The Hotel Outsourcing Dilemma: Externalisation v. Specialisation

The decision to outsource a service is not simple. It requires an exhaustive analysis that enables an improvement in processes to be guaranteed, therefore contributing added value to your hotel offer and often becoming an exercise in trust, as starting constraints include resistance to change and thinking nobody can do it better than you can as you are the person who knows your establishment best.

Outsourcing is an old, efficient business model worthy of consideration. It can lead to an improvement in quality in the provision of service and to a reduction costs, therefore achieving a higher level of competitiveness and enabling the hotel owner to focus on their core business.

In fact, more and more companies in every sector are turning to subcontractors. There are numerous examples in the marketing of consumer goods but one of the best examples is presented by Robert Reich, (2012) and based on the manufacture of a car.

When General Motors spends $20,000 on a Pontiac Le Mans that money is distributed in the following manner:

• 6,000 to Korea for manpower, assembly and components.
• 3,500 to Japan for components and electronics.
• 1,500 to Germany for engineering and design.
• 500 to Taiwan for components.
• 500 to England for marketing.
• 300 to Singapore for components.
• 100 to Ireland for data processing.

Meanwhile, the $7,600 that actually stays in the USA is shared out as follows:

• Authorised dealers throughout the country.
• Security and surveillance companies.
• Consultants and strategists in Detroit and California.
• Cleaning and maintenance companies.
• Lawyers and bankers in New York.
• Lobbyists in Washington.
• Marketing agencies.
• Health and safety companies.
• General Motors employees.
• General Motors shareholders (many of whom are not North Americans).

It is highly likely you will find it difficult to identify with a company like General Motors. However, business management does not differ greatly from company to company when talking about production costs, whether for a service or a product. It is often a case of doing your sums while considering the fact that results must achieve optimal customer service, which includes both tangible and intangible aspects: brand, design, etc.

One of the great advantages of outsourcing lies in the possibility of hiring people who are specialised in certain management areas, allowing you to offer a service in accordance with the needs of your clients and enabling you to specifically dedicate your time to the development of your strategic business unit, the accommodation establishment.

In this case, subcontracting work is likely to be more beneficial for a small establishment as this type of establishments have a smaller capacity for creating internal departments that cover all areas of hotel management.

The other huge advantage is the saving on set costs. The hotel has a specific workforce that must always be in the establishment, regardless of occupancy. Outsourcing enables set costs to be converted into variables.

Even still, it is true that this method does not only involve advantages: the externalisation of services also sees a loss of control over the provision of these services as a direct consequence, and this requires constant communication between the hotel and the subcontracted company.

A deterioration may also occur in the provision of service derived from an unawareness or lack of identification with your business objectives. It is possible that the alignment of strategies becomes a complicated task. Communication will again play an important role: the subcontracted company must understand your mission, vision and values, and it must undertake to help achieve your goals.

Irrespective of the aforementioned, the decision to outsource services will always depend on the hotel’s own resources and its capacity to manage certain areas. Obviously, set strategic services must be provided from the hotel, however it is worth considering to what point the creation of specific departments is necessary to deal with other areas. Despite this, subcontracted companies should always be kept in the loop and they must keep you informed of everything that is going on around you in order to achieve quality service.

Such is the case with new technologies and digitalisation, which is one of the services that is most often outsourced in hotel establishments. The media plan and positioning are relatively simple tasks but they require effort, knowledge and time. Having a service provider does not exempt you from the responsibility of knowing what they are doing and the results that are being obtained, however.

At Paraty Tech, we believe in quality service and communication with the client. We understand that every establishment is different and that our services must align with your objectives. For this reason, our customer support service is available 24 hours a day, 7 days a week, 365 days a year.

We study your needs and those of your clients. Being hoteliers gives us a competitive advantage that allows us to conscientiously adapt to a changing environment.