Challenges And Progress In The Hospitality Industry Commerce Essay

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Sustainability within business is not a matter of black and white. It is a complex endeavour and therefore has a lot of challenges and opportunities. Indeed, businesses are now more determined than ever to tackle the sustainability challenge, to be socially responsible, reduce their environmental impacts, act ethically and be more accountable and transparent to stakeholders and the society.

In fact, consumers and stakeholder urge businesses to act more socially responsible and they are being asked to pay attention to business ethics. This has become more important as companies expand globally. In this paper I will focus on the hospitality industry (i.e. hotel industry) as a business enterprise of my interest. I will critically look at the major challenges the hotel industry is facing in progressing towards sustainability, what is being done to achieve corporate sustainability, and what further steps need to be taken in order to become a sustaining corporation.

1.1 Background

On the whole, the hotel industry has been lagging behind in sustainability. Though it is true that the leading brands are now embracing a more sustainable approach, for the vast majority of the hotel sector there is still a long way to go when it comes to basic environmental management issues. For example, in 2008, the CERES coalition of investors, environmental groups, and other public interest organizations reported that the travel and leisure industry was a poor-performer in their analysis of governance and climate practices, scoring only 27 out of a possible 100 points and sitting next-to-last among 11 sectors surveyed (CERES 2008, pp 40-45).

Needless to say the hospitality industry is a multibillion-dollar industry as it renders its goods and services to millions of people all around the world. This number is expected to grow even more in Australia over the next decade. People are travelling ever more and thus the demand for hotel accommodation is growing. According to the Australian Government, Australian tourism forecasts project that by the end of 2010 Australia will have had 5.9 million inbound tourists (Australian Forecasting Committee 2010). The whole tourism industry employs an estimated 482,800 people. This makes up about 4.7% of total employment in Australia (Australian Hotels Association 2009). A business of this magnitude is bound to have huge effects on the social, economic and political aspects of a country. Hence this enterprise has a great potential to contribute to corporate sustainability.

So what are the challenges that are being faced by the hotel industry in progressing towards sustainability? My answer here relates to a few issues, ranging from: globalisation, the energy to power sustainability, and financing sustainability. I will discuss these issues below and thereafter I will look at what is being done to convert these challenges mentioned above into opportunities. Finally, I will discuss what can be further done to steer hotel industry into becoming a socially responsible enterprise.

2. Challenges

1.1 Globalisation

Globalisation can be said to be a two double sided sword: one side offers opportunities and the other challenges. For instance, one of the issues that has been brought about by globalization is the fact that it has increased the gap between rich and poor, because the policies that drive globalisation have mainly focussed solely on the needs of business (International Labour Organisation 2002). One of the contributors to this widening gap between rich and poor has been brought about by (weak) labour rights. Indeed, the hotel industry is no exception to this. Although part of the industry has addressed the issue of the environment for a long time, the main issues that has emerged with globalisation - and that has not been properly addressed - is the issue of labour rights (Dodds & Joope 2007). Labour rights include issues such as: wages, women rights, the requirement of skills and the right for employees to join labour unions.

In 2007, the International Society of Hospitality Consultants listed top 10 challenges that the hospitality industry faces. Top amongst them were labour rights. The main problem highlighted was the problem of attracting and retaining skilled labour, which has become a global sustainability issue. The wage level issue, and failure to address job satisfaction is a huge problem in the hotel industry as well. Needles to say being employed in the hotel industry mainly translates to low wages and long working hours, which is integral part of the labour rights issues. Corporate sustainability includes the integration of human capital and ensuring that staffs are well trained and included as a sustainability mission. The latter means that; an organisation has to tap and nurture their employees' knowledge and skill (Dunphy 2010 pp.154-155). By doing so a company gains competitive advantage which is based on the development and utilization of the human capital in designing a more stringent sustainable workforce.

1.2. Energy to Power Sustainability - Business of Business is Business

Does the hotel industry feel that they have the energy to power sustainability? In other words: why should they bother? Just like any other business enterprise the hotel industry feels that they are in the business to make money. More importantly, it the hotel industry also feels that the product that they sell (service) is highly perishable and once it is not sold it can't be stored to be sold the next day, therefore the business goes at a loss due to this fact. So, one of the tensions that have emerged with the sustainability goal is that most executives have framed sustainability as a limitation for business and to some extent a cause for loss instead of profit. "But in a world where consumption outgrows the planets ability to regenerate its raw materials, businesses that figure out how to deliver enhanced value by radically reducing material inputs and investing in sustainability will be well-positioned for success" (World Commission on Environment and Development 2005). The hotel industry executives may think of sustainability as a distraction from the core duties of the company, which is to produce goods and services. However being sustainable for some executives is an additional duty that they would rather not deal with. From this vantage point the executives are sometimes unable or unwilling to juggle profit making and sustainability at the same time - that is ensuring that they are consistently maximising their profit while investing in a socially responsible manner. As Milton Friedman the Noble -Prize winning economist once asked: "do corporate executives, provided they stay within the law, have responsibilities in their business activities other than to make as much money for their stakeholders as possible" (New York Times Magazine 2000). This means that there is still a fundamental belief that a business' primary obligation is to provide higher financial investments to its investor in terms of higher stock and dividends.

1.3 Financing Sustainability

Another challenge being faced by the hotel industry is the initial investment in sustainability. Sustainability can be said to be expensive especially if the hotels have to change their facilities - for example when they invest in florescent bulbs that are energy saving but in fact last longer would mean changing the wiring of all the rooms in a hotel. More so, it could also mean changing suppliers to those who share the same mission with the company and ensuring that the suppliers also are acting sustainably. This will mean that most of the equipment that was bought will be considered redundant before the equipments 'life' is over - meaning that the equipment was not used to its maximum and thus resulting to a loss for the company. In essence, sustainability is mainly built on reducing consumption and increasing longevity use of materials, which should produce monetary savings in the long-run. However, many times this notion is sometimes lost in translation, making businesses reluctant to adopt sustainable practices (Corporate Social Responsibility Newswire 2007). The challenges of financing sustainability goals have been an issue especially during these times of economic downturn. The hotel industry feels that they should tighten their belts more and that they should not be spending any money in any activities rather, they should be saving in every way possible.

Hence given these challenges one might ask: What are the hotel industries prospects to conquer these challenges and turn them into opportunities? In other words, what is the hotel industry to progress toward corporate sustainability?

3. Moving Forward

The hotel industry is in every way trying to catch up with being sustainable even with the above challenges that have been mentioned. Some of the things that the hotel industry is doing to progress towards sustainability are:

3.1. Reputation and Brand Building

Research has shown that between 50-90 percent of a company's market can be attributed to reputation (Sustainability Handbook 2007 p.41). This leaves little doubt that the hotels industry reputation and brands are valuable. The hotel industry executives have therefore ensured that the hotels are aligned with sustainability and this also means acting responsibly and sustainably. For instance, hotels like Hilton, Marriot and Scandic amongst others have built their brand and reputation by recently joining the worldwide sustainability movement "Team Earth." This is a movement that unites businesses, non-profit organisations and individuals to address five important environmental issues: climates, water, health, waste and food - this initiative presents an opportunity for actions and presents solutions for a more sustainable world (Marriot News Centre, 2009). A good example of reputation and brand building through sustainability is the Scandic hotels invest heavily on staffs which are a core concept of globalisation. The staffs undergo intensive training on environmental issues and sustainability. Through this, the hotel is able to only hire the best of the best. Combined with other factors they have received international reputation and built their brand name by receiving prestigious awards from various recognised institutions (Scandic 2008). The International Hotel and Restaurant Association named Scandic as "Highly Recommended "in 2004 and the chain received the "Environmental Award" in 2005.

3.2. Sustainability as part of the Strategic Plan

In order for hotel executives to have the power and will to power sustainability, they are aligning their sustainability mission into the company's strategic plan, giving the business thereby corporate longevity and survival (Dunphy 2010 p.156). This aspect is important because if the business aligns sustainability with their strategic plans, this gives the business a competitive advantage over its competitors - it acts as a core competency for the business and strength in the internal analysis of a company's Strength, Weakness, Opportunities and Threats (S.W.O.T). For example the Hilton Inc. Sustainability plan that is in their strategic plan is to have zero waste by 2015 (Hilton Newsletter 2005). By aligning this to the strategic plan it helps motivate the executives into fulfilling the milestone. This is done by keep a track of the progress by the use of a score card which is used as a global reporting initiative (GRI). This will also include sustainability into the financial plan of the company. Hotel industry will realise that in fact sustainability helps the business cut costs like for example saving water, electricity and waste. Though the initial investment might be expensive as mentioned earlier the benefits are reaped in the long ran.

Having said this, is there anything more that business can do so as to progress toward being a more sustainable corporation? The answer is yes: in order for a company to achieve superior performance they must do more:

3.3. Transparency

By communicating the performance of the company internally and externally the executive can show employees and stakeholders what has being going on and what needs to be changed or improved. This way the sustainability report with the aid of the GRI as a form of a score card acts as a part of a check to ensure that the business is heading in the right direction. Transparency, spurs change because it invites scrutiny and positive feedback and reaction from stakeholders from whom the company needs the support (Global Report 2006)

3.4. Engagement with Stakeholders (NGOs)

It is important for the hotel industry to create alliance with other NGOs so that they can help create opportunities and solve problems together, as seen earlier in the case of the Hilton group that joined the "Earth Team", which includes NGOs and individuals and this is a step that the entire hospitality industry should follow. These stakeholders also include activists, communities, investors, suppliers, joint ventures partners, employees and others who may affect the company or perceive they may be affected by it (Yaziji 2004). NGOs have great impact on public opinion and governments; therefore they can come handy in having profound effect on regulations thus hotel industries would benefit from creating alliances with NGOs.

4. Conclusion

In conclusion, it is evident that the hotel industry is not immune to all the challenges of becoming a sustainable corporation especially when it comes to labour issue - a factor mainly driven by globalization. It is also evident that a lot of executive find investing in sustainability a bother and also costly. However, it is also true that though investing and switching to sustainability is costly and takes time it is also true that the company will reap the fruits in the long run as they will have invested in cost cutting strategies, which then could translate into higher revenue. It is also important for the company to include sustainability in their strategic plan and keep a record such as a score card to keep track of the progress.

With this in mind, there is little doubt that the hotel industry will progress towards sustainability and build their brand which will then enhance their reputation. A good example is the Scandic hotel. However, there is still so much more that can be done. Some of the things that could be done by the hotel industry for instance are to enhance transparency, where they report what is going on within the company to the general public. Together with aligning the company's sustainability to the business mission and vision, the company should also look at forming alliances with NGOs in order to benefit from their knowledge and influence.

This are just but a few things amongst others that business would do to conquer the challenges and move towards a more sustainable corporation.