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8/8/2019 Aviad Israeli

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The Performance of the Israeli Hospitality Industry:

An Evaluation of Crisis Periods and of Different Locations

Aviad A. Israeli

Department of Hotel and Tourism Management

The Guilford Glazer School of Business and ManagementBen Gurion University of the Negev

Beer Sheva, Israel 84105

Tel: +972 8 6461254

Fax: +972 8 6472920

Email: [email protected]


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Managers and Their Crisis Management Practices


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Importance and Usage ofHospitality Crisis Management Practices

The study of hospitality managers crisis management focused on

evaluation of

the importance of practices that assist the organization in times of crisis

the level of usage which managers report for each of these practices


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TitlePracticeCategory

Practice 1Firing employees to reduce labor forceHuman

Resources

Practice 2Using unpaid vacation to reduce labor force

Practice 3Decreasing number of working days per week

Practice 4Freezing pay rates

Practice 5Replacing high-tenure employees with new employees

Practice 6Increased reliance on outsourcing

Practice 7Marketing to domestic tourists in joint campaigns with local merchants (such

as Visa, MasterCard)

Marketing

Practice 8Marketing to domestic tourists with focus on specific attributes of the

location

Practice 9Price drop on special offers

Practice 10Reducing list price

Practice 11Marketing to foreign tourists with specific focus on the location's distinctive

features and relative safety

Practice 12Marketing and promoting new products or services (family events, catering)

Practice 13Marketing to new segments (such as ultra orthodox)

Practice 14Cost cuts by limiting hotel servicesMaintenance

Practice 15Cost cuts by postponing maintenance of the building (cosmetics)

Practice 16Cost cuts by postponing maintenance to the engineering systems

Practice 17Extending credit or postponing scheduled payments

Practice 18Organized protest against the lack of government supportGovernment

Practice 19Industry-wide demand for governmental assistance with current expenses

Practice 20Industry-wide demand for a grace period on tax payments

Practice 21Industry-wide demand for a grace period on local tax (municipality) payments

PracticesHospitality Crisis Study


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PropositionsHospitality Crisis Study

There will be a strong positive correlation between the importance oneassigns to a certain practice and the level of usage of this practice (a necessarycondition for rational and coherent crisis management)

Both importance and usage practices will follow the constructs ofhuman

resources, marketing, maintenance, andgovernment(i.e. construct validity)


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Research PopulationHospitality Crisis Study

328 general managers from all of the hotels in Israel registered with theMinistry of Tourism.

116 usable questionnaires (response rate of 35%)


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Main FindingsHospitality Crisis StudyCorrelation between Importance and Usage

Correlation for all practices was significant and positive

For the four practices with the highest correlation (freezing pay rates,pricedrop on special offers, reducing list priceand cost cuts by postponing maintenance to theengineering systems) the average means for usagewere higher than themeans for importance.

One possible explanation is that these four practices have been extensivelyused in past crises and are almost automatically considered when a newcrisis arises.

In the other practices importancewas higher than usagewhich maysuggest that possibly more could be done.


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Main FindingsHospitality Crisis StudyFactors of Practices Importance and Usage

Practices Importance

Factor 1 reliance on government andmarketing

Factor 2 maintenance cost cuts

Factor 3 lowering prices through laborcutbacks

Factor 4finding neglected segments andtightening employment terms

Practices Usage

Factor 1 cost cutting practices

Factor 2 recruiting government support

Factor 3 massive marketing

Factor 4focused marketing and shorterworkweek


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Hospitality Management Performance


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Management Performance

Top-down approachperformance is externally defined (by topmanagement or by forces or standards outside the organization) andthen used to monitor and evaluate management

Bottom-up approachmanagers perceive performance and definewhat it is and then act accordingly

The study investigated the following issues Do managers in the hospitality industry have a clear perception (and

definitions) of their organizations performance

Do managers understand the service and production dimensions of theirperformance

Do managers perceive one or both dimensions as significant Do managers evaluate themselves as performers on these dimensions.


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Management PerformanceProfile Combinations


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Research PopulationManagement Performance

328 manager, members of the Israeli Hotel Association

60 useable questionnaires were returned (a response rate of 18%)


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Main FindingsManagement PerformancePerception of Performance Measures


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Main FindingsManagement PerformanceAction on Performance Measures


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DefinitionsEffectiveness and Efficiency

Effectiveness and efficiency are two common terms in management

Effectiveness is generally described as doing the right thing. This usually

includes all the activities that will help the organization reach its goals

Efficiency is generally described as doing things right. It is defined as

getting the most output from the least amount of inputs, and themeasurement is generally done using a ratio of inputs to outputs


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DataEffectiveness and Efficiency


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FindingsEffectiveness and EfficiencyAre Managers Effective and\or Efficient


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Industry PerformanceCrisis Vs. No-Crisis PeriodsDifferent Locations


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Crisis Impact on HospitalityThe Effect of Location

Eilat is a resort and vacation destination in which a largeproportion of the hotels has a corporate affiliation; thuscorporate intensity is relatively high. Another characteristic ofEilat is that it has a relativelylow level of foreign visitors. Tel

Aviv is a business center with a relatively average level ofcorporate intensity, which traditionally had a relatively highproportion of foreign visitors.


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Crisis Impact on HospitalityComparing Occupancy

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000

-09

2000

-12

2001

-03

2001

-06

2001

-09

2001

-12

2002

-03

2002

-06

2002

-09

2002

-12

2003

-03

2003

-06

2003

-09

2003

-12

2004

-03

2004

-06

2004

-09

2004

-12

2005

-03

2005

-06

2005

-09

2005

-12

2006

-03

2006

-06

2006

-09

2006

-12

2007

-03

2007

-06

2007

-09

2007

-12

2008

-03

occupancy Israel Occupancy Tel Aviv Occupancy Eilat

Crisis period

No crisis period


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Crisis Impact on HospitalityComparing Yield

In its basic definition, which was introduced by Orkin (1988), yieldis computed by dividing the revenues realized by the revenuepotential. More specifically, yield is:

PotentialRateAverage

RoomsSoldofRateAverage

SaleforAvailableRooms

SoldRoomsYield


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Crisis Impact on HospitalityComparing Yield

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000

-09

2000

-12

2001

-03

2001

-06

2001

-09

2001

-12

2002

-03

2002

-06

2002

-09

2002

-12

2003

-03

2003

-06

2003

-09

2003

-12

2004

-03

2004

-06

2004

-09

2004

-12

2005

-03

2005

-06

2005

-09

2005

-12

2006

-03

2006

-06

2006

-09

2006

-12

2007

-03

2007

-06

2007

-09

2007

-12

2008

-03

Yield proxy Israel Yield proxy Tal Aviv Yield proxy Eilat

Crisis period

No crisis period


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Conclusions

Managers generally know what to do in times of crisis, butfail to perform

Managers are unclear about the true meaning of

performance in their organizations The outcome is that managers are generally effective but

during crisis periods, they turn their attentions to efficiency

Crisis have a different impact on the industry. Some areas

consistently perform above average in times of crisis andbelow average under no-crisis conditions.

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