Non-Core Sector and its Outsourcing
Maintaining a healthy balance between core and non-core ancillary products is imperative for a sustained generation of desired revenue levels. Creating the internal processes and systems which facilitate the sale of ancillary services is just as necessary. The opportunity for non-core sectors of revenue is immense. Tickets to museums, insurance services, sporting events, and concerts, in addition to the already existing core services, add to the dynamism of the living space offered to the guests.
It isn’t that non-core services weren’t being provided earlier. From late check-outs to convenient parking, fast internet and spa treatments, hotels have been providing these services for a long time to enhance their customer’s experience. However, a re-evaluation of the circumstances and the modus operandi of these services needs to be done in the wake of changing situations worldwide due to the pandemic.
One can draw inspiration from the aviation industry, which derives a considerable part of its earnings from ancillary services. Some American airlines generate nearly 40% of their revenue from these ancillary services. This comes from a wide array of services, including bigger seats, pre-landing taxi and hotel booking, shopping for different products and even discounts on upcoming flights. Such an approach helps to widen the income source for a particular business. However, an effective MO for executing such non-core activities should be undertaken. This leaves hotel owners mainly two choices: either to perform the non-core activities in-house or to outsource them. Taking either option depends on the hotel’s circumstances and some considerations.
Outsourcing of non-core sectors can have its share of advantages and disadvantages. Hotels outsourcing their non-core sectors typically do it to focus more on the core sector and also to maintain a competitive edge. However, such an outsourcing exercise should be backed up by sustainable goals and not for short-term goals of cost saving. Though saving resources is one of the aims of this exercise, an unsupervised decision can often result in unexpected costs to the hotel itself.
Outsourcing helps hotel customers receive a better quality of service at a cheaper rate. The supplier’s specialization level in the particular field can also help raise the hotel’s standard in that field. Outsourcing also instils a sense of market discipline in the organization, which in turn induces the business to add powerful incentives to raise productivity, innovate and constantly keep improving the quality of the product. Moreover, in the case of a change in consumer preferences, finding a new supplier with better and cheaper resources is much more economical than scrapping and constitutes a whole department within a hotel. All of this can help concentrate on the hotel’s functions which are carried out strictly by the staff.
However, one should be wary of specific points where being careful can help expedite the development process of the hotel. Firstly, confidential information should be handled carefully with outsiders as its loss can lead to the loss of the hotel’s competitive advantage. In the extreme case scenario, the transfer of excessive amounts of services to outsourcing companies lead to complete dependence on external factors for its survival. Hence a balanced approach should be adopted, keeping the hotel’s integrity and revenue intake on an equitable basis.
Discuss such topics at the Hospitality Management College at Amrapali Institute, Haldwani. Amrapali Educational Institute is a top-ranked institute in Uttarakhand.