Lesson 3 - Change and Crisis Management

HospitalityConceptsandInnovationsChangeandCrisisManagement1Learningoutcomesfortoday:GainfurtherunderstandingofkeybusinessprocessesthatdriveinnovationConsidercrisisasastimulusforinnovationandgainanintroductoryunderstandingofcrisismanagementConsiderbusinessprocessengineeringasadriverofinnovation2Let'sReviewWhatthecharacteristicsofthehospitalityindustryareandconsiderhowthismightmaketheindustrymorevulnerabletocrises?3CrisesandHospitalityBetween1980and1991,outof802businessdisasters,8%occurredinoraffectedhospitality(Barton,1994).LegionnairesdiseaseFireBuildingstructurecollapseMassmurderMurderandTheftMurderandRapeTerrorism4DefinitionofaCrisesAnyactionorfailuretoactthatinterfereswithanorganisation'songoingfunctions,theacceptableattainmentofitsobjectives,itsviabilityorsurvival,orthathasadetrimentalpersonaleffectasperceivedbythemajorityofitsemployees,clientsorconstituents(Selbst,1978citedinRitchie2004,p.670)5TypesofCrises(Parsons,1996,citedinRitchie,2004,p.671)6TypesofCrisesEvansandElphick(2005)7CrisisTypologySeymourandMoore(2000)ResponseBooth(1993)ResponseTheCobratypeofcrisisissudden,forexample,adisasterwhichmaycomeasashockDefensiveresponsewithrelianceontheknowntrustedsourceSuddenthreatoflosstothewholeorganisationDefensiveresponsewithrelianceontheknownandtrustedThePythontypeofcrisiscreepsuponacompanygraduallyforexamplecausedbypoormanagementBureaucraticresponsewhencrisisisnotrecognised-negotiatedresponsewhencrisisrecognisedPeriodicthreatoflosstopartorwholeoftheorganisation.GradualthreatwithanincreasingthreattopartoftheorganisationNegotiatedresponseandrecognitionofproblem.Bureaucraticresponseasthecrisisisnotrecognised8EvansandElphick,2005CrisisLifecycle(Ritchie,2004)Faulkner(2001)Fink(1986)Roberts(1994)1.Pre-eventPre-event-whereactioncanbetakentopreventdisasters2.ProdromalProdromal:whenitbecomeclearthatthecrisisisinevitable3.EmergencyAcute:thepointofnoreturnwhenthecrisishashitandthedamagelimitationisthemainobjectiveEmergency:whentheeffectsofthedisasterhasbeenfeltandactionhastobetakentorescuepeopleandproperty4.IntermediateIntermediate-whentheshort-termneedsofthepeoplemustbedealtwith-restoringutilityandessentialservices.Theobjectivehereistorestorethecommunitytonormalityasquicklyaspossible5.Longterm(recovery)Chronicstage:clean-up,post-mortem,self-analysisandhealingLong-termphase:continuationofthepreviousphasebutitemsthatcouldnotbeaddressedquicklyareattendedtoatthispoint-repairtodamagedinfrastructure,counsellingvictims,reinvestmentstrategies.6.ResoultionResolution:routinerestoresornewimprovedstate9Canyouthinkofsomecriseswhichhasaffectedthehospitalityindustryrecently?Whatcategorydotheyfallinto?10Theimpactofcrises2002-Balinightclubbombingwhere202peoplewerekilled.Declinedinnumberofvisitors2003-SARSinAsia.Peoplestoppedtravelling2004-typhoonstruckFloridaandtheCaribbeanandleadtoadeclineintouristnumbersandrevenues(LawsandPredeaux,2005)11TheimpactofcrisesTheUNWTO(2010)indictedthatinternationaltouristarrivalsfellby4%in2009duetotheeconomiccrisisThecostofdisruptiontotheglobalairlineindustrywasUS$1.7billionafterjustaweekofflightrestrictionsduetheash/volcanocrisis(Warden2010,citedinHall2010p.401)(Hall2010)12ExamplesDominos-=hYomw1cLA2UBartenderchargedwithmanslaughterMumbai,Nov2008,173dead,308injuredStaffingcrisisStaffArrest,2010UnrestinEgypt/Libya13SurvivingaCrisisYouhotelisat100%occupancyandthenewshasjustreportedthatacycloneisheadedtowardsyourdestination.AstheHotelManager,howwouldyoudealwiththis?14Whatiscrisismanagement?anongoingsystemiceffortthatorganisationscarryoutinanattempttoidentifyandpreventpotentialrisksandproblems,tomanagethosethatoccurinordertominimisedamagesandmaximiseopportunities,andtotakeintoaccountlearning,planningandtrainingactivitiesaswellastheinterestsoftheirstakeholders(Santana,2003;WangandRitchie,2010citedinWangandRitchie2012,pxxx)15Howdoweplanforacrisis?1.Crisisplanning(beforeacrisis)2.Implementationofcrisismanagement(duringacrisis)3.Evaluationandcontrol(afteracrisis)(WangandRitchie2012)16CaseStudy-ResponseofSpanishhospitalitysectortothefinancialcrisisin2008/2009Alonso-AlmeidaandBremser2012)About70%ofhotelsquestionedinMadridparticipatedSpanisheconomysufferedinthefinancialcrisisduetobank'slackofliquidity,changingperceptionofrisk,housingmarketadjustmentsandtheglobalrecession.ThisledtojobcutsandunemploymentItimpactedthehospitalitysectoraspeoplespentless17MadridhotelsreliedheavilyondomestictourismInEurope,SpainhasthelargestnumberofhotelsandrestaurantsInternationaltourismtoSpainalsodeclinedThesurveyfoundthatSpanishhotelsthathadastrongbrandimageproducebetterfinancialperformanceduringacrisisthanotherhotelsSomehotelsdecreasedinternalcostsbutdidnotloseinsalesHotelswhichcouldnotdecreaseinternalcostshadtoreducetheirprice18LoyalcustomersarekeyastheyarewillingtorecommendtoothercustomersandwillspendmoreHotelmanagersshouldbuildcustomerloyaltyHotelswhichfocusoncost-cuttingmeasuressuchasreduceoffers,stafflayoffetc.performworseasthechangetheserviceoffered19CrisesandChangeWhat