Commercially Outsourced?
In most crisis, organizations can take a step back, examine the long-term strategy, deploy resources, and put their weight behind a chosen path. In the ongoing pandemic faced throughout the world, companies like governments (for lockdowns) had no choice but to take extreme measures by drastically reducing workforce and other expenses. It was an instinct to survive. The environment is slowly changing and requires hospitality companies to take cognizance of their actions and review their strategic choices for the future.
Commercial functions and structures also underwent dramatic changes. The business models within commercial management had been evolving over the years. It will continue to do so as customer behaviour changes around travel, and it alters the consumption at hotels and resorts.
Complexity
Advancement in technology and changing consumer behaviour in the last decade led to the emergence of new functions to support the commercial organization. These functions have evolved rapidly and require expertise. The need to be out there and address customer expectations remains strong as ever in the hyper-competitive environment.
In the ensuing years, it created multiple layers of support build on top of each other. It led to commercial organizations ballooning into massive set-ups where experts converged under one roof. These structures evolved as clusters of support or managed under different umbrellas to deliver efficiencies to varied organizations.
A lot changed last year with commercial re-alignments and massive reductions in human capital, but did the changes reflect a long-term strategy?
- How can commercial structures continue to be simplified at all levels?
- What do efficiencies mean in the newly changed environment?
Capability
The changing environment of the past years also led to redefining the commercial organization. Structures referred to as ‘Marketing Organizations’ got redefined as ‘Commercial Organizations’. Did those changes lead to an ideal structure?
- Were companies able to identify true pillars for commercial successes?
- What are the new core capabilities? Was the support infrastructure redefined?
Today, every commercial organization needs to evaluate its core capability given the pillars for commercial success, which should help drive its forward-looking strategies. It would assist companies to focus on functions that need strengthening to leap forward. Hotel companies will need to examine their structure to stay efficient if their core capability is not driving their commercial performance. Should companies look for supporting capabilities in outsourced models?
There may be a need to minutely examine tasks for each function at all hierarchical levels for its operating environment and future growth pipeline. For example, in Unboxing Revenue Management, I have argued that hotel companies that believe that the core of their revenue strategy means having an advanced revenue system presents a great case to outsource revenue management. Similarly, one can question resources needed for public relations or digital and content marketing or distribution management. Should sales structures change to reflect on newer realities of localized environments?
It by no means is a simple exercise. It requires due considerations across a host of variables such as culture, core strengths, organizational structures and the future view of business and the company.
Talent
One of the most critical pieces of the commercial structures is the competency of the talent. It is not surprising that cost-based decisions have been the primary driver for layovers during crises that aggravated during COVID-19. As and when the recruitment process starts, hotel companies will choose relatively inexperienced talent at lower costs for greater efficiencies. It usually leads to a longer recovery curve.
As hospitality companies understand their commercial capabilities and resources, it would serve them greatly if they were to creatively use the experienced talent that is available in the marketplace. So how can hospitality companies use the abundance of talent available today to build a faster recovery path?
Strategic Alternative
Outsourcing is not an alien concept to the hospitality industry. Many functions and processes have been outsourced in the past to create efficiencies in the workplace.
Understanding hotel commercial capabilities and support that will serve well in a highly complex environment over the next few years will help build sustainable structures. Some companies find relevance in outsourcing as they operate with far few resources, and some do not pursue as they project its support as adding value. Will companies continue to choose their traditional way of conducting business? or will they alter their strategy to move ahead?
Commercial organizations need to view outsourcing in the current environment as a strategic alternative that has the potential to positively influence performance and efficiencies.
