Latest Trends in Hotel Industry 9789380075563

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First Edition, 2009

ISBN 978 93 80075 56 3

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Published by: Global Media 1819, Bhagirath Palace, Chandni Chowk, Delhi-110 006 Email: [email protected]

Table of Contents 1. Trends and Classifications 2. Participating Countries 3. Applicability of Classification 4. Hospitality Marketing 5. Marketing Research Process 6. Marketing Analysis 7. Recruitment Strategy 8. Workload Analysis 9. Castellion Method

Global Hotel Industry: Trends and Classifications NEW TRENDS IN HOTEL INDUSTRY In cooperation with the International Hotel and Restaurant Association (IH&RA), a WTO Affiliate Member, WTO has responded to a recent initiative of its government Members to convene a world conference on the latest developments in the hotel industry in Saint Petersburg Russia during April 25-28,2004. This interest by Governments is timely as they need to review and update regulatory measures and incentives to promote investments in the sector in the face of ongoing liberalization and expectations that such investments contribute to sustainable development and poverty alleviation and meet the consumers’ demand of competitive, safe and quality services. As a growing trend in the industry is chain affiliation, a special section of the conference will be dedicated to examining measures enabling co-existence and partnership between destination suppliers of tourism services and the mother national and transnational hotel companies and consortia developing and promoting their own brands of hotel services and striving for an effective management of resources. An important issue to be considered relates to the preservation and enhancement of the national idiom of hotel facilities, their effective access to the world’s distribution channels and the integration of local labour force. Hotel classification stood at the outset of the conference initiative. Disliked by one part of the industry on the grounds of its legitimate concern over undue Government intervention, but equally preferred by a sizeable consumer representation and practiced in many countries as an orderly measure of both mandatory and voluntary nature, it will stand firmly on the conference agenda. The discussions will be based on a recent joint WTO-IH&RA project, a status report and study on hotel classification. Finally, the Conference will analyze the critical issue of human resources for the hotel industry which is faced by continuous needs of training new staff and its motivation towards quality service against the sector’s seasonality and other challenges, such as safety and security, automation and recognition of qualifications. A set of guidelines and recommendations is expected from this conference on each of the subjects mentioned investment, chains, classification and training - to which participants from the public and private sector will be invited to contribute. This will be made easy as most of the conference proceedings will be carried out by means of panel discussions. The conference hosts, St. Petersburg and the Russian Federation represented by the Ministry of Economic Development and Trade promise a warm welcome to participants from the world and WTO membership looks forward to a useful and purposeful event. Joint WTO - IH&RA Conference Calls for Systematic Approach to a New Hotel Classification The World Conference on New Trends and Measures in the Hotel Industry, jointly organized by the World Tourism Organization (WTO) and the International Hotel and Restaurants Association (IH&RA) suggested a cautious, albeit systematic approach to hotel classification at world level with a view to reconciling the legitimate demands and concerns of consumers and industry with the obligations of the governments. The Conference held in St. Petersburg, Russia and was attended by 210 participants from 22 countries. The Conference was opened by the WTO Secretary-General Francesco Frangialli, Deputy Minister of Economic Development and Trade of Russian Federation Vladimir Strzhalkovsky and the IH&RA Chief Executive Officer Alain-Philippe Feutr co-chaired by Mr. Henryk Handszuh, WTO Chief of Quality and Ms. Natela Shengeliya, Chief of the Russian Tourism Department. “Governments need to review and update regulatory measures and incentives to promote investments in the sector in the face of ongoing liberalization and expectations that such investments contribute to sustainable development and poverty alleviation and meet consumers’ demand for competitive, safe and quality services, “said the WTO Secretary-General Mr. Francesco Frangialli in his opening address. The Conference dealt with such important issues for the hotel industry today as the desirability of classification schemes, mechanisms to attract investments, the importance and training of human resources and the role of hotel chains. Russian representative for classification discussions Ms. Margarita Nemolyaeva said “the current lack of coherence among the variety of existing national hotel classifications is responsible for consumer complaints in her country, adding that there was an urgent need for a solid, objective and universally acceptable referent in this area.” It was observed during the event that a common international understanding on hotel classification could be helpful in multilateral trade negotiations. The WTO and IH&RA (a WTO Affiliate Member) should devise a methodology and tools for setting up hotel classifications schemes which could be recommended to countries, delegates concluded. This methodology should include: • provisions for respect of cultural and differences in a systematic manner; • references to basic norms which could be recognized as minimum standards of universal application irrespective of cultural differences, which are vital to all human beings and consumers and correspond to ethics and the satisfaction of their basic needs; • mechanisms of consultations and cooperation between the public and private sector;

•

consultations with consumers to which effect the provisions of the United Nations Guidelines for Consumer Protection should be used, particularly by devising consumer surveys and soliciting consumer response; • provisions regarding consumer redress; • a request for the universal use of common terminology in the hotel industry and respective classifications by adapting and developing standard EN ISO 18513-2000 for this purpose; • provisions on classification audits and relationship between classification and licenses to operate; • provisions on additional elements which may be determined through international consultation in order to make this instrument comprehensive and transparent. “The Conference did not pretend to seek enactment or even to impose an international hotel classification scheme, but a mentioned document could represent a reasonable measure devised by the major stakeholders in addressing the complex nature of tourism and the demands of consumers and industry” said co-chairman Mr. Handszuh. “New hotel classification referents could be used voluntarily in different countries, taking into account the local practices and conditions.” According to WTO, public-private partnership is crucial in the development of these endeavours. The existing approaches to hotel classification issues are rooted in the various cultural and administrative traditions. Some of them, inspired by Roman Law, provide for government intervention and public classification systems aimed at informing and protecting the consumer. It should be noted, though, that such public systems are, as in Spain, increasingly decentralized in favour of regional authorities. On the other hand, models more widely accepted in Anglo-Saxon and Nordic countries provide for either consumer protection through justice, the same as in Germany, or through voluntary certification mechanisms, as in the United Kingdom. This part of the discussion at the Conference was based on a recent joint WTO-IH&RA project, a status report and study on hotel classification. This study shows that there is a diversity of situations worldwide; that while consumers seek transparency and protection of their rights to truthful information which classifications should carry, the industry requires a fair framework for free competition which classifications should not blur. WTO and IH&RA therefore concluded that “it would be advisable to devise a methodology providing those countries wishing to set up a national or regional classification scheme with the necessary tools to do so”, and that “cultural differences between countries in terms of service and facilities according to destinations, regions and purpose of travel” should be taken into consideration in this exercise. The picture has become even more complicated due to the expansion of global and national hotel chains. This growing trend in the industry is reflected by the fact that over 20 per cent of a total of 16 million rooms worldwide are now controlled by a dozen leading chains. Major chains often consider that their brands themselves provide appropriate standards, making redundant any classification. The participants appealed to national and local governments and to the hospitality industry to closely cooperate in advancing the various issues discussed at the Conference in St. Petersburg. JOINT WTO AND IH&RA STUDY ON HOTEL CLASSIFICATION Survey rationale. With the dramatic development of domestic and international travel in the past fifty years, the question of how hotel ratings compare across the world is periodically raised by various public and private-sector interests. As a result hotel classification has appeared on the agenda of the World Tourism Organization for a considerable number of years. Most recently, the topic was included in the WTO 2000-2001 Work Programme. The International Hotel and Restaurant Association (IH&RA) proposed that before any new work has undertaken, the first stage of any project should be to draw up a status report on the various schemes existing throughout the world. WTO then appointed IH&RA its designated expert to undertake this status report. In this first stage, IH&RA limited its role to surveying the private sector and specifically to preparing: • a status report (i.e., inventory) of existing hotel classification schemes • a comparative analysis of these schemes (qualitative and quantitative elements) At the same time, WTO surveyed public sector involvement in hotel classification via its Member National Tourism Administrations. Scope and findings of survey. After reviewing previous work by other bodies (IUOTO, ISO, CEN, HOTREC), the present study collates the results of these two surveys and provides a comparative analysis of their findings, 31 countries for the private sector and 89 for the public sector. Overall, of the countries surveyed, 83 have an official hotel classification scheme, while only 23 countries have an official classification scheme covering hotels, apartment hotels, motels and inns. Where the public sector is concerned, 20 countries indicate that classification is used to control or monitor accommodation tariffs and 13 that it is used as the basis for the application of government taxes such as VAT (Value-Added Tax). The private sector report no link between classification and the social obligations imposed on employers. The two bodies most involved in devising and drafting the hotel classification scheme are officials of National Tourism Administrations (NTA) with other government officials (in 49 countries) and the national hotel association, rarely alone and generally when consulted by government authorities (in 48 countries). In addition, 40 countries indicate that the system is based on that of another (usually neighbouring) country. Classification is mandatory for all establishments in 46 countries. In 55 countries it is needed to obtain a license to operate whereas in 32 others, establishments can operate without being classified.

Other forms of classification. Alongside the grading schemes surveyed above, the report reviews other forms of classification. Major Tour Operators often rate hotels according to their own criteria while schemes used in electronic distribution channels (e.g., CRS, GDS) are typically devised for the benefit of the travel professionals (and travel agents in particular). These are often based on guides such as the US Official Hotel Guide originally only available in print and now also electronically. Although the star rating system is the one most in use throughout the world, other symbols are also used (diamonds, crowns etc.), sometimes even in combination. Irrespective of the symbol used, all systems break accommodation down into three or four major bands (usually luxury, superior, mid-market, budget/economy). Major hotel companies prefer to use branding as a means of positioning their product on the market and typically place the customer and his/her profile, needs and desires at the heart of their marketing strategies. Within the hotel industry itself the debate continues as to whether formal classification is necessary or not—as instanced by HORESTA the Danish Hotel Association and the Israel Hotel Association, offering case-studies respectively for and against. Be this as it may, there are currently moves afoot in a number of world regions—Scandinavia, South East Asia, Middle East and even Europe - for some form of harmonized regional system. Consumers. While all approaches to classification claim to be for their benefit, consumers or their representative bodies are in fact rarely consulted in the process of establishing a system. The report concludes that systems set up by the private sector are far more responsive to consumer demand, rapidly recognizing new forms of accommodation such as time-share and resorts, whereas standards and criteria laid down by the public sector tend to be infrequently checked and rarely updated to meet changes in consumer taste—or in destination market. More generally, many surveys show that consumer choice is governed first and foremost by considerations of price and destination, rather than on the basis of complex classification systems of which consumers have either little knowledge or little understanding. Public and Private sector responsibilities. In conclusion, it is important to separate out the respective responsibilities of the public and private sectors in the area of hotel classification. As recent events such as SARS, Mad Cow and Legionnaire’s disease have shown, public authorities must obviously ensure minimum standards of safety and hygiene in accommodation establishments. Private sector bodies, being commercially driven, must meet the consumer’s demand for better and more transparent information on both products and destinations. This implies the consistent use of recognized and harmonized terminology. Given the interest expressed in the survey, it would seem advisable to provide states wishing to set up a national or regional classification scheme with the necessary tools to do so. It is therefore important to devise the appropriate methodology taking into account cultural differences between states as they relate to services and facilities, markets and purpose of travel. To be sustainable, tourism must be able to consolidate its diversity, not seek uniformity. Failing this, any attempt at regional and even global harmonization of what can only be voluntary systems would, under the guise of clarification, merely end up creating more cpnfusion. Introduction Background Historically, hotel classification systems were developed to ensure safe and reliable lodging and food for travelers at a time when very few such trustworthy establishments existed. With the unprecedented growth of international tourism in the past fifty years, during which hospitality has reach the status of a mature industry, the focus has moved from consumer protection (generally guaranteed by national regulations and legislation) to consumer information. Today, standardization and competitive marketing of hotel services to foreign customers and tourist professionals have emerged as driving forces for instituting a local or national hotel classification systems. With so many people now travelling, both within their own country and often far beyond, the idea has arisen of devising one single scheme which could be applied to hotel accommodation throughout the world for the benefit of both consumers (tourists) and travel professionals (tour operators and travel agents, in particular). Whether this is in fact desirable - and indeed feasible - remains a subject of considerable discussion. As a result, the issue of hotel classification is one that has appeared on the agenda of the World Tourism Organization for a considerable number of years. Most recently, a comparative study of hotel classification systems (the formal determination of hotel ratings or categories) was included in the WTO General Programme of Work for the 2000-2001 biennium, as a specific project (Activity 12: National Tourism Legislations) under Part B (Documentation) of the Section 7. The WTO Quality Support Committee at its 4th meeting (Madrid, 12-13 April 2000) recognized that “in the present changing regulatory framework for tourism, the decentralization of government competence for the sector and the appearance of diverse voluntary quality standards applied to accommodation establishments, hotel classification systems: (a) are challenged by part of industry as unduly interfering with the marketplace and free competition, especially where such systems are established and controlled by government; (b) continue to play the role of consumer guidance as traditional category indicators; (c) however, confuse customers because of the lack of international harmonization and accountability; (d) are requested by a number of developing countries as a regulatory measure, especially for small business, and in order to achieve compatibility with tourist-sending countries.” In consideration of the above, the Committee requested the Secretariat to carry out a comparative study of existing hotel classification schemes world-wide with a view to: (a) identifying the common characteristics prevailing in such classifications;

(b)

establishing minimum international classification criteria as reference values and guidelines which could be used by interested parties in rating hotels and similar accommodation establishments; (c) defining recommended procedures and rules for classification; (d) preparing the WTO position on classification outlining the various types classification available (voluntary, corporate, industry-controlled, government-controlled, etc.) and the prevention of its use as a barrier to free competition and trade in hotel services.” Also, the same Committee strongly recommended that this activity be closely coordinated with representatives of the operational sector, to begin with WTO’s Affiliate Member, the International Hotel and Restaurant Association (IH&RA). The recommendation of this Committee was subsequently endorsed by the WTO Executive Council at its 63rd and 64th session (Madrid, 28-30 November 2000). Based on this recommendation, the Secretary-General of WTO formally consulted the International Hotel and Restaurant Association (IH&RA). After an exchange of letters and various meetings between representatives of both organizations, IH&RA proposed that before any new work was undertaken, the first stage of any project should be to review the various schemes existing throughout the world tapping the experience and expertise of the national hotel associations across the globe. WTO then appointed IH&RA its designated expert on this aspect of the project. IH&RA officially advised the Secretary-General early in January 2001 that it was prepared to cooperate with WTO initially in two areas, viz,: • to prepare a status report on existing hotel classification schemes • to carry out a comparative analysis and interpretation of such schemes and their functions. It was understood that in the light of the conclusions of the study, which could give rise to recommendations, both organizations would examine the possibility of undertaking a follow-up to this activity as already outlined in the recommendations of the WTO Quality Support Committee. 1. Objectives This joint WTO/IH&RA study is expected to produce the following results considered to be of interest to governments, industry professionals and consumers: (a) to achieve transparency regarding existing hotel classification schemes and policies, on the basis of comprehensive research and international comparisons; and, (b) to bring into focus the implications of the present situation in order to guide governments and industry in any further action they may wish to undertake in this area. 2. Previous work IUOTO-Hotel Trade Charter. In 1952, a Hotel Trade Charter was drawn up by the International Union of Official Travel Organizations (IUOTO) - the predecessor to the World Tourism Organization. This marked the beginning of expressions of interest in the issue of hotel classification, taken up at IUOTO as of 1969. In 1971 it was decided that any overall system, to be successful, should be evolved at the regional level, in close consultation with hotel industry professionals. World Tourism Organization (WTO). When the World Tourism Organization was created in 1975 it formally took over the functions previously covered by IUOTO. As a result, between 1976 and 1982, all WTO Regional Commissions came to adopt standardized hotel classification systems on a regional basis, using the model established by IUOTO. In 1985, the WTO General Assembly adopted a resolution to include the issue of hotel classification in its Work Programme for the period 1986-1987 as part of its standard-setting activity. Two surveys of Member States were carried out in 1985-1987. They form the basis of the Report on “Interregional Harmonization of Hotel Classification Criteria on the Basis of the Classification Standards adopted by the Regional Commissions” [PG(V I)/B.5.2] presented to the Executive Council in Fez, Morocco, in November 1988. The surveys showed that out of the 74 respondents to the questionnaire, 54 (i.e. 73 per cent) had national hotel standards consistent - either fully or partially - with WTO-recommended classification standards. In the remaining 20 Member States, national standards were either not consistent with WTO standards - or there was no classification system in place, European Union-HOTREC. In the spring of 1982 the then European Economic Community (EEC) proposed a common EEC grading of Hotels. This gave rise to discussions between the Confederation of Hotels, Restaurants and Cafes in the European Community (HOTREC) and the Commission Services on whether or not grading was the most satisfactory way of providing the consumer with relevant information on which to base his/her choice of accommodation. HOTREC favoured providing more efficient consumer information and proposed a standardized EEC hotel information system based on graphical symbols without grading. These discussions ultimately led to the adoption of Council Recommendation of 31 December 1986 on Standardized Information in Existing Hotels (86/665/EEC) stating that Member States should encourage the use by their national tourist bodies or other competent bodies, in collaboration with bodies representing hoteliers, of the set of standard graphical symbols designed to cover hotel facilities. The Recommendation also invited the Commission “to make an analysis, in cooperation with Member States, of their tourist bodies and/or representatives of their hotel industries, of existing hotel-grading systems and to examine the practical usefulness and the desirability of producing a Community-wide grading system for hotels.” In response to this invitation, HOTREC produced its study in 1988 on “Proposed Uniform Hotel Information System for Hotels in Member States of the European Economic Community” (Doc.88.31). This document reviewed and compared existing grading systems within the EEC, analyzed the problems inherent in grading as well as those specific to the EEC and reviewed consumer information needs and booking patterns. In view of the practical difficulty of

setting up a worthwhile and workable European hotel grading system, it concluded that consumer information needs would be far better met by a standardized information system. Signs, Symbols and Terminology-WTO, CEN & ISO. The question of graphical symbols and standardized terminology was then taken up by a number of different bodies. The World Tourism Organization reported in 1989 on The Standardization of Tourist Signs and Symbols (PG(VI)B.5.l in relation to tourist attractions, services and facilities, without however any particular reference to hotel facilities. Work was also undertaken on public information symbols in the early 1990s by the Comite Europeen de Normalization (CEN - the European Standardization Committee bringing together the national standards bodies of Europe) in conjunction with the International Organization for Standardization (ISO). Some of these symbols specifically covered hotel and restaurant services. By the late 1990s, European efforts were focused on the harmonization of description criteria for tourist services. In 1996, CEN set up a Working Group within its Technical Committee (TC 329) in charge of Tourist Services to study the advisability of setting up an international standard on hotel classification. This was in response to a request formally made to ISO for an international standard by AIT/FIA, the international trade association representing automobile clubs (Alliance Internationale du Tourisme and International Automobile Federation). Members of the CEN TC had reservations regarding a standard but agreed on the need to clarify terminology. Immediately both HOTREC and IH&RA officially made known their strongly opposition to the idea of an international standard for the classification of hotels on the grounds that “creating a single grading system that transcends national boundaries would be an impossible and undesirable task.” At the same time, both organizations supported the idea of improving consumer information. Then in 1997, ISO set up a Working Group specifically on “Accommodation Facilities.” While agreeing to let CEN continue to lead the work on the harmonization of “terminology and description criteria,” it was proposed to extend the group’s area of investigation to cover the quality of accommodation services. This led to a formal proposal to use ISO 9000 as the basis for an international hotel classification standard. This was once again vigorously opposed by IH&RA and HOTREC on the grounds that ISO 9000 only assures that predetermined standards are consistently provided but gives no indication of the level of that standard. In addition, ISO 9000 does not address consumer expectations on service delivery. A series of meetings of the ISO WG followed in 1997-1998, where IH&RA consistently voiced its opposition to the proposals under discussion and where no consensus could be reached between participants. Noting this irreconcilable division the ISO Technical Management Board decided to disband the WG and refer the work on a terminology standard back to CEN in February 1999. The CEN work in this area was completed with the publication in January 2001 of the European Standard on Tourism Services - Hotels and other types of tourism accommodation - Terminology (prEN ISO 18513). Latest developments at the EU level. In May 2003 the European Parliament Committee on Regional Policy, Transport and Tourism (RETT) requested the EU Directorate-General Research to carry out a study on hotel classification in the European Union. The stated purpose was to review existing classification schemes in Member States. 3. Methodology The Study was mainly based on desk research. Background documents include: • National laws and regulations on hotel classification. (These are available at the WTO Documentation Centre.) • The results of studies and reports prepared by other sources. (Reference is made to the HOTREC surveys on Classification of Lodging Establishments in Countries Represented within HOTREC of 1988,1996, 2001.) • The results of periodic surveys on classification of lodging establishments conducted by IH&RA among its member National Hotel and Restaurant Associations. (This survey was conducted in 1995,1997, and 2000.) Twin survey methodology. After a series of consultations and internal meetings, including a debate at the IH&RA National Association Chief Executives Council (NACE) in Amsterdam in April 2001, IH&RA and WTO agreed that the most efficient way of covering the hotel classification issue would be to devise two parallel questionnaires, one intended for the National Tourism Administrations (NTAs) i.e., the public sector, the other for National Hotel Associations, i.e., the private sector. These two sectors may both be involved either separately or jointly in establishing and running a country’s hotel classification scheme, so it was essential to be able to track the form this involvement took as well as the overlap, where it occurred. In April 2002, these two questionnaires were devised by WTO with input from IH&RA. WTO then circulated the public sector questionnaire to all its Members while IH&RA circulated the private sector questionnaire to its National Association members as well as to non-Member associations. Hasteners were sent out in the following months and additional information sought from respondents where this was considered necessary or particularly interesting, especially regarding new or evolving schemes. At the same time the WTO undertook the same process at its end. Given the difficulty in obtaining replies from some key Member States or Associations, compilation was deferred in order to achieve as broad a coverage as possible. This was undertaken by IH&RA in 2002-2003, with preliminary results of both questionnaires consolidated by late 2002 and a first draft report submitted to WTO in April 2003. Late replies continued to be received after this date up to January 2004 have been incorporated into the final analysis. The following chapter gives the consolidated replies to the IH&RA questionnaire followed by those of the WTO questionnaire and finally a comparative analysis of

findings of both surveys. Given below is the explanatory note to the IH&RA questionnaire sent to National Hotel Associations, as well as the slightly different note accompanying the WTO questionnaire sent to National Tourism Administrations. Explanatory Note to IH&RA Questionnaire • Purpose: The findings of this survey will contribute to the “joint IH&RA and WTO study on hotel classification” which follows on the recommendation of the WTO Quality Support Committee, the WTO work programme for 2002-2003 and the Memorandum of Understanding between the International Hotel and Restaurant Association (IH&RA) and the WTO Secretariat. (WTO and IH&RA have agreed to undertake jointly a study on hotel classification to include a status report on existing hotel classification schemes and a comparative analysis and interpretation of such schemes and their functions.) Object: The scope of the survey is limited to hotels and similar establishments (Such establishments provide services entered as number 63110.0 in the Central Product Classification (CPS) and coincide with “tourism characteristic activities” in the Tourism Satellite Account: Recommended Methodological Framework) [e.g., apartment hotels, motels, inns, etc. (These terms are subject to debate and regional interpretation. At the European level, standardized terminology has been adopted to this effect by CEN (European Committee for Standardization)], irrespective of their location (urban, rural, coastal, etc.). Other types of accommodation facilities, irrespective of their denotation and regional interpretation (e.g., holiday centres, holiday homes, youth hostels, holiday camps, camping and caravanning sites, time-share, etc.), are excluded from the survey. Definitions: For the purpose of the survey, the term “classification of accommodation establishments” denotes a system, duly published, in which accommodation establishments of the same type (e.g., hotels, motels, inns, etc.) have been conventionally broken down into classes, categories or grades according to their common physical and service characteristics and established at government, industry or other private levels. Scope In view of their national situation and the availability of information, NACE respondents may provide of replies: information on classification (governmental, nongovernmental or both, if both systems coexist or are complementary). Document: The respondent’s efforts to provide simple and unequivocal answers, whether affirmative (yes, underline), non-affirmative (no) or factual (specify) is much appreciated. As a principle, you are not requested to attach additional supporting documents, unless you feel that such existing documents (if possible, in English or French) need to be sent to IH&RA to further clarify your replies. It would greatly assist us if you could use the opportunity of the survey to attach to the completed questionnaires the latest relevant regulatory instruments and/or indicate their country website from which such instruments could be viewed and/or downloaded. This will facilitate clearer investigation of classification criteria. Explanatory Note to WTO Questionnaire Purpose, Object and Definition were identical to those given for the IH&RA questionnaire. Scope In view of their national situation and the availability of replies: of information, NTA respondents may provide information on government classification (covered by Part A of the survey) or non-governmental classification (Part B), or both systems (should such systems co-exist or are complementary), as well as on announced classification (Part C). Documents: The respondents’ efforts to provide simple and unequivocal answers, whether affirmative (yes, underline), non-affirmative (no) or factual (specify) will be appreciated. As a principle, they are not requested to attach additional supporting documents, unless the respondents feel that such existing documents (if possible, in English, French, Russian or Spanish) need to be sent to the WTO Secretariat to further clarify their replies. With respect to national legislation and regulations governing accommodation classification, which are normally requested and received by the WTO Documentation Centre on a regular basis, respondents are kindly requested to check on this situation and, when appropriate, use the opportunity of the survey to attach to their completed questionnaires the latest relevant regulatory instruments and/or indicate their country website from which such instruments could be viewed and/or downloaded. This will allow the researchers to better investigate the classification criteria. Status Report on Classification Compilation of Replies from the Private Sector to IH&RA. Questionnaire on the classification of accommodation establishments (hotels and similar establishments), completed by national hotel associations (NACE). The questionnaire was circulated to 68 national associations in 61 countries. The following is the analysis of the 32 replies received.

Participating National Associations Country/

Association

Respondent

Austria

Austrian Professional Hotel

Gregor Herzog Chief Executive Officer

Canada

Association Hotel Association of Canada

Caribbean

Caribbean Hotel Association

Chile

Asociacion Gremial de Empresarios Hoteleros de Chile Colombian Hotel Association

Gustavo Abel Ernst Manager Manuel Bermudez General Manager

Czech Republic Denmark

Czech National Federation of

Dr. Vladimir Stentina

Hotels and Restaurants Danish Hotel, Restaurant and Tourism Association

Egypt

Egyptian Hotel Association

General Secretary Torben Kaas Head of the Classification Dept. Baghat Badawy

Territory

Colombia

Anthony P. Pollard President John Bell Director General & CEO

Director of Marketing,

Estonia

Estonian Hotel and Restaurant

Finland

Association Finnish Hotel and Restaurant

Greece

Association Union des Metiers et des Industries de I'Hotellerie National Hotel Association of Georgia Hotelverband Deutschland Germal Hotel and Restaurant Association Hellenic Chamber of Hotels

Hungary

Hotel Association of Hungary

Iceland

Icelandic Travel Industry Association Hotel and Restaurant Association

France Georgia Germany

Promotion & Training Donald Visnapuu Managing Director Pekka Ropponen Consultative Manager George Mtvaradze General Manager Markus Luthe Deputy Chief Executive Agni Christidou Manager

Gabor Lombosi General Secretary

Iraq

in Iraq Israel

Israel Hotel Association

Jordan

Jordan Hotel Association

Kuwait

Kuwait Hotel Owners Association

Lebanon Malaysia

Syndicate of Hoteliers of Lebanon Malaysia Association of Hotels

Netherlands Koninkljik Horeca Nederland Norway

Norwegian Hospitality Association

Romania

Romanian Hotel Industry Federation Slovak Association of Hotels and Restaurants Ministry of Commerce and Industry Directorate General for Tourism

Slovak Republic Sultanate of Oman

Sweden Switzerland

Swedish Hotel and Restaurant Association Swiss Hotel Association

Turkey

Turob-Turkish Hotel Association

United Arab Dubai Government Emirates Department of Tourism and Commerce Marketing United

British Hospitality Association

Kingdom United States of America*

American Hotel and Lodging Association

Erna Hauksdottir Director

Dleir Ismail Chairman Abraham Rosental Director General

Fakhri Twal Director Mohamed A. Najia General Secretary Melhem Hage Sophia Maxwell Administration Manager Hans van der Kooij Sector Manager Hotels Bjorn Arnesen Senior Manager Mihai Rajnita Chief Executive Officer Zora Dundekova Dr. Heba A. Aziz Advisor-Research and Development Ali Al Sudairi Statistical Analyst Rikard Bergsten Head of Classification Dept. Annette Siegwart Classification Kasim Zoto Board Member Majid Sager Abdulla Al Merri Executive, Hotel Classification Martin Couchman Deputy Chief Executive Tia Gordon Director of Communication

Total

32 Countries

* There is no official hotel classification system, hence no replies to the questionnaire

1. 2.

Is an official classification system in place in your country? If yes, at what level?

Country/Territory

Yes No Level

Austria

X

Canada

X

Caribbean Chile Colombia Czech Republic

X

X X

Denmark

X

Egypt Estonia Finland France Georgia Germany

X

Greece Hungary Iceland

X

Iraq Israel Jordan Kuwait

X

Lebanon Malaysia

X X

Netherlands Norway Romania Slovak Republic Sultanate of Oman

X

Sweden

X

Switzerland

X

Turkey

X X X

United Arab Emirates United Kingdom United States of America*

National; responsibility of the Austrian Professional Hotel Association Provincial; each province has different regulation Varies from country to country National; Tourism Board National; under tourism law in cooperation with Czech National Federation of Hotels and Restaurants National; cooperation between hotel association and Tourist Board/Ministry for Trade and Industry Government Government

X X X

National Government National; voluntary system operated by DEHOGA National Government National; it is open to every hotel and guesthouse, but voluntary Government

X X

X X

X X X

Government; in coordination with Kuwait Hotel Owners Association Government Government, Ministry of Culture Arts and Tourism of Malaysia International, with Belgium and Luxemburg X

X X X

X

Government; Ministry of Tourism Government Government; Ministry of Commerce and Industry/Directorate General of Tourism National, voluntary system operated by SHR for the first year (2004) National; the classification system of the Swiss Hotel Association is under private law Government Government Regional; 4 systems: England, Scotland, Wales and Northern Ireland

3. (a)

Application to facilities. Current classification in force applies to:

Country/Territory

Hotels Apartments

Austria Canada

Chile Czech Republic Denmark Egypt Estonia France Georgia Germany Greece Hungary

Iceland Iraq Jordan Kuwait Lebanon Malaysia Netherlands Romania Slovak Republic Sultanate of Oman Sweden Switzerland Turkey United Arab Emirates United Kingdom Country/Territory

X X X X X X X X X

hotels X X X

Motels Inns X X X X

X

X Floating hotels

X

X

X X X X X X X

X X

X

X X X

X X X X X X

X X X X X

X X

X X

X X

X XX

X XX

X

X XX

X X

X

X

X

X X X

B+B's, 'campagnards'

X

X

X X

Others

All or specific

X X X X

XX

Tourism residences All kinds of hotels with 10 and more rooms Health and spa hotels Restaurants

Guesthouses

Historic buildings Guesthouses

Last date

Graphiail symbol

August 1987 1998

Stars Stars Stars

2001 1986

Stars Stars

types Austria

Canada Chile Czech Republic Denmark Egypt

Optional

Estonia

France Georgia Greece Hungary Iceland Iraq Jordan Kuwait Lebanon Malaysia

All types of hotels All

1987 (2002)

Letters (stars)

24 June 1998

Stars

1994 All

Stars for hotels, apartment hotels and motels, Orchid for Inns 1 January 1999 Stars 1999 Stars

Netherlands Romania

All Specific types

Slovak Republic Sultanate of Oman Sweden Switzerland

Specific types All Specific types Members of SHA

October 2001

Turkey United Arab Emirates United Kingdom

All

06 July 2000

Stars Stars Stars Stars for hotels, motels special symbol for apartment hotels, inns Stars

All

1997

Stars

2000

(b) Additional comments: Country/Territory

Comments

Czech Republic

Basic classification is in force all types of facilities classification of CNFHR as ticked above.

Germany

Private guest houses and Bed & Breakfast accommodation (non-commercial) are classified

according to a different system run by the German Tourist Association (DTV).

Greece

In March a new classification system has been legislated, but it has not been applied yet. The relevant decree provides that all the hotels must be classified according to the new system by the end of September 2003.

United Kingdom

Some group hotels are permitted entry into the scheme guidebooks without having a star rating.

4. Basis for establishing classification. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

State Constitution Tourism law NTA competence Agreement between government bodies concerned Recommendation in a government-adopted tourism development plan Prerogative/declared objective of a national hotel association Decision (ad hoc) of a national hotel association Agreement between independent hotels Government recommendation Recommendation in a tourism development plan implemented by industry

Country/Territory

Austria Canada

1

Basis for esta 3 4 2

X

X

M M da sificatio Types o/ rs ng s n 5 6 7 8 9 10 concerned

X

X X

Varies in

provinces Chile Czech Republic Denmark

X X

Egypt Estonia France Georgia

X X X

X

All

el

X

All

X

Germany Greece Hungary Iceland Iraq Jordan Kuwait Lebanon Malaysia Netherlands Romania

X

X X X X

X X X X X

Slovak Republic

X

X

X

X X

All hotels All

X X

X X

X X

X X

X

X X X

X X

X X X X

X

X

Sultanate of Oman Sweden Switzerland Turkey United Arab Emirates United Kingdom

X

X

X X

X X X X

All accommodation and F&B All hotels

X X X X

X X X X X

X All hotels X X

6. Classification authority/body deciding each classification. (Classification authorities such as National Tourism Ministry/ Hotel Association, etc. The following (hotels, apartment hotels etc.) may each be classified by a different authority) Country/

Hotels

Apartment

Motels

Inns

Others Classification authority

hotels

Territory

Austria

X

X

X

X

Canada Chile

X

X X

X

X

X

X

X

X

Czech Republic

X

Denmark

X

Egypt Estonia France Georgia

X X X X

X

X

X

Germany

X

X

X

X

Greece

X

X

X

Hungary

X

X

Austrian Professional Hotel Association

X

X

X

X

X

X

National Tourism Board Single body in cooperation with CNFHR Classification Board (3 rep. from Danish Tourist Board and 3 rep. from the national hotel association) Ministry of Tourism Ministry of Economy DGCCRF Single body for all types of establishments DEHOGA in cooperation with regional tourism associations Tourism Directorates of the 13 regional authorities; in the new system the competent body will be the Greek National Tourism Organization Local authority/

Iceland

X

X

X

X

municipality Icelandic Tourist Board

Iraq

X

X

X

X

Tourism Board

Jordan

Kuwait

X

Government authority in coordination with hotel association

Lebanon

Malaysia

X

X

X

Netherlands

X

X

X

Romania

X

X

X

Slovak

X

X

X

Republic Sultanate of X X Oman Sweden X Switzerland

X

X

Turkey United Arab Emirates

X

X

United Kingdom

X

X

X

X

X

X

Ministry of Culture, Arts and Tourism of Malaysia One single authority which inspects the star-system; this is obligatory to be able to use the name 'hotels' Ministry of Tourism with Industry Representatives Each establishment Directorate General of Tourism Swedish Hotel and Restaurant Association 5 regional and 1 national commission, allbodiesof the SHA Department of Tourism and Commerce Marketing England: AA/RAC Scotland, Wales and Northern Ireland: national org.s

7. Bodies involved in devising and drafting classification. Was the classification system in question prepared by: (a) NTA/NOT and other government officials (b) An expert designated/recommended by WTO/OMT (c) In consultation with an international hotel and/ o r restaurant association (d) In consultation with national hotel association (e) A private national/international consultant (f) Collaboration between hotel industry and NTA/ Government/NOT experts (g) On the basis of another country's classification system (h) By revising the previous system (i) In consultation with Consumers' Association

Country/ Territory

Others

1

2

3 4

5

6 7 8

9 Extensive

Austria Canada Chile Czech Republic Denmark Egypt Estonia France Georgia Germany

X

X

X

X

X X

X X X

X X X X X X

X

X

X

X

X

X

X X

X

X X

X

X

X

research

X X X

X

Greece

X

X

X

Hungary

X

X

XX

Iceland Iraq Jordan Kuwait Lebanon Malaysia Netherlands Romania Slovak Republic Sultanate of Oman

X

X

X

Consumers' Association demanded a national classification scheme. Market introduction in 1996, relaunched in 1999 There has been research into the classification systems existing in Europe.

X X X

X X

X

X

X

XX X X X

X

X

X

X

X X

XXX XX

X

X

Sweden Switzerland Turkey United Arab Emirates United

market

project on tourist expectations and needs is the basis for the current system. The research project was government funded and carried out by the Vienna University of Economics.

X

X

X

X X X

X

X X

X

X

X X

X X

X

X

XX X X X

X

Directorate General of Tourism in consultation with other rninistries concerned Based on HORESTA (Denmark's) system

Kingdom

8. Applicability of Classification (a) Country/

Is

Territory

classification mandatory?

Austria

No

Canada Chile Czech Republic Denmark Egypt

Can establishments Can classification be Is it necessary operate without beingareas, mandatory to obtain classified? e.g., as in a certainlicense/ condition for permission/ membership of a hotel registration to association ? operate?

Yes No Varies from province to province No Yes No Yes Yes, No Yes No Yes hotels Yes

Yes, but will not be

Yes No No No

Yes

Yes

No No No No

Yes No

classified as a tourist No Estonia No France Georgia Germany Yes No Yes Greece Hungary Iceland Yes No Iraq Jordan Yes

Kuwait Lebanon Malaysia

Yes Yes

Netherlands Romania Slovak Republic Sultanate of Oman Sweden

Yes Yes Yes

Switzerland

Yes, for

Turkey United Arab Emirates United Kingdom

No

establishment Yes Yes No Yes

Yes No Vac

No

I CO

No Yes

No No

No

No

Yes No Yes

No

No Yes

No No No

Yes No No

Yes No No according to the ne Tourism Act 2002 which was implemented for mandatory classification, before yes Yes No No No Yes

YES

No

Yes, non-members of No

Yes

SHA SHA members No Yes Yes No

Yes No

Yes Yes

No, Yes, except in exceptin Northern Ireland Northern Ireland

Yes, e.g., in order to obtain advertisement i i Board publications

No

Country/Territory

Of establishments (by type of bl h )%

Austria Canada Chile Czech Republic

70 90 20 100

Of room capacity (by type of establishments) % 75 95 35 100

Denmark

70

90

25 of hotels

50 of hotel rooms

Egypt

Estonia France Georgia Germany

Greece Hungary Iceland

Can all establishments apply to be classified? Yes Yes Yes Yes, space of rooms according to law act 173/98 Sb No, only national hotel association's members Yes Only certified hotels can be classified No Yes Yes, more than 8 beds Yes

65 50 15 30 100 100 100 100 Yes Most of the largest hotels in the country Yes and most of the hotels in Reykjavik are classified but there are very many small guesthouses and few are classified.

Iraq Kuwait Lebanon Malaysia

80

80

Netherlands Slovak Republic

100 963 hotels, motels, inns and similar 100

100 - 120.000 rooms, of which 45% seasonal 100

Yes Yes No Yes, if they have appropriate infrastructure as a tourist accommodation premise and valid business license Yes Yes, all minimum criteria recommended by WTO are applied Yes

Sultanate of Oman Sweden

30 35% of the

40% of the members

Yes No, establishments

Jordan

Romania

members Switzerland

45

80

Turkey United Arab Emirates United Kingdom

55 100

75 100

have to be members of SHR No, established have to be members of the SHA No Yes

30-40

60

Yes

,

9. Verification of compliance with classification system (a) Is verification performed by: Country/Territory

Austria Canada Chile Czech Republic Denmark Egypt Estonia

Independent Other parties Local Hotel (third party government government industry inspectors) inspectors inspectors party) inspectors Central

X

X X

X X

X

X

Classification Commission (Ministry of Economy)

France Georgia Germany X

X

Greece Hungary

X X

X X

Iceland

X

X

NTA and RTA X

Iraq

Jordan Kuwait Lebanon Malaysia

Netherlands Romania Slovak Republic Sultanate of Oman

Consumer protection organizations, municipality

JHA inspectors

X X X

X

X

X

X

X X

X X X X

Sweden

X

Switzerland

X

X X

Third party inspectors are Authorities for fire department and health

Turkey United Arab

X

X X

Emirates

United

(c-d) Cost of verification borne by: Kingdom

(b) Mode of verification:

X

Country/Territory

Announced

Mystery checks

Other methods

visits at fixed date Austria

X

Frequent

Chile Czech Republic

X

X

questionnaires to be answered by the hoteliers Yes, except for 5* One time visit upon application 100

Denmark Egypt Estonia France Georgia Germany Greece

X

X

Hungary Iceland Iraq Jordan Kuwait Lebanon Malaysia Netherlands Romania Slovak Republic Sultanate of Oman

X X

Sweden

X

Switzerland

X

Turkey

X X

Canada

United Arab Emirates

United Kingdom

Yes, except for 5*

X X

X X X X

Non-announced visits of the competent public authorities

X X X X

X

X X

X

DGT inspectors random surprise visits X X X

Country /Territory

The verifying authority X

Austria Canada Chile

The hotel company

X X

Czech Republic Denmark Egypt Estonia France Georgia Germany Greece Hungary Iceland Iraq Jordan Kuwait Lebanon Malaysia Netherlands Romania Slovak Republic Sultanate of Oman

X X

Every year Once upon registration Every two year Every year

X

X (State)

X

Every two year Occasionally Every year Every three year Can occur at any time Occasionally Every year

X

Every year Every three year

X X X

X X X X X X X

X

X

Sweden Switzerland Turkey United Arab Emirates

Periodically of verification

concerned

X X X

X

X

United Kingdom

Every two year Every two year Every three year Occasionally Every year and when necessary Every year Every five year Occasionally Every year or when asked by the establishment for classification Every year

10. How frequently is the classification system updated? 11. Who finances the system? 12. What are the main criteria referred to for classification?

Country/ Territory

How frequently is

Who finances the

What are the main criteria

classification system

system?

referred to for classification ?

Austria

Every year

Membership establishments of the

Hard- and software

Austrian

Canada Chile

Czech Republic Denmark

Every year Quarterly, regarding registered and classified establishments Every two year

Professional Hotel Association The hotels National Tourism Administration

Respective facilities

Every three year

The classified hotels

Estonia France

Every five year

Government Hotel concerned

Georgia

Every year

Hotel company

Germany

After 4-5 years

Hotels (classification fees)

the criteria are

Numerous Availability of services, e.g., restaurant facilities. meeting rooms, recreational, parking Law act 137/98 Sb and classification of CNFHR All services and facilities that can be measured Number of rooms, surfaces, service Georgian National Standard; 12 December 1996 237 objective criteria, mainly hardware;

checked and updated to market needs Greece

Hungary Iceland

Every five years hotels have to update certain supporting documents Every five years

Government and hoteliers

Every year

The participant hotels

Iraq Jordan Kuwait

Lebanon

Government

Jordan Hotel

When it is needed

Association Kuwait Hotel Owners Association Government

minimum criteria by category and assessment points to be reached Compulsory technical specifications and functional standards which can be compulsory or optional The level of comfort provided Objective The JHA hotel classification system Location, building, indoor units, personnel

Country/

How frequently is

Who finances the

What are the main criteria

Territory

classification system updated?

system?

referred to for classification?

Malaysia

Every 3 year

Ministry of Culture,

Qualitative & aesthetic Tourism requirements of Common areas (lobby, reception, bar, restaurant, banquet halls, recreation), Services (F&B, Frong desk), Safety Standards & hygiene, Staff and rooms All enterprises in the Hardware, very the hotel, restaurant and little attention to catering industry service-related aspects Ministry of Tourism Minimum and taxes paid by recommended by WTO operators Government Qualified personnel, quality and number of services Directorate-General Location, outlets, buildfor Tourism ing, indoor units Initial one time cost Hotel standard and covered by Swedish service functions Tourist Delegation (Government). Ongoing costs covered by the hotels through a yearly fee based on Arts & Malaysia

Netherlands Every 3 year Romania

Almost every 3 year

Slovak Republic

Irregularity

Sultanate of Every year and Oman when necessary Sweden Just initiated so only minor adjustments regularly

Switzerland

Turkey

number of rooms. Information: Swiss Hotel every year Association

standards of class: every five year Every year Government

United Arab Every year or Government Emirates when changes are announced at a hotel Every year United Fees paid by particiKingdom pating hotels

Quality of infrastructure and services Standard of rooms and other social activities of the hotel Services, health standards, infrastructure England: facility based Scotland, Wales: quality based

13. Is there any link between the classification scheme and: Social obligations of the employer (i.e., rating as a criterion to determine social charges); Other burdens on the employer (i.e, rating as a criterion to determine other charges/taxes imposed on the employer). 14. Are you satisfied with the existing system in your country? 15. Plans to introduce new classification or revise current classification?

Country/Territory Austria Canada Chile

Czech Republic Denmark

Estonia

Country/Territory

Obligations relating to employer Are you satisfied with the existing system in your Plans to introduce new classification or revise current classification ? None Yes, they have just modernized the system Yes, but there is always room for There is an ongoing revision improvement Not considered No, the actual system does not evaluate Yes, the local hotel association and national quality of service; infrastructure nor tourism administration are working on a minimum requirements; it should be also plan to review the current classification mandatory and incentivated as a system to include above mentioned aspects marketing tool; classification and verification should be periodical None Not in all respects With two or three years The hotels must comply Yes, it is easily understood as all criteria They are currently revising the with all relevant laws (tax, are measurable; grading meets the classification as they do at least every three working conditions, license. expectations of the customers, and the years etc.) independent classification board ensures the credibility of the scheme None Yes, in general, only periodically of Government system includes a lot of verification should be every five years bureaucracy, so it is more effective to be managed by NTA, may be in cooperation with NOT Obligations relating to Are you satisfied with the existing system in Plans to introduce new classification or revise current classification? employer your country?

Finland France Georgia

None Needs to be improved

Germany

None

Yes, as far as there is no official hotel classification system in Finland Yes Lack of information in both parties

Plan for new classification based on international experience and laws Existing system will be revised regularly in 2003

Hungary

To provide minimal services

Yes, it is their own marketing system with the possibility of changing aspects immediately The old system had to be modernized; the new one has not yet come into force, so cannot be evaluated Yes

Iceland

plus additional services None

Yes, quite satisfied, but many hotels find it

No, not yet; we have only had this system,

too expensive, would like to add subjective criteria in the future

which is the Danish one, for a few years

Out of 16 per cent social security fees, the owner pays 11, 6 per cent None

Might need update

Revise current classification

Lebanon

CNSS education

Yes, it has just been revised and the new one is quite modem

Malaysia

No

Greece

Iraq Jordan Kuwait

transportation,

There is a need to renew it every five years

Exist plans for the system to be managed Yes, to differentiate criteria for service by the national hotel association but not for apartments certain yet

Netherlands

Officially no, but there are

The are in the process of evaluating the system; they have conducted a survey among examples of real estate taxes their members and 44 per cent want to maintain the present system, 28 per cent prefer a being based on the star voluntary system and 18 per cent want no classification at all rating of the hotel concerned

Norway

They are working on hotel classification and now they have conducted a survey among the consumers and tour operators

Romania

Could be better, but state regulations, Within one month, but the only change control and certification is still necessary refers to F&B sector till privatization is ready and operators

Slovak Republic Sultanate of None

Oman Sweden

No

will be more checked by market consumers than by official bodies Yes Not in near future Yes, the system is currently satisfactory; The tourism law will add and revise there is a tourism law which will amend certain points and improve further the classification Yes, and there is an intention to build a Studying to classify apartment hotels and Nordic System with Sweden and Denmark conference facilities

as a base Ceuntry/Territory

Obligations relating to

Are you satisfied with the existing system in

employer

your country? Yes

Switzerland

None

Turkey

None

United Arab Emirates

Hotel must respect local traditions, social values and Muslim religion; facilities must be given to employees None

United Kingdom

No, the changes in the industry are very fast and the classification system is not very effective actually Yes, but intend to develop and improve the system in 2003 No, three schemes is too many

Plans to introduce new classification or revise current classification? The current classification will be revised during the next three years and enter in force in 2005 Involve more the hotel association instead of central Government Always trying to keep up with the development of the industry The governments in England, Scotland and Wales are moving towards accepting the need for a combined system

1. Additional comments

Country/ Territory

Additional comments

Each province has different rules, regulations, laws; classification is not mandatory in many provinces. Canada According to the Canadian Constitution, property and civil regulation is a provincial matter, so there are four different classification systems in Canada. Many countries such as Barbados, St. Lucia, Bahamas and Jamaica had plans to establish a system, but none of them had implemented it. 'Les departments d'outre mer Francais' are part of France and therefore subject to French legislation. Cancun, Cozumel and the Riviera Maya are subject to Mexico's star system. Caribbean CHA's official position has always been to oppose the setting up of national classification programmes, on the grounds that with different criteria, they would totally confuse an already turbulent marketplace. It is conceivable that a case could be made for a Caribbean regional programme, but it would require an awesome amount of preliminary discussion and could meet difficulties in implementation. More to the point would be a common approach to hotel licensing, with proper criteria in place for space requirements, fire safety and health standards, etc. Colombia Due to the last government tovirism reform law in 1996, there is not an official hotel or similar establishment classification in Colombia at this moment. Czech The system is basically established on the law/act 137/98 Republic Sb. /Czech National Federation of Hotels and Restaurants (CNFHR) built it up to the quality of services and equipment. France Besides of government classification, 'Hotelcert' has a private additional rating system. Hungary International chains (e.g., ACCOR Group) do not like the valid categorization system. Netherlands In The Netherlands the name 'hotel' is protected by law. Accommodations need to have at least one star to be able to call themselves hotel. The scheme is updated whenever one of the participants (i.e., Belgium, Luxembourg and Holland) asks modification. The national automobile association ANWB operates its own system. This system is a voluntary system, paid for by the individual hotels. Around 60 per cent of all establishments with at least one star in the official classification participate. If one is willing to pay the fee, it will be 'ANWB preferred supplier' and will receive a label on or near the front entrance. Romania Operators should submit a written request (a complete file). For new developments, a pre-project visa must be obtained from Ministry of Tourism. Generally speaking, all criteria are applying of those minimum recommended by WTO. Compliance with

minimum requirements of norms and consequently with health, sanitary-veterinary, work safety, fire safety bodies certificates. It applies to: buildings, room size, safety and security criteria, staff certificates proving graduation of hospitality schools (front desk, restaurant waiters, cooks, chefs) and a certificate for hotel director/General Manager, issued by Ministry of Tourism/. Restaurants are part of the classification scheme, rated by stars by Ministry of Tourism. The only and very recent private classification guide appeared on the market — House — and it created rumours among Ministry of Tourism officials. The Romanian Hotel Industry Federation's position is that as long as it is a free market, government can rate hotels much more objectively than inspectors, who can be 'Convinced'. Switzerland The classification system of the Swiss Hotel Association is the only classification system in Switzerland. It was adopted by SHA in 1979 and has been revised every 5 years. United The classification system is not very clear, some hotel groups Kingdom award themselves star ratings.

2. Compilation of Replies from Public Sector to WTO Questionnaire on the classification of accommodation establishments (hotels and similar establishments). Completed by responsible officers of National Tourism Administrations (NTAs) in collaboration with their national hotel association(s). 145 questionnaires were sent out. The following is the analysis of the 89 replies received.

Participating Countries Country/ Territory

Respondent

Address

Algeria

Salid Rebach Vice-Director Monica Bonell Tuset Tourism Technician

Ministry of Tourism R.N.36 El-Balir, Alger Ministry of Presidency and Tourism, Department of Tourism Carrer Prat de la Creu 62-64, Andorra la Vella Secretariat of Tourism Suipacha 1111, piso 20 (1368), Buenos Aires Ministry of Trade and Economic Development, Tourism Development Department 5 Mher Mkrtchian str., 375010, Yerevan

Andorra

Argentina

German Luis Perez Executive Coordinator

Armenia

Aram Torosyan Senior Expert

Azerbaijan

Bakhtiyar Gylyndzhov

Senior Official Belgium

Mauling Alfons

General Assistant Benin

Paul C. Akoha Director of Tourism & Hotellerie

Bolivia

Tec. Monica V. Vargas O.

Responsible for Tourism Services Bosnia and Herzegovina Botswana

Dunja Pejic

Senior Advisor

Kenneth Bentinck For/Director

Brazil

Nelson Faria Lins d' Albuquerque Junior

Chief of Tourism Product Quality Department Burundi

Nsabimana

Flemish Tourism Grasmarkt 61, 1000, Brussel Ministry of Culture, Industry and Tourism Ministry of Foreign Trade and Investment Av. Mariscal Santa Cruz, Edificio Palacio de las Comunicaciones, Piso 16, Laz Paz Ministry of Trade and Tourism Vuka Karadzica 4, 78000 Banjaluka Department of Tourism Private Bag 0047, Gaborone Ministry of Sports and Tourism, Brazilian Institute of Tourism SCN-Quadra 2, Bloco G, Sala 204, 70712-907 Brasilia/DF BP 902, Bujumbura

Grading Service of Tourism Establishments Cambodia*

Ministry of Tourism

Om Somsun Under Secretary of State

Chad

Akia Abouna

Ministry of Tourism Development

Chile

Minister of Tourism Development Humberto Rivas Ortega Chief of Planification Department

Av. Providencia 1550, Santiago

China

Zhou Zhang

Deputy Director of Hotel Division Costa Rica

Lic. Martin Quesada Rivera

China National Tourism Administration 9A, Jianguomennei Ave., 100749 Beijing

Chief of Tourism Services and Enterprises Department Croatia Cuba Cyprus

Zdenko Mick Deputy Minister Maria Elena Lopez Reyes

Director of Department

Kyriakos Kyriakou

Tourist Officer Czech Republic Ecuador

Quality

Ministry of Tourism Ul. Grada Vukovara, 78, Zagreb Ministry of Tourism Calle 19 No. 710 esq. Paseo Vedado, La Habana Cyprus Tourism Organization P. O. Box 24535, 1390 Nicosia

Petr Houska Old Town Square 6, 110 15 Prague 1 Deputy Director Monica Jaratnillo Luquc Ministry of Tourism Chief of National Tourism Resources

Eritrea Ethiopia France

Gambia Georgia Germany Ghana Greece Guatemala

Guinea Equatorial Haiti

Hungary India*

Indonesia

Tseggai Mogos Ministry of Tourism D/G/T Service Matewos GfMariam Tourism Commission Head of Standardization P.O. Box 2183, Addis Ababa & Licensing Department Michel Veneau Direction of Tourism Assistant Chief of 2, rue Linois, 75015 Paris Tourism Industries & Professions Department Jmmo Javmeh Gambia Tourism Authority For: Director General Kololi, P. O. Box 4085, Bakau, K.M.C Maya Margvelashvili State Department of Tourism and Deputy Chairman Resorts of Georgia 80, Chavchavadze Str., 380062, Tbilisi Markus Luthe, DEHOGA and HA Deputy Chief Executive 10873 Berlin, Germany Adeline Boateng Ghana Tourist Board Quality Assurance P. O. Box 3106, Accra Manager Evangelia Papadopoulou Ministry of Development, General International Relations Secretariat of Tourism Department 2, Amerikis street, 10564 Athens Hugo Armando Ruiz Garcia Guatemala Tourist Commission Chief of Registration and 7a. Ave. 1-17, Guatemala, C.A. Supervision of Tourism Enterprises Department Gobino-Mttemba Ministry of Information, Tourism and Molmguaivina Culture, General Secretariat of General Director of Tourism Malabo Tourism Marie-Jo Bredy Planification Director Georges Belin Investments Director JnClaude Rolles Consultant Gabor Lombosi Hotel Association of Hungary Secretary-General P. O. Box 233, H-1444, Budapest /. Dash Tourism India C-l Hutments Joint Director-General Dalhousie Road, 110011 New Delhi 1 Cede Ardika

Minister of Culture and Tourism Iran

Fereidoun Nateghi Elahi

Technical Advisor to the Deputy Minister and Chairman of Iran Touring and Tourism ITTO Italy

Mauro Di Pietro

Ivory Coast Jamaica

Director of Tourism Carrole Brady

A.M.

Guntley-

Director-General Jordan

Nader Dahabi Minister of Transport

Kazakhstan

Shaikenova Rashida

Executive Director Kenya

Clement Mivatsama

Director of Tourism Lebanon Macau

Mohammed Zantout Inspector at Minister of Tourism Maria Isabel da Costa Alves

Head of Division Madagascar

Licensing

Rasolofoniaina Haga

Director of Tourist Development Department

Ministry of Culture and Tourism of the Republic of Indonesia Jl. Medan Merdeka Barat 17-19, 10110 Jakarta Ministry of Culture & Islamic Guidance, Iran Touring & Tourism Organization Hajj and Pilgrimage Bldg., Azadi Ave., P. 0. Box 14155-1555, Tehran Ministry of Productive Activities General Tourism Board Via della Ferratella, 51, 00184 Rome B.P.V. 184 Ministry of Tourism and Sport Jamaica

Tourism Center 3rd Floor, 64 Knutsford Boulevard, Kingston 5 Ministry of Tourism & Antiquities P. O. Box 224, Amman 11118 Kazakhstan Association of Hotels and Restaurants 98 Zheltoksan str., office 509, 480091 Ministry of Tourism and Information P.O. Box 54666, Nairobi Ministry of Tourism Rue de la Banque Centrale, Beyrouth Macau Government Tourist Office Largo do Senado, 9 Edf. Ritz Ministry of Tourism Rue Fernand Kassanga, B.P. 610 Tsimbazaza, Antananarivo 101

Madeira

Bruno Camacho Pereira

Regional Director Malawi

Isabel T. Chakhumbira

Senior Tourism Officer Malaysia

Data' Tengku Alaudin Tengku Abdul Majid

Secretary General Maldives*

Ahmed Solih

Assistant Director, Trade Standards

Regional Secretariat of Tourism and Culture, Regional Tourism Board Avenida Anniaga, 18, 9004-519 Fonchal Ministry of Tourism P. O. Box 402, Blantyre Ministry of Culture, Arts and Tourism 36 Floor, Menara Dato' Onn, Putra World Trade Centre, 45, Jalan Tun Ismail, 50694 Kuala Lumpur Ministry of Tourism [email protected]

Country/

Respondent

Address

Territory

Mali Malta

Mauritius Mexico

Moldova Monaco*

Alton, I. MSiga Albert Callus

BP 191 Omatho, Bamuko Ministry of Tourism WTO Deputy Permanent Auberge d'ltaly, Merchants Street, Representative Valletta CMR 01 C. I. Mijoo Ministry of Tourism For Permanent Secretary Level 12, Air Mauritius Centre, John Kenedy Street, Port Louis Eduardo Barroso Aiarcon Secretariat of Tourism Secretary of Tourism Presidente Masarik 172, 7 piso, Colonia Operation Department chapultepec Morales, Delegacion Migue Hidalgo C.P. 11587 Mexico, D.F. National Tourism Agency Kalmyk Serdzhiu Consultant Office 901-A, 180, Stefan cel Mare Blvd, MD-2004 Chisinau Direction du Tourisme et des Congres, Dario dell'Antonia Delegue General Tourisme

Mongolia

Montenegro Morocco

Mozambique Netherlands

Niger Nigeria Pakistan Paraguay

Peru

au 2a boulevard des Moulins, MC 98030 Monaco CEDEX L. Enkhnasan Ministry of Infrastructure, Government Building-2 United Nations Street 5/2 Ulaanbaatar-210646 Predrag Nenezic Ministry of Tourism Minister of Tourism Trg Vektre b.b., 81000 Pongorica M. El Ouardighi Ministry of Tourism, Board of Tourist Abderrahmade Activities and Enterprises Chief of Tourism 22, Avenue d'Alger Hassane Rabat Establishments Department PO Box 614, Maputo, Fax 307677 Antonio Jose Filipe Saia National Director A.K. Vis Bedrijfschap Horeca en Catering Bar. Project Manager Benelux- De Coubertinln. 6, Hotel Classification 2719 EL Zoetermeer, Postbus 121, 2700 AC Zoetermeer Madougai Ousmane Ministry of Tourism and Arts Regulation Service B. P.. 480/12130, Niamey Embassy of Nigeria cia Embassy of Nigeria Madrid Madrid Khalid Hussain Warraich Department of Tourist Services Deputy Controller B6 Markaz F-7, Islamabad Operations Department Aurelio Rojas Chief of Operations Palma 468 — Asuncion Department

Miguel Antonio Zamora S. National Director of

Tourism

Philippines

Poland

Portugal

Puerto Rico

Ministry of Integration

Industry, Tourism, & International

Commercial Negotiation, Department of Tourism Calle Uno Oeste, 50 Urb. Corpac, San Isidro, Lima 27 Atty. Ma. Victoria V. Department of Tourism, Office of Jasmin Tourism Standards Director of the Office RM. 204, 2nd Floor DOT Bldg., T, M. Tourism Standards Kalaw St. Ermita, 1000 Manila Mrs. Malgorzata Milka- Ministry of Economy, Department of Tourism PI. Tizech Krzyzy 3/5, 00-507 Bryska Director of Warsaw Department of Tourism General Tourism Board Jose Sancho Silva General Director Av. Antonio Augusto de Aguiar, 86, 1069-021 Lisboa Jose M. Tirado Economic Puerto Rico Tourism Company, R h

Specialist

Department of Business Intelligence, Division of Research & Development P. O. Box 902390, Old San Juan Station, San Juan of Ministry of Economic Development and Trade

Russia

N. Shenguelia Chief Tourism Department

San Marino

Gloria Licini, Dominique Morolli

Officer of Tourism Promotion and Programming Sector Contrada Omagnano, 20, San Marino Hotel and Tourism Board Caixa Postal 40 St, Tome

Sinha Levkovic Assistant Director of Inspectors Quality Assurance Unit Joseph O. Mansaray Pl i & D l t

Inspectors Quality Assurance Unit P. O. Box 92, Victoria, Mahe

Sao Tome et Principe Seychelles

Sierra Leone Slovak Republic

Manager Eliska Romanova Senior Officer Ana Bozicnk Senior Counselor Dr. Joseph Raputsoe

South Africa

National Tourist Board of Sierra Leone Room 100, Cape Sierra Hotel, P. O. Box 1435, Freetown Ministry of Economy, Department of International Cooperation in Tourism

Mierova 19, 827 15 Bratislava Ministry of Economy Trubarjeva 11, 2000 Maribor Department of Environment and Tourism Private Bag x447, 0001 Pretoria

Spain

Antonio Nieto Magro

Jose Lazaro Galdiano 6

Sudirector General

de

Cooperaciony Coordination Turistica Director/Trade Standards (Hotels and Guest-Houses) Andrea Kammer Hotel Classification Service Salama A. Kibogoyo Principal Tourism Officer Anate S. Bagnah Director of Tourism

Sri Lanka Switzerland

Tanzania Togo

Professions Tunisia

Turkey

Turkay Can Manager

Ukraine

Ludmila A. Mechterskih Chief of Accommodation Establishment

Classification Sector Vu Quoe Tri Deputy Director of Hotel Department Aleksandar Susa

Vietnam

Yugoslavia

Advisor

28036 Madrid

Sri Lanka Tourist Board, No. 80, Galle Road, Colombo 03 Swiss Society of Hoteliers

Monbijoustrasse 130, CH-3001 Bern Ministry of Natural Resources

P. O. Box 9352, Dar-Es-Salaam Ministry of Tourism B.P. 1289, Lome Ministere du Tourisme et de I'Artisanat, Office National du Tourisme The Union of Turkish Municipalities Guesthouse Selanik Cad. 57, Kizilay/Ankara Accommodation Establishment Classification Sector 36, Yaroslaviv Val. 01034 Kyiv, Vietnam National Administration of Tourism 80-Quan Su Street, Hanoi National Tourism Organisation of

Serbia Dobrinsjka 11, 11000 Belgrade, Serbia, FR

Zambia

Micheal Lengalenga

Ministry of Tourism Environment and

Principal Inspector

Natural Resources

Standards

P. O. Box 30575, Lusaka Cambodia* Letter of 17 July 2002, advising that they are preparing the replies. Germany* There is no government classification, hence no replies to questions in part A. India* Survey returned void. Maldives* E-mail of 10 July 2002. They do not have a Hotel Classification System in the Maldives Monaco* They only sent the legislation and have not replied to the survey. Nigeria Verbal note of 12 June 2002: "the questionnaire has been transmitted to the appropriate Nigerian Authorities for their necessary action." Tunisia Sent the classification system of hotels "Normes 2000" but did not reply to the survey.

Part A: Government Classification

1. Application to Facilities (a) Current classification in force applies to: Country/ Territory

Hotels Apartment Hotels

Algeria Andorra Argentina Armenia Azerbaijan BelgiumFlemish Benin Bolivia Bosnia and Herzegovina Brazil Burundi

X X X X

Motels Inns Others

X

X

X X

X X

X

X

X

X X

X

X

X

X

X X

X

X

X

X

X X

X

X X X X

X X

Holiday villages, pensions, chalets Pensions, chalets and bungalows

X

Complimentary hospitality, resort

Chile China Costa Rica Croatia apartments,

X X X X

Cuba Cyprus

X X

X

X

X X

X

X

Holiday

villages,

tourist

guesthouses, pensions X

X

X

X

Tourist villages

Tourist

villages,

traditional

houses, guesthouses, tourist

apartments

and

furnished

apartments which are regarded as

perishing

classes

Czech Republic Ecuador Equatorial Guinea Ethiopia France Ghana Greece Guatemala Hungary

X

Indonesia Iran Italy

of accommodation

X

X

X

X X

X X

X

X X X X X X

X

X

X

X

X

X

X

X

X

X X

Floating hotels, pensions

Pensions, guesthouses

X X

X

X

X

X X

X

X

Resorts

Bed and breakfast, apartment house, tourist hotel

Country/ Territory

Hotels Apartment Hotels

X Ivory Coast X X Jordan X Kazakhstan X Kenya X X X Lebanon X X Macau Madagascar X X X Madeira X Malawi X Malaysia X X Mali X X Malta X Monaco X X Moldova holiday villages, tourist ships

Mongolia

X

Montenegro Morocco

X X

Mozambique Netherlands Nigeria

X X

Pakistan

Motels Inns Others X

X

X X X

Hotel suites, hostels X X

X

X X X

Chalets Ecolodges

X X X X

Rural tourism Lodges Self-catering

X

Villas, bungalows, pensions,

Traditional ger camp (gertraditional house) X X Resort hotel complexes X X X Holiday villages, restaurants X

pensions,

X X

X

X

X

X

X

X

Guesthouses

X X X

X

X X

Ecolodges, pensions, resorts

X

Pensions, homestays Pensions, guesthouses, bivouac grounds X Apartment hotels, pensions,

X X

X X

Puerto Rico Inn

X

X

X

X

X

Paraguay Peru Philippines Poland

X

Portugal

X holiday villages, guesthouses Puerto Rico

X

Sao Tome et Principe San Marino Seychelles Slovak Republic Slovenia South Africa Spain Sri Lanka Tanzania

X X X

X X

X

X X X

X

X X X

X

X X X

X

X

Country/ Territory

Hotels

Togo Tunisia Turkey Ukraine Vietnam Yugoslavia Zambia

X

Boarding houses X X X

Camps, marines, apartments Guesthouses Lodges, villas, restaurants

Apartment Motels Inns Hotels

Others

X

X XX

X

Holiday villages

X

X X

X

X X

X X

Pensions Lodges

cottages,

Country/Territory

All or specific types

Last date

Graphical symbol

Algeria Andorra

all

1999

stars

Argentina Armenia Azerbaijan Belgium-Flemish Benin Bolivia Bosnia and Herzegovina Brazil Burundi Chile China Costa Rica

Stars

All

1984

Stars

All

Stars

All Specific types

Croatia Cuba Cyprus Czech Republic Ecuador

All AH All All hotels

Ethiopia France

Specific types All

Ghana Greece

All

Guatemala Hungary All All Italy Ivory Coast Jordan All hotels, apartment hotels & motels

All 1978 1992 1988 26 February 1997 10 May 2002 2002 1969 2002

Stars Stars Stars Stars Stars Stars Stars, letters Stars

14 February 1986 1979

Stars

24 June 1998 1983

Stars Stars

Hotels 1 January 1994

Stars, ABC

Country/Territory

Kazakhstan Lebanon Macau Madagascar Madeira Malawi Malaysia Mali Malta Moldova Montenegro Monaco Mongolia Morocco

All or specific types

Last date

Graphical symbol

All

2000

Stars

All

19 April 2001

Stars

All

1995/2001

All

2002

All Hotels All hotels all tourist ger camps All

1998 2000

Stars 1.2 grade

25 November 1986 1999 1978 1977

Stars

13 July 2001

Stars None Stars Stars N/A

Netherlands Nigeria Pakistan Paraguay Peru Philippines Poland Portugal Puerto Rico Sao Tome et Principe San Marino Seychelles Slovak Republic

All All All

Slovenia South Africa Spain Sri Lanka Tanzania Togo

All

Turkey

Tunisia Ukraine Vietnam Yugoslavia Zambia

All All All All Specific, hotels

Stars; 'standard', 'comfort', 'superior' (self-catering) Stars Stars Stars 1-4L

13 June 2001 1997

Stars Stars

18 March 1993 All

1 November 2001 23 May 1997

All All

Stars Stars

Hotels All All

Stars

1989

Stars

2000

Stars Stars

27 April 2001

(b) Additional comments, if any:

Stars Stars

Country/Territory Jordan Mongolia Tunisia

Comments Established at Central government level, Ministry of Tourism and Antiquities Both standards expected to be revised by end 2002. The draft of motel, guest house standards is in process. The system "Normes 2000" includes 3, a start system which is compulsory plus a Quality Label and Specialization, which are both voluntary.

2. Basis for Central/Local Government Authority an Role in Establishing Classification 1. State constitution 2. Tourism law 3. NTA competence 4. Agreement between government bodies concerned 5. Recommendation in a government-adopted tourism development plan Country/ Territory

Bodies involved 1 5

2

Algeria Andorra

X

X

Argentina

X

Armenia Azerbaijan Belgium-Flemish Benin Bolivia Bosnia and Herzegovina Brazil Burundi Chile China Costa Rica Croatia Cuba Cyprus

X

X

3

Others 4

XX

Agreement between each group's representatives and Hotel Union of Andorra and Chamber of Commerce of Andorra representatives.

X

X

X

X X X X XX

X

X X X X X

Czech Republic

X

Ecuador

X

X

X

X

X

X

Ethiopia

France Ghana Greece Guatemala Guinea Equatorial Hungary Indonesia Italy

X X

X

X

X

X X X X

X

X X

X

X

Ivory Coast Jordan Kazakhstan Kenya Lebanon Macau Madagascar Madeira Malawi Malaysia Mali Malta Moldova Mongolia Montenegro Morocco Mozambique Netherlands Nigeria Pakistan Paraguay Peru Philippines Poland Portugal Puerto Rico Sao Tome et Principe San Marino Seychelles Slovak Republic Slovenia

X

X

X

X

X X

X X X

X

X

X

X

X

X

X

X X X

X

X X X

X X

X Government guideline X

X X

X Treaty with Belgium and Luxemburg

X

X X X X X X X X

South Africa

X X

Spain

X

X

X

X

X X X X

X X

X X

X X

Catering law X

Bodies invo

Country/ Territory 1 Sri Lanka Tanzania Togo Turkey Ukraine Vietnam Yugoslavia Zambia

X

X X

X X X X

2

Others

ilve 3 4

5

X X

X

X

X

X X X

X

X X

X

X

X X X

3. Rationale and Use of Government Classification Country/Territory Is classification compatibility justified by with the existence consumer of classification concerns? systems in other countries? Algeria Yes Andorra Yes Argentina Yes Armenia Yes Azerbaijan Yes Belgium - Flemish Yes Benin No

Does it seek

Yes Yes Yes Yes Yes No Yes

Is it used to control accommodation tariffs within established classes? No No Yes No Yes No Yes

Is it used as the basis for applying different taxes (e.g. VAT)? No No No No Yes No No

Bolivia Bosnia and Herzegovina Brazil Burundi Chile China Costa Rica Croatia Cuba Cyprus Czech Republic Ecuador Ethiopia France Ghana Greece Guatemala Hungary Indonesia

Yes Yes

Yes No

No No

No No

Yes Yes Yes Yes Yes No Yes Yes

Yes Yes

No

No

No No No No Yes No No No No No No Yes Yes No No

No No No No No No No Yes No Yes No

No No Yes Yes Yes Yes Yes

Country/Territory

Is classification justified by consumer concerns?

Italy Ivory Coast Jordan Kazakhstan Kenya Lebanon Macau Madagascar Madeira

Yes

Malawi

Malaysia Mali Malta Moldova Mongolia* Montenegro Morocco Mozambique Netherlands Nigeria Pakistan Paraguay Peru Philippines Poland Portugal Puerto Rico Sao Tome et Principe

Yes Yes Yes Yes No Yes Yes Yes No Yes Yes Yes Yes

Yes No No

Is it used as the basis for "pplying different taxes (e.g., VAT)?

yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No yes Yes No Yes Yes Yes

Does it seek Is it used to compatibility control with the existence accommodation of classification tariffs within systems in other established countries? classes? Yes Yes Yes No Yes Yes Yes No Yes Yes Yes No Yes No No No Yes Yes Yes No Yes Yes Yes Yes Yes No No No Yes No Yes Yes No Yes Yes No Yes Yes Yes Yes

Yes No Yes Yes No Yes

Yes Yes Yes Yes Yes Yes

No No No No Yes Yes

No No No No No Yes

Yes No No Yes No Yes Yes No No No No No Yes Yes No Yes No

San Marino Seychelles Slovak Republic Slovenia South Africa Spain Sri Lanka Tanzania Togo Turkey Ukraine Vietnam Yugoslavia Zambia

No Yes Yes No Yes Yes Yes No Yes Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

Yes No Yes No No No No Yes Yes No No No No No

No Yes No No No No No No No No Yes No No No

4. Classification Authority/Body Deciding Each Classification

Moldova Mongolia* Montenegro Morocco Mozambique Netherlands Nigeria Pakistan Paraguay Peru Philippines Poland Portugal Puerto Rico Sao Tome et Principe San Marino Seychelles Slovak Republic Slovenia South Africa Spain Sri Lanka Tanzania Togo Turkey Ukraine Vietnam Yugoslavia Zambia

Yes No yes Yes No Yes Yes Yes

Yes No Yes Yes No Yes Yes Yes

No No No Yes Yes No Yes Yes

No No Yes Yes

Yes No Yes Yes No Yes

Yes Yes Yes Yes Yes Yes

No No No No No Yes

No No No No Yes Yes

No Yes Yes No Yes Yes Yes No Yes Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

Yes No Yes No No No No Yes Yes No No No No No

No Yes No No No No No No No No Yes No No No

No Yes No

(a) Other rationale and use: Mongolia: It is used to update hotel and ger camp service quality.

Country/

Hotels Apartment Motels Inns Others Classification authority

Territory

hotels

Algeria

X

X

Andorra

X X X

X X X

X

X

X

X

Benin

X

X

X

X

Bolivia

X

X

X

X

Bosnia and Herzegovina Brazil

X

Burundi

X

Chile China

X X

X

X

National Tourism

Administration Tourism Department

X X

X X X X

Argentina Armenia Azerbaijan BelgiumFlemish

X

Local Government

X

X

Central Executive Body Toerisme Vlaanderen National Tourism Administration National Tourism Administration, motels: / local Government

Embratur, National Consulting and Regional Committees X

X

X

Ministry of Environment and Tourism National Tourism Service National Technology and

X

Supervision Costa Rica

X

X

Croatia

X X

X X X

Cuba Cyprus

X

X

Czech Republic

X X X X

X

X X

X

X

Administration Tourism Institute Costa Rica Ministry of Tourism Ministry of Tourism

Hotels Committee and Board of Directors of Cyprus Tourism Organisation National Hotel and Restaurant Association

Ecuador

Ethiopia France Ghana

X X X

X X X

X

Greece

X

X

X

Guatemala Hungary

X

X

X X

X X

X

Italy Ivory Coast Jordan Kazakhstan

X X

X

X

X

X

X X

X X

Kenya

X

X

X

X

X

Local prefecture National Tourism Administration National Tourism Administration National Tourism Administration

Provincial Government Classifying Committee Ministry of Tourism, Jordan Hotel Association Hotels and Restaurants Authority, Ministry of

of

Lebanon

X

X

Macau

X

X

Madagascar

X

Madeira

X

X

X

Tourism and Information

X

X

Ministry of Tourism Macau Government Tourist Office Ministry of Tourism Tourism Chamber,

X

Regional Tourism Board, Regional Secretariat of S i l S bj t Ci il Protection Government conjunction

X

X

X

Malawi

X

X

X

Malaysia

X

X

X

Hotel Boards Panel set up under the Ministry of Culture, Arts & Tourism, consisting of Ministry officials and members from nongovernmental organizations (hotel association, tour operator association and other relevant government

Mali

X

X

X

X

Malta

X

X

Moldova Monaco

X

X

X

X X

X

X

X

X

X

X

X

X

X

X

agencies) National Classification Committee Mlalta Tourism Authority N ti Ministre l Tde i 1'Etat Agency et Commission Hoeliere Hotel and ger camp classification committee Ministry of Tourism National Tourism Administration Bedrijfschap Horeca and Catering

with the Tourism and

X X

X

Mongolia Montenegro Morocco Netherlands

X X X

Country/ Territory

Hotels Apartmen Motels t hotels

Nigeria

X

Pakistan

X

X

X

X X

Paraguay Peru Philippines Poland Portugal

X

Inns Others Classification authority

X

X

X

National Tourism Administration Department of Tourist Services

X

X

X X

X X X

National Tourism Board Department of Tourism 16 representatives of the

X

X

X

X

level Central Administration,

X

Tourism

Puerto Rico Sao Tome et X Principe San Marino X

X

X

X

X

X

National Tourism Office

X

Committee of Hotel Classification Ministry of Tourism and Transport Ministry of Economy Classification Council

Seychelles

X

Slovak Republic Slovenia South Africa Spain

X X

X

X X

X X

X

X X

Sri Lanka Tanzania Togo

X

Turkey

X

X

A commission consisting of two inspectors from NOT and a representative fromNTA

Ukraine

X

X

State Standardization Entity Gosstandart, National Tourism Adminstration of Ukraine

Vietnam

X

Yugoslavia

X

Zambia

X

X X

X

X

X X

X X

X X

X

Regional government authority

X

National Hotel Board

National Committee of Licensing and Classification

X

X

X

x.

X

X

Vietnam National Association of Tourism Commission of Ministry of Trade, Tourism and Service Hotel Board of Zambia

5. Methods and Bodies Involved in Devising and Drafting Classification Was the classification system in question prepared by: 1. An expert NTA /NOT official(s) 2. A team of NTA/NOT and other government officials 3. A private national consultant 4. A private international consultant 5. An expert designated/recommended by WTO/OMT 6. On the basis of another country's classification system 7. By revising the previous system 8. In consultation with National Hotel Association(s) 9. In consultation with Consumer's Association

Country/ Territory

Bodies involves 1 2

Algeria

3

5

6

X X

7

8

9

X X

Andorra

Argentina Armenia Azerbaijan Belgium Flemish Benin Bolivia Bosnia and Herzegovina Brazil Burundi Chile China Costa Rica Croatia

4

Others

X

X

X

X X

X

X X X X X X

X X X X

X X X X

X X

X X X X

X

X X X X X X X X X X X

X X X X X

X X

Ministry of Tourism prepared the regulation consulting national hotel association and foreign consultant

Cuba Cyprus Czech Republic Ecuador Ethiopia France Ghana

X X

X X

X X X X X X

X

X X X

X

X X

X

X

X X X X X X

Classification is in line with Hotel Classification Standards for Africa

Country/

Territory Greece Guatemala Hungary Indonesia Ivory Coast Jordan Kazakhstan Kenya Lebanon Macau Madagascar Madeira Malawi

Malaysia Mali Malta Moldova Mongolia

Montenegro

Others

B o d i e s i n v o l v e s 1

2

3

4 5

6

X

7

X X X

X X

X X X X

X X

X

X X

X X X

X

X X X X

X X

X X X

X X X X X X

X X X X X

X X X

X X

X

X X X

X X X X* X X X *

X

X

X

X X

X

Morocco

Mozambique Netherlands Nigeria X Pakistan

X X X

X

Study tours were undertaken in Zimbabwe and Zambia system before amending the classification

X X X X X X X X

X X X

X

9

X X

X X

8

X

X* X

X

X X X X

Ministry of Infrastructure; Mongolian Tourism Board; Ministry of Health and Welfare; Ministry of Nature; other government controlling authorities; Mongolian Tourism Association; Mongolian Hotel Association, Standards Authority *USA, Germany, UK, Switzerland, Spain, Crotia, Austria and international hotel companies; tour operator organizations

X X X X

Rules have been frames by the Federal Government of Pakistan

Paraguay Peru Philippines Poland

X

Poland Portugal

X X X

Puerto Rico Sao Tome et Principe San Marino Seychelles Slovak Republic Slovenia South Africa Spain Sri Lanka Tanzania Togo Turkey Ukraine Vietnam Yugoslavia Zambia

X

X X

X X

X

X X X X X

X

X X X X X X X Elaborated by the State Secretariat of Tourism in collaboration with the General Board of Tourism X X

X X X X

X

X

X

X X X X X X

X X X X X

X X X X

X

X

X X X

X

X X

X X X Chamber of Economy X X X X X X X X X X X X X X X X X X X X X X X X X X X X

Notes: Mongolia 6* Based on Russian standard 7* Existing standards expected to be revised by end 2002

6. Applicability of Classification Country/Territory

Is it mandatory for all establishments?

Is it necessary to obtain license/ permission/ registration to operate?

Can establishments operate without being classified?

Algeria Andorra Argentina Armenia Azerbaijan Belgium - Flemish Benin Bolivia Bosnia and Herzegovina

Yes Yes Yes

Yes Yes Yes

No

Yes Yes Yes Yes Yes No No

Yes Yes Yes Yes Yes Yes Yes

Brazil

Burundi

No Yes No No No No No Yes Yes

Chile China Costa Rica Croatia Cuba Cyprus Czech Republic Ecuador Ethiopia France Ghana Greece Guatemala Hungary Indonesia Italy Ivory Coast Jordan Kazakhstan Kenya Lebanon Macau Madagascar Madeira Malawi Malaysia Mali Malta Moldova Mongolia Montenegro Morocco Mozambique

Netherlands Nigeria Pakistan Paraguay Peru Philippines Poland Portugal Puerto Rico Sao Tome et Principe

San Marino Seychelles Slovak Republic Slovenia South Africa Spain Sri Lanka Tanzania

No No No Yes Yes Yes Yes Yes Yes No Yes Yes Yes Yes Yes Yes yes Yes No Yes Yes Yes Yes Yes No Yes No Yes Yes Yes yes No Yes Yes No Yes

No Yes Yes Yes Yes No Yes

Yes Yes Yes Yes Yes Yes Yes Yes Yes No No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No Yes Yes

No No No Yes No Yes

Yes Yes No Yes Yes Yes

Yes No Yes Yes No Yes No Yes

Yes No Yes Yes Yes Yes Yes Yes

Yes Yes Yes No Yes No No No Yes Yes No Yes No No No No No Yes Yes No Yes No Yes Yes No No Yes No Yes No Yes Yes Yes Yes Yes Yes No Yes No

No Yes No No Yes No Yes No

Togo Turkey Ukraine Vietnam Yugoslavia Zambia

Yes Yes No Yes Yes Yes

Yes Yes No Yes Yes Yes

No Yes Yes No Yes Yes

7. Verification of Compliance with Classification System (a) Is verification performed by: Country/ Territory inspectors

Algeria Andorra Argentina Armenia Azerbaijan Belgium Flemish Benin Bolivia Bosnia and Herzegovina Brazil Burundi Chile China Costa Rica Croatia Cuba

Local Hotel Central government governmen industry inspectors (second party) inspectors X X X X X X

Independent (third party) inspectors

X

X X X

X X X X X

X

X

X

X X X X

X

X

X

X

X

Other parties

Cyprus Tourism Organization

Cyprus Czech Republic Ecuador Ethiopia France Ghana Greece Guatemala Hungary Indonesia Italy Ivory Coast Jordan Kenya

X

X

X

X

Lebanon Macau Madagascar Madeira Malawi

X

Malaysia Mali Malta Moldova Mongolia Montenegro Morocco Mozambiquf Netherlands Nigeria Pakistan Paraguay Peru Philippines

X X X

X

X

X X

X X X X

X

X X X

X

X

X

X

X X

X

X X X X

X

Hotel and Restaurant Association Board

X X

X

X

X X

X

X X X

A grading/classification committee, appointed by the Board will be responsible

X X

X

X

X

X X X

X

X X

X

Poland Portugal Puerto Rico

X X X

Sao Tome et Principe San Marino

X

X

X

X

Many hotel chains have their own inspection personnel

Seychelles Slovak Republic Slovenia South Africa Spain Sri Lanka Tanzania Togo Turkey Ukraine Vietnam Yugoslavia Zambia

X X X

X X X

X

X X

X

X

X X X

X

X V

X

(b) Mode of verification: Country/Territory

Announced Mystery Other methods visits at checks fi d d t

X Algeria Andorra Argentina Armenia X

X

X X X

X

Azerbaijan Belgium-Flemish Benin Bolivia Bosnia and Herzegovina Brazil Burundi

Local government's decision

Unannounced visits by identified inspectors X X X

Chile

X

China Costa Rica

X

Croatia Cuba Cyprus

X X

Czech Republic

Unannounced inspectors

Ecuador X X X

identified

Accommodation establishments must fill in the classification questionnaire Unannounced visits by identified inspectors

X X

X X

X

X X

X

X

X

X

X X

X X X X

Unannounced visits

A questionnaire will be distributed to will be sent to the grading committee for verification and inspectors will inspect the establishment Based on public complaints, public requests and requests from hotels

Malaysia X

Mali Malta

Unannounced visits by identified inspectors X

Moldova

Mongolia

X X X X

Montenegro Morocco

Mozambique Netherlands Nigeria Pakistan

X

Between June and August

X X

X

Paraguay Peru Philippines Poland Portugal Puerto Rico Sao Tome Principe San Marino Seychelles

by

Unannounced visits Announced and unannounced visits by X

Ethiopia France Ghana Greece Guatemala Indonesia Italy Ivory Coast Jordan Kenya Lebanon Macau Madagascar Madeira Malawi

visits

Unannounced visits by identified inspectors X X

X

X

X

X

X X

X

et

Comment cards

Slovak Republic Slovenia

South Africa Spain Sri Lanka Tanzania Togo Turkey Ukraine Vietnam Yugoslavia Zambia

X X

Proposed self-estimation level is verified by classification commission with pre-announced visits before establishments acquire fixed classification symbol

X X X

X

X X X X

X X

(c-d) Cost of verification borne by: Country /Territory

The verifying authority

Algeria

X

Andorra Argentina Armenia Azerbaijan Belgium-Flemish Benin Bolivia

X

Bosnia and Herzegovina Brazil

The hotel company Periodicity of verification concerned Depends on NTA's decision Every year Every year Every two years Every year Every three years

X X X

X X

Every year or when necessary Every three years Every year

Burundi Chile China Costa Rica Croatia Cuba Cyprus Czech Republic Ecuador Ethiopia France Ghana Greece Guatemala Indonesia Italy

X

X

X X X

X X X

X

X X X X

Ivory Coast Jordan

X X

Kenya Lebanon

X X

X

Every year Irregularly, at least once a year Every two years Not a particular date Once or twice a year

Macau Madagascar Madeira Malawi Malaysia Mali Malta Moldova Mongolia Montenegro Morocco Mozambique Netherlands Nigeria Pakistan

Paraguay Peru Philippines Poland Portugal Puerto Rico Sao Tome et Principe San Marino Seychelles Slovak Republic Slovenia South Africa

Every year Not established, only in case of changes detected Every year Every year Every two years Every three years Every two years, routine inspections every two months Every two years Every year Every year Occasionally Every year Every year Every month Every three years When characteristics change

X X

X X

X X X X X

X

X

When necessary Every two years Every three years Every year When necessary Every year Depends on hotel company request Every three years Every two years

X X

Every two years

X

Every three years Every year

X

X X

X X X X X

Every year X X X

Every year Every two year Every year

Twice a year Every five years

X

Every year

X

Every year Every three year

X

Every year

Spain Sri Lanka Tanzania Togo Turkey Ukraine Vietnam Yugoslavia Zambia

X

Every year X

X X X

Every two years

Every year When necessary

X

X

Every year

X

Every two years Every five years Every year

X X

8. Plans to Introduce New Classification or Revise Current Classification Country/

Comments

Territory Algeria Andorra Argentina

Classification is at central administration level and local level. The National Tourism and Sport Secretariat has set up a cooperation agreement to develop the 'Tourism Quality System' with representative private-sector entities. Its objectives include

stimulating national legislation for tourism establishments and facilitating national and/or international technical assistance from countries which implemented similar systems in terms of categorization criteria and quality systems. Azerbaijan A new classification preparation is underway and few changes are being introduced in the existing normative legislative base

Benin Bolivia

Project in process There is a compulsory development of the 'National Recategorisation Programme' every five years, obliged by the tourism establishment's regulation.

Brazil

The revision and actualization of classification criteria is defined by National Technical Consultancy

Burundi Chile China Costa Rica

Current classification is under revision The presentation of a study is in process, which helps to elaborate the technical basis and standards for a new classification system, according to the actual market expectations. It is being revised. Classification is used to define the level of quality and competition within regional markets. They are interested in reforming the actual hotel classification system, implementing ISO 9001-2000 norms for detailed grading of guest-related service's quality as well as quality documentation developed by the enterprise.

Cuba

The Cuban Norm, which includes classification requirements was

Cyprus

revised in 2001. Revisions are planned every five years or when necessary. Under consideration. Municipality taxes are levied according to classification. In the end of 2002

Czech Republic Ecuador

Ethiopia

Ghana Greece Guatemala Jordan

Kenya Lebanon

Malawi Malta Moldova

Technical regulation has been elaborated under the assistance of a national consultant and taking other countries' (e.g. Spain, USA, etc.) classfication and categorization system as a reference. This regulation is adequate to the actual situation in Ecuador. Government level of classification is much preferred to promote quality service in the tourist facilities industry. Although, classification is a new phenomena, intensive explanation of the use of classification and related ideas must be detailed. There is a plan to revise current classification on the basis of WTO criteria (standards for Africa) introducing new names like 'five star delux' in the classification system. Classification is in the line with 'Hotel Classification Standards for Africa. Revise current criteria. Introduction of new classification on the basis of star system. There is a need for a non-governmental support of classification procedure to make it competitive at international level. A new revision of the current classification will be introduced within the next 5 years. East African Regional Classification Document is being prepared as an improvement of the current Kenyan criteria. The new classification system is very recent and in process of application. Has already drafted or amended classification system to conform international standards. New classification system was introduced recently. The classification in question is a new one and will be implemented till the end of 2002.

Mongolia Revise current classification. Montenegro Establishment of new classification in harmony with international procedures is in progress. Peru Philippines Department of Tourism is planning to adopt the star classification for hotels. Poland Is revising its provisions connected with hotel facilities classification. Puerto Rico Next year a new classification system will be introduced with new standards of classification and evaluation for all properties. Sao Tome et Principe San Marino Revise in project. Slovenia Ongoing project of renewing classification system for all types of establishments. Ukraine A new classification preparation is underway and few changes

are being introduced in the existing normative legislative base.

III. Comparative Analysis Sources of Information WTO surveyed the public sector, specifically the role of governments in hotel classification in the various countries. The survey has been completed by National Tourism Administrations (NTAs) in collaboration with their national hotel association(s). IH&RA surveyed the private sector specifically to prepare: • a status report (i.e., inventory) of existing hotel classification schemes. • A comparative analysis of these schemes (price, qualitative and quantitative elements). The survey was completed by National Hotel and Restaurant Associations. The findings of the two reports were collected from a total of: 32 countries, surveyed by the private sector 89 countries, surveyed by the public sector 13 countries replied to both IH&RA and WTO questionnaire

Official Classification Systems in the Various Countries Covering Hotels, Apartment Hotels, Motels and Inns Number of countries having an official hotel classification system in their country Public Sector:................................................... 70 countries Private Sector: ................................................. 26 countries Total (by crossing)........................................... 83 countries Number of countries having a classification system applying to Apartment hotels Public Sector:................................................... 43 countries Private Sector: ................................................. 17 countries Total (by crossing)........................................... 51 countries Number of countries having a classification system applying to Motels Public Sector:................................................... 49 countries Private Sector: ................................................. 19 countries Total (by crossing)........................................... 56 countries Number of countries having a classification system applying to Inns Public Sector:................................................... 38 countries Private Sector: ................................................. 15 countries Total (by crossing)........................................... 46 countries Number of countries having a official classification system for all four categories Public Sector:................................................... 16 countries Private Sector: ................................................. 13 countries Total (by crossing)........................................... 24 countries Number of countries having an official classification system for three categories Public Sector:................................................... 25 countries Private Sector: ................................................... 4 countries Total (by crossing)........................................... 25 countries Number of countries having an official classification system for two categories Public Sector: ..................................................... 8 countries Private Sector: ................................................... 2 countries Total (by crossing)............................................. 9 countries Number of countries having an official classification system for one categories Public Sector:..................................................... 6 countries Private Sector: ................................................... 6 countries Total (by crossing)........................................... 11 countries N.B. In this case the category is always hotels Note:

Where a classification system exists the graphical symbol most widely used is the star. Systems are mostly set up by the government, a region or the Tourism Board of the country and the establishments are only consulted. Afterwards they are adopted into the Tourism Law, the State Constitution or regional constitutions. 20 countries state that there is a relation between Classification and Room Rates 13 countries state that there is a relation between Classification and Taxation

According to the private sector a majority of countries report no link between classification and the social obligations of the employers

Which bodies are involved in devising and drafting classification or by whom have the classification system in question been prepared An expert NTA/NOT official(s) Public Sector:................................................... 33 Private Sector: ................................................... 5 Total (by crossing)........................................... 36

countries countries countries

A team of NTA/NOT and other government officials Public Sector:................................................... 43 Private Sector: ................................................. 14 Total (by crossing)........................................... 49

countries countries countries

A private national consultant Public Sector:................................................... 12 countries Private Sector: ................................................... 6 countries

Total (by crossing)........................................... 14 countries A private international consultant Public Sector:................................................... 12 countries Private Sector: ................................................... 7 countries Total (by crossing)........................................... 16 countries An expert designated/recommended by WTO/OMT Public Sector:..................................................... 4 Private Sector: ................................................... 5

countries countries

Total (by crossing)............................................. 7

countries

On the basis of another country's classification system Public Sector:................................................... 36 Private Sector: ................................................... 8 Total (by crossing)........................................... 41

countries countries countries

By revising the previous system Public Sector:................................................... 48 countries Private Sector: ................................................... 5 countries Total (by crossing)........................................... 49 countries In consultation with National Hotel Association(s) Public Sector:................................................... 47 countries Private Sector: ................................................... 4 countries Total (by crossing)........................................... 48 countries In consultation with Consumer Association Public Sector:................................................... 13 countries Private Sector: ................................................... 9 countries Total (by crossing)........................................... 17 countries

Applicability of Classification in the Countries In 46 countries it is mandatory for all establishments to have a classification to operate. In 55 countries it is necessary to obtain a license/permission/ registration to operate. In 32 countries establishments can operate without being classified. N.B. According to the private sector only two countries oblige establishments to become members of a national association to obtain a license to operate. Applicability of Classification in the Countries In 46 countries it is mandatory for all establishments to have a classification to operate. In 55 countries it is necessary to obtain a license/permission/ registration to operate. In 32 countries establishments can operate without being classified. N.B. According to the private sector only two countries oblige establishments to become members of a national association to obtain a license to operate. Methods of Verification In general verification of establishments is undertaken between every one to five years and in some countries more irregularly. Plans to Revise Existing System or Introduce New One

Cf question 15 (private sector) and question 8 (public sector) Questions appearing only in the private sector questionnaire Q. 11. Who finances the system? 11 countries: individual establishments 3 countries: national hotel associations 9 countries: government 1 country: shared between national association and government Q. 12. What are the main criteria? As this was an open question, replies vary considerably listing a range of objective (quantitative) and subjective (qualitative) criteria. Q. 14. Satisfaction with existing system. Of the respondents who replied to this question: 16 countries are satisfied with the existing system in their country 4 countries are not satisfied with the existing system in their country 5 countries would like improvements to the existing system Current Trends in Hotel Classification New Information Technologies Electronic distribution in the form of Central Reservation Systems (CRS) was initially developed in the 1960’s by the major airlines as a way of managing their inventory and controlling the rising number of flights and fares. Originally only used by airline reservation staff, in the1970’s CRS were gradually made available to travel agents to facilitate the reservation process and give access to inventory data. As the systems developed, user demand and high capital costs prompted the owners of these systems to expand their product offering from solely airline seat to include hotel accommodation, car hire, cruises and almost every other travel product. This gave rise to today’s one-stop-travel-shops, i.e., the Global Distributions Systems (GDS). Four main companies dominate the sector - Amadeus, Galileo, Worldspan and Sabre -with a number of smaller GDSs active regionally. Most GDSs subsequently developed their own CRS with data structures more closely adapted to their particular product (e.g., hotels), linking them electronically to the GDS to gain access to the powerful travel agent market and paying a transaction fee to the GDS owners for each booking processed. The limited space available on the display screens in CRSs and GDSs strongly influenced the choice of criteria and abbreviations in which a hotel could be described for selling purposes. From the perspective of the travel agent, these systems using a text-based interface are far from ideal as hotel sales and marketing tools, as they can provide only very sparse information. Since the emergence in 1994 of the Web as an additional and competing electronic distribution channel there has been a rising number of consumer-oriented websites offering a much wider range of information, as well as booking facilities, some of them effectively bypassing both the travel agent and the GDS to create a direct link to the consumer. Once again, the question of categorizing hotels for the benefit of consumers or travel professionals (specifically the travel agent) has come to the fore. This prompted one of the major third-party marketing and reservation providers, Utell, a Pegasus Solutions Company, to introduce its own hotel classification system. Phoenix (June 4,2001) - Utell today introduced Utell selections, an innovative approach that categorizes its portfolio of 6,400 hotels to assist travel agents in finding the perfect hotel for clients. Utell selections classifies Utell properties into well-defined categories, and is based where possible on the American global industry publication Official Hotel Guide (OHG). Utell selections provides global consistency in segmenting hotels, since some ranking systems, such as the “star system,” vary from country to country. Utell selections enables hotels to match customers’ expectations with the experience, and uses a universally accepted travel publication, OHG, as the foundation for classification. Utell selections segments hotels into three core categories and four niche categories. All hotels are classified in one of the core categories: luxury, superior and value. Hotels can be further identified as one of four niche categories - style, resort, apartment or airport, dependent upon the defined category criteria. The three core categories are defined as:

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Luxury selection. Properties in leisure and business locations that provide the ultimate hotel experience for guests who demand the highest standards. Corresponds to the OHG system as Superior Deluxe, Deluxe, and Moderate Deluxe. • Superior selection. Hotels and resorts that offer excellent quality rooms and facilities for both business and leisure. Classified by OHG as Superior First Class, First Class, and Limited Service First Class. • Value selection. Hotels that create a comfortable atmosphere providing excellent value for money. Includes the OHG Moderate First Class, Superior Tourist Class, Tourist Class and Moderate Tourist Class. The four niche categories are defined as: • Style selection. Boutique and historic hotels each with distinctive decor and design characteristics. • Resort selection. Includes properties that have recreational activities in the hotel or adjacent to the hotel. • Apartment selection. Caters to travelers who need extended stays and amenities that include a kitchenette. • Airport selection. Must be within seven miles of an airport and many offer transportation to and from the airport. Based on extensive research carried out over nine months with travel agents and hotels, Utell realized the need to better segment its growing number of independent and chain hotels into a consistent classification system. Hotels wanted to be promoted in easy-to-understand groups in a manner similar to how their customers view them, instinctively. “The ‘star system,’ for instance, is not consistent around the world - a five-star hotel in Spain and a five-star hotel in Indonesia are not comparable, leading to inconsistency in service levels and expectations,” said Michael Prager, Operations Managing Director, Utell. The Utell selections classification system will be introduced on June 4, 2001, and is profiled on all of Utell’s distribution channels, including international voice representation, Utell’s proprietary Web site http://www.utell.com/ and the four major global distribution systems (GDSs). Utell’s voice reservation agents who handle calls from over 40 countries have also been trained to describe hotels and help customers identify the hotel that best meets their needs based on Utell selections. It is obvious from this example that the prime motivation is to simplify the travel agent’s task in matching supply and demand in order to “help increase reservations and revenue.” This classification system is based on an American trade publication which itself does not refer to the star system, which is only one of the various systems in use in the USA where neither the American Hotel and Lodging Association (AH&LA) nor the federal government is involved in hotel classification. This is generally left to automobile or petrochemical-related interests. Hotel Industry - The Role of Branding The major international hotel chains focus far more on defining and positioning their brands than on hotel classification per se (e.g., star or other ratings) as granted by national hotel associations or other bodies. According to the country, properties managed by these chains will be classified according to the local or national scheme operating in the country in which the properties are located if this is mandatory or considered beneficial. However, rather than focusing exclusively on the quantitative and qualitative criteria displayed by individual properties, for brands, the customer is the key focus. Brands are generally defined in terms of price tier (e.g., Luxury, Upper scale, Mid-market, Economy/Budget) with specific target customers in view -individual business travellers, individual leisure travellers, Meetings, Incentive, Conference and Event (MICE) travel, group leisure travel etc. Branding also takes into account the location and the type of market in which the property is located - urban, suburban, airport, leisure destinations, gateway cities and major metropolitan areas. An interesting example of this is given by Marriott International’s brand reference chart. Each brand is defined in terms of price position, types of markets, brand essence, brand positioning, target customers and customer value proposition (also listing hotel benefits and features). Marriott Hotels, for instance are

targeted principally at Upper-Upscale Frequent Business Travellers. A detailed customer profile is then used as the basis for defining and positioning the brand in relation to the company’s other brands, and in relation to competition. The following gives some (but not all) of the features listed - and illustrates how customer-centric this approach is. (Note that Hotel benefits and Features, i.e. qualitative and quantitative criteria, are used specifically to support the Customer Value Proposition.) Marriott International - Marriott Hotels Brand Upper-Upscale Frequent Business Travellers Target Customer • “Grounded Achievers”: travellers focused on productivity and accomplishment, looking for predictable/consistent hotel experiences and genuine caring service Price Tier • Quality Brand Positioning • “For grounded achievers who value dependable familiarity” Brand Essence • “Confidence for people going places” Customer Value Proposition • “Helps you achieve your business objectives” • “Helps you Relax and recharge for the next day” etc Hotel Benefits and Features • Well-lit desks with large workspace, task lighting, ergonomic seating and easy access to electrical and data ports • One in-hotel contact for all needs • Express check-out • Complimentary in-room coffee/tea Focusing on the customer’s lifestyle and needs, the idea is to enhance the customer’s overall experience and gratify his sense of identity. Travel Industry - Tour Operators The hotel classification systems devised and run by national hotel associations and/or government authorities are not necessarily used by travel professionals, particularly when they are dealing with clients from outside the market where the accommodation is provided. It is well known that the major Tour Operators assess prospective hotels according to their own criteria and then provide their own description in their promotional material. Reproduced below are very general descriptions given by some of the major tour operators in the UK as to what their classifications mean. In this case, First Choice is the most specific. First Choice • Basic, comfortable, budget ranged • Standard popular accommodation. These hotels normally feature a selection of public areas including a restaurant • Large, modern or well-established accommodation with a wide range of facilities • High standards of comfort and service The company points out that “Accommodation of similar ratings, but in different countries, cannot always be meaningfully compared.” Thomson Holidays Thomson T ratings are based on our annual appraisals and customers’ views taken from the end-ofseason Customer Satisfaction Questionnaires. Hotels and apartment? are rated from “2T” for no-frills, good value accommodation to “5T” for more comfort and a wider range of facilities. To a very few of our best hotels, we award a Blue Ribbon classification. These are internationally renowned luxury hotels which offer an exceptional standard of comfort. There may be some differences between accommodation that shares the same T rating category. This is where our T-plus rating can be a useful extra guide. Airtours

The “A” ratings are awarded by specially trained Airtours staff, based on such criteria as the public area furnishings, food and drink outlets, room and leisure facilities and service. They range from AA for simple accommodation to AAAAA offering the highest quality and level of service. Thomas Cook The universal ratings system is based on the views (at the time of publication) of senior managers both in the UK and overseas. As can be seen, none of these are particularly objective, but this information at least provides some insight into how the tour operators go about rating accommodation. Travel Industry - Hotel Guides The Official Hotel Guide (OHG)-USA: This Guide is widely recognized by travel agents as a comprehensive and reliable source of information on hotels around the world. The Official Hotel Guide (OHG) provides comprehensive, in depth profiles of 29,000 hotels and resorts worldwide. For over 38 years, travel professionals have relied on its unique classification system and unbiased profiles to help them successfully match their clients to the right hotel. Its rich content has made it the hotel directory that travel professionals pay hundreds of dollars to subscribe to year after year. NorthStar, parent company of OHG, has now incorporated OHG into its Hotel and Travel Index which it claims is the industry’s leading print and online hotel information source for travel professionals with 79,000 hotels online. Views of Main Stakeholders (a) National Tourism Administrations (NTAs) and the World Tourism Organization (WTO) Since 1988 WTO ceased to be engaged in harmonizing hotel classification standards region-wise and worldwide, partly due to the lack of coordinated and clear approach in favour of hotel classification by its Government Members and partly in response to the negative view on government intervention in this area by its Affiliate (private sector) Members representing the hotel industry. On an individual basis, however, both governments and private consultants have never ceased to approach the Organization and its Secretariat to ask for “WTO hotel classification”, fielding sectoral support missions and technical cooperation to establish classification in respective countries and regions (at the time of preparing this report, a WTO-sponsored mission is taking place in Maldives), or at least for recommending WTO-trusted experts to do this job. The Secretariat has also taken note of such projects taking place without WTO having been consulted as an intermediary. As a result, WTO has never “freed itself” from hotel classification and over the years has sent dozens of missions and consultants to interested countries and regions to do hotel and related classification, but without defining common “WTO standards” for such missions and consultants. It has been seen through this experience that, certainly, States are sovereign and that it is legitimate for their governments represented by NTAs to seek classification and that they need international referents and support in this effort. Their objectives appear to be similar to those sought by the private sector, first of all to ensure fair competition in the hotel industry, also to provide for “transparency at first sight” for the consumer. Trade related aspects of classification have also become important for the national hotel industry, especially in developing countries where private and government investors have made important investments and great sacrifices to upgrade their hotel facilities and now expect to be fairly remunerated for this effort while observing that differences in their favour with the attributes of the same category establishments in the tourism sending countries appear to be widening. Reference to unequivocal internationally-recognized standards can therefore help them defend their economic interests when it comes to negotiating contracts with wholesale tour operators. From the WTO perspective, the lack of common understanding of hotel classification standards has also led to confusing quality aspects of the supply of hotel services (largely responding to the general question of HOW they are supplied) with physical and quantitative aspects of hotel establishments (required to respond to the question of WHAT) which normally intervene in classifications, while both aspects are important for competition. This converging approach can be seen, for example, in CEN (European Committee for Standardization) standard EN ISO 18513-2000 followed by ISO, while WTO experience, also expressed in the WTO definition of quality in tourism as well as national experience, such as Spanish ICTE, shows that attribution of a hotel establishment to a given category level does not imply an

automatic attainment of quality criteria, although the higher the category, the higher the quality potential of the establishment. These considerations suggest that an international agreement on the meaning and guidance on hotel classification could satisfy the various demands and constitute a service to Governments, the private sector, consumers and the international community at large. (b) Hotel Industry-National Hotel Association Involvement in Classification Within the hotel industry, views can diverge diametrically on the need (or not) for a national classification scheme. Two classic examples are provided by the national hotel associations of Israel and Denmark, the former having abandoned classification, while the latter has adopted it after operating without classification for a number of years. The Hotel Industry in Israel -12 years without Classification or Grading (Information provided by Abraham Rosental, Director-General, Israel Hotel Association-IHA) In April 1992, the system of grading hotels according to stars was cancelled and no other official system has taken its place. Today, twelve years later, IHA can evaluate if the decision to cancel the grading system proved itself correct or not, if the “great damage to tourism to Israel”, which many in the tourism industry predicted, came true, or if perhaps the goals of cancellation were realized. In order to determine what happened since then, it is necessary to take into consideration the situation of hotels before the government cancelled the regulations for grading hotels, the situation today and expectations for the future. Background (i) Government involvement: The rationale behind the government grading system was to give official information on the standard of hotels in the country and to control the criteria for grading according to the star system. But in reality, from the 300 or so hotels in Israel, some 60 of them did not have star grading at all. They were published under the classification as “not yet graded”, “not recommended”, holiday villages, camping grounds, apartment hotels, and so on. The official information concerning their level did not exist at all. The rest of the hotels were grouped into 6 grades mainly in the 3-4 and 5 star categories. Therefore, most if the hotels were concentrated in total; into three standards of grading. For instance, there were about 80 hotels in the 4 star category and it was obvious to all that there were great differences among them and it was not possible to ascertain much about a specific hotel in a similar large group. The grading of part of the hotels did not reflect the reality. There were hotels which, having received their high grade, lowered their standards during the years and it was difficult, if not downright impossible to change their grade. Additional difficulties in grading were discovered also in comparisons between city hotels and holiday hotels, new hotels and old hotels, small and large hotels and between regular hotels and apartment hotels and suite hotels. The grading of a hotel created certain expectations from the client. A great part of the complaints received about hotels were in the style of “this is not the service of a hotel graded X stars.... Who gave the hotel the stars...” etc.... (ii) Travel agent reaction: The situation was worsened by travel agents who published tour packages to Israel in the old and known manner of “overnight in a 4 star hotel in Jerusalem...”. These travel agents did not promise a specific hotel, or certain level of services - they only promised to give the client a hotel of a certain grade and nothing more. (iii) Hotel reaction: When there are many hotels with the same grade, it is clear that there is a very good 4 star hotel whose rates are expensive and there is a bad 4 star hotel whose rates are cheap. In fact, there have been many cases in which travel agents ordered the cheaper hotels for their clients... however, they stood by their promise to supply a 4 star hotel, but the once who suffered where the clients themselves who thought that this was the level of hotels in Israel. A situation was created whereby hotels used to sell their grading and not their diverse and various services. The grade influenced the rates and it was acceptable, of course, that a higher graded hotel would receive a higher rate. As a result of this, there was a fear that lower graded hotels would not make any special effort - because in any case they would not get anything for

their efforts, while hotels of higher grades also will not try improve themselves since their grades are solid and go on forever. Healthy Competition With the cancellation of the grading, the new name of the game is competition. Each hotel must establish itself from the aspect of the product, the service, publicity and marketing. The Name of the Game is the Name That is to say, that which determines now is the name of the hotel - what does it supply, what services does it give and what is its real level. In short, does it have a good name or a bad name in the market? Indeed, with the cancellation of grading, we have witnessed a wave of renovations by hotels. Hotels began to publicize themselves more and in particular to publicize their services and their amenities which they offer their clients. They started to be concerned about their good name and understood that this would bring clients. This healthy competition became a regular method of operation. Moreover, wholesalers abroad began to sell hotels and not grades. Israeli agents “were forced” to become better acquainted with hotels in the country and to know what they were selling - no longer to be satisfied with knowledge of the grade of the hotel alone. Hotels entered into intensive competition, the power of the market did its work and stabilized the hotels in the country according to actual levels. Hotels aspire to improve themselves diligently in order to put themselves in better standing in the hotel market. The Hotel Industry is no longer frozen and conservative. Other Forms of Classification In addition, readers must remember that there exists a worldwide hotel guide called OHG, which is kept by most travel agents in the world. This voluminous guide grades hotels in the world and is considered the most trustworthy among travel agents. The large tourism wholesalers in the world (TUI, Thompson, Neckerman, etc.) grade the hotels that they sell by themselves. A potential client in Germany who takes a “TUI: prospect in his hands, for instance, knows with certainty which level hotel he can expect. We are in the era of the internet and the huge store of information available to the user. For most hotels in Israel, there are today, independent sites with a lot of information, pictures and details describing the hotels’ services and amenities. There are more than 42,000 hotel rooms in Israel, 26,000 of them about 60 per cent belong to internationally known chains. IHA are sure that a potential tourist well appreciates the difference between a “Crowne Plaza” hotel room and a “Days Inn” hotel room and he doesn’t need the grading information. Hotel Classification in Denmark (Information provided by HORESTA Denmark, the Danish Hotel Association) 1. Background Prior to 1997, there was no hotel classification system in Denmark. The Danish Tourist Board had produced an official accommodation guide for the country but it had not rated the hotels listed in it. The guide included only basic information. Reading through this information, the consumer had sufficient information to guide his/her choice of hotel. There was no monitoring or assessment of facilities listed in the guide. 2. Hotel Industry Reaction The hotel industry in Denmark was historically opposed to the introduction of an official scheme. The Danish Hotel Association - HORESTA Denmark - had a definite policy opposing “official, compulsory classification systems.” The Association felt that such systems left the way open to government intervention and gave government the opportunity to impose tariff levels and to control pricing. The industry was aware that users such as tour operators and consumers expressed a need for classification systems. However, such systems were dependent on the criteria requirements behind the grades and on the types of control and monitoring involved. 3. Travel Industry Reaction As there was no classification system in Denmark, tour operators in general had their “own” system. All the grading was done by the individual operators themselves.

4. Danish Tourist Board Reaction Originally, the Danish Tourist Board did not plan to introduce a classification system because: • Such a system was not considered necessary. • The Board could not afford to implement a system. • The Danish Hotel Association was opposed to official classification system and would fiercely oppose any attempt to introduce such a scheme in the country. • The travel industry was at that time implementing its own schemes which it felt were ore reliable and trustworthy. The country’s accommodation sector had very high standards in both facilities and service and it was common opinion that there was no need to introduce a classification system at that time. 5. Current Situation HORESTA introduced the new Hotel Classification System in Denmark on 14 May 1996 and approved the classification of member hotels by the star scheme. This scheme is reserved for HORESTA members. All Danish hotels associated with HORESTA which have at least 8 rooms are classified on a scale ranging from 0-5 stars. The classification scheme is based upon objective criteria, i.e., the presence or absence or a wide range of facilities and service. The number of stars is therefore not indicative of subjective features such as atmosphere, quality of food and service, location or view. The Danish Tourist Board welcomed this new classification scheme, firstly, because such a scheme had long been called for by both customers and tour operators; secondly, because experience from abroad showed that a star classification scheme was a tool for improving hotel standards. This was a quality improvement that was crucial if Danish hotels were to hold their own in the increasingly competitive international tourist market. 6. Why a Star-rating? Everywhere in the world guests are accustomed to inquire about hotels in terms of the number of stars. Even though the criteria vary from one country to the another, a national classification nevertheless offers customers greater opp9rtunity of finding a hotel which conforms to the standard desired, thereby avoiding the wrong choice of hotel -something which is disagreeable for both parties. The most important objective for HORESTA was to satisfy their customers’ wishes as well as they can. Moreover, experience from other countries showed that in many instances classification was a useful aid for a hotel manager is interested in improving his/her product. With the criteria and inspection report in hand it is easier to make improvements precisely where guests will gain most from them. 8. Role of the Classification Board • Lays down the criteria according to which the classification will be undertaken • Ensures that these criteria are consistently adapted to developments taking place in the world • Has the initiative of discussing alterations to criteria and taking decisions about such alterations 9. What Does the Classification Scheme Cost? HORESTA contributes financially to the establishment of the scheme. Running the classification scheme will subsequently be paid for by the hotels, according to the following criteria: • Hotels with less than 20 rooms/apartments • Hotels with at least 20 rooms/apartments • Annual price rate • Annual extra charge per room/apartments These charges, to be paid by quarterly instalments, were instituted as of March 1997. 10. Five Categories A prerequisite for classification is that the hotel is deemed to have reached an overall satisfactory standard of cleanliness and maintenance. The HORESTA classification scheme is not based on an assessment of the hotels, but is a recording of actual conditions. If “Hotel Garni” is displayed on the sign or listed here on www.danishhotels.dk, it means that the hotel restaurant usually only serves breakfast. A small selection of the more than 100 criteria is shown below:

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All rooms have at least a hand-basin with hot and cold running water. There is at least one bathroom and toilet per 10 rooms. • Telephone box, or suitable sound-proofing for a communal telephone. At least 20 per cent of the rooms have private bath/shower and toilet. • All rooms have private bath/shower and toilet, as well as telephone, TV, radio and writing desk. • Comfortable chairs in the rooms. TV with international channels and film channel or in-house video service. Modem connection in at least 10 per cent of the rooms. Round-the-clock reception, a la carte restaurant and bar. Mini-bar in all rooms, or round-the-clock room service with refreshments. • Luxurious interior decor. Rooms with safebox and some form of air-conditioning - with suites available. Modem connection in all rooms. Room service until 11 pm for meals. Indoor swimming pool, or fitness centre with professional staff. Large selection of toilet articles, etc. Hotels fulfilling a number of specified requirements concerning meeting facilities can apply for the designation ‘Hotel and Conference Centre’. As far as holiday centres are concerned, a special set of criteria was drawn up in close collaboration with the ‘Association of Holiday Centres in Denmark.’ These describe both the facilities available and the activities on offer. 11. What the Classification Does Not Say... The aim of the classification scheme is to provide guests with an immediate overview of the hotel’s general and objectively recorded standard as regards facilities and services. It is not designed to provide a qualitative or subjective evaluation. Certain types of information are not covered by the classification, which is why sensible marketing on the part of the hotel ought to contain such information. This can be indicated with the aid of symbols, text, photographs or a combination of all three. Regional Classification Schemes 1. Towards a Nordic Classification Scheme? Sweden Opts for the Danish Model In March 2003, after lengthy consultations with representatives of hotel chains, cities/destinations, distributors and various consumer organizations, the Swedish Hotel and Restaurant Association (SHR) took the decision to classify Swedish hotels that are members of the Association. For the time being, this is on a voluntary basis. In principle, SHR has adopted the Danish scheme, with certain adjustments to suit Swedish conditions and the requirements of certain key players on the Swedish market. It will also use the Danish website as a model, specifically in terms of data flow. The classification process started in Stockholm and the Gothenburg area and is gradually being extended to cover Member hotels throughout the country. It is anticipated that by late 2004 all SHR members, some 1000 hotels, will be graded. To do this, SHR has recruited a staff of four people to run the scheme and carry out the inspections. Costs will be covered by the hotels on a no profit/no loss basis. The government is covering the introductory cost in order get the scheme launched, thus enabling SHR to reduce the level of financial risk involved. So far, the system is being rolled out successfully, with key players backing the project. However, some hoteliers still have strong reservations about classification. SHR believes the timing is right and that the website model will offer a distinct competitive advantage to members. Both Norway and Finland are closely following developments in Sweden. Ultimately, the vision is to establish a Nordic classification system common to all the players in the region. (Information provided by the Swedish Hotel & Restaurant Association) 2. Adapting the Swiss Hotel Association (SHA) System to Other Countries? In 1979 SHA introduced a hotel classification system which was the fist and only private one of its kind in the world. It is based on self-assessment by the hotelier which is subsequently reviewed by one of SHA’s five regional committees. Following comprehensive overhauls in 1985, 1989 and 1994, the SHA hotel classification scheme underwent its fourth review in 2000. The new standards give hoteliers the option of applying for a maximum of three specialization categories (e.g. Family, Historic, Golf, Congress Health Hotel) as well as an optional Seal of Quality qualification, in recognition of the fact that the quality of individual hotels has steadily increased over the years. Reviews are undertaken every five years to allow for periodic reclassification well received by SHA members, despite the substantial investment involved.

The SHA system is used in Switzerland by the Canton Ticino Tourist Office (for classifying hotels which are not SHA members) and has been adopted at the international level by Germany, Austria, various North Italian provinces. South Tyrol and Trinidad and Tobago. HOTREC is studying the system as a discussion basis for further projects at the European level. 3. The Association of South East Asian Nations (ASEAN) Starting in 1976, the ten States Member of the ASEAN (Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic Republic, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam) have developed comprehensive programmes and plans of actions on cooperation in tourism. Among the different activities included under these programmes and plans in favour of ASEAN cooperation in tourism, the establishment of a common hotel classification scheme is under consideration. 4. The Economic Community of West African States (ECOWAS) ECOWAS, which groups fifteen countries (Benin, Burkina Faso, Cabo Verde, Cote d’lvoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo) has established a programme of cooperation in the tourism sector which focuses on three areas, namely: Promotion and marketing of tourism products; Facilitation and Harmonization of regulations applicable to tourism activities and the hotel industry. With regard to hotel classification, at its 45th session (Lome, Togo, 5 December 1999), the Council of ECOWAS Ministers adopted regulations on proposed standards for classification of hotels, motels and guest inns in the sub-region, taking into account those drafted and proposed by WTO for the African region in 1984. ECOWAS has however introduced in its proposed standards new elements, such as minimum ceiling standards, billing and payments rules, insurance requirements and services entrances. A workshop on the implementation of this harmonized hotel classification system was jointly organized by ECOWAS and WTO in Dakar, Senegal, in July 2001. Participants in this workshop have recommended to ECOWAS Member States to establish their respective national classification committees, in order to take responsibility for classification of hotels and the setting up of inspection teams in each state, based on the standards as approved in 1999 by the Council of Ministers. Participants also agreed that the ECOWAS Secretariat should take responsibility for sourcing of the funds necessary to meet the classification training and human resource development requirements for the implementation of the aforementioned regulations between 2002 and 2003. Review of Graphical Symbols - Stars, Diamonds and Other Crown Jewels A variety of graphical symbols are used in the hotel and lodging industry throughout the world. In the USA, both the American Automobile Association (AAA) and the petrochemical company Mobil provide information on hotel and lodging facilities, rated according to their own system. 1. Mobil “Star” Ratings • A Mobil One-Star Lodging Establishment is a limited service Hotel/Motel/Inn that is considered a clean, comfortable and reliable establishment. • A Mobil Two-Star Lodging Establishment is a Hotel/ Resort/Inn that is considered a clean, comfortable and reliable establishment, but also has expanded amenities, such as a full-service Restaurant on the property. • A Mobil Three-Star Lodging Establishment is a Hotel/ Resort/Inn which is well-appointed, with a full-service Restaurant and expanded amenities, such as, but not limited to: fitness centre, golf course, tennis courts, 24-hour room service, and optional turndown service. • A Mobil Four-Star Lodging Establishment is a Hotel/ Resort/Inn which provides a luxury experience with expanded amenities in a distinctive environment. Services may include, but are not limited to: automatic turndown service, 24 hour room service, and valet parking. • A Mobil Five-Star Lodging Establishment provides consistently superlative service in an exceptionally distinctive luxury environment with expanded services. Attention to detail is evident throughout the Hotel/ Resort/Inn from the bed linens to staff uniforms. Lodging Criteria and Expectations The following criteria are suggested—criteria of what a guest can generally expect at each star level. They are not individually mandated nor are they limited to those items listed below. These are merely a representative sampling of the hundreds of points covered during our inspection process. Additionally, at each level the lodging establishment is required to meet or exceed the requirements of the previous star

rating. For example, a Two-Star hotel meets the criteria expectations of a Two-Star hotel as well as the One-Star hotel. A Three-Star hotel meets the criteria expectations of a Three-Star hotel, a Two-Star hotel and One-Star hotel, and so forth. 2. American Automobile Association (AAA) “Diamond” ratings (a) One Diamond: These establishments typically appeal to the budget-minded traveller. They provide essential, no-frills accommodations. They meet the basic requirements pertaining to comfort, cleanliness and hospitality. (b) Two Diamond: These establishments appeal to the traveller seeking more than the basic accommodations. There are modest enhancements to the overall physical attributes, design elements and amenities of the facility typically at a moderate price. (c) Three Diamond: These establishments appeal to the traveller with comprehensive needs. Properties are multifaceted with a distinguished style, including marked upgrades in the quality of physical attributes, amenities and level of comfort provided. (d) Four Diamond: These establishments are upscale in all areas. Accommodations are progressively more refined and stylish. The physical attributes reflect an obvious enhanced level of quality throughout. The fundamental hallmarks at this level include an extensive array of amenities combined with a high degree of hospitality, service and attention to detail. (e) Five Diamond: These establishments reflect the characteristics of the ultimate in luxury and sophistication. Accommodations are first class. The physical attributes are extraordinary in every manner. The fundamental hallmarks at this level are to meticulously serve and exceed all guest expectations while maintaining an impeccable standard of excellence. Many personalized services and amenities enhance an unmatched level of comfort. Both AAA and Mobil award ratings on a scale of 1 to 5 (5 being the highest rating-signifying the absolute ultimate in service, luxury, atmosphere and price). Both organizations conduct annual on-site physical inspections and both provide inspections, evaluations and rating free of charge to hotels. AAA overhauls its ratings standards about every five years and invites industry representatives to comment on them before issuing the final version; while Mobil does not disclose detailed criteria to hotels or provide them with any feedback. AAA is currently implementing a major revision of standards for its 2005 awards to be announced in the autumn of 2004. This revision was delayed by the events of 11 September 2001. 3. Mexico favours “Stars and Diamonds” Cancun, Mexico - 2 September 1999 - During the XXV Tianguis in Acapuico, Mexico’s Secretary of Tourism, presented the new Mexican hotel rating classification, called “Stars and Diamonds”. This system is the result of several years of extensive research, and has integrated criteria from various sources like AAA, Mobil, Michelin, Small Luxury Hotels, Relais et Chateaux, The Leading Hotels of the World and Spain’s ITQ2000, among others. “Stars and Diamonds” has been sponsored by the Mexican Hotel Association, as well as the Mexican Chain Hotels Association and approved by the Ministry of Tourism. This classification is voluntary and will be based on a certification by an independent board. It will consider, on the one side, the quality of a hotel (basically the room), which will be rated with stars, and on the other side, the quality of its services and staff, to be rated in diamonds. This certification will be renewed every year after a site inspection. 4. United Kingdom Seeks to Harmonise Three Systems Information provided by the British Hospitality Association - BHA There are new, harmonized, quality standards for hotels under a unified system agreed between the two major motoring organizations - the Automobile Association (AA) and the Royal Automobile Club (RAC), and the English Tourist Board (Scotland and Wales will have slight variances with these standards). Quality standards will be signified with the award of ‘Stars’. The minimum number of stars is one and the maximum is five. There is no legal compulsion for hotels to seek quality recognition, although they are subject to local controls and licensing. Requirements for the granting of stars, crowns etc. can be found inside the cover of the AA and RAC Hotel Guides. These guides can generally be found in the Information Section of local libraries.

Hotel Classification (Stars) (a) One Star Hotels: Hotels in this classification are likely to be small and independently owned, with a family atmosphere. Services may be provided by the owner and family on an informal basis. There may be a limited range of facilities and meals may be fairly simple. Lunch, for example, may not be served. Some bedrooms may not have en suite bath/shower rooms. Maintenance, cleanliness and comfort should, however, always be of an acceptable standard. (b) Two Star Hotels: In this classification hotels will typically be small to medium sized and offer more extensive facilities than at the one star level. Some business hotels come into the two star classification and guests can expect comfortable, well equipped, overnight accommodation, usually with an en-suite bath/shower room. Reception and other staff will aim for a more professional presentation that at the one star level, and offer a wider range of straightforward services, including food and drink. (c) Three Star Hotels: At this level, hotels are usually of a size to support higher staffing levels, and a significantly greater quality and range of facilities than at the lower star classifications. Reception and the other public rooms will be more spacious and the restaurant will normally also cater for non-residents. All bedrooms will have fully en suite bath and shower rooms and offer a good standard of comfort and equipment, such as a hair dryer, direct dial telephone, toiletries in the bathroom. Some room service can be expected, and some provision for business travellers. (d) Four Star Hotels: Expectations at this level include a degree of luxury as well as quality in the furnishings, decor and equipment, in every area of the hotel. Bedrooms will also usually offer more space than at the lower star levels, and well designed, co-ordinated furnishings and decor. The en-suite bathrooms will have both bath and fixed shower. There will be a high enough ratio of staff to guests to provide services like porterage, 24-hour room service, laundry and drycleaning. The restaurant will demonstrate a serious approach to its cuisine. (e) Five Star Hotels: Here you should find spacious and luxurious accommodation throughout the hotel, matching the best international standards. Interior design should impress with its quality and attention to detail, comfort and elegance. Furnishings should be immaculate. Services should be formal, well supervised and flawless in attention to guests’ needs, without being intrusive. The restaurant will demonstrate a high level of technical skill, producing dishes to the highest international standards. Staff will be knowledgeable, helpful, well versed in all aspects of customer care, combining efficiency with courtesy. Guest House Classification (Diamonds) The Diamond awards assess guest accommodation at five levels of quality, from one Diamond at the simplest, to 5 Diamonds at the luxury end of the spectrum. Terminology 1. WTO Thesaurus on Tourism and Leisure Activities Due to the considerable growth worldwide in the volume of information on tourism activity and at the same time the sizeable increase in automated documentation systems regarding this sector, the World Tourism Organization (WTO) set itself the task of creating a structured multilingual tool to facilitate indexing and bibliographical search into tourism and allied fields: The Thesaurus on Tourism and Leisure Activities. This linguistic instrument was developed between 1996 and 1999 - by the means of an effective partnership between the WTO Secretariat - and the Secretariat of State for Tourism of France through its Tourism Directorate. The Thesaurus - which was initially established as a specific documentation language to help search for information relating to tourism activities - can be also used as a guide to tourism terminology as well as for the standardization and normalization of a common indexation and retrieval language, at the international level. Its basic framework is made up of semantic fields, which include terms, definitions and relations linking the terms to each other. The 8,185 terms thus selected are distributed over 20 fields representing tourism activity. Field 08 concerns Accommodation and its main related aspects, i.e. Accommodation Capacity; Holiday Accommodation; Youth Accommodation; Rural Accommodation; Hotel Trade and Other Means of Accommodation.

The first edition (French-English-Spanish) of the Thesaurus was published in 2001 and the Italian version in 2003. The Croatian and Portuguese versions of the Thesaurus was published in 2004. The objective set for this linguistic tool during 2004-2005, is to provide updated on line editions and also expand it to other languages. 2. WTO Tourism Legislation Database (LEXTOUR) As from mid-November 2003, the WTO Documentation Centre launched the Tourism Legislation Database - LEXTOUR. This database has been designed to act as a referral system facilitating via the WTO Website (www.world-tourism.org), direct access through links to external websites, databases and information servers on tourism legislative data produced and distributed by authoritative sources, such as national parliaments, central government bodies (including national tourism administrations -NTAs), professional associations, universities, etc. Presently, some three hundred information systems have been identified in more than 130 countries. A number of webservers recorded in LEXTOUR (especially those administrated by NTAs) provide references to and/or full text of legislative and regulatory instruments governing tourism accommodation and, in particular, hotels and similar establishments. CEN-ISO After many years of work, investigation and broad industry consultation both at the European and international levels the CEN work in this area was completed with the publication in January 2001 of the European and International Standard on Tourism Services - Hotels and other types of tourism accommodation -Terminology (prEN ISO 18513). This was released as an official ISO publication in 2003, described by ISO in the following terms: This is a dictionary of core terms for the tourist industry, meaning that when one person uses a term, the others anywhere in the world know exactly what is being described and what they can expect. ISO 18513 can serve as a reference for the explanations given in travel brochures or in automatic booking systems; in business-to-business communications; in definitions given in tourist statistics; or consumer advisory services, to avoid misunderstandings when tourist offers are provided; and for interpretation in legal conflicts. Conclusions Synthesis of findings It is obvious from this study, based on a survey of both the public and private sectors, that not only is the situation complex - but that the solutions are just as complicated. 1. Classification by Other Entities First and foremost, it should be noted that the study does not attempt to do more than refer briefly to classification standards or criteria used by consumer bodies or travel professionals e.g.: • Consumer guides (Michelin, RAC, AA etc.) • Global Distribution Systems (GDS) (Amadeus, Galileo, Sabre etc.) • Computer Reservation Systems (CRS) and brokers • GSM codification used by computers and telephone technology in cars • Major voluntary chains and consortia • Major hotel chains • Major hotel franchisors • Tour Operators • ISO (International Organization for Standardization) It would also be useful to take a look at furnished rentals, i.e., neither hotels nor resorts, which form a large share of the holiday rental market. These are often subject to the same rules and regulations as regular private rentals, rather than those applying to tourist accommodation. In addition to all these classification standards or criteria, others are laid down by governments, professional bodies or private enterprises. 2. Consumer-driven? One point is obvious - all these approaches claim to be for the benefit of the consumer. Yet consumers are very rarely consulted even though many organizations claim to be acting on their behalf.

Here one fundamental difference can be noted between the public and private sectors. When such standards and criteria are laid down by governments, they tend to remain in force for years at a time, are infrequently checked and rarely updated to meet changes in fashion and consumer taste or take account of changes in destinations and markets. In this respect, the private sector is much quicker at responding to demand, as instanced by such developments as timeshare, resorts, villas providing traditional hotel services etc. Similarly, the criteria set out in private-sector consumer guides are much more responsive to consumer and market demand. Many surveys show that consumer choice is governed first and foremost by price and destination, rather than by classification systems that are so complex that the consumer is either unaware of them or unable to decipher them. In fact, where the public sector is concerned, government interest in having a classification system is often prompted by the need to organize the domestic market, obtain statistics and assess competition from neighbouring countries/destinations. 3. Summing up In the light of recent events such as 9/11, SARS, Mad Cow disease and Legionnaire’s disease, ensuring minimum standards for safety and hygiene should obviously fall to governments. As most of the other aspects of classification are basically commercial, or market-driven, this could be a first consideration guiding the classification debate. The two notions, destination, whether country or region, and purpose of travel (business, leisure, etc.) are fundamental. As noted in the report, Europe is currently considering the feasibility of an EU classification system; similar investigations are underway within ASEAN (Association of South East Asian Nations); in the Nordic countries and in the Middle East; while Central African states have expressed interest in some such system. 4. Key Considerations 1. Private sector requirement: consumer information—There is strong consumer demand for better and more transparent information on both the products and destinations on offer. This implies the consistent use of a given and recognized terminology. It also raises the problem of the language(s) in which the information is made available. On the positive side, the diversity of information available can also be considered an advantage. 2. Public sector responsibility: Hygiene and safety— Government concern should focus more on ensuring hygiene and personal safety than on the commercial aspects of classification. 3. Methodology—It would be advisable to devise a methodology providing those states wishing to set up a national or regional classification scheme with the necessary tools to do so. The point here is to provide a systematic way of taking into account the cultural differences between states in terms of service and facilities according to destinations, regions and purpose of travel. To be sustainable, tourism must be able to consolidate its diversity, not seek uniformity. Without these intermediary stages, any international classification system would run the risk of being irrelevant and therefore inefficient, especially as it could necessarily only be voluntary. In the long run, this would end up merely creating more confusion.

Hospitality Marketing

Hospitality means kindness in welcoming strangers or guests. The word comes from the Latin hospes, meaning guest, and developed into hospice, a place of shelter for travellers. These days, the services (or products) offered to the modem traveller by hospitality establishments can cater for every human comfort. The hospitality business is a massive industry encompassing all forms of transport, tourism, accommodation, eating, drinking, entertainment, recreation and activities. It is the world’s largest employer of people and a vast consumer of physical” resources. Some countries depend almost entirely on tourism and business travel and the consequent use that visitors make of the country’s hospitality facilities. A new project, factory or real estate development can be a huge boost to the prosperity of a city or region, involving finance, the production of a wide range of materials and the employment of large numbers of people. The influx of work extends to the increased sale of food, cars and consumer goods, etc., as the wage earners spend their earnings. This is called the multiplier effect. An increase in tourism has the same multiplier effect, which is why it is so important. The provision of tourist facilities and hospitality establishments for a city or region is called its infrastructure. The market demand for hospitality in a city or region will determine the extent of its infrastructure and therefore how many hotels, budget lodges, tourist resorts, restaurants, special interest parks, etc. are required. The demand for hospitality may change for reasons of government action, weather, business booms and busts, tourism fashions, special events, festivals, building projects or simply increased money and availability. In the hospitality industry, marketing is a term often used when referring to selling and advertising. Effective marketing requires planning from the initial conception of a product right through to its delivery to the customer and thereafter to the retention of the customer. So, whereas selling and advertising are the noticeable aspects of marketing, they are only part of a total planning process. Marketing is as old as civilization. It is the origin of business. It started with simple bartering and then evolved into the centralized exchange process of a town market. Before long, trader—the exchange of goods and services for money—began between cities and countries. This resulted in large numbers of merchants venturing to distant places, across oceans and continents in search of new markets and opportunities for trade. Towns, roads, sea routes, train lines and air routes have resulted from trade requiring the movement of goods to markets and for buyers to get to the markets. Empire building and many wars have been brought about by nations and corporations greedy for bigger markets and/or access to markets denied to them by trading nations protecting their own markets. The growth of hospitality has always been tied to the expansion of business, tourism and travel, and is arguably the oldest professional activity. Providing travellers with a place to stay and eat is mentioned in

the earliest writings of people, and the concept of a hotel (public house or inn) pre-dates the Bible. In fact, the Egyptians, Greeks and Romans built pleasure and tourist resorts which rivalled today’s massive complexes in style and grandeur, if not in modern appliances. Civilization mainly functions as a consequence of trade and marketing. The successors to the traders or merchants of the past who searched for and found solutions to people’s needs and wants are now called marketers. In the last 150 years, the process of either providing services or developing goods that can be manufactured and sold for profit has become a sophisticated business practice referred to as ‘marketing’. Most markets don’t just happen, they are brought into being by those who understand how people think. Good marketers have an appreciation of the fact that most people want to improve their way of life, and create products and services which help them to achieve that. Economic, political and environmental change can quickly affect this volatile industry. Suddenly, there can be either an under-supply or oversupply of facilities. The challenge for marketers is to meet each development and maintain a viable customer base. With the exception of 1991 and 1986, the total number of overseas visitors to the UK rose steadily between 1980 and 1990. The overall decline in visitors in 1986 was largely attributable to a 25 per cent fall in numbers from North America, who feared Arab reprisals due to the Libyan bombing. In addition, the nuclear disaster at Chernobyl raised fears of a nuclear fallout in Europe. A similar decline occurred in 1991 when the Gulf War and the recession in the USA caused the number of American visitors to the UK to fall by 22 per cent. As a result, 1986 and 1991 were times when there was an extreme over-supply of facilities. During 1991 the average room occupancy achieved by UK hotels was 54 per cent. While the recession was a disaster for most of the hospitality industry, it created a golden opportunity for budget hotels. The limited facilities they offered were of less concern to travellers than the very attractive price which stood, in 1995, at £30-£35 for room only. As a result, in less than a decade the budget market has become the fastest-growing hotel sector in the UK. From virtually no purpose-built budget accommodation in the mid-1980s, the UK now boasts nearly 300, with a further 160 units expected by 1997. Regular, average room occupancy levels are approximately 80 per cent. These two examples show that investment planning should be selective to growth areas in tourism and that the hospitality industry must be realistic about the sudden swings in demand which can and do occur. It is a very dynamic business and every decade witnesses a shift in market demand for varying types of accommodation and products. In the 1950s and 1960s formal dining was provided mostly by the grander, traditional hotels and restaurants. It was expensive and consequently only accessible to a wealthy minority. In the last thirty years, lifestyles have changed from eating out being an exception to being the norm, embracing the widest range of restaurants and cuisines. Nowadays, the majority of the population have learned to enjoy the pleasures of dining out. Currently, nearly every nationality’s food is represented in major cities. Even rural and coastal towns can usually boast a range of regional and ethnic restaurant outlets, serving quality food and offering a fair selection of wines. There has been a steady shift in preference from formal to casual and lower priced eating out for several decades. This trend accelerated with the 1990s recession. As a consequence, during the 1990s new trends in travel, tourism and accommodation requirements have emerged. As the changes continue, the study of the hospitality industry, as always, has to be based on the reasons why people travel, why certain destinations are preferred and why certain types of accommodation and hospitality will be in demand. Some of the main terms used in marketing require definition. A market is a place of trade, or a group of people who have common needs and wants. Needs are basic human requirements such as food, shelter, transport, money, security and sex. Wants are the individual ways in which people prefer to satisfy their needs. For example, someone may need a vehicle to get to work and use for recreation, but they will prefer or want a particular type and brand of car. Some may want a bicycle or a motor bike. For a hospitality business, a market is a group of people who require a place to stay, eat or drink. Because not everyone wants the same solution to their need for a product, there are many submarkets, and products are developed which satisfy the requirements of each of these sub-markets. These submarkets are termed market segments.The size of a market is measured by the total number of people who want a particular type of product or service to satisfy their needs. This is called market demand. A coffee shop in a remote village, for example, would find that its market would be small and therefore there

would be limited demand for its services. The differences in the wants and needs of each market segment may be the result of where people live, their age, how they live, the size of their families, how much money they have to spend, their lifestyle preferences, what they want to achieve in life, peer group pressure or their attitudes towards the way a product performs or functions. The understanding of these differences is part of the planning process called market analysis, and the process of measuring the differences is covered by demographics and psychodynamics or psychographics. The hospitality industry consists of a large number of different types of business, with each one having its own means of producing income. The main types of businesses in the category of hospitality are hotels, self-catering accommodation, guest houses, restaurants, pubs and bars and tourist resorts. Each style of establishment has one thing in common—they all add value to their business activity by providing a place for guests and giving service in exchange for a fee. The difference between what it costs the hospitality establishment to provide the place and the service, and the fee received in return, is called profit. Bedrooms, bars, restaurants, room service, leisure facilities and valet service, etc. are called ‘products’ or ‘outlets’ by the industry. Each product or outlet is expected to contribute to the hotel’s income, which is why they can also be referred to as ‘profit-earning centres’. A hotel and other tourist accommodation receives most of its income from its main product, which is room hire or accommodation, representing around 45 per cent of its total revenue. Currently, annual average room occupancy varies between around 60 per cent and 70 per cent depending on geographic location. That means, on average throughout the year, between 60 per cent and 70 per cent of available rooms should be occupied. Obviously, some months the percentage will be lower and other months it will be higher than the average. For those hotels which are dependent on the business traveller, fewer rooms will be occupied on weekends than on working days. One of the management’s marketing jobs therefore is to fill the down periods with customers to maintain the desired occupancy percentage average. They do this by offering special-value packages, weekend rates and holiday package rates. They also seek accommodation business from conventions, seminars, conferences and groups. Providing rooms for guests requires a considerable investment by the owners of a property in the building, its facilities and fittings. This money is recovered over a period of time by including a fixed amount (called capital recovery) into the room rate. As well as providing a comfortable, often stylish property for guests to stay in, the hotel has to employ staff for cleaning, maintenance, reception, guest services and sales. In addition, it has to have people to manage and administrate. There are many sundry costs involved in the running of a hotel. These expenses, largely involving labour, are termed ‘general overheads’, and they too are incorporated as a percentage of the room rate. The amount which is charged for room rate, the end price to the guest, depends on three factors: (1) the perceived value to guests provided by the hotel’s property and services; (2) the market demand for hotel facilities and services prevailing at the time; (3) the intensity of competition offered by other hotel operators. After room hire, the next highest income earner for hotels is food and beverage sales—that is, their restaurants, bars, coffee shops, room service and the food and beverage required for functions, conferences, etc. Industry figures indicate that food sales account for around 34 per cent and beverages for 14 per cent of most UK hotel incomes. Minor operating departments, including telephone calls made by guests, provide a further 5 per cent of income. Rentals for shops owned by a property, such as a hairdresser, florist, newsagent, clothes shop, etc., contribute 1 per cent. These businesses are often independent operators who gain customers from the hotel’s guests. The remaining 1 per cent of a hotel’s income is contributed by services paid by guests for such things as laundry, valet, leisure facilities, health club, etc., depending on the type of operation. Apart from the establishments which provide accommodation only, nearly every other type of hospitality business makes money from food and beverage sales. They buy raw materials, such as food produce and beverages, and add value by using labour to turn them into some form of value added product or service for sale to customers. As a general rule for food and beverage types of outlets, the cost of materials amounts to about a third of the sale price; the labour required to make and service the products amounts to another third; and the remaining third is gross profit. The gross profit has to allow for a percentage to cover either capital recovery or rent and the general overheads. What is left is net profit before tax.

Owners and managers of establishments endeavour to minimize the running costs of materials, labour, overheads, interest paid on capital and rent so that they can maximize the amount of profit. This requires a careful balance between what the customers are prepared to pay and how much it costs to provide the products. The marketing function has to take this balance into consideration. Its purpose is to find customers and meet their demands by providing products and services which have sufficient value to attract them to buy at the right price. There are many factors to consider in marketing planning. The principles involved are universal and can be adapted to almost any business or organizational activity. To continue with the analogy of marketing and a journey, there has to be a destination and a reason for going there. These are called marketing objectives. One has to prepare for the journey and find out as much as possible about what can be seen and enjoyed at the ultimate destination. It is wise to be prepared for any likely happening. This is market analysis. The means of getting there, the route to be taken and how the problems of travel can be overcome are called strategies. Strategies are designed to achieve objectives. Marketing planning is a series of steps which make use of procedures and disciplines to direct one’s thinking so that all the available information is examined before making a decision on the best strategies to implement. The acronym ORGANISATION is an easy way of remembering the steps involved in the strategic planning process of marketing. O Orientation. What is the business about? What is its mission? A motive of making money. If it doesn’t make money it won’t survive, so making money is simply saying ‘surviving’. A mission statement must describe the areas of activity in which it intends to operate, which services or products it intends to provide and which needs and wants of the market it proposes to satisfy. R Research. Who needs or wants the business and its products? One can never have enough information about the market in which the business intends to operate. A study of the people Who comprise the market and its segments is mandatory. G Gather data. It is essential to know what is happening in the market place. Much of this information can be obtained from sales figures, market share, customer preferences, competition, etc. A Analyse the data. Assess the market. When all the available information is sorted, a big picture of the market should emerge. Decisions can now be made. N Narrow the total market to target markets and select the most viable ones. I Identify what you want to achieve. Set marketing objectives, the engine or driving force for the entire marketing planning process. S Strategies. Decide the marketing mix strategies, the methods to be employed which will achieve the marketing objectives. The marketing mix strategies are People, Product, Positioning, Price, Place and Promotion. A Arrange distribution. Decide where and how you will sell the establishment and its products. T Tactics. Decide which tactics you will use to implement the strategies. Tactics are short-term strategies, the communication tools of marketing. I Implement the plan. Inform the market through promotions or tactical communications. O Observe the results. What changed as a result of the plan? More customers? A larger market share? Greater awareness? N Next. What changes, improvements or modifications to the plan are now necessary to make the marketing more effective? Marketing information systems Marketing information systems and the research principles on which they are based are not a specific component of the strategic plan, but they do establish the foundation for all strategic decisions and controls. Preparation of both the internal and environmental analyses is guided by principles of research. The purpose of the marketing information system is to provide marketing decision-makers with an organized and continuous flow of relevant marketing data and information.

Marketing research is the process by which the data or information is gathered. Sometimes, the research process will require that a formal research report be prepared, such as when there are problems or when a strategic change is being considered. Most often, it entails the regular and routine gathering of information to keep the marketing information system updated with relevant and actionable data and information.

An effective information and research program will not automatically make the best strategic or tactical choice obvious, but in most instances it will reduce the range of possible alternatives from thousands to some manageable number. A marketing information system and marketing research will bring an organized and logical process to bear on important questions, thereby lessening the number of decisions made by intuition, conjecture, or back-of-the-envelope calculations. Too often firms make decisions that are based on what management assumes the market wants, rather than making the necessary effort to assess the true need. If a hotel chain is considering a weekend package, the marketing department would first need to find out if there was adequate demand for the promotion and then what features would make the offering attractive to the target customer. A short survey of likely weekend customers could help design the package that will best match the customers’ demands and therefore increase the chances for the promotion’s success. A simple ranking of benefits from the customers’ perspective will increase the effectiveness of all promotional efforts. Often, a hotel will spend millions of dollars on renovations based on what a designer thinks should be done, rather than the customer. Besides supplying planning information for both the internal and environmental analyses and strategy formulation, research methodology is also used for monitoring current operational performance through employee surveys and various quantitative and qualitative measures of functional area performance: for example, establishing task standards and allowable variances for cooks, servers, housekeepers, bartenders, and so on. Additionally, research serves year-round functional needs, by helping departments keep up with current and future trends, such as the latest POS equipment, key-product pricing, new services or food items, innovative employee incentives, and new ideas for decor. Formal research efforts, such as a customer survey, can also be utilized as a control mechanism to alert the firm if the premise on which decisions were made has changed, and, if so, to allow the firm to determine if there was enough of a change to force a revision of the plan. Research will never replace experience and good judgment, but it does help marketing managers increase their percentage of successful strategic and tactical decisions through a more objective appraisal of the situation. Data, by definition, are not the basis for managerial decision-making. Data are only the unconnected pieces of knowledge or facts that may or may not be relevant to the business. When effectively arranged and organized, or characterized as relevant, the data are then classified as information-that is, data in a usable form. A business magazine is filled with data. Perhaps some of the data will be considered as information that can be used in the decision-making process. For example, the following individual pieces of data on a primary competitor may not mean much; but when considered together, they become information that could be used to surmise that the competitor may be expanding soon. • A primary competitor implemented a new training program, • The company had recently negotiated a large loan. • It is not experiencing financial difficulties. • It is modifying its menu or service mix. • The company has hired a new advertising agency. After managers analyze this information, based on their personal experience and knowledge, it becomes competitive intelligence-one of the major goals of research. The marketing information system (MKIS) is a combination of people, equipment, and procedures organized for the purpose of supporting the decision-making efforts of marketers. The basic concepts of the system are as follows: • Various pieces of data are gathered from the environment in which it operates-marketing intelligence or the environmental analysis, and from the company itself-the internal records or internal analysis. • It must be determined if primary data are required: if so, a formal research plan should be prepared to acquire it-marketing research. • The data are then analyzed to determine what is useful for decision-makers-information analysis.

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Data and information must then be made available in a usable form to decision-makers; if information is critical to any aspect of the business, it must be distributed immediately to the appropriate individuals or departments-distributing information. • Marketers must determine if additional information is necessary before decisions are madeassessing information needs. • The information is then used to make the essential marketing decisions-planning, execution or implementation, and control. The MKIS was primarily a manual task. Recently as with most everything in business, it became more computerized. In fact, some firms are beginning to use a relatively new process that originated in the decision information sciences: marketing decision support systems (MDSS). A decision support system (DSS) is defined as “an information-producing system aimed at a particular problem that a manager must solve and decisions that managers must make”. The sophistication of the different types of systems will vary with the complexity of the problem.

All decisions are essentially on a continuum between programmed (repetitive and routine decisions) and non-programmed. Consequently, a DSS could be used as a tool to gather data, analyze files, prepare reports, estimate decision consequences, propose decisions, or, in the case of highly programmed decisions, make decisions. The MDSS is made up of four components: a database, reports and displays, models, and analysis capabilities. The database should contain a broad variety of relevant data and be tied to other databases within the firm, and preferably to various outside services such as ABI Inform. Reports and displays can be qualitative, quantitative, or both. For example, through guided dialogue or prompts, the user would enter certain information, perhaps a competitor, then specify what types of information were desired on that competitor. The database would then assemble the information in narrative form or into tables or charts. Models are used to test marketing managers’ theories about certain actions, answer “what if” questions, and assist

in setting more realistic objectives. Analysis capabilities include the ability to relate available data to models, clarify relationships between them, perform statistical functions, and recommend courses of action. There are two essential differences between the marketing information system (MKIS) and the marketing decision support system (MDSS). The first is that the MDSS has the ability to convert raw data into information that the marketing manager can actually use for making decisions. The extent of the problem of information overload that occurs in many marketing information systems is greatly reduced in the MDSS. The necessary information is simply retrieved and then manipulated to help with the decisionhence the term decision support systems. An example of how a computer can help make a decision is the use of spreadsheet-based software packages with built-in formulas for marketing and financial analysis. If the marketing department wanted to find out what would happen to profits if they implemented a three-month advertising campaign, they could procure the information from the MDSS. Assume that the campaign has a cost of $30,000. Based on its characteristics and similarities with past campaigns, the program projects sales increases for the first three months of the campaign at $15,000, $18, 000, and $22,500, These figures would be entered in the spreadsheet along with the cost of the campaign to determine possible changes in profit, basically its initial viability. Potential residual sales increases for later months could also be entered to determine total estimated increases in profit from the campaign. The differences between current marketing expenditures, sales, and profits and the MDSS projection could be compared and presented in a table or graph format. The second difference is the cost of the MDSS. Although the use of the decision support system (DSS) concept will increase in the future, few current firms have the financial and human resources necessary to support DSS for the marketing function. Besides requiring additional software packages and training, it is necessary to set up a computerized marketing information center. As decision support systems become more user friendly, their use will increase. What will likely happen in the future with MDSS is essentially what happened during the evolution from electronic cash registers to computerized point-of-sale systems. Lower prices, simpler technology, reduced labor requirements, and fewer maintenance problems. During the evolution from the MKIS to the MDSS, the marketing information system will be the primary source of marketing information. The tasks necessary to support a marketing information system consists of the following: deciding which data are necessary; gathering, storing, and cataloging the data; and analyzing and communicating the data. The first step is to decide what data will be gathered and who will participate in the gathering process. Basic divisions of information needs are internal and environmental. Management must recognize that while every internal or environmental factor may not be of equal importance, each has the ability to positively or negatively affect the business’s future. Internal data. Each business should keep reasonably detailed records on what customers have purchased. When possible, it is helpful to be able to identify the customer by demographic or geographic data and, in the case of a hotel, to know how to contact them. To limit the amount of time required for gathering this information, it should be systematically integrated into routine record-keeping. Internal information could consist of overall sales [occupancy percentage, average daily revenue (ADR), and revenue per available room (REVPAR) for hotelsl; sales by day part (11 a.m. to 2 p.m., etc.), day, week, month, and year; individual product or service sales; customer comments (postmeeting or group reports for hotels); and reservations. Environmental data. Environmental data will include information related to political regulations, the economy, societal trends, technology, personnel, ecology, target customers, competitors, and suppliers and creditors. The key concerns are customers and competitors.

Customers. The majority of research in the hospitality industry deals with customers’ perceptions and purchase behaviors: essentially, what they have bought in the past, what they are currently buying, what they say they will buy in the future, and on what basis they are making each of these decisions. What customers say they will buy in the future will help management decide on new products or services and desired levels of performance, and will help verify other sources of information. Caution should be used when considering basing strategies on what people say they will do because many will often say one thing and do another. The inclination for many survey respondents is to answer questions either in a socially accepted manner, in a way that will psychologically place them in a higher social class, or in an attempt to impress the interviewer. They may also base their response on their psychological age. Teenagers tend to think of themselves as about five years older, young adults in their twenties are generally satisfied with their chronological age, adults between thirty and forty respond to questions as though they were about five to ten years younger, and adults over forty respond as if they were about ten to fifteen years younger, For example, a common twisting of the truth relates to the way people reply to questions about their physical activities. “I stay extremely active” may mean that the respondent bowls once a month or might possibly be a reference to activities from five or ten years ago. Other attempts to avoiday not reflect this. Customers may also stretch the truth reality include a customer saying “I always try to eat foods that are low in fat,” when, in fact, the actual diet m by responding that they like leg of lamb, when they may never have had the dish. Their response could be based on not wanting to appear uncultured. Assessing future desires through surveys may provide interesting information, but because of the aforementioned response problems, its accuracy is often questionable. The key limitation is that this information, by itself, may not yield actionable data about future trends. What people are currently buying and what they have bought in the past, especially the recent past, are far better indicators of what they may buy in the immediate future. The purchase behavior of the individual customer for each hotel or foodservice establishment and its competitors is the best and most accurate source of information. If the research question concerns adding services that the hotel is not offering, a survey with questions about preferences for various services could be taken from a sample of current customers. One problem similar to that discussed above is that customers commonly reply positively to questions about their desire for additional services. Most people want a greater selection, more comfort, greater convenience, and additional services. There are several methods of increasing the accuracy of this line of questioning. One is to tie costs to the additional benefits: “How much are you willing to pay for the

addition of a continental breakfast with your stay in our hotel?” “Is this worth an additional $5 per night?” Another is to have the respondent prioritize a series of potential changes by ranking them from 1 to 5, or however many there are in the list. This forces them to make choices between alternatives and allows for a reasonably accurate pool of target customer preferences. Another and possibly more accurate means of calculating what new features current customers desire is to find out what they are currently purchasing from various competitors. If a primary competitor increased sales after adding certain products or services, then, depending on intervening circumstances or variables, it may be worthwhile to consider the addition. Often, there are questions concerning the geographic base of data. National or regional syndicated surveys denoting trends should be considered in an analysis, but the closer the information is to the business, the greater its importance in the decisionmaking process. Large chains with a dispersed customer base can make suitable use of major syndicated poll results, such as that of the Gallup, Roper, and Yankelovich organizations. For example, national polls concerning the spending habits of children and teens would be beneficial to national fast-food chains, because they show likely trends in the behavior of their target customers. These same data would be only of passing interest to a local independent fast-food company. While they may provide insight into where societal shifts are occurring, the data are not reliable enough to use exclusively for planning major new strategies on a localized basis. Like the larger chains, the local fast-food operator must have data on the target customers located within its trade area, or at least within its community. The smaller the firm’s geographic territory the greater the requirement that data be gathered from that territory. This reduces the possibility of results that do not mirror the firm’s target market. The U.S. Census Bureau provides an enormous amount of data, but because of the way in which they are gathered, the data are of greater benefit for larger firms. Data are collected on two forms: a short form that goes to all households and includes only basic demographic data, and a long form that goes to a sample of households but is much more detailed. The data are available in both printed and electronic formats. In general, the larger the area being studied, the greater the detail of the Census Bureau’s reports. This means that firms focusing on limited trade areas must generally rely on other sources of data. There are various types of analysis for Census reports: demographic and expenditure data; examination of changes over time; differences between cities or areas; and customized reports, such as how increases in various age, occupation, or racial groups affect the overall expenditures for an area. Competitors. A business must first determine who the competitors are that most affect its sales, essentially, which businesses in the trade area can be viewed as alternatives by the target customers. These will be known as primary competitors. Strategic groups, secondary competitors, and industry competitors must also be identified and categorized. After the competing firms have been identified, a system must be set up to gain as much information as possible about them. An effective and thorough research program increases the likelihood of the company taking a proactive rather than a reactive or passive posture in dealing with the future. Past philosophies of planning have emphasized being prepared for change. In modern competition this is not good enough. A proactive response helps the company meet the cuttingedge needs of customers and gives it a time advantage over less astute and aggressive competitors. Secondary data. Most data are secondary data-data that already exist and were not gathered for the current need. The vast majority of research for the hospitality business will be secondary data. These data are usually the first sought because they are the quickest and least costly to gather. Their value is critical for the hospitality industry. If each time a company needed to do some type of research, the data had to be acquired firsthand, the decision process would quickly be bogged down and become excessively expensive. For example, if, instead of testing a particular service for a hotel, management had found an article detailing how the service was already tried and how successful or unsuccessful it was, much time and effort could be saved. Secondary data will come from two sources, internal and environmental (or external). Much of the information necessary for the internal analysis of a company can be collected from secondary sources, such as financial statements, operational policies, supplier files, employee records, and manager’s meeting notes. Some will need to be collected from primary sources, such as customer surveys. Environmental data should generally be gathered through industry journals, trade magazines, business magazines and newspapers, local newspapers, competitors’ annual reports, and various association and government reference books at the library. If secondary sources do not provide adequate information for the planning process, then a research plan must be prepared for the purpose of gathering primary data.

Primary data. If data are collected for a specific purpose, they are called primary data. Even the most successful companies must keep up with the current needs of their customers. Business volume may be good today, but consumer tastes can change rapidly. Primary data supply a business with the most current and relevant appraisal of a particular question. Common sources of research data include internal records; personal contacts of management and employees; trade journals and magazines; business journals and magazines; restaurant and hotel associations; chambers-of commerce; industry experts; electronic databases (CD-ROM); the U.S. Census; marketing research firms; and primary research, such as observation, experiments, and surveys. The vast majority of internal data will come from computerized information systems, such as point-of-sales (POS) systems for restaurants and property management systems (PMS) used in hotels. In addition to keeping track of sales in dollars and products and services sold, these systems can store data on customers, as well as provide operations and inventory controls. The most critical data should become a component of daily or periodic controls, such as the daily sales report or income statements. These would normally be internal data but could occasionally be environmental data, such as weather conditions, pay day, or other occurrences, such as a convention or sporting event, that caused an increase or decrease in sales. Intelligence gathering. Each business should have a research or intelligence gathering system that is executed throughout the year. One of the most important parameters for a firm’s research or intelligence gathering system is its consistency. The intelligence function cannot be expected to reach its potential for benefit until a substantial amount of information is accumulated. Granted, a considerable volume of information can be gathered in a week’s time, but only a historical record of events coupled with recent happenings will yield the best information and subsequent intelligence. The data search must be intensified during an approximate three month period prior to making any major changes in the strategic plan. This action serves two purposes. First, it obviously helps to accumulate more current data; and second, it focuses management’s conscious and subconscious thoughts on relevant issues in the environment. Necessitated by their dispersed customer base, hotels must focus on gathering data from the key origination cities supplying them with business. As the number of locations and sales volume increase for both restaurants and hotels, there is a corresponding need to include more information in the analysis, simply because more variables exist. Ideally, there should be a free flow of environmentally related information opportunities and threatsfrom all functional departments of the’ organization. Those individuals closest to the customer can prove invaluable in deciding on key factors to consider in the environmental analysis and in supplying appropriate information. Some hotels give each employee memo pads designed to record specific information about each customer. The information is then recorded in the hotel’s database, to be used in the future to allow the hotel to cater to guests’ desires without the guests having to ask. Each member of the management team should be assigned a key data source to review on a regular basis. For example, one manager may be responsible for Restaurant Business and the Wall Street journal, another may have Hotel Business and Business Week. This task has a multiple purpose: • It helps to gather data for competitive intelligence. • It is a form of continuing education for managers. • It improves teamwork because managers will begin to discuss their findings. • It gives managers a feeling of confidence in their personal ability and knowledge possibly its greatest benefit. Each manager should be given an area of responsibility for research that most relates to his/her experience and interest. For example, an older manager could be assigned the elderly target market; someone interested in quantitative data could be assigned the analysis of statistical data, competitors’ annual reports, or other sources of financial data; a female manager could be assigned societal trends related to women’s dining and travel habits; and a manager with a young family might be assigned the traveling and dining needs of his/her target group. Management personnel should also be assigned a set of primary and secondary competitors to visit throughout the year. Competitor analysis reports should be prepared on each visit. These visits will help the manager and the business keep a better perspective on what is going on in the industry and on their own company’s abilities compared with others competing for the same customer.

Nonmanagement personnel could be given specific assignments, such as to cut out all articles from a particular periodical or newspaper relating to restaurants or hotels, or simple research assignments for the library. For example, on a monthly basis, spend four hours at the library searching for articles concerning primary competitors. Some primary research for nonmanagement personnel should entail reporting on their experiences at local restaurants and, perhaps, hotels while on vacation. Storage and cataloging. The strategic marketing plan should serve as the framework for storage and cataloging marketing information. Essentially, each component of the plan should have a file folder to accumulate applicable data. The data are collected throughout the year and stored in the appropriate file. If possible, someone in the company should be responsible for compiling a manual or computerized database dedicated to internal and environmental data. This person does not need to be from management but must be cognizant of the specific information needs of the firm. If equipment, personnel skills, and time permit, key elements of the data could be entered into a computerized database. Although it is possible to store data on word processing software, database software is preferable. If key data or information is stored in a computerized database, questions of whether a piece of information is important enough to be entered can be simplified if management specifies by circling or highlighting the information. Since it may be difficult to take all records to a strategic planning meeting, data and information considered essential could be placed in the fact book and taken to the meeting. There are various options for the fact book. If there is not enough room to store all work in a single book, the book might be kept in sections covering certain topics. Separate fact books could be utilized for internal and environmental information. Since information will be needed both for planning purposes and for routine decisions, it should be organized for the convenience of users. Having information in designated files is helpful, but perhaps further subdividing is necessary. A competitor’s signing of a major convention may be hidden in a file unless a system is available to prioritize or cull critical events. Standardized reports or analysis forms can be used to help organize the data for analysis. On a regular basis, individuals can be assigned the task of summarizing data from specific sources. For example, whoever is assigned to gather intelligence on a particular primary competitor could also be responsible for summarizing relevant data on a monthly, quarterly, or semiannual basis. Analysis and communication. Without a systematic means of analyzing and communicating the data, much of the effort expended in gathering and cataloging will be wasted. Analysis consists of deciding which pieces of data are important and their accumulation in reports, charts, graphs, and statistical forms to allow management to discover any meaning. Even though actual planning meetings are not being held, discussions of key information that may influence strategies should be held on a regular basis. Internal information will obviously be discussed at regular manager’s meetings, but environmental data should also be a standard topic at each meeting. Since the majority of planning decisions will be based on the firm’s marketing information system, it should be viewed as a vital functional component. In larger firms, management information systems, of which marketing information systems are a vital subset, are being upgraded to functional staff positions. These managers have titles such as director of management information systems (MIS) or vice-president of MIS.

Marketing research process The American Marketing Association has defined marketing research as “the function that links an organization to its market through information. This information is used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve the understanding of marketing as a process. Marketing research specifies the information required to address these issues; designs the method for collecting information; manages and implements the data-collection process; interprets the results; and communicates the findings and their implications”.

Smaller independent hotels and restaurants may get by with a minimal amount of primary data or formal marketing research information. Their main focus would be on secondary data, such as internal records (statements of income, daily sales reports, and product mix reports), or data gathered by reading a few trade magazines and talking to customers. Most companies will have extensive research requirements, that is, information to increase the company’s knowledge of opportunities and threats and to support the conclusions made when selecting objectives and strategies. As marketers determine that additional data are necessary for decision-making, a proper marketing research project must be planned and implemented. The process provides a systematic approach to research

that ensures that the necessary data are gathered, that the data are gathered in a scientific manner, and that the gathered data are relevant to the decision-making process. Decide the purpose of the research and set research objectives. A clear understanding of the purpose of the research is needed to expedite the remainder of the research process. The purpose will most often be to gather data about critical problems or threats and about significant opportunities faced by the firm. Sometimes, the problem will be obvious, such as the sales of certain menu items being very low. Other times, the actual problem will be somewhat unclear, such as when overall sales are down. The most frequent research problems and opportunities are generally related to sales being less than desired or to the need to know more about customer behavior. The setting of research objectives (or research questions) helps to further clarify the problem or opportunity, to decide what information is needed by marketers to answer questions about the problem or opportunity, and to determine what type of research design is necessary. Generally, the number of objectives should be limited to about six to avoid attempting to answer too many questions with the same research project. An extremely long questionnaire, or one that includes questions on too many different topics, may limit the number of usable responses and consumers willing to complete the survey. Research objectives will usually be of a more general nature than those on the actual questionnaire. The following are typical objective oriented questions: 1. Why are sales low? 2. Are we missing any major opportunities? 3. What are the main reasons that target customers are eating at the restaurant for lunch/dinner? What are the main reasons that target customers are selecting our hotel? 4. At what other restaurants/ hotels are the business’s target customers dining/ staying? 5. Of the customers in the trade area, which segment is most likely to select a restaurant with a menu similar to ours? 6. What type of ambient sound is most desired by target customers? 7. Which restaurants /hotels have the friendliest employees? 8. When entering the doors of the business, what are the target customers’ expectations? 9. How important is speed of service/ check-in or check-out for target customers? 10. What is a fair price for a meal/room at our restaurant/ hotel? 11. Does the restaurant have an appropriate selection of appetizers, entrees, desserts, and beverages? Does the hotel have the services most desired by our guests? 12. Does the number of telephone sales calls per sales manager affect the number of rooms sold? 13. Which of our three recipes for Italian dressing do customers like most? 14. What effect does the addition of two vegetarian entrees have on the sale of other entrees? 15. What might happen if we raise our corporate rates from $90 to $95? 16. Will a new headline for print ads attract more attention than the one we now use? Design a research plan for gathering the information. Here, decisions on types of research, research continuity, collection methods, sampling plan, measurement scales, research instruments, and data requirements must be made. There are three basic types of research: exploratory, descriptive, and causal. The type of research to be implemented will depend in large part on the nature of the research objective. 1. Exploratory research: When it is necessary to better identify a problem, exploratory research is generally implemented. Many times, before research can be undertaken to gather specific data on an issue, information must be gathered to give researchers a clearer understanding of the issue. Answers to questions 1, 2, and 3 above could be viewed as requiring exploratory research. Sometimes exploratory research is thought of as a waste of time because it lengthens the time needed to complete the research project. In practice, exploratory research will shorten the time needed for the research project by increasing the focus of the remainder of the research and, in some cases, will provide insights showing that a formal research project is unnecessary. One useful research design is the two-stage approach, where the researcher first uses exploratory research to learn more about which issues are important, and then proceeds to descriptive research to learn more about the specific issues. Exploratory research is commonly

obtained through literature searches, discussions with individuals experienced on the subject, and focus group interviews. 2. Descriptive research: The usual purposes of descriptive research are to describe the potential for a product or service, the characteristics of various target markets, and the relationship of different variables. Answers to questions 4 through 12 above would call for descriptive research. Descriptive research could include identifying segmentation characteristics such as geographic, demographic, psychographic, and buying behavior (occasions for use, frequency, attributes sought) of heavy, medium, light, and non-users; identifying similar characteristics of competitors’ customers; determining the relationship of different variables; and making predictions regarding customers. 3. Casual approach: This type of research gathers evidence about a cause-andeffect relationship between variables. Answers to questions 13 through 16 above would require causal research. The relationship between the variables is generally considered to be asymmetrical: one variable (the independent variable) causes a change in another variable (the dependent variable). The simplest means of distinguishing between the two is the fact that the independent variable always precedes the dependent variable. In descriptive research, the decision-maker, based on experience and judgment, must make inferences about relationships between variables. Causal research yields considerably less ambiguous data because the inde-pendent variables (the cause), through experiment, are manipulated to show how they affect the dependent variable (the effect). It is used to measure which variables cause a change in what is being predicted, why the relationship exists, and the nature or degree of the relationship. When decision-makers have adequate experience in research and the hospitality industry, they can use the implicit causal model. This entails examining the relationships between variables from the descriptive research for cause-and-effect relationships. While this does not provide clear evidence of a relationship, it is often possible for the marketer to make reasonable assumptions that certain relationships exist. There are two categories related to continuity or time dimension. 1. Longitudinal studies. The same respondents (referred to as a panel) or different respondents (referred to as cohort groups) are questioned at different points in time to find out how their opinions and attitudes have changed. If a restaurant is considering some changes in its menu, management could use a longitudinal study (possibly a survey) to get a “before-and-after” picture of the menu change. Many hotels and restaurants have ongoing surveys that are tabulated every three months or so for a customer satisfaction index (CSI). 2. Cross-sectional studies. These studies are taken at one point in time, representing a snapshot of the opinion of a segment of the applicable population, For example, “What do people currently think of our products or services?,” “What menu items or services would customers like to see added?’” or “What level of importance do customers place on certain key attributes?” Since longitudinal studies that utilize extensive questionnaires may be expensive, the addition of questions concerning past behavior patterns and future expected patterns can be included in a cross-sectional study. 3. Collection methods. There are three primary types of collection methods used in the hospitality industry: observation, survey, and experiment. The decision as to which type to use will be based on the type of research being done, the firm’s research skills, and its ability to purchase outside research support. 4. Observation. This involves the recording of relevant characteristics or actions of customers. Observation makes it possible to gather data without going through the formality, expense, or time necessary for a survey. The chief advantages of observation are that it can be used to accurately gather data on present behavior, it takes little time to gather the data, and it is the least expensive method of collecting primary data. The main drawback is that simple observation cannot expose attitudes, motivations, and product knowledge that result in purchase behavior. It basically gathers data related to who, what, when, where, and how much, but it does not expose why the behavior occurred. Observation methods include the following:

•

Direct observation. This consists of passively watching or sometimes mingling with subjects to note or elicit relevant actions and to assess characteristics. It is relatively easy to determine what type of mood customers are in by observing their degree of satisfaction with service during and after check-in or check-out at a hotel, or during and after a meal in a restaurant. Customers’ behaviors can also be examined at competitors’ businesses. By seeing how customers dress and what types of cars they drive, researchers can assess whether they have white collar or blue collar jobs and, within broad categories, their income. Additionally, estimates can be made of their age or observations can be made of their family circumstances, such as couples, couples with children of a certain age, and single adults. • Contrived Observation. This occurs when the researcher becomes a participant in the relevant actions, such as staying at a competitor’s hotel and recording certain aspects of the experience. • Content Analysis. This is an analysis of any marketing phenomenon to categorize important characteristics such as emotions, humor or serious tone, colors, headlines, illustrations, or targeted audiences. • Physical trace measures. This includes the examination of actual behaviors. Because of the time involved and since the behavior may or may not be indicative of typical actions of the subject, it is not a popular method of observation research. Examples of this method including examining the garbage of subjects, walking by their cars to see or hear what radio stations they listen to, and noting wear on a floor to determine traffic patterns. By seeing how often customers finish their beverages and meals or ask for doggie bags, management could form opinions on food quality and portion sizes. • Behavior recording devices. These include various types of mechanical devices such as traffic counters, the people meter (used by A.C. Nielsen to record which television channel a subject is watching), video tape recorders, equipment that measures the subject’s galvanic response to certain stimuli, eye movement recorders that can determine what portion of a print ad catches a reader’s attention, and voice pitch analysis devices to note changes in emotions. Surveys. Surveys gather primary data by asking people questions about their knowledge, attitudes, preferences, motivations, and intended behavior. The primary purpose of the survey is to learn something about the larger population from which the survey sample has been drawn. Sometimes the gathered data are qualitatively analyzed, such as when assumptions are made after talking to individuals or groups. Individual interviews are sometimes termed depth interviews and have the purpose of examining the reasons for specific behaviors and attitudes-essentially determining why the respondent has acted in a certain way in the past and how this may or may not change in the future. Group or focus interviews are designed to gain insight into a situation by stimulating free-flowing exchanges between the interviewer and respondents. If the questions are statistically interpreted, whether by multivariate statistics determining the mean (average) or by the analysis is normally said to be quantitative. This helps explain what is happening and its frequency. Experiment. Experimental research designs are based on a cause-and-effect relationship between an independent variable and a dependent variable. Basically, the independent variable, such as advertising, causes a change in the dependent variable, usually sales. In the experiment, the researcher will normally manipulate one independent variable; such as raising prices during a certain time period but not during another, to see what effect the price increase (the independent variable) has on sales, customer counts, or guest nights (the dependent variable). A common problem with experimental research is that there will always be more than one independent variable that is causing a change in the dependent variable. If the experiment focuses on price resistance, the personalities and sales abilities of sales managers will influence customers’ reactions, as will competitors’ price changes during the experiment’s time period. For this reason, careful analysis is necessary before major decisions based on experimental research are made. There are two basic types of experiments used in business research: the laboratory experiment, done in an artificial setting, such as a booth for taste testing or a special hotel room set up specifically for the experiment, and the field experiment, where testing is done in a natural setting-the restaurant or hotel. Sampling plan. Before data can be gathered, the firm must decide who or what will be the target of the research. This is accomplished by selecting a sample, a group of elements chosen to represent the population that is being studied. The main reason that a sample is selected is that the alternative would be

to study the entire population, referred to as taking a census. Obviously, this would be too costly and take a considerable amount of time. A surprising reason for using a sample is that it will generally be more accurate than a census. This, occurs because the firm would need to hire more interviewers who would likely be less skilled, more supervisors for the interviewers, and more people to enter the data into the chosen research software program. The basic process for selecting a sample is as follows: 1. Identify the target population. The population is the aggregate of all elements in the study. Since the purpose of research is to learn more about a certain population, that population must be identified. If the population is not properly identified, then subsequent data collection and analysis will be of little value to decision-makers. The description of the target population should include the sampling elements, the sampling units, the area of coverage or extent, and a time period. Sampling elements are objects about which data are being sought. They will most likely be individuals but could also be families, businesses, products or services, time periods, or anything else that researchers desire to learn more about. The sampling unit is the relevant population from which the sample will be drawn. This unit would normally be the customers of a business, who could be further categorized, such as people of a certain age, income, occupation, gender, user status, or purchase behavior. In some cases there would be several stages to the selection of a sampling unit. For example, if a hotel desired research data on meeting planners working for Fortune 500 firms that have three or more 400-room-night meetings per year, there would be a three-stage sample: stage 1, Fortune 500 firms; stage 2, three or more major meetings per year; and stage 3, meeting planners. The most critical of the sampling units in this multi-stage progression is the final unit, referred to as the final sampling unit. The area of coverage or extent concerns the decision of how far-reaching the research study should be. This would include parameters such as instore, local, state, regional, national, and international. Area of coverage decisions will be based on the specific requirement of the study. If the purpose is to find out what people think about a product or service for one facility, an in-store survey may be adequate. When management wants to know what people in the immediate market think, then a local survey should be taken. For multi-unit chains, state, regional, or national samples must be used. Since hotels have a much broader trade area than that of restaurants, surveys should be taken in each community that supplies a significant percentage of the hotel’s business, or, at the minimum, in the hotel from each primary customer segment. The time period would indicate when the study should be made. If data are sought on buyer behavior on Sundays, then this would likely be the best day to gather the data. This might be expressed as May 7, 14, and 21 of 19XX. Other examples of the time period are during May of 19XX and May 1 through July 31, 19XX. 2. Identify the sampling frame. The sampling frame is a list of sampling units that will be used to acquire the sample. This could consist of telephone books, lists from a marketing company, lists of subscribers to a magazine or newspaper, or lists of registered voters, business owners, and association members. There are few lists that include all members of the population, so the researcher must determine which sampling frame will be most representative of the population. If there is a multi-stage sampling unit, as in the above example of the Fortune 500 firms, then there would need to be a separate sampling frame for each stage. 3. Determine the relevant sample size. The central issue in sample size is to be reasonably sure that the mean (average) of the sample is representative of the mean of the population. Generally, the question of having a large enough sample size is not a major concern, because most marketing studies contain sample sizes that are more than adequate to represent the population from which they were drawn. The sample size depends on six factors: 1. Statistical Theory. For many firms, the size of the sample will be determined by statistical analysis. While the formulas themselves are not complicated, the theoretical knowledge required to use them is beyond the scope of this book. In spite of the availability of statistical determination, the majority of sample size decisions are made based on the remaining five factors.

2.

The Number of Groups and Subgroups in the Sample. In most studies, there will be several targeted groups, such as seniors, singles, and various income classes, for which the data are being gathered. A rule of thumb is to have a minimum sample size of 100 for the largest target group, with remaining groups sampled proportionately For example, if a firm’s largest primary target group represented 40% of sales, then 100 surveys would be collected for this group. The remaining groups would require 150 surveys, for a total sample size of 250 (100 + 40 = 250, 250 - 100 = 150). If a group represented about 20% of sales, its sample size would be 50 (250 X 0.20 = 50). If there were groups that comprised less than 20% of total sales or customers, then the marketer would first determine if the size of the group warranted specific strategies and tactics and therefore survey information. If the answer is yes, then the sample from the small group would have to be large enough to gather an adequate number of responses. 3. Variability of respondents’ opinions. One of the most important factors in deciding on the size of the sample is the size of the population variance. If researchers feel that a high percentage of the sampling units think and act similarly, then the size of the sample could be quite small. As the number of different opinions on key issues increases, the sample size should also increase. 4. Budget constraints. If a firm had $5,000 budgeted for the study and the preparation of the questionnaire was $1,500, printing and collection of survey data was expected to cost $10 each, and the quantitative and qualitative analysis of the results were $1,500, then the maximum number of surveys would be 200 ($5,000 - $3;000 = 2,000 $10 = 200). 5. Importance of the study. If the desired data are critical to the future of the company, then a larger survey may be necessary. For issues of less importance, either a smaller sample size could be used or perhaps simply conducting individual or group interviews with a few people representative of the population would suftice. 6. Time constraints. If a firm is in dire need of the data, then a large study may not be feasible. If the research is part of a marketing plan and has been anticipated, then the question of the size of the sample would be more flexible. There are two different classes of sampling procedure: probability and non-probability sampling. 1. Probability sampling. In probability sampling, the size of the population is known, the population is clearly defined so that researchers can tell which sampling units belong to the population, and each element of the population has an equal or known chance of being selected. Random selection allows researchers to calculate the nature and extent of any biases in estimates, to estimate the sampling error, and to use various types of statistics to formulate conclusions about the study’s results. The most frequently used methods of probability sampling are simple random sampling, in which each element or respondent in the population is selected in some randomized manner; stratified sampling, in which the population is divided based on homogeneity within the groups and then elements of the groups are selected randomly (e.g., college students, business professionals, and retirees); and cluster sampling, in which the population is divided based on heterogeneity within the groups, one or more of the groups for the study are selected randomly, and then either all elements within a cluster or random samplings of the clusters are selected for the study. One purpose of cluster sampling is to lower the cost of the study by reducing the size of the sample and increasing the proximity of the elements. 2. Nonprobability sampling. The key difference between probability and nonprobability sampling is that with nonprobability sampling the selection of elements cannot be statistically projected to the population. While probability sampling is technically superior to nonprobability sampling, there are advantages to the latter. First, because of human error, careless implementation, and sampling and nonsampling errors, the goals of probability sampling may not be achieved. Because of these errors, the results of a carefully controlled nonprobability sample will often be as accurate as a probability sample. Second, if the objective of the research is only to gather data to learn more about a few specific issues, then nonprobability sampling may be suitable. Nonprobability sampling is generally adequate for most exploratory and sometimes descriptive research. Third, when time and cost are issues, nonprobability sampling may be the only alternative. The three primary types of nonprobability sampling are (1)

convenience sampling, in which researchers choose whomever they desire or the most expeditious source of survey participants to.be included in the sample; (2) judgment sampling, in which sample members are selected based on their knowledge, experience, or perceived value of their opinions on the subject; and (3) quota sampling, in which respondents are selected based on various demographic or other segmentation variables such as age, gender, race, income, personality, or group affiliation. For most research projects, especially major studies, the task of developing measurement scales will normally be assigned to a research specialist. When the task is less critical or will not require statistical interpretation, a marketer with a knowledge of the basic principles of measurement should be able to select a measurement scale. Although the measurement scale developed by a nonresearcher may not be adequate for many statistical inferences, it would likely be adequate for the purposes of the research project. Since the purpose of this book is not to teach statistical applications, only the basics of measurement will be reviewed. Measurement scaling is the procedure used to assign numbers to measure various attributes possessed by elements such as people, products, events, and businesses. The critical task is to . select the most appropriate measurement scale, one that gathers information that will help researchers obtain answers to research questions and achieve their objectives. The categories include nominal, ordinal, interval, and ratio scales. Each successive scale has the characteristics of the previous scale, plus more rigorous properties that can be utilized for additional statistical applications. Even so, the selection of a particular scale will be based on the information needs of the research study, not the ability of researchers to provide numerous statistical inferences. Nominal scales: These are used to divide one group into mutually exclusively subgroups for the purpose of categorization (e.g., Moslem, Jewish, Protestant, Catholic). Gender, race, religion, geographic areas, societal groups, occupations, housing status, and marital status are examples. There is no particular order or distance relationship that can be interpreted and there is no arithmetic origin. Because the responses do not indicate the amount of an attribute possessed by the element, the mode (the most frequently occurring response) is the only measure of central tendency that can be used. Individual frequency percentages can also be determined. Even though nominal scales are not compatible with most statistics, they are still quite valuable. In most surveys, attitudes of individual market segments are categorized with nominally scaled questions. Ordinal scales: These represent an order sequence, where successive responses on the scale express either a greater or lesser preference with no consideration of distance. If respondents were asked to rank their preference for five different hotels with 1 being the most preferred and 5 the least preferred, the responses would indicate only the order of their preference. There is no assumption of the distance between each response on the scale. Typical statistics are the mode, median, and frequency percentages. Interval scales: These possess the attributes of nominal and ordinal scales plus equal differences between response categories. The attributes of order and distance give researchers the ability to apply most desired statistical applications. The most frequently used interval scales are the Likert, semantic differential, constant sum, and purchase intent scales. One of the most effective and efficient measurement scales for assessing customer satisfaction is the semantic differential scale. It measures a person’s attitude toward an attribute (a variable) by providing a 3-11 point scale bounded by evaluative terms. The most commonly used scale categories are 5 and 7. The development process for the semantic differential scale involves the selection of bipolar adjectives that help describe some dimension of the attribute. The responses can be scored on a positive only number line (i.e., 1 through 5), or with a neutral center, such as -2, -1, 0, +1, and +2 (also, -3 to +3, and so on). It is important to vary the sides for positive and negative adjectives. This increases the accuracy of the data by reducing the possibility of a respondent checking off categories without reading them. A problem with varying the polarity of the responses is the increased difficulty of interpreting combined data. For example, if on a seven-point scale a hotel achieved a 5.9 rating for employee warmth (negative / positive polarity) and a 2.4 rating for courtesy (positive / negative polarity), the courtesy rating would need to be transposed to a 5.6 before overall scores could be analyzed. Although the majority of data, which primarily target customers’ preferences on critical attributes, can be obtained with the semantic differential scale, in some instances categorical (or nominal) scales (explained later) will be needed. Profile analysis is a method in which the semantic differential scale is used to present the research data graphically. Essentially, the mean responses for various scores are plotted and then compared. The

most common comparisons are between a firm and its primary competitors. Other comparisons could be between businesses of the same firm, different target customer groups, different time periods, and the difference between the business’s present standing and its ideal or benchmark position. Likert scale measures the degree of agreement or disagreement with various statements. It consists of a list of questions or statements to be measured and the evaluative part the measurement scale. The Likert scale is sometimes called a summated scale, because the scores for each individual can be added for a total score that can be compared to that of other respondents. Constant sum scale simply asks respondents to indicate their ratings for various items by dividing 100 points among them. Although it is sometimes questionable as to whether this is an ordinal or interval scale, for most research purposes it can be considered as interval. Generally, this scale would be interpreted by adding the scores for each hotel and then dividing the sum by the number of responses. The purchase intent scale attempts to measure a respondent’s inclination to make a certain purchase. Ratio scales: When the responses in the measurement scale consist of consecutive numbers, they can be recorded with a ratio scale. These have all the properties of interval scales plus the concept of an absolute zero point. This allows for the assumption that a response of 4 is not only two equal spaces from response 2 but also has twice the value. Examples include sales; market share; the number of menu items, hotels or restaurants, and customers; dollars or percentages spent on anything such as advertising, public relations, or food costs; counts of physical objects or events; and the age of each customer completing the survey. A hybrid ratio/nonminal measurement scale that is increasing in use is the magnitude estimation scale. Here, respondents are asked to agree or disagree with a certain characteristic of a sample element. Next, respondents express their level of agreement or disagreement with the answer by allocating up to 100 points to the question. Respondents must be informed that large numbers indicate strong agreement or disagreement, small numbers indicate moderate agreement or disagreement, and zero indicates a neutral position or opinion. While this type of question is highly valid for individual responses, the variation or wide range in individual responses makes the combination of results more difficult to interpret statistically. There are several areas that must be addressed before most scaling decisions are made. These include the number of categories, the inclusion of a neutral category, the number of favorable and unfavorable categories, and forcing a response. Number of categories: The key element in this decision is the ability of the respondent to discriminate between the various values. For several reasons, the most commonly used scale category is 5. One reason is that this scale number is relatively simple to interpret. Respondents rate items as “poor,” “fair,” “average,” “good,” or “excellent.” This means that, if they do not like the object being measured, the question is only whether they think it’s very bad or just below average. The opposite would be true if they liked the object. If they think it’s neither, they can rate it as neutral. Rating scales of 3 or 4 generally are not thought to have enough categories to allow for effective and worthwhile discrimination. It is impossible for the researcher to determine if a rating of 1 for a three-point scale represents very bad or just below average. A rating of 4 indicates marginal improvement but still retains some of the problems of the three-category rating; also, it does not have a neutral or average response. Additionally, as the number of possible responses goes up, so does the ambiguity and variability of the responses. For example, on a ten-point scale, how does the respondent measure the difference between a response (rating) of 7 or 8? Does an 8 equate with average (80 is an average grade in school) or a 5 or 6 (a score in the middle)? to allow for effective and worthwhile discrimination. It is impossible for the researcher to determine if a rating of 1 for the three-point scale represents very bad or just below average. Neutral category: If the scale is based on an odd number, there is usually a category for a neutral response. To respondents, this generally means that they feel the rating should be average. It could also indicate an inability to make a decision or ignorance about the question or object being measured. Using an even scale removes the neutral category and forces respondents to make a choice of either above or below average. The advantage to management of not using the neutral category is that it lets the business know where it stands, above or below ;average, and it gives management a tool to use as an motivator for themselves and employees. Number of favourable and unfavourable categories: The question of whether to use a balanced number of favorable and unfavorable categories or an unbalanced number depends on the likely responses. If customers typically rate various products or services favorably, then perhaps an unbalanced scale with a

more favorable response category would yield more actionable results. Instead of the balanced scale of “poor,” “fair,” “average,” “very good,” and “excellent,” an unbalanced unfavorable scale of “poor, “fair,” “good,” “very good,” and “excellent” would allow for more discrimination. A frequent research problem occurs when people, either out of ignorance or attempts to influence responses, use a four-point scale with three favorable response categories: for example, “fair,” “average,” “good,” and “excellent” or “fair,” “good,” “very good,” and “excellent.” Forcing a response: When a scale does not include a response such as “I don’t know” or “No opinion”, the researcher is forcing respondents to provide answers on a topic of which they may not have reasonable knowledge. If it is felt that there will be a reasonable number of respondents who cannot answer the question, then an unforced scale should be used. The use of the unforced scale will rarely influence survey results because the response is commonly viewed as if the respondent did not answer the question. Research instruments These include various behavior recording devices previously discussed in observational research and the most commonly used means of recording research information, the questionnaire. Questionnairs: The questionnaire is simply a set of questions asked of an individual, a respondent, with the purpose of gathering research data. The following outlines the basic process of developing a questionnaire: • Decide the purpose of the questionnaire. What is the company trying to find out? Common objectives are to find out what customers think about present product offerings, prices, and possible future offerings. Along with the purpose-related information, demographic data must be gathered to discover if various customer groups feel differently about a certain issue than other groups. • Develop possible questions that will help achieve the stated purpose. The questions allow researchers to make reasonably correct inferences about the research objectives. It is best to consider some type of exploratory research before preparing a questionnaire. Since the questionnaire must provide decision-makers with actionable data and information, asking the appropriate questions is imperative. Some of the most important considerations in deciding on specific questions and their order are as follows: 1. The questions should be stated in clear, precise, and understandable language. “Do you feel the impetuosity and verve of our servers are somewhat copious or reticent?” If the question is unclear, the answers will also be unclear. 2. Avoid double-barreled questions. This is asking respondents to rate two or more variables in one question. “How do you rate the room service and dining room service at the Hyatt? 1 2 3 4 5” 3. Adjust for “order bias.” If a respondent is asked to select his/her favorite item from a list, the order of the items in the list will influence the responses. To reduce this problem, alternate the order of the items on questionnaires. 4. Avoid loaded questions. Loaded questions influence the respondent to answer in a certain way For example, “How did you like our new shrimp gumbo?” would be better as “How would you rate our new shrimp gumbo?” 5. Anything that influences a respondent’s answers should be limited. For example, topics such as abortion, women’s rights, or increases in college tuition may cause heightened emotions in respondents, resulting in biased answers to other questions. For this reason, questions on controversial subjects should normally be placed toward the end of the questionnaire. Additionally, when possible, the company for which the survey is being taken should remain anonymous. This helps limit preconceived opinions of the company from influencing answers. An example would be a mall intercept survey to gather information on the firm’s and its competitor’s image and level of customer satisfaction. Interviewing people after a good or bad experience may not yield actionable data because of the likelihood that these people do not represent the population from which they were selected. Even so, the derived data could still be used for operational purposes.

6.

Often, marketers are concerned about people’s unwillingness to complete multi-page surveys. Experience has found that, except for “mall intercept interviews,” once a person commits to answering the questions, length does not significantly reduce response rates. To increase the chances of having respondents completing lengthy questionnaires, do not number each question. 7. Depending on the information sought, the format of questions can be structured, unstructured, open-ended, or closed-ended. (a) Structured. A formal list of questions is followed by the interviewer or included in the questionnaire. (b) Unstructured. The interviewer would be given explicit directions for the data sought but would let the respondent’s answers guide the process. Because of the wide variations in answers, this format requires an experienced interviewer and is rarely used exclusively. Like open-ended questions that follow, the results may be difficult to interpret statistically. (c) Open-ended. Respondents can answer these questions in any manner they choose. The purpose here is to learn as much as possible about customers’ preferences by broadening the allowable responses. However, because of the broad range of answers possible to questions such as “What are some of the reasons you stay at this hotel?” and “What are your five favorite restaurants?” using the data for statistical interpretation is sometimes difficult or time-consuming. (d) Closed-ended. Answers to these questions are limited to those included in the questionnaire. The purpose of this type of question is to locate specific answers that can be statistically tabulated and to make it easier for the respondent to record responses. 8. The interview should begin with an introduction and include questions to qualify the individual (sample element) as a participant in the survey. (a) Opening Statement. Since the respondent has taken personal time out of the day to do something with little perceived value or benefit to him/her, you will need an opening statement to reduce this perception. “We are trying to find out more about people’s likes and dislikes about staying at hotels. Could I please ask you a few questions?” (or, “Would you mind answering a few questions to help us serve you better?”) (b) Qualifying the Respondent. The first questions should help determine if the respondent is qualified to answer the remaining questions on the survey. If the respondent does not have a reasonable knowledge of the subject being surveyed, or if they are not from the desired target group, it would be best to go to the next respondent. Two common problems in this area are lack of knowledge-many people will not admit that they do not know something-and lack of recall/ memory-the respondent may have eaten at the restaurant or stayed at the hotel but too much time or too many experiences since that time have clouded his/her opinion. 9. The order of the questions should progress from easy-to-answer and nonpersonal to moredifficult-to-answer and personal. (a) Warm-up questions. The next group of questions should be warm-up questions that ask for general responses about the survey topic. Their purpose is to stimulate the respondent’s memory and to prepare the respondent psychologically for the more specific questions that will follow. It is like stretching before running. (b) Demographic questions. Questions on such subjects as age, education, income, type of work, and value of home will help identify and categorize respondents. Because of their personal nature, demographic questions should generally be asked last. Psychographic information, such as where the respondent shops, political affiliation, recreational activities, and hobbies, could also be included here. (c) Conclusion. Always end the survey with a sincere “Thank you!” (written or oral). 10. Consider the quality of the questions. This includes their validity reliability, pretesting, and revision. Data requirements

The primary requirements for assessing the quality of data are as follows: 1. Validity and reliability. The questions should meet the tests of validity—whether or not the questions measure what they are supposed to measure—and reliability—whether or not the responses can be replicated in the future. 2. Relevance. Whether relevance is measured stati-stically or by expertise or by common sense, the business must feel comfortable making decisions based on the data and derived information. Since most data are secondary, and possibly may have first been applied toward some other purpose, they should relate to the business’s situation and should be applicable to the task at hand. 3. Proper quanity. Because both secondary and primary data are relatively easy to gather, there is a tendency to report more than is needed. Years ago, a major problem of research was not having access to enough data. 4. Timeliness. Primary data are generally gathered for a specific purpose with associated time constraints. Therefore, the data should be gathered in a timely manner. 5. Proper cost. A small fortune can be spent gathering information. A major research request from a national research firm could easily cost $50,000 to $200,000 or more. Some firms will have planning staffs of ten or more employees to gather and analyze data. The key is that the money spent should have some relationship to the need. Management must decide subjectively on the importance of the decisions to be made, and on how much should be spent on secondary or primary data to improve the accuracy of those decisions. There are statistical formulas for calculating an approximate value of research, but even these are quite subjective in nature. 6. Management time. Managers need to keep up with the firm’s competitive environment. How much time is spent on this will vary depending on the volatility of the competitive environment, in particular, the company’s trade area, its customers, and the economy. Management personnel should set aside between 30 minutes and one hour per day for reviewing the various research sources. The traditional cup of coffee and the Wall Street journal are not a waste of time. It is a relaxing way to engage the mind for the day’s work and to see what major competitors are doing or to learn about strategies from other industries. Contact methods The three most commonly used contact methods are personal face-to-face contact with the respondent, sending a questionnaire through the mail, and contacting the respondent by telephone. Although the Internet is currently not a highly effective method of collecting survey information, its use will increase. The key problem now with an internet survey is that its use is concentrated into a small segment -of the population that is not generally representative of most hospitality business’s target customers. Additionally, this would be a type of convenience or nonprobability sample, since researchers cannot estimate the likelihood of one respondent being selected over another, In spite of these drawbacks, several chains and some independent operators are having a moderate success with the Internet, primarily with opinion polls of company and competitor’s products and services. Personnel contact: The face-to-face interview historically took place in the respondent’s home, Because of the expense, crime, time constraints, and new technologies, other survey methods have taken its place. The most visible replacement has been the mall-intercept interview, where employees of a marketing firm ask shoppers at a mall questions about a product or service. Occasionally, respondents are asked to view a commercial in order to solicit their opinion. One of the least costly means of accumulating primary research, and one of the most frequently used types of survey for the hospitality industry, is the selfadministered or in-store survey. Since it is generally completed immediately after the event to which the questions refer, its accuracy is usually superior to external surveys. Its limitations are that the number of questions must generally be kept to those fitting on a postcard-sized comment card, and that it is difficult to get a representative sampleoften only those who are very happy or very upset with their experience tend to complete the survey. A drawing for free meals or a free stay in the hotel can motivate a more dispersed sample. Another type of personal collection method in wide use in the hospitality industry is the focus group. A small group of respondents who have either dined at the restaurant or stayed at the hotel are gathered in a room to discuss their opinions of their experience. The focus interview normally uses open-ended questions

and an unstructured style. The interviewer will have a brief written questionnaire but will be given the freedom to guide the respondents to extract the greatest amount of information possible. Because of the unstructured nature of the questioning, the focus group should be recorded by audio or preferably by video equipment. Among the overall advantages of the personal contact method are that questions can be explained and a wider range of question formats is possible. Mail: Mail surveys are taken by mailing out a reasonably structured questionnaire to respondents and requesting that the completed questionnaire be sent back. Typical response rates vary with the type of information requested, the targeted sample, and incentives offered to participants, but the average response is about 10%. With attractive incentives, response rates of 50% or more are possible. Since the survey will be self-administered without the aid of an interviewer, questions must be easy to understand. As more syndicated marketing firms create special databases from which to extract custom mailing lists, sampling selection is becoming more accurate. For extensive survey questionnaires, a major advantage of mail surveys is that they are generally less expensive than other contact methods. Two forms of mail surveys that are increasing in popularity are mail panels, where a group of respondents, either for free or minimal pay, agree to complete a reasonable number of surveys, and diary surveys, where a record is kept of an individual’s visits to a hotel or restaurant. The response rate for these surveys will obviously be much higher than for standard mail surveys. The business must be careful not to use the same respondent for too long because there will be a tendency for the recording to become tiresome, thereby causing the respondent to simplify answers or write in the same answer each time. Telephone: Telephone surveys entail phoning respondents to ask them a series of questions. To simplify the process, most telephone interviews are conducted by means of a computer hooked up to a telephone (computer-assisted telephone interviewing—CATI). The computer is programmed to randomly select phone numbers to dial. The interviewer must first read specific directions for the interview and then ask the questions at a rapid pace to hold the attention of the respondent. The questions for telephone surveys are, by necessity, simple, since the respondent cannot remember long lists or more than one or two specific details. Because of the verbal contact with the interviewer, the response rate for telephone surveys tends to be high, between 60% and 80%. Two common problems of telephone surveys are that it is difficult to get respondents to answer questions concerning demographic variables such as income, race, and religion, and the tone of voice of the interviewer will often have an effect on the respondent’s answers and willingness to participate in or complete the survey Analysis of research data

Quantitative analysis of the results of the research are generally accomplished with either descriptive or inferential statistics. Descriptive statistics focus on an analysis of the distribution of values of a question, essentially summary measures for the data. The primary methods used to describe distribution are as follows: Location. Mean—average; median—midpoint of the distribution; and mode—the most frequently occurring value. Spread or dispersion. Variance-the average of the squared deviations—measures dispersion; standard deviation—the square root of the variance—improves measurement of dispersion by expressing deviations in their original units; range the difference between the smallest and largest scores in the distribution; and quartile analysis—a comparison between different quarters of the distribution. Shape. Kurtosis measures the distribution’s peakedness or flatness, which shows where scores tend to accumulate. Inferential statistics includes methods that allow researchers to test the significance of the difference between various sample statistics and corresponding population values through hypothesis testing. In hypothesis testing, various assumptions about a population are tested to determine whether they are equal to, greater than, or less than the population from which they were taken. Also included are various types of statistical analyses that attempt to explain the relationship between two or more variables. The accuracy quality of the analysis can be increased if quantitative support, such as trends in market share, sales, and profit are factored into statistical results. Interpretation of research data

Two simple methods of interpreting survey results are to determine the frequency and mean for each question. While the mean shows the average response, frequencies present the range of responses. The frequency is calculated by totaling the number of responses (173) and then dividing the number of responses for each category by this figure. The mean can be derived by multiplying the scale category (1, 2, 3, 4, and 5) by its respective scores or responses (5, 25, 42, 56, and 45), then dividing the sum of these products by the total number of responses for the question. A perceptual map can be developed using the mean responses for two related product attributes such as value and product quality, room rate and room quality (features and appearance), price and service quality, price/room rate and location, convention facilities and room rate, and service quality and product quality. Knowing the mean allows for comparisons with prior periods and with competitors’ scores. While management will find variable information from the analysis of means and frequencies (descriptive statistics) and higher-order statistics (inferential-primarily multiple regression), it is imperative that an overall measure or total score be established for the firm. This composite score is critical, because it is the most effective means of measuring and presenting the firm’s overall market position relative to its primary competitors. Performance scores for various categories of questions within the composite score, such as five questions about the guest’s experience at the front desk, can be totaled separately to provide functional departments with more specific assessment information. It would be nice if management could

simply add up the firm’s means for 20 or so various attributes to be compared with past surveys or with competitors. Unfortunately, this unweighted rating method is not valid, since each response has a lesser or greater influence on the firm’s actual position. Inetrpreting the mean response for quantitative categories: Often, there is a need to calculate or interpret the mean response for various research questions. This method would technically be applied only to interval and ordinal data. The mean response is interpreted using the midpoint assumption. Reporting the findings: Whether or not the research up to this point was performed by the firm’s research or marketing personnel or by outside researchers, the findings will normally be formally presented to management. If quantitative analysis beyond basic descriptive statistics was applied to the data, it should be explained thoroughly.

Marketing Analysis Market analysis is the information base upon which marketing planning decisions are made. Its purpose is to understand the dynamics of a market by segmenting it into convenient components so that it is possible to identify the opportunities that exist. In this way, improvements can be made to a property or its products. It is a detailed examination of the business environment in which a property operates, and has to be comprehensive, otherwise important developments can be overlooked to the detriment of the property’s sales and competitive position in the market. In the continuing search for improved sales performance, a property which is an aggressive marketer will use market analysis to give it direction on how its products can be marketed better and thereby attract new customers. As part of the process, it needs to constantly use market analysis to review and assess the market. This is because the internal and external factors affecting the patrons of an establishment are constantly changing as a result of competitive activities. Therefore market analysis should be an on-going process of assessment and re-evaluation of a property’s performance. This requires an information system so that there is a constant supply of vital information. In marketing analysis, the people forming the market are segmented into various categories. The market’s total size in financial terms and sales numbers is measured and market share figures are compared. The external and internal influences on the market are identified in search of any factors likely to affect the marketing mix strategies in the future.

The answers to each of the following questions need to be quantified, compared with previous years or periods, compared with industry averages and, if possible, compared with the competition. Most of this information will come from sales analysis, reservations records and customer surveys. 1. Market segments. Who is buying? What types of people are they? From where do the majority of guests and food and beverage patrons come? What products are they buying? How often and when are they buying? 2. Sales and profit analysis. What is the size of the customer base? What are the sales figures by numbers of unit sales? What are the sales figures in financial volume terms? Which products are being sold? Which products are returning a profit and which are not?

3.

Market share and product comparisons with competing establishments. Which establishments are doing well? Which opposition products are selling well? Why? Which segments of the market are they getting? Which market segments do they attract that would suit your property? 4. Market environment. What are the tourist attractions, business reasons or other reasons which are attracting hospitality business to the city or region? Who are these people and how are they categorized? In terms of districts, regions or countries, from where are they coming? Which mode of transport do they use to get there? Which motorways do they use, for instance? Are the facilities currently on offer by all the properties in the city or region meeting the customers’ needs? 5. External factors affecting the market. What government rules and regulations which are in existence or pending are affecting people’s purchase decisions for hospitality? What social values or behaviour trends are occurring which may influence events in the future? 6. Product appraisal. How does the property compare with the competition? ƒ How large is it? How many rooms? What is the composition of the rooms? How many seats in each food and beverage outlet? What are the other facilities, such as meeting rooms, function facilities, bars, business centre, car parking, etc.? ƒ What are the entertainment and leisure facilities provided by the property? How do they compare with other properties? ƒ Where is the property located and how convenient is it? ƒ What is the physical condition of the property, its equipment and facilities? ƒ What is the ambience of the property like and how is it positioned in people’s minds? The exciting part about market analysis is that it invariably reveals opportunities and therefore gives direction for marketing decisions. Naturally, it will also unveil unpalatable truths which must be faced and corrective action taken, Frequently, analysis will point to the need for more information. It is a lot of work to gather all the data, but let us repeat: in marketing you can never have enough appropriate information.

Because people are the core of the hospitality business, an essential part of market analysis is a thorough examination of the existing and potential customer base. There are many ways of segmenting a market to form a complete picture. All markets consist of buyers who differ from each other by their needs, what they want, how much they are prepared to pay and where they come from. For planning purposes they can be divided into demographic, geographic, psychographic and behavioural segments. Unsophisticated managers of establishments simply segment their customers into tourists and locals, or even ‘foreigners and regulars’. Common industry practice is to segment customers simply as holidaymakers, corporate business clients, groups, packages or FITS —Frequent Independent Travellers—which means they don’t fall into any of the former categories, and that often seems to be the limit of the managers’ concern. Their attitude is: ‘Why does it matter where they come from as long as they keep coming?’ Of course, that attitude is irresponsible and unprofessional. It does matter where customers come from, where they are travelling to and why they are visiting the area. No-one does anything without a reason, Marketing is about understanding those reasons and using the information to make better use of the opportunities those reasons represent so as to provide greater customer satisfaction and ultimately increased sales. Business segments: A clarification of business travel reveals the individual reasons for choice of hospitality. Each category will want different standards and levels of food and accommodation, depending on their occupation, income, lifestyle or position. The main segments are: • a Sales representative calling on company customers; • an executive, professional person or civil servant attending a meeting or conference; • a person or group attending a convention or training seminar;

•

an itinerant professional or trade person on an assignment for a limited period—a classification which could also include entertainers or sports persons. Pleasure segments: There is a large combination of factors which can cluster to form the pleasure segments of the market, including age, income, lifestyle, class, nationality, living mode and the customer’s means of transport. Some typical segments are: • people visiting a friend or relative (called the VFR market—Visiting Friends and Relatives); • honeymoon couples and lovers; • individual pleasure seekers who want to meet someone, play sport, take part in special events or enjoy the night life; • couples on holiday with a planned itinerary; • couples, or single people, with children of varying ages and stages; • package holidaymakers; • tour, coach, sporting or social groups. Every age group has its own needs. Young people aged between 18 and 24 have quite different requirements of hospitality from, say, older people aged between 55 and 65. Both groups need to eat and sleep, but they prefer to do both things in environments which have strongly contrasting styles. Gender changes people’s preferences. What a male thinks is an OK place to stay may not be a female’s idea of a suitable establishment. Family size changes people’s needs. A couple with three children will want a different style and size of accommodation from a young, single man. Income influences choice. What some people want can become severely modified by what they can afford. Occupation will also affect choice. For instance, the corporate business or professional person with an expense account will generally aim for a higher standard of facilities than a self-employed electrician. People from other countries often have distinct ideas on where they will feel most comfortable. The Hilton group, for example, has endeavoured to appeal to the large number of Japanese tourists and business persons by having bedrooms designed to Japanese specifications, offering a Japanese menu at breakfast and having an interpreter on staff. An odd effect of this seemingly good marketing strategy is that many Japanese report that they are disappointed by this concession. Social class segments: There are several ways of segmenting a market by social distinctions. The two most common forms are (1) demographic, which is subdividing the market by people’s ages, gender, occupation, ability to pay and place of origin; and (2) psychographic, which is subdividing people by their personality types, lifestyle aspirations and reasons for wanting a particular kind of hospitality experience. Classifications such as upper class, upper middle, lower middle, upper lower and lower are somewhat dated, but still remain useful. All socio-economic segments are of interest in marketing, depending as they do on people’s income, occupation, schooling, place of residence and standing in the community. Lifestyle segments: Psychographic or motivational segmentation is arguably a more exact form of segmentation because lifestyles are often the reason for choosing a particular hospitality experience. Lifestyle segments offer a marketer the opportunity to target plan more accurately to people’s needs and prepare a product mix which will be geared to their wants. Buying stage segments: Holidays and extended business trips are usually ‘considered purchases’, and there are various stages of readiness to purchase, ranging from being ‘aware’ of the property, to being ‘interested’ and then to being ‘ready to buy’ before people ultimately become customers. Each stage is a market segment and requires careful attention in hospitality marketing so that the transitions are smoothly handled by an establishment without loss of too many potential customers. ‘Benefits sought’ segments: There are many segments in this category arising from people who seek specific benefits from hospitality, such as their requirements for: • certain styles of accommodation (quiet, busy, popular, big, small, luxurious, budget, etc.); • types of meals (gourmet, regional fare, carvery, fast food, vegetarian, etc.); • locations (near to sea, views, shops, theatres, business, transport, etc.); • facilities (golf, pool, sauna, tennis, equestrian, etc.). Purchase cycle: Most products have markets which are cyclical, and this is especially the case With hospitality. There are those who have annual holidays and those for whom it is possible to have more than one holiday in a year. These are ‘seasonal’ or ‘habitual’ holidaymaker segments. There are even some

lucky ones who manage to holiday all year round. Business travel drops off significantly in July and August. What constitutes a holiday for people varies considerably, ranging from a camping trip to a world sightseeing tour staying at the largest and most expensive establishments. Types of travellers are grouped into segments depending upon their financial worth to a marketer. Business travellers are categorized according to their frequency of travel and labelled as either heavy, medium or light users. Airlines promote products to the ‘frequent flyer’ segment and offer incentives, such as the award of air miles, to attract their membership or custom. Similarly, large hotels target heavy user segments and offer discounts, room upgrading or special privileges to attract their patronage. Restaurants always pay special attention to ‘regulars’ and endeavour to cherish and nurture this customer base through loyalty award schemes and being responsive to their requests for special products or services. User segments:There are many with a ‘club’ mentality who regularly attend a bar, restaurant or hotel, etc., which they particularly like. They can also be dubbed a ‘loyal’ segment. Others have a routine of drinking or eating, but shift their loyalty from time to time. These are called ‘shifting loyals’. Switchers are the ones who have no sense of belonging to one establishment and constantly explore places for new experiences. Another large segment for the hospitality industry is the ‘celebratory’ or ‘special occasion’ segments—those people who use outside facilities for weddings, anniversaries, birthdays, reunions and a miscellany of other special occasion reasons. Price segments: Many people are forced to pay less, some pay less because they are careful with their money and there are those who ink that if it is expensive it must be good. Hospitality establishments will vary in the way they cater for all the different price segments in the market. Competing products: An easy form of segmentation is to label the people which each competitor mainly seems to attract and refer to that market by the competitor’s name. Thus we can have the ‘Sheraton’ market, the ‘Inter-Continental’ market and so on. Not all products compete in exactly the same way. For example, two budget lodges may be on opposite sides of a motorway with almost identical facilities. However, each will attract a different segment of the available passing traffic.

Where several establishments are similar, say, a group of four- and five-star hotels in a city, a simple way of market analysis is to divide the available customers in the market into ‘fors, againsts, indifferents and unawares’. • Those who are for an establishment are customers now, or likely to be soon. Many will pass on the good word and attract others. • Those who are against the establishment have been there and didn’t like it, and they are bad news because the chances are they will tell people they didn’t like their experience. • Those who are indifferent know about it but see no reason for trying it. They are not convinced and they are going elsewhere. • Those who are unaware simply haven’t got the message. They don’t have enough information. It is the percentages in each category which are important in this exercise. An establishment with a high ‘against’ percentage is in deep trouble. The place with a high ‘indifferent’ percentage is not competitive enough. It is not offering enough benefits. One of the main reasons for segmenting a market is because we are concerned with people’s minds, understanding what they need and want. It is what existing and potential customers know, think, feel and believe that has formed the market, so if we want to improve our products’ chances in the market place we must understand the mind-set of each market segment. All market segments have to be measured for their viability. Regional market segments are only significant if they have sufficient numbers to warrant special marketing considerations. Japanese, American and German tourists, for instance, are large segments of the total tourism market in the UK. People from the Falkland Islands are not. In a large city, some suburbs will deliver a greater number of customers than

others. In order to conserve the marketing effort, it is obviously wise to concentrate on the larger segments unless there is a specific reason for targeting specialized segments. The collection and analysis of sales data are the main ways of determining the trends of a business’s progression or regression. Sales figures are helpful in identifying weaknesses and strengths of products, geographic sales areas, sales representatives’ performance, agents’ activities, selling methods and advertising. Market share figures are necessary because these demonstrate how the business is doing by comparison with others in the same area of activity. Often in the hospitality industry these figures are shared, to the advantage of all concerned. If not, market share estimates have to be obtained by either market research, observation of supply deliveries or by doing regular customer counts. What is happening to and for the customer is the major concern of hospitality marketing. The reason for market analysis is to identify how well the various services of the property are being delivered. In the hospitality industry, service is everything. How is the customer being treated by the establishment, from initial contact through to paying the bill? Are the products performing to the standards required? More importantly, are the products meeting the expectations of the customers? Service is a measurable function. Not only does the establishment’s performance have to be measured, it also has to be compared with what the competition is doing. For example, Pizza Hut promoted that if the customer’s order did not arrive in ten minutes it was free! How would the average restaurant perform with that as an offer? Nine times out of ten, the sum total of the customers’ experiences over time will determine an establishment’s sales results and its market share. In a large hotel or holiday complex with many products or profit centres involved in producing a total result, each product in the mix has to be analysed to ascertain strengths and weaknesses. Government rules and regulations, taxation demands, trade and supplier considerations, etc., all impact on the industry. As part of the analysis, the measures taken by an establishment to meet such requirements must be assessed. Reactions to change are important. Compiling files of the opposition’s advertising, observing and reporting on their sales promotions, seeing their products in action and noticing customer reactions, builds a picture of comparative performances. A market analysis Is not complete without this information. A business never works in isolation, and a hospitality establishment is always very visible in the market place. It is necessary to discover how tourist boards, suppliers, bankers, insurers, politicians, government departments and influential people in the industry perceive the market and obtain from them their opinions of how the property is performing. Trade publications, trade and industry reports, government statistics, newspapers and published marketing research are invaluable sources of information. The performance of intermediaries (distribution and agency sales outlets) must also be part of the market analysis. A report from and about each agent which makes a significant contribution to an establishment’s sales often reveals a goldmine of usable information. Further analysis is needed to examine the leading indicators of the industry in a search for impending building developments, government and legal interference, economic trends, social and cultural trends and even climatic change. Market analysis is a fact-gathering process. The sum total of the information gained should provide a picture for management to take action on future marketing changes and improvements. Each market segment therefore has to be measured against the performance of each of the property’s products. It should reveal what the property is good at and what the customer thinks it lacks. No segmentation system is perfect. There will always be some people who don’t quite fit into the allowable categories.

Recruitment Strategy Recruiting in a large market is easier than recruiting in a small one. This is a matter of conjecture. They are two different problems. Having defined what you want, the strategy adopted will be directed by the answers to the questions: •

What is the size and character of the labour market?

•

Who are the competition?

•

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Other companies

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Leisure

What information will attract candidates?

The next step is to ask two more questions: •

What information should be given out?

•

What source of recruitment would be appropriate for the vacancy?

The first question depends on the size of the market. Basically, the smaller the market the more specific and revealing the information should be. The second question is a matter of selecting an appropriate source or channel. Again, the size of the market is influential. Trawling through a large market may require a number of sources used simultaneously but fishing with a fine net in a small market may require something very specific and limited. The sources of recruitment are: •

Advertising

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Employment agencies

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Job centres or job points

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Consultants

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Headhunters

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Outplacement consultants

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Existing staff

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Waiting list

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Previous applicants

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Casual callers

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Education systems

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Casual correspondence

If the vacancy is to be advertised you have to consider: 1.

Choice of journal—circulation figures, readership dates, publication dates and comparative cost.

2.

Timing of advertisement—when published, best day and resource of personnel department.

3.

Cost effectiveness - display, semi-display and lineage.

4.

Classified sector.

5.

Cost effectiveness of repeats.

6.

Use of logo.

Cost and speed are always a factor. The hotel and catering industry has a time pressure built into its recruitment functions, therefore recruitment means fast recruitment. For this reason, the processing of applicants who apply without vacancies, becomes a prime source of recruitment. Waiting lists are cheap to maintain.

Selection By far the commonest method of selection is the employment interview. Its popularity persists, despite constant criticism of its effectiveness. Such effectiveness is usually measured in terms of the ability of the method to predict job acceptances by candidates and their performance in the job. Critics cite the case for psychological testing and biodata methods as more valid alternatives, because they are based on more solid measurements.

The interview is labelled highly subjective and unsuccessful. While this is true, and, without denying the merits of alternative methods, the whole of people management could be said to be subjective. Of course, interviews are subjective and require judgement just like most of management. The real problems with the interview are that too much is expected of it and that it is often done badly. Fallible though it is, the method is quick, convenient and, when done well, an effective method is selection. An interview is a conversation with a purpose, in fact it has several purposes all pursued simultaneously. These objectives can be stated quite simply, and are: •

To decide if the applicant is suitable for the job, or, to put it another way, to decide how suitable the job is for the applicant.

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To decide if the applicant will fit into the existing work group and fit into the organization as a whole.

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To attract the applicant to the job (the interview is part of the recruitment process). To communicate the essential expectations and requirements of the job (the interview is part of the induction process).

An interview is an information-gathering, information-distributing, information-evaluating and judgement-forming activity! That makes it sound mechanical, but it does emphasize that judgement is based on information; not pre-conceived ideas, but gathered information. Good interviewing is often described as a skill implying that there is some set technique which is universally good. This is true, but only up to a point. Good interviewing technique is simply some good habits and the skill of asking questions. Be wary of formulas and set plans! There are dangers in overstructuring an interview. There is, however, a format which combines activities with thought and which constitutes a good habit. Should you know the job? The answer is yes, but it's not an absolute pre-requisite for good interviewing. It all depends on what we mean by 'know' the job. Actual experience of the job or supervising the job brings a certain bias with it, but is, nevertheless, enormously helpful. The task of the employment interview is to bring the character, experience and skills of the applicant and the requirements of the job together in a judgement. To have no knowledge of the job is to render the interview ineffective. Why is job knowledge so necessary? There are three main reasons, which are: •

It tells the interviewer what questions to ask.

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It enables the interviewer to assess the relevance of the applicant's career to the job in question.

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It enables the interviewer to discuss the job with the applicant.

This does not imply that interviewers must have experience of the job. There are other ways of obtaining job knowledge, the most common of which is job analysis. A detailed description of all the duties and responsibilities of a job can be obtained through analysis of the job and laid down in a job description. The job description can then be given to the applicant. The problem with a written job description is that it may mean more to the applicant than it does to the interviewer, and is thus not too helpful to the latter in forming questions. However, from a good job description a set of required knowledge, skills and abilities (KSA) can be derived for each duty or responsibility.

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Knowledge—a recognized body of information that is required for successful performance in the job.

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Skill—a competence with a measurable level of performance that is essential to the job.

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Ability—A more general capability.

There are four stages in transferring a job description into an aide for interviewing, which are: 1.

Job analysis produces a list of tasks.

2.

Rate the tasks in order of importance.

3.

Apply KSA to each task.

4.

Decide which KSAs will influence selection.

The interviewer has a set of key KSAs at his or her disposal, but this approach does not directly translate into questions which will help distinguish good from poor. Perhaps a more direct approach is to combine KSAs with a form of job analysis known as critical incident technique. The essence of critical incident technique is that people with experience of a job identify 'incidents' and attach to them examples of good behaviour and poor behaviour. These incidents are more explicit descriptions of behaviour than the simple description of the task. A number of incidents can reflect one task. The key requirement here is a panel of expert people, who know the job through experience or supervision, to judge important incidents and justify good and bad examples. An example might be useful here. Suppose the job in question is a Hotel Assistant Manager and you have already obtained a list of tasks and ranked them. One particular task has been identified, among others, as being a useful selector. The task is handling individual guests in respect of personal credit and settling accounts. You now need to identify KSAs. A critical incident exercise throws up an apposite incident: A maid reports to her supervisor that a room has been severely damaged with mirrors and furniture broken. The supervisor verifies this and reports it to the Assistant Manager. The guest is not due to check out for another day. The first task of the team is to identify what the knowledge skill and ability are in respect of this incident. They would come up with something like: •

•

Knowledge: •

The legal position.

•

The insurance position, including assessment rules.

•

Rules on credit and procedures.

•

Current reservation situation.

Skill: • To analyse situations into information collection area. • To be able to devise a set of alternative strategies based on the information collected. • To be able to think through and anticipate client reactions. • Personal assertiveness. • Recording formally what is required.

•

Ability: •

A general ability to confront difficult social situations.

Clearly this situation will revolve around information on client status, booking situation and damage assessment. The team should then be able to produce a range of examples of what would be good practice and bad practice. The final stage would be to translate this into a situational interview question. This might be either a straightforward 'What would you do?' or the more detailed 'What information would you need to handle this incident?' or 'Would you confront the client?' Given a set of tasks with KSAs attached to them, there are five stages to the procedure of developing something useful to the interviewer: •

Through the experts, get examples of good and bad practice associated with each critical incident.

•

Allocate incidents to just one KSA that each best illustrates. The process collects the incidents that are selected and rejects those that are not.

•

Translate the salient critical incidents into 'situations' which form the basis of a situational interview. These situations describe an important piece of behaviour in the job.

•

Divide situations into those that would require experience to deal with them and those that would not. In the case of the latter, additional information has to be added to the situation.

•

The question attached to the situation is: 'How would you handle this situation?' It follows, therefore, that some guidance as to what might constitute good and bad performance is required. To do this, the panel of experts has to create a range of answers.

The application of critical incident technique brings the dull job content list to life. By creating situations which illustrate the degree to which an applicant has the relevant KSA, the interviewer gives him or herself something concrete to assess. One way or another, some knowledge of the job is required by the interviewee. The more realistic and 'alive' the knowledge, the more likely it is that the evaluation of the answers will move from 'yes, they can do it' to 'yes, they will probably do it well'. Time is always a constraint in an interview, therefore it is not to be wasted. The technical goal of the interview is to get yourself into a position to answer four basic questions: •

Can they do the job?

•

Would they do it well?

•

Will they fit in?

•

Are they motivated?

The situational interview places the emphasis on the job and asks: Can the applicant match up to good practice in this job? The drawback is that the applicants are being invited to speculate in a way which will make them look good on the basis of what they think the interviewer considers good practice. An alternative strategy is to work solely from the reality of the applicant's past. In other words, the strategy is to probe their previous employment in order to ascertain what the applicant did. This approach is applicant centred rather than

prospective job centred. If probing the past is the strategy and there is the usual time constraint, then the style of question must be incisive without being intimidating. A severe limitation of episodic questions is that they can easily miss the big picture. Motivation is part of that big picture. No one question will give you a clue, an impression has to be formed from a multitude of stimuli. One clue to motivation is the applicant's references and priorities. Here, the general open-ended question can be useful. •

'Did you enjoy college?'

•

Tell me about your present job.'

Moving from the general to the episodic, a good strategy is to open with a general question which simply defines the area to think about, then follow it with an episodic question with the appropriate follow-up. The technique is called funnelling. An example: •

Tell me about your present job.'

•

'What aspect do you most enjoy?'

•

'Can you give me an example of when that aspect went particularly well?'

•

'Why do you think it worked well on that occasion?'

Here, the questioner has gone from the general and, working from the responses, funnelled down to a specific piece of behaviour. Interviewing a prospective assistant manager and interviewing a prospective chef cannot be the same task. Similarly, interviewing someone for a job to which they aspire, but of which they have no actual experience, must be different from interviewing someone who has done a similar job before. In this case the main thrust of the task is different. First, you are looking for managerial ability, second, to verify qualifications and skill, third, to assess potential and ability to learn, and finally, to verify experience. Perhaps the key difference is whether the job is one requiring managerial skills or manual skills. Clearly, as management is action orientated the situational interview or questioning based on action taken in the past might be appropriate. This type of behaviourally-orientated questioning is not too appropriate when the job involves manual skills. For manual skills, it is advisable to have checklists of skills you require and ask the applicant to record this level of competence before the interview. Normally, the kind of pre-interview information available to an interviewer falls into four categories: personal circumstances; employment experience or career; education; and references. They should be addressed separately then judged for coherence. Do they tell a story? What information is missing? In reviewing the material on personal circumstances, the key question would be: 'How do the personal circumstances fit with the demands of the job?' Also: 'What might be the effect of the job on these personal circumstances?', 'What change, if any, is implied?' In reviewing education and formal qualifications, the obvious question is: 'Are they appropriate and sufficient?' References are more difficult to handle. More than any other aspect of the process they carry the assumption that the past indicates the future, that performance in one job has some continuity with the next. Do leopards change their spots? This is the usual unspoken question which passes through the interviewer's mind while scanning a career history. Indications of work stability, skill accumulation, can be obtained

from a career history. The important point is that judgements are not made at this point, but questions arise to be covered in the interview. There is one safe rule when several applicants are being considered, which is evaluate each one separately before you begin to compare their relative merits. This maxim is true whether or not you've used a structured interview. For each applicant you will have four sets of information to evaluate: •

Domestic circumstances

•

Previous career

•

Organizational compatibility

•

Suitability for the job

The advantage of using a structured interview technique based on KSAs, or KSA attached to situations, is that you can compare the performance and response of each candidate against each KSA and situation. However, a holistic evaluation of each candidate must precede any comparisons. The most helpful hint that can be given to anyone attempting to develop and improve their skill at interviewing is to be aware of the natural biases and common traps associated with this activity. Here are some: •

Favouring negative information over positive information. Selecting a poor performer will be noticed, but missing a good one will go undetected, therefore screening for negatives tends to be given more emphasis than looking for positives. Exaggerating the importance of aspects of the job that you have no knowledge of. Letting an impressive attitude make you forget to ask some essential questions about skills and knowledge.

•

It is easy to become too systematic and overstructured. Applicants can sense this and anticipate your questions. When this happens you both begin to tango.

•

Letting first impressions (good or bad) overrule the evaluation of evidence from the interview.

•

Making a judgement on the basis of the pre-interview material, which either the interviewer spends the whole time trying to verify or which simply renders the interview pointless.

•

Perhaps the most common and damaging fault is simply to make a decision too soon, often during the interview itself. It needs an effort to train oneself into the habit of always reserving judgement until all the information has been gathered and evaluated.

Often the obvious is taken for granted and thus overlooked. It goes without saying that applicants should be put at their ease. Anxiety, however mild, is a barrier to communication. Space can be intimidating. Thus, inappropriately large rooms and placing the applicant and interviewer wide apart all tend to intimidate. Some writers argue that the interviewer's desk is a barrier and that both parties should sit side by side. The problem with this solution is that it is harder to take notes on your lap and, of course, notes must be taken. Here is the interviewer's main physical problem—how to concentrate and take notes at the same time. The worst position to be in is finding yourself unable to recall an answer to a key question when you are evaluating at the end. Last, but not least, allow yourself time. Not just for the interview, but time to appraise the pre-interview data and time to contemplate your decision.

Two habits that commonly undo good intentions are first, trying to see too many people in too short a time. In such circumstances, the squeeze comes on time for evaluation and judgement. Second, interruptions are preventable, and if they occur unforgivable, and that includes during the time you have set aside to think over the applicant.

Appraisal System An appraisal system attempts to ensure some continuity of purpose by checking the validity of individual goals in terms of organization goals. However, everyone not only wants to know how they are getting on, but to know this in relation to others. Again, perfectly natural, but potentially problematic for a system. It would be obvious to use an appraisal system to rate employees for promotion, but in doing so it may introduce a note of ambiguity in the way the system is perceived by both managers and workers. To illustrate the point, if a worker comes to an interview thinking that its purpose is to discuss the development of skills, he or she might tell of personal weaknesses. This would not be in their interests if the appraiser considered the purpose of the interview to be to decide on pay in relation to others! All appraisal systems have the potential to disrupt in this way.

An appraisal system can promote effectiveness, job satisfaction and better manpower utilization. It can also promote organizational inefficiency, personal insecurity, distrust and conflict; which way it goes depends on how it is done. Doing it well means, at a personal level, the interviews being conducted professionally, and at an organizational level, by the purposes of the system being clearly defined with natural contradictions resolved. To a large extent, the performance of appraisers is dependent upon the integrity of the system. Possibly the best way to understand the purposes associated with appraisal systems is to ask why an organization would have a formal system. There are a number of reasons. 1.

To ensure that each job is being done in the way which the organization wants it to be done, e.g. output standards, the right method and the right priorities.

2.

To stimulate better performance.

3.

To assess performance and inform those assessed about how their performance is seen.

4.

To collate aggregate information on manpower capacity. Literally a skills audit.

5.

To measure the strengths and weaknesses of the selection procedure.

6.

To measure the relative performance of employees.

7.

To highlight promotable employees.

8.

To indicate where skills need to be developed and improved.

Looked at objectively, these purposes seem perfectly reasonable. The problem occurs when they are telescoped down into an interview. 'Why are we here? Is it to fulfil all these purposes?' Is the character of the interview: 1.

Counselling—to help the employees to overcome some difficulty?

2.

Promotion—assessing the potential for another job?

3.

Training and development—assessing future needs?

4.

Pay—deciding of how much performance deserves?

An appraisal interview cannot accomplish all these objectives, therefore to ask it to do so simply renders it ambiguous and ineffective at achieving anything. If ambiguity exists in the system, people will become defensive at interviews and managers will become cynical about the system itself. This is self-defeating. At the heart of the dilemma lies the absolute nature of a development need. If an employee is not performing properly in a particular area of the work, it matters not a jot whether he or she is better or worse than someone else. When it comes to development, relative judgement doesn't count. To remedy a deficiency you have to look at it in absolute terms. This is why appraisal for development and appraisal for promotion don't sit comfortably together. An organization has to ask certain questions in order to reduce the ambiguity of a system. •

Is the appraisal system part of the control process?

•

Is the appraisal system there to allocate rewards?

•

Is the appraisal system for developing the needs of employees?

The answer may be yes to all three. It is a question of balance and emphasis. What has to be remembered is that overemphasis on the first two will negate the third almost completely.

One approach is to let the control system do its job and let the appraisal system address development issues. Perhaps one of the most fruitful returns which an appraisal system can give is to regularly realign people with their jobs. This is particularly important where the quality of work is both crucial and difficult to measure. People become comfortable with their jobs over time. A natural bias creeps in which is to give priority to: 1.

The visible results of the employee's work which the control system measures.

2.

What the employee is good at.

3.

What the employee likes doing.

Important points of the work which aren't measured, the incumbent is not good at or doesn't enjoy are neglected. An appraisal interview can find this bias and reintroduce the incumbent to the priorities as seen by higher management. A receptionist may enjoy working with the computer and find it easy, what is more, the control system demands regular reports but no attention is given to guest relations. What does management want? Usually it is everything, so it is a matter of realigning priorities. An appraisal system is good at this. It could be argued that if the output of the job can be measured accurately, then all you need is a control system rather than an appraisal system. This is true only if you ignore the personal needs of the operator. What is also true, however, is that in certain circumstances appraisal systems become more important. These are: 1.

When the job requires a good deal of employee discretion.

2.

When personal character plays a large part in the success of the job.

3.

When the job has wide scope.

4.

When it is difficult to measure the output of a job.

5.

When quality is difficult to measure and requires some consensus as to what is 'good'.

6.

When there is a high rate of technological change.

In other words, where standards cannot be easily measured and where jobs are under pressure to change that is when 'talking a job through' can play a significant role. Some common faults of the system include: •

That any ambiguity in the system is allowed to enter the interview. There may be confusion over the purpose and meaning of the exchange.

•

Setting artificial performance measures to please the system, for example asking people to affect things over which they have little control,

•

The Mr. Average syndrome. Appraising employees in relation to some idealized 'benchmark' standard. Using only relative comparisons makes a mockery of absolute performance. If the 'benchmark' person were to leave, everyone's 'performance' would change without any actual change taking place. This syndrome distorts the whole process and leads to complacency.

•

Letting relative values dominate objective performance values to the extent that everyone is doing relatively well, but everyone's standards are not good enough.

Two skills are essential to the appraisal interview:

•

Being able to give feedback. The ability to give 'good news' and 'bad news' without causing exaggeration, overconfidence or resentment.

•

Being able to elicit facts and feelings. The ability to draw out how the individual sees their job and to distinguish between facts and feelings.

In a very real sense, the skills mentioned above stem from preparation and from strategy. Assuming that the interview will be based on some performance measures and conduct reports, the interviewer must be prepared to support comments with facts. Support for comments is best achieved by looking at performance from a variety of perspectives—behaviour towards supervisor, behaviour towards colleagues, achievements, quality, quantity etc. Again, working from the reported performance it is useful to make a list of good and bad performance indicators. Using this as a guide, the interview should elicit feelings about these aspects of the job. People have priorities, and by seeking their priorities the interviewer may also be finding out what they like and what they don't like. This strategy follows the job alignment principle. How far do the good performance indicators relate to priorities and likes and the bad indicators to priorities and dislikes? The assumption of the above approach is that disliking something leads to poor performance. While this is true in general, there may be barriers which intervene and cause the dislike or simply prevent achievement of anything. When the interviewer comes across a barrier he or she must check that it is real and not just an invented excuse. The outcome of an appraisal interview should be: •

An assessment of performance.

•

An assessment of priorities.

•

An assessment of barriers to performance.

•

An agreed plan of action for the future.

Pay Administration An organization which wishes to retain staff and motivate through loyalty might adopt a paternalistic pay philosophy whereby all new employees receive all benefits from their first day nothing is conditional. Such an organization might feel that they can best utilize labour and develop flexibility when the labour force is stable. Another organization may have a philosophy of conditional merit, whereby nothing beyond the basic is earned except by merit criteria. This assumes a calculative and competitive motivation in staff. What is being said here is that the way an organization administers rewards tells a story to its employees about what it assumes is their motivation. In any organization different occupations have a different value to the organization, have different training periods, and have different labour market characteristics. Consequently, there are different levels of reward.

The structure of pay differentials is an intimate part of the structure and functioning of the organization. That the structure is acceptable to those who live it is crucial to the health of the organization. One thing is certain and that is that the greater the differentials the more salient pay is in the relationship between workers. Simply because pay is distributed differentially by management it follows: first, that there has to be some overall justification for the differentials, second, that this rationale has to be acceptable to the staff and third, that questioning the structure is questioning management's authority and judgement. A pay structure has to be manageable and it has to be regarded as legitimate by employees. What is meant by a manageable structure? To answer this question, it is necessary to ask what a pay structure is supposed to do. it has four primary functions. First, to ensure that sufficient numbers of people are attracted to the organization from the labour market.

Second, to encourage the internal labour market to function correctly so that incentives exist for promotion and training opportunities. Third, to ensure that feelings of inequity are not engendered. If, for example, a particular occupation was short staffed because the rate was not attractive to either external or internal candidates and could not be increased without causing problems elsewhere in the organization, then the structure is not doing its job and is interfering with the operation. Finally, to allow for the development of new jobs evolved through reorganization or the introduction of new technology. Pay structures grow up in a haphazard manner as a result of many pressures, such as the labour market, customs and practices, power bargaining and the boss's whim. The result, when looked at from the outside, appears idiosyncratic and illogical. There are likely to be distortions between job content and rewards, and distortion between the rewards for different jobs. However, what looks illogical from the outside, might make perfect sense to those within. Just because there are distortions, that does not imply that management automatically need to impose logic on a pay structure by such means as a job evaluation programme. Two prerequisites suggest themselves: first, the existing pay structures must have become in some way unmanageable and second, the employees themselves must feel the inequity produced by the distortion. To change the wage structure in the absence of either of these two conditions runs the risk of creating more dissatisfaction.

Job Evaluation Job evaluation is about 'job content' and pay structures. It is not about levels of pay or pay systems, although it is closely associated with both. It is a technique by which relative value is given to jobs in order to confer legitimacy upon the pay structure and, more importantly, upon pay differentials. In other words, the work of job evaluation is to change the pay structure which normally means making it more logical and systematic. By pay structure is meant the hierarchy of differentials between jobs within an organization. There are only two questions pertinent to pay structures: 'what is the distance between jobs, and why?' Job evaluation attempts to answer them both by asking 'what should the distance be?' It is worthy of restatement that job evaluation relates solely to pay structures.

Management must analyse their problems carefully before embarking on such a scheme. They must be able to distinguish a problem of pay structure from other closely related ones such as income, pay systems, pay administration and labour market. Once it has been decided that job evaluation is needed, it might be supposed that it is just a matter of which method? However, this is far from the case and there are six major factors which have to be considered at the planning stage. These are: •

The existing pay structure.

•

The selection of evaluators.

•

The appeals system.

•

The entrance of new jobs into the pay structure.

•

The effect of job evaluation on communication in the organization as a whole.

•

The system of job evaluation.

These factors must be considered separately, but they are in reality inseparable. It is generally accepted by experienced practitioners in job evaluation that a new pay structure produced by job evaluation must bear some resemblance to the old pay structure. This is another way of saying that a change in pay structure can never be too radical unless you want a riot on your hands! The rationale for this is simply that although a pay structure may be illogical to an outsider, it has some meaning to those inside. Employees will have their own views on their own value, their own skill, the skill of others, the authority of others etc., and these perceptions are likely to be assailed by job evaluation. Therefore, it follows that management must justify the changes it proposes. The dictum of Barbara Wootton that 'change—always, everywhere, in everything—requires justification: the strength of conservatism is that it is held to justify itself, was never more apt. The relationship between the pay structure and the authority structure is significant. The former supports the latter and, therefore, a change in either will be reflected in the other. Usually, the existing pay structure will be fairly close to the spread of authority, therefore restructuring has to be done with extreme care. In a sense, job evaluation is itself a 'justifying technique'; it lends respectability and authority to a process of restructuring. However, the technique itself cannot act alone if management argue 'well, you'll have to accept it, we used a recognized technique' as its sole justification— they could have problems. The other additional approach to lend 'acceptability' to the final outcome is to use job evaluation as part of a participation exercise. At the outset, management must decide whether they maintain the job evaluation programme under their sole control and 'impose' its solution or let employees' representatives participate to improve the 'acceptability' of the result. The merits and disadvantages of one are the reverse of those of the other. There is a limit to the degree to which participation can take place. That limit is normally centred around the definitions of job content; the management alone must decide. If a participative approach is adopted, there remains the key question of representation on the evaluation panel. An evaluation panel has to act independently, but independence does not confer the legitimacy necessary to the acceptance of its findings. For this reason, the constitution of the panel is a crucial factor. There are usually a number of key combination alternatives: outsiders/employees; unions/non-unions; by occupation; by level; by department. The problem with having every department represented is that 'interests' take over and the tendency is for the status quo to be preserved. Great care needs to be taken with the constitution of an evaluation panel. Who evaluates is as important as the method used. It might be suggested that expertise in personnel, job evaluation or salary administration are necessary qualities for evaluators - this is not so. Access to expert advice on job evaluation is essential but the qualities needed for an evaluator are common sense and enough knowledge to be able to understand a job description— no more, no less.

The final outcome of any job evaluation scheme will be that someone will earn more or less than they did before the scheme, therefore an appeals procedure is an integral part of the overall scheme. There are two questions here: the constitution of the appeals panel, and the rules for appeal. Normally the constitution of the appeals panel follows that of the evaluation panel, but it is advisable for some personnel to change so that there can be a fresh look at the job. The rules for appeal are important, because without them a job could be continuously rewritten until it passes the appeal panel. Phoney duties written in to gain a successful appeal bring the whole system into disrepute. It follows, therefore, that not only should management fix the job content, but that they should also decide how far a job must change before an appeal can be made. Other rules should include guidelines on evidence, advocacy and referback. One of the reasons why pay structures are so often chaotic is that jobs continuously change. Pressures from the product market, from the labour market, from the abilities of incumbents, and from new technology all force changes in job content. Sometimes these changes occur imperceptibly, sometimes they are planned. In either case, the job evaluation system must accommodate such changes so that a new job can go through the system at any time without causing friction. The emphasis is always upon management to keep the initiative and a close eye on job content. The problem with job evaluation is that it is basically irreversible. In this sense, the introduction of job evaluation is a watershed for any organization. There is no going back once logic has entered the system; it cannot be returned to chaos at will. Only further job evaluation can change a pay structure based on job evaluation. It is this irreversible quality which makes management treat the technique with respect. One thing job evaluation does is to make salaries public knowledge within the organization. If an organization is used to secrecy, job evaluation will bring a change which may promote less secrecy in other areas as well. Even if individual earnings remain confidential, grades and the salary ranges associated with those grades will have to be published. Employees will not only know their own grade and salary, but also those of others. It is for this reason that a 'consciousness' of the earnings of others is a pre-requisite of job evaluation. The technique itself will result in such a consciousness and if it was not there already, the effect could be traumatic. The message is that a job evaluation exercise at the point of instigation has a profound effect upon the communication system of an organization. It remoulds the relationships between individuals, between departments, and between the organization and its employees. This effect is likely to have lasting repercussions and in this case the communication system is permanently remoulded. At the outset it is necessary to make clear that there is no ideal system to meet a particular organization's needs. It is always a case of the 'best fit' being applied after some crude analysis of the problems to be encountered. There are three basic approaches to job evaluation each of which offer a number of systems, these are: 1.

2.

Qualitative judgment alone: (a)

Ranking (whole job comparison)

(b)

Job classification

Quantifying qualitative judgement:

3.

(a)

Points system

(b)

Factor comparison

Comparing differences in decision making: (a)

Castellion

(b)

Time span

(c)

Profile

The following is a brief description of the principal techniques in common use. No attempt is made to be comprehensive in this review and further study is advised. The selection of these particular techniques is based on their popularity and because they form the basis of many of the other techniques in use. Job ranking is the simplest method of job evaluation and involves 'whole job comparison'. In other words, jobs are compared in their entirety without involving factor or specific criteria. Only general concepts such as value to the organization are used. Its principal merit is its simplicity, but its central weakness is its vagueness due to lack of specific criteria which leaves the result open to wide interpretation and consequently to altercation.

Step One A set of approved job descriptions are studied by a panel of evaluators and sorted into a rough hierarchy.

Step Two Each job is compared with every other job and jobs are formed into groups and a hierarchy determined.

Step Three (Optional) Numerical paired-comparison is applied to the hierarchy. To do this, a job scores 2 when it beats another job, I if it is valued the same and 0 if the other job is valued higher. In this way, the top job scores: 2 × number of jobs - 1 and the bottom job scores 0 as it was beaten by every other job.

Step Four The pair comparison scores of each evaluator are aggregated together to produce a panel score.

Step Five Job clusters are formed which might suggest grades. In the example, there appear to be four clusters.

Step Six

A -18

BC -15

DEFT - 9

HIJ -4-0

The job evaluation exercise is now over (except for appeals). It is now necessary to convert the findings into a pay structure. It is very important to notice that pair-comparison does not measure the 'distance' between jobs, it only puts jobs in clusters. Therefore, we can say that BC is more valuable than DEFG but not by how much. If a pay structure is justified on pair comparison scores, it has no validity. The chief advantage of job ranking is its simplicity and the fact that it can be applied to a fair number of jobs. However, it does rely on a substantial amount of goodwill to be successful. In addition, it has no direct means of transfer to a wage structure as it does not measure distance between jobs. There is also a tendency for job ranking to closely follow the existing authority structure; in other words to be very conservative.

Points Method Possibly the most commonly used method of job evaluation, its principal attractions are its flexibility and its use of specific criteria which lend some measure of justification to the final results. The disadvantages are first, that using specific criteria it is difficult to apply the method over a very wide range of jobs and second, that it is difficult to find suitable criteria which will be appropriate at the time of the initial exercise and later when appeal and new jobs come forward for evaluation.

Step One The crucial step in the points method is the selection of criteria - those headings under which judgement will be applied. The choice of criteria must be governed by two practical considerations, first, the need for as few criteria as possible and second, the need for all criteria to actually apply to as many jobs as possible. Examples of factors would be skill, effort, responsibility, working conditions and hours.

Step Two After deciding upon a set of factors it is essential that each factor is unambiguously defined so that all the evaluators are using the same concepts. 'Responsibility', for example, is a factor which needs vigorous description before it is used. This is not a tedious semantic argument. If the evaluators are not sharing the same meaning of the \vord in question, then the result may be injustice and delay.

Step Three Once definitions have been agreed it is necessary to divide the factor up by degrees. In other words, to create a scale of application for each factor, for example normal hours, fairly unsocial hours, very unsocial hours.

Step Four Once factors have been chosen and degrees allotted to each factor, it remains to weight each factor and allocate points.

Step Five All the previous stages were preparatory steps in evaluating each job and evaluation will come to a points score. It is this point score which will allocate the job into the hierarchy which in turn will form the basis of the wage structure.

Step Six

The differences between the points method and whole job ranking is that the points method does measure the distance between jobs and, therefore, is more easily converted into a pay structure. This is never an easy task, but by allocating a sum of money to each point, it is possible to draw a pay curve for the organization. By plotting pay against points divided into equal measures, it is possible to see how jobs fall into clusters and to see the distance between clusters. Having done this, it is necessary to form grades and there is no scientific way of doing this—the cluster and distances between them are only a guide. Note the overlaps between grades. This is normal as it allows the wage structure to incorporate the workings of the pay system.

Workload Analysis The objective of workload analysis is to produce an estimate of what labour supply should be so that managers can adjust labour supply to meet the forecast targets. Six activities are necessary before reaching the final stag of adjusting labour supply.

Workloads chart

Work Load Analysis

Workload Analysis Tool

1.

Determine a system of forecasting demand (sales forecast) - operations should have a sales forecast for several reasons besides workload analysis. However, for whatever reason a forecast exists, the frequency of the forecast, i.e. monthly, weekly, daily or hourly, will depend to an extent on how much scope management actually have to adjust labour supply. If you can only adjust monthly, then it is pointless measuring the workload daily!

2.

The classification of the job - the jobs which really require analysis are those which vary directly with the level of business'. However, in practice it is not so easy to classify jobs into direct 'sales related' and 'non-related'- there are many grey areas.

3.

Determine an appropriate unit of measure for each direct job.

4.

Turn the unit of measure into a performance standard.

5.

Translate the sales forecast into a forecast for the demand for labour by using the performance standards.

6.

Compare forecast labour demand with forecast labour supply. •

Adjust

An example for maids Sales forecast

390 rooms

Performance standard

15 per man day

Demand for labour

26 man days (390/15)

Estimated labour supply

24 man days

Adjustment

+ 2 man-days

It is worth emphasizing that as workload analysis works from a forecast and ends with some kind of adjustment to labour supply, the possibility exists that the forecast may not match what actually happens. So it is not an exact science and adjustments may over- or undercompensate. Earlier, it was stated that there were two objectives in the task of utilizing labour efficiently in conditions of fluctuating demand. Table 1 is an example of a workload analysis for a seven day forecast of room sales for a hotel. The occupation under measurement is room maid and there are thirty-two maids employed. The purpose of Table 1 is to show the manager where oversupply or undersupply will occur. In this example, on five days there is a projected shortage and on two of those days it is sizable. The argument is that the situation is manageable in advance once the position is clear. There is no exact way of measuring the optimum level of full-time employment, but the same productivity analysis that helps to match supply with demand also contributes to this problem. The principle is: given any forecast of sales, what estimate of mismatch is produced by every possible range of full-time employment. Table 1 uses the same room forecast as Table 2, but this time the room difference calculation is carried out for a range of employment levels from twenty-eight to thirty-six. Clearly, how these figures are interpreted will depend on the ease or difficulty the hotel has in adjusting labour supply. Here, 34-35 looks manageable.

Table 1 l

2

3

4

5

6

Room sales

PS

Requirement

FT staff

Staff dist

Room dist

375

15

25

23

-2

-30

420

15

28

23

-5

-75

480

15

32

23

-9

-135

210

15

14

23

+9

+135

480

15

32

23

-9

-135

360

15

24

23

-1

-15

300

15

20

23

+3

+45

Column 1= Daily estimate of room sales produced by rolling forecast technique. Column 2 = Performance standard. Column 3 = Man/day requirement or demand for labour (Column 1 - Column 2) Column 4 = Number of full-time staff on duty or estimated labour supply (the estimate of labour supply should be expressed in terms of numbers on duty which will differ from total numbers employed. To get the figure, total number employed should be adjusted to their actual daily hours, e.g. if maid works a five day, forty hour week and you employ thirty-two maids, the daily supply of labour is: 32 × 40 = 1280 total LS per week to get total LS per day/7 × 5 = 914 hours/day to get the LS per day/40 = 23 maids Column 5 = Difference between requirement (Column 3) and estimated labour supply (Column 4). A minus means a shortage and a plus means an excess. Column 6 = The differences in Column 5 are expressed as room differences simply by multiplying Column 5 by Column 2. This column can be seen as representing under or overcapacity.

Table 2 Room

Employment level

forecast 28

29

30

31

32

33

34

375

-75

-60

-52

-45

-30

-22

-15

420

-120 -105

-97

-90

-75

-67

-60

-45

-30

480

-180 -165

-157

-150

-135

-127

-120

-105

-90

210

+90

+105

+112

+120 +135

+142

+150 +165 + 180

480

-180 -165

-157

-150

-135

-127

-120

360

-60

-45

-37

-30

-15

-7

+15

+22

+30

+45

+52

300

+60

35

36 +15

-105

-90

+15

+30

+75

+90

In addition to being an aid to forecasting, the performance standard also allows management to reverse the process and ask: 'How productive were we?' After all the forecasting and adjusting has been done, an actual amount of business occurs in a particular period and it is

then possible to use the performance standard to examine exactly what did happen: How accurate was the forecast? How accurate was the adjustment? The concept of using the performance standard to analyse actual business brings labour management directly into the budgeting and accounting systems. The figure for actual labour supply can always be obtained through timesheets or wage documentation.

Table 3 Day 1

Day 2

133

354

b Actual labour supply

12

16

c Performance standard

20

20

d Productivity standard

7

18 (a/c)

e Actual productivity

11

22 (a/b)

a

Actual lunch cover

This means that, once broken down by appropriate activities, the various performance standards can be used to compare the performance of these activities in different periods in the past. An example would be useful. Take a restaurant at lunchtime, with a performance standard of twenty covers per waiter. What this means is that in Day 1, the restaurant was overstaffed and that they really needed only seven waiters to serve that number of guests. In Day 2, the waiters produced over the required standard. The key to efficient labour utility is not the measurement of productivity, but the flexibility of labour supply which follows from that measurement. It is through the actual adjustment that productivity is achieved. The extent to which management can adjust is very much subject to prevailing conditions in both the external and internal labour markets and, where applicable, the conditions of the union agreement. That said, the range of options given to management is as shown in Table 4. On a day-to-day basis, not all these options are open; technological substitution, for example, requires considerable planning. Given the short time span in which adjustments have to be made, the most common methods of extending labour supply are: overtime, some form of bonus system, casual labour and part-time employment. At the very least, management should be aware of, and have compared, the cost of these alternatives.

Work Scheduling Perhaps the most basic rule of labour management is that as the work ebbs and flows management should be constantly monitoring those flows and scheduling workers in line with the peaks and troughs. The example of the maids was based on a time period of a day but in other forms of work the production is best measured by the hour—most food and beverage work and reception come into this category. To do this it is not necessary to have someone standing around all day recording the number of guests handled each hour.

Table 4 Reduce demand

Adjustment mechanism for labour supply

Reduce services

Increase personal productivity

Substitute technology

Recruitment Labour turnover Absenteeism Overtime Staff adjustment Shift realignment Flexible hours Increase part-time work Casualization. Days off Holidays Contract work Increase internal mobility Retirement Redundancy Natural wastage Lay off Pay

A quicker method is to time stamp every bill or check and use that as the collection base. If there is a night audit function they can be delegated to sort the bills into an hourly timeframe. The whole process has five stages: •

Create a chart displaying 24 hourly periods.

•

Time stamp all checks or bills.

•

Record each check into the relevant time period.

•

Produce a histogram.

•

Adjust staff schedules to suit the pattern of demand.

Note the overall time chart need not be twenty-four hours and that any period can be brought into focus. Work study is the practical tool of the scientific management movement. Its aim is simple: to produce the most efficient method of doing a task. The techniques of work study are rooted in the man-machine relationship in manufacturing industry and the image is of a man with a stopwatch.

The stopwatch is still relevant but the techniques have spread to all areas of work. The primary role of work study is actually at the planning stage in the design of the workplace. Rarely, except through specialized consultants, is operational knowledge incorporated into design. Not unnaturally, the priority is always the guest. Notwithstanding design considerations, managers have to work with what they have got and make it work efficiently. Work study can help. The main productivity problem is matching labour supply to demand. Workload analysis can contribute, but its contribution depends on the creation of performance standards. It is here that work study can play an important role. Just a few minutes' observation in any area will show how significant to performance is the number of journeys made by the worker - most jobs are not static. Here is an obvious area where work study can contribute. Work study is not just standing around with a stopwatch and timing every task, it is a range of techniques to solve particular problems. Some applications are as follows:

The Efficiency of Group Work Two of the factors which contribute to the efficiency of group work are the distribution of the tasks amongst the group members and the order in which those tasks are done by each individual. One way to check this is simply to observe everyone all the time and record everything that they do. This is an onerous task and the technique of work sampling makes it a great deal easier. The basic idea of work sampling is to take a type of photograph of the work group at regular intervals during the day. The procedure is as follows: •

Draw up a matrix sheet with employees along the top and time period along the side.

•

Choose a time period; basically the larger the number of tasks being undertaken the smaller the time period. A common practice is to use one-hour periods.

•

At set intervals record what each member of the group is doing. It is essential to keep the intervals exactly the same. Do this throughout the day.

•

Total the proportion of time spent on each activity. Note that each sample represents the whole of that time period.

Care must be taken in interpreting the results because one activity is unlikely to represent everything that worker did in the period but with this technique it does. For this reason the first three steps of the procedure must be repeated many times before being totalled. What the technique shows is:

•

The loading on workers (distribution of tasks).

•

The amount of wasted time.

•

The order of tasks.

Two extra benefits follow from this technique. First, a model can be built showing how the work tasks should be distributed and priorities attached. Second, more detailed work can be done on those tasks that appear to be taking a disproportionate amount of time. A simplified example illustrates the procedure. We are looking at a group of waiters and porters preparing a large banquet. In this kind of exercise coverage must be comprehensive, it is no good looking at part of the group. Here we are reproducing an extract of only four staff.The time span is four, one-hour periods leading to service at 7.00 pm. All the staff are surveyed and a proportion expressed as a histogram. As banquet preparation is not a continuous task, to get a proper analysis several banquets would have to be surveyed in this manner. These are only estimated proportions.

In a hotel, room cleaning is the central work activity of the organization and as such getting it done efficiently contributes greatly to profitability. Comparative studies of productivity in this area always show a wide variation. Alas, the reason for this variation is often not efficiency but differences in the factors which create the productivity. For this reason productivity studies and pay surveys have to be very carefully scrutinized.

Factors Affecting Productivity 1.

2.

Time taken to clear a room •

Personal ability of cleaner.

•

Personal motivation of cleaner.

•

Size of the room.

•

Design, layout or decor of the room.

•

Standard of cleanliness required.

•

Order of work.

•

Number of items to be placed in the room.

•

Quality and appropriateness of the equipment.

Number of rooms cleaned in a specified period •

Pattern of demand from guests.

•

Proximity of rooms to be cleaned.

•

Quality and appropriateness of the equipment.

The process of cleaning a room contains four elements which are: •

Time to accomplish each separate task.

•

The standard to be achieved.

•

The order of work.

•

The number of journeys.

The objective of work study would be to get the best methods of accomplishing each task which is mainly a matter of the right equipment, and to get the best sequence of work. Practice shows that the overall time is greatly reduced if the number of journeys is reduced and this is a function of the sequence or order of work. The approach is in two stages: first, to observe and measure the performance of a worker who is considered to be a good performer and to compare the results with observations of slower workers who produce the same quality. Second, to examine closely the observations of the good performer. A quick way into this work is to examine journeys, because that automatically gives you the work order. The technique for this is the 'string diagram'. Here a peg board is used with a peg representing each place where the cleaner stands and works, e.g. bathroom, RHS bed, LHS bed, trolley etc. A piece of string is tied to the trolley peg and the observer simply simulates the worker's journeys on the board. The length of the string measures the total journey length and is compared between cleaners. If this does not show substantial differences between good and poor performers then the difference must be in the time taken to undertake particular tasks. The next step, therefore, is to time particular tasks such as bathroom cleaning and bedmaking. If this doesn't produce differences then the poor performance must be wasting time which is a problem for supervision.

Labour Stability

•

Labour mobility is a conspicuous feature of hotel and catering industries, the question of measurement needs to be addressed. There are four principal reasons for measurement.

•

Labour turnover determines the rate of recruitment.

•

It is an indication of the state of the external labour market.

•

High instances of labour turnover are usually seen as being bad for the organization, although skill accumulation does require a degree of mobility.

•

If a rate is measured, then performance can be compared between defined categories such as organizations, individual units, departments, occupations, age groups etc.

The commonest way of measuring labour turnover is the straightforward percentage. The calculation is:

number of leavers in a specific period X 100 Average number of employees during the period The average number of employees during a period is simply calculated by taking the number employed at the beginning of the period and the number at the end of the period and finding the average. The merits of this measure are obvious, particularly in comparisons. The rate of labour turnover in different departments or in different establishments can be compared. There are, however, two important drawbacks. These are: •

If one of the pairs in a comparison has, during the period, undergone a major change in employment level (up or down) then you are not comparing like with like, because the percentage figure doesn't capture the essential relationship between recruitment and labour turnove. When reviewing a set of percentages this possibility must be borne in mind. It would be wrong, for example, to compare a unit that had just opened with ones that have been running for some time, on the basis of this measurement.

•

The percentage figure of labour turnover can hide areas of stability within the target population. A figure of 100 per cent labour turnover may be produced by the 400 per cent turnover of a quarter of the target population, thus hiding both a more serious problem and an important characteristic of the majority.

If there are many reasons for labour turnover there is one very sound reason for having a measure of stability, and that is that such a measure would be a good indication of the effects of policy change on the conditions in the external labour market. What stability means is the capacity for a firm to retain its labour force. In order for a measure to be useful, it must express this capacity over time and allow for comparisons in the same way as the labour turnover percentage. The stability index fits these conditions well. This index simply expresses the total length of service of all present employees in the time frame as a proportion of the maximum possible stability. This notion of the maximum possible stability simply means: the total length of service if nobody left in the time frame. For example, if a firm employing ten workers was ten years old and everyone who started ten years ago was still with the firm, then the maximum possible stability would be 100 years. If, as in this example, the length of service of present employees is also 100 years, the stability index = 1, which is maximum stability. The stability index goes from 0.0 to I and can be turned into a percentage by multiplying by 100. Two examples would be useful.

Example 1 A hotel employs 400 people. Let us say that 200 employees have one year's service, 100 have two years' service, fifty have four years' service and fifty have five years' service. The total length of service of all present employees is 850 years. The period under measurement is five years. The maximum stability is, therefore, 400 X 5 years - 2000 years.

Stability index

850 = 0.42 or 42 percent 2000

In normal usage the stability measure looks backwards over time and often the size of the firm will have changed over time. This is purely a technical problem for the index and it is resolved as shown in Example 2.

Example 2 As in Example 1, we take a hotel with 400 employees who have a combined length of service of 850 years, only this time the size of the workforce has fluctuated. Size of workforce 2 years X 400 = 800 2 years X 450 = 900 1 year × 410 = 410 Maximum service possible = 2110

Stability index =

850 = 0.42 or 42 percent 2110

Comparing the two examples shows that size changes do make a difference. It would be completely wrong to work from the current size of the firm if it were known that, in the period under examination, changes had occurred in size. The beauty of this measure is that it is possible to make genuine comparisons between organizations of different sizes. One word of caution—great care must be taken with the interpretation of comparative data using the labour turnover percentage or the stability index when it is suspected that some of the firms in the sample have experienced considerable changes of size. Where the change is an increase the labour turnover measure becomes suspect, and where it is decreased the stability index loses its power.

Recruitment

Recruitment is at heart a 'search' process. This process contains four main elements: the hiring standard (what you want); the target market (where you think you will find it); the sources of recruitment (by what means you intend to get it); and the cost (how much you are prepared to invest in the search). Clearly these elements are interrelated with performance in one determining performance in another. For example, if you are vague about what you want, you will probably misread the market, which in turn might make you choose an inappropriate

source or channel and it will end up costing you more than you thought. Surprisingly, there are only really three recruitment strategies: •

Ring the bell—make your organization visible in the market by spending money on the search process.

•

Pump up the balloon—extend the size of the labour market by paying more.

•

Do-it-yourself—Extend the size of the labour market by lowering the hiring standard and offering more training.

There are many variations but what will determine your recruitment strategy will be your approach to the four elements of the search process. Recruitment is not an exact science but if you get the first element wrong, you may get the next wrong as well. In other words, the key to recruitment is defining what you want in the first place. This is never easy because you need to translate a job into a person! There are five broad characteristics of labour markets. These are:

Size (Large/Small) Labour markets vary in the number of people they contain. Clearly the principle cause of this would be the level of skill. The more unskilled the work, the larger the market would be.

Status (Primary/Secondary) Strongly related to size, markets are classified into primary and secondary. Primary markets contain good jobs with careers attached and require qualifications to enter. As a consequence, they are more stable. By contrast, secondary markets contain largely unskilled jobs requiring no training. Consequently, such markets are characterized by mobility and variable attachment to the market.

Response to Supply and Demand Changes (Fast/Slow) The speed of response to changes in supply and demand varies with the level of skill involved. A shortage of highly-skilled chefs cannot be made up quickly simply by raising the pay because it takes time to train people. On the other hand, a shortage of room maids could be made up quickly by a pay adjustment.

Pay Level (High/Low) Markets can vary by level of pay, usually determined by level of skill.

Pay Distribution (Wide/Narrow) For any given occupation is the range of pay wide or narrow? It is not difficult to see that if you are looking for someone in a small primary market with a wide distribution of high pay, it is a totally different problem from looking for someone in a large secondary market with a narrow distribution of low pay. The strategy will certainly be different. How, though, can these market characteristics be anticipated from job characteristics? In this respect, there are four key indicators: 1.

The level of skill.

2.

The degree of specificity (how specific the skills are to an organization).

3.

Whether or not performance standard can be measured.

4.

The extent to which personal qualities play a part in the job.

The effects of 1 and 2 are fairly obvious - they will change the size of the labour market, but 3 and 4 have an interesting effect. They both represent the possibility of greater individual differences in performance. If standards cannot be formally specified you are going to get a variety of performances. Similarly, if the jobs require personal characteristics, they are going to get a variety of personal differences. Both have the effect of producing a wider distribution of pay in the market. The reverse direction would indicate opposite market characteristics. The model of hotel labour markets suggests that, with the exception of the skilled levels, most hotel and catering recruitment takes place in a market which is secondary in status, large, quick to respond to supply and demand changes, and has low pay with wide differentials. There is an 'active principle' at work in the area where job characteristics meet labour market characteristics—it is a 'substitution effect'. If, for a moment, it is assumed that the larger the labour market the better chance you have of finding what you want cheaply, then it is in the interests of the employer to design jobs in ways that increase the ability of the organization to substitute one person for another in the same job. The substitution effect becomes easier when: •

The more unskilled the job.

•

The more training is offered by the company.

•

The more personal attributes count in the job.

•

The less dependent the job is on previous education.

•

The more knowledge can be substituted by information.

•

The less the degree of specificity.

A football manager is only allowed two substitutes in a game. Normally it is one defender or one attacker, but eleven substitutes would be more efficient and would bring down the price of the first eleven!

Now Look at the Person Nothing helps the recruitment campaign more than knowing exactly what you are looking for. A word of caution is necessary here, because the labour market will not pass up someone who exactly meets an exacting specification. It is always a case of approximation, therefore the specification must be focused but at the same time couched in terms which allow a range of quality across desired attributes to, be accepted. This will allow the selection process to be more efficient. The device for focusing jobs and people is the hiring standard or hiring specification. The purpose of this device is to specify the desired attributes of the person required for the job. Three central features of a hiring specification are: essential attainments, preferred experience and preferred education and training. It is also useful to specify aspects you don't want. In the hotel and catering industry, hiring specifications try to express a balance between technical aspects of the job and personality traits deemed essential.

Castellion Method This is a variation on the points method which uses decision making as its unit of comparison. As such, it is primarily used as a method of evaluating managerial jobs. The factors used are as follows: (a)

The complexity of decision making

(b)

Pressure of work coefficient (a x b)

(c)

Numerical computations'

(d)

Comprehensive ability

(e)

Vigilance

(f)

Consequence of errors

(g)

Education

(h)

Experience

A matter of degree is applied to each factor as per the points method. The relationship between factor a ' b is recognition that the volume of a decision depends not just on its intrinsic difficulty, but also on the time pressure under which it is made.

Benchmark Jobs Many practitioners advocate the pre-selection of certain jobs to be used in job evaluation in order to save time. Although precautions are taken to ensure that these jobs are representative of all the jobs to be evaluated, the principle is a dangerous one, particularly where job evaluation is being undertaken for the first time. Benchmark jobs are used to speed up the process of evaluating new jobs. By this means, a new job or an appeal is compared with the benchmark job for the particular grade to which the job aspires. Again, there is a great danger here from the ever-changing nature of job content.

If benchmarks are to be used they must be constantly under review. It is absolutely essential to 'write up' each stage of the job evaluation process so that the constitution rules, i.e. those referring to the selection of evaluators, evidence and the factor definitions are handed on to those who continue the job evaluation process. The use of new criteria or a new rule would defeat the object of the whole exercise. Perhaps the most important benefit of job evaluation is that it gives management a tool by which they can control their pay structure. The accent on job content means that management will be forced to be continually aware of employees' jobs and how they are changing - this can only contribute to the health of the organization. Furthermore, by giving the pay structure a logical character and a degree of legitimacy, job evaluation overcomes problems of differentials which cause dissent and friction amongst employees.

In addition, job evaluation usually promotes more open communication within the organization so to achieve the purpose its results must be public knowledge. These then are the benefits. However, all this presumes that the exercise has been carried out successfully, which basically means that everybody is happy with the results. This dependence for success on the acceptability of the results is the central weakness of job evaluation. It is, in fact, a pseudoscientific technique—its measurement being purely subjective (work study is subjective to a degree). The values it places on jobs and the distances it prescribes between jobs are abstract conceptions. They become 'reality' only if you are prepared to believe them. This is why faith in the system and trust in the evaluators is so vital to the success of any scheme. This weakness does not, however, invalidate the techniques. A more serious criticism of job evaluation stems from a more general criticism of the true importance of pay structures. One of the major influences on the pay structure is the labour market, but is there any evidence to show that a logical pay structure is any less susceptible to pressure than an idiosyncratic one? Major movements in the labour market can distort a logical structure like any other but what is significant is that the sheer logic of systematic pay structures may make it difficult to respond to market pressures. A less organized scheme may have less difficulty in adjusting. Given the basic irreversibility of job evaluation, such rigidity may be a disadvantage. To put it simply, the value which a scheme gives to a job may not be that put on it by the labour market and sooner or later the two values will clash. As job evaluation is about job content, it does not concern itself with performance. It is concern for performance that forces a link between the pay grading structure produced by job evaluation and the pay system. There must be a degree of overlap between pay grades to allow for seniority increments and merit increments. All organizations need some people to stay in their jobs and such requirements can be met by seniority or long service increments. As the person is doing the same job, they cannot be regraded, therefore the top limit of their grade must overlap the higher grade. Similarly, differences in merit should not be suffocated by the lower point of the grade above. Merit can exist without promotion possibilities, therefore merit increments should be able to overtake the lower points on the grade above. The greater the overlap of greates, the greater is the weight given to the incumbent of the job against the value of the job content.

Pay Surveys It is not uncommon to find managers baffled by the wage survey they themselves commissioned. Complex surveys do require a degree of statistical sophistication and expert interpretation. However, the situation often demands a simpler less ambitious form of survey. What has to be accepted at the outset is that labour market surveys are a most difficult type of survey to conduct. Pay surveys measure the differences between occupations and organisations in a defined labour market area in terms of: •

Absolute value of pay.

•

Increase or decrease in value over time.

•

The rate of increase or discrease over time.

The prime objective must be to find out what other firms are paving in the occupations you are interested in. However, that is not as simple as it sounds. A further objective must be to collect data in such a way that you can understand it and win be able to see the

relationships you want. What you are looking for in a pay survey is the state of competition which will be revealed in the relationships between the figures you collect; but only if the information is collected with care. There are basically three types of pay survey, each with a different capacity.

Photographic Shot The most common form of survey is the one-off photographic shot, where the surveyors collect data just once and for a specific purpose. This type of survey usually collects data on: (a)

The absolute value of pay by occupation and by firm and also, therefore,

(b)

pay differentials by occupation and by firm.

2) Repeated survey: If a survey is repeated at intervals over time it can add other dimensions to the data. Repeated surveys can show: (a)

Absolute value of pay by occupation and by firm.

(b)

Pay differentials by occupation and by firm.

(c)

Absolute value of the increase or decrease over the time period by occupation and by firm.

(d)

Change in differentials by occupation and by firm.

(e)

The 'rate' of increase or decrease.

(f)

Differences in the 'rate' of increase or decrease.

The advantage of using indexation is that it shows the direction and rate of change more clearly than absolute figures. The normal practice is to use one year as the base year (= 100) and let all other years be expressed as a percentage of that base year. Alternatively, it is possible to use one occupation as the base (= 100) and express all other values of pay against the base. If it is a local labour market, knowing the geographical parameters is essential. These are normally approximated by estimates of travel to work times and costs. In order to avoid wasted effort it is a good idea to know who the key firms are who represent competition. If a particular firm is known to be a pay 'leader' they must be included in the sample. The basis of a survey, that is its whole validity which allows for interpretation, is that like is being compared with like. If occupational pay is being compared, then the occupations must be equivalent. The same occupational title is not enough. In order to ensure occupations are equivalent, either of two conditions must prevail. (a)

The survey should use an occupational classification. The importance of this cannot be overstated.

(b)

The surveyor should have enough knowledge of essential differences between occupations to interpret the data with accuracy.

The units of measurement are equivalent, basic pay = basic pay or total earnings = total earnings. Is the survey measuring starting pay or pay at some other point in time?At the very minimum, the surveyor must be aware of occupations which are linked in some way. Links can be for a variety of reasons, e.g.: occupations which compete for the same people or an occupation which is training for another. The point about occupations that are linked is that pay differentials can be explained by the nature of the link and in some circumstances pay

might be expected to move together. In order to interpret your findings, certain additional data is essential: •

The date of the last increase.

•

The date on which pay levels are set.

•

The frequency of pay reviews.

Grievance Management The problem of grievance procedures is that nobody loves them! The problem of grievances is that they are, for managers, so easy to disregard. In a sense, the first situation is a result of the latter. Managers find it all too easy to attribute grumbles to troublemakers or disputes to the 'six of one, half a dozen of the other' category, before investigation. To some, 'good people' don't have problems but they do. To many managers the formal grievance procedure is an unwanted rival to their 'I'm always approachable' authority. Given the complexity of negative behaviour, some sympathy is due to management in this respect. However, managers cannot simply look the other way or rely entirely on their own busy resources. At any one time in any organization there will always be a degree of dissatisfaction, and while it is impossible to eradicate grievances altogether, it is clearly management's task to minimize and contain such conflict. The problem facing management is not simply a matter of the complexity of grievances, but that they exist at numerous levels. To put it simply, there are individual, group and workforce grievances. Obviously as the scale of the problem varies the means of prevention and resolution also vary to scale.

Pie chart of grievance general

Prevention is better than cure, but if you have a problem there must be some means of settling it without damaging the operation. The key elements in prevention are knowing the patterns of conflict (labour turnover, absenteeism, stoppages etc.); the behaviour of supervisors and junior managers; and the organization's operating policies, particularly personnel policies. The key element in resolution of conflict is the operation of an authentic dispute and grievance procedure. The hotel and catering industry has a reputation for high levels of labour turnover—the facts confirm this. The levels are so high that consideration of any other form of conflict behaviour tends to be subsumed under this one problem. Two cases were made that mitigate high levels of labour turnover; these were the need for numerical flexibility to match variations in demand and the need for skill accumulation by personal mobility. Accounting for these cases still leaves an awful lot of conflict-related labour turnover. The first step to prevention is to recognize the type of problem that you have, which includes separating the preventable from the inevitable. In relation to preventable conflict, three areas of concern can be identified from research. 1.

The arbitrary behaviour of supervisors and managers Because of the shift system and because standards are subjectively defined, employees face more than one supervisor, each with their own ideas about what they regard as good performance. Inconsistency is difficult to work with. This may be the background pattern of quitting, based on what is seen as unfair action by managers.

2.

The induction crisis The induction crisis is endemic in the industry. Workers leave employers within a very short period because either the job is not what they thought it was going to be or it is incompatible with their non-work life. While acknowledging that the pressure of the recruitment function is often extreme, there is always a premium on

getting things as straight as possible at the outset. As a generalization, recruiters concentrate on the person's ability to do the job, but neglect to find out whether the person has realistically thought out the job in terms of their domestic life for themselves. Often an interviewee makes a mistake which costs the employer time and trouble. 3.

Distribution of effort and rewards Productivity is though individual effort and does not increase with length of service, there is no point in rewarding seniority. While true in general, this argument loses some of its force on the ground. People expect to be rewarded for producing more or staying longer.

4.

With a workforce that contains both a transient population and a stable population, the lower levels of management are confronted with an enormous problem of how to distribute rewards and effort in such a way as to turn the transient population into permanence, while not upsetting the already permanent employees by denying them privileges. Matters like the distribution of days off have no economic impact, but have enormous significance for operational health.

In the front line of people management are the supervisor and the junior levels of management. It is their behaviour that, to a large extent, determines the general level of morale and incidents of discontent. How impressive labour contracts are for service workers, there is a greater than normal probability of misunderstanding and misinterpretation. It is difficult to manage service workers through a set of ambiguous rules. What is more, the occasion of shift overlap means that most workers have more than one manager which leads to a problem of inconsistency. All this points to the need for the training of supervisors and managers in people-handling skills. Uniformity would be impossible and undesirable, but a degree of consistency in actual skill can only be beneficial.

Policies that Help 1.

Knowing the house rules There are always some house rules and while it is usual to get them across through the induction process, people forget. Many problems occur over a misinterpretation of rules, therefore access to the rules and, if necessary, an independent interpretation (possibly by the Personnel Manager) would cut off grievances before they start. It is the 'is he allowed to change my day off?' syndrome.

2.

Individual differences As productivity is individual productivity in this industry, it is wise to select carefully to avoid friction based on effort comparisons.

3.

Distribution of effort and rewards Give guidelines to departmental managers on distributing effort and rewards. Make clear divisions between the status of those under training and those accepted as competent performers. Give clear guidelines on the privileges of long service.

4.

Irregular hours of work Even if consumer demand is irregular, work can be organized on a continuous basis. Waiting around for work simply breeds gripes.

5.

Promotion and training Well-organized training and published opportunities.

6.

Pay system Easily understood and with legitimate differentials.

7.

Pay and benefits Competitive.

The goal of these policies is to try to eliminate unfair arbitrary management action, unstable and irregular work, inadequate employee status and recognition. The above policies don't, themselves, promote harmony, but they are the bedrock on which it is built. There is a certain irony in the fact that neither managers nor workers are enthusiastic to use the formal grievance procedure. Managers see it as a slight on their authority and workers don't trust the system, because it always supports management authority. Looked at objectively, if workers do take their grievances to the system they are in fact affirming management authority. Grievance procedures are about justice, rough justice possibly, but justice nevertheless. The real merits of formal procedure are, first, that by bringing the grievance out into the open they force resolutions to be on the lines of some fair principles or precedents. Second, this form of resolution is healthier for the organization in the long run than the alternative form of resolution, that is an informal settlement. Informal approaches are necessary and sometimes preferable, but not for everything. The danger of informal systems is that they use 'favours' and 'reciprocity' as the basis of resolution which are, by their very nature, secret and open to misinterpretation. There is plenty of evidence to show that when the informal settlement system dominates, it ends in an expensive mess with unofficial privileges having to be bought out! Settling a grumble with a bit of extra overtime solves nothing! Impact of a procedure upon a grievance: •

It helps to identify those to whom the grievance should be put and those who may be approached for assistance.

•

It may help to clarify the issue if the grievant has to write it down or explain it to a representative.

•

It may help to obtain appropriate information.

•

It may speed up resolution insofar as it specifies time limits and ensures only those with the appropriate authority are involved.

•

By requiring that records be kept it lessens the chances of ambiguous customs and practices becoming involved.

•

It reduces the level of emotion involved.

There is a dilemma at the heart of any judicial procedures, and grievance and dispute procedures are no different. The problem is that speed of resolution is incompatible with consistency of justice. Anybody with a problem wants it resolved as soon as possible. This is natural. If everything was solved quickly that would mean everything would have to be settled at a low level of authority. This would mean inconsistent judgements which would, themselves, eventually become the source of conflict. If one person made all the judgements they would be consistent, but dangerously slow. This is the design problem of all procedures—how to reconcile speed with consistency. Fundamentally, grievance procedures consist of a number of dimensions. These are first a number of stages following a set order. At each stage there is an attempt to resolve the grievance. There are levels of authority which are superimposed onto the stages of the grievance procedure. For example, the first two stages may attempt to resolve the grievance at supervisory level, after which the remaining stages move to an ever higher authority level. The big element here is the terminal stage where the grievance must be resolved. Third, at any stage representation or arbitration may be superimposed. Fourth, there is the matter of

formality; the degree to which the procedure is written down and rigidly applied. Finally, there are fixed time limits on the duration between each stage in order to prevent unfair delays. Key issues in designing a procedure 1.

Basic structure - number of stages.

2.

Place of the terminal stage.

3.

Time limits on stages.

4.

Roles of participants.

5.

Recording of procedure stages.

6.

Scope of the procedure.

7.

Representation.

8.

Procedure differentiation (some problems may require different procedures).

None of this will work without someone making it work. This is usually a role for Personnel. Where a union is recognized, it is essential to specify the point in the system when union representation takes place and the point where the dispute can go to arbitration. These matters are the subject of negotiation.

Personnel Administration Personnel management should still be considered important, yet it is. No matter how weak or strong the internal labour market, there is always a basic administrative function to be undertaken; whether this is done by someone called a Personnel Manager or by someone else, it still has to be done. Personnel is often seen as bureaucracy which is a little unfair. Such sentiments are really a substitute rationale for rejecting a strong internal labour market which is, in itself, perfectly legitimate. The real problem for personnel in the hotel and catering industry is that the normal unit size is far too small to carry a Personnel Manager, but someone still has to maintain some kind of personnel function. Often this function is delegated to an Assistant Manager who is responsible for other areas as well, or it is split between more than one person. In the case of large companies, the response of Head Office Personnel is to try to lay down guidelines in order to achieve a minimum standard of administration. This structural difficulty could easily be used as an excuse for poor administration, but it is really a very strong argument for actually doing it efficiently. If one takes a close look at the role personnel management actually plays in the business, it is possible to identify four points of impact.

All the paraphernalia of job descriptions, good interviewing, good recruitment, trial periods, induction, etc. are, in effect, trying to make the agreement less imprecise. The more mutual the understanding can be between the new recruit and management, the greater the likelihood that the person will give the performance expected. This is, in effect, the second point of impact supporting the economic objectives of the organization by trying to find the most productive people. This cannot be understated, because productivity in this industry is individual productivity. Recruitment is a prominent feature of the personnel function, but it is important to realize that whoever is doing the recruiting is sitting at the interface between the internal and external markets and in fact controlling that relationship. The response of the external feed back

into the internal is through the recruiter, because no one else knows what is happening in the external market. The last point of impact is in coping with the fallout when the relationship between management and worker goes wrong. Discipline, grievance handling and disputes procedures don't work automatically—they need handling. Being part of management does not compromise the need to make whatever procedures are agreed on actually work. None of these four points of impact are actually precisely represented by particular roles, yet they are what personnel activities and roles should be doing. •

Making the relationship between manager and workers more precise, particularly in the initial stages.

•

Recruiting the most productive people.

•

Managing the relationship between the internal and external labour markets.

•

Facilitating the resolution of conflict.

It is not that a Personnel Manager wakes up one morning and decides to make an employee's psychological contract more precise or relate the internal market to the external, but that is what he or she is actually doing in much of his or her daily activity. If this is personnel management's role in the organization, what is the contribution of administration? All that paperwork—files, reports etc.—what is it for? The objectives of good personnel administration are: •

To provide sufficient information for management to make decisions affecting individuals, groups, departments, occupations and the workforce.

•

To promote the feeling of equity of treatment.

•

To give individual employees the feeling of confidence that their affairs with the organization are being administered correctly.

•

To promote and maintain the goodwill and reputation of the organization in the labour market and with external institutions.

What is actually required to achieve these objectives will vary with circumstances, but there is a bare minimum which any organization cannot fall below. Every activity has its basic 'good housekeeping' rules and personnel administration is no exception. Essential good habits in personnel administration: •

Maintain all personal files on a comprehensive and 'active' basis. All files to be 'serviced' regularly.

•

Maintain a management information system in respect to manpower.

•

Ensure that all the basic 'processes' of personnel are efficiently operated, for example: (a)

Recruitment

(b)

Selection

(c)

Engagement

•

Ensure that all aspects of pay administration are efficient and in line with agreements and laws.

•

Ensure that the organization confidentiality policy operates at all times.

•

Pay attention to detail at all times.

News of sloppy administration soon gets around. Beyond a basic duty toward employees, there is an obligation to produce information to assist managerial decision making. In fact, the quality of aggregate information produced for management is, at least to an extent, dependent on the degree of vigilance over individual files. In any organization the Finance Department produces hard data, that is factual data e.g. cash levels, stock levels, revenue etc. Although this data is open to interpretation when presented together each piece of data is 'hard'. If a personnel file says a person was born on a certain date that is hard data. The number of people who leave the organization is hard data. The importance of distinguishing between hard and soft data is that personnel information tends to be a combination of both. Often they are confused and hard data is somehow seen as more valuable than soft. Soft data is subjective data, but that does not mean that it is less valuable. What matters is the integrity with which the data was collected. This means that soft data should not be generated by people with a vested interest in its interpretation. This is where the independence and integrity of personnel actually matters. An example would be useful. If the reasons for leaving were submitted by the department heads this is worthless data, but if they were the result of an exit interview conducted by personnel staff then they would be acceptable. Obviously, just one reason for leaving may be inadequate, but a degree of tolerance of the acceptability of soft data is made when the data collection instrument is being designed. Data doesn't have to be hard to be useful. Principles of designing personnel data collection: •

Define the purpose of the data collection, which means defining the activity or behaviour you are interested in.

•

Decide whether you are interested in locating the problems within the organization in relation to this activity or monitoring long-term trends in the activity or both.

•

Personnel data is not designed so that you can take action directly from the data, but should be designed to show what the problem is, where it is and suggest what questions you need to ask of those with authority in the identified area. Selection interviewing given the number of maids leaving for home responsibilities and hours. You should also want to know about induction training and why there are so few transfers between day and evening?

•

Ensure that soft data is collected in an unbiased way.

Day-to-day administration - policy guideline The important point in laying down guidelines is not to put people in straight jackets, but to give them flexibility while ensuring that people know who does what! Documentation •

Personal files

•

Contracts of employment

•

Job descriptions

Regular procedures •

Recruitment

•

Selection

•

Employment

•

Termination

•

Appraisal

•

Promotion

•

Status change

•

Transfer

Occasional procedures •

Discipline

•

Grievance

•

Legal

•

Manning levels

•

Performance standards

•

Casual labour

•

Overtime

Pay •

Grade structure

•

Incremental structure

•

Job evaluation

•

Overtime

•

Deductions

•

Loans

•

Advances

•

Savings plan

Benefits •

Sick pay

•

Holiday

•

Discounts

•

Entitlements

•

Health plans

Training •

Induction

•

Skills

•

Supervisory

•

Statutory

•

Management

Security •

Locker inspection

•

Security checks

Relationship with external bodies •

Government

•

Education

Trade unions •

Recognition

•

Agreement

•

Bargaining structure

Individual recognition •

Seniority

•

Long service awards

•

Birthdays

•

Retirement

Employee Social Activities Seen as a list it looks daunting, but if the basic documentation is computerized, then many of the other functions become much easier to administer. The argument here is that if the basic things are done properly, then management strategies related to the business will have a greater chance of success.

Costs of Training One of the most difficult areas in management is to encourage training. At the heart of this problem is the fact that training outputs are often hard to quantify and that costs are difficult to allocate. One remedy would be to quantify the outcomes of training so that the benefits can be more easily seen and assessed. This is a matter for training policy and planning. In relation to costs, there are basically two approaches. The first is to take a simple line and allocate only directly attributable costs to the function. The second is to take an economic approach which involves quantifying benefits and bringing into the calculation production costs and performance costs. In other words, the costing of training can be made as simple or as complicated as you like. Perhaps what determines the approach is whether training in an organization is mainly a matter of short-term courses or one of continuous activity directly linked to performance. Well-designed training courses always have clear objectives. This is the first step to quantifying the benefits of training. However, the organization of training also has objectives. These relate to costs, to the effectiveness of delivery and to the achievement of productivity. The objectives of training organization are:

•

To improve performance.

•

To shorten the length of training time.

•

To obtain better employee retention.

•

To facilitate change.

The effect of training on performance has to be considered in three distinct but related aspects, which are: getting the newcomer up to the required performance as quickly as possible; raising the standard of all employees; and facilitating change through re-skilling. Perhaps the most obvious problem of evaluating training is that its effect is over time. Some results are fairly instantaneous but others are long term. Effects of training through time: Short term 1.

Change in training investment.

2.

Change in attitude knowledge and skill of labour.

3.

Potential change in the marginal product of labour.

Medium term 1.

Change in the actual marginal product of labour.

2.

Change in the organization's total output.

Long term 1.

Change in the organization's total output.

Despite the built-in difficulties of evaluating training, there are some very clear-cut issues that the organization has to rule on to develop a training policy: •

The nature of training in the organization - is it short term or continuous or both?

•

Are the outcomes of the training short term or long term?

•

Is the output change going to be measured? If yes, by means of a 'before and after' approach, or by monitoring continuous productivity, or both?

•

Does the organization favour simplicity or complexity in its account approach?

To put it simply, if training can be quantified, then the accounting approach should be appropriate to that task. If, however, the training is for whatever reason hard to quantify, then a simpler approach is probably better. The key issues here are, is the training continuous and is the outcome of that training reflected in measured productivity changes? If this is the case, then the investment has to be closely monitored by the accounting system and the productivity controls. Alternatively, if the training is continuous but it is difficult to measure the outcomes, then control must be focused on the quality of the training rather than on its costs. In other words, it is more a matter of control on training performance than an accounting control issue. What should be included in training costs? The answer to this question will depend on the decisions made in relation to the issues discussed above. A possible list would include: •

Wages of trainees.

•

Cost of recruiting trainees.

•

Salaries of instructors.

•

Instructional materials.

•

Cost of external courses.

•

Costs of training centre.

•

Cost of errors or spoilage.

•

Output foregone.

If the organization is involved in continuous, or long-term, training where the outcome can be measured through changes in productivity, then the following list of cost items is appropriate: •

Cost of initiating the training function.

•

Cost of running the training function.

•

Cost of training capital.

•

Cost of training working capital.

•

Cost of instruction.

•

Wage cost of trainees net of output.

Notwithstanding the problems of measuring output and using it as a means of evaluating training, if an output measure does exist then the effectiveness of training may be measured in a number of useful ways; for example, by changes in the marginal product after training. Alternatively, a comparative approach may be taken in which the output of the trainees can be measured against that of an experienced worker and the effectiveness of training gauged by the time it takes trainees to reach the experienced worker standard (EWS). The questionnaire is now part of the manager's life. It must be done well. The kind of surveys conducted by human resource managers include employee opinion surveys, inter-firm surveys, pay surveys and employee attitude surveys. The problem of questionnaire design is that there are no guaranteed formulas for success. Though a difficult task, it is one which becomes easier with practice. Among its many attributes the questionnaire is an especially good too] for collecting information on facts and opinions from large numbers of people. Once you are committed to a questionnaire you are involved in two processes: a creative process of writing questions and a design process of devising a structure which is rational in terms of the questionnaire's objective and intended subjects. As in most aspects of management, if the objectives are not clear then the results will be as unclear as the objectives. Before even starting to design your questionnaire, a number of aspects of your topic have to be considered and clarified. Some of these aspects will appear to be obvious, but elementary mistakes are even more harmful than errors in design detail. Put simply, there are three fundamentals that you have to get straight before you start: •

What do you want to know?

•

How much do your intended subjects know?

•

What are you actually measuring?

What do you Want to Know?

1.

What people think about a subject—their opinion.

2.

What proportion of people hold a particular view?

3.

Is something important to people?

4.

How much do people know about a particular subject?

5.

How do people feel about a subject?

6.

Do people believe in a particular subject?

7.

How important is the subject compared with something else?

8.

What are people's expectations?

9.

Do people expect change?

The list is not exhaustive and it is easy to see how such topics as job satisfaction, opinions on pay and reactions to change could benefit from asking these basic questions before you start.

How Much do your Intended Subjects Know? It would be ridiculous to ask people questions on subjects they know nothing about. It happens! This is an area where expert assumptions have to be made. In other words, the manager has to have a rough idea of how much the intended subjects know of the topic. However, these assumptions are not just about knowledge. Some thought has to be given to how your subjects learnt their knowledge of the topic. Did they learn it through some form of education or from experience or both. There is a connection between how one remembers something and the way it was learnt originally. Is it remembered for what it is, or is it remembered by association or comparison with something else? If you ask people their opinions on something, you have to have grounds for suspecting that they will know about it and have feelings towards it. Assuming your subjects know about your topic, some thought needs to be given as to the form in which they hold this knowledge. Three dangers he in wait here: nostalgia, reality and 'ought' modals. To put it another way, your subject can be seen 'through rose-tinted glasses', 'through self-constructed reality' and 'by reference to how it ought to be rather than how it is'. These aspects are not matters of interpretation to be applied to data once it has been collected; they are aspects that can be accommodated by a questionnaire and need to be part of preliminary thinking.

What are you Actually Measuring? Questionnaires can take many forms, particularly when psychological aspects are being measured. While it is beyond the scope of this chapter to review every type of questionnaire, it must be dearly understood that you must be certain as to what is being measured and accept, that in most circumstances, only one form of response can be measured by one questionnaire. It must also be accepted that in some cases there is a need to seek expert opinion. If the project involves psychological measurement, then having the project undertaken by specialists is the advisable course of action. Are you measuring: knowledge, some aspect of behaviour, opinions, priorities, attitudes, beliefs, values, perceptions, feelings, evaluations? Seeing opinions and attitudes as the same thing is a common error. Everyone worries about the response rate of their questionnaire. The sample size has been calculated, but will I make it? It is not a matter of luck! Questionnaire design plays a part in

the success and it is not just a case of making it look pretty! In designing the structure of a questionnaire, you have three questions to consider. First, how to induce people to fill it in; secondly, how are the responses to be aggregated; thirdly, and most importantly, will it achieve the objectives? These questions are in fact criteria by which you could judge your questionnaire design. Alas, there are no firm rules you can apply to questionnaire design— circumstance dictates. However, it is possible to identify the kind of design decisions that have to be made. The list below is not exhaustive.

Design Questions 1.

The length of the questionnaire.

2.

here to put personal details.

3.

The degree of disguise.

4.

Whether to fire blanks.

5.

Whether to use check questions.

6.

Running order or sequence.

7.

The need to aggregate the data.

8.

The need to compare the data with other data.

9.

The need to computerize the data.

The best way to answer these questions is to imagine yourself filling in a questionnaire. This is where a degree of awareness of the subject's knowledge can contribute. That said, there is no substitute for piloting the questionnaire.

Writing Questions There are no easy answers here, only pitfalls to avoid. As in the case of design, question writing is aided by the ability to think out what information you are seeking and the ability to visualize how your intended subjects might perceive your topic. Remember any question is supposed to: •

Raise attention.

•

Focus.

•

Eliminate alternatives.

•

Draw an unambiguous response.

These criteria presuppose that the subject is interested, aware and has knowledge of, or about, the subject you are surveying. There are basically two types of question— open-ended and dosed. The closed question restricts the answers to a small set of responses and requires the questionnaire designer to have a fair knowledge of the range of options the subjects might have in this area. It does, however, generate precise answers. The open-ended question has the merit of not imposing restrictions as to the possible answer, but is harder to aggregate and computerize.