Cornell CHR Reports

Competitive Hotel Pricing in Uncertain Times

Thu, 02 Jul 2009 12:03:58 EST

This analysis of the pricing (ADR), demand (occupancy), and revenue (RevPAR) dynamics in the U.S. hotel industry for the period 2001 through 2007 demonstrates the potentially negative consequences of attempting to maintain market share by offering prices below those of direct competitors. This seven-year study examined the outcomes of pricing behavior on total rooms revenue and occupancy for hotels and their competitors in both bad times (2001-2003) and good (2004-2007). The results are the same in both periods. Hotels that offer average daily rates above those of their direct competitors experienced lower occupancies compared to those other hotels, but recorded higher relative RevPARs. For 67,008 hotel observations, this pattern of demand and revenue behavior was consistent for hotels in all market segments, from luxury to economy. Overall the results suggest that the best way to have better revenue performance than your competitors is to have higher average rates. The findings suggest that lodging demand may be inelastic in local markets, and hotel operators may wish to resist the pressure to undercut competitors when possible.

Managing a Wine Cellar Using a Spreadsheet

Wed, 20 May 2009 15:34:57 EST

Using examples from a new Wine Cellar Management Tool, this report describes the many spreadsheet-based analyses in this tool that can assist an individual, restaurant, or bar to manage a wine cellar. If one is disciplined about recording the inflows and outflows to and from the cellar, the spreadsheet tool will provide several cellar analyses. In addition to providing insight into the key questions of what to consume and what to promote, the tool shows such interesting and informative analyses as appellations, vintages, and types of wine. In the tool described in this report, the spreadsheet itself incorporates form-based sets of data entry fields. The Wine Cellar Management Tool, which is available at no charge from The Center for Hospitality Research at Cornell University, does not require actual knowledge of how to construct a spreadsheet. It does require diligent data entry regarding wine purchases and withdrawals.

The Wine Cellar Management Tool
Download The Wine Cellar Management Tool

$ or Dollars: Effects of Menu-price Formats on Restaurant Checks

Mon, 15 Jun 2009 10:37:53 EST

Empirical research on menu design and price presentation has focused primarily on menus’ effects on consumers’ attitudes, and not necessarily on actual purchase behavior. This study examines how customers reacted to menus’ price formatting in terms of actual sales, as measured by check totals for lunch at St. Andrew’s, the restaurant at the Culinary Institute of America, in Hyde Park, New York. Price formats tested in the study were a dollars and cents numerical format with a dollar sign ($00.00), a numerical format without a dollar sign (00.), and scripted or written-out prices (zero dollars). While the numerical manipulation did not significantly affect total spending when compared to such non-menu factors as party size or length of time at the table, the price formats did show noticeable differences. Contrary to expectations, guests given the numeral-only menu spent significantly more than those who received a menu with prices showing a dollar sign or those whose menus had prices written out in words. Psychological theory, by contrast, predicted that the scripted format would draw higher sales. Although these findings may apply only to lunch at this particular restaurant, they indicate that menu-price formats do influence customers’ spending, both in terms of total check and spending per cover.

Customer Preferences for Restaurant Technology Innovations

Wed, 29 Apr 2009 11:22:01 EST

When restaurateurs evaluate whether to adopt technology-based service innovations, they must consider not only the costs and benefits of that technology, but also customers’ reactions to the procedural changes accompanying the innovation. Technology that damages customer satisfaction may not be worthwhile, no matter how much it reduces labor costs. In this report we present the results of a national survey on customers’ perceptions of eleven restaurant technologies, as well as whether respondents use those technologies and the value they see in them. The technologies are pagers for table management, handheld order taking while waiting in line, internet-based ordering, kiosk-based payment, kiosk-based food ordering, online reservations, payment via SMS or text message, payment via (RFID) smart card, payment via cell phone using NFC technology, virtual menus available tableside with nutritional information, and virtual menus online with nutritional information. These technologies are categorized in the following five categories: kiosk, menu, online usage, payment-based service innovations, and queuing. Using a research technique called best-worst choice analysis, the study found that the technologies used most commonly were pagers and online reservations, while cell-phone payment was used hardly at all. The results show that the perceived value of a specific technology increases after the customers have had the opportunity to use it, and different demographic segments valued the technologies differently. Frequent technology users visited restaurants more often than infrequent technology users did.

Fostering Service Excellence through Listening: What Hospitality Managers Need to Know

Mon, 06 Apr 2009 15:55:21 EST

Amid the “noise” created by increased use of computers and other technology, the ability to listen takes on increasing importance for hospitality employees. Listening is essential in the course of delivering personal, customized service. A survey of eighty-three hospitality managers found the highest agreement with the statement that effective listening is vital to business success. For hospitality organizations, that success is tightly linked to the quality of service produced by employees. At the same time, survey respondents gave their lowest agreement to the statement that most members of their organization listen well. Listening is the foundation of two organizational processes essential to service delivery, one involving the accurate exchange of information and the other facilitating the development of strong relationships. Employees who are good listeners have a willingness to listen and an awareness of their own listening ability (although that may be overestimated). While developing listening competencies is not easy, it is possible for managers to improve their service employees’ listening abilities through modeling effective listening and offering training that is then augmented in the workplace—all the while improving service delivery. In addition to the rapid pace of the hospitality industry and interference from technology, one other barrier to effective listening is the diversity of employees and guests. Not only cultural differences, but also gender and age differences influence listening styles and effectiveness.

How Restaurant Customers View Online Reservations

Thu, 25 Jun 2009 16:25:04 EST

Restaurant customers appreciate the convenience of being able to make restaurant reservations online, but they also like the personal touch of telephone reservations. A study of 696 restaurant customers found that nearly one-third had made an online reservation. Those who made reservations online tended to be younger than those who did not, and online users also ate out more frequently. Those who made online reservations considered those reservations to be significantly more convenient than telephone reservations, and the online users also thought that websites gave more information about a restaurant than what they learned by calling on the telephone. At the same time, those online users felt that they had a better personal connection with the restaurant when they made telephone reservations. This tradeoff between efficiency and service perceptions points to a strategy of offering reservations via both methods. Emphasizing the convenience of online reservations may encourage customers to use the website, and that will give restaurant operators more information about their customers. Whether a restaurant uses a third-party reservation service or builds its own website, one key to ensuring a successful reservations process is to make the electronic process as straightforward as possible.

Key Issues of Concern in the Lodging Industry: What Worries Managers

Wed, 04 Mar 2009 14:07:17 EST

Human resources management is the most troubling issue of concern to managers and executives in the lodging industry worldwide, according to a survey of 243 managers taken during 2008. The study identified a common set of shared problems that impede the ability of industry leaders to manage effectively, with human resources issues being at the forefront. Over 60 percent of respondents from six different regions of the world in both general manager and executive positions reported that the human resource issues of attraction, retention, training, and morale were key areas of concern. Other problems include economic and environmental matters, understanding customer needs, rising operating costs, and thinking strategically in a competitive environment. The study provides an update to a similar study conducted in 2001. Certain issues identified in that earlier study, including information technology and branding, have dropped from hotel executives’ list of concerns.

Don’t Sit So Close to Me: Restaurant Table Characteristics and Guest Satisfaction

Tue, 27 Jan 2009 12:55:53 EST

Managing restaurant capacity effectively includes making sure that the dining room is equipped with sufficient tables of the appropriate size and type to meet expected demand. Restaurateurs usually make a point of seating parties at the right-size table to maximize seat utilization, and some restaurants set tables fairly close together to make the best use of the available floor space. We examined whether providing guests at a full-service restaurant in New York City with extra personal space improved their satisfaction and meant increased spending or longer lengths of stay. Guests seated at tables that were larger than necessary (that is, parties of two seated at four-tops) did not have significantly different perceptions of satisfaction or spending behavior from those seated at right-size tables (that is, at deuces). However, parties at closely spaced tables reported significantly reduced satisfaction, as well as lower spending per minute when compared with widely spaced tables. Patrons dining at this New York restaurant seemed uncomfortable when tables were set as close as seventeen inches apart, and were more satisfied when the distance was closer to a yard apart. These findings, which apply to the dinner period at a fine-dining restaurant, offer support for the practice of seating parties at appropriately sized tables, and suggest that restaurant operators give careful consideration to the spacing of tables in the dining room.

Compendium 2009

Wed, 11 Feb 2009 13:21:01 EST

The 2009 Compendium is an anthology of the more than 40 reports, tools, and white papers published by the center in 2007 and 2008. Authors include numerous faculty members of the Cornell School of Hotel Administration, as well as the University of Utah, the National University of Singapore, and Ohio State University. Contributing practitioners include the general manager of the Willard Hotel and the managing director of MindFolio. The compendium contains executive summaries of all reports, conveniently arranged by topic. Categories are communication, finance, human resources, marketing, and operations and management for both hotels and restaurants. All the reports, tools, and white papers described in the compendium, as well as the compendium itself, can be downloaded at no charge by following the simple registration instructions on this web site.

The Job Compatibility Index: A New Approach to Defining the Hospitality Labor Market

Mon, 12 Jan 2009 12:09:12 EST

Both employers and employees usually look within the confines of their own industry when they are thinking about filling or taking a job. When the labor market is tight, however, hotel operators might be better off if they could consider workers from other industries who have skills that would fit them for hotel jobs. By the same token, when the job opportunities are rare, job seekers can look outside of their current industry for positions that match their skill set. (This would include unemployed hospitality workers, who could seek compatible jobs in other industries.) Because existing sources that give listings of comparable jobs do not explain how or why they match up various jobs, it makes sense to use a human-capital approach to comparing jobs. This means analyzing and matching the individual skills, knowledge, and abilities needed for each position. The Job Compatibility Index presented here provides a method for comparing jobs based on their component skills. The index compiles the compatibility score and importance rating of each of 35 skills for the job in question. To arrive at a single index score, the compatibility of each skill is weighted by its importance. By adding up the resulting scores one can see how a seemingly unrelated job is in fact a potential source of hospitality employees. Taking the example of a hotel front-desk clerk, the index identifies nine jobs that involve most of the same skills, only three of them in the hospitality industry, expanding the reach of the potential labor pool by ten-fold. Non-hospitality jobs that require skills similar to the front-desk job including personal and home-care aides, nursery workers, and life guards. Thus, the JCI identifies opportunities for both employers and workers.

Research made possible by a grant from job.travel, a senior partner of the Center for Hospitality Research.

Service Scripting: A Customer’s Perspective of Quality and Performance

Thu, 04 Dec 2008 09:27:13 EST

Many hospitality services are scripted, under the theory that scripts are an efficient method of ensuring a consistent level of service quality. However, few empirical studies have examined how the use of scripts affects the customer’s view of service quality. Using videotape scenarios in an experimental setting, this study tests the effects that scripts have on perceptions of service quality in two types of hotel service interactions—namely, a standardized encounter (in this case, check-in) and a customized encounter (i.e., concierge service). As a starting point, this study found that customers are able to detect when scripts are in use in both kinds of interactions. Moreover, the study points out the value of taking customers’ views into account when designing services. For the standardized interaction, respondents to this study reported no difference in their perceptions of service quality regardless of whether the scenario was highly scripted, moderately scripted, or relaxed (essentially, improvised). In contrast, for the concierge service, respondents perceived that a heavy use of scripting diminished service quality. At the same time, a moderate or relaxed approach to scripting for the customized concierge scenarios had no effect on respondents’ perception of service quality. This study suggests that hotel managers should be circumspect in scripting customized encounters, but may apply scripts to standardized services without diminishing perceptions of service quality.

Nontraded REITS: Considerations for Hotel Investors

Thu, 13 Nov 2008 13:59:57 EST

Nontraded REITs are an attractive buy-and-hold investment for income-oriented investors. Sold through broker-dealers, shares in these real estate investment trusts do not trade on public exchanges, promise relatively high returns, and contain specific triggers for liquidating the trust. In the first such study of nontraded REITs, an examination of the comparative effects of a long holding period and a short holding period shows that investors who purchase hospitality REITs early in the cycle see a diminished return as a result of subsequent sales. In effect, the early investors subsidize the commissions paid to the dealers who sell to late-term investors. This effect is an unintended consequence of the fact that the REITs’ share prices are fixed, regardless of the value of the underlying assets. The REITs’ high dividend structure somewhat mitigates the effect, but those high dividends mean that some REITs’ payout exceeded the amount cash they took in (as measured by funds from operations). While these characteristics do not mean that investors should exclude nontraded REITs from their portfolios, would-be investors should apply due diligence. This report offers recommendations to help guide that process.

Forty Hours Doesn't Work for Everyone: Examining Employee Preferences for Work Hours

Thu, 30 Oct 2008 14:47:48 EST

Current economic conditions have caused many employers to reduce employees’ work hours—a trend that will likely continue if the economy worsens. Yet research on work hours is limited, as most studies in this area have focused on the effects of employees’ working in excess of a 40-hour work week. This report seeks to specifically examine the effect of “hours mismatch,” which is defined as the mismatch between the number of hours the employee desires to work and the actual number of hours worked. Based on a study of 1,032 individuals, the results show that hours mismatch is an important predictor of attitudinal outcomes, including life satisfaction, work-family conflict, job stress, and intent to turn over. Moreover, the measurement of difference is generally more predictive than simply measuring hours worked. The results show that working either more than the desired hours or less than desired hours has effects on attitudes like job stress, intent to turn over, and life satisfaction. Although employees disliked working “over hours,” a substantial shortage of work hours was far worse. Although employers may face the need to reduce workers’ hours, this study suggests the importance of taking into account workers’ preferences when determining work schedules, or at least understanding the kind of psychological impact that reduced hours will have on their workforce.

The Importance of Behavioral Integrity in a Multicultural Workplace

Tue, 14 Oct 2008 15:35:07 EST

The notion of “behavioral integrity” describes the extent to which one person perceives that another lives by his or her word, keeps promises, and lives by professed values. Effective management leadership depends on how employees perceive their manager's behavior on these points, because this drives credibility. Since most managers are neither saints nor demons, employees judge their managers’ integrity by interpreting a mixed set of managerial actions and behavior. This study examines how different employee groups might understand and react differently to cues about their manager’s consistency. We surveyed 1,944 employees at 107 hotels and found that the observer’s race affects his or her perceptions of behavioral integrity. African American employees in this study were especially sensitive to violations and affirmations of behavioral integrity. Moreover, African American employees scored their African American managers more harshly than they did their non-African American managers. The study also found that senior managers’ integrity trickles down to affect behavior and attitudes throughout the organization. These results suggest a need for executive training and vigilance focused on the issue of behavioral integrity, because managers’ integrity affects the attitudes, conduct, and loyalty of all employees.

Forecasting Covers in Hotel Food and Beverage Outlets

Fri, 10 Oct 2008 15:00:10 EST

In this report we explain our finding that a lodging property can generally use information on its occupancy to improve the accuracy of cover forecasts in its food and beverage outlets. We examine twenty-seven forecasting methods. Six of the methods forecast covers using only an outlet’s historical data, while the others include information on the property’s occupancy. We conducted our study using four hotels that have a total of thirty-three combinations of food and beverage outlets and dayparts. The food and beverage outlets include room service, lounges, cafés, and main restaurants. Since we have extensive historical data from one of the properties, we split that into two samples, giving a total of forty-one outlet-daypart scenarios. In all of the cases we used an eight-week holdback data set to test the models. In thirty-four of the forty-one outlet–daypart scenarios, the best forecast originated with one or another of the models incorporating occupancy data. On average, forecast accuracy improved by over 11 percent when using occupancy data. In those thirty-four cases where using occupancy data improved the forecasts, the average improvement in accuracy was over 14 percent, while the accuracy improvement exceeded 25 percent in seven of the scenarios.