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The Performance of the Israeli Hospitality Industry:
An Evaluation of Crisis Periods and of Different Locations
Aviad A. Israeli
Department of Hotel and Tourism Management
The Guilford Glazer School of Business and ManagementBen Gurion University of the Negev
Beer Sheva, Israel 84105
Tel: +972 8 6461254
Fax: +972 8 6472920
Email: [email protected]
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Managers and Their Crisis Management Practices
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Importance and Usage ofHospitality Crisis Management Practices
The study of hospitality managers crisis management focused on
evaluation of
the importance of practices that assist the organization in times of crisis
the level of usage which managers report for each of these practices
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TitlePracticeCategory
Practice 1Firing employees to reduce labor forceHuman
Resources
Practice 2Using unpaid vacation to reduce labor force
Practice 3Decreasing number of working days per week
Practice 4Freezing pay rates
Practice 5Replacing high-tenure employees with new employees
Practice 6Increased reliance on outsourcing
Practice 7Marketing to domestic tourists in joint campaigns with local merchants (such
as Visa, MasterCard)
Marketing
Practice 8Marketing to domestic tourists with focus on specific attributes of the
location
Practice 9Price drop on special offers
Practice 10Reducing list price
Practice 11Marketing to foreign tourists with specific focus on the location's distinctive
features and relative safety
Practice 12Marketing and promoting new products or services (family events, catering)
Practice 13Marketing to new segments (such as ultra orthodox)
Practice 14Cost cuts by limiting hotel servicesMaintenance
Practice 15Cost cuts by postponing maintenance of the building (cosmetics)
Practice 16Cost cuts by postponing maintenance to the engineering systems
Practice 17Extending credit or postponing scheduled payments
Practice 18Organized protest against the lack of government supportGovernment
Practice 19Industry-wide demand for governmental assistance with current expenses
Practice 20Industry-wide demand for a grace period on tax payments
Practice 21Industry-wide demand for a grace period on local tax (municipality) payments
PracticesHospitality Crisis Study
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PropositionsHospitality Crisis Study
There will be a strong positive correlation between the importance oneassigns to a certain practice and the level of usage of this practice (a necessarycondition for rational and coherent crisis management)
Both importance and usage practices will follow the constructs ofhuman
resources, marketing, maintenance, andgovernment(i.e. construct validity)
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Research PopulationHospitality Crisis Study
328 general managers from all of the hotels in Israel registered with theMinistry of Tourism.
116 usable questionnaires (response rate of 35%)
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Main FindingsHospitality Crisis StudyCorrelation between Importance and Usage
Correlation for all practices was significant and positive
For the four practices with the highest correlation (freezing pay rates,pricedrop on special offers, reducing list priceand cost cuts by postponing maintenance to theengineering systems) the average means for usagewere higher than themeans for importance.
One possible explanation is that these four practices have been extensivelyused in past crises and are almost automatically considered when a newcrisis arises.
In the other practices importancewas higher than usagewhich maysuggest that possibly more could be done.
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Main FindingsHospitality Crisis StudyFactors of Practices Importance and Usage
Practices Importance
Factor 1 reliance on government andmarketing
Factor 2 maintenance cost cuts
Factor 3 lowering prices through laborcutbacks
Factor 4finding neglected segments andtightening employment terms
Practices Usage
Factor 1 cost cutting practices
Factor 2 recruiting government support
Factor 3 massive marketing
Factor 4focused marketing and shorterworkweek
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Hospitality Management Performance
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Management Performance
Top-down approachperformance is externally defined (by topmanagement or by forces or standards outside the organization) andthen used to monitor and evaluate management
Bottom-up approachmanagers perceive performance and definewhat it is and then act accordingly
The study investigated the following issues Do managers in the hospitality industry have a clear perception (and
definitions) of their organizations performance
Do managers understand the service and production dimensions of theirperformance
Do managers perceive one or both dimensions as significant Do managers evaluate themselves as performers on these dimensions.
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Management PerformanceProfile Combinations
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Research PopulationManagement Performance
328 manager, members of the Israeli Hotel Association
60 useable questionnaires were returned (a response rate of 18%)
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Main FindingsManagement PerformancePerception of Performance Measures
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Main FindingsManagement PerformanceAction on Performance Measures
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DefinitionsEffectiveness and Efficiency
Effectiveness and efficiency are two common terms in management
Effectiveness is generally described as doing the right thing. This usually
includes all the activities that will help the organization reach its goals
Efficiency is generally described as doing things right. It is defined as
getting the most output from the least amount of inputs, and themeasurement is generally done using a ratio of inputs to outputs
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DataEffectiveness and Efficiency
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FindingsEffectiveness and EfficiencyAre Managers Effective and\or Efficient
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Industry PerformanceCrisis Vs. No-Crisis PeriodsDifferent Locations
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Crisis Impact on HospitalityThe Effect of Location
Eilat is a resort and vacation destination in which a largeproportion of the hotels has a corporate affiliation; thuscorporate intensity is relatively high. Another characteristic ofEilat is that it has a relativelylow level of foreign visitors. Tel
Aviv is a business center with a relatively average level ofcorporate intensity, which traditionally had a relatively highproportion of foreign visitors.
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Crisis Impact on HospitalityComparing Occupancy
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000
-09
2000
-12
2001
-03
2001
-06
2001
-09
2001
-12
2002
-03
2002
-06
2002
-09
2002
-12
2003
-03
2003
-06
2003
-09
2003
-12
2004
-03
2004
-06
2004
-09
2004
-12
2005
-03
2005
-06
2005
-09
2005
-12
2006
-03
2006
-06
2006
-09
2006
-12
2007
-03
2007
-06
2007
-09
2007
-12
2008
-03
occupancy Israel Occupancy Tel Aviv Occupancy Eilat
Crisis period
No crisis period
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Crisis Impact on HospitalityComparing Yield
In its basic definition, which was introduced by Orkin (1988), yieldis computed by dividing the revenues realized by the revenuepotential. More specifically, yield is:
PotentialRateAverage
RoomsSoldofRateAverage
SaleforAvailableRooms
SoldRoomsYield
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Crisis Impact on HospitalityComparing Yield
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000
-09
2000
-12
2001
-03
2001
-06
2001
-09
2001
-12
2002
-03
2002
-06
2002
-09
2002
-12
2003
-03
2003
-06
2003
-09
2003
-12
2004
-03
2004
-06
2004
-09
2004
-12
2005
-03
2005
-06
2005
-09
2005
-12
2006
-03
2006
-06
2006
-09
2006
-12
2007
-03
2007
-06
2007
-09
2007
-12
2008
-03
Yield proxy Israel Yield proxy Tal Aviv Yield proxy Eilat
Crisis period
No crisis period
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Conclusions
Managers generally know what to do in times of crisis, butfail to perform
Managers are unclear about the true meaning of
performance in their organizations The outcome is that managers are generally effective but
during crisis periods, they turn their attentions to efficiency
Crisis have a different impact on the industry. Some areas
consistently perform above average in times of crisis andbelow average under no-crisis conditions.
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