Beachside hotel human capital dilemma

This is a case of two competing hotels, Sunrise Hotel andBeachside Hotel that are both located in a medium sized, tourismbasedtown in the Northeast U.S. The hotels are both competingfor the same set of guests, as well as the same set of potentialemployees. They are both budget hotels, right next door toeach other, with 60 guest rooms each and a view of the beach.The occupancy during peak season for the Sunrise Hotel is98%, but during the winter months goes down to 65%. TheBeachside Hotel has peak season occupancy of 90% and off peakoccupancy of 50%.Joe is the General Manager of Sunrise Hotel and has been inhis current position for 5 years. He has been with Sunrise Hotelfor a total of 10 years. He worked his way up at Sunrise Hotelfrom front desk agent to front desk supervisor, and finally toAssistant General Manager before he became the GeneralManager. He does a good job of screening potential employeesfor his front desk area of the hotel because he realizes theimportance of that area of the hotel, especially in tourist areas.He also has incentives set up for excellent performance of thefront desk agents and training and development programsdesigned to give everyone information that will help them dotheir job better. There is a sense of teamwork at Sunrise Hoteland that helps everyone want to do a good job. His guest satisfactionratings for his hotel are overall excellent. On a ratingscale of 1–10, his hotel averages a 9.The average length of tenure of his employees is 4 years,and his current front desk supervisor was promoted fromwithin, along with his Assistant General Manager. Because ofthe small size of the hotel, Joe is actually involved with all ofthe hiring decisions and helps to give training programs himself,along with his leadership team. The employee turnoverat the Sunrise Hotel is 25% overall and that is primarily whenhourly employees graduate high school or college and leavethe Sunrise Hotel for a career somewhere else.Brian is the General Manager of the Beachside Hotel anddeals with a very different situation. Brian was brought infrom another hotel in the same hotel group about 6 monthsago. He was told by his boss that he needed to “fix” this hotelso that it would start having better customer satisfaction ratingsand more return guests. Despite the fairly high occupancynoted during peak seasons, the off peak season occupancy isonly 50%. Also noted by his boss, the occupancy should be asgood as the Sunrise Hotel. Brian has been with his hotel groupnow for 2 years and he came out of the accounting and financedepartment in his old hotel. He has a great understanding ofthe numbers in the lodging industry, but has not been involvedwith the human resource aspects of the job.The turnover of hourly employees at Beachside Hotel is120% and that means that Brian is constantly running the hotelshort handed and with new employees. The Beachside Hotelhas been doing the hiring through a human resource practitionerin the hotel that was put in the position because shereally could not handle serving guests at the front desk verywell. Mary was promoted to human resources a year ago after

she had one too many altercations with the guests at the frontdesk. The owner of the hotel wanted to make sure that shewould not make any of the other guests angry, so he promotedher to a human resources practitioner. Since that time, she hasbeen busy trying to keep up with hiring and she has had notime for training employees. Because she is so busy, paychecksoften come out to employees late, there are no policies writtendown for employees to use as a guide for performance, customersare treated badly by new and poorly trained employees,and the departments of the hotel do not communicatevery effectively and therefore everyone blames everyone elsewhen things go wrong.The average length of tenure of the front desk agents at theBeachside Hotel is 3 months and the customer satisfaction ratingat the Beachside is a 6 out of a 10 possible rating. Most ofthe front desk agents that are hired come from other hotels inthe area after they quit or are fired. Brian is not involved in thehiring for the hotel at all, and does not get involved with trainingand development. He spends most of his days looking atthe financial reports for the hotel and analyzing average dailyrate, occupancy rates, and REVPAR.Brian knows that he has many problems to deal with and sohe goes to the Sunrise Hotel to observe things over there fora while. He sees a happy crew and talks to Joe about how heis making that happen. Joe is happy to help, but wants Brianto go back and observe his employees first and come up withways that he specifically can help guide Brian.

1. What systems should Brian implement in order to startchanging the human capital practices in the BeachsideHotel?2. What could Brian learn from Joe in terms of the human capitalaspects of running a hotel?3. How could training and development programs be implementedin the Beachside Hotel in order to help with turnoverand occupancy rates at the hotel?4. How could a return on investment perspective help or hurtthe Beachside Hotel in trying to compete with the SunriseHotel?5. What other human resource initiatives could be undertakenby either the Sunrise Hotel or Beachside Hotel in orderto help with the overall performance of their respectiveorganizations?

Solution

This case study gives many examples of issues that could beimproved upon in order to help with the human capital performancein the Beachside Hotel. The Sunrise Hotel offers many good practices

that help to ensure a return on investment in their human capitalpractices. The low turnover, length of service of employees, and thepositive ratings regarding guest satisfaction all point to the positive,human capital focused culture of Sunrise Hotel. The above questionsgive some discussion points that will help to focus studentsand practitioners on some of the positive actions that can be takenby Beachside Hotel to help improve performance and the tone of thecompany. Here are some partial solutions to the case study questions.

1. In order to start changing the human capital practices at theBeachside Hotel, there needs to be a serious shift in the culturethere. Since Brian did not have any human resources background,he does not get involved in hiring, training, and ensuring thatthese functions are used to build a stronger service culture. Mary,the HR practitioner, was put into place because she could not workwith customers, yet she is now in charge of the internal customersin the organization, the employees. Brian needs to get involvedin building a stronger culture by making sure that he works withMary to make sure that she is focused on people and creating apositive atmosphere. Investments need to be made in training anddevelopment of the people currently employed at Beachside Hoteland also in the new people to build a committed workforce.

2. Brian should start out by learning more about the human capital inhis own hotel first and getting himself immersed in the people of thecompany. The service profit chain starts internal to the organizationand then looks to the external guest. Brian could then observesome of the human resource practices that are being used at theSunrise Hotel and apply them to his own hotel. Joe gets involved inall of the hiring at the Sunrise Hotel as well as the training there.Brian should implement more of a focus in the top management ofBeachside Hotel in order to emulate Joe’s focus on developing a cultureof service and in taking pride in the people that work for him.

3. Brian needs to focus on hiring the correct people for the variousjobs at the Beachside Hotel and should then work with each personto determine what it would take to get them to be satisfied in theirjobs. Training and development not only give people the skillsthat they need to be successful in their jobs, but also they help todevelop people in other facets of their life, i.e., time managementskills, money management skills, and even tuition reimbursementfor college classes. These development classes help people feela sense of connection with their jobs and would help them to besatisfied in their overall lives. The more satisfied employees are, themore that they tend to stay at a place of employment and the morethey tend to satisfy the guest that they serve. Having the top managementin a company get involved with the training and developmentof their people, helps them commit to their future growth andhelps the employee feel that their employers believe in them.

4. Since Brian’s job is to “fix” the Beachside Hotel, there will need tobe an initial investment in order to get the human capital practicesto a point where there are some significant improvements. Theseimprovements will hopefully drive the service level up at the hoteland thus drive occupancy and repeat customers. There needs to bea return on investment focus for the hotel as they try to change the

culture. It appears that currently, there is not a focus on investmentin human capital at all and the cost is the low customer satisfactionscores, high turnover, and a lack of repeat guests. Thishotel needs to encourage a focus on the human capital areas as wellas focusing on the return on investment in this area. It needs to benoted that the return on investment may take a period of time toshow a positive return, but hopefully the effort will be worth it.

5. Some of the other human resource initiatives that could be undertakenby either or both properties are: regular and thorough performancereviews, 360 degree feedback programs, round tablediscussions with employees to focus on their needs, incentive programsto reward employees for positive performance toward theobjectives of the organization, offer reward programs for guests inorder to boost the level of repeat guests to the hotels, more opencommunication regarding progress toward the goals of the organizationsin order to keep employees in the loop regarding performance,top management needs to focus on having a focus on theservice profit chain regarding the internal guest satisfaction aswell as the external guest satisfaction.