LESSON 1: THE HOSPITALITY

INDUSTRY

LEARNER OUTCOMES!
On successful completion of this lesson a learner will be able
to:
 Understand the Origins of the Hospitality Industry.
 Enumerate the evolution of the Hospitality Industry
through Time.
INTRODUCTION

The history of the hospitality industry is closely linked to that of civilisation. It is a

history that has evolved as major civilisations appeared and developed. Facilities
offering hospitality to travellers and guests have existed across centuries; they have
evolved in their offerings by constantly adapting to the wishes of their most
important stakeholders.
History of the Hospitality Industry

 The hospitality industry, which belongs to the larger business group

called the travel and tourism industry, is found within the services
sector. The hospitality industry, which, according to the United
Nation’s World Tourism Organisation, will be the world’s largest
industry by 2020, generally includes the service organisations that
cater to people’s needs for food, drinks, and accommodations, as
well as recreation, travel and entertainment.
 The Origins of the Hospitality
Industry
There is evidence of the existence of the hospitality industry
dating back far into ancient times. Such evidence can be
traced back to around 4000 BC, and owes much to the
Sumerians with their invention of writing (cuneiform),
money, and the wheel. All these inventions permitted people
to be able to move from place to +place for pleasure, and be
able to pay for any services received.
_

 
Prior to these inventions, nomadic peoples travelled as
a way of life, seeking out any conveniences from place
to place. In those days, people travelled either on foot
or on animals and as such could not cover great
distances in a day. Upon nightfall, they would seek
convenient places that could provide them with such
basic necessities as water, food, fuel, and shelter. When
they travelled in groups for safety purposes, these
groups were called caravans.
 Further evidence of the existence of the hospitality
industry can be derived from the Code of
Hammurabi, which was established around 1780
BC.
Hammurabi was the ruler of Babylon from 1792
BC to 1750 BC. The Code of Hammurabi (which
meant ‘The Code henceforward’) was discovered by
modern archaeologists in 1901.
Evolution of the Hospitality Industry
through Time
 The Greeks developed thermal baths in villages designed for rest
and recuperation, while the Romans developed an extensive
network of roads throughout their empire. This extensive network of
roads created the need for lodging facilities for travellers, which
later culminated in the construction of mansions that catered to the
needs of those travelling on imperial duty. The Romans also
constructed thermal baths across their empire, which span across
most of Europe and the Middle East.
Before the Industrial Revolution

Prior to the Industrial Revolution (which covered the period from 1750 to 1850),
important hospitality industry-related events included the following:
• The construction of extensive networks of roads and lodging facilities by the Romans.
They built some 10,000 inns stocked with food and beverages 25 miles apart, to aid their
officials as they travelled across the Roman Empire.
• The appearance of caravanserais as resting places for caravans along the various routes
of the Silk Road between Europe and Asia.
•Monasteries and abbeys became establishments that offered resting places for travellers
on a regular basis.
• Relay houses were set up in China and Mongolia for travellers and couriers.
Continuation…
• Ryokans appeared during the Nara period (c. 700 AD) in Japan; such as:
1. Nishiyama Onsen Keiunkan ( 西山温泉慶雲館 ) is a hot spring hotel in
Hayakawa, Yamanashi Prefecture, Japan. Founded in 705 AD by Fujiwara Mahito, it
is the oldest hotel and perhaps the oldest company in operation. In 2011, the hotel
was officially recognized by the Guinness World Records as the oldest hotel in the
world.

2. Hoshi Ryokan in Ishikawa, which was built around 718 AD, and has been owned and
operated by the same family for 46 generations.
Cont…
• In Europe, many inns appeared. These were relatively small and simple operations,
basically fulfilling the housing needs of travellers by providing them with a spare room
at a price. Some of these inns have remained famous to date, such as:
– The Angel Inn in Grantham, Lincolnshire, United Kingdom, which was opened
in 1203 and is regarded as the oldest surviving English inn. It was built as a hostel for
the Brotherhood of the Knights Templar, and is today called the Best Western Angel
and Royal Hotel.
Continuation…
 – The Auberge Cour Saint George in Ghent, Belgium, which was opened in 1228, and is
now called the Hotel Best Western Cour St. Georges.
 – The Auberge Des Trois Rois in Basel, which was opened in 1681 as lodging for the
gentry, and is now called the Grand Hotel Les Trois Rois.
 • Both in France and in England, laws were established which required hotels to keep a
register of their visitors. Thermal spas were also constructed in both Karlovy Vary
(Carlsbad) and Marienbad in what is now the Czech Republic.
 • During the 1500s, the first travellers’ guide books were published in France. Signs began
to be used to identify those establishments that had something special to offer travellers.
 • During the 1600s, stagecoaches that used a regular timetable began operating in
England. This greatly changed the way people travelled, and also influenced the need to
house them at their journey’s end. The roads became safer and new junction points were
created, which eventually led to the founding of new towns.
 • By the mid-1600s, clubs and lodges had become widespread across Europe and America.
From the Industrial Revolution till 1899

Some developments of note in the hospitality industry during this period were:
 • The appearance of a new style of hotel that provided luxurious amenities in very
opulent surround
 dings similar to the royal palaces. These hotels were constructed to accommodate a
very mobile aristocracy, as well as wealthy industrialists.
 • The appearance of the Grand Tour, which was originally about privileged young
Englishmen who spent their gap years on an extended tour of Continental Europe.
Possibly, the best known of these youngsters was James Boswell, who kept an
elaborate journal of his travels and experiences. The first major guidebook for the
Grand Tour was published in 1749 by Thomas Nugent.
Some hotels of note that appeared during
this period include:
 • The City Hotel opened in New York City in 1794. It is said that this
was the first building in America specifically built for the purpose of
being a hotel. It was the largest hotel in New York until 1813, and
stayed operational till 1849.

 • Hotel Danieli, formerly Palazzo Dandolo, is a five-star palatial hotel

in Venice, Italy. It was built at the end of the 14th century by one of the 
Dandolo families.
LESSON 2: OPERATIONS
MANAGEMENT
LEARNER OUTCOMES!
On successful completion of this lesson a learner will be able to:

 Define the meaning of operations management in the Hospitality Industry.

 Discuss the importance of operations management.
 Differentiate the characteristics of operations management’s processes.
Introduction.

Operations management is about how organizations produce goods and

services. Everything you wear, eat, sit on, use, read or knock about on
the sports field comes to you courtesy of the operations managers who
organized its production. Every book you borrow from the library,
every treatment you receive at the hospital, every service you expect in
the shops and every lecture you attend at university – all have been
produced
What is Operations Management?

Operations management is the activity of managing the resources which produce

and deliver products and services.

 Operations managers are the people who have particular responsibility for
managing some, or all, of the resources which compose the operations function.
Again, in some organizations the operations manager could be called by some
other name. For example, he or she might be called the ‘Hotel Manager’ in a hotel
company, the ‘Restaurant manager’ in a restaurant, or the F&B manager for the
food and beverage department of a hotel.
Three Core functions of Operations
Management:
 1. The marketing (including sales) function – which is responsible for
communicating the organization’s products and services to its markets in order to
generate customer requests for service; Operations management Operations
function Operations managers
 2. The product/service development function – which is responsible for
creating new and modified products and services in order to generate future
customer requests for service;
 3. The operations function – which is responsible for fulfilling customer
requests for service through the production and delivery of products and services.
there are the support functions which enable the core functions
to operate effectively. These include, for example:

 ● The accounting and finance function – which provides

the information to help economic decision-making and
manages the financial resources of the organization;
● The human resources function – which recruits and
develops the organization’s staff as well as looking after
their welfare.
The input–transformation–output
process
All operations produce products and services by changing
inputs into outputs using an ‘input-transformation-output’
process. Put simply, operations are processes that take in a
set of input resources which are used to transform something,
or are transformed themselves, into outputs of products and
services.
Inputs to the process

One set of inputs to any operation’s processes are transformed resources. These are
the resources that are treated, transformed or converted in the process. They are
usually a mixture of the following:
 ● Materials – operations which process materials could do so to transform their
physical properties (shape or composition, for example). Example for this are the
raw food ingredients in a restaurant.
 ● Information – operations which process information could do so to transform
their informational properties (that is the purpose or form of the information.
 ● Customers – operations which process customers might change their physical
properties in a similar way to materials processors: for example, hairdressers or
cosmetic surgeons. Some store (or more politely accommodate) customers: hotels,
for example.
The other set of inputs to any operations process are transforming resources. These are
the resources which act upon the transformed resources. There are two types which form
the ‘building blocks’ of all operations:

● Facilities – the buildings, equipment, plant and

process technology of the operation;
 ● Staff – the people who operate, maintain, plan
and manage the operation. (Note that we use the
term ‘staff’ to describe all the people in the
operation, at any level.)
Outputs from the process

 Although products and services are different, the distinction can be subtle.
Perhaps the most obvious difference is in their respective tangibility. Products are
usually tangible. You can physically touch a television set or a newspaper.
Services are usually intangible. You cannot touch consultancy advice or a haircut
(although you can often see or feel the results of these services). Also, services
may have a shorter stored life. Products can usually be stored, at least for a time.
The life of a service is often much shorter. For example, the service of
‘accommodation in a hotel room for tonight’ will perish if it is not sold before
tonight – accommodation in the same room tomorrow is a different service.
Operations Processes

 A process is an arrangement of resources that produce some mixture

of products and services’. They are the ‘building blocks’ of all
operations, and they form an ‘internal network’ within an operation.
Each process is, at the same time, an internal supplier and an
internal customer for other processes. This ‘internal customer’
concept provides a model to analyse the internal activities of an
operation.
Hospitality operations described in
terms of its processes:
OPERATIONS INPUTS PROCESSES OUTPUTS
1. Airlines  Aircraft  Check passengers in Transported
 Pilots and air crew  Board passengers passengers and
 Ground crew  Fly passengers and freight
 Passengers and freight around the
freight world
 Care for passengers

2. Restaurant  Raw ingredients  Seating the guests Satisfied Guests

 Chefs, managers and  Taking and preparing
waiters orders
 Raw ingredients  Serving orders
 Guests  Care for guests
Operations management is relevant for all functions
hence the two meanings of ‘operations’:

 ‘Operations’ as a function, meaning the part of the

organization which produces the products and
services for the organization’s external customers;
 ‘Operations’ as an activity, meaning the
management of the processes within any of the
organization’s functions.
Four Characteristics of Operations
(4V’s):
 The volume of their output;
 The variety of their output;
 The variation in the demand for their output;
 The degree of visibility which customers have of
the production of their output.
The activities of operations
management:
 ● Understanding the operation’s strategic performance objectives. The first
responsibility of any operations management team is to understand what it is
trying to achieve.
 ● Developing an operations strategy for the organization. Operations
management involves hundreds of minute-by-minute decisions, so it is vital that
there is a set of general principles which can guide decision-making towards the
organization’s longer-term goals.
 ● Designing the operation’s products, services and processes. Design is the
activity of determining the physical form, shape and composition of products,
services and processes.
Continuation…

 ● Planning and controlling the operation. Planning and control is the activity of
deciding what the operations resources should be doing, then making sure that
they really are doing it.
 ● Improving the performance of the operation. The continuing responsibility of
all operations managers is to improve the performance of their operation.
 ● The social responsibilities of operations management. It is increasingly
recognized by many businesses that operations managers have a set of broad
societal responsibilities and concerns beyond their direct activities. The general
term for these aspects of business responsibility is ‘corporate social responsibility’
or CSR.
Summary

Operations management
 ■ Operations management is the activity of managing the resources which are
devoted to the production and delivery of products and services. It is one of the
core functions of any business, although it may not be called operations
management in some industries.
 ■ Operations management is concerned with managing processes. And all
processes have internal customers and suppliers. But all management functions
also have processes. Therefore, operations management has relevance for all
managers
Why is operations management important in
all types of organization?
■ Operations management uses the organization’s
resources to create outputs that fulfil defined market
requirements. This is the fundamental activity of any type
of enterprise.
 ■ Operations management is increasingly important
because today’s business environment requires new
thinking from operations managers.
What is the input–transformation–
output process?
■ All operations can be modelled as input–transformation–
output processes. They all have inputs of transforming
resources, which are usually divided into ‘facilities’ and
‘staff’, and transformed resources, which are some mixture
of materials, information and customers.
 ■ Few operations produce only products or only services.
Most produce some mixture of tangible goods or products
and less tangible services.
How do operations processes have
different characteristics?
■ Operations differ in terms of the volume of their outputs,
the variety of outputs, the variation in demand for their
outputs, and the degree of ‘visibility’ they have.
■ High volume, low variety, low variation and low
customer ‘visibility’ are usually associated with low cost.
What are the activities of operations
management?
 Responsibilities include understanding relevant performance
objectives, setting an operations strategy, the design of the operation
(products, services and processes), planning and controlling the
operation, and the improvement of the operation over time.
 ■ Operations managers also have a set of broad societal
responsibilities. These are generally called ‘corporate social
responsibility’ or CSR objectives.
LESSON 3: OPERATIONS
PERFORMANCE
LEARNER OUTCOMES!
On successful completion of this lesson a learner will be able to:

 Identify the importance of operations performance.

 Determine how the stakeholders’ objective are being taken into account.
 Differentiate the five operations performance objectives.
 
 Introduction
Operations are judged by the way they perform. There are many
individuals and groups doing the judging and there are many different
aspects of performance on which the assessment is being made. The
people doing the judging are called ‘stakeholders’ and the aspects of
performance they are using are called ‘performance objectives’. And if
we want to understand the strategic contribution of the operations
function, it is important to understand how we can measure its
performance.
 Operations performance is vital for any organization and it can
significantly affect the profitability of an organization.
It is no exaggeration to view operations management as being able
to either ‘make or break’ any business. This is not just because the
operations function is large and, in most businesses, represents the bulk
of its assets and the majority of its people, but because the operations
function gives the ability to compete by providing the ability to
respond to customers and by developing the capabilities that will keep
it ahead of its competitors in the future.
 The ‘stakeholder’ perspective on operations performance.
Stakeholders are the people and groups that have a legitimate
interest in the operation’s activities. Some stakeholders are internal, for
example the operation’s employees; others are external, for example
customers, society or community groups, and a company’s
shareholders.
 Typical stakeholders’ performance objectives
Stakeholder What stakeholders want from What the operation wants from
the operation stakeholders
Shareholders Return on investment. Investment capital Long-term
Stability of earnings. commitment
Liquidity of investment
Directors/top management Low/acceptable operating costs Coherent, consistent, clear and
Secure revenue Well-targeted achievable strategies Appropriate
investment Low risk of failure investment
Future innovation
Suppliers of materials, services, Early notice of requirements Integrity of delivery, quality and
equipment, etc. Long-term orders Fair price On- volume Innovation
time payment Responsiveness Progressive price
reductions
Society Minimize negative effects from Support for organization’s plans
the operation (noise, traffic, etc.)
and maximize positive effects
(jobs, local sponsorship, etc.)
 The five operations performance objectives
Broad stakeholder objectives form the backdrop to operations decision-making,
and top management’s objectives provide a strategic framework, but running
operations at an operational day-to-day level requires a more tightly defined set of
objectives. These are the five basic ‘performance objectives’ and they apply to all
types of operation:
1. The quality objective. Quality is consistent conformance to customers’
expectations, in other words, ‘doing things right’. You would want to do things right;
that is, you would not want to make mistakes, and would want to satisfy your
customers by providing error-free goods and services which are ‘fit for their
purpose’. This is giving a quality advantage.
2. The speed objective. Speed means the elapsed time between customers requesting
products or services and receiving them. You would want to do things fast,
minimizing the time between a customer asking for goods or services and the
customer receiving them in full, thus increasing the availability of your goods and
services and giving a speed advantage.
3. The dependability objective. Dependability means doing things in time for
customers to receive their goods or services exactly when they are needed, or at least
when they were promised. You would want to do things on time, so as to keep the
delivery promises you have made. If the operation can do this, it is giving a
dependability advantage.
4. The flexibility objective. Flexibility means being able to change the operation in
some way. This may mean changing what the operation does, how it is doing it, or
when it is doing it. Specifically, customers will need the operation to change so that it
can provide four types of requirement:
● product/service flexibility – the operation’s ability to introduce new or modified
products and services;
● mix flexibility – the operation’s ability to produce a wide range or mix of products
and services;
 ● volume flexibility – the operation’s ability to change its level of output or
activity to produce different quantities or volumes of products and services over
time;
● delivery flexibility – the operation’s ability to change the timing of the
delivery of its services or products.
You would want to be able to change what you do; that is, being able to vary
or adapt the operation’s activities to cope with unexpected circumstances or to
give customers individual treatment.
5. The cost objective. To the companies which compete directly on price, cost
will clearly be their major operations objective. The lower the cost of producing
their goods and services, the lower can be the price to their customers. Even
those companies which do not compete on price will be interested in keeping
costs low. You would want to do things cheaply; that is, produce goods and
services at a cost which enables them to be priced appropriately for the market
while still allowing for a return to the organization.
 Keeping operations costs down.
All operations have an interest in keeping their costs as low as is
compatible with the levels of quality, speed, dependability and
flexibility that their customers require. Productivity is the ratio of what
is produced by an operation to what is required to produce it.
Productivity = Output from the operation
Input to the operation
 Often partial measures of input or output are used so that comparisons
can be made. So, for example, in the food manufacturing industry
productivity is sometimes measured in terms of the number of products
produced per year per employee. This is called a single-factor measure
of productivity.
Single-factor productivity = Output from the operation
One input to the operation
 One operation may have high total costs per car but high
productivity in terms of number of cars per employee per year. The
difference between the two measures is explained in terms of the
distinction between the cost of the inputs to the operation and the
way the operation is managed to convert inputs into outputs. Total
factor productivity is the measure that includes all input factors.

Multi-factor productivity = Output from the operation

All inputs to the operation
Worked Example:
A restaurant has five employees and ‘processes’ 200 guests per week. Each employee
works 35 hours per week. The restaurant’s total wage bill is Php20,000.00 and its total
overhead expenses are Php10,000 per week. What are the restaurant’s single-factor labour
productivity and its multi-factor productivity?
Labour productivity = 200 = 40 guests/employee/week
5

Single Labour productivity = 200 = 1.14 guests/labour hour

(5 × 35)

Multi-factor productivity = 200 = 0.0067 guest/Peso

( 20,000 + 10,000)
 ■ Operations management can either ‘make or break’ any business. It
is large and, in most businesses, represents the bulk of its assets, but
also because the operations function gives the ability to compete by
providing the ability to respond to customers and by developing the
capabilities that will keep it ahead of its competitors in the future.
Stakeholders objectives being incorporated to Operations.
■ At a strategic level, performance objectives relate to the interests of
the operation’s stakeholders. They relate to the company’s
responsibility to customers, suppliers, shareholders, employees, and
society in general.
 The five performance objectives of operations and their internal
and external benefits which derive from excelling in each of them
■ By ‘doing things right’, operations seek to influence the quality
of the company’s goods and services. Externally, quality is an important
aspect of customer satisfaction or dissatisfaction. Internally, quality
operations both reduce costs and increase dependability.
■ By ‘doing things fast’, operations seek to influence the speed with
which goods and services are delivered. Externally, speed is an
important aspect of customer service. Internally, speed both reduces
inventories by decreasing internal throughput time and reduces risks by
delaying the commitment of resources.