1Family hotel businesses:Strategic

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Family hotel businesses:
Strategic planning and the need for education and training
Mike Peters
*
Dimitrios Buhalis**
‘Education and Training’
Special Edition 2004
*Department of Strategy and Tourism Management
Center for Tourism and Service Economics
University of Innsbruck
Universitätsstrasse 15
A-6020 Innsbruck
Email: mike.peters@uibk.ac.at
**School of Management, University of Surrey, Guildford GU2 7XH
England, UK
Email: d.buhalis@surrey.ac.uk
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Abstract: Small businesses dominate the tourism and hospitality industry worldwide and
are of critical importance for the competitiveness of destinations. Small/family hotel
businesses are characterised by a number of specific business processes which generate
particular training and educational needs. It is increasingly clear that small businesses are not
miniature versions of larger once, but they have different structures, priorities and strategic
objectives. This paper investigates a number of management areas, such as: planning, strategy
development and behaviour in these enterprises, to determine skill and competency gaps. A
survey of small family hotel businesses in Austria was carried out in 2003. Performance,
growth and internal management procedures were assessed to analyse problem areas and to
identify the lacking skills in the tourism industry. The results demonstrate areas of tourism
training and education for family hotel businesses.
Keywords: tourism family business, planning processes, training and education in tourism,
hotel enterprises.
Introduction
Family businesses display a relatively low growth rate, compared to non-family firms.
They often face typical management and growth problems which call for specific training
areas such as succession or conflict management issues (Duh, 2000; Ibrahim et al., 2003).
Furthermore, family firms have particular priorities and structures that often reflect the
lifestyle of the family wants to follow rather than rational business principles. Other crucial
training areas, such as the creation of business plans and strategic development have been
neglected in the past although they are largely responsible for the performance and growth of
an enterprise (Aram and Cowen, 1990; Astrachan and Kolenko, 1994). As the tourism
industry is dominated by small and medium sized family enterprises, it serves as an example
to investigate management processes and behavioural patterns of family entrepreneurs. In
2003, a survey was conducted in North Tyrol’s hotel industry (Austria) to investigate how
small family tourism businesses organise their planning and how (or if at all) they develop
goals and strategies for their businesses. Secondly, the research also investigated how the
style of the planning process does influence the growth or success of a tourism family
business. Thirdly, the main problems associated with the management of small family hotel
businesses (FHB) were assessed. This paper focuses on the needs of the fragmented tourism
industry for training and education, and concludes with a number of core areas for vocational
education and training for family businesses.
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Advantages and disadvantages of family businesses
Recent literature provided a series of contributions to the field of family business
management. The discussion of these contributions leads to a number of hypotheses which
were tested in the empirical part of the paper. Family businesses definitions focus around
variables such as ownership participation or risk assumption. Broader definitions also include
social aspects of entrepreneurial life. Wherever family systems strongly interact with the
entrepreneurial level of the enterprise system, the enterprise shows a family business
character. This implies that the development of a family business depends on three factors,
namely: the entrepreneurs’ family, ownership, and enterprise system (Gersick et al., 1997).
This paper adopts the Upton, Teal, Felan’s definition (2002, p.72). They characterise family
businesses as “businesses where the family ownership or control does have a significant
influence on the decision making processes in an enterprise”. Evidently, the relationship
between the firm and the family does create a special entrepreneurial culture and philosophy
as well as business processes which are unique to family businesses (Hammer and
Hinterhuber, 1994). A number of advantages and disadvantages are therefore emerging
particularly for family businesses, regarding their market performance and management and
they reflect their unique character. The social sciences literature reports the following
advantages:
1. Personal relationship with enterprise stakeholders: For small enterprises, establishing
personal relationships with customers and employees can be a main source of
competitive differentiation. The business dealings of small owner managers are often
not based on contracts but on personal relationships. This implies loyalty, personal
service, understanding in difficult service encounter situations and potential
personalisation of services and products leading to competitive advantages which are
difficult to imitate. However, personal relations can also be a burden for the
entrepreneur (for instance if incapable family members play an active role in the
family enterprise) or a supplier provides unsuitable raw material (Meissner, 1994;
Morrison et al., 1999; Steinle et al., 2002).
2. Market niche advantages: Technological developments, especially in the tourism
industry, market liberalisation, as well as globalisation (which promote relatively
homogenous products) open up new opportunities for small and medium sized
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enterprises. Market niches, which often have to be ignored by global and/or big
enterprises, offer growth chances for small family businesses. Small local businesses
can easily identify lead customers’ wishes and should be able to tailor new niche
products for potential future customer segments (Frehse and Peters, 2002).
3. Flexibility and reaction: Due to the typically flat hierarchy in family businesses,
management can decide quickly and react immediately to market changes (e.g. in
terms of customer demand or competitive actions) (Ittner and Larcker, 1996). They
can adapt their product on the spot to meet demand requirements.
4. Flexible labour force: Often family members are much more flexible in their work
arrangements and adopt their lifestyle to the needs of the business. This is particularly
important for hospitality businesses that have a high degree of seasonality and also
require different efforts at different times of the day. For example mornings are
particularly busy for family hotels which need to serve breakfasts, arrange check outs
and payments for departing guests and clean room almost simultaneously. It is getting
busy later in the afternoon when new guests arrive and perhaps the hotel operates a
restaurants or bar. Unless staff are flexible to work unsociable hours and according to
demand it will be difficult and uneconomical for the organisation to meet operational
demands. In addition, family members are flexible with payments and often share
what financial resources are available on the longer term, rather than demand monthly
payments and payment when the cash flow of the organisation cannot support it.
Finally, it is not unusual for family members to offer unpaid work to support the
family in busy periods whilst they have a different profession and paid employment.
5. Continuity. Particularly in Europe the reputation of family businesses that have been
operating for many years is, in the eyes of the customer, a criterion for buying
(credible) goods or services. The continuity of family businesses and their presence in
the market place are perceived to constitute strong social values (Peters, 2001).
Family businesses do also face a number of typical disadvantages and problems which receive
heavy attention in the literature.
1. Informal business practice and lack of planning: small family businesses often
have informal business practices and processes. Although this can be used to their
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advantage through flexibility and ability to react fast, they often lack a systematic
management approach. This effectively means lack of procedures which leads to
variable performance and improvisation by family members, effecting both
product standardisation and quality control. In addition, book-keeping, accounting
and financial management are often inaccurate leading to potential revenue loss,
lack of statistics for rational decision making and miscalculation of critical
performance indicators, such as return on investment, variable cost and pricing
structures.
2. Marketing and market research, training and qualification deficits: The
management functions of strategy development, marketing and quality
management and technology adaptation are often core deficiencies for small
hospitality businesses (Buhalis, 1994; Buhalis and Main, 1998). At the operative
level, a study conducted in the Austrian hotel industry in 1999 found severe
qualification gaps in the area of human resource management (Weiermair, 2000;
Weiermair et al., 1999). Most family businesses have limited marketing skills and
fail to employ suitable professionals to ensure that their products are marketed
appropriately. Their budgets are limited for any kind of marketing campaign and
thus they find difficult to reach their markets. This is particularly evident in
tourism and hospitality where clientele often resides in a different country, speaks
different languages and is bombarded by international brands for its custom. As a
result, family hotels depend on intermediaries such as tour operators to reach
potential clients (Buhalis, 1994; Buhalis and Cooper, 1998).
3. Financing: While large organisations act as anonymous and autonomous market
suppliers, family businesses provide income for a whole family. Family enterprises
are seen as heritage for following generations. Thus, family entrepreneur