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2023/3.
MULTIDISZCIPLINÁRIS KIHÍVÁSOK
SOKSZÍNŰ VÁLASZOK
GAZDÁLKODÁS-ÉS SZERVEZÉSTUDOMÁNYI FOLYÓIRAT
MULTIDISCIPLINARY CHALLENGES
DIVERSE RESPONSES
JOURNAL OF MANAGEMENT
AND BUSINESS ADMINISTRATION
Online folyóirat
Főszerkesztő: Fenyvesi Éva, PhD
Szerkesztette: Vágány Judit Bernadett, PhD
Borító: FLOW PR
Kiadja: Budapesti Gazdasági Egyetem
Felelős kiadó: Prof. Dr. Heidrich Balázs, rektor
ISSN 2630-886X
2023.
REDUCING COSTS AND CREATING VALUE IN THE
HOTEL INDUSTRY - FORCED GOOD PRACTICES
KÖLTSÉGCSÖKKENTÉS ÉS ÉRTÉKTEREMTÉS A
SZÁLLODAIPARBAN - KIKÉNYSZERÍTETT JÓ
GYAKORLATOK
MONDOK Anita
Keywords: hotel operation, cost reduction, sustainable practices, value-creation
Kulcsszavak: szállodaüzemeltetés, költségcsökkentés, fenntartható gyakorlatok,
értékteremtés
JEL Kód: O32, Z32
https://doi.org/10.33565/MKSV.2023.03.06
133
ABSTRACT
External business environmental challenges such as the effects of climate change and sustainable
operation required hotel managers to take strategically planned action. All of this was
exacerbated by the COVID-19 pandemic, which appeared in several waves from 2020, and
the energy crisis resulting from the Ukrainian-Russian armed conflict. The periodic return of the
pandemic has created a high level of uncertainty not only for operators but also for workers.
The energy price boom that unfolded from the second half of 2021 required cost-saving solutions
from market players that typically necessitate a significant investment and provide a long-term
return. In the planning process, the guest experience and value-added approach became
paramount, as the long payback period required forward thinking and good prediction of the
future.
In this article, focusing on relevant literature sources and using a constructivist grounded theory
strategy, data mostly from the period between 2020 and 2022 has been collected and analysed,
. The purpose of these two research questions is to answer what challenges Hungarian hotel
market players face and what factors negatively impact their business during the period of 2020
and2022, as well as how hotel operators respond to the identified challenges and how these
responses relate to the global best practices. In addition to studying general cost-saving practices
in Hungarian hotels, the focus is on improving the guest experience and providing operators with
real cost-effective operational solutions. Value creation occurs in all areas of hotel operations,
including front and back-of-house work areas. Solutions such as heating system modernisation,
digitalisation, organisational development and outsourcing of activities will be presented.
ABSZTRAKT
Az éghajlatváltozás hatásaira való reagálás és a fenntartható működés olyan kihívások voltak
a külső üzleti környezetből, amelyek stratégiailag megtervezett lépéseket követeltek meg a
szállodaüzemeltetőktől. Mindezt súlyosbította a 2020-tól több hullámban megjelenő COVID-
19 járvány, valamint az ukrán-orosz fegyveres konfliktusból eredő energiaválság. A járvány
időszakos visszatérése jelentős bizonytalanságot okozott nemcsak az üzemeltetők, hanem a
munkavállalók részéről is.
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A 2021 második felétől kibontakozó energiaár-robbanás, amelyet a lakosságot kevésbé, inkább
a közszféra fogyasztóit súlytotta, olyan költségtakarékos megoldásokat követeltek meg a piaci
szereplőktől, amelyek jellemzően jelentős beruházást igényelnek és hosszú távon térülnek csak
meg.
Jelen cikkben a 2020-2022 időszakra fókuszáltan, a témában releváns szakirodalmi
forrásokon alapuló adatgyűjtést végeztem, amely az elemzéssel együtt a konstruktivista módon
megalapozott kutatási stratégiák mentén zajlott. A két vizsgált kutatási kérdés arra kereste a
választ, hogy a magyar szállodapiac szereplői 2020-2022-ben milyen kihívásokkal
szembesültek, és milyen tényezők befolyásolják negatívan üzleti tevékenységüket, illetve, hogyan
reagáltak a szállodaüzemeltetők az azonosított kihívásokra, és ezek a válaszok hogyan
illeszkednek a globális legjobb gyakorlatokhoz. A magyar szállodák általános
költségtakarékossági gyakorlatának vizsgálata mellett olyan megoldásokra helyeződik a
hangsúly, amelyek a vendégélményt növelik, és a költséghatékony üzemeltetés terén valódi
megoldást jelentenek az üzemeltetőktől. Az értékteremtés a szállodai működés különböző
területein valósul meg, lefedve a front és back munkaterületeket egyaránt. Olyan megoldások
kerülnek bemutatásra, mint a fűtési rendszer korszerűsítése, a digitalizáció, a szervezetfejlesztés
vagy a tevékenységek kiszervezése.
INTRODUCTION
The hotel sector has recently recovered from the impact of the COVID-19
pandemic, with domestic hotels facing a highly challenging period due to
significantly increased energy prices, escalating raw material expenses, and a
noticeable decline in revenue. The article pertains to how service providers have
reacted to current market trends that have challenged the hotel industry in the
past three years (2020-2022). In addition to the relevance of the topic, the decision
to choose this subject was influenced by the fact that existing literature has
typically addressed consecutive market difficulties separately, with publications
either focusing on describing the parameters of the crises or on comparing them.
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Meanwhile, the exploration of practical solutions and responses to the global and
local challenges faced by a particular country has remained unexplored.
The research objective of the article is to identify and systematise the often forced
responses to the operational challenges of the domestic hotel market in recent
years. The research question of the secondary research is how to improve the
competitiveness of hotels and how to achieve efficiency improvements without
reducing the guest experience. This article is not intended to present the literature
on crisis management or the chronology of crisis situations. The aim is to
showcase practices in the Hungarian hotel industry during the period between
2020 and 2022 out of necessity but can help improve the efficiency of
organizations in the long run.
While there are many different responses to crisis management practices in the
hospitality industry, there are also local examples that are similar to, but distinct
from, international practices. Best practices in Hungary can serve as a model for
travel companies and the hotel industry to find effective solutions.
LITERATURE REVIEW
Maximizing economic profit is the ultimate goal of enterprises and shareholders
and the basis for enterprises to grow and expand. With the rapid development of
the economy and technology, competition between companies has become
relatively complex. The era of relying solely on products and services to remain
at the forefront of business is history. Contemporary marketing theory focuses
on optimizing consumer satisfaction, including demand for products and services,
as well as consumers’ psychological needs (Lemon & Verhoef, 2016). Business
strategies that focus on improving customer experience have an effect on
increased revenue and, as a result, on increasing the value of the company as well
as the utility of the system for all of the company. The customer’s perspective of
value creation is also important in complementing strategies for value acquisition
via better market distribution, transaction costs and resources.
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The company’s value creation is achieved through business processes related to
quantity, quality and operational business methods. In these processes, the mutual
relationships between process participants are crucial, among which the
relationships between enterprises and employees, enterprises and customers, and
enterprises and society can be said to be the most important. Therefore, value
creation does not mean generating profits for the company, but goes beyond that
and aims to create the conditions for a sustainable business in the spirit of going
concern (Brlečić Valčić & Bagarić, 2015). A key factor for a thriving tourism
industry is the ability to identify and manage key changes and interactions of
various influencing factors (Dwyer, et al., 2009). Therefore, the proper
management must connect shareholders with tangible short-term benefits from
revenue generation and cost control, while delivering long-term non-financial
benefits through good risk management and building trust with other
stakeholders to enhance brand value and reputation (Mattimoe, 2015).
Key challenges faced by hotel operators – travel demand
In a macroenvironment, numerous factors need to be considered to describe all
the variables that affect the market. However, demographic changes have a direct
impact on the quantity and structure of demand and thus the labour market (e.g.,
the number and qualifications of employees) (Grimm, 2009).
The current global travel and tourism market demand can be divided into
generations (Glover, 2010). This is the reason why tourism products mainly target
the unique needs of certain demographic groups in order to make them more
attractive to customers. Schewe and Meredith (2006) found that the lifestyles and
customer behaviours of today’s consumer base are more diverse than previous
generations. In the tourism market, almost all people aged 15-75 are active and
decision-making tourism participants, covering four generations.
In today’s business environment, excellent customer experience is critical to a
company’s success (Verhoef et al., 2009). Experience is widely considered in many
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fields of the economy. However, capturing the experience is a difficult task.
Experience has different meanings and therefore many different definitions.
Mostly customer experience is described as it “originates from a set of interactions
between a customer and a product, a company, or part of its organization, which
provoke a reaction” (Gentile, Spiller & Noci, 2007:397). Many factors related to
consumer, brand and situational factors are thought to influence consumer
behaviour. The most commonly explained components of experience are
affective, cognitive, conative, and sensorial (Godovykh & Tasci, 2020).
The main reason people travel is that they are looking for pleasurable experiences.
Therefore, tourism is highly experience-intensive (Sørensen & Jensen, 2015).
Moreover, Luo, Lam and Wang (2021) explored the direct link between hedonism
and revisit intention. Viewing travel experience as a mediating variable between
hedonism and repeat purchase intention justifies travel providers’ reasons to
improve existing products or develop new ones to improve the travel experience.
The accumulation of information and online content shapes the travel experience
in three distinct stages: before travel, during travel, and after travel (Hjalager &
Jensen, 2012). Reading online reviews can give travellers a clearer picture of their
expectations, increase their confidence in decision making, and reduce the risk of
their needs not being fulfilled (Jun, Hartwell, & Buhalis, 2012). The Internet
enables users to access information, share experiences through content and
communication, and co-create experiences (Neuhofer, Buhalis, & Ladkin, 2015).
Online connectivity can help users meet their information, entertainment and
communication needs. Because of this, connectivity gives travellers peace of mind
that all needs can be met instantly. While connectivity can support and enhance a
traveller’s personal development, it can also lock travellers into their own online
world, missing out on potential learning experiences (Tanti & Buhalis, 2017).
Perceptions of tourism risks are often viewed as potential losses due to
uncertainty about the outcome of tourism activities. Of all the perceived risks
associated with tourism, health risks are one of the most influential factors on
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tourist behaviour (Novelli et al., 2018). During the COVID-19 pandemic, tourist
perceptions of health risks have increased, negatively impacting individual travel
intentions. While travel rebooking is usually free, travel cancellations often require
high fees to be deducted from the refund amount, costing the traveller.
Consequently, participants may choose to make riskier decisions (postpone) to
avoid paying cancellation fees, and because, among other reasons, individuals tend
to favour future gains and losses in the face of current uncertainty (Golets et al.,
2023). Purchasing travel with lenient cancellation, rebooking or refund policies is
considered more important today than before the COVID-19 outbreak (Canziani
& MacSween, 2021).
Key macroenvironmental challenges faced by hotel operators
1. Tourism security
Safety is usually defined as the absence of danger, so it cannot exist without a
threatening object, so it always refers to someone or something. Security is a state
where there is no danger to human consciousness or life, a state where there is no
fear and full certainty about the future. Tourism and safety concepts are
inseparable. Tourists’ behaviour and their visited travel destinations are largely
influenced by safety perceptions and security and risk management.
Environmental, social and economic issues, and the international governance
system that manages them, now clearly belong to contemporary understandings
of security (Boulding, 1991). The grouping of various safety elements in the
tourism literature is inconsistent. Some authors classify these factors into six risk
groups: terrorism, crime, health risks, road safety, natural disasters, and political
situations (Breda & Costa, 2006). Michalkó (2020) also grouped the most
important factors for tourism safety. In his work, he highlighted five factors that
can be used to assess visitor safety (regardless of whether adverse events harm
them or are caused by them): public safety, health safety, consumer safety,
technical safety and navigation safety.
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Due to recent concerns about the global spread of the coronavirus, also
biosecurity has become an important awareness and management issue in the
tourism industry. Concerns about the potential for travellers to spread disease
between populations are evident, especially if the process of globalization does
facilitate greater human mobility (Hall, Timothy & Duval, 2004)).
Addressing the effects of climate change and sustainable operations are challenges
from the external environment that require serious, strategically planned actions
by hotel managers (Abdou, Hassan & El Dief, 2020). These have all reached their
peak in waves of COVID-19 outbreaks starting in 2020 (Zhang el al., 2022) and
the energy crisis triggered by the Ukrainian-Russian armed conflict (Stanytsina et
al, 2022). The periodic recurrence of the epidemic had brought great uncertainty
not only to the operators, but also to the workers. Resilience as a concept has
become an everyday industry term (Ugurlu el al., 2022) as many hotels took
advantage of the closure due to the pandemic as an opportunity to improve and
invest in energy efficiency. However, by 2022, with strong growth in domestic
and international travel, the travel market could return to its pre-pandemic
heyday.
Economic security has also become an issue for the tourism industry. The energy
crisis demonstrates the interconnectedness of security issues, as the economic
crisis also turns into a social and political crisis as people lose their jobs and prices
for some basic commodities rise.
2. Energy crisis
Although tourism contributes significantly to the development of many local and
national economies, business and leisure travel also poses significant
environmental and socio-cultural risks, particularly because the hospitality
industry often consumes unreasonably large amounts of energy. Due to the recent
ongoing economic, energy, health and war crises, the hospitality industry is now
more interested than ever in environmental issues and cost-effective economics.
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The largest utility expense in the hospitality industry is energy, accounting for
approximately 60% of total costs (Usman et al., 2020). Across all hotel categories,
except the upscale category and in all urban areas, tourist accommodation demand
fell as gasoline prices increased. Hotels spend money on the following categories
of energy, in descending order: ventilation, air conditioning, lighting (with TV and
radio), kitchen, laundry, heating and hot water (Upadhyay & Vadam, 2015).
Therefore, the energy dependence of the hotel industry is becoming increasingly
evident and causing concern among hoteliers (Menegaki & Agiomirgianakis, 2018,
2019). Rising energy prices not only affect the hotel industry, but also the food
and beverage industry, which accounts for 17.24% of tourists’ daily expenditure
(Toni et al., 2022).
According to the survey of the Hungarian Association of Hotels and Restaurants,
the energy cost per room in the first quarter of 2022 increased by 280 percent
compared to the same period in 2019, jumping from 8 to 23 percent as a share of
revenue (Fucskó, 2022). In addition, the hotel industry was not be able to pass on
to guests unprecedented and unpredictable cost increases in the fall of 2022,
which coincides with weakening demand and soaring inflation after the peak
summer season. As a result, operators had to incur most of the additional costs
at the expense of their own profits (Szász, 2022). The biggest losers are hotels
that have been using a lot of energy to operate: these hotels have wellness areas.
Worst affected are accommodations that have spent little or nothing on energy-
related renovations in recent decades. In other words, smaller, less modern,
typical three-star hotels located in the countryside have been hit the hardest
(Szántó, 2022).
3. Other operational challenges
Lockdowns have distorted consumer behaviour and affected all businesses due to
shortages of various inputs and significant changes caused by the labour market
during the COVID-19 pandemic. Mandatory hotel closures in waves during the
pandemic created a sense of insecurity for those employed in the industry, which
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drew workers to sectors that offered more secure livelihoods and were less
exposed to the health emergency. However, as the pandemic has subsided, former
tourism workers are no longer keen to return, having found new jobs and
embarked on new careers. In the absence of a Hungarian skilled labour force that
can be mobilised, the number of South Asian workers in tourism is increasing,
with some hotels already employing five to six guest workers, but plans are
underway to increase their numbers because of a lack of domestic labour. The
lack of workforce affects the standard of services, which is also a crucial aspect
given the compulsory accreditation of lodgings. If a hotel establishment holds a
four-star rating but its personnel only possess three stars, it cannot be considered
a four-star hotel. Therefore, the evaluation should encompass the staff, presenting
a highly challenging endeavour currently (Irházi, 2022).
A direct result of higher energy prices is higher inflation, which leads to lower
consumer spending. This situation raises legitimate concerns for all involved (Hu,
2022). Domestic accommodation facilities not only have to survive under the
pressure of a labour shortage, but the high inflation rate, which is also high by
European standards, is also reducing domestic demand. The devaluation of
incomes and pensions is diverting spending from purchases to necessities and
services and away from travel, which meets higher levels of need. This is a major
challenge for regions that provide services dominated by domestic traffic, and less
of a challenge for service providers in the capital (Szabó, 2023). There would be
no problem with a decline in the number of domestic visitors if the loss of visitors
were made up by foreigners, but the statistics do not suggest this. The number of
foreign guests in domestic accommodation is nowhere near the figures for 2019,
or even below the 2018 result (Nagy, 2023).
The hotel industry actors generally use two main methods to maintain business
continuity. The first is to reduce costs, either by reducing the amount of energy
used or by passing the costs on to guests. The second is to increase the revenue
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side, which can be achieved either by increasing service prices at the same volume
or by increasing service volume at the same price level. Reducing costs may risk
damaging the previous level of guest experience, while increasing prices may keep
price-sensitive segments away from the service provider (Brown & Dev, 2000).
The most important practices studied and recommended in the hotel business
literature are mostly related to efficiency-improving solutions. The most
commonly mentioned strategies are:
₋ To track and manage energy costs, to eliminate waste and adopt safe practices
to save energy
₋ To practice preventive maintenance
₋ To track food waste and improve inventory control
₋ Leveraging technology to reduce costs (automate processes, reduce
unnecessary steps, and use technology to improve communication and
coordination)
₋ Application of marketing channel management and revenue management
solutions
₋ Supplier contract review
₋ Lower labour costs through cross-training and flexible working hours.
RESEARCH METHODOLOGY
The aim of this article is to identify and systematise the factors that have occurred
in the Hungarian hotel market in the period between 2020 and2022, which pose
challenges for operators, and to present the responses given by market players in
a summary covering different areas of operation.
Accordingly, the information base of the secondary research was the literature
research, the primary source of which was electronic publications, press releases
and articles published or referring to the relevant period. In view of the novelty
and topicality of the subject under study, the number of available scientific
publications is limited, and in order to explore market processes, the study also
143
used publications that had focused on challenges that had arisen in earlier periods,
however conclusions can be adopted to the current situation. The wide range of
literature available relates primarily to the theoretical knowledge of general
management, cost management and human resource management in the Google
Scholar, EBSCO and JSTOR databases. The articles were selected based on their
relevance to the field, topicality and applicability of the practices applied in the
global and European market, including the Hungarian hotel market.
In this study, data collection and analysis were guided by constructivist grounded
theory strategies. Grounded theory is a popular qualitative method among social
scientists. In particular, its constructivist orientation has recently become
increasingly important in tourism research (Matteucci & Gnoth, 2017). In contrast
to Glaser’s (1978) objectivist and Strauss and Corbin’s (1990) postpositivist
versions of grounded theory, constructivist versions of grounded theory the
constructivist version of grounded theory (Charmaz, 2006, 2008, 2011) assumes
that the research process results from interaction, that data production and data
analysis are socially constructed, and that the goal of research is to increase
situated understanding. Furthermore, constructivist grounded theory encourages
researchers to process the data of their study by describing behaviours, engaging
in reflexivity (Charmaz, 2011).
The research questions of the article are:
₋ What changes are faced by Hungarian hotel market operators in 2020-
2022 and what factors have a negative impact on their business activities?
₋ How are hotel operators responding to the identified challenges and how
do these responses align with global best practices?
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RESULTS
The followings are the solutions to external environmental factors that have been
most often used to address challenges and improve efficiency, grouped under four
main areas.
Solution 1 - Reconstruction, refurbishment
Although favourable weather conditions led to much lower energy use than
planned in the period between 2021 and 2022, which somewhat compensated for
the increase in energy prices, owners and operators have recognised the need to
invest in energy efficiency (Knittel, 2022).
Key areas for reducing energy consumption include facility design and
construction, energy efficient building materials, insulation, lighting, air
conditioning, energy efficient appliances and equipment. For operating units,
retrofitting will result in significant additional costs in the short term, which will
only be recovered in the longer term for own property, and is less realistic for
rental units. It is mainly retrofitting insulation or replacing windows and doors,
lighting awareness and equipment replacement that offer an easier, simpler
solution for the whole range of operators. All of these retrofits do not negatively
affect the visitor experience and may even improve lighting or air conditioning
conditions to increase guest satisfaction (Yi et al., 2018).
In the domestic hotel market, different levels of energy-saving measures can also
be observed for different properties. Most commonly, the replacement of
traditional light bulbs with modern LED technology and the installation of
motion sensors are common, but automation of systems is not uncommon.
In Hunguest Hotels units, these solutions could achieve savings of up to 30-40%
in 2021 without reducing the guest experience, and these measures were
continuously reviewed during 2022, looking for additional opportunities to
improve energy efficiency, such as in the kitchen and laundry. Hunguest also
considered it important to educate employees to ensure that they took due care
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when operating energy systems (Fucskó, 2023). The training introduced the
importance of using no stand-by mode of electric devices or the elimination of
unnecessarily printed documents.
Renewable or clean energy is derived from natural sources that are constantly
being renewed, such as solar, wind, hydro, and geothermal energy (Hardy et al.,
2002). Of these, solar energy is the easiest to harness in urban environments - it
can be easily installed on roof structures - while geothermal energy also has good
potential in Hungary. In hotels operated by Hunguest, a renewable energy
investment programme was launched in early 2022, under which solar panels have
already been installed on four buildings and the technical construction of two
more is underway (Fucskó, 2023).
The Hotel Lycium in Debrecen has purchased the heat energy it needs to operate
from the local district heating company, which increased its costs to eighteen
times the 2021 annual price level in October 2022. This could not be managed
either by raising prices or by taking short-term energy efficiency measures, so the
hotel’s general renovation, which had been planned for several years, was brought
forward. This will include, in addition to the installation of solar panels, a
complete renovation of the building engineering services, the installation of
shading solutions and the reconstruction of the building’s insulation
(turizmus.com, 2022).
The Balneo Hotel Zsori Thermal & Wellness **** in Mezőkövesd, Hungary, has
launched an investment to modernise the building’s energy efficiency and increase
the use of renewable energy, using European Union funds. By installing a 28
square metre flat collector and a solar panel system with a nominal capacity of 50
kw, the hotel plans to reduce its current electricity consumption by almost a third,
which will be generated from renewable energy sources (balneohotel.hu, 2023).
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Solution 2 - Digitalisation
The change in the legal environment forcing digitalisation developments predates
the COVID period. The Hungarian Tourism Agency established the National
Tourism Data Centre in 2019. With the establishment of the system, it became
mandatory for all accommodation establishments to use accommodation
management software to provide online data. Many accommodation
establishments had to digitise their previously paper-based registration systems,
which posed a major challenge in terms of financial and human resources, not
primarily for larger hotels, but for smaller family-run houses, guesthouses or even
private accommodation providers. In many cases, digitisation in the front office
has also entailed a move to computerised record-keeping in other operational
areas, such as finance, purchasing and inventory management. The aim of the
introduction of the system is to make the accommodation market more
transparent and to eliminate the grey economy. This has been complemented by
the requirement for accommodation establishments to indicate in online
advertisements the type of accommodation and its registration number with the
National Tourist Information Centre, thus filtering out establishments that
continue to operate illegally (turizmus.com, 2020).
Hotels have been given a further step towards digitalisation during the COVID
period, when, starting from 1st September 2021, all lodging facilities were
mandated to digitally document all visitors’ personal papers - irrespective of the
age of the traveller. As a component of the registration procedure, lodging
facilities are obligated to employ a document scanner and property management
software to send the information. The visitor information documented in the
software through the digital document scanners is also added to the Guest
Information Closed Database in conjunction with the National Tourist
Information Centre. This stipulation has compelled lodging operators to acquire
supplementary hardware, and has additionally presented a hurdle for software
development firms.
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Social media has dramatically changed service industries such as hospitality and
tourism. During the epidemic, social media promotions have become standard
operating procedures for many companies. Live streaming allows viewers to
communicate and share ideas. A variety of live hotel business can attract hotel
customers, from kitchen cooking to hotel room tours to wedding exhibitions in
banquet halls. As a result, popular live streaming platforms enable hotels to create
online communities, initiate meaningful discussions about their products and
attract more hotel guests.
During the epidemic, people’s lifestyles quickly adapted to the new virtual reality,
including e-learning, e-commerce, electronic entertainment, live conferences and
remote work. A particular manifestation of the fear of the virus, of living in
quarantine, was the number of guests moving into hotels, who wanted to continue
their usual business life from the properties.
The COVID-19 pandemic has led more companies to turn to digital applications
to enable a work-from-anywhere economy and reduce risk in daily operations. In
some ways, the COVID-19 pandemic is accelerating enterprise demand for 5G
technology solutions.
Due to the COVID-19 pandemic, facial recognition hardware manufacturers have
developed contactless body temperature measurement and facial recognition
solutions to meet the urgent need to control the virus in a timely manner.
In many cases, the digitisation process has been forced upon accommodation
establishments by external circumstances. However, digitalisation is not only
essential for more efficient operations, but also for enhancing the guest
experience. Data-driven personalisation allows establishments to offer guests
personalised offers and services. Digital systems used in operations can help to
achieve significant savings in energy consumption, which helps to increase cost
efficiency. In addition, smart applications can also save significant amounts of
paper through digitised processes from booking to check-out, supporting the
sustainable operation of accommodation facilities. Digital technologies can also
148
reduce exposure to labour shortages, one of the most serious problems facing the
industry today. Digitalisation is primarily a means to increase efficiency and can
only replace a fraction of the tasks that require live labour. A common problem
is that unnecessary duplication of processes is generated because IT is more
advanced than the digital competences of employees (Potekhina et al., 2022).
In daily practice, guests mostly encounter digital room keys, which already existed
before, but the pandemic has accelerated the uptake of the service. Both
businesses and guests have recognised their usefulness in minimising personal
interaction. Self-check-in has also spread to many establishments in the aftermath
of the pandemic - online check-in, long used in air travel, has become a popular
service for guests (António & Rita, 2022). Many hotels support their guests’ hotel
stays with a smartphone application, which in many cases also controls the
technical equipment in the guest rooms. A common solution is to control lighting
or air conditioning via the app. Smart guestroom solutions also play a role in
energy efficient operation of guest rooms, reducing operating costs and
improving the guest experience. The continuous monitoring of guest rooms also
increases guest safety (Lam & Law, 2019).
KViHotel, a four-star hotel in Budapest, has fully digitised both the mandatory
(booking, payment, check-in, key collection and delivery) and the usual operation
processes (room status check, meal management, contact with reception/cleaning
staff, room temperature adjustment, taxi ordering, etc.). The advantage of this
solution is that there is no queuing and no waiting, all the tasks are placed in a
single online interface for the convenience of the guest. Thanks to digitalisation,
the cost of running the reception is minimal, while housekeeping costs are also
lower than in other units of similar size and service level (ekkv.hu, 2018).
The hotel industry has also discovered chatbots as a cheaper and faster way to
manage guest requests 24 hours a day. This means that even guests travelling from
another time zone can request detailed information about their future
accommodation at any time. The chatbot can also collect and forward important
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information to hotel staff. Both physical and voice-based robots require the
development of artificial intelligence adapted to the needs of the hotel industry.
The Barack Thermal Hotel & Spa in Tiszakécske has integrated the Bonomi chat
assistant into its website, which is a Messenger-based application, using chatbot
technology to automatically chat with visitors and guests (bonomi.io, 2023).
The application of AI-related technologies is evident in the accommodation
industry, and with the development of service robots in South Korea, the United
States, and European countries, especially Japan, we find more and more practical
applications of robotics in the accommodation industry (Yu, 2020). Although the
hotel industry is utilizing cutting-edge technology to provide a service that aligns
with the customer experience, widespread acceptance is lacking. Despite the
potential for artificial intelligence, automation, and other advancements to
transform operations and enhance customer service, there exists a certain
hesitancy to embrace them in favour of customization (Orea-Giner et al., 2022).
However, there are some industry-leading examples such as Connie, the AI-
powered concierge at the Hilton or the Savvy smart mirror at the Sinclair Hotel
in Texas.
Ketty and Bella, intelligent serving robots have been put on shift at Hotel Karos
Spa****. After the probationary period, Bella continues to assist the waiters in the
Food Garden, while Ketty continues to provide guidance and information to
guests in the lobby and occasionally event participants can also meet her at
conferences (karos-spa.hu, 2022).
Solution 3 - Reorganisation of hotel operation processes
While Covid-19 has had a significant impact on hoteliers worldwide, these
challenges also present opportunities for innovative redesigns. As hoteliers
reopen, they are forced to be more efficient. With no other options, the existing
management model was forced to be creative and aggressively adapt to the
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unprecedented situation, especially when it came to raising capital and realigning
operational strategies (Breier et al., 2021).
Notable features of hotels’ propensity to outsource include the wide range of
activities carried out, the high labour costs associated with many hotel activities,
and the volatility in demand for hotel services. Strong fluctuations in hotel
demand can be seen within economic cycles, a year, a week or even a day.
Consequently, outsourcing has been described as “part of hotel operations”
(Wood, 1999). Outsourcing is especially important in the travel industry, where
hotels are increasingly choosing to outsource a variety of non-core services, even
some that are more relevant to their competitive advantage. Today, the services
provided by providers cover almost all the activities required to provide
hospitality services. The decision to outsource can allow a company to free up
needed resources to focus on what matters most and invest in new or improved
ROI processes or new opportunities.
Due to the market challenges posed by COVID-19, hoteliers are often using
tactical and strategic outsourcing to increase efficiency and reduce costs.
Outsourcing in the future is expected to be more sustainable given the triple
bottom line (economic, socio-cultural and environmental). This type of
outsourcing should also have a positive impact on the hotel’s sustainable
performance. In addition, outsourcing can also facilitate the use of Industry 4.0-
related technologies in the hospitality industry, making them more accessible and
faster to implement (Espino-Rodríguez, 2023).
More and more, major corporations are seeking to completely outsource their
operational finance and accounting procedures, allowing them the freedom to
concentrate their financial assets on crucial strategic business value.
Furthermore, after the pandemic outbreak, Hungarian hotels enhanced HR
practices such as employee rotation, job mergers, and employee cross-training as
mandatory training elements (Grotte et al., 2021). Mercure Budapest Corona
implemented one of the best practices. The hotel closed for only three months
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when it was unable to accommodate guests during the COVID-19 pandemic. In
order to protect trained employees, no workers have been dismissed in a year.
Positions and functions were thoroughly reviewed to determine where there was
room for rationalization, which tasks were redundant, and who was suited for
what. Waiters were found work in other areas, such as workers in central
warehouses, security services or temporary help at reception (turizmus.com,
2020).
Since Shostack (1982), service blueprints have been widely used by service
providers as a tool for designing and managing service processes. Blueprints are
a way to visualize the process of a service. A service blueprint is an image or map
that provides an overview of the service system so that it can be objectively
understood and addressed by the various actors involved in the delivery,
regardless of their role perspective. The design process consists of four steps:
identifying all necessary processes, isolating failure points, establishing time
frames, and making cost-benefit analysis (Shostack, 1984). Because flexibility and
standardization are two major benefits of service blueprinting work, a successful
service blueprinting process must produce a blueprint that describes a
standardized process, but is flexible enough to meet the unique needs of
customers (Kelley, 1993).
As many hotels try to ensure the safety of their operations during the pandemic,
service blueprints help them assess existing hotel-guest personal relationships in
service processes and digitize or adapt protocols to the health emergency. As the
pandemic recedes, service blueprints are being used to improve efficiency,
emphasizing solutions such as streamlining redundant processes, standardizing or
involving guests in service delivery. Standardized service process, that is, the
international practice of operating under a hotel brand, is becoming more and
more common in the domestic hotel market, with some new brands entering the
capital (such as Intercity Hotel, Hard Rock Hotel, Eurostar), and newly opened
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countryside hotels (e.g., Tokaj, Mercure and MGallery; Debrecen, Mercure;
Szántód, Mövenpick hotel).
As one of the areas of sustainability, the reduction of waste and the recycling of
food waste has also become a focus of the hotels in the context of making
processes more efficient. For example, the hotels in the “Stylish Rural Hotels”
cooperative have gained a competitive advantage precisely through conscious,
environmentally friendly operation. The Hotel Nemzeti, Hotel Oktogon or
Mamaison Hotel Andrássy recycle food left over from breakfast through the
Munch meal-saving app.
A long-standing practice in the USA is to reward guests if they do not request
daily cleaning. For hotels, promoting guests to reduce housekeeping has multiple
advantages: it allows operators to adopt eco-friendly measures by consuming less
water, electricity, and cleaning substances; it assists them in reducing labour
expenses, and it motivates guests to join reward programs, which holds
significance for the chains.
From September 2020, the Royal Club Hotel plants a tree for every direct booking
in partnership with the non-profit organisation One Tree Planted, with a target
of 5,000 trees (hah.hu, 2020). Increasing the proportion of direct bookings will
help reduce the hotel’s commission to intermediaries and direct communication
with guests will also help build guest loyalty.
Although experts predicted a significant wave of hotel, restaurant and spa closures
in the autumn of 2022 (Vámosi, 2023), the mild winter, falling energy prices and
stronger foreign and domestic demand compared to previous years helped
accommodation operators to stay open. Kastélyhotel Sasvár in Parádsasvár, Hotel
Castello in Siklós, Hotel Solar in Nagyatád, Hotel Nagyerdő in Debrecen and
Danubius Hotel Hungária in Budapest will be closed for several weeks during the
winter of 2022-2023. In some hotels, departments (health, fitness) or floors are
closed in order to work more economically. In the end, the Hungarian hotel
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market lost only a few operators, such as Kincsem Wellness Hotel in Kisbér or
Zichy Park Hotel in Bikács. The Thermal Gara Hotel in Füzesgyarmat, the
Tiszavirág Hotel in Szeged and the Park Hotel in Harkány cease their operations
indefinitely.
Solution 4 - Employee and guest empowerment
Among the most important resources for a successful hospitality operation is the
talent of its employees. Recruiting and retaining a high-quality workforce remains
a major challenge for operators. Sharing power and authority regarding decision-
making empowers workers and improves their sense of self-efficacy, which is
positively related to their overall satisfaction on the job (Meng & Han, 2014).
Providing employees with empowerment promotes employee involvement in
decisions, the generation of good ideas, and the implementation of those ideas.
Embedding empowerment in an organization’s culture has been argued to
facilitate employee satisfaction, motivation, and productivity. In addition to
becoming more responsible, employees can also be motivated to develop their
capabilities and competencies by accepting more responsibilities. Empowering
employees involves sharing power and responsibility and obtaining their
commitment. It is well documented that highly committed and loyal employees
perform better at work and are more productive (Locke & Latham, 1990), possess
higher levels of responsibility, and are more satisfied with their jobs (Karim &
Rehman, 2012). Employee commitment is linked to low turnover rates, high
employee satisfaction, and high productivity (Sahoo, Behera & Tripathy, 2010).
Supervisors play a crucial role in acting as a mentor, offering guidance and
facilitation, rather than relying on the control and command approach. They
should regularly provide feedback to employees regarding work-related matters
so that they can consistently enhance their performance. Support from
supervisors and colleagues will stimulate employees’ enthusiasm to share their
ideas. Education also has a significant correlation with empowerment; therefore,
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employees should be exposed to various customer service training aspects not
only upon their initial arrival at the hotel but also throughout their careers. Those
who contribute ideas that benefit the organization should receive rewards,
whether monetary or non-monetary. Meanwhile, mistakes should be seen as
learning experiences or opportunities to grow rather than just a way for
management to assign blame (Ayupp & Chung, 2010).
In Hungary the training companies most often promote the following trainings:
leadership communication trainings, assertive communication training for
employees, effective feedback techniques for managers, training of peer coaches
for the development of the hotel organisation, understanding and managing
generational differences in the workplace community. In addition, the most
common empowerment tools in domestic hotels are the career programme, the
talent management programme, company events for employees and their
relatives, the employee exchange programme and the exit interview.
Danubius Hotels applies performance assessment system to get feedback on
employee contribution and employee satisfaction is measured through a public
opinion survey, these elements are incorporated to the Employee Value
Programme (danubiushotels.com, 2023). Katedra Danubius is the internal
management training platform at Danubiushotels. It aims to provide a practice-
oriented management approach to effectively motivate and manage hotel teams.
A further objective is to develop self-awareness and learn leadership techniques.
Each group will learn the skills through intensive training over seven months,
using highly practical methods. Many motivation and coaching sessions are also
provided, with one-to-one discussions and mentoring (Balassa, 2020).
In addition to cafeteria elements (health fund, pension fund, school start-up
allowance, travel allowance), the most commonly used incentives are the service
fee or the use of own services at a discount.
Mellow Mood Academy’s talent programme provides excellent development
opportunities and career planning for employees (mellowmoodhotels.com, 2017).
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The Hungarian University of Agricultural and Life Sciences and Mellow Mood
Hotels Group have signed a cooperation agreement for the implementation of
joint training, research and practical programmes under the supervision of the
Mellow Mood Academy in 2022 (uni-mate.hu, 2022).
The fusion of customer and employee contentment, it is contended, results in
enhanced organizational performance via, firstly, repeat business and positive
word-of-mouth endorsement, and, secondly, enhanced employee morale,
heightened exertion and reduced staff turnover and absenteeism, as well as
ingenuity and originality (Hales & Klidas, 1998).
While manufacturing companies have primarily relied on internalized research
and development procedures to generate innovative knowledge (Chu & Chan,
2009), the majority of hospitality enterprises are shifting their focus towards
external procedures that depend on knowledge generated by external sources,
such as clients, business partners, and competing firms (Williams & Cothrel,
2000). Importantly, numerous hospitality enterprises are utilizing online platforms
to facilitate customer interaction (Blazevic & Lievens, 2008). A crucial challenge
is to efficiently employ these platforms for the creation of innovative knowledge.
Effective customer interaction contributes knowledge that can be utilized for the
creation of new services or more personalized service offerings (Bogers et al.,
2017).
Traveller evaluations such as satisfaction, perceived quality and value, trust, and
safety gained more value during the pandemic. Perceived hazard is characterized
by uncertainty and outcomes, with escalating levels of uncertainty and/or a
growing likelihood of more severe adverse outcomes resulting in heightened
perceived risk (Oglethorpe & Monroe, 1987). Throughout the health crisis,
lodging providers employed a plethora of communication platforms to effectively
connect with and persuade visitors. The primary emphasis was on fulfilling guests’
desires for security and hygiene, which emerged as the predominant aspect shared
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among travellers. Encounters that evoked positive sentiments have notably
heightened the inclination of potential vacationers to embark on journeys (Sekar
& Santhanam, 2022). E-Word of Mouth (e-WOM) on social media platforms
played a crucial role during the COVID-19 pandemic; its contribution was vital
for communication throughout the period of quarantine. Hotels have recognised
the effectiveness of social media and e-WOM, which they continue to actively use
in the post-pandemic period.
To encourage guests to return, hotels have moved away from price marketing
tools to value creation and guest loyalty due to cost pressures. The significance of
providing exceptional customer value in the hotel sector is acknowledged as a
possible origin of competitive edge and a precursor to customer contentment,
allegiance, future buying intentions (Mohd-Any, Winklhofer & Ennew, 2015) and
recommendations (Prayag et al., 2017). Value can arise from the engagement
between the hotel and the traveller via a process of value co-creation in order to
devise distinctive or personalized guest experiences resulting in heightened levels
of customer satisfaction.
The Kecskemét 4Points by Sheraton hotel primarily caters to corporate travellers,
hence it is of utmost significance to offer top-notch services. Amidst the Covid
closure, the hotel’s in-house ticketing system underwent enhancements to
oversee, document, and supervise the upkeep and fixing of technological
apparatus within the hotel, alongside the housekeeping tasks concerning guest
rooms and communal spaces. The user-friendly cloud-based software, which is
uncomplicated in nature, also furnishes hotel managers with real-time updates on
the progress of tasks. The Customer Relationship Management resolution aids in
heightening guest contentment and enhancing customer loyalty (diosoft.hu,
2023).
Hotel brands expanded their loyalty programmes during the pandemic, and many
of them are investing significantly in maintaining their progress. Frequent traveller
programmes not only encourage direct bookings as customers accumulate and
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redeem their points, but they also provide hoteliers with a direct means of
communication with guests and incentivize the utilization of hotel restaurants,
bars, and spas, thereby increasing additional revenue. Hotel companies are now
making more development decisions with loyalty members in mind. As Covid-19
disrupted the guest mix, loyalty programmes were in need of a makeover. With a
decline in high-volume business travel, traditional loyalty programmes are no
longer practical. The most successful frequent traveller programmes now offer
more personalized incentives that cater to the needs of both occasional business
travellers and leisure travellers. Loyalty programmes play a crucial role in customer
retention, as many conveniences, such as mobile check-in and keyless entry, are
exclusive to loyalty programme members (travelweekly.com, 2022).
IHG Hotels and Resorts (represented in Hungary by Crowne Plaza Budapest,
InterContinental Budapest, Holiday Inn Budaörs, Vignette Collection Budapest -
Verno House and D8 Budapest) has completely renewed its IHG Rewards loyalty
programme for 2022. Five tiers have been created instead of the previous four,
and the way points are earned and used has also changed, offering a wider range
of options to programme participants (ihg.com, 2022).
Table 1. Key areas of challenges and usual responses in the Hungarian
hospitality market in the examined period
1. Reconstruction, refurbishment
₋ facility design and construction, energy efficient building materials, insulation, air
conditioning, energy efficient appliances and equipment
₋ replacement of traditional light bulbs with modern LED technology, installation
of motion sensors, installing automation systems
₋ use of renewable energy (solar, geothermal)
2. Digitalisation
- IT development to be compatible with National Tourism Data Centre and Guest
Information Closed Database
- e-conference solutions and remote work – hotels became places of quarantines
or safe areas to be in
- digital applications to enable a work-from-anywhere
- contactless body temperature measurement and facial recognition solutions to
diagnose ill persons
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- contactless check-in and check-out, use of electronic keys
- smartphone application to support hotel guest experience
- use of chatbots
- use of AI and robots
3. Reorganisation of hotel operation processes
- outsourcing activities to reduce labour shortages
- employee rotation, job mergers, employee cross-training
- service blueprinting
- standardisation
- reduction of waste and recycling of food waste
- rewarding guests if they require no housekeeping services or making direct
booking
4. Employee and guest empowerment
- sharing power and authority regarding decision-making, embedding
empowerment
- mentoring, offering guidance and facilitation
- performance assessment system to get feedback on employee contribution and
employee satisfaction
- career planning for employees
- leadership communication trainings, assertive communication training for
employees, effective feedback techniques for managers, training of peer coaches
for the development of the hotel organisation, understanding and managing
generational differences in the workplace community
- active use of social media platforms to keep contact to guests and to promote
properties
- reshaping of guest loyalty programmes
- Customer Relationship Management solutions
Source: compiled by the author
CONCLUSION, SUGGESTIONS
The challenges, which came in several waves, generated a wide spectrum of
responses from service providers, mainly in the short term. However, dealing with
an emergency immediately, does not offer long-term impact, and once it has
passed, changing circumstances present a new challenge. This is why it is
important to define short and long-term strategies simultaneously, as the guest
encounter and the exceptional level of service to guests are consistent
anticipations that should not be undermined. As such, many believe the COVID-
19 pandemic to be a significant turning point in tourism that afforded the
159
opportunity to consider the environmental and social issues that are pertinent to
the sector and initiate a new course in tourism management (Séraphin &
Gowreesunkar, 2020).
It should be emphasised that successive challenges have forced hotel operators to
carry out renovations and improvements that have been delayed, and to retrain
or reskill their staff. In addition, the social responsibility of hotel operators has
been strengthened, primarily through collaborative efforts to retain employees. It
has been demonstrated that operators can effectively address the situation by
discovering innovative solutions of their own.
At the same time, the vulnerability and fragility of the sector has also become
clear, which in the long term reminds the decision-makers that, by learning from
the situation and considering the acquired knowledge, they must be more
deliberate in preparing for similar crises in the future. Moving forward, the
successful lodging providers will be those who can promptly and appropriately
respond to the altered situation, based on their abilities and circumstances, and
utilizing their resources consciously.
The reconstruction or refurbishment projects have long-run returns, however
increase guest experience mostly in short term. Preference may be given to design
or boutique hotels whose operating model is based on keeping the interior design
and appearance constantly modern and in line with trends. The presence of local
folklore or traditions is a distinctive feature of an increasing number of hotels
(e.g., Hungarikum Hotel, Castellum Hotel). Sustainability should also be a key
aspect of reconstruction projects, and is increasingly expected by guests.
Significant resources must also be devoted to retaining employees, which can be
achieved by more extensive internal training, expanding the cafeteria system or
supporting atypical employment.
Another crucial domain is the implementation and continuous advancement of
digital technologies, which have demonstrated their effectiveness and suitability
throughout the COVID-19 outbreak. Moving forward, digital technologies will
160
have a significant impact on streamlining services and other procedures, as well
as guaranteeing contact-free services. Additionally, digital technologies have the
potential to elevate the guest experience in hotels, particularly for Generation Y
and Z, while simultaneously boosting productivity.
The business process management is evident in executing operational business
processes and tasks with a greater degree of effectiveness. The utilization of this
approach enhances the adaptability of a hotel company, ability to innovate, and
the pace at which innovations are implemented in response to the needs of hotel
guests. As there are no limitations between functional divisions, employees are
increasingly perceiving the organizational goals as their own, leading to a greater
contribution to the competitive strategy and its expedited achievement.
Consequently, continuous improvement and responsiveness will play a key role
in the market success of hotel operators.
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ISSN 2630-886X
