Analyzing Outsourcing Procedures for the Sydney Novatel Hotel

This report examines the implications of outsourcing within the hospitality industry, using the Sydney Novatel hotel as a case study. It explores the factors driving outsourcing decisions, such as the need for cost optimization and increased efficiency in a competitive market. The report highlights the advantages of outsourcing, including reduced labor costs, the ability to focus on core business functions, and access to specialized expertise. Conversely, it also discusses the disadvantages, such as potential loss of control, communication challenges, and the impact on employee morale. The analysis covers various aspects of hotel operations, including housekeeping, and offers strategic insights into the decision-making process regarding outsourcing, ultimately recommending a balanced approach for the Sydney Novatel to leverage the benefits while mitigating the risks associated with subcontracting.

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Table of Contents
Introduction......................................................................................................................................3
Factors for utilizing outsourcing procedures in the Hotel business.................................................3
Advantages of outsourcing activities...............................................................................................4
Conclusion.......................................................................................................................................7
References........................................................................................................................................8
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Introduction
The report is made with respect to a five star hotel -The Sydney Novatel which had been
employing own staff for cleaning the Hotel’s accommodation rooms and other areas of the hotel.
There has been a decision of outsourcing the cleaning activities of the hotel, so the benefits and
drawbacks of outsourcing have been discussed in the report. It’s not easy to discuss outsourcing
in the hospitality business, because the hotel product is dependent on aspects that hoteliers
cannot manage forever (Espino-Rodríguez & Lai, 2014). A few times, the hotel cannot take up
the workload and they feel a need to subcontract dedicated firms that offer high-quality services.
Moreover, a hotel has huge fixed costs. To keep a hotel running means that there hotel will have
a fixed charge regardless of if there are guests visiting the hotel or not. Workforce will need to
work daily and, thus, compensated with a salary. With the intention of managing these costs,
hoteliers may choose to subcontract a few activities so that fixed expenses become variable
expenses.
Factors for utilizing outsourcing procedures in the Hotel business
The competition for services demands as of hotels is growing up each year thus there is a need to
expand the effectiveness and to limit the costs (Al-Kassem, 2017). The primary point of the
management of The Sydney Novatel must be to make business successful, i.e. generating the
utmost gains with costs optimization. However, the assets and gear economy isn't sufficient,
likewise the vast element of costs is remuneration paid to staff of the hotel. To take care of this
issue, outsourcing is a solution which allows transferring some of the activities of The Sydney
Novatel to external firm. Moreover, it gives a guarantee to management that the work will be
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done in timely manner and as per requirements. In case the work is not done properly then the
same can be outsourced to any other business without any hassles to hire and fire workers
(Wanchoo, 2010).
Advantages of outsourcing activities
Reduction of costs is the primary aim for which The Sydney Novatel can think about outsourcing
its functions, for example housekeeping. As per research and studies into hotel industry, there
has been over 25% decline in labour expenses in the hotels in which housekeeping was
subcontracted (Lamminmaki, 2011).
Besides the housekeeping division generally has the maximum turnover rate of workers.
Outsourcing the personnel assists in decreasing not only the direct wages and expenses, but also
the recruitment and training expenses. Most of the staffing firms operate on the basis of contracts
and get paid on a fixed monthly basis, so there will be no variations on monthly basis.
Outsourcing of a division such as housekeeping too allows the management to concentrate on
guest facilities and marketing (Sharda & Chatterjee, 2011). Despite the fact that guests observe
the outcomes of a housekeeper’s job, they don’t intermingle with guests in the manner a front
desk staff or waitress does. And getting some outside staffs isn’t a bad thing all the time for both-
other hotel employees or the outsourced employees.
There are a few benefits offered by Outsourcing like:
- allowing the present employees to focus on key activities on business interests,
- concentration on accomplishment of main strategic objectives,
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- lessening or steadying the overhead expenses, and thus achieving cost benefit over the
competitors,
- giving flexibility in reaction to changing market environment, and
- Reducing investment in advanced technology (Gewald, 2010).
Outsourcing has various benefits for different industries and not only for the hotel and hospitality
industry. The major advantage is that outsourcing permits to give complete focus and resources
to the major areas of the hotel and the noncore areas can be outsourced to other business. Along
these lines, organization will have upper hand. Likewise redistribution and optimum utilization
of staffs of the organization will be conceivable. Another preferred benefit is that lesser material
is needed (Gold, 2012). Usually the outsourced acts are less expensive than the maintenance of
own division for carrying out some tasks. It is due to lower expenses incurred by the outsourcer
as the assigned task is part of its particular specialization. Furthermore, by utilizing outsourcing,
organizations can obtain advancements and the choice of higher quality level which may not be
there with The Sydney Novatel. Other than this there is a probability of utilizing particular
capacities which no one but specialists can do. Additionally it is essential to keep in mind about
passing on of all duties of the allotted capacities to outsourcer.
By outsourcing, there is permanent decrease of fixed costs (Leahy & Montagna, 2011). It's the
primary preferred benefit of outsourcing, as it will empower The Sydney Novatel keep running
with the costs of what is utilized by visitors, and that's it. This implies The Sydney Novatel can
employ the services of another organization as per its workload.
It will allow The Sydney Novatel to provide with high quality of specialized goods and/or
services. Experts will offer The Sydney Novatel with the most ideal goods or services for
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instance, with regards to planning the promotion and advertising of any sort, the experts can do
that more efficiently and that too at low cost.
Nowadays, it is very common that hospitality management operates hand in hand with expertise
(Edward, 2012). The firms which have expertise in technology services for the hospitality
business will offer The Sydney Novatel with particular software (programs and applications) to
deal with allowances, arrange storehouses, or manage other internal procedures. If The Sydney
Novatel does not outsource IT management, it can be truly costly, as The Sydney Novatel would
have to employ software developers and different experts to work at the hotel. Apparently,
expenses would increase a lot if The Sydney Novatel creates its own solutions.
Disadvantages of outsourcing activities
One of the drawbacks is that The Sydney Novatel might lose control. It is tough for the
businesses to trust the third-party. This can be a stronger case of losing control in case of
services. The services enjoyed by the guests at The Sydney Novatel are described by
simultaneity, that is, the services are produced when they have to be used, so it is quite hard to
control quality.
The outsourced service-providers have to be extremely vigilant with this, particularly when they
are specifically managing clients. They should make a decent attempt to prevent
depersonalization.
Another drawback is that the outsourcing brings inadequate alliance. There's an actual threat that
aims and other key factors are not accurately adjusted. Interior communication within a business
is complicated, yet necessary (Alvarez-Galvan, 2012). At the point when there are outside
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specialists taking part in this procedure, The Sydney Novatel needs to ensure that the targets are
precisely conveyed and communication takes place in both directions.
In some cases, hoteliers are hesitant to provide important information to external firms. On the
specialized level, these details have to be secure. Indeed, the most crucial details involve- the
building’s technical security. There might be hesitancy in terms of trustworthiness, privacy and
accessibility. This is the reason The Sydney Novatel might want to handle its data itself and
might not want to share with the external business. There is also a risk of decrease in employee
morale. Rahman & Kamarulzaman (2010) regard the impact on employee confidence as one of
the main risks of outsourcing. It is also believed that outsourcing forever leads to shifting/
dismissal of workers.
Conclusion
Outsourcing, or not outsourcing, is a choice that is dependent upon the kind of hotel and the
mindset of every hotelier. There are altogether different services that can be outsourced however
the most sensitive ones are those which specifically include customers, such as clothing, cleaning
and janitorial facilities, eatery, and so on (Olson, 2013). Whatever the case is, it's not a simple
choice to be made, and the main point is to maintain balance between the hotel's own particular
assets and outside assets. However, looking at the given benefits and drawbacks of the
outsourcing, it is advised that The Sydney Novatel outsources (Subcontracts) some of its
activities. The externalized services will add to the hotel's effectiveness while other functions can
be kept under the control of the management of The Sydney Novatel. It will precisely allow the
Sydney Novatel to get two major benefits which are of competitive advantage and ability to
segregate the activities into core and non-core, and finally focusing on the core ones.
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Reference
Al-Kassem, A. (2017). Recruitment and Selection Practices in Business Process Outsourcing
Industry. Archives Of Business Research, 5(3).
Alvarez-Galvan, J. (2012). Outsourcing and service work in the new economy. Newcastle upon
Tyne: Cambridge Scholars Publishing.
Edward, Y. (2011). Outsource. Boston: Pearson.
Espino-Rodríguez, T., & Lai, P. (2014). Activity outsourcing and competitive strategy in the
hotel industry. The moderator role of asset specificity. International Journal Of
Hospitality Management, 42, 9-19.
Gewald, H. (2010). The perceived benefits of business process outsourcing. Strategic
Outsourcing: An International Journal, 3(2), 89-105.
Gold, T. (2012). Ethics in IT outsourcing. Boca Raton, FL: CRC Press.
Lamminmaki, D. (2011). An examination of factors motivating hotel outsourcing. International
Journal Of Hospitality Management, 30(4), 963-973.
Leahy, D., & Montagna, C. (2011). Economising, Strategising and the Decision to
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Outsource. SSRN Electronic Journal.
Olson, R. (2013). Does It Make Sense to Outsource Utility Operations?. Opflow, 26-27.
Rahman, M., & Kamarulzaman, Y. (2010). A framework of outsourcing relationship marketing:
a focus on the Malaysian hotel industry. International Journal Of Electronic Customer
Relationship Management, 4(1), 4.
Sharda, K., & Chatterjee, L. (2011). Configurations of outsourcing firms and organizational
performance. Strategic Outsourcing: An International Journal, 4(2), 152-178.
Wanchoo, R. (2010). Fourth Generation Outsourcing Ricardian Model on Indian Outsourcing
Industry and Need For Next Generation Outsourcing. Prabandhan: Indian Journal Of
Management, 3(1), 13.
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