The Cornell School of Hospitality Administration: What will 2015 bring?

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We asked our partners at the Cornell Center for Hospitality Research to poll the research faculty at the Hotel School to understand their guidance about what to expect in 2015. We were also able to get a preview of what the faculty will be working on in terms of research this year. I know the Center for Hospitality Research is always interested to know what the industry is worried about or wants to investigate, so I hope you will reach out with your questions, comments, and interesting business problems!

What should the hospitality industry expect in 2015?

Bill Carroll, Clinical Professor, Services Marketing, believes that the economy and technology will be big drivers for hospitality in 2015. He says: “Technology will drive change in the ways consumers engage travel and hospitality suppliers. Increasingly consumers will find travel planning, execution, and savoring more digital, mobile and seamless. This will be driven primarily by consumer use of mobile devices, increasingly functionality of apps; and increasing use of big data management. As important, these trends will financially favor intermediacies over suppliers.”

Bill is an economist, so we asked for his predictions in that area as well. He predicts that North America will grow, while China will shrink slightly. In the balance, it will even out, but expect more activity from NA, and a bit less from China.

From a human capital perspective, Mike Sturman, Professor, Associate Dean for Faculty Development, Academic Director of The Center for Hospitality Research and The Kenneth and Marjorie Blanchard Professor of Human Resources, reminds us of labor legislation that will impact our industry “A huge issue for the hospitality industry in 2015 will be employee wages, and in particular the wages of minimum wage or near-minimum wage workers. As of January 1st, 21 states and Washington DC saw increases to the minimum wage. Eleven states have increases scheduled for the future, and 16 states have minimum wage linked to cost of living or similar indexed increases. The effect of these wage increases will be particularly salient for the restaurant industry, but we will also likely see related increases in pay across much of the hospitality industry, as even works earning somewhat more than the minimum wage are likely to see increases in their pay related to minimum wage changes. This year will also see continued battles between employer and labor groups on this issue, as the fight over minimum wage and living wage changes are only going to continue.”

Tony Simons, Associate Professor Management & Organizational Behavior, agrees “In the US and elsewhere, there is growing awareness of, and the actuality of, extremes of income and wealth inequality. Along with that is, in the US, an awareness that the economic recovery has largely left lower-wage workers behind, and that there is a growing pool of working poor.”

To net it out for our analytic hospitality executives, the maintaining the delicate balance between labor costs and service levels is only going to get more challenging in the next year. If you don’t have the right forecasting and optimization to understand demand patterns and match that to needed labor, you’ll throw your organization out of balance.

Dave Sherwyn, John and Melissa Ceriale Professor of Hospitality Human Resources, Academic Director of the Cornell Institute for Hospitality Labor and Employment Relations and Stephen H. Weiss Presidential Fellow, mentioned the NLRB is seeking to change the test to determine if a franchisor is a joint employer from the control test to the Industrial Realities test. The NLRB could be the tip of the iceberg – the DOL and the EEOC could follow. If this comes to be, franchisors will either: (1) relinquish substantial control over their brand; or (2) be responsible for employment related liabilities.

Soberingly, Jack Corgel, Robert C. Baker Professor of Real Estate and Director of Graduate Studies for the Baker Program in Real Estate, reminds us that terror attacks on major US cities can become a real possibility, given recent activity.

How do you think the hospitality industry needs to be prepared to address these trends?

Bill suggests that “In a word, the hospitality industry must be “resilient”. Fortunately, the major changes driving change in 2015 are foreseeable – technology and economic growth. So, forward thinking is straightforward for impacts that have high probability of occurring. Simultaneously, a focus on the strategic core of service experience provision is critical. Finally, organizations should insure that the core of their service experiences are made "resilient" to foreseeable and non-foreseeable impacts.”

(As an aside, I love the advice about resilience. Technology is changing nearly faster than we can keep up, true, but the best advice is to keep focused on the core service experience, yet with an eye to “the art of the possible”)

To address the salary gap, Tony Simons suggests the following “These trends will manifest in increasing pressure to raise salaries at the lower end of the wage scale. If we, as an industry, are to pay our workers more, then we must seek ways to enhance service and productivity to offset increasing costs. In my opinion, the highest-leverage point at which to engage that mission is leadership practice, from CEOs all the way down to supervisors. It is well established that workers do more, better, are more creative, and are more generous to guests when they are engaged, when they care about the company, and when they feel like the company cares about them. “

Jack Corgel says hotel management needs to be prepared for the worst at two levels – an attack on the hotel property and an attack in the city market. Hoteliers will need to increase expenditures on security, increase cash reserves, update property emergency and shut down plans.

Dave Sherwyn feels the industry needs to address the issue of the franchisor as joint employer on all fronts: legally, lobbying, and operationalizing. “In other words, the industry needs either stop this progression or figure out what franchising will look like under the industrial realities test. Will franchisors accept employment liability, exercise more control, and incur more costs? If so, will they be able to pass the costs on the franchisees or the consumer? If not, will franchisors give up brand control? If so, what will that do the brand? Franchisors need to thinking of this now, even though it could be years before the issues is resolved.”

What research projects are you working on in 2015?

  • Tony Simon: I am studying how the trust and credibility processes differ across cultures and countries. How leaders who are seen to consistently deliver on their word increase employee engagement through trust and also through improved communication of standards. How the effective implementation of ethical leadership initiatives, diversity initiatives, and other leadership approaches often depends on the personal credibility of the leader as a critical make-or-break factor. To better understand how to develop these trust- and credibility-based leadership skills, I am engaged in a six-year project to help train, coach, and document the leadership skills and their effects at the police department, fire department, and government bureaucracies in five English cities.
  • Jamie Perry, Assistant Professor and Rachel Etess Green '98 and Jason Green Faculty Fellow, Human Resources: Currently, I am working on two projects that will benefit the hospitality industry. The first project is a meta-analytic review of 40 years of research on diversity training. In this project, my colleagues and I examine the effects of diversity training over time and across characteristics of training context, design, and participants. The second project is a field study of healthcare teams that examines how social differences (e.g. power and status) impact the teams’ cognitive, motivational, and affective states, and performance outcomes. Both of these research projects are important to the hospitality industry because current workforces are composed of individuals with diverse abilities, cultural backgrounds, and work styles that may impact how work is performed. By understanding and leveraging the differences, organizations can not only reap the performance benefits of diversity, but will also be able to retain top talent.
  • Rohit Verma, Singapore Tourism Board Distinguished Professor in Asian Hospitality Management, Service Operations Management, is working on two projects: Text Analytics: Leveraging On-Line Text Reviews in Managing Hotel Operations and Understanding Technology-Based Innovations in Upscale and Luxury Hotels
  • Jack Corgel is working on a project called: Sell Hotels Now – How to Decide!

From all reports, the industry will continue to move fast, with pressures from all sides both internally and externally. It seems that it is becoming more important than ever to have the right data and analytics strategy in place to anticipate these trends and identify opportunities. Be assured that we at the Analytic Hospitality Executive will be here to help in 2015!!

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Kelly McGuire

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