Outsourcing in Hotels

The concept of outsourcing, derived from the American terminology ‘outside resourcing’, has become popular in almost all industries throughout the globe. Although it is seen, by many, as a happening trend, there are voices that question its effects on different industries. Outsourcing has acquired special importance in the Indian hospitality industry. However, before going in for outsourcing, it is necessary for the management to analyse the influence of outsourcing on organisational performance of the property. Ashok Malkani takes a look at how the Indian hospitality industry views outsourcing and the pros and cons of introducing this element in hotels, in the Indian context.

Outsourcing has become a hotly debated topic these days and its pros and cons are being studiously ascertained by almost all industries. It has a direct impact on the company or establishment’s top and bottom line.  

Outsourcing, incidentally, is the process of delegating a company’s business or operations to third parties or external agencies. It can leverage benefits ranging from low cost labour, improved quality to product and service innovation among others.

Outsourcing has grown in popularity across the globe, because in many cases it facilitates the establishment to reduce costs, concentrate on core activities, gain access to skilled work force, increase in-house efficiency, provide flexibility in staffing, etc.

Business outsourcing has become a common trend but few would be able to explain how and when the concept developed. One can say that the seeds were sown when technological advancements increased their pace, allowing businesses worldwide to have access to the latest technology. This created a level playing field, allowing more and more small & medium sized businesses to compete with their larger counterparts.

What, exactly is outsourcing? It can be defined as ‘the strategic use of outside resources to perform activities traditionally handled by internal staff and resources.’ Sometimes known also as facilities management, outsourcing is a strategy by which an organisation contracts out major functions to specialised and efficient service providers, who may eventually become valued business partners.

Outsourcing is a concept that is widely embraced by the hospitality industry. One of the major reasons for this is the belief that it allows reduction in costs and improves quality and efficiency, giving rise to increased customer satisfaction.

The Potential Advantages

Ashish Battoo, Director of Rooms, Hyatt Regency Pune, disclosed, “Outsourcing various jobs in hotels is a strategy adopted by the hotel industry as it can offer many benefits in terms of availability of skilled labour which may not be available in-house; can offer cost benefit as the outsourced vendor can perform the job more economically; outsourcing can involve minimum supervision from the hotel personnel if the scope of work is detailed; the hotel can concentrate on its core competency and thereby increase on its efficiency through outsourcing.”

“The core functions of a hospitality property are acquisition and retention of guests. To achieve these objectives, hospitality properties have to offer attractive incentives and then, subsequently, work to retain these clients with good service and high levels of satisfaction. Outsourcing certain specialised key functions allows the hospitality property to concentrate on its core competencies.  For example, the basic function of a housekeeping department of a hospitality property is to look after cleaning and maintenance of the hospitality property. Outsourcing laundry would allow the department to concentrate on its primary task,” elaborated Meghana Tendulkar, Housekeeping Head, Hotel Marine Plaza, Mumbai.

 “The main reason for outsourcing in hotels is because it can savecost of purchases and space. Additional manpower cost can be saved too,” added Sarosh Khatib, Senior Vice-President — Sales & Marketing, The Fern Hotels& Resorts, Pune.

Jai Chugh, Director of Operations, Jaipur Marriott Hotel, declares that the “main advantages of outsourcing in hotels are that it can reduce fixed costs,can help in getting the best available talent in a highly specialised area without carrying them on their payroll, and can provide for a competitive advantage when competing with bigger competitors who have the budgets, in-house skills and technology to do it alone.”

Kamlesh Barot, Past President, Hotel and Restaurant Association (Western India) or HRAWI stated, “Depending on the size of a hotel, outsourcing can prove to be a value-added proposition in various areas of operations and management. It can make the recruitment process more proficient and bring in fresh talent. The payroll can become efficient and management of human resource can get easier through outsourcing.”

“Outsourcing is almost a norm in most hotels overseas. In India, we have now begun realising the advantages of the same. It is definitely a facility which a lot of budget and full service business hotels should adopt to increase their profit margins. It can help in reducing management time and effort, can bring down capital expenditures, and can help in reducing operating costs,” averred Gaurav Wattal, Director of Operations at JW Marriott Mumbai Juhu.

 “Outsourcing helps in reducing manpower and training costs,” stated Sunil Bhatia, Director, Sales & Marketing, The Mirador Hotel, Mumbai.

 “One of the major reasons for outsourcing certain services is to reduce the workload of our employees and to help them concentrate on the things that are directly engaged in hotel operations. Since we believe in offering the best services to our guests, it is only fair to leave some of the work to the experts. Another major advantage of outsourcing is that a lot of time is saved through it if skilled manpower doesn’t have to be searched for and appointed by the hotel,” opined Kabir Mehra, General Manager — Eastin Residences Vadodara.

“Outsourcing in hotels has the potential to be a systematic approach since in that case the HR of hotels have to focus only on employees directly engaged in hotel operations and guest satisfaction. The efficiency of regular employees also increases due to outsourcing,” Kabir elaborated further.

“Advantages in outsourcing include reduction in fixed costs as for example having an in-house laundry would have cost us much more with regards to installation & maintenance costs, including the electricity consumption for the same,” explained Sanjay Menon — Front Office Manager,  UTropicanaResort Alibaug, Maharashtra.

Other Side of the Coin

While there are monetary and other potential advantages in outsourcing in hotels, there are also some potential disadvantages. So one has to weigh the pros and cons diligently before employing an outsourcing agency for hotels.

Ashish listed the potential disadvantages, some of which are given here. “Outsourcing workforce tends to have less accountability with hotel as compared to the hotel’s regular employees as the former are not on the hotel’s payroll as employees. Moreover, it is difficult to have control on the outsourced labour. Safety and security concerns are also there in case of outsourced employees. It is also often difficult to train outsourced employees in soft skills for handling guest interactions. Iteration rate for outsourced employees is also high,” he pointed out.

 “Outsourcing in hotels has to be selectively done and should not be employed in areas where safety and security of the guest is at stake. While cleaning of public areas can be outsourced, the cleaning of rooms should not be ideally outsourced as there the personnel have direct access to the guests’ property,” explained Meghana.

“Though the service vendor is expected to verify the credentials of all the employed personnel, but this can be often bypassed, thus making outsourcing a grey area. Hence, the trust and dependability on the outsourced personnel is limited,” she added further.

 “The main problem with outsourcing is that the quality of service is often beyond our control; on time delivery is also a challenge,” expressed Sarosh.

“There needs to be a strong emphasis on training for outsourced employees since the outsourced employees that are brought in may not have the experience necessary for the job. Training also needs to be provided to ensure that all employees deliver services of the same or similar standards, regardless of whether they are in-house or outsourced. Having a training program in place is necessary to assure quality standards are not lost. Clear and constant communication is needed in order to ensure that the third-party employees carry out the mission and goals of the hotel,” Jai averred.

“While sourcing a portion of the staff from an outside company there is the possibility that a two-tiered system will be created when dealing with the two staffs. Assimilating both staffs together to create one team rather than two separate groups of personnel allows everyone to work together and focus on the same goal,” Jai explained further.

“With outsourced employees, there is often no continuity as frequently the staff keeps changing and newer, disoriented staff, having no belongingness to the property, keeps coming in, creating problems in the quality of deliverables,” declared Kamlesh.

Sanjay puts it in a nutshell by saying “Outsourcing does have the potential to affect safety, security and quality.”

“The major disadvantages of outsourcing include lack of control as we cannot have full control over the quality of service that is being provided by the outsourced company. Especially on those services which are directly linked with the guests like laundry services. Also while outsourcing manpower, we tend to give out confidential data to the professionals, which could leak out,” elaborated Sanjay.

“The major disadvantages in outsourcing for hotels include lack of control as we cannot closely monitor the quality of service that is being contracted to the outsourced company. This is especially true for services which directly involve interaction with the guests such as housekeeping, laundry services, concierge, etc. Also, while outsourcing for revenue management, information technology and other sensitive areas, we tend to give out confidential data to the outsourced professionals, which could be misused,” affirmed Kabir.

“Disadvantages of outsourcing could also be that a lot of the times, the manpower employed is below the expectations of the management and that the manpower keeps changing since the outsourced agency rotates its employees between organisations and hence a lot of time is consumed in briefing the employees from scratch. Personal hygiene is also an area of concern in outsourcing, and we would not put our reputation at risk because of it,” noted Kabir further.

Services Outsourced

Despite the potential disadvantages, many of the hotels in India outsource several services. The biggest push behind outsourcing is, undoubtedly, savings in terms of cost.

Outsourcing is believed to get you talented people in a specialised area without carrying them on your payroll. This is highly beneficial, particularly for budget hotels. If as an hotelier owning a small budget hotel, you are installing a new computer system, you might have one IT person and outsource beyond that. It would give your hotel the benefit of maintaining competitive advantage when contending with larger competitors who have the budget, in-house skills and technology to do it alone.

But all services in hotels cannot and shouldn’t be outsourced, for various reasons. So, what are the services normally outsourced by hotels and why? 

“Some of the commonly outsourced services in hotels are security, housekeeping, banquets, F&B service, maintenance, back of the house, travel desk, laundry and utility,” averred Kamlesh.

“Typically services outsourced would be housekeeping services like public area cleaning, horticulture, laundry services, spa and salon services, kitchen stewarding, services pertaining to employee cafeteria, etc. Currently we have outsourced our F&B dining program, sales and marketing setup, outsourced the manpower for our horticulture, public area cleaning and kitchen stewarding. We tell the agencies of our expectations and they hire and train their team as per our requirements. The flip side is that there is sometimes inconsistency in the staff they provide,” proffered Gaurav.

 “The services outsourced by us at The Mirador Hotel Mumbai are laundry, spa, and security and also pest control services,” claimed Sunil.

“The advantage of outsourcing is that you can leave the job to the specialists. The disadvantage is that one has to continually check on their quality,” he informed further.

 “Hotels can outsource any kind of services such as night cleaning, stewarding, window and chandelier cleaning, floor care, kitchen cleaning, security, laundry management, valet parking services, pool maintenance services, landscape maintenance services, equipment maintenance services, maintenance contracts for air-conditioners or boilers, floral arrangements, services pertaining to information technology, loyalty program management, furniture, fixture & equipment purchasing services among others,” expressed Sanjay.

“The services that are being outsourced in hotels nowadays involve manpower of highly skilled and trained professionals who would be a great asset to the hotels,” he said.

 “Services which are generally outsourced in hotels include cleaning and maintenance of public areas, including marble polishing, pest control, façade cleaning, laundry services, horticulture and floral arrangements,” conveyed Ashish.

“At Hyatt Regency Pune, we have outsourced cleaning of public areas, floral arrangements, horticulture, pest controlling and façade cleaning. Outsourcing these services in housekeeping allows the department to get the job done by professionally trained employees, thus increasing the quality and efficiency,”pointed out Ashish.

 “All specialised labour-intensive functions in hotels where skilled and trained manpower is essential, can be outsourced. Also, all functions which are not directly related to service operations but necessary for smooth functioning of the hotel, can be outsourced. For example, a hotel would outsource its EDP and IT requirements (non-core function) to a computer firm so that all Internet and Wi-Fi related queries can be directed to professionals. It saves time, energy and training resources,” expressed Meghana.

“Our hotel, Marine Plaza Mumbai, outsources many multi-departmental functions like laundry, pest control, marble polishing and florist in housekeeping, car rentals in front office, AC servicing, painting /polishing in engineering, etc. The idea is to allow qualified professionals to perform the above functions thus saving on capital costs. This is essential for functioning in a metro city like Mumbai where space is at a premium and rentals are high, though this logic can be applied to smaller non-metro cities as well. A qualified professional is equipped with resources required to perform tasks. He/she will also keep in touch with the latest trends and developments in his/her own fields thus allowing more freedom to hotel professionals,” Meghana elaborated.

“Like there are pros and cons to every situation so it is the same with outsourcing. While it allows more time, flexibility and lesser capital resources, it also comes with a greater direct cost as the supplier has to factor in his/her own profit and sustainability margins. It is then, up to the hotel management team to balance the cost versus utility aspect. It has to come up with a solution which works as a win-win situation for itself as well as for the service provider,” she analysed.

“The Fern Hotels& Resorts, Pune being a budget hotel outsources laundry, IT services, car services to external vendors,” disclosed Sarosh.

“It saves cost on purchase of equipments, employee salary, maintenance; space is also saved and is put to better use. Disadvantages are delay in delivery, at times, which can cause discomfort,” he pointed out.

 “Hotels normally outsource housekeeping of public spaces, kitchen stewarding, loss prevention & laundry.  We, at Jaipur Marriott Hotel, also follow the same concept.  These departments are partly outsourced with us as well,” informed Jai.

‘Services like laundry, security, pest control, maintenance of exterior landscaping and kitchen stewarding need to be outsourced, and Eastin Residences also outsources these services,” asserted Kabir.

Yes, there are pros and cons for hiring manpower in hotels from outsourcing agencies. While there is potential of cost saving, there is also the question of security and safety as well as quality of service being offered. For outsourcing, the hotel has to pay heed while selecting an appropriate agency to perform duties efficiently and cost-effectively. It has also to ensure secrecy as far as outsourcing of revenue management and IT of the hotel is concerned. Read more about it ….in our next issue.

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