or consume the specific menu items served in their business a steak loving carnivore could own a vegetarian bistro and not be bothered in the least so long as guests were willing to trade them money for their vegetarian menu items and the bottom line was profitable there d be no worries Foodies are not indifferent to the need to pay the bills at least they won t stay in business long if they arel but they tend to be more personally and even passionately interested in what s on their menu McVety et al refer to the amount of time and physical work a person performs on a specific task as sweat equityl and foodies are the owners who literally sweat over the details of the menus prepared in their kitchens on a daily basis While willing to supply a ton of sweat equity to the business foodies are not usually inclined to do a lot of formal marketing research They tend to believe in their own love of the items they carefully select for the menu a sort of gut feeling approach and want to share these with guests For a foodie the fact that they can make money doing so is significant but really not the best or most important thing about being in the foodservice business Tom Colicchio has been winning foodservice awards since the 1990 s at a variety of restaurant locations check out httpwwwcraftrestaurantcom to see current examples Click hei to see and hear Tom discuss some of what he has experienced when balancing the finance and foodie perspectives as an entrepreneur in the foodservice business Click here to check your understanding of the finance vs foodie perspective by completing Learning Object 91 The business formformat will also affect what shows up on the menu of any foodservice business The menu of an independent entrepreneur is limited only by one s budget and imagination while a franchisee is more or less limited to what the franchisor allows on the menu and ownersoperators of management companies may have to seek their client s input and approval or not for any menu additions or changes they d like to make Understanding the score that is the accounting dataforecasts related to what s on a menu is critical no matter what the ownership form or format may be It s necessary to understand what it actually costs to include any specific items on a foodservice business s menu which may then be compared with what potential guests are willing to pay Even the foodie type owners who may wait to do this analysis until after they ve already opened will need to understand their expenses in relation to their revenues or they ll likely go out of business fast Paying close and continuous attention to accounting data and Juwenmages corpmmn being willing and able to adjust operations and menus especially during times of volatile and dynamic market conditions is critical Check out this link to a recent article about new menu ideas born out of challenging financial circumstances Sometimes sticking with the tried n true is a good idea too for evidence of the wisdom of this approach click here to check out a slide show of some of the oldest foodservice businesses located in the United States Human resources related issues such as the availability and cost of labor in any specific location may also affect what s on the menu at a foodservice business It s impossible to present guests with menu items requiring complicated recipes if the talent isn t available to produce them Recruiting selecting training and compensation issues may all influence what goes on the menu Click here for a review of the HR module Foodservice ownersmanagers making choices about what to include on the menu as well as those pondering other operations related questions may turn to research and consulting organizations such as People Report to learn more about best practices and current HR related costs in the US foodservice business Check out examples of the resources available at Peoplereportcom Remember the peanut butter and jelly sandwich recipe video from Module 34 The use of standard recipes for all menu items is very important Standard recipes provide a detailed description of the items quantities preparation steps and portion sizes for each menu item which allows for better expense control product consistency and greater guest satisfaction Click here to see example standard recipes When specific menu items have been determined whether this is done via extensive market research or by the gut feelings of the owner or some combination thereof the decision about how to produce the items or the ingredients to prepare them must be made If PBJs are on the menu should the biz make its own peanut butter and jelly and bake the bread from scratch Or buy some or all of these items Unless a foodservice biz is going to grow its own vegetablesfruitsgrains andor raise and slaughter its own meatfishpoultry they ll have to buy some of the ingredients or items from someone That someone could be a local source found on a website like httpwwwlocalharvestorg or httpwwwfarmsreachcom Or it could be a manufacturervendor such as Two Chefs on a Roll which develops and produces specialized products and menu items customized for what it calls its true partners those companies for whom they develop menu items Or it may be a regional or national manufacturer andor distributor such as M or Gordon Food Service which may provide a wide array of services including online ordering delivery inventory management assistance marketing and promotional resources and more No matter who the foodservice biz may purchase from purchase specifications should be established so that any supplierspurveyors know exactly what s needed Click here to learn more about the terminology used to ensure consistency and enhance quality and safety in the use of purchase specifications Predicting the future is challenging under any circumstances but misjudging when it comes to deciding how many of each menu item will be needed at any point in time might prove disastrous Inaccurate predictions may mean either lost revenues running out of an item and losing the sale and creating a disappointedangry guest or having too much of an item risking the expense of spoilage or waste or having money that could be spent or invested somewhere else tied up in unused inventory The difficulty in forecasting explains in part why new businesses are so vulnerable in their first year as the ownermanager tries to figure it all out and why franchising is relatively popular in the foodservice segment because the franchisor s past experiences provide forecasting insights to new franchisees they likely wouldn t have had otherwise Closely related to the question of how many will be needed is the howwhere will we keepcontrol all the stuff til we need it question Unless it s a grow your own sort of foodservice operation it will be necessary to obtain any ingredients or menu items purchased from a suppliervendor The importance of this step the receiving function is significant It s at this point that the foodservice business takes over control of the products and is liable for their costs The responsibility for safetysanitation shifts from the suppliervendor to the foodservice biz and mess up here and guests could be sickened or worsel As each ingredient or item arrives usually as part of a larger delivery from a truck traveling to several other locations it s up to the ownermanager of that foodservice business to ensure it is of the proper quality in the correct quantity at the agreed upon price again demonstrating the importance of standard recipes purchase specifications and forecasting From a sanitation and cost control standpoint it s critical that all items are maintained under proper storage conditions and that access is limited to control against theft This step in the process can be easily overlooked in the frequently busy and sometimes hectic environment of any foodservice business Ownersmanagers can be too busy doing something else to properly receive deliveries or may delegate the task to an untrained or poorly motivated employee resulting in the potential for problems with quality quantity pricing sanitation andor theft It s also important that storage areas are conveniently located to food preparation areas with appropriate environmental controls relative to temperature humidity and security maintained at all times The first in first out FIFO system of inventory management is common in foodservice operations to insure the careful tracking and prompt use of all ingredients and menu items held in inventory The FIFO system helps control costs and maintains appropriate food safety and sanitation standards so the owner is more likely to be happy and the guests are less likely to experience poor quality or even foodborne illness Will they step up to a counter or pull a car up to a drive through window Will they serve themselves off a buffet line or will the menu item be brought to them by one or more servers while they are seated at a table Will guests prepare their own m or have front row seats to be not only fed but also entertained There are many ways to get menu items to guests but no matter what method of service is utilized the importance of managing this particular moment of truth can t be overstated While electronic and technological innovations continue to be developedl the frontline employees have a unique opportunity to enhance or ruin the guests dining experience These service employees may make or break the guest experience via the suggestions they make and the attentiveness they provide or fail to provide Even if something should go wrong these employees may be able to salvage the experience for the guest and the revenue for the business by how well they handle any problems or complaints For those who recall the old Seinfeld TV show click here to view a compilation video of some service experiences you may enjoy The perfectly prepared menu item served flawlessly will likely delight the guest who orders and consumes it but from the owner s perspective they still gotta get paid right All foodservice businesses need to have a system in place that results in all menu items produced being documented as sold actually served to guests and traded for payment Again the specific means for implementing such a system may vary significantly and the service style is nearly always related to payment collection Whether guests pay at a counter before getting food or pay at the end of a buffetcafeteria line after selecting food or pay a server at the table after the food is served or pay a cashier after the food was served at table or any other system which might be conceived of the foodservice biz needs to get paid According to the National Restaurant Association the range of median profits before tax for US foodservice businesses ranges from 36 to 97 of total revenues In other words these businesses typically earn between about 4 and 10 cents profit on each dollar of sales they generate Where any business falls in or outside of this range is related to many factors Some the ownermanager may control what menu items to offer prices to charge service levelsstyle to provide etc and others are beyond control occupancy costs like lease or rent charges prices charged by vendors etc What s vitally important is that the ownermanager has a scorekeeping system in place so that shehe understands what may be controlled and has the best information available to assist in making predictions about what they can t control so that any required adjustments can be made quickly In an effort to control expenses foodservice ownersmanagers typically pay close attention to several different operating ratios that are related to the menu We ll consider the following here the average check per person the food cost percentage and the contribution gross profit margin for each menu item Ownersmanagers typically keep track of how many guests use their foodservice operations during specific time frames eg day parts associated with meals such as breakfast lunch and dinner as well as daily weekly monthly and annual totals They use this guest count data traditionally referred to as CO vcrf to compute the average check per person This calculation simply requires taking the guest count number of covers for a time period and dividing it into the total food sales for that same time frame If you have a Facebook profile and an interest in starting your own virtual restaurant click m to Food cost percentage is computed by dividing the cost of food sold by the total food sales and can be calculated for the entire menu expenence Resmurant 39 t for a given time frame eg one month or one City39 week or even a meal period or to analyze results at the level of each individual menu item Analysis at the individual menu item level can be used when deciding what items to include on the menu and how to price them Food cost percentage per menu item can be considered along with each item s contribution toward profits also known as its contribution margin gross profit to help ownersmanagers to make menu adjustments Contribution margin is calculated by subtracting the actual food cost per menu item from the item s menu priceClick here for example calculations for contribution margins and food cost percentage All foodservice businesses have a menu but how and where and under what circumstances they serve food can vary significantly Because of continuous changes and developments in the foodservice business over time the considerations for sorting and grouping these businesses can be a bit confusing However as noted earlier the National Restaurant Association NRA does provide periodic reports and forecasts related to US foodservice business activities and results see wwwrestaurantorgresearch for more details So we ll continue our overview of the foodservice business by considering the two main categories Noncommercial places that provide self operated foodservice where the primary goal is not to generate profits it s to provide food and beverages in a place where something else considered to be more important ie education health care corrurrunitygovernment services or some type of business other than a restaurant is going on i but the people there still need sustenance There are some contracted commercial operations in business and industry Bampl health care education and other settings places where management companies have been hired to provide on site food and sometime other services and to try to make a profit These are outlined further under the managed services link included in the commercial subgroups which follow below For purposes of consistency and staying organized here we ll use the NRA s distinction that noncommercial operations are those that self operate and don t have profit as a priority There are several sources of information for those working or interested in noncommercial operations including the Society for Foodservice Management and the National Association of College amp University Food Services One of the primary trade related publications and websites for this foodservice category is Food Management Commercial places where the goal is to generate profits from the sales of food and beverages with varying types and levels of service included This is what most Americans would probably recognize as re restaurant business While there are several large chain operations overall the commercial restaurant segment still has a place for smaller or individual operators as the 50 largest chains generate only about 20 of the annual segment wide revenuesz Click on each of the 7 categories below to explore Commercial Foodservice operations in more detail K PFuIIser39vice restaurants Places where the order is taken by a server while the guest is seated at a table and the guest then pays aftereating Making a category based on when the guests pay and where service is provided still leaves room for a lot of variation even between and among full service restaurants Further distinctions within the full service subcategory are often made based on Af liation or lack thereoD Independents Defined by some as a single location or operation it s not uncommon for ownersoperators of a small number usually 4 or fewer restaurants to still be known as independent especially when compared to the largest of chain operations which may number into the thousands Chains While a case could be made that two or more affiliated restaurants be they owned franchised or managed by the same person or entity could be called a chain for purposes of consistency in this e text we ll refer to a chain as an entity with five or more locations of the same brand name For evidence of the role of franchising in the restaurant business especially in the limitedquick service subsegment click here to check out Franchise Times magazine s listing of the top 200 restaurant franchisees A vezage guest check per person The National Restaurant Association NRA uses the following ranges Less than 15 per person 15 2499 per person More than 25 per person Style of Table Service Click here to read about different styles of table service from Perspectives on the Hospitality Industry by Carl Borchgrevink Service eve Casua dzmng Informal and comfortable and often chain affiliated via franchising the guest check per person is likely to be in the mid range category but sometimes lower The table service is typically American but sometimes English family style and the menu commonly includes comfort foods and may even feature breakfast served over the entire time the restaurant is open Alcohol service may be available but is usually not a featured component of the dining experience Eine dzmng Upscale and luxurious are words associated with this subcategory of full service restaurant Most are independent operations with an emphasis on ambience china service and linens mood lighting and decor etc and high average guest checks necessitated by labor intensive culinary preparation and service requirements There is some management contracting done but effectively no franchising An emphasis on gourmet food and the chef as a sort of featured artist and promotional attraction is common check out httpwwwacfchefsorg to learn more about what it takes to become a certified chef The highlighting of wine service is also a frequent practice typically provided by expert professionals lcnown as somineliers To leain more about what it takes to develop wine and beverage expertise check out httpwww mastersommeliers org andor httpwww ommelier ociet ofamerica org The style of table service offered in fine dining settings may vary but French service or at least highly personalized team oriented service is provided no matter what the actual type of cuisine or menu emphasis may be culinary innovation and experimentation with the fusion of ethnic traditions is common in fine dining restaurants Other common subcategories of full service restaurants include core menu type eg ethnic steakbarbecue seafood theme oriented eg httpwwwhardrockcom and celebrity owned click here jr examg1e 5Q LimiTed quick service quot 2 restaurants Places where guests usually order at a cash register and pay before they eat sometimes staying at the restaurant to eat their food but often taking it with them to consume elsewhere Convenience and speed of service combined with a low guest check per person average are features of the quick service restaurant QSR category Drive through window service may also be provided if geographically feasible Chains specifically franchised chains are well known in this subsegment but the top 50 companies generate only about 25 of the total annual sales 3 in this segment Subcategories are typically based on the core menu provided at the restaurants 05 magazine uses the following list to divide up and compare quick service restaurants based on their menus Burgers Sandwiches PizzaPasta Snack Chicken Mexican Seafood and Asian Check out the Top 50 chains according to OS magazine by clicking Distinctions between subcategories aren t hard and fast it s not uncommon at present to encounter what are known as fast casual concepts again based on menu type such as ethnic soup and salad and bakery cafes examples of this category include Panera Bread and the Grand Traverse Pie Company which we considered when we explored entrepreneurs back in Module 4Speaking of Panera this company has begun experimenting with a nonprofit version of its traditional operation recently opening a location where the menu board inside the store officially named St Louis Bread Co Cares has quotsuggested funding levelsquot instead of set prices The executive leadership of Panera believes this nonprofit cafe is a way to leverage its skills in running restaurants to help the community click m if you d like to learn more about this unique endeavor Further evidence of the blurring of category distinctions may be found when considering alcoholic beverage service typically not available at US quick service restaurants But for proof that it s not necessary to have a sommelier to serve wine in a restaurant check out this article about alcoholic beverage service at QSRs www aqrmaoa in comarticle HeatHr 3509th cash lphtml Another related subcategory is that of cafeterias and buffets Again speed and convenience are key factors that most guests who dine at these restaurants appreciate as they choose meals from buffet stations or a continuous cafeteria line In the case of self serviceall you can eat buffets guests take advantage of the flexibility but ownersmanagers must be especially aware of food costs and pricing as guests can decide their own portion sizes Independent operations featuring ethnic menu buffets eg Chinese Indian Thai are common in many US communities but chains compete in this subsegment too For examples click on httpwwwbuffetcom and httpwwwgoldencorralcom If you are interested in keeping up with what s going on in the commercial restaurant world check out these examples of free restaurant related e mail newsletters and other resources National Restaurant Association Nation s Restaurant News Technomic Restaurant Report Sullivisioncom ll Snack and nonalcoholic beverage bar39s This subsegment includes establishments that sell baked goods popcorn ice cream and frozen yogurt or coffee and juices which may be consumed inside or taken away for later enjoyment Businesses that feature specialty cookies or freshly squeezed juices and smoothies are included They may also sell related merchandise like beverage mugs or t shirts but most feature a specific snack or nonalcoholic drinks and coffee is among the most popular According to the International Coffee Organization the consumption of coffee is a centuries old practice that has evolved into a substantial global economic contributor the cultivation processing trading transportation and marketing of coffee provides employment for millions of people It is also a facilitator of human interaction at the individual and community level around the world see wwwicoorgcoffee storyasp for more background on the history of coffee Coffeehouses are typically a cross between a restaurant a cafeteria and a bar while the menu is coffee and hot drink teas etc oriented light snacks may also be included Depending on the location coffeehouses often serve as centers for conversation reading writing or studying Franchising is relatively common in this sub segment and chains such as Starbucks are well known players and tend to dominate 4 Still there are many parts of the world including the United States where independent operations are competing vigorously Click here for a look at what some independents do to gain an edgeSpeaking of Starbucks given some of the latest plans this corporation is undertaking it may be necessary to reclassify at least some of their locations in the future click here to find out why KY Drinking places Hospitality businesses that emphasize the making and selling of alcoholic drinks to be consumed on premises Whether called pubs bars taverns or nightclubs these businesses often include limited menu food service as well as drinks and may also feature music or entertainment too Taverns which often have a more extensive food menu have a long and storied place in American history Before during and after the formation of the United States taverns were traditional meeting places where people gathered to share companionship and the news of the day in a comfortable environment Independent operations predominate in the United States but chains are more common in other regions of the world according to Beer in the evening which bills itself as the UK39s biggest and busiest pub bar and club guide Here s a link to examples of chain pubs in the UK wwwbeerintheeveningcomchains One of the unique aspects of operations in this subsegment is the need for ownersmanagers to be aware of the varying legal requirements and liability laws associated with serving alcoholic beverages Legal drinking ages vary as do the penalties for businesses who serve intoxicated guests who may then injure themselves andor others The State Bar of Wisconsin has assembled a summary of the liability considerations for serving intoxicated individuals in each US state i click here to have a look For a free drinking places e mail newsletter check out wwwbarbizma combarbiz e Managed services Also referred to as on site foodservice and food contractors these are the contracted commercial operations mentioned earlier in the module that exist in business and industry BampI health care schools and other settings places where management companies have been hired to provide on site food and sometimes other services and to try to make a profit While there are thousands of companies involved in contracting the largest 50 companies generate nearly 90 of the revenue 5 There are several multinational multi billion dollar companies that are the leaders in this subsegment including ARAMARK m and Compass Group Among the other settings in which contractors such as these do business are museums professional sports stadiums and arenas concert halls and amphitheaters racetracks both where human beings race motor vehicles and where horses and dogs race each other e and other popular tourist attractions such as national and state parks Cafer39er s These are the businesses that specialize in providing single event food service such as family celebration graduation wedding reception business events trade show and luncheons They utilize vehicles and equipment to transport the meals and snacks to the events andor prepare food at an off premise location This subsegment also includes banquet halls that host events of the sort mentioned above Independent operators are more common than chains in this subsegment as the 50 largest companies generate only about 15 of the total annual subsegment revenues 6 Because of the predominance of independent operation organi ation such as the National Association of Catering Executives httpwwwnacenet provide members with continuing education as well as networking and marketing opportunities Given the relatively recent interest in green issues across the business spectrum organizations such as the Sustainable Catering Association have emerged to provide resources to those interested in advancing what they refer to as the triple bottom line advocating programs in support of people planet and profit Click onhhw taimlylm Atmiwa v idilm org to learn more Another somewhat recently emerging and related subsegment is that of personal chefs They work with individuals or families to identify tastes as well as any dietary restrictions then develop customized menus that are prepared in the client39s home packaged labeled and then stored in the refrigerator or freezer The personal chef plans the customized meals shops for the required ingredients prepares the dishes and leaves them behind with directions for how to heat up the meal or otherwise finish any necessary minor preparations The website for the US Personal Chefs Association httpwwwuspcacon is an excellent source of more information for those who may want to connect a love of cooking with a desire to start one s own business I Vending The earliest forms of vending are alleged to have existed in ancient Egypt and it seems that ever since that time humans have been figuring out more and better ways to sell food beverages and other products directly to customers from specialized machines To see a vending history timeline click here According to research firm Market Researchcom the vending industry in the United States currently consists of approximately 5000 companies of which the top 50 produce about 40 of the annual sales Some of the food service contractors we looked at earlier have vending divisions eg ARAMARK Sodexo and Compass Group while other independent companies of varying sizes often operating on a regional or local basis make up the rest of the subsegment Sales of cold beverages make up about 40 of annual vending sales with candy and snacks accounting for about 30 of the sales Because a variety of hot and cold food may be available in vending machines they frequently offer customers an alternative to restaurants and other food service options including grocery and convenience stores NAMA the trade association for vending has developed an overview of vending operations which is available Follow these links to a listing of organizations and websites that provide free vending related news and information www allabontvendino m m ne sinde htm and wwwvending orgkno ledgelinks php It is ultimately pretty tough to make too many precise and meaningful distinctions between foodservice business categories and subcategories For example over the recent past many foodservice operations have realized that by providing and promoting take out andor home delivery meals they can more effectively compete across all of the dining day parts ie breakfast lunch and dinner especially with grocery and convenience stores which historically hadn treally been considered the competition The bottom line is that foodservice ownersmanagers of all sorts must pay constant attention to the needs and wants of the marketplace and economic conditions because these circumstances may change frequently The fundamentals presented in the lst 8 modules are ultimately more important to understand than which arbitrary category any particular business may or may not fit in A couple of foodservice research and consulting organizations have been mentioned in this module People Report httpwwwpeoplereportcom and Technomic which also provides a food industry glossary www 39 39 mm Ifartsglnssarvhtml but there are many others that possess and provide typically for a fee tons of foodservice related expertise Another well known contemporary provider of consulting services and data for restaurants is Malcom M Knapp Inc httpwww nmh 39 39 mm click here to view an example of the type of reports this firm provides its foodservice and other clients In fact back in the mid 1950s these sorts of experts got together and formed an association called Foodservice Consultants International The membership consists of consultants from around the globe and there s even a student membership category for those interested in learning about consulting while still enrolled in school Check out httpwwwfcsiorg to learn more A relatively recent development is the partnering of quot 1 traditional print media educational institutions and consultants to combine resources and share information with foodservice industry v ownersmanagers and also to generate revenues An example of Jupitenmages Commie this may be found at httpwwwmonkeydishcom The idea behind MonkeyDish formed by Restaurant Business magazine in conjunction with the Culinary Institute of America and Technomic is to provide a customizable website that foodservice ownersmanagers can use to find stuff like recipestrends marketplace demographic data video training tutorials and RSS feeds from media sources This module also mentioned several suppliers and vendors to both noncommercial and commercial foodservice organizations again there are many other organizations involved From kitchen equipment to dining room furniture to computerstechnology and cleaning supplies there are vendors out there for about anything you could think of A convenient way to see examples is provided by a company called FoodService Resource Associates LLC Click on the link to learn more Another site of potential interest for anyone who enjoys dining out even if you d never ever want to ownoperateor work in a restaurant is The Daily Fork httpwawdaiyforkcom which is billed as food news restaurant reviews dining tips and delicious distractions From the irreverent to the ridiculous to the occasionally sublime this site has it Revisiting the idea that it s both what you know and who you know that matters for success we ll start this module by acknowledging what everybody in the lodging business has in common No matter the size location or service level operational success in lodging hinges in great part on how well the ownermanager can plan organize lead and evaluate the series of events and circumstances that arises as guests do what they do before during and after their visit to a hotel We ll refer to this from here on as the lodging loop Lodging guests may seek a variety of experiences from leisure or love in Japan to sleeping tightquot in a pod in New York to 39 e under the sea or surrounded by ice to up in a tree When the lodging loop is well managed the chances that the business can satisfy guests and reach its financial andor other goals is greatly enhanced We ve previously explored the fundamental operations questions a foodservice ownermanager faces now we ll look in greater detail at what lodging ownersmanagers must think about and do from an operations standpoint to succeed The approach taken in this module will be similar to that in the foodservice module as we consider essential questions that lodging ownersmanagers must answer The operating profit margins in well managed lodging businesses tend to be larger than those in the foodservice businesses considered in the previous module But the required capital to construct a hotel building which may include hundreds and sometimes thousands of individual guestrooms with furnishings fixtures and amenities typically results in a substantial mortgage loan as well as significant utility and maintenance costs just to keep the physical plant operating To be able to manage efficiently enough to be able to reach and maintain profitably lodging managers must be prepared with good answers to several basic operations related questions We ll first look at these questions from a broad perspective and then revisit some of the issues raised with a tighter focus later in the module For now let s start with What to do before they get here What to do when EQinPQ Loop 121 910 they leave es Ions arrive What to do during their stay Thinking back to the marketing module the ownermanager should plan and execute marketing strategies including determining what lodging productsservices to provide where to locate them and how to make them available to potential guests Choices about which people to employ as well as how to price and promote the productsservices ideally based on a market research must be made before guests arrive Failure to do so will likely result in an absence of guests which quickly translates into lost revenues and shrinking profits Because of the highly perishable nature of lodging productsservices recall Module 32 lodging ownersmanagers try to get guests to utilize room reservation systems to reduce the uncertainty of operations and improve expense control and revenueprofit forecasts While it s preferable that guests make reservations even if they don t the lodging ownermanager must have systems in places to meet and ideally exceed the level of service that guests are expecting upon arrival Whether the guest is to be checked in via a self service touch screen kiosk or personally welcomed by a uniformed valet and escorted to a reception areafront desk a guestroom must be assigned and a room key must be issued with guest safety and security ensured at all times From the owner s point of view payment or the promise thereof must also be obtained It is also becoming more commonplace for ownersmanagers to emphasize conservation of resources therefore technology may be employed to assist the hotel in terms of energy management not to mention to ensure security as well as confirm billingpayment and enhance speed of service Maintaining guestroom cleanliness and sanitation is essential as is providing other amenities and services guests need and may want such as in room guest information entertainment systems and vending Guest safety and security must continue to be of high priority as well as awareness of other guest desires that might include wake up calls possibly automated and voice messaging systemsmailboxes Emergency management plansprocedures must be in place and the maintenance of all building systems power heating and cooling etc and facilities must be done on a continuous basis Accuracy in terms of guest accounts must be also maintained and it is common practice for hotels to employ systems that make it easy for guests to purchase food beverages and other itemsservices and charge them to the room account which can lead to higher guest satisfaction and more profits for the owners Lodging ownersmanagers strive to ensure that all guests leave satisfied or to at least uncover any problems that may have arisen during a guest s stay with the hope of resolving them sooner rather than later It s also relatively common for chain hotels to offer guest loyalty programs that must be verified and updated at this stage Reconciling and receiving payment for all productsservices guests consumedpurchased before they depart is a high priority as is preparing the room for the next guest as well as updating guest history records to be used as a database for future strategic marketing decisions No matter the checkout options offered by the hotel again ranging from self service credit card processing to personalized face to face send offs each guest should leave with an invitation to return at the first opportunity The contemporary US hotel business includes approximately 50000 properties owned or operated by about 30000 companies with the largest 50 companies generating about 45 of the annual revenuesl Categorizing the various types of lodging operations may be every bit as confusing if not more so than making sense of the world of foodservice For purposes of consistency we will use the terminology employed by STR Global to characterize the various sorts of lodging operations that exist STR Global is an internationally recognized aggregator of travel research and lodging operations historic data that was formed in 2008 and consists of the combined websites of three formerly separate entities HotelBenchmarkcom Smith Travel Research and The Benchcom STR Global is not a consulting firm in the traditional sense as it does not provide operating advice or comment on specific companies or hotels but STR Global does make forecasts or predictions based on the operating data that lodging organizations around the world make available These hotels and companies voluntarily provide their past operating data to STR Global In return as an independent third party STR Global then provides for a fee those hotels and companies and anyone else willing to pay for it with summaries of selected operating data based on the needs of the company or individual purchasing the information No specific individual company or hotel operating data is shared but each company or hotel can select the aggregated data that s most meaningful to it categorized by region property size location type and chain affiliation and purchase access to only that information Click w to view a sample STR Global report STR Global has also compiled a glossary of industry terms that may prove to be a handy reference as you explore the lodging business check it out w STR Global makes a fundamental separation based on whether a property offers its guests food and beverage services Fullservice hotels typically offer at least one restaurant with a combined or separate bar as well as minimum service levels often including bell service and room service Limitedservice hotels offer overnight accommodations sleeping and bathroom facilities but typically no foodservice and few other amenities or services aka rooms only operations The other key distinction STR Global makes relates to whether a property is considered to be independent or affiliated with a chain Any property that does not share a brand name with any other property is effectively an independent hotel The word chain in this context refers to hotels with a common brandithere are no distinctions made relative to ownership form or the lodging properties franchise status or management company affiliation we will look at these distinctions a bit later in this module Further subdividing of both chain and independent hotels may then be done based on their price the rates they charge guests to rent rooms their building structure andor service level and their location Price distinctions for both chain and independent hotels in a given geographic location are based on the average room rates they charge as follows Luxury those with the highest rates top 15 Upscale the next 15 in terms of average room rates Midprice the middle 30 of average room rates Economy the next 20 of average room rates Budget those with the lowest rates bottom 20 Examples of bwidzng Structure aim air service 1eve categories include All suite The space the guest rents includes at least one bedroom but also a separate living area that may include kitchencooking and refrigeration appliances All suite hotels may include morning breakfast service and a manager s reception each evening in the priceroom rate referring to these as complimentary but typically don t offer full restaurant service Examples of all suite chains include Embassy Suites and AmeriSuites Boutique These are properties that are usually smaller less than 200 rooms and feature unique physical layouts and ambience as well as upscale amenities food and beverage service and high average guestroom rates While many boutique hotels are independents there are chain examples such as Kimpton Hotels and Joie de Vivre Hotels Some independent boutique properties have combined to form referra assocz atrbns marketing alliances that are generally less strict and expensive than franchises Referral associations provide independent properties whether boutique or not with a shared centralized reservation system and a common image logo or advertising slogan They may also include other benefits such as group purchasing discounts As a referral association member each independent hotel may then refer guests to each of the other member hotels providing convenience to guests seeking similar service levels and property ambience even though it may be provided by otherwise nonaffiliated hotelsian example is Boutique Hotels and Resorts International Conference While any hotel could refer to itself as a conference center the lntemational Association of Conference Centers IACC has established guidelines related to the type of meeting space and services provided as well as the average size of the groups hosted and sources of revenues to provide clarity as to which properties can authentically claim to be conference centers Click for the current guidelines for membership in the IACC as well as links to a directory of locations and conference center management companies Convention Hotels that don t fit in the conference category because they are larger 300 rooms or more with more space for bigger meetings 20000 square feet or more are classified as convention properties Most every major city in the United States and many around the world includes several convention hotelsioften owned andor managed by a hotel chain such as Hyatt Hotels Hilton Hotels or Starwood Hotels Desnnanbn Resorts These are typically full service hotels that often include several restaurants and a variety of food and beverage services True destination resorts such as those operated by Vail Resorts click m to see examples go a step further as they attract guests directly because of the sheer attractiveness of the property andor surrounding region which often includes or provides immediate access to golf skiing or other amenities and facilities such as swimming pools and even water parks and spa services for more information about water parks click on this link to the World Water Park Association and for more about spas click on this link to the lntemational Spa Association Bed and breakfast inns BampBs may be considered a subsegment of this category while they don t often include extensive recreational amenities BampBs are typically independently owned and very small average size is about eight rooms destination properties Click this link to see the American Bed and Breakfast Association s member listing of US BampBs GamngCasznoz These are lodging properties that are oriented around providing casino gaming but may also combine convention facilities andor resort amenities An upcoming module will provide a more extensive look at casino operations Location provides yet another way to categorize hotels for example Urban This location could include almost any of the previously described hotels that happen to be located in a heavily populated metropolitan area Suburban This includes properties located in the outskirts of metropolitan marketsiwhere the urban sections end and suburbs begin is not always clearly defined but many large cities have extended residential areas ringing the city s center and hotels in those regions are referred to as suburban Smal MetroTown The distinction here isn t always clear cut but this is the category for properties located in or nearby a small town in what are sometimes referred to as secondary or tertiary markets Interstatemotorway This includes any lodging facility that draws the majority of its guests from motorists as they pass the hotel on nearby freeways or other main roadways However hotels are typically only classified this way if they are not r r 7 m located in or do not fit in one of the other location categories Jupiterlmage corporation already mentioned Azipom If a nearby airport how nearby may vary generates most of the guest demand for a lodging property it may be aptly called an airport hotel The Dearborn Inn built in 1931 on the grounds of the Ford Motor Company near some of the original car manufacturing industrial complexes in metropolitan Detroit Michigan claims to be the first airport hotelz Though the nearby airport closed not long after the hotel opened because of its unique architecture and historic beginnings the Dearborn Inn is included on the National Registry of Historic Places Click here to take a video tour of this example of the blending of lodging categories There are other ways to classify hotels for example the American Hotel and Lodging Association s AHampLA website uses hotel size eg the number of guestrooms as another point of differentiation Click m to see the AHampLA s latest data about the size of hotels as well as other noteworthy facts about hotels in the United States Another method for categorizing hotels is based on the ratings of outside organizations International governments often provide ratings of the hotels within their borders and proposals to establish global standards have been floated but such systems are unlikely to be established given inherent individual country and regional subjectivity concernsg In the United States two of the better known hotel ratings providers are the ForbesTravel Guide formerly the Mobil Travel Guide and the American Automobile Association AAA Click to learn more about how the Forbes Travel Guide decides which properties earn its highest and lowest ratings between 1 and 5 stars and click to learn more about how AAA determines its ratings between 1 and 5 diamonds A sign that the interest in environmental issues is impacting the lodging business is the recent addition by AAA of eco icons to its ratings in an effort to help travelers make better informed choices about which hotels are making stronger efforts to manage their environmental impacts5 Module 5 introduced operating formats specifically management companies and franchising Both are common in the lodging segment Some companies specialize in franchising such as Choice Hotels International and others focus on providing lodging management services such as White Lodging Services and some do both like Marriott International depending on the needs and desired financial returns of the hotel s owners No matter how we might classify any particular hotel when it comes down to being in the Jon gzng biz all will have at least one person or maybe several responsible for seeing to what s required based on how the ownermanager answered the lodging loop LL operations questions presented earlier If we were to consider a bed and breakfast operation with say five guestrooms one person could conceivably managehandle each of the areasfunctions in the following list If the example was a 500 room full service property there could be dozens or in the case of housekeeping even hundreds of people working in that area In either case and for any other lodging example some person or persons would do work related to these basic operations categories sometimes referred to as djvjszbns It s important to acknowledge that the lines between divisions and the specific names they are called may vary and sometimes overlap Subdivisions sometimes called departments are often made within these categories and again there may be a variety of different structures and names used by different properties around the world of lodging It s up to the ownersmanagers at any specific property to decide on the organizational framework they believe is best Click on each of the following examples of the functional divisions of a hotel to experience the traditional approach to organizing for success in hotels m FOOD AND BEVERAGE ampB MARKETING HUMAN RESOURCES HR ACCOUNTING Using a functional divisiondepartment lens provides a fairly straightforward view of hotel operations but the necessity of orchestratingblending these functions so that the guest experience is seamless and profits are maximized can be a bit more complicated Most guests minimally want their needs met and usually appreciate it when their expectations are exceededibut they don t generally care to think much about which department is responsible for any aspect of their stay in a hotel So those that own manage or are otherwise employed in hotels may be served by a functional approachiit provides a command and control perspective that s easy to grasp But the top leadership of any lodging property usually called the general manager GM and her or his leadership tearnithe folks in charge of each of the divisions or departments at a specific hotel sometimes called the executive committeemust all learn to play nice on behalf of the guests at least The potential for competing priorities and both inter and intradepartrnental conflict is high There s an old saying that goes something like this sales promises but operations delivers Promising something to convince someone to buy and then later delivering on the promise isn tthe same thing If the hotel sales department were to promise early check in to a convention group on the day of a different large group s checkout aka when the house turns fessentially all of the rooms are being vacated by one set of guests on the same day that a whole new set of guests is arriving the relationship between the front desk and housekeeping on that day may be more than a bit strained and both front desk and housekeeping employees wouldn t have many nice things to say about the sales department either Because of the unique challenges associated with being in the hotel business organizing by divisionsdepartments presents other challenges as well Instead of organizing strictly by functional departments contemporary hotels often consider the lodging loop questions and then assign tasks and responsibilities to employees based on their best answerssolutions to those questions An example of an approach to operating that breaks down or redefines division and departmental relationships and may lead to increased profits for a hotel is the use of revenue management instead of pricingroom rate decisions initially being made by marketing and control of the future inventory and pricing of guestrooms then being separately handled by reservations the front desk eventually assumes control of the actual daily utilization and pricing of the rooms inventory which guest actually pays what specific rate and gets assigned to which particular room upon arrival a revenue manager works between and among these departmental functions to avoid departmental politics and boundaries and maximize revenues and ideally profits The phrase revenue management sometimes referred to as yz39eJd management has its origins in the hospitality business as a result of the deregulation of the US airline business back in the 1980s and has also been influenced by the impact of global distribution systems GDS which allow for broad and decentralized access to the market of hotel rooms for potential buyersguests Revenue management techniques may lead to increased revenues for any business airlines car rental companies cruise lines and even energy companies that produces a fixed amount of productsservices that are highly perishable review this term in Module 32 especially when the customersguests are willing to pay different prices for essentially the same productsservices In the lodging business this means that hotels may depending on a variety of specific circumstances charge guests from different market segments guests on vacation vs individual business travelers vs convention attendees etc different room rates for access touse of the same types of guestrooms To decide how to do this and increase the amount of money a hotel takes in revenue managers use the power of computerized technology to analyze huge amounts of information They consider past demand data what the current competition is up to the influence of seasonal and regional perspectives the price sensitivity for whichever guest market segments the hotel is targeting and the reservation costs across whatever sales channels the hotel is utilizing from travel agents to its own website to personal selling and anything in between and beyond as well as a forecast of guestroom demand across all targeted segments on a da y basis From all this then the revenue manager can setrecommend and adjust guestroom rates as well as sales strategies specifically for groups and convention business Any student taking this course or reading this digital publication who aspires to a position of leadership in the hotel business would likely do well to pursue a greater understanding of revenue managementiif you are enrolled in a hospitality management curriculum at a college or university your program will Jupitenmages Corporatin no doubt include coursework that delves deeper into this subject For those who d like to read more now Neal Salerno a consultant who bills himself as the Hotel Marketing Coachquot has assembled several aiticles that cover the basics of revenue managementi click m to have a look Staying at a fundamental level for purposes of this coursetext hotel ownersmanagers must understand that setting rates usually has less to do with how a guestroom is furnished or configured and a whole lot more to do with what guests are willing to pay for that room on a given night So even if computerized analysis of loads of data isn t done managersowners that utilize market segmentation and anticipate shifts in short term demand may still charge different rates to different guests for the same types of guestrooms on the same night The greater the demand for guestrooms on any given night the higher the rates the hotels will be able to charge The who and what you know perspective still applies when it comes to success in the casino gaming segment so in a sense this hospitality segment is not much different from the others we ve considered to this point But none of the other hospitality segments stirs the level of interest and sometimes controversy that gaming can Though there are for example some individuals and organized groups opposed to quick service restaurant menus and marketing practices and others who fight against development of resort hotels in environmentally sensitive regions no other hospitality segment invokes as much scrutiny legal regulation and in some cases opposition for example the Stop Predatory Gambling Foundation previously known as the National Coalition Against Legalized Gambling httpwawncalgorgas does the casino gaming segment While gambling is an activity that humans have been engaging in for literally tens of centuries1 individual and various societal perceptions of the morality and legality of gambling seem to swing back and forth on a historical pendulum Narrowing the scope to a consideration of the history of gambling in the United States legal lotteries were a common source of financing for the original US colonies and lottery generated funds were used to build libraries churches and even some of the first colleges including Princeton Harvard and Yale2 Gambling has been government sanctioned as well as prohibited at various stages in US history but even when it has been outlawed it never seemed to be eliminated only forced underground Recent US history demonstrates that the pendulum has swung back to the legalization of several forms of gambling which we ll look at in greater detail later in this module To view an overview of how legalized gambling in the United States has evolved over the past 80 years or so click hei The current national consensus seems to be that those who want to gamble should be allowed to do so but since the chance for problems is real rules and controls must be put in place Given historic concerns about the morality of gambling as well as the potential for money laundering and past links to organized crime contemporary casino gaming operations are among the most highly regulated businesses in the United States Laws and regulations govern the number and location of casinos casino ownership who may work and play in them hours of operation what records must be maintained and shared with regulators the types of gambling they may offer and how they promote their games Casino ownersmanagers are required to observe for pathologicalcompulsive gambling in their operations and must pay a portion of the casino s revenues to fund services for problem gamblers Explanations for why people gamble range from recreational as a forum for socializing andor a means of surrogate risk taking entertainment to occupational a very small proportion of gamblers pursue their livelihood through gambling to 18percentgrey2009 sed under license fern Shuttersto Inc patho39ogical EStimated to be a fractional portion of all gamblers The societal and individual impacts of casino gaming vary from providing an enjoyable form of entertainment for most to potentially facilitating addictions and destructive behaviors for a few3 links between gambling and other addictions such as drugs and drinking have been identified as well The multiplier effect of dollars flowing into an economy from casino gambling and then being re spentinvested as well as paid in tax revenues to governments which then develop infrastructure and other improvements has been significant in many places with Las Vegas being perhaps the most visible but certainly not the only US location Elected officials in search of revenue sources to fund government services have increasingly turned to legalized and often relatively heavily taxed gambling venues and casinos4 Thus without predicting which way the legal pendulum may swing in the future it s clear that at present gambling especially in the form of legalized casino gaming is a significant segment in the contemporary hospitality business world According the American Gaming Association there are five forms of legal gaming in the United States charitable commercial casinos lotteries Native American gaming and pari mutuel wagering So at present government sanctioned gambling is permitted in casinos through state lotteries and at race tracks bingo parlors charity gambling events and through sports bookmaking The total annual revenue from all of these examples is estimated to be around 85 billion with the top twenty companies controlling about 60 of the market1 How much is wagered illegally is impossible to accurately tally but estimates have placed this amount in the range of 80 to 380 billion on sports betting alone2 seems like all those NCAA Final Four basketball bracket betting pools really add up across campuses and officesl While state lotteries pari mutuel wagering betting typically on dog or horse races where the winning amounts depend on the total amount bet on each race and charitable gaming eg church raffles casino nights sponsored by parentteacher associations with proceeds going to scholarships etc are legal on a state by state basis for purposes of this module we ll focus on casino gaming operations Casino gaming generates about 70 of annual legal gambling revenue in the United States1 and involves many of the more popular and appealing careers and employment opportunities in this segment Commercial casino operations were legalized in Nevada in 1931 in NewJersey in 1976 and in ten other states in the time since then resulting in the neighborhood of about 445 current commercial casino operations give or take a few as economic circumstances shift2 Because of the historic treatment of Native Americans by the US government a series of court decisions lead to legislation ultimately passed in the late 1980s known as the Indian Gaming Regulatory Act or IG RA that created the legal framework for Native American gaming to come into existence This legal framework included gaming classifications Class II and III games with the most popular and financially lucrative being Class II and Class III games for an explanation of the difference between these levels click hei There are currently about 423 Native American casinos operating in the United States3 Many Native American tribes viewed gaming as a chance to create economic development and thus established ownership and operation of their own casinos or in some cases hired management companies to operate casinos for them Each federally recognized tribe is considered a sovereign entity and may negotiate an agreement with the state within which it is approved to ownoperate casinos referred to as a compact Given the diversity of tribes the different perspectives of state governments and the menu of games that may be offered there is great variety in Native American gaming operations from local tribal bingo halls to the largest casino in the world Foxwoods Resort Casino Click w to view a short video tour of one of the casino floors at the Foxwoods Resort Casino The National Indian Gaming Association has developed an informational video outlining Native American gaming operations including the benefits and regulations associated with tribal gaming click hei to have a look An extensive list of resources and information pertaining to Native American gaming may also be found While there are differences in the ownership structures regulatory considerations and taxation regulations between Native American and commercial casinos the actual operation of a casino from a functional perspective or even from the gaming customer s point of view should not be very different As is true with lodging operations casinos may be explored and understood from an operating departments point of view It is common for casinos to include lodging accommodations and food and beverages as part of their productservice offerings in fact several of the largest hotels in the world are components of casino operations including the MGM Grand Luxor and Mandalay Bay all located in Las Vegas In addition to size distinctions the hotel operations in casinos while intended to generate revenues and profits may at times take a back seat to casino operations Accommodating casino customers especially high rollersquot whose gambling activities may mean literally millions of dollars in revenue to the casino may supersede the typical hotel s occupancy ADR or REVPAR goals Top of the line suites click for sample images of these sorts of accommodations may be comped fan abbreviation for provided on a complimentary basis that is offered to the best casino customers at no charge to encourage and reward gambling activity We ll further explore casino comps and related marketing tactics a little later in this module For now let s start at the top the executive leadership in large casino operations may have titles such as CEO chief executive officer or president instead of general manager as was common in lodging Those in charge of major departments many of which overlap with those in non casmo hotels may hold the title of vice president Whatever the title the person at the head of each department is called casinos are typically organized around these functional areas Casino Oxalions Markcg39 g Finance quot 39 Ca1ch quot 39 and Emma Sec H1111 SHIVCIHaIICC Entcnaznmcn Rcczaan39on 1 Food and BC VCIEE Human Resumes Casino gaming shares fundamental i attributes with all hospitality a segments and yet this part of the II 3 business world is unique not only because of the controversy that it may create but in its allure it is after all the only hospitality segment l that provides the built in chance for its customers to leave with more Jupiterlmages Emma on money than when they began their productservice experience The casino gaming segment is also distinctive in its establishment of and ongoing funding for the National Center for Responsible Gaming NCRG The NCRG pays for research into the causes of and solutions for problems related to youth and pathological gambling And so for those who may playgamble in casinos it is wise to remember that the house advantage 139s ca While casinos can be a source of exceedingly comfortable hotel accommodations fine food and beverages and wondrous entertainment they exist to attract and retain customers ata pro tiwhich means that the vast majority of customers they attract will leave with less money sometimes significantly less than they brought to the casinollf you are interested in leainmg more about casino gaming check out these resources We ve up to now considered the foodservice lodging and casino gaming segments of the HB world Distinctions sometimes significant and sometimes subtle can be made between each but private clubs are unique even amongst other segments All other segments include customers as one of the primary stakeholders of the business but not clubs As with the other HB segments private clubs do have owners and they do have employees and vendors and perhaps creditors but only private clubs have members Achieving success is still about meeting and trying to exceed expectations but for private club managers it s the needs and expectations of those particular stakeholders who provide new meaning to the idea of frequent guests or customers some of these folks may be members of their club for their entire life not to mention the previous generations of their family who are or were club members their whole lives as well We explored nonprofit organizations back in Module 2 and we ll revisit this concept now as some private clubs do qualify for this tax exempt status which means that some club managers will view the bottom line of their club s income statement differently than others When it comes to success in the club management segment both what and who ya know still matters it s just that some of those ya need to know eg the members may have exceptional expectations and require unique levels of service but they are usually willing to pay for it But before we go any further let s establish a bit of perspective and context relative to private clubs why do they even exist It turns out that people have been forming private clubs at least since the ancient Greeks did1 and for reasons that range from social to recreational to professional Some current club members may be looking for a place to network andor do business deals and others are looking to feed their ego andor recreate or compete on the tennis courts or golf course No matter the individual motivation tojoin to gain membership in a contemporary private club it may be necessary to pay an up front initiation fee and then dues each month to stay a member and for some clubs this may only be after having been approved to join by other members of the club there may be a waiting list and everyone who applies may not be accepted A private club typically exists to serve a limited number of members therefore organizational goals related to revenue and profit maximization as well as growth and expansion of the business so common in other hospitality segments are often different in the private club segment Franchising and chain affiliations are virtually nonexistent with the exception of the limited number of private clubs operated by a management company An example of this type of management company is ClubCorpwhich we talked briefly about back in module 5 i remember The decision about legal ownership form taken by some private clubs is not very different than any other hospitality business operated for profit the owner chooses based on issues related to nancing control liability and taxes Private clubs operated as for profit entities are commonly referred to as nonequity clubs aka proprietary or developer clubs and will often be formed as corporations with the ownersmanagers retaining operational control much like any other hospitality business Nonequity clubs sometimes begin as components of real estate development projects where the company developing a large piece of property includes a golf course and country club surrounded by single family homes andor condominiums click here to see an example i the developer may incorporate a membership in the club as part of the deal when someone buys a house or condo in the development The real estate development company may eventually decide to sell the golf courseclub especially if all of the surrounding lotscondos sell out at which point the current club members or some other business may purchase the club to continue its operation Most private clubs that are oriented towards health and fitness also fit in the nonequity ownership category examples of facilitiesservices available at these clubs could range from aerobics to yoga and include climbing walls free weights and indoor courts of all sorts basketball racquetball squash and tennis The trade association for these clubs is the International Health Racquet ampSportsclub Association IHRSA click here to visit their website which includes a find a club link providing a convenient means to further explore examples of these sorts of clubs around the world if you re interested Because nonequity clubs are operated as for profit businesses members are very much like typical hospitality business guestscustomers as they have limited input and control over decision making activities and overall club management and operations This type of ownership is the exception most private clubs1 are literally owned by their members and are known as equity clubs As noted in Module 2 the Internal Revenue Service may grant tax exempt status to certain nonpro t organizations which exist to achieve some other goals beyond profit Section 501c7 of the IRS code stipulates that private clubs which have limited membership and exist substantially to promote social activities and recreation and where no club earnings are used to directly benefit any individual member may be apply for and be approved as tax exempt Tax exempt status typically applies only to federal and state income taxes depending on location clubs may have to pay tax on income generated from nonmembers eg banquets sold to outside groups or fees charged to guests andor state taxes charged on employee payroll expenses Equity clubs are established by foundingmembers who provide the financial and other resources necessary to buy or build the club facilities They also develop bylaws and articles of incorporation which are used to establish the nonprofittax exempt status with the IRS as well as set up the management and operational structure for the private club The internal organization of an equity club typically looks something like this Board of Directors who are elected by and from the club membership to establish and implement policies and set strategies as well maintain financial oversight of the club s operations Committees are formed based on the bylaws and used to divide the work necessary to keep the club functioning as well as disperse power andprovide internal checks and balances Common committees utilized in equityclubs are financebudget deciding how to allocate the financial resources of the club and 1116171176129pr decisions about criteria for admitting new members etcA range of other committees are possible depending on the club s bylawsmcluding athletic social and long range planning General Manager not a member of the club but the individual sometimes a management company employee hired to manage day to day club business on behalf of the members Some clubs refer to this position as the Chief Operating Officer COO as shehe directs overall operations of the club hiring and supervising necessary staff etc while reporting to the club s board of directors Private clubs as was true with other hospitality segments are often organized and operated via a department structure Many share similarities with resort operations some private clubs include overnight accommodations for members or their guests click w to see an example Private clubs may include expansive recreational facilities and some offer a variety of high quality food and beverages as well as banquets and special events No matter how extensive the facilities may be the emphasis in private clubs is on service members who are often the owners pay a premium for the privilege of accessing the club and they generally expect to be treated accordingly moments of truth always matter in hospitality businesses but the intensity of the members expectations are usually turned up a notch or two in private clubs Which and how many departments are included in any particular private club depends on several factors starting with the members priorities as the club was established eg recreation andor social andor food and beverage and then influenced by the General Manager as shehe organizes day to day operations in an attempt to meet and exceed members needs and expectations The fundamental operating principles related to marketing human resources and accountingscorekeeping still apply in private clubs whether there is a separate department established to focus on each or not Smaller clubs like smaller restaurants or hotels may consolidate any or all of these areas under the club GM andor outsource components of some or all of them to other businesses Depending on the sizepriorities of any given club there may or may not be a Member Relations department which would be the rough equivalent of a marketing department Depending on the membership roster of the club is there a waiting list or is the club low on members or somewhere in between this department may be developing and executing tactics intended to find and sign up new members or focusing on retaining current members while developing public relations and publicity programs to influence longer term positive perception of the club in the local community or both Examples of departments which may be found in private clubs are listed below Most would be similar in descriptionfunction as presented in the lodging module and each would likely be headed by a Department Manager or in the case of recreation oriented departments a Club Professional or Pro who reports to the club s GM or C00 The number of additional employees in each department would vary again based on member priorities and management s discretion Food and Beverage may include Catering Director Chef Dining Room Manager Banquet Manager etc Controller scorekeepinglaccounting function Human Resources attracting and retaining employees Membership Director attracting and retaining members Club Professionals depending on recreation facilities may include Golf Tennis andlor Aquaticslswimming Clubs exist to serve their members and the varying types of clubs members form may be categorized in several ways Distinctions about types of clubs are a bit more straightforward than was true ofthe foodservice or lodging segments still there is often overlap of facilities and services provided for our purposes we ll use the following categories based on the primary emphasis of the servicesfacilities clubs intend to provide to their members starting with Country clubs are literally and figuratively built around golf sometimes including very extensive facilities including not only the golf courses but also a pro shop with golf equipment and other merchandise and attire for sale Some level of food and beverage service is nearly always provided typically with at least one upscalefine dining room but possibly including other stylesservice levels available at several locations on the grounds of the club Facilities to serve banquets and special events are also commonly included at country clubs as are swimming pools and tennis courts for the use of members and their guests Click here to see the website for the club located at the site recognized as the birthplace of the game of golf theRoyal and Ancient Golf Club of St Andrews Scotland To begin to get a sense for the variety of contemporary private clubs centered around golf click on any of the following links to view the websites of clubs who s General Managers were kind enough to share their perspectives in video interviews you may view at the end of section 126 of this module Oakville Golf Club in Toronto Ontario Canada The Golf Club at Chaparral Pines in Payson AZ Highland Country Club in Fayetteville NC and Orchard Lake Country Club in Orchard Lake MI There are thousands of other examples of country clubs around the world and most have a website so hop on your favorite search engine and have a look if you re interested meanwhile here s a link to what may be the longest golf course in the world httpzwwwnullarborlinkscom in Australia City clubs are typically established by business professionals in urban areas to accommodate networking of both a social and business nature These clubs are generally focused on high quality food and beverage service and may include meeting rooms and even overnight accommodations as well as exercise facilities The US military has traditionally offered club services similar to what is available at a city club to its personnel at a variety of locations around the world but the Jupiterlrnages orporaton number of such facilities has been in decline in recent yearsl Another related example of private clubs often offering similar sorts of services and facilities to its members are University Clubs These clubs have historically been established to serve the social and professional and sometimes recreational needs of university administrators faculty and staff as well as their families and guests Because the variety of clubs is so vast a convenient way to experience some examples of private club websites is to click on this link to the ClubCorp interactive map which allows you to point at a state and click to see examples of clubs they ownoperate in that state Yacht clubs provide boating related services such as moorage slips the rough equivalent of reserved parking for boats and fueling and possibly food and beverage swimming and locker roomclubhouse facilities for their members Click here to see examples of yacht clubs around the world Has eqmw dubs have opportunmesm generate revenuesfrom hand ethese matters bvthe c ub39sbv aws Membershrp dues rthe pnce each member rs charged wprcaw mbmhm m or c r cmbsZ The hrgher pmces charged by coder cmbshh both mmatmn fees ah coder cbbs as compared m mtv dubs dues bv aws Demsmns about and pohmes re ated m membershrp eveb dues and wmp ememed bythe mahagemem at each mdwwdua dub Fund and beverage 77 Most dubs brrer road and beverage servrce Much rs pmced and pad rbr mdch subsrdr x nseswnh m r r vehd ssuch as m s In a twrst on pmmg pohcy some prwate cmbsduhze mbmhmbbd ahd bev rmmm I mberdoesntspen mrmmdm ambdm oh food andor beveragesm the cmbddrhgaseurmerrame bheh e a ed ed Newquot em V P mbdhc smhe member pavswhetherthev eat r anhe dub or ehvrrohmem Sports activityfees which are the prices clubs may or may not charge members and their guests to utilize the various sportsrecreational facilities available at the club Charges to play golf referred to as green fees are common in nearly all cases but the price level may be varied based on timing weekday vs weekend as demand shifts How much andor whether or not to charge fees for access to swimming pools fitness equipment and tennis courts for example will vary based on individual club policy Assessments pricing decisions across the previously noted revenue sources for clubs is done based on historic financial performance as well as budget forecasts not unlike practices in other hospitality segments Clubs have the somewhat unique opportunity to make up revenue shortfalls or cover expenses which may have been underestimated for any financial period through the use of assessments Say for example the monthly forecast was that 20 new members would join the club and pay a 5000 initiation fee but no new members joined and some current members quit causing over 100000 less in monthly income In that same time frame maybe food expenses jumped due to vendor price increases and golf course maintenance costs skyrocketed due to draught conditions and a gopher infestation rememberw M The club s board of directors may decide to use the assessment option assuming the bylaws permitted they could implement a one time or maybe even periodic charges to members over the next year to bring the budget in line Such charges don t usually sit well with the general club membership so assessments must be used judiciously or the club s board members may find themselves facing the equivalent of a recall election Clubs may also generate revenues from sales of merchandise or attire in the pro shops operated in conjunction with recreation facilities golf or tennis most commonly as well as fees charged to nonmembers who may be permitted to access the club facilities as guests of members to play a round of gold for example or perhaps spend the night in a guestroom if the club has them These sorts of revenue sources are secondary to others previously mentioned as most clubs earn most of their revenues from the primary facilities and services they provide to their members Unlike managers in other hospitality segments who will likely interact with numerous new customers on a daily basis and who could do similar work with one of hundreds of different chain operations involved in operating thousands of locations around the world club managers are typically employed by an independent entity formed to serve a relatively small and exclusive group As rewarding and challenging as meeting and exceeding member expectations may be the unique circumstances involved in clubs may at times feel somewhat closed and isolating to managers employed in them The good news is that private club managers have created what is arguably the most effective professional development and networking organization in the world of hospitality the Club Managers Association of America CMAA While CMAA has been mentioned previously it s fitting to wrap up this module with an invitation for anyone interested in getting experience in club operations orjust learning more about private clubs to visit the CMAA website httpwwwcmaaorg CMAA s continuing education and professional certification programs are among the most highly regarded in hospitality business circles If you are a student studying at a hospitality program your schoolinstitution may already have a student chapter of CMAA but if not click here to learn more about CMAA student membership for example they usually include a nice list of internship possibilities at CM MA member clubs around the US Why are there such things as events and meetings It seems the human need for affiliation has manifested itself in group gatherings of one sort or anotheripolitical religious sporting or socialisince antiquity think of the ancient origins of the Olympic games various traditional religious pilgrimages etc No matter the size or purpose of any successfully planned and executed get together of people the function of event planning is fundamentally driven by the answers to these two questions What s the goat why have a meeting or event So starts the process of meeting and event planning The process can be complex and lengthy and typically entails specialized roles and responsibilities critical to the success of the meeting or event The people involved in meeting and event management fall into two basic categories planners and suppliers Planners are the individuals who organize implement and control every aspect of a meeting convention or other event and suppliers are purveyors providers vendors or contractors who provide planners with meetingevent related facilities products andor services to ensure the success of a meeting or eventl Meeting and event planners are often divided into subcategories such as association and corporate Association planners may work for state regional national and international associations As you look around at the world of business it may seem as though there is an association forjust about everything but even if there s not just about every association holds meetings and events it can be big business Associations generally represent a constituent group such as the American Medical Association While many of these constituents might be professionals eg doctors and lawyers the constituents of the association can be I um I II I I 39 eg Wine and Spirits of America 39 39 eg The National Rifle Association or competitors eg The American Contract Bridge Leag One of the ways that associations may attempt to serve their constituentsmembers is to protect them often by lobbying that is trying to influence legislators and laws that would impact the association members Due to the importance many associations put on their lobbying efforts Washington DC is home to most association headquarters in the US and many major associations also maintain offices in the state capitals around the country as well Many of the meetings associations plan are educational sessions for their members and a once a year annual convention which is where associations make most of their money for the year The members who are attending these meetings and events are doing so voluntarily This is an important distinction The planning timeframe for an annual convention or conference for an association is long term typically spanning a few 2 to 5 years Corporate meeting planners and coordinators arrange and execute meetings marketing events and other special gatherings for a business they are directly employed with whether its legal structure is a sole proprietorship partnership LLC or corporation Many corporate planners are involved in the event planning for new product introductions or other marketing related goals It is common for corporate planners to work as internal consultants within their companies assisting other departments with expertise in the planning controlling and organizing of events The attendees of most corporate meetings and events are required to be there by their employers as compared to association meetings and events which are optional for the members And while some larger association meetings may have a multi year planning horizon most corporate meetings are planned in a year or less sometimes even with only a few days of advance notice There are other methods for classifying event and meeting planners Some are organized based on the industry they specialize in serving There are for example meeting planners for government agencies httpwwwsgmporg for medical meetings wwwhceaorg as well as planners who focus on religious meetings and events httpwwwchristianmeetingorg Another subcategory for planners is based on their status as independent or thirdparty planners Remember the earlier descriptions of contract management companies Third party planners are the rough equivalent these planners are often entrepreneurs who start and operate their own 39 39 I 39 firms cu 39 a ociation or anyone else who lacks expertise or time may then hire an independent planner to manage a specific meeting or event The most familiar example of third party planners may be those who specialize in weddings aka bridal consultants click here if you are interested in learning more about these sorts of planners Another third party planning example is firms that specialize in providing incentive travel services Businesses typically larger ones may use incentive tripsevents to reward top performance by employees based on specific criteria Usually these criteria are related to achievement of targeted revenue goals and are presented to top performing salespeople andor dealerships Rather than face the myriad of details involved in this process it s not uncommon for third party planners who specialize in incentive events and travel to be hired by businesses to manage these programs from start to finish click here to visit the website of an incentive travelevents management company And yes there is even an international association of folks involved in incentive travel known as the Society of Incentive Travel Executives click E if you d like to explore further Opposite the meeting pJamcris the meeting supijcr This can be the facility holding the meeting or event a hotel resort conference center or convention facility or a combination thereoD There may be other public venues where the meeting or event is held a museum botanical garden business office or church to name a few In each case the meeting or event facility or venue is a supplier of the meeting space There are many other examples of suppliers that may contribute to the process of accomplishing the goals and measurable objectives of a meeting or event These include individuals and organizations that provide products and services such as Audio visual equipment Decor and theatrical propslightingsound Temporary structures tentscanopies Telecommunication and computer servicesequipment Online meeting management software Transportation and toursexcursions Entertainment attractions eg theme parks entertainers professional speakers Promotional products Ever wonder where all those little give away items like refrigerator magnets and pens and ash drives with a company s logo and website come from Well it turns out there is an association for folks in that line of work so if you want to know more click here to visit the website for the Promotional Products Association International The list of suppliers and yes many of these have associations too goes on and includes Shipping companies and international brokerage firms Exhibition contractors aka general service contractors or GSCs Special effects fireworks companies Printers sign makers Language translators Security services contractors Photographers and videographers Whether they are members of an association or not these companies and businesses may specialize in supplying products and services to meeting and event planners or consider meeting and event planners as a market they target among others There are two other noteworthy examples of meeting and event suppliers destination management companies DMCs and convention and visitors bureaus CVBs According to DMCNetworkcom a consortium of DMCs from around the world a destination management company provides expert destination knowledge creativity and logistical know how for groups in the areas of airport meet and greet transportation tours and activities teambuilding and event production from unique venues to entertainment and decor So meeting and events professionals may hire a DMC to help smooth the learning curve associated with meeting in an unfamiliar locationithe fees charged by the DMC can save the meeting planner and attendees time headaches and heartaches CVBs may provide some of the same services as a DMC but they are typically structured as nonprofit organizations CVBs are the more typical US examplename for destination marketing organizations DMOs often referred to as tourism boards in other regions According to the Convention Industry Council s online glossary we ll revisit the ClC as it s known a bit later in the module Convention and visitor bureaus are not for profit organizations charged with representing a specific destination and helping the long term development of communities through a travel and tourism strategy Convention and visitor bureaus are usually membership organizations bringing together businesses that rely on tourism and events for revenue1 Click here and scroll down to the Convem39on and Vjsjmanrean entry to read more CVBs in the United States are often primarily funded by a transient occupancy tax sometimes referred to as a bed tax as well asby dues paid to the CVB by its members The bed tax gets its name because it s usually charged to guests staying in a given region s hotels as a percentage of the room rate they pay Politicians recognize that this sort of tax doesn t anger the majority of local residents because they don t end up paying itithe out of town guests come pay the tax and go and don tvote in local elections If the bed tax revenues are then used to support the CVB the potential returns on this tax investment benefit seem relatively clear As an indication of the recognition of the importance of the multiplier effect associated with spending by travelers and visitors CVBs and DMOs have formed the Destination Marketing Association International DMAI the global association of CVBs and DMOs The DMAI not only helps promote and protect the interests of its members it offers educational programs including the chance for students to learn about careers and opportunities associated with this component of the world economy Click here to see the web brochure which outlines the benefits associated with student membership in the DMAI What we have examined of the meeting and event industry so far has been referred to as the meeting exposition event and convention MEECindustry1From this point forward we will do the same As you can see the MEEC component of hospitality business intersects and overlaps with many of the segments we ve considered up to now So no matter the type of meeting or the affiliation of the planner the meeting planning process invariably begins with the reason for the meeting or event goal and what we hope to accomplish at and after the meeting or event is completed measurable objectives Every decision a meeting planner makes and each supplier the plarmer has chosen to provide goods or services for the meeting or event is selected in support of achieving the goal and objectives What does it take to be a meeting and event plarmer Organization and multi tasking skills creativity attention to detail time management patienceflexibility communication skills organization and multi tasking skills and attention to details are all critical personality traits and skills necessary to become a successful meeting and event plarmer Did we say organization and multi tasking skills and attention to detail enough Yeah well that s because these attributes really matter Needless to say checklists are an important part of the meeting and event planner s toolkit Some students believe that because they like to plan parties they will be good meeting and event planners One problem with this perspective is they forget that they are planning an event or meeting for someone else aka 26 client Understanding and then translating the client s vision into reality including measurable objectives adds difficulty to an already challenging process The most effective meeting planners know that before they can plan a successful event they must first have a meeting oft26 minds with their client OK so what functions does the planner undertake to successfully carry out a meeting or event The Convention Industry Council CIC the umbrella organization of many national and international MEEC associations developed a list of activities about which meeting planners and coordinators must be knowledgeable in order to become qualified as a Certified Meeting Professional CMP we ll look closer at this designation later in the module The list is as follows Developing goals and objectives Selecting meeting design and theme Selecting sites and facilities Coordinating with convention and visitors bureaus and local committees where appropriate Negotiating contracts with facilities Budgeting and cash handling Housing and reservation management Arranging transportation Planning program timelines Creating a specifications book or planning guidebook Defining registration procedures and policies Planning and coordinating with the facility and its representative eg the convention services manager Planning meeting event room set ups Managing exhibit space and exhibitors Meeting with staff prior to actual meeting or event Planning and managing food and beverage menus and service Determining and ordering audio visual requirements Selecting speakers where necessary Selecting and booking entertainment where necessary Developing and scheduling marketing and promotional programs Producing printing and shipping where necessary meeting materials Evaluating outcomes based on objectives and other post meeting event responsibilities This list is not in precise chronological order and the relative importance of any these activities will vary based on any particular meeting or event So let s consider examples what types of meetings do corporations hold The list includes board meetings sales and other types of training meetings stockholders meetings and incentive trips which were previously described in this module Associations often hold meetings similar to those of corporations but since these gatherings are often a major source of revenue for the association and member attendance is voluntary the goal and objectives must be attractive to the association and its members Examples of association meetings include conventions board meetings committee meetings conferences that are based on regions or the time of year and educational seminars or workshops Sometimes these meetings may overlap a convention may have educational sessionsor training seminars held during the convention there could be dozens of sessions or more taking place at the same time known as concurrent sessions Many associations while holding the armual convention or regional conferences will have an exhibitor hall or trade show in progress concurrently A trade show is basically a market place where individuals andor companies exhibit or showcase their goodsservices It also provides the invaluable aspect of doing business face to face with existing or prospective clients Parts of the show floor might have networking areas such as lounges and a show might even have feature events like attendee luncheons or cocktail receptions to provide additional face to face sellmgnetworking opportunities To begin to get a sense for how cool and complex a trade show can be click lg to view an example of a trade show floor plan To breathe some life into the list of activities previously presented let s consider an example But before we get into the details it s useful to start with fundamentals In the case of preparing for any meeting planners and others often use an acronym to remind themselves of the importance of the objectives for any meeting and to pay attention to what matters as they work through the plarming process The acronym planners use is SW7 and it refers to the need for the objectives to be Specific Measurable Achievable to the goal Relevant to the goal Time bound We ll keep the SMART framework in mind as we look at an example Let s suppose a corporate meeting planner is assigned responsibility for planning an important sales training class for a company s new product introduction An objective for the training might be The nine eastern region sales managers of the XYZ Company will attend new product training in Hartford CT on February 3rd and 4th ZOXX The costs of the training meetings will not exceed 25000 This objective gives us valuable information for all of the other key activities Site selection plays a key role in whether an association member will attend a voluntary meeting but since this is a corporate meeting example that s less relevant Weather conditions may have an influenceim the United States southern locations in the winter and northern locations in the summer are often more attractive to attendees Accessibility via roads and airports is also part of the consideration for the planner In our case Hartford was chosen by the vice president of sales for the XYZ Company the client in this case so the meeting planner must select a venue in Hartford This could be a hotel conference center or both Cost will certainly play a role Let s say this product introduction is top secret in this case a secluded facility may be very important When it comes to budgeting we know that we have two days worth of meetings to plan That includes overnight accommodations meals meeting room rentalfees possibly and other expenses Internet access audio visual needs transportationprinting costs related to training materials etc Many meeting plarmers choose to set up what is known as a complete meetzngpackagc where all of the food and beverage lodging and audio visual requirements are included in a per person price As part of the budget process it s important to know who s paying Will some costs by borne by the attendee Will all costs be covered by the corporation Or will all costs be borne by the individual One of the first things a planner must do after identifying the goal and objectives is to develop a timeline of when each activity is to be completed and by whom There are various issues related to contracts menu selection finalization of attendees program development day of event activities and post event evaluations that must be completed Some activities must be done early in the planning process others can be done later Many meeting planners and students learn it is better to have a timeline and checklists than to work from memory Important things may be forgotten or the responsible person for the activity may not have been aware of his or her responsibility Items like this could have a significant impact on the success or failure of an event Registration for an event can be simple as in our sales training example or complex as in the case of a large convention with many thousands in attendance over multiple days Registration materials are an element of the marketing for the convention Materials must be persuasive in gaining interest to attend Registration issues include number of days attending ensuring accessibility for any attendees with disabilities dietary concerns payment policies registration deadlines contact information requirements and housing requirements if multiple hotels are being used It can be even more complex if family programs activities for the attendees families to do while their family member is involved with the eventmeeting are developed The costs dates and marketing of such family programs must be included in the registration materials Program development including the timing of activities within the meetingevent is another planning component that helps to motivate attendance In our case it may be best for the training to take place and then be followed by networking at a cocktail reception so that the sales managers may share ideas In other cases programs might include entertainment For example an association may wish to recognize the leaders in their industry with an awards dinner and dance following the educational seminars andor trade show offered during the day A company might wish to inspire their top employees with a popular motivational speaker such as a famous political leader or athletic coach An incentive travel planner may wish to develop a truly unique travel experience that none of the attendees has ever been a part of before All of these are programs and all are developed based on the goal and objectives developed by the client and plarmer The actual day of the event activities may include greeting attendees posting directional signs so they can find their way around distributing name badges confirming meal and coffee break timing and expected number of participants checking audio visual equipment operation and confirming room set ups including arrival and distribution of handouts or other materials This may seem a minor detail but meeting rooms can be set up many different ways and the decision of which arrangement to choose is a function of the goal and objectives of the meeting For our sales training example we know we are working with a small group of nine managers Therefore we ll require a room that is not too big very common or too small for our needs Our setup likely requires tables and chairs in a classroom format with a projector computer and table to demonstrate the new products maybe even an area for a coffee break station or continental breakfast If we were holding the cocktail reception we would require fewer tables and more walking around space Every meeting or event has different set up requirements Click here to see examples of common meeting room setups Once the meeting is overthen what Evaluation to determine whether the goal and objectives were achieved is the primary activity In our sales training case there also might be a test to make sure the trainees understand the product and how to sell it General matters such as clean up and shipping the product samples or unused training materials back to the office must be handled It is also common practice for meetingevent planners to authorize cash gratuities be paid to employees of the suppliers to the meeting and charged on the account of the organization holding the meetingevent For example the various department heads and key employees of a convention hotel from rooms operations to food and beverage and beyondiwho gets included in the gratuity pool is at the discretion of the meeting plaimer may all receive extra compensation courtesy of the meeting planner for the job of ensuring the success of a meeting If an exhibition or trade show was part of the convention or event making sure that exhibitors are satisfied and that reservations for future years are secured can be part of the post event activities A review of the bill from the hotelvenue is certainly an important part of the post event activities both the planner and supplier want to ensure that everything is in order to eliminate any questions or disputes and ensure the bill will be paid promptly Since many meeting plaimers act as agents or representatives for their company or association they are ultimately responsible for spending the organization s money wiselyLastly conducting a post event survey hard copy or online is a great way of getting feedback from attendees and exhibitors to see how the event went for them and to get their ideas and suggestions for future improvement OK now you know a little about what a meeting planner does But how does one become a professional As a student one of the first things you can do is to become involved in your school s meeting planning club andor fundraising committee or to start one up if none currently exist Taking classes that pertain to meeting planning is certainly wise you may want to investigate theatrical production classes as well Obtaining as much hands on experience as possible via a MEEC related summer job or internship is also strongly recommended Even after graduating and becoming gainfully employed in the MEEC industry there are many professional organizations such as Meeting Professionals International M the International Association of Expositions and Events E the Professional Convention Management Association PCMA the International Special Events Society and the International Festivals amp Events Association each of which may provide great opportunities for career exploration andor employment networking The MEEC segment has evolved over recent years and now offers significant professional development opportunities for planners and suppliers Certifications are also gaining important and broader acceptance for example the Certified Meeting Professional CMP designation noted earlier may be achieved through continuing education ongoing service to the industry and documented work experience Just as the CMAA provides professional development and certification for private club managers the Convention Industry Council coordinates similar opportunities for meeting and event professionals Another example of the increasing sophistication and evolution of MEECs is the Convention Industry Council s APEX or accepted practices exchange Industry professionals have spent countless hours developing a glossary of terms templates for various meeting or event planning forms contract templates and checklists for the various activities we discussed earlier Click here to learn more about this resource
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