This month Hotel News ME looks into the pros and cons of outsourcing in hotels.
As companies look to reduce costs and improve expertise in certain areas of their business in order to remain competitive, so outsourcing has become en vogue. This concept of sub-contracting an operation to a third party is not new to the hospitality industry, yet outsourcing trends vary greatly from region to region.
Laundry is a good example – in the US, most hotels have their own laundries on site; in the UK, most properties outsource; and in the Middle East, using a third-party laundry service is an emerging trend as new laundries start to open their doors. Laundry is just one of a growing list of services the region’s hotels are starting to farm out to the experts. Others include housekeeping, recruitment, F&B, spas, revenue, asset and facilities management, IT/cyber security and valet parking, to name a few.
“As is often the case with hospitality industry trends, the UAE and in particular, Dubai, are leading the way [in the Middle East], with outsourcing becoming increasingly common,” says Martin Kubler, CEO of Iconsulthotels. “We’re mostly seeing security and housekeeping services being outsourced, mainly due to cost reasons, but given the current business climate, more outsourcing may be on the cards across the region.
“Previously, hotels in the region benefitted from consistently high occupancy rates, which necessitated (and made possible) keeping operations in-house, because it was easier to operate under constant high pressure with in-house staff, but these days, occupancies fluctuate considerably and hotels are looking at ways to be more flexible staffing-wise.”
One major barrier to outsourcing, however, stresses Kubler, is that many Middle East markets still suffer from a lack of choice when it comes to suppliers of quality outsourced services and staff.
Mike Scully, founder of First & Foremost Hospitality, says until recently, the relatively low labour costs in the Middle East meant outsourcing was not common practice.
“We do, however, see the use of third-party companies providing many of the following services; watersports, pool maintenance, project management, lift engineering, water treatment, pest control, training, painting and decoration and laundry,” he says.
“Where we see the best examples of outsourcing working is in the technical areas that require expensive equipment or highly trained staff or those who have specifically tailored their offering to suit the new age of internet purchasing with the costs that go with it.” Deciding whether or not to outsource is not an easy decision to make, concedes Shalini Mendriatta, the new director of asset management at Roya International.
“The key is to balance the hotel’s own resources with external resources,” she says. “Some third-party services will improve the hotel’s productivity while others will have to be ‘home-made’.”
Rupprecht Queitsch, CEO & senior partner, International Hospitality Consulting Group (INHOCO) believes outsourcing can improve competitiveness and save costs, but “pretty much like everything in business, outsourcing success stories are based on good leadership and choosing the right partner”, he notes. “Make sure you get the right fit in terms of quality, professionalism and engagement,” Queitsch stresses.
What the hoteliers say
Hilton: Mark Allaf, cluster general manager, Hilton Garden Inn Al Mina and Hilton Garden Inn Al Muraqabat, says he liaises closely with the hotels’ laundry suppliers to ensure the outsourcing model remains successful. “When working with multiple industry partners, we must maintain an active and on-going dialogue to uphold high standards of quality and outstanding hospitality, in line with our values and culture,” he explains.
An advocate for outsourcing, Allaf says it provides hotels with the opportunity to work with industry experts across a number of sectors. However, because the Middle East is “relatively new” to the concept, the industry needs to understand the nuances of each market and each hotel, because “one size does not fit all”, he warns.
JA Resorts & Hotels: William Harley-Fleming, group director of development and acquisitions at JA Resorts & Hotels, points out that as international brands continue to expand across the Middle East and include more mid-scale and limited-service properties in their portfolio, they are seeking to maximise operational efficiencies as they do in other regions.
“This includes outsourcing many ‘heart of house’ functions, transport and logistics, and specialty food and beverage outlets,” he says. “Through the use of external resources, hotels can reduce their role in recruiting, background employee checks, and training expenses, allowing the management team to focus on areas where their expertise is crucial such as sales, marketing and customer service.”
He also notes that contrary to popular belief, outsourcing leads to “higher levels of quality”, although many of the region’s luxury hotels prefer to keep all guest services in house for the sake of consistency. Mövenpick Hotels & Resorts: Philip Jones, general manager of Mövenpick Hotel Jumeirah Beach says international brands have been careful to protect brand and service standards, but have now proved in markets like the US and Europe that some functions such as housekeeping can be outsourced with no negative impact on quality.
“The cost benefits need to be weighed against the risk of using a third party, where if a defect occurs, that impacts your guests and your brand,” he says. “That said, given the pressure to drive commercial improvements, these are risks that most business are willing to accept.”
Steigenberger Hotel Group: Siegfried Nierhaus, vice president MEA, Steigenberger Hotel Group, has noticed the Middle East hospitality sector’s “increasing appetite for outsourcing”, again, driven by the budget and mid-scale market.
He agrees says the UAE is leading the way as “specialist supply companies notice the niche and are swiftly stepping in with an offer that combines a promise of economies of scale and quality delivery, providing a tempting, often ‘no brainer’ decision to consider outsourcing”. Many on-property pre-opening tasks are outsourced, notes Nierhaus. He references the new-to-market Steigenberger Hotel Business Bay, Dubai, which “successfully deployed the pre-opening outsourcing of security, valet parking and housekeeping”.
“We have maintained a number of key outsourcing suppliers now that we have moved into operation mode (since November 2015) and are assessing the effectiveness on a regular basis,” he reveals. The key to keeping the outsourced service “on brand”, he adds, is to ensure the outsourced team feels “including, motivated and on board”.