Tourism The Business of Hospitality and Travel, 5th Edition Instructors Manual

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Tourism The Business of Hospitality and Travel, 5th Edition

By George Thomas Jr, Maurice Weir, Joel Hass

Table of Contents Page Chapter One: Introducing the World’s Largest Industry, Tourism .......................................1 Chapter Two: Marketing to the Traveling Public ...................................................................18 Chapter Three: Delivering Quality Tourism Services ............................................................29 Chapter Four: Bringing Travelers and Tourism Service Suppliers Together......................44 Chapter Five: Capturing Technology's Competitive Advantage ...........................................51 Part I. Integrative Cases: Using Cases to Teach Hospitality and Tourism ........... 58 Whose Money Is It?: Teaching Note .............................................................................61 Measuring and Managing Employee Turnover at Tastee Max: Teaching Note ..........................................................................65 Boss or Friend: Teaching Note ......................................................................................87 100% Satisfaction Guaranteed .......................................................................................96 Chapter Six: Transportation ...................................................................................................104 Chapter Seven: Accommodations ...........................................................................................114 Chapter Eight: Food and Beverage.........................................................................................126 Chapter Nine: Attractions and Entertainment ......................................................................134 Chapter Ten: Destinations ......................................................................................................145 Part II. Integrative Case: Using Cases to Teach Tourism Flying the Competitive Skies: U.S. Airline Industry: Teaching Note .....................160 Georgia’s Restaurant Businesses: Challenges Of Family Entrepreneurship.........................................................166 WinterSnowsport Resort: Teaching Note...................................................................180 Taking a Dive: Teaching Note .....................................................................................183 Chapter Eleven: Economic and Political Impacts of Tourism……………………………. 194 Chapter Twelve: Environmental and Social/Cultural Impacts of Tourism........................204 Chapter Thirteen: Sustaining Tourism’s Benefits.................................................................211 Chapter Fourteen: Exploring the Future of Tourism ...........................................................219 Part III Integrative Cases: Using Cases to Teach Hospitality and Tourism ......................................................... 228 Coyote Pass Hospitality: Teaching Note ....................................................................231 Coping with Crisis: Teaching Note ............................................................................234 Any City Can be a Tourist Destination: Teaching Note............................................239 Resorts Go Up . . . And Down: Teaching Note ...........................................................245

Chapter One Outline Introducing the World’s Largest Industry, Tourism i. Quote: Mark Twain ii. Chapter Opener: Could a Career in Tourism Be in Your Future?

I. Introduction A. Tourism is the business of travel B. Multi-faceted industry composed of many components II. Services and Tourism A. Growth rate of services sector faster than any other B. Tourism a truly worldwide C. Tourism has increased steadily over the past 50 years III. What is Tourism?

A. Definition: “Tourism is the temporary movement of people to destinations outside their normal places of work and residence, the activities undertaken during their stay in those destinations, and the facilities created to cater to their needs” B. Tourism and the Blind Men and the Elephant: Diverse and difficult to describe C. Tourism does not have its own NAICS code but its component industries do D. Tourism is equivalent to the “visitor-service industry” IV. A Tourism Model A. Figure 1.2. Model highlights the important participants and forces that shape tourism B. Dynamic and interrelated nature of tourism C. The traveling public (tourists) are the focal point (heart) of the model D. Tourism promoters link the traveling public with the suppliers of services 1. Travel agents 2. Tour wholesalers 3. Promotion agencies such as state tourist boards E. Tourism suppliers provide the services that tourists need when they travel 1. Transportation suppliers 2. Lodging suppliers 3. Food and beverage suppliers 4. Attractions and entertainment 5. Destinations F. External forces affect all participants in tourism; tourists, promoters and suppliers 1. Social/Cultural 2. Economic 3. Political 4. Environmental 5. Technological Cook, Hsu & Marqua, 5th ed.

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(Teaching Hint. Use the Tourism Model to illustrate the organization of the students’ textbook.)

V. The History of Tourism A. Early travelers migrated for food and hunting B. Phoenicians, Mayans, early Chinese traveled for trade and military control C. The Empire Era 1. Egyptians, Greeks, and Romans 2. Traveled for government, commercial, educational, and religious purposes 3. Necessity of long-distance travel to control vast land areas 4. Affluence of sizable percent of empires’ citizens 5. Demand for travel services, lodging, food, etc.

6. Greeks a. Use of common language and currency b. City states became attractions in themselves; shopping, sports centers 7. Romans a. Large middle and upper class that could afford leisure travel b. Developed road systems, water systems, system of inns, and liveries c. Latin as additional common language d. Common legal system and protection 8. These empires started the necessities that encourage travel a. Affluent population with time and money to travel b. Safe and easy travel c. Widely accepted currencies d. Widely used languages e. Legal system which protects personal safety D. The Middle Ages (5th to 14th centuries) and the Renaissance Era (14th to 16th centuries) 1. Decline of Roman Empire ushered in era called the Middle Ages a. Feudal system developed from the fragmentation of governments b. Transportation and safety declined c. Less acceptance of currencies and less knowledge of common languages d. Some travel by crusaders to the Holy Land e. Marco Polo’s historic travels in late 13th century 2. Development of merchant class gave rise to Renaissance Era a. Kings and queens began to gather larger areas of land b. Increased interest in travel for commerce and pleasure E. The Grand Tour Era (1613 to 1785 A.D.) 1. Trend of luxurious travel started by wealthy English 2. Developed as status symbol and spread throughout Europe 3. Goal was to experience the “civilized world” and study the arts and sciences 4. These travels often lasted for several years 5. Industrial Revolution (c. 1750 A.D.) changed economic and social structures 6. Nations moved from agricultural to industrial economies 7. Development of more efficient forms of transportation Cook, Hsu & Marqua, 5th ed.

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8. Growth in travel for business reasons F. The Mobility Era (1800 to 1944) 1. Growing economic prosperity 2. Increase in systems, modes, and speed of travel (roads, railroads, steamships) 3. Thomas Cook developed tour packages for mass travel 4. Invention of automobile and airplane expanded freedom to travel G. The Modern Era (1945 to present) 1. Paid vacations introduced in the early 1900s made leisure travel possible for working and middle classes 2. Millions were introduced to international travel during World War II 3. Postwar prosperity made mass ownership of automobile possible 4. Advent of jet travel shortened travel time 5. Credit cards made purchasing power “mobile” and safer 6. Time, money, safety, and interest in travel led to unparalleled growth of tourism 7. Development of mass tourism a. Organization mass tourists: Buy packaged tours and follow itinerary b. Individual mass tourists: Visit popular attractions and patronize tourism services promoted through mass media 8. 2lst Century has seen widespread use of Internet, introduction of Euro, travel to and from previously closed countries, .e.g., China 9. Problems also loom: Terrorism, fuel prices VI. Bringing Tourism into Focus A. Typical reasons for travel 1. Vacation and leisure trips 2. Visits to friends and relatives (VFR) 3. Business and professional trips B. Host community is affected by tourism C. Can study tourism from a variety of perspectives; anthropology, sociology, etc.

D. Wide variety of questions relating to tourism need to be answered E. Technology having unprecedented affect on tourism industry VI. Geography Describes the Traveler’s World A. Geographic knowledge is important for all tourism professionals B. Knowledge of geography helps to meet travelers’ needs C. Maps 1. Maps show you where you are and how to get to where you want to be 2. The most accurate map of the world is a globe The most common representations of the globe are Mercator , Goode’s Homolosine, Mercator, and Robinson projections D. Reading Maps 1. Reading maps requires an understanding of basic cartography notations 2. Every map has several things in common: latitude and longitude Cook, Hsu & Marqua, 5th ed.

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E. Indexes and Locators 1. Specific map locations are identified through the use of two index points 2. Specific points of interest may only be identified by letters or numbers 3. Maps have locator information F. Scales 1. Maps are replicas of reality 2. Everything shown on a map must be proportional which requires a map scale 3. Legends 4. Symbols or icons are often used on maps to indicate points of interest, services, and attractions 5. Legends save space and draw attention key features G. Physical geography: Study of natural features of region 1. Landforms and Vegetation a. Landforms refer to the surface features of the earth b. Relief maps provide clues to the many different types of landforms 2. Water a. Most of the world (over 70%) is covered by water, and most of this water is salt water b. Oceans, seas, gulfs, lakes, and rivers. c. Water transportation was the first means of moving large numbers of people and cargoes d. Water currents can have dramatic impacts on land temperatures and the amount of moisture that falls 3. Climate and Seasons a. Travel and tourism professionals should be able to describe general weather patterns for any location at any time of the year b. Location, combined with season, will dictate long-term weather patterns c. The world is divided into five basic climatic zones which are based on distance from the equator, 0 latitude H. Human geography: Study of a region’s cultures and peoples 1. Importance of language, religion, politics, and economics to travel to an area 2. International travel is encouraged or discouraged by similarities and differences I. Regional geography: Combination of physical and human geography 3. Combination often makes one region more attractive than another 4. Tourism is a regional activity, travel to area and explore that region (Teaching Hint. Students can be placed into small groups/pairs and assigned a geographic destination. They then develop a thumbnail sketch of key physical and human geographic characteristics. This exercise can be done through library resources or through various Web sites, such as www.travelweb.com or www.expedia.com.)

VIII.

Studying Tourism from Business Perspectives A. Marketing

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1. Marketing Concept: Organizational philosophy centered on understanding and meeting the needs of customers 2. Production orientation and sales orientation inferior to customer orientation 3. Marketing Mix (the 4 Ps) - Product, Price, Place, and Promotion a. Product is the good or service offered to consumers b. Price is the value that must be given up to obtain the product c. Place includes the location and activities required to make the product available to the consumer d. Promotion is the activities undertaken to communicate the availability and benefits of a product 4. Market Segmentation: Process of grouping consumers into segments characterized by common traits and needs B. Management 1. The planning, organizing, directing, and controlling of present and future actions to accomplish organizational goals 2. The common thread that holds an organization together and moves all its members in the same direction C. Finance 1. How organizations manage revenues and expenses 2. Business is an organization operated with the objective of making profits 3. Profits are revenues in excess of expenses and used as a measure of performance 4. Not-for-profit organizations also need to track their revenues and expenses 5. Accounting is the common language of business a. Used to record the financial activities of an organization. b. Managers and others use accounting information to make better decisions c. Accounting cycle involves analyzing, recording, classifying, summarizing, and reporting financial data 6. Three primary building blocks to measure financial success a. Margin: Amount of a sales dollar remaining after operating expenses b. Turnover: Number of times a dollar of assets has been used to produce a dollar of sales c. Leverage: Extent to which borrowed funds are used 7. Return on Investment (ROI): A measure of the profitability of an organization 8. Tourism organizations typically face low margins, high turnovers, and need to use leverage (other people’s money) 9. Need to balance financial performance with hospitality to guests (Teaching Hint. Use Figure 1.9 to discuss different strategic approaches, e.g., Singapore Air vs. Southwest Airlines or a full service restaurant vs. a quick service restaurant.)

(Teaching Hint. We have found the two following mini-lectures to work very well in explaining financial concepts to students with varying levels of previous exposure to financial topics. The first lecture, “Helping Students Understand Profitability in Hospitality and Tourism Operations”, is very effective with students who have had limited or no exposure to financial Cook, Hsu & Marqua, 5th ed.

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topics. The second lecture, “Bringing Financial Analysis into Focus”, should be used with students who have had some basic exposure to financial topics. If you are spending more than one class period on Chapter one topics, you might want to consider using mini-lecture one during the first class period and mini-lecture two during the second class period.)

Mini-Lecture Helping Students Understand Profitability in Hospitality and Tourism Operations It seems like any time you start to discuss financial or profitability subjects in hospitality or tourism classes, students’ eyes often glaze over. This seems to be especially true in introductory classes. The next time you begin discussing these topics try this eye-opening exercise to help students understand how difficult it is to make a profit and where all of the money goes.

You might start by asking students how many of them have ever worked in a restaurant. Then as those who have worked in a restaurant if they ever gave a free drink or French fries to a friend? You can turn the question around and ask those who haven’t worked in a restaurant, if they ever received a free drink or French fries from one of their friends working in a restaurant? When I ask these questions, I always get several raised hands. The purpose of these questions is not for discussing ethical issues, but to get students thinking about money and profitability. I’ll come back to the significance of these questions from a profitability perspective later.

After this, or some other type of introduction, pull out a crisp new one dollar bill and two rolls of pennies. I like to create a little drama by breaking the rolls of pennies open and letting them spill and clatter on to a table or desk top. Now that you have every ones’ attention, ask another simple question such as; Does this pile of pennies equal the same amount as the dollar bill? Making some noise by mixing the pennies around and picking the dollar bill up a few times and popping it always seems to focus attention on the demonstration.

To encourage involvement in this demonstration, ask one or a few volunteers to come up one at a time and pull out how many pennies they think a restaurant owner makes out of every dollar in sales. Be sure to put the pile of pennies back together and announce that results after each volunteer makes an estimate. From past experiences, depending on the level of the class, I have found that students will pull out anywhere from fifty cents to five cents.

Now ask, by a show of hands, how many of you have paid for a meal in a restaurant? If they are paying attention almost everyone will raise their hands and if everyone doesn’t raise their hand, ask the question again. Continue by holding up the one dollar bill and explaining that this represents what the customer pays Cook, Hsu & Marqua, 5th ed.

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and then point to the pile of 100 pennies and explain this is how the restaurant owner will use the money to pay the bills.

You can use the information provided by the National Restaurant Association in the following table, an example from the textbook you are using in class, or any other financial statement to demonstrate where the pennies go.

The Restaurant Dollar FullService Restaur ants Where it came from: Total Sales

100%

Where it went: Cost of Sales

31%

Salaries, Wages, & Benefits

33%

Restaurant Occupancy Costs

5%

Other

27%

Income before Taxes

4%

Source: The National Restaurant Association, 2003.

Using the information in the table, you can show how many of the pennies go to paying for the cost of food, beverages, salaries, and other operating expenses, and how few pennies remain as profits. Do this by counting out the pennies that are used to pay for each category as you discuss these categories. In the end, there will only be four lonely pennies lying all by themselves far away from the pile of ninety-six pennies.

Students are often surprised by this demonstration as they think that restaurants make a lot of money. But, the small profit margin shows that relatively few mistakes or gifts to or from a friend can cause the profits to disappear. Now, go back to that opening question about giving away or receiving “free” food or drinks and discuss the impact of these seemingly innocuous gestures.

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This demonstration is easy to modify to demonstrate the thin profit margins for all tourism service suppliers or for use in any country. I have successfully used this demonstration in England, France and Costa Rica while discussing profitability for airlines, guides, hotels, tour operators and travel agencies.

Bringing Financial Analysis into Focus Using the analogy of flying an airplane has proven to be a helpful tool for explaining the concept of Return on Investment (ROI) to students who are unfamiliar with or uncomfortable with financial concepts. Just like pilots must pay attention to some very basic details to keep their airplanes flying safely and on course, business managers must also focus their attention on some basic financial information to ensure efficient and effective performance.

The thought of flying may seem terrifying to the first time student, but an experienced pilot can fly any plane from a small Cessna two-seater to a Boeing 747 jumbo jet if they know how to operate their controls – the stick, the rudder pedals and the throttle. These controls allow the pilot to remain on heading, at the right altitude and at the right air speed. By focusing on these three simple control points they can reach their destinations safely and as scheduled.

Managers can accomplish the same goals of achieving planned performance with the use of three financial measures; profit margin, asset turnover and ROI which is a measure of earning power. Stated another way, ROI is a measure of how well a business is performing financially in relation to how wisely investments in assets are being used to generate sales dollars. This relationship can be seen in the following formula.

PROFIT MARGIN

ASSET X TURNOVER

Net Operating Income Sales

X

ROI = (EARNING POWER)

Sales Average Operating Assets

=

Net Operating Income Average Operating Assets

Profit margin measures the amount of each sales dollar remaining after the operating expenses needed to achieve these sales have been deducted. The lower the operating expenses, the higher net operating income and profit margin.

Asset turnover, or simply turnover, is a measure of how many sales dollars each dollar of assets produces. Turnover measures a business’ control over investments in operating assets. Operating assets are those investments that have been made in the business. The lower the investment in operating assets for a given level of sales, the higher the turnover will be.

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Using this information, the return on investment or earning power of the business can be improved in several ways. ROI can be increased by:     

increasing sales at a faster rate than the corresponding expenses increase increasing sales while maintaining expenses at the same level decreasing expenses by a greater percentage than the percentage decrease in sales, decreasing expenses while maintaining the same level of sales, decreasing the operating assets used without changing the sales or operating expenses, or  increasing the sales generated without increasing the investment in operating assets.

By keeping your discussion of financial topics at a simple level, students will begin to become familiar with the concepts and how they fit together.

IX. Tourism’s Challenges and Opportunities A. Tourism is often an attractive form of economic development 1. Creates wide variety of jobs 2. Brings money into a community or country B. Can create greater cultural understanding C. Can also change social structures and strain natural and man-made resources D. Unanswered questions relating to the expansion and future of tourism E. Ethics and industry codes of ethics help guide individuals when making decisions (Teaching Hint. Divide class into two groups, one highlighting the opportunities provided by tourism development and the other highlighting challenges created by tourism development.

Have each group produce a list. After about 10 to 15 minutes, have the groups share these lists and then discuss. This works well as an open class discussion or for small groups. In large sections we pair up groups that have been discussing each side of the argument.)

X. Where Do You Fit In? A. Wealth of career opportunities in tourism B. Tourism will remain the world’s largest “industry” with highest job growth rate XI. Topics Covered in each Chapter A. Part 1: The Traveling Public and Tourism Promoters 1. Chapter 2: Devoted to the traveling public and travel needs 2. Chapter 3: Explores concept of quality and importance in tourism services 3. Chapter 4: Activities by tourism promoters in fulfilling needs 4. Chapter 5: Capturing Technology’s Competitive Advantages B. Part 2: Tourism Service Suppliers 1. Chapter 6: Transportation 2. Chapter 7: Accommodations Cook, Hsu & Marqua, 5th ed.

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3. Chapter 8: Food and Beverage 4. Chapter 9: Attractions and Entertainment 5. Chapter 10: Destinations C. Part 3: The Hospitality Environment 1. Chapter 11: Economic and Political Impacts of Tourism 2. Chapter 12: Environmental and Social/Cultural Impacts of Tourism 3. Chapter 13: Sustaining Tourism’s Benefits 4. Chapter 14: Exploring the Future of Tourism D. Integrated cases at the end of each part XII.

Summary You Decide

Major Topic: The Grand Tour vs. Modern Adventure Tourism The first You Decide foreshadows Chapters 10 through 12 (tourism’s effects on the environment and host communities). This You Decide is placed first in the text to start students thinking of the effects that tourism can have on the environment and on host communities.

Suggestions for In-class Discussion: Have students brainstorm on the effects that aristocratic youth had on the destinations they visited during their Grand Tours. What did these young people do, what did they see, how did they likely interact with the native peoples of the places they visited? What positive and negative effects might they have had on these places and their people?

Next have students think about the effects that 21st century travel to new and exotic places has on the environment and host countries, e.g., Nepal, Galapagos Islands, Antarctica.

Have them conclude their discussions by considering how the Grand Tours of the past are similar to the Adventure Tours of today. How are they different?

As an additional research assignment, students could find statistics that show the high rate of growth in the number of tourists to less-developed countries such as Nepal.

1. Why should we study tourism?     

Tourism-related businesses are the leading producers of new jobs worldwide.

Tourism knows no political, ideological, geographical, or cultural boundaries.

Tourism is one of the top 5 exports for 80% of the world’s countries.

Tourism tends to weather economic downturns better than most industries.

Tourism is a major industry in many countries.

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 Tourism may be the world’s peace industry.

2. History has taught us that people travel and engage in tourism activities in increasing numbers when several basic conditions can be met. Identify and describe these conditions and why they help facilitate travel and tourism activities.

Tourism flourishes when:  Individuals have free time to travel. (Also money)  Travel is easy and safe. (Also inexpensive)  Currencies are easily exchangeable.  Common languages are spoken.  Legal systems create a perception of personal safety.

3. What is geography?

Three broad categories of geography:  Physical geography: Identification and description of natural features of the earth.  Human geography: Identification and description of human activities on the earth. including language, religion, and political and economic activities,  Regional geography: Effects of the combination of physical and human geography on a region.

4. How do physical, human (cultural), and regional geography influence tourism activities?

Physical geography: Certain landforms and climate types attract visitors while others deter visitors.

Human (cultural) geography: Cultural facets also can attract or discourage visitors; language, food and beverages, arts and crafts, religion, special customs. Government is a part of human geography and government policies on currency transfer, visas, etc. can encourage or discourage tourism to and from a country.

Regional geography: Physical and cultural features can combine to increase or decrease the attractiveness of a potential destination. Location of population centers, inexpensive easy transportation to an area, availability of comfortable accommodations, etc.

5. Why should we study travel and tourism from a marketing approach?

Studying tourism from the marketing approach provides valuable insight into the process by which tourism organizations create and individual visitors obtain desired goods and services.

Customers can be very demanding and prospective tourism professionals need to learn how to determine the needs and wants of tourists to be successful.

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The marketing concept is just as important to tourism organizations as it is to manufacturing organizations. Tourism students need to know the set of marketing tools and techniques included in the marketing mix. Market segmentation is a crucial concept to understand to satisfy travelers’ differing needs.

6. Why should we study travel and tourism from a management approach?

To be successful, a tourism organization needs to be managed well. Management involves the planning, organizing, directing, and controlling of an organization’s present and future actions so that the organization will be able to attain its goals. Management is the thread that keeps an organization together and moving in the same direction.

7. Why should we study travel and tourism from a financial approach?

All tourism organizations need to manage revenues and expenses. To continue operations and provide services to tourists, they must generate revenues to cover costs of operating and, if they are businesses, to earn a profit. Most tourism businesses operate with small margins, high turnover, and considerable leverage. These realities make the financial management of tourism enterprises especially critical.

8. What are some of the future opportunities and challenges facing the tourism industry?         

Will tourism development create environmental problems?

Need to adapt to and adopt technology to improve service and profitability.

How will removal of trade barriers affect tourism?

What will be the skill needs for tourism’s future work force?

As less-developed countries increase their tourism offerings, how will they be impacted by tourists?

Natural and man-made disasters happen at increasing frequency. How shall tourism businesses face these challenges? Are there opportunities that came with the crises?

Repercussions from the global economic slowdown on tourism Continuous concern for safety and security with respect to tourism Importance of fuel costs on tourism

Encourage students to add challenges and opportunities to this list.

Short Answer Questions 1.

2.

3.

4.

5.

6.

Describe what tourism means from a consumer perspective.

Describe what tourism means from a business perspective.

What can we learn from the Empire Era that can be applied to tourism issues today?

What factors must be present to foster tourism growth?

Why is a basic understanding of geography important for tourism professionals?

Explain the differences between physical and human geography.

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7. Explain the marketing concept from a tourism perspective.

8. How can you determine if decisions and/or actions are ethical?

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Mini-Lecture We always discuss ethics at some point in both introductory and upper-level courses. The following mini-lecture provides some of our thoughts on what we cover. Please feel free to add or subtract depending on the learning objectives for your course.

Ethics: Introductory Concepts Ethics: The study of what is good or right for human beings. It asks what goals people ought to pursue and what actions they ought to perform. Business ethics is a branch of applied ethics.

Ethics: A universal principle, standard or framework of conduct.

A capitalistic society encourages businesses to pursue profits because the people and government of the society believe such businesses best serve society (through economic growth) and violate no rights. This conviction is the source of business’s legitimacy. But distrust of business has increased, due in some part to the belief that businesses have ignored the basic ethics of society.

Why do we need to discuss ethics in class early in the term?  To sensitize students to the ethics of a situation.  To prod them to think about the ethics of a situation.  To emphasize the importance of ethics in business.

Many of North America's ethics are based in Judeo-Christian ethics and founding documents.  Ten Commandments  Golden Rule  Bill of Rights (first ten amendments to the U.S. Constitution)  Concept of equality, fairness, equal opportunity Legal does not equal ethical.

Legal often translates into “what can we get away with?” while many ethics cannot be legislated due to the language of the law.

A rule of thumb suggested: “Would I feel comfortable explaining to a national TV audience why I took this action?”

Supplemental Lecture Materials: Classic Philosophies of Ethics A. Ethical relativism: What is wrong in one society/situation/person may be right for another.

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This is really an empty ethical philosophy because it gives up on the core of ethics, universal standards for conduct.

B. Consequentialism (a type of relativism, also called utilitarianism): The consequences of an action are the sole factors to be taken into account in determining whether that action is right or wrong, maximize the greatest good for the greatest number of people.  Ends-justify-the-means argument.  Sum total of consequences of an action needs to be good for the group.

Ask students for example situations. Then ask them to think of situations where the group would benefit but individuals or smaller groups would suffer. (Bill of rights supplies many examples.)

C. Deontology: A right action is right because it is one’s duty to do the greater good. Basic philosophy of most major religions.

D. Immanuel Kant’s (1724-1804) philosophy: If the universal practice of the action would be harmful to society, it is unethical/immoral.

E. Thomas Garett (1966) 1. Is the intent/motivation for the action “good” or “evil” (i.e., to injure some party)?

2. Are there negative side effects to the means and/or end?

3. What are the alternative actions? If there is an alternative means to the end which provides more good consequences or fewer bad consequences, it is unethical not to select this alternative.

F. John Rawls (1971) The Theory of Social Justice 1. We don’t have control over who we will be when we are born, what our social status in life will be.

2. We would want to minimize our risk of being in a harmful life situation.

3. Therefore everyone should be treated with equal respect and justice so life is not simply a lottery where some win and some lose by nature of their birth. a. liberty principle: Each person is to have an equal right to the most extensive basic liberty compatible with a similar liberty for others. b. difference principle: Inequalities in the system should only be tolerated if they do not make the position of the most disadvantaged worse, e.g., no slavery, no sweatshops.

Liberty principle is the basis for consumer’s right to safety, information, choice and redress.

Difference principle states we cannot exploit one group for the benefit of another. For example, it would be unethical for a grocery chain to send its best produce to its store in the wealthy section of town and its less fresh produce to the store in the low income section of town.

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Ethics Supplemental Lecture ― Underpinnings of Business Ethics Why does society and business need ethics? To develop trustful, mutually beneficial relationships.

Without trust, relationships do not develop and exchange processes would cease.

Immanuel Kant’s question is an easy way to decide what is ethical.

When faced with an ethical dilemma, we should ask ourselves whether we would be willing to have everyone take that action. If we would not be willing to permit the universal practice of the action, it is immoral.

Ironically, unethical behavior is only beneficial in an ethical society. If no one felt compelled to tell the truth, lying would not be advantageous. If most people wrote bad checks, businesses would not accept them. If most people refused to pay for goods they purchased on credit, credit cards, mortgages, car loans, etc., would not be available.

Model of Ethical Decision Determinants Personal Moral Philosophies

Ethical Decisions

Organizational/Peer Relationships

Opportunity Ask students where their personal moral philosophies come from.  Family upbringing  Religious teaching  Formal schooling  Peers  Mass media  Government: Founding principles, laws, court rulings, policies, debates Ethics In-class Activity Unethical behavior is a parasite on society, sapping its strength and weakening the social order.

However, it is often difficult to know what is ethical. In business, we have many publics and sometimes treating one group ethically may be to treat others unethically.

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Have students think about some issues on which large groups in society disagree about what is ethical; e.g., affirmative action, state lotteries, product safety (air bags, seat belts, helmet use).

Have students suggest tourism-related ethical issues on which groups may disagree; e.g., access to wilderness areas, tipping for better restaurant tables, etc.

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Chapter Two Outline Marketing to the Traveling Public i) Quote: Hilaire Belloc ii) Chapter Opener: A Ride on the Wild Side!

I. Introduction A. B. Center of Tourism Model is Travelers/Tourists C. Highly diverse groups with some same and some different needs D. Important to understand consumer behavior 1. Definition: The study of consumer characteristics and the processes involved when individuals or groups select, purchase, and use goods and services to satisfy wants and needs.

2. Consumer Behavior a function of two major factors a. interpersonal influences, e.g., family b. personal characteristics, e.g., age, gender, personality II. Decisions, Decisions, Decisions A. Large number and variety of decisions go into a vacation 1. General decision to go away from home 2. Length of trip; time period 3. Destination choice; single or multiple 4. Use travel agent to help 5. Book in advance or “wing it” B. Information gathering – amount and timing is important to tourism suppliers 1. Information seeking – may limit to internal information search but usually feel need to gather new information a. External search of two types, personal sources and non-personal sources and non-personal sources b. Personal sources – friends, relatives, salespeople c. Non-personal sources – print media, advertising, etc.

1. Tourism suppliers often control the content of non-personal sources, e.g., website and advertising, but not travel guides d. Business travelers and tour package travelers often have decisions made for them e. Independent travelers may make all decisions prior to trip or be completely spontaneous en route f. Certain characteristics have been found to lead to greater information search, e.g., length of trip and multiple destinations 2. It’s all in the details a. Domestic vs. international trips Cook, Hsu & Marqua, 5th ed.

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b. Personality and demographics c. General information to specific 3. Destination marketing entices visitors to a region and specific information, such as brochures, provided by local suppliers in the region.

III. Foundations for Understanding Tourism Motivations A. Push and Pull Motivations 1. Push to travel by individual personality traits and needs 2. Pull to travel from appealing attributes of destination 3. Inhibitors to travel; lack of time, money, health or security B. Maslow’s Hierarchy of Needs: Physiological to self-actualization 1. Higher order (top three) vs. lower order (bottom two) 2. Lower needs must be satisfied before higher needs become important 3. Lower needs of most consumers in advanced economies have been met 4. Travelers may seek satisfaction of any/all levels of needs when they travel C. The Travel Career Patterns: Pearce’s hierarchy of tourist needs IV. More detailed and travel specific needs than Maslow V. Three layers consisting of travel motives: the core layer, moderately important travel motives, and relatively stable and less important travel motives.

(Ask students to explain similarity of the two theories.)

D. The Psychocentric-Allocentric Model: Plog’s Model I. Use of personality characteristics to understand tourist travel patterns II. Continuum from allocentrics to psychocentrics a. Allocentrics/Venturers: Innovators who seek out new locations and activities b. Psychocentrics/Dependables: Tradition-bound travelers who prefer traditionally popular locations and experiencing commonplace activities; desire predictability in their travels c. Most travelers are somewhere in between venturers and dependables (Teaching Hint: We find that students enjoy discussing the dimensions of Plog’s continuum.

You can facilitate this discussion by having them describe a destination with which they are familiar. Ask them to write down their personal preferences, how they travel to destinations, what they like to see and do, their accommodations preferences, etc. They should then conclude their list with one or two sentences describing their most recent travel experience. Depending on class size, students can present their list in small groups or in front of class. The group or class then places each student on continuum based on their descriptions.

You can ask the students to take the Travel Personality Quiz at http://besttripchoices.com/, which will tell them which type of traveler they are. The website also classifies destinations into the various types. Students can discuss if they agree or disagree with the classifications.)

IV.Segmenting the Tourism Market A. “You can’t please all the people all the time” is underlying logic of market segmentation.

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1. No average tourist and no average vacation

2. Market segmentation is the process of dividing a large heterogeneous market into two or more smaller more homogeneous market segments; consumers with similar needs B. Bases for segmenting the tourism market: Approaches to segmenting markets C. Geographic segmentation 1. Grouping potential tourism customers based on their location 2. Oldest and simplest basis for market segmentation 3. Group by nation, region, state/province, city, neighborhood 4. Common for tourism suppliers to market to a limited region: Time and money involved in traveling often a factor in travel decision making D. Demographic segmentation 1. Grouping potential tourism customers based on objective characteristics 2. Most popular basis of segmentation 3. Demographic information routinely collected and widely available 4. Collected by organizations such as Statistics Canada and U.S. Bureau of the Census E. Psychographic segmentation 1. Grouping potential tourism customers on their lifestyle and personality 2. Lifestyle is the way people live identified by their activities, interests, and opinions (AIOs) 3. Plog’s continuum is psychographic-based 4. Example of Family Getaway Traveler, Adventurous/Education Traveler, Romantics F. Product-related segmentation 1. Most direct form of segmentation, group people based on their productspecific wants 2. Can group based on benefit sought; e.g., need for suite-style hotel room 3. Can group based on amount of use; i.e., light, medium, heavy, non-use 4. Can group based on brand loyalty; e.g., frequent flyer plan member 5. Leisure vs. Business traveler is use of product-related segmentation (Teaching Hint: Use the following “Segmentation Exercise” with the Joe Tourist and/or Trina Traveler diagrams to illustrate different segmentation bases.)

Segmentation Exercise Use the following two diagrams (you may copy into powerpoint or prepare a handout) to illustrate how segmentation is used. Begin by showing “Joe Tourist” and explaining each of the different descriptors for each segmentation approach. Then show “Trina Traveler” and have students fill in the blanks for product-related segments.

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G. Putting segmentation knowledge to work 1. There is a cost-effective limit to segmentation 2. Need to consider five factors a. Can segment be easily identified and measured in terms of purchasing power and size? b. Is segment large enough to be potentially profitable? c. Can segment be reached effectively through advertising/promotions? d. Is segment interested in the service offered? e. Is segment likely to grow or shrink in the long-term?

3. Most important reason for segmenting is to better meet customer needs.

4. Deciding which segments to target a. Use five step approach to decide which segments to target 1. Step 1: Choose and apply one or more of the segmentation bases 2. Step 2: Profile each segment in as much detail as cost effective 3. Step 3: Forecast the market potential for each segment 4. Step 4: Guesstimate the share of market potential organization could gain 5. Step 5: Based on step 4 estimates, choose which segments to target (i.e., develop marketing mixes for) V. Specialized Tourist Segments A. Four large distinctive segments of tourism consumers deserve special discussion B. Business and professional travelers 1. Bread and butter of the industry because price and seasonal fluctuations less common than with leisure travelers 2. Business travel tends to be inelastic: Demand does not change substantially with changes in price 3. Vacation/leisure travel tends to be elastic: Example of airfare fluctuations 4. Globalization has meant increase in international business travel 5. Business travel is the third largest expense for corporations, after labor and information processing expenses 6. Professional travel is similar to business travel but reason for travel is to attend professional meetings 7. Professional travel is somewhat more elastic (price-sensitive) than business travel 8. Technological improvement in communications (such as teleconferencing) has not led to a decline in business or professional travel 9. Many companies cater to the special needs of business travelers 10. Marriott example of further segmentation of business/professional segment C. Incentive travelers 1. Rewarding employees for good work with all-expense paid trips 2. Research shows free vacation is a more motivating incentive than money 3. These trips are usually first class all the way and organized by incentive tour operators D. SMERF Groups 1. Social, Military, Education, Religious, and/or Fraternal Groups Cook, Hsu & Marqua, 5th ed.

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2. Hard to define and reach 3. Tend to travel on weekends; opposite of business travelers 4. Not always price sensitive E. Mature travelers 1. Immense market for tourism is population age 55 and older 2. This age group is presently the largest and fastest growing age group in industrialized countries 3. Mature travelers spend more than younger travelers and account for 80 percent of all commercial vacation travel 4. These older adults are wealthier and have more free time than other groups 5. Mature travelers today are healthy and partake of many tourism activities 6. Growth of intergenerational travel, vacation used for extended family bonding F. Special-Interest Travelers 1. General interest tourism vs. special interest tourism (SIT) 2. SIT tend to travel in small groups, have high education, hire guides, spend more and travel in shoulder or off-season 3. Sport tourism – travel away from home to play or watch a. Participatory vs. spectator sport tourists b. Professional and amateur sport tourism VI. Delivering High-Quality Service A. Must meet customer expectations by satisfying needs B. Need to provide consistently high-quality service C. As market becomes more competitive, service quality becomes more critical for success D. Chapter 3 devoted to this topic VI. Summary You Decide Major Topic: The positive and negative impacts of special tourism events This You Decide allows students to think about the impact that special tourism events can have on their communities. In particular, they must decide whether they would want a motorcycle rally to be held in their home communities.

Suggestions for In-class Discussion: Have students brainstorm both potential positive and negative impacts of a motorcycle rally.

Begin by looking at the effects that would be listed as positive in any marketing campaign.

Next, look at the potential negatives as a citizen of the community.

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    

Marketing exposure Increased number of visitors Increased expenditures Fun activities for visitors and community members Increased tax revenue from sales

A sample of negative impacts could include:    

Possible crowds and congestion Noise Strains on roads, police, and the local environment Image of the community

After developing lists of pros and cons, ask students to state their decisions based on their home town.

As an additional research assignment, students could find copies of media discussions about special event tourism activities in an assigned city of your choice.

Discussion Questions 1. What do we mean when we refer to segmenting a market?

Market segmentation refers to the process of dividing a large heterogeneous market into two or more smaller more homogeneous market segments.

2. Why do we segment the tourism market?

Tourism marketers form segments to group travelers based on similar characteristics or needs so that tourism products can be designed that better satisfy the specific needs of a group/segment.

3. Identify and provide examples of the common approaches to segmenting the tourism market.

4.

5.

6.

7.

Common approaches to segmenting markets: Geographic (the Northwest, Southern Europe, Quebec) Demographic (professionals, senior citizens, college-educated) Psychographic (conservative, sports enthusiast, classical music buff) Product-related (need for cheap, clean motel; heavy use of rental cars)

4. Why are business travelers so important to the tourism industry?

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Business travelers are the bread and butter of the tourism industry because they tend to be less price-sensitive, travel during all seasons, and tend to travel no matter what the temporary state of the economy is.

5. How do SMERF groups complement the business travel market?

The Social, Military, Education, Religious, and Fraternal markets can provide significant revenue opportunities during weekend and shoulder periods when business travelers are not typically utilizing tourism services. It should also be noted, that contrary to popular opinion that these groups are often not price sensitive.

6. Why are mature travelers so important to the future of the tourism industry?

The mature traveler segment is the fastest growing age-related segment and will continue to expand at a rapid pace in the future. Mature travelers tend to spend more and take longer vacations than do other segments. They are also free to travel any time during the year, are healthy and active and able to partake in a variety of tourism activities throughout the year.

7. Why are special interest travelers becoming more important to tourism service suppliers?

General interest tourism has evolved into special interest tourism. Today, more travelers focus their vacation on a special interest activity and select a destination based on the ability to participate in one or more pastimes. SIT travelers tend to a. b. c. d.

Travel in small groups on specific itineraries.

Use travel agents and tour guides Highly value education and skill enhancement Spend above-average

SIT includes ecotourism, an exploding market segment.

8. Why are incentive travelers so important to the future of the tourism industry?

Incentive travel is a popular way to motivate and reward employees. These vacation trip rewards are usually first-class and therefore are not price-sensitive.

9. Why should the topic of customer service be important to tourism service suppliers?

The tourism marketplace is becoming more competitive. In addition, the tourism consumer is more demanding and more difficult to satisfy.

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(Teaching Hint: We have created three mini-cases, which we call Hastings A, B, and C that make excellent tools for generating student discussion and highlighting chapter content.

Hastings A is used after Chapter 2, Hastings B follows Chapter 3, and Hastings C calls for the use of concepts introduced in Chapter 5. Cases B and C build on Case A. We have provided some suggestions for discussion of each case. Realize, however, that a large number of topics can be linked to the cases and our teaching note for each is only illustrative, not exhaustive.

Please feel free to copy for distribution.)

Mini-Case Hastings A, B, C Hastings A Mini-case on Consumer Considerations for the Hastings' first major trip After raising four children and operating a local diner in Clarksburg, WV for nearly forty years, the Hastings retired in an attempt to finally enjoy life. One of their dreams is to travel through Great Britain and Ireland, the mother countries of their ancestors.

Because of their family and professional obligations (often working 80-hour workweeks), the Hastings have never been out of the U.S. and the only trips they have taken were rare, short camping trips with the kids or weekend trips to attend family gatherings and college graduation ceremonies. In anticipation of this "trip of a lifetime," they have made an appointment with travel consultant Marie Boone, who is the daughter of a close friend.

Carefully think about the Hastings’ special needs. If you were Marie, how would you handle their unique case? What questions would you want to ask and what factors should you consider?

Why? How will these factors influence the advice you give the Hastings?

Teaching Suggestions for Hastings A This case provides sufficient information for students to begin understanding the importance of profiling tourists. A good starting point for discussion is to develop a list of all the decisions needed to be made. Will the Hastings want to make all these choices? Next students should consider the Hastings' tourism profile in terms of Maslow's Hierarchy of Needs. The responses you receive from students will depend on their own background and the experiences of those with whom they are familiar. For example, some answers will focus on safety needs because the Hastings have never traveled by plane or outside the U.S. Other answers may focus on belongingness needs because the stated purpose of the trip is to explore ancestral roots.

Students often tend to be myopic, only thinking about situations based on their background and experiences. No matter what answers are given, encourage students to practice empathy by truly placing themselves in the Hastings' shoes rather than simply looking at the situation through their own eyes. Once the Hastings have been analyzed using Maslow's Hierarchy, it is fairly easy to make the conceptual leap to the Travel Career Patterns model. On this model, Cook, Hsu & Marqua, 5th ed.

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students may classify the Hastings as having lower travel career level and being internally motivated.

When looking at the psychocentric-allocentric (venturers-dependables) model, students usually begin by discussing the fact the Hastings have traditionally been near psychocentric/venturer in their travel behaviors, but that their new travel plans will place them in the midcentric category. This movement creates anxiety for the couple, as well as an opportunity for Marie to educate the Hastings about the wonderful travel experiences they are planning.

Students can rely on information they learned in Chapter 1 to prepare an outline of some basic information Marie should share with the Hastings. This outline should include information from at least the following areas: physical geography, human geography and regional geography.

This mini-case can also be used for discussing the bases for segmenting tourism markets.

Students can brainstorm or speculate on the segments to which the Hastings belong. Make sure they attempt to place the couple in segments considering all four of the bases described in Chapter 2. Students may also be encouraged to develop questions that they would ask the Hastings to gather more detailed information so Marie may better fill their needs.

Short Answer Questions 1. Why do tourism suppliers vary in the types of information they provide prospective customers?

2. Describe the differences between push and pull motivations.

3. Explain why Pearce’s travel career patterns model is similar to Maslow’s hierarchy of needs model.

4. Describe the differences between venturers and dependables as explained and depicted by Plog.

5. How would you segment tourism consumers on a geographic basis?

6. How would you segment tourism consumers on a demographic basis?

7. How would you segment tourism consumers on a psychographic basis?

8. How would you segment tourism consumers on a product-related basis?

9. Describe the process marketers would use to accomplish the market segmentation decision process.

10. Why are business travelers considered to be the “bread and butter” consumers of the tourism industry?

11. Why are the SMERF segments of the tourism market hard to identify and target?

12. Why are mature travelers a very important segment for tourism suppliers?

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Chapter Three Outline Delivering Quality Tourism Services i. Quote: Jan Carlzon ii. Chapter Opener: All’s Well that Ends Well?

I.

Tourism Services A. Services are actions; goods are material objects B. Services are often accompanied by facilitating goods which support the service C. Services/Goods Continuum: Pure service to pure good D. Differences between goods and services 1. Services are intangible: Actions not objects 2. Services are highly perishable a. Cannot be inventoried (airplane seat once the plane has left the gate) b. Revenue potential perishes with passage of time 3. Customer is often active participant in producing the service (salad bar).

(Teaching Hint. Prepare a powerpoint or hand out copies of “Tourism Services & Facilitating Goods.” Instructor or students can fill in list of tourism service suppliers and then add a list of their respective facilitating goods. The list of facilitating goods for different companies shows the different segments that they target. We have found that when students enjoy this exercise and become engaged when completing this exercise in small groups. Facilitating goods can also be used as sources of additional revenue. For example, restaurants frequently sell souvenir mugs, glasses, etc. Have students think of additional examples where facilitating goods are sold.

As you discuss the concept facilitating goods, caution students to not confuse the sale of retail shop merchandise with facilitating goods.)

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Tourism Services and Facilitating Goods Instructions. Identify one tourism service supplier in each category, then list the facilitating goods that would be associated with that supplier.

Accommodations Tourism Service Supplier

Facilitating Goods

Transportation Tourism Service Supplier

Facilitating Goods

Food and Beverage Tourism Service Supplier

Facilitating Goods

Attractions and Entertainment Tourism Service Supplier

Facilitating Goods

Destinations Tourism Service Supplier

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II.

Quality A. High quality is subjective, varies from person to person B. Definitions of quality 1. Synonymous with excellence 2. A form of measurement, an amount of quality 3. “Eye of the beholder” 4. Value-based definition: Trade-off between quality and price C. Higher quality has been found to yield three benefits 4. Commands higher prices 5. Increases market share 6. Yields truly brand-loyal customers D. Quality differences 7. Service quality more difficult to define than quality of goods a. Quality is engineered into hard goods b. Manufacturers are able to consistently build to standards c. Services are actions of people who vary considerably d. Customer often participates in the “production” of a service 8. Consumer's skill, decisions, and companions can affect service quality

III.

Service Encounters A. Every interaction between a service employee and customer is a service encounter 1. Both parties bring expectations about what will occur during encounter 2. We learn what to expect from past encounters and observations 3. Each member of interaction plays a role in a service encounter “play” B. Service Scripts 9. Encounters follow similar steps 10. Some variability in the steps followed

(Teaching Hint: Place students into groups and assign each group a tourism-related encounter, e.g., the check-in process at a hotel. Have students develop a script for the task they are assigned. It can be interesting to have two or more groups do the same encounter and see if they differ. Or have one group write the script from the perspective of the guest while its counterpart group writes the script from the supplier’s (employee’s) perspective.)

C. Service encounters are “moments of truth” during which quality is judged D. Service encounters as theater diagram 1. Back stage support areas 2. Front stage areas and personnel 3. Other audience members (customers) and their behaviors E. Quality assurance in tourism services is a management challenge IV.

Service Quality Model

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A. Customer has certain expectations regarding service’s quality 1. Word-of-mouth from friends 2. Personal needs 3. Past experiences 4. Marketing communications B. Five quality dimensions 1. Tangibles: Physical aspects of the service that customer sees/interacts with 2. Reliability: Ability of personnel to perform service accurately and consistently 3. Responsiveness: Employees’ willingness to help and provide prompt service 4. Assurance: Sense of trustworthiness that the employees inspire 5. Empathy: “Warm, fuzzy” heartfelt hospitality employee shows the customer, individualized treatment (Teaching Hint: Show students the “Eight Dimensions of a Goods’ Quality” (listed towards the end of the Chapter 3 outline). Then have them develop a list of factors to use in determining the quality of hotel, restaurant, etc. They can use the five dimensions of service quality to critique the service aspect of the offering, while they use the goods dimensions to critique the facilitating goods component of the service.)

V.

Quality and Customer Satisfaction A. Customer compares expectations to service received and determines satisfaction level 1. If perceived “actual” quality is better than expected: Highly satisfied 2. If perceived “actual” quality is less than expected: Dissatisfied 3. If perceived “actual” quality is about what was expected: “Just” satisfied B. Major benefits to delivering more than expected to achieve high level of satisfaction rather than simple satisfaction C. Value of highly satisfied customers (HSC) 1. HSC pass more word-of- mouth than “just satisfied” customers tend to 2. HSC are more likely to purchase again and spend more in the future 3. HSC are less likely to respond to competitors’ promotions than “just satisfied”

VI.

Human Resources: The Key to High-Quality Service A. A wide range of skills from entry level dishwashers to senior executives are needed in every service organization so understanding what is involved with managing the human side of service organizations will help create .

B. Service organizations depend on everyone at all levels to deliver customer satisfaction.

C. Need to develop learning organization, dedicated to continuous improvement 1. Encourage employee participation/commitment to delivering value 2. Develop and expand employee capacity and innovation 3. Create a workplace where everyone is motivated to excel D. Bringing employees into the organization helps them become acquainted with the organization and understand the expectations the organization and their supervisor have for them.

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E. Labor unions are common in most industrialized countries. Understanding the importance of these unions and learning to work with them or avoid having to work with them is critical to every organization whether they are unionized or nonunionized.

F. Set the stage for peak performance and maintain this performance with continued orientation and training.

G. Anticipating and meeting guest needs 1. Learn and understand customer needs and expectations 2. Frequent management interaction with customers 3. Welcoming suggestions from front-line employees 4. Streamline the bureaucracy (fewer levels of management) 5. Develop standards and policies that employees can learn and follow 6. Teach employees to “think while doing” to meet customer’s needs H. Building service teams 1. Manager is active team member and role model 2. All team members know their roles and can carry their share of the “load” 3. Team members need to share common goals 4. All team members supported with appropriate technology 5. Team members able to make independent decisions without supervision 6. Management should be coach rather than boss a. Main focus of management should be to find problems, not assign blame b. Continuously improve systems so the team can excel VII.

Service Mistakes A. Can have a break from customer’s service script 1. Type 1 break: Deliver more than expected, a positive break that leads to high satisfaction 2. Type 2 break: Deliver less than expected, a negative break that leads to dissatisfaction

(Teaching Hint: Using the scripts developed before, have students write some breaks from the script that are positive and negative.)

B. Mistakes Happen 1. Failure in core service 2. Unwillingness to accommodate customer’s special need or request 3. Unsolicited tourism employee actions C. Most customers give the provider a chance to make things right 1. Right the situation and “turn the frown upside down” 2. Reversal of problem is called service recovery 3. Failure to solve problem can lead to highly memorable dissatisfaction D. Satisfied guests represent potential future income flows while dissatisfied represent opportunities lost E. Be a Can-Do Problem Solver Cook, Hsu & Marqua, 5th ed.

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1. Need do-it-right-the-first-time spirit 2. All team members need to search for fail points: Steps vulnerable to failure 3. Encourage customers to voice problems immediately 4. Give quick response to any problems F. Making things right involves a few simple actions 1. Customers want acknowledgment that problem exists 2. Like to be told why the problem occurred 3. Want a sincere apology 4. Want to be made whole again through appropriate compensation G. Steps should be taken to continuously improve so problems do not reoccur (Teaching Hint: Using the negative breaks that they wrote in the previous exercise, have students explain both good and bad service recovery possibilities. Many will base their answers on real world experiences.)

VIII.

Service Guarantees A. Difficult to replace or repair a tourism service B. Guest often must complain face-to-face to provider C. Offer guarantee that has five features 1. Unconditional with regard to elements under the service provider’s control 2. Easy to understand and communicate: No fine print and legal language 3. Should be meaningful: Guaranteeing an important element of quality 4. Easy to collect: No hoops to jump through, no guilt placed on customer 5. Appropriate restitution/compensation for customer’s trouble a. Consider price of service b. Consider level of inconvenience to guest c. Consider what guest considers fair D. Good idea to provide variety of problem solutions/restitutions to ensure guest is happy

IX.

Summary You Decide

Major Topic: Defining Quality Suggestions for In-class Discussion: This “You Decide” provides students an opportunity to think about what quality means to them in an airline setting and what it might mean to others who are in different market segments from themselves. There are several questions posed in this situation that can be used as a starting point for discussion. In an environment when many airlines are charging for both services and facilitating goods that were once free, you will find that this situation creates a lively discussion.

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What does quality mean to you?

Does quality mean the same thing to everyone?

When customers see a particular brand, should they expect a specific level of service?

Do customers make quality distinctions among airline brands?

What obligations, if any, do airlines have to communicate quality distinctions to their customers?

What level of service do you think passengers should expect from airlines?

What services and facilitating goods should airlines provide to customers at an additional charge?

Discussion Questions 1. Describe how services are different from goods.

Services are intangibles that cannot be placed in inventories and pulled out of warehouses or off of shelves like goods which are tangible and can be felt or held. In addition, services are not only intangible but also highly perishable.

2. Define quality using the many meanings the word can have.

There are four major definitions of quality.  Quality is the same as excellence.  Quality is an amount, a form of measurement.  Quality is subjective and, like beauty, resides in the “eye of the beholder.”  Quality can only be determined by considering the trade-off between quality received and price paid. This is called the value-based definition of quality.

3. Explain why the quality of tourism services is harder to define and manage than the quality of hard goods.

Tourism service quality is more difficult to define than quality of goods because:  Quality is engineered into hard goods, while services are actions of people who vary considerably.  Manufacturers are able to consistently build to pre-set standards; services can vary due to a variety of factors (like time of day, weather, specific employee).  Consumer’s skill, decisions, and companions can affect service quality.  Customer often participates in the production of a service so adds another element of variability to the process.

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4. How are expectations of a tourism service formed?

Customers form expectations regarding a service’s quality from:  Word-of-mouth communications from friends and relatives,  Personal needs,  Past experiences,  Marketing communications.

5. What is a break from the service script? How do breaks from the script affect customer satisfaction?

A break from the service script is an interaction that was not expected. The break can be positive; that is, the service provider delivers more than the customer had expected. A positive break leads to high satisfaction. However, a break also results when the provider delivers less than was expected. This results in a negative break that leads to dissatisfaction.

6. What should a tourism service employee do to “turn a frown upside down?”

Making things right, or turning a frown upside down, involves a few simple actions:  Customers want acknowledgment that the problem exists.  They like to be told why the problem occurred in the first place.  They want a sincere apology from the employee or manager.  They want to be made “whole” again through an appropriate compensation.

7. What can management do to ensure high-quality service?

Management can use a variety of means to ensure high service quality.  Learn and understand customer needs and expectations a. Use of marketing research b. Frequent management interaction with customers c. Welcoming suggestions from front-line employees d. Streamline the bureaucracy (fewer levels of management)  Take care in employee selection Positive attitude Basic abilities Flexibility in interactions with others  Provide substantial employee training Develop standards and policies that employees can learn and follow Teach employees to “think while doing” to meet customer’s needs  Develop a strong service team Manager is active team member and role model All team members know their roles and can carry their share of the “load” Share common goals All team members supported with appropriate technology Cook, Hsu & Marqua, 5th ed.

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Team members able to make independent decisions without supervision  Management needs to be more coach than boss Main focus of management should be to find problems, not assign blame Continuously improve systems so the team can excel

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Hastings B Mini-case on the Hastings’ Expectations [If students have not previously read and discussed mini-case Hastings A, they should do so before discussing Hastings B.] Marie Boone was preparing for a follow-up appointment with the Hastings. To take advantage of an international “fare war,” Marie had already booked the Hastings’ flights to and from London, but they had not yet discussed the all-important vacation particulars such as accommodations, sight-seeing, and transportation options within Great Britain.

Marie wondered, “What advice should I give them about the type of trip they should take?”

Marie realized that this trip was the first major vacation the Hastings had ever had. She tried to put herself in their shoes.

“If I were Mrs. Hastings, what would my expectations be? How comfortable would I be in a foreign country, even if it were English-speaking? How confident would I be in planning activities and getting around to all the sights? And which sights would I want to see most?”

Marie also wondered how action-packed the trip should be. After all, the Hastings were retirees. She wondered how much relaxation should be built into their itinerary.

Teaching Suggestions for Hastings B Hastings B is an exercise to accompany Chapter 3 so that students can think critically about how expectations can effect satisfaction. First, they need to imagine what quality level the Hastings are likely to prefer and what the expectations of the Hastings might be. In Hastings A, they learned that the Hastings were small-business restaurateurs who had only taken rare camping trips as vacations. This means that the Hastings’ expectations will be based less on personal experiences and more on the three other factors of word-of-mouth from friends and relatives, marketing communications, and personal needs. Given that the Hastings are not experienced travelers, the quality level they are seeking may be best defined as “with the comforts of home.” Sharing baths with strangers may not be deemed appropriate to the Hastings, and eating strange foods may not be welcome (or healthful) either.

For example, although it may seem impossible to some, the Hastings may have very rarely stayed in a hotel/motel. (We know they have never flown before.) Given their long work hours, they may have little experience with most other tourism service providers as well. Their service encounter scripts are therefore quite fuzzy. Students need to realize that this trip represents a long-time dream for the couple and their expectations are likely to be idealized, based to a certain extent on images gleaned from books, movies, television, and travel brochures.

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Students need to consider the importance of a smooth trip to meet the Hastings’ expectations and to minimize the negative breaks from the script that might mar the experience. Because the Hastings are such travel novices, service mistakes may be particularly upsetting to them because they have no experience with contingency plans.

Most students will suggest that Marie sell the Hastings a “Best of Britain”-style tour that other clients have praised. All five of the service quality dimensions are likely to be important in this case, but empathy may be what makes or breaks encounters for the Hastings (because they will be relying on the expertise and kindness of others for advice and special help).

However, she also needs to be careful about which tour she suggests because the “if this is Tuesday, it must be Belgium” type of tour may be too hectic for the Hastings. She needs to discuss their desired relaxation-to-activity ratio with them before they choose an itinerary.

Lastly, given their age, Marie should strongly encourage the Hastings to purchase comprehensive trip insurance. If a health crisis prevents them from taking the trip (or interrupts the trip), the Hastings will want to be able to get their money back so the trip can be rescheduled and afforded in the future.

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Service Quality Dimensions In the original research on service quality, ten dimensions were found. In subsequent work, the researchers consolidated several of the dimensions and suggested service quality was composed of five factors. Below is a list of the five dimensions with their respective subdimensions.

Tangibles: Physical facilities, equipment, and appearance of personnel Reliability:Ability to perform the promised service dependably and accurately (Doing things right the first time and every time) Responsiveness: Willingness to help customers and provide prompt service Assurance:

Knowledge and courtesy of employees and their ability to inspire trust and confidence  Competence: Knowledge concerning performance of the service  Courtesy: Politeness, thoughtfulness  Credibility: Truthfulness, believability  Security: Honesty, concern for safety of guest and his/her possessions

Empathy: Caring, individualized attention provided to customer  Access: Hours of operation, location, waiting time  Communication: Flow of communication between supplier and guest  Understanding: Desire to understand individual guest needs

Source: Valerie A. Zeithaml, A. Parasuraman, and Leonard L. Berry (1990), Delivering Quality Service. New York, NY: The Free Press.

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The following is a list and explanation of goods quality dimensions that is often used.

Eight Dimensions of a Goods’ Quality Performance  The main functional characteristics of the goods  Usually able to be measured objectively Features  The “bells and whistles” that add to the goods’ basic functioning  Usually able to be measured objectively  Importance to “quality” depends on the individual customer’s preferences Reliability  The likelihood of the goods failing to perform during a specific time period under specified operating conditions  Most applicable to durable goods (rather than consumables)  Importance as a quality dimension increases when down time and maintenance are costly to the customer Conformance  Closeness of match with the design specifications  How well the goods performs the function customer expects  Also involves consistency of performance Durability  A measure of goods’ useful lifetime/longevity  Amount of use received before goods physically deteriorates  Repairability can extend durability  Importance as a quality dimension increases when repairs are costly Serviceability  Speed, courtesy, competency, and ease of repair  Includes complaint-handling procedures  Acceptable time involved in repair/remedy is subjectively defined by customer Aesthetics  Sensory factors of the product; e.g., look, feel, sound  Importance is subjective; varies considerably among customers Perceived Quality  Quality is subjectively perceived and may differ from “reality”  Can be affected by goods’ image, advertising, and reputation

Adapted from David A. Garvin (1988), Managing Quality. New York, NY: The Free Press.

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Services as Theater In Chapter 3, we talk of service roles and service scripts, obviously applying the metaphor of theater to the production and consumption of services. Students enjoy extending this metaphor to all features of a service.

Employees = cast Customers = audience Physical facilities = the set Uniforms = costumes Front stage = those areas that the customer sees Back stage = those areas that the customer rarely sees Director = manager Performance = service encounter Personal front/"character" = face/role that employee assumes when front stage (Allowed to “break character” when back stage) Many tourism services have stereotypical “sets” that the students know. A fun exercise is to ask student groups to describe the appropriate set for an array of tourism service suppliers. For example:  Fine dining restaurant, family dining restaurant, fast-food restaurant  Resort hotel, business hotel, budget hotel  Miscellaneous service settings such as ice cream parlor, train station Back in the mid-1980s, PBS produced a program based on Tom Peters and Robert Waterman’s book In Search of Excellence. Within the program was a segment on Walt Disney World and the use of theater to manage the Magic Kingdom theme park. It is an excellent video segment if you can find it. Also check out the chapter on Disney in the Peters/Waterman book.

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Short Answer Questions 1.

2.

3.

4.

5.

6.

7.

How would you define quality in relation to tourism services?

Why is it useful to think of service encounters occurring in a theater setting?

Explain the differences between reliability and responsiveness in relation to quality.

Explain the importance of empathy in delivering high-quality service.

Describe how a total learning organization functions.

How can managers build effective teams?

Why is it important to encourage customers to complain when service expectations have not been met?

8. How can tourism managers ensure that problems are handled and their guests leave smiling?

9. How can a tourism service provider guarantee service quality?

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Chapter Four Outline Bringing Travelers and Tourism Service Suppliers Together i.

Quote: Theodore Levitt

ii.

Chapter Opener: One Stop Does It All!

II.

Introduction A. Travel necessitates a variety of services B. Goal of service suppliers is reaching, serving, and satisfying travelers C. Chapter 3 introduces the variety of tourism service suppliers and how travelers obtain information about them

III.

Serving Traveler Needs A. Thomas Cook is credited with being the first tourism intermediary, packaging tourism services and then selling the package to tourists B. To attract business, tourism suppliers must provide prospective customers with information on which they will base tourism choice decisions C. There are many alternatives ways to provide information and services to prospective guests D. Three types of distribution channels can be used

IV.

Why Use Intermediaries?

A. Intermediaries make information and services widely available cost-effectively B. They perform a variety of value-added functions such as: 1. Provide information about types and availability of services 2. Contact current and potential customers 3. Make reservations and other travel arrangements 4. Assemble packages of services 5. Prepare tickets 6. Bear financial risk by buying services in bulk for resale to individuals/groups C. Intermediaries are frequently paid on commission (earn a percentage of service price) D. May also charge customer modest fee E. Intermediaries exist where they perform a necessary role more cost-effectively than the supplier could perform the same function

(Teaching Hint. To illustrate the power of intermediaries, have each student identify some city that s/he wishes to travel to and specify a departure and return date. Next, have them identify by company name [brand] the type of accommodation they would use plus the name [brand] of a rental car company. Now, ask students how they could obtain information on each of these trip components. You will need to press them a bit for multiple ideas, as almost all of them will simply pull out their mobile devices or mention the Internet. You may take the exercise further by having students actually gather information, assigning different students different methods of Cook, Hsu & Marqua, 5th ed.

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information search; e.g., travel agents, 800 numbers, travel guides, etc.)

V.

One-Level (direct) Distribution Channels A. Simplest form of distribution, no intermediary between supplier and customer B. Most tourism suppliers utilize one-level distribution channels as well as other levels C. Purchase directly from the supplier; e.g., via 800 numbers or personal computer D. The Internet is increasing the direct availability of information and purchase

VI.

Two-Level Distribution Channels A. Intermediary between tourism supplier and tourist, either brick-and-mortar or via Internet B. Cruise lines use travel agencies extensively C. Travel agencies are the department stores of the travel industry 1. Agents perform many of the functions mentioned in III(B) but do not take title to services and then resell (function #6) 2. Flow of payment is from customer to agent to supplier, with the agent retaining the commission as payment for his/her service to both parties 3. Agents may specialize by market segment (business travelers) or by supplier (cruise lines) 4. Agents no longer limited geographically; compete with all other agents 5. Travel agencies a. Large can grant overrides, converting full-fare seats to discount fare seats when all discount seats have been sold out (called conversion ability) b. Agency owners affiliate with large agencies by franchise or consortium c. Internet agencies d. Change in role due to Internet 6. Small agencies a. Trend toward agency alliances has not seen demise of small agencies b. Majority of U.S. agencies have total sales of less than $1million c. In-house agents more competitive die to Internet D. Improving service delivery through cooperative systems 1. Agencies big and small use global distribution systems (GDSs) 2. Via GDSs agents have on-line information about schedules, availability, and fares, and allow booking of some reservations and printing tickets 3. Two airline GDSs; Sabre and TravelPort 4. These GDSs are also used as databases/reservation systems for many other tourism services such as hotels and rental cars 5. Two important cooperative systems for airline ticketing a. Airlines Reporting Corporation (ARC) b. International Airline Travel Agency Network (IATAN) c. Act as financial clearinghouses for airlines and agencies d. Due to decline of airline commissions as revenue source, agencies now striving to increase sale of other tourism services; e.g., hotel rooms

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VII.

Three-Level Distribution Channels A. Add another level of intermediary such as tour operators to two-level channel B. Some travel agencies have entered tour packaging business C. Tours A package of two or more tourism services priced together Four primary forms of tours; independent, foreign/domestic independent, hosted, escorted Five major reasons for purchasing a tour a. Convenience b. One-stop shopping c. Cost-savings d. Special treatment e. Worry-free Travel agents are primary sellers of tours D. Dynamic Packaging 1. Bundling of all components chosen by traveler to create one reservation 2. One price/payment 3. Sell on value, features, and benefits; not lowest(commodity) price E. Tour operators 1. Purchase tourism services in bulk and then mark up the price and resell in packaged form 2. Plan, prepare, market, and often operate vacation tours 3. Also termed tour packager or tour wholesaler 4. Many financial risks in the tour packaging business a. Highly perishable product (once tour starts no more sales) b. Services paid for in advance and if not sold cannot be “returned” c. Services paid for (or prices committed to) far in advance so have risks due to inflation, foreign currency fluctuation, and unforeseen circumstances d. Markup is often only 20% 5. Receptive service operator is local company that handles group’s needs while in its location 4. Consolidators and Travel Clubs 1. Consolidators buy excess airline capacity and resell at discounted prices 2. Travel clubs perform similar function for their members plus offer discounts on other tourism services 5. Meeting Planners 1. Professionals employed by corporations, associations, etc. to organize all the details entailed in meetings 2. Table 4.5 lists meeting planner decisions 3. Meeting planner must balance meeting costs with meeting attendee desires

VIII.

Tapping the Power of Multiple Distribution A. Internet is increasing the use of the direct channel by tourism suppliers B. General result of Internet is that tourism suppliers have more channel options

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IX.

Tourist Boards and Other Intermediaries A. Popular use of blogs, sponsored and non-sponsored B. Tourism offices provide general information about certain area; nation, region, state/province, city C. Often operate tourist information centers and central reservations offices D. Large cities have convention and visitors bureaus; small cities use chambers of commerce; both funded at least in part by local tourism service suppliers E. These information sources periodically offer familiarization tours to tourism intermediaries, designed to promote sale of the area as a tourist destination

X.

The Internet: It’s Not One-Stop Shopping.

A. Omnibus sites f Expedia, Travelocity, and Orbitz B. Consolidator sites such as Hotel.com C. Destination sites D. Use of fam trips and trade shows to inform tourism intermediaries E. Consumer trade shows such as ITB Berlin

XI.

Selling Adds a Personal Touch A. Most tourism suppliers have their own sales force B. Often conduct missionary sales activities supplying information and brochures to other sales people and industry members to aid in their sales efforts C. Personal selling is especially critical to travel agents and meeting planners D. Personal selling involves discovering customer needs and matching those needs with the most satisfying services E. Steps in the selling process 1. Acquiring Product Knowledge -- gather knowledge useful to clients 2. Approaching the client – first contact with potential client 3. Qualifying the client – determining client’s needs and whether have service to fulfill those needs 4. Making the sales presentation – present benefits of service that fulfills client’s needs 5. Closing the sale – responding to objections and booking the sale 6. Following up – service after the sale builds client loyalty 7. Building relationships – professional behaviors when dealing with clients, time and time again

(Teaching Hint: This is a good opportunity to practice a little role playing. Depending the focus of your course, select a personal selling setting, e.g. travel counselor, catering sales manager, event planner, etc. Then have students follow the steps in the personal selling process to outline how they would both make a sale to a potential client and maintain the relationship with the client. We have always used small groups for this exercise. We then have representatives from teams serve in the roles of sales person and client. After the presentation we either have a discussion about both positives and negatives of the interaction or have Cook, Hsu & Marqua, 5th ed.

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students write-up short reaction papers to what they have experienced with the focus of the papers being how they can use these experiences in their future employment).

XII.

Summary You Decide

Major Topic: Familiarization Trip: Yes or No? Suggestions for In-class Discussion: Ask students to outline the situation of the case. Is this a familiarization trip? Why or why not?

How might Brenda benefit from this trip? How might she be harmed? In other words, what are the future dangers of accepting the invitation?

What might John Smithers expect from Brenda in the future?

Does a business relationship warrant this invitation? Why or why not?

Note: You may find that male students tend to respond differently than female students to this You Decide. An interesting exercise is to reverse the gender of the two main characters to see if students think the same way when the roles are reversed.

Discussion Questions 1. Describe how services are different from goods.  Services are actions, goods are material objects.  Services are often accompanied by facilitating goods which support the service.  Differences between goods and services: 1. Services are intangible: Actions not objects 2. Services are highly perishable a. Cannot be inventoried (airplane seat once the plane has left the gate) b. Revenue potential perishes with passage of time 3. Customer is often active participant in producing the service (salad bar) 2. Explain the functions of intermediaries in tourism distribution channels.  Intermediaries make information and services widely available cost-effectively.  They may perform a variety of value-added functions such as: 1. Provide information about types and availability of services Cook, Hsu & Marqua, 5th ed.

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2. Contact current and potential customers 3. Make reservations and other travel arrangements 4. Assemble packages of services 5. Prepare tickets 6. Bear financial risk by buying services in bulk for resale to individuals/groups  Intermediaries exist where they perform a necessary role more cost-effectively than the supplier could perform the same function.

3. What are the differences in one-level, two-level and three-level tourism distribution channels?

The One-Level (direct) Distribution Channel is the simplest form of distribution; no intermediary between supplier and customer. Most tourism suppliers utilize one-level distribution channels in addition to other levels. Consumers may purchase the service directly from the supplier via 800 numbers or personal computer.

The Two-Level Distribution Channel involves an intermediary between tourism supplier and tourist. This is the most common form of tourism service distribution, and the travel agent is the most commonly used intermediary. Travel agencies are the department stores of the travel industry.

The Three-Level Distribution Channel has two intermediaries between the tourist supplier and the consumer. Often the two (or more) intermediaries include a tour operator and a travel agent.

4. Why have travel agents remained an important link in the distribution of tourism services?

Agents perform many functions; most importantly they match suppliers and consumers by providing information and counseling to prospective travelers. A significant portion of most travel service reservations are made through travel agents.

5. How has the Internet changed the distribution of travel services?

Traditional channels of distribution of tourism services have evolved to incorporate Internet technologies. As travelers have become comfortable with information technology and the power of the Internet, they view it as a do-it-yourself means to search for tourism service information and for the booking and purchase of travel services.

6. Explain the functions of tour operators and wholesalers.

Tour operators and wholesalers purchase tourism services in bulk and then mark up the price and resell them in packaged form. Among their specific functions are to plan, prepare, market, and often operate vacation tours. They also bear some of the financial risks in the tourism business by purchasing blocks of a service in advance which if not sold cannot be Cook, Hsu & Marqua, 5th ed.

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“returned.”

7. How is information about tourism services made available to the traveling public?

The traveling public has many ways of obtaining tourism service information including:  Direct contact with tourism suppliers concerning their offerings through 800 numbers, web sites, etc.  Visiting/contacting a local or online travel agent  Contacting organizations such as convention and visitors bureaus and/or national, state/provincial, or local tourism offices/chambers of commerce  Visiting social media sites  Miscellaneous other sources such as travel clubs 8. Why have personal selling skills remained important for tourism services professionals?

With the commoditization of many tourism services that has been brought about by widespread Internet access, personal selling skills have become more important than ever.

Individuals with extensive product knowledge and the ability to identify and meet customer needs can differentiate their offerings taking them from order taker to problem-solver status.

Short Answer Questions 1.

2.

3.

4.

Why would tourism service suppliers consider using intermediaries?

How can travel agencies successfully compete in today’s competitive tourism environment?

Describe the components that would be brought together to create a successful escorted tour.

Describe how tourism suppliers can successfully tap the benefits of dual distribution channels.

5. Explain the meaning of the statement, “Effective salespeople are more than just ordertakers.”

6. Explain how and why a salesperson should qualify a client.

7. Even though you may never hold a sales position, why is it important to learn the basics of personal selling?

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CHAPTER FIVE OUTLINE CAPTURING TECHNOLOGY'S COMPETITIVE ADVANTAGE

i. Quote: Shoshana Zuboff ii. Chapter Opener: Staying on the Cutting Edge I. Introduction A. Technology: use of new knowledge and tools to improve productivity and systems B. Creates both challenges and opportunities for tourism service providers C. Inexpensive data storage and processing speeds given rise to POS and ERPS D. Outcomes from investments in technology 1. Enhanced productivity 2. Improved communications 3. Enhanced customer service 4. Improved profitability 5. Competitive advantage II. Improving Operating Efficiency and Effectiveness A. Rising wages, increasing input costs, and intensifying competition necessitated changing of old ways B. Examples of technology improvements 1. Staffing programs match staff levels to demand levels 2. Communication technology (such as remote devices) make internal ordering and inventory stocking more efficient C. Management Information Systems 1. Computer-based systems for collecting, storing and retreiving information for planning, decision-making and problem-solving 2. Point-of-sale systems are frequently major input to MIS 3. Aggregation of data can improve financial, management and marketing decisions 4. Property management systems 5. Enterprise Resource Planning System is total integration of all information sources D. Providing Customer Convenience and Enhancing Service 1. Do-it-yourself approach via kiosks 2. Data base marketing/data mining aids in targeting microsegments with customized marketing mixes (Teaching Hint. Here is a good opportunity to have students brainstorm about types of information that may be available to suppliers through their own [and purchasable] databases. After developing a list in groups or as a class, ask them to identify and explain why they think specific pieces of information should be privacy-protected.)

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III. Changing Communication and Distribution Channels A. Advent of the Internet fundamentally changed all distribution channels B. Online booking engines allow travelers to compare schedules and prices without a middleman C. Internet distribution for hotels D. The Internet as a Travel Tool 1. Internet and travel product distribution Travelers use Internet for ideas, inspiration and information 2. Web uses a. Source of customized maps b. Up-to-the-minute weather c. Status of flights, etc. d. Replacement for guidebooks as source of destination info e. E-mail contact throughout trip E. Internet as Communication Medium - cell phones as dominant platform for Internet F. The Power of User-Generated Content 1. Social networking and blogging - one traveler speaking to another 2. Both positive and negative comments communicated IV. Improving Profitability V. Improving Operating Efficiency and Effectiveness A. Revenue management: Method of allocating service capacity, originated by airlines B. Now applied in many industries that can improve revenues through its use C. Certain operating conditions must exist for revenue management to be effective 1. Service capacity is relatively fixed, cannot be easily and cheaply expanded (or reduced) to meet increase (decrease) in demand 2. Demand can be separated into market segments with differing price sensitivities and needs 3. Service capacity, i.e., “inventory” is perishable 4. Services can be sold in advance through reservation system 5. Demand fluctuates substantially 6. Marginal sales costs are low and marginal capacity costs are high (selling an additional service unit costs little but adding service supply is very costly) 7. Internet is allowing even greater use and fine-tuning of revenue management (Teaching Hint. Draw students’ attention to the example in Figure 5.2. Have students critique the applicability of revenue management to other sectors of the tourism industry, using the seven operating conditions listed above.)

D. Must consider factors such as market position, customer satisfaction, and demand for related services when using yield management

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Mini-Lecture We have used the following diagram to help students understand the concept of yield management. Students seem to appreciate the simplicity of this diagram when trying to comprehend this new concept.

The Airline Passenger Pyramid

Very Time-Sensitive Business Travelers

Moderately Time-Sensitive Business Traveler Price per Ticket Discretionary and Vacation Travelers

Price-Driven Travelers

Bargain Hunters

The above chart is a simple way to demonstrate the dynamics of yield management. Although limited in number, the very time-sensitive business travelers who must fly and, for the most part, are not particularly concerned about price are the most profitable for airlines.

Bargain hunters, who make up the bulk of airline passengers, are found at the bottom of the pyramid. They will purchase tickets months in advance or snag last-minute discounts that are available through consolidators.

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Price-driven travelers are calculators. They will consider the price of the ticket against other alternatives, such as driving or possibly taking the train.

Discretionary and vacation travelers are able to plan their trips in advance. This allows them the time to shop around, waiting for a price that fits within their spending budgets.

Moderately time-sensitive business travelers have some flexibility in planning their trips. Since most of their trips are not last-minute decisions, they are able to take advantage of advance purchase discounts. The airlines are particularly interested in attracting and retaining this group of flyers. Therefore, they have promoted memberships in frequent-flyer programs to gain loyalty and repeat business.

II. Reference Flint, Perry. (1997). “Will the Real United Please Stand Up?” Air Transport World. August, 34(8): 26-34.

VI. Summary You Decide Major Topic: The positive and negative aspects of frequent user (loyalty) programs This You Decide allows students to think about how the information obtained when travelers join and participate in frequent user (loyalty) programs special tourism events can be used and/or misused. In particular, they must decide what types of information is ethical to obtain, how it can be used, how long it should be retained, whether it can be shared with other organizations, and other policy related issues.

Suggestions for In-class Discussion: Ask students if they are members of travel related frequent user (loyalty) programs. Ask those who are to describe why they joined these programs. Next, have students brainstorm both potential positive and negative aspects of these programs. Begin by looking at the effects that would be listed as positive from a marketing perspective. Next, look at the potential negatives as a customer whose potential private information could be obtained and stored.

A sample of positive impacts could include:    

Targeted marketing Improved customer service Reduced marketing costs Customer loyalty

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

Improved profitability

A sample of negative impacts could include:    

Customers may not realize the types of information being collected Databases could be “hacked” Customers may be “bombarded” with unwanted communications Personal information could be obtained by unknown individuals within the organization

After developing lists of pros and cons, ask students to state their decisions both on their opinion as a consumer and on their opinion as a manager within an organization who could use this information.

As an additional research assignment, students could find examples of frequent user programs provided by at least three different tourism service suppliers in different segments of the industry. You may also choose to make these assignments to avoid excessive duplication in the obvious choices; airlines, care rental companies, and hotels.

Discussion Questions 1. What technological advances have had the most significant changes on the tourism industry?

Increasing data storage capacities and improved processing speeds which can be achieved at lower and lower costs are permitting all participants in the tourism industry to tap the benefits of information technology.

2. How can technology be used to enhance productivity?

Technological applications for productivity enhancement can be found in a variety of applications for tourism service suppliers. Staffing programs allow supervisors to schedule employees in key time slots to meet peak customer demands while limiting coverage during slack times. Advances in communication technologies make internal ordering and inventory stocking more efficient by allowing employees to communicate through remote devices. Wireless headsets, handheld order-entry equipment, and pointof-sale are improving productivity in retail operations. Management Information Systems provide the backbone for operational decisions as they collect and store data and then provide information for planning, decision-making, and problem solving.

3. How can technology be used to improve both internal and external communications?

Organizations are finding new ways to improve customer service and reduce costs through improved communication systems. Database marketing, also called data mining, Cook, Hsu & Marqua, 5th ed.

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is aiding tourism suppliers in targeting microsegments of their markets and customizing marketing mixes to fulfill the needs of specific travelers.

4. How has the Internet changed the delivery of tourism services?

The introduction of the Internet expanded travelers’ choice for points of purchase. Travel marketers created online booking engines that allowed travelers to compare available inventories. The Internet has become a major source of information about travel products and destinations. As on-line users have become more comfortable, confident, and convinced of the security on the Internet, more and more travelers are relying on this medium for their travel needs.

5. How can technology be used to enhance customer service?

The Internet has become a major source of information about travel products and destinations. Kiosk applications have allowed customers to take control over service delivery options and hand-held devices and laptops are also aiding employees in the service delivery process, freeing up more time to focus on the customer service.

6. How can revenue management be used to improve financial performance?

Revenue management requires allocating capacity to customers at the right price and at the right time, thereby maximizing revenue. Additional benefits can be obtained from revenue management when it is combined with dynamic packaging and suggestive selling.

Short Answer Questions 1.

2.

3.

4.

5.

6.

7.

8.

How has technology impacted tourism service suppliers?

How can technology be used to improve operating efficiency and effectiveness?

How can tourism service suppliers use the power of management information systems?

Why have do-it-yourself applications been so widely accepted by travelers?

How can tourism service suppliers use data mining to improve their marketing efforts?

How has the Internet changed the distribution of travel services?

Explain pros and cons of user-generated content related to tourism service offerings.

How can revenue management be used to enhance customer service, improve operating efficiency, and increase profitability?

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Part I Integrative Cases Using Cases to Teach Hospitality and Tourism Included at the end of each major section of the textbook are four integrative cases related to topics covered in the section. These cases can be used in a variety of ways to augment your course. (They can also be omitted if time does not permit their use.) For example, the cases can be used: 1. as thorough examples of real situations which the students read to understand the reality of the tourism business world; 2. to illustrate specific concepts from the textbook and generate class discussion of the concepts exemplified by each case; 3. as critical-thinking/problem-solving exercises in which students take on the role of a tourism service manager, critiquing the situation and problems faced and then suggesting possible solutions and courses of action that could be followed; and 4. as examination material for students to apply the knowledge they have learned.

Cases are a frequently used teaching tool, especially in business courses. Cases are an efficient means for providing students with a glimpse of the depth of details and issues that are faced by managers every day. Some cases may be straightforward while others may include a wide variety of issues from which the instructor can choose to focus class discussion.

When using cases as a pedagogical tool, you should feel free to utilize them in a variety of ways. No single format is ideal or “the right way” to present a case. In fact, varying how they are used keeps students interested and challenged. The goal of cases in teaching is to provide students with platforms on which they can practice the knowledge they are acquiring and build their critical-thinking skills.

Using Cases to Develop Problem-Solving Skills One common approach to the use of cases employs the problem-solving framework. This approach can be used by freshman and sophomore students in a rudimentary way, but probably works best with junior and senior students who have already substantially developed critical-thinking skills and feel more comfortable with ambiguous learning situations that are provided by cases.

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The goal of case teaching is not for students (or instructors) to come up with the one best answer/solution, but to learn and exchange ideas in pursuit of a solution or course of action. Through careful reading and pre-class thought followed by lively in-class discussion, students learn that there is rarely one best answer in a situation but they do come to realize that some analyses and actions are better than others. Cases are, in essence, vehicles for class discussion through which the instructor and the students challenge each other to think more critically.

Suggested Formats for Class Discussion of Cases In the ideal case discussion situation, the instructor plays a minor role while the students enthusiastically debate each other and generate new topics for discussion. In reality, the instructor often must take an active role to keep discussion focused and to highlight the important topics represented in the case.

We have intentionally excluded questions at the end of the case descriptions in the textbook. If you are teaching students who are inexperienced in case analysis, you may choose to supply them with some of the questions we provide in the teaching notes of this Instructor’s Manual. Students who are accustomed to the case method should not need the extra input of questions before they begin their analysis. More experienced students should be comfortable working with the cases without questions to guide them.

When using a case to illustrate chapter topics, the instructor usually needs to generate class discussion by asking some questions which focus the students’ thinking and comments. We have provided a variety of discussion question possibilities with each case teaching note, but you should feel free to add others, even taking the case into a completely different direction.

When using cases to prompt students to practice problem-solving skills, instructors often use a team approach. Students are placed in teams (three to five is a good number) and then the teams work on the assigned case outside of class to be prepared to lead class discussion during the class period. Some instructors also like to use case presentations. A team is selected to present their analysis in front of the class, and then other teams ask questions and comment about the analysis presented.

You may also find that to ensure thorough reading and pre-class preparation students need to write a short paper on a case. A danger in the use of cases is that all students may arrive to class ill-prepared, on the belief that other students will provide the needed discussion. If each student is held responsible for a case “write-up,” lively class discussion is virtually ensured. Write-ups can be brief and to the point (one or two pages), or you may require them to be more complete (five to ten pages). With freshmen and sophomore students the write-up can simply be a list of concepts illustrated in the case. For higher level Cook, Hsu & Marqua, 5th ed.

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students, one commonly used case write-up format is listed below.

1.

2.

3.

4.

5.

Situation Problem statement (there may be more than one which you choose to limit) Possible alternative courses of action Pros and cons of each alternative Selection of preferred alternative, logic for selection, and plan of action

From cases students learn about real situations facing managers. In addition, students learn that others may approach a situation differently and that individuals analyze problems from differing perspectives and with differing values and assumptions. Students therefore can begin to develop the important skills of listening, understanding, and debating through the use of cases. Students often begin to realize that in the face of argument (that is well supported by evidence) they will need to modify their positions.

Cases provide the instructor with an added means of educating students and also a means of opening their minds to the thoughts of others. With practice, both instructors and students find cases a rich addition to the education process.

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Whose Money Is It? Teaching Note Critical Incident Overview While receiving tips may seem like simple and expected practice, the distribution of tips can become a cause for concern and dissatisfaction. No matter how tips are received, it seems like someone is always dissatisfied. This incident involves a server, Katy, at a restaurant, Charley’s, who is dissatisfied with how her tips are being distributed. Charley’s has a tip pooling plan where servers receive 30% of the pooled tips and the kitchen staff receiving the remaining 70%.

Although Charley’s hourly pay rate for servers is $2.10 above the full federal minimum wage, Katy has decided that the tip pooling plan is unfair and has filed suit against Charley’s claiming it had violated the Fair Labor Standards Act. This incident is suitable for undergraduate and graduate compensation, human resource management, hospitality, restaurant, and food service management courses.

Learning Objectives After analyzing this incident students should be able to:  Examine how tip credits are used to reduce the Federal minimum wage,  Differentiate between customary and non-customary tip pools,  Examine the arguments put forth by Katy and Charley’s restaurant, and  Create alternative tip pooling plans to address the needs of all employees other than those classified as supervisory or management.

Research Methods This incident is based on court documents, Cumbie v. Woody Woo, Inc. (United States Court of Appeals, Ninth Circuit, Misty Cumbie, on behalf of herself and all others similarly situated v.

Woody Woo, Inc., No. 08-35718. Filed February 23, 2010).

The name of the server and the restaurant has been changed to prevent students from searching for the court decision.

Questions 1. Whose argument should be accepted by the court, Katy’s or Charley’s?

2. Does Charley’s need to take a tip credit to meet Federal minimum wage requirements for its servers?

3. Is the tip pooling plan used by Charley’s a customary or a non-customary plan? Why is this distinction important?

4. How could you modify Charley’s tip pooling plan to alleviate future concerns?

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Answers to Questions 1. Whose argument should be accepted by the court, Katy’s or Charley’s?

Since many students have held tip paying positions, this question will create a lively discussion.

We suggest that you start discussing this question by asking how many students have participated in a tip-pooling plan. If you receive any positive responses, ask them to explain how these plans operated. In addition, ask if they were paid full minimum wage or tip credit minimum wage. Continue the discussion by asking those that received tips in a food service establishment if they shared any of their tips with bussers or kitchen staff members such as cooks and dishwashers.

Before you delve into answering the question it should also prove interesting to ask if any of your students served in supervisory or managerial positions in establishments where tipping was a common practice and get their opinions on the importance of tipping as a piece of compensation. Finally, ask if your students are willing to share how much they made in tips on both good and bad shifts. We have found that students who have not worked in tipped positions are often amazed at the amount of money involved in tipping.

With this basic background information, we suggest that you either ask students by show of hands or by dividing them into opposing groups to take or defend one side of this disagreement.

Once they have committed themselves or been assigned to defending one side or the other, ask for the logic of their defence.

2. Does Charley’s need to take a tip credit to meet Federal minimum wage requirements for its servers?

Once challenged to think through some the issues and emotions, students must be challenged to deconstruct the facts of this situation. This question provides them the opportunity to understand the basic of the tip credit provision of meeting the minimum wage under the Fair Labor Standards Act (FLSA). Minimum wage requirements and tip credit provisions can be found by directing students to http://www.dol.gov/whd/regs/compliance/hrg.htm. The FLSA states that employers are required to pay all employees the current minimum wage. If states, counties, or other legal jurisdictions have a higher minimum wage than the Federal minimum wage, this higher minimum wage must be paid.

The FLSA further specifies that employers may include employees’ tips as a tip credit in the calculation of wage payments provided that the tip credit does not exceed the actual amount of tips received. In addition, the employer must inform employees that a tip credit is being used to meet Federal (or other jurisdictional) minimum wage requirements. Employees must also be allowed to keep all tips unless they are participating in a tip pool with other customarily tipped employees. When an employee’s tips do not make up the difference between the tip credit minimum wage and the minimum wage, the employer must make up the difference.

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This base line FLSA information is important for students to understand and apply to this situation. The bottom line is that Charley’s is not taking a tip credit. Note the facts; Charley’s is paying servers an hourly rate that is a full $2.10 above the federal minimum wage.

3. Is the tip pooling plan used by Charley’s a customary or a non-customary plan? Why is this distinction important?

This question directs students thinking and analysis to a more in-depth understanding of the tip credit provision of the FLSA. Unless there is an agreement to the contrary servers own all of their tips. However, redistribution agreements called tip pools can be made where servers tips are redistributed. A customary tip pool as defined by the FLSA would include all employees that are customarily tipped for their services. This is opposed to a non-customary plan which would include other employees.

The importance of this distinction is that, if employees are participating in a customary tip pooling plan, employers are allowed to take a tip credit. Employers are not allowed to take tip credits when employees are participating in non-customary plans.

Based on these distinctions, Charley’s would not be allowed to take a tip credit for its employees.

Once again, students should note that Charley’s is not taking a tip credit.

4. How could you modify Charley’s tip pooling plan to alleviate future concerns?

Armed with the intricacies of tip-pooling plans and tip credits for determining minimum wage payments, students should be challenged to device alternatives that meet the expectations of all employees. We have found that many students, especially, those who have worked in tipped positions will quickly defend customary tip-pooling plans and offer proposals that are based on hours worked, numbers of customers served, and/or seniority. You should challenge them to also think about possible alternatives for non-customary plans that will meet the requirements of the FLSA. Suggested Classroom Activities This incident is well suited for roll play activities. We suggest that you divide the class into three group; cooks, supervisors, and servers. Have each group select a spokesperson for negotiations and prepare for a discussion of three possible splits of the tip pool; 30/70, 40/60, and 50/50 from any position’s perspective. After preparation assign each of the three parties one of the positions and possible tip pool splits. By having each group prepare for each position and scenario, they will be forced into discussing the pros and cons of each alternative. Once discussions begin, be prepared for a lively outcome. Although motivation and equity have not been included (these subjects are not the focus of the incident) in the learning objective for this incident, don’t be surprised if these subjects are not brought up in these discussions.

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Epilogue The courts found in favor of Charley’s as the restaurant was paying in excess of the Federal minimum wage and therefore not taking a tip credit.

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TEACHING NOTE MEASURING AND MANAGING EMPLOYEE TURNOVER AT TASTEE MAX RESTAURANTS Dr. Bonalyn J Nelsen, Rochester Institute of Technology Patricia A. Walker, Rochester Institute of Technology Critical Incident Overview This critical incident offers students the opportunity to measure the direct and indirect costs of employee turnover and make a business case for addressing and managing that turnover in a quick service restaurant chain. Ronda Garvey, assistant manager of a Tastee Max restaurant located in the food court of one of upstate New York's busiest malls, is concerned about excessive employee turnover in her restaurant. In 2008, average employee turnover within the nine-unit quick service restaurant chain was 66.3 percent—well below the industry average of 120 percent (U.S. Bureau of Labor Statistics, 2009). However, the average annual turnover rate for Ronda's restaurant was 122.7 percent, approximately double the turnover rate of other Tastee Max stores. Ronda had several ideas about how the turnover problem could be addressed, but knew that obtaining support for her ideas would not be easy. Noting that the chain's employee turnover was about half the industry average for quick service restaurants, Tastee Max's corporate managers had been relatively unconcerned about the problem. Key to the success of any initiative taken to curb turnover was gaining the support of corporate management. Ronda wondered (1) what type of retention strategy she should suggest and (2) how to make a business case to gain credibility and support for her ideas.

This critical incident is suitable for use in advanced undergraduate and graduate courses in human resource management, human resource metrics, performance management, strategic human resource management, hospitality and food service management.

Learning Objectives The learning objectives of this incident are: 1. To identify and describe the causes of employee turnover in a quick service restaurant.

2. To identify and recommend retention strategies for managing employee turnover.

3 To measure the direct and indirect costs of employee turnover.

4. To identify and describe the strategic impact of employee turnover in a quick service restaurant chain.

5. To use data on the direct and indirect costs of employee turnover to plan and describe a business case for remedial action within a firm.

6. To identify and recommend additional methods of measuring and analyzing employee turnover.

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Research Methods This field-researched, decision-based critical incident employs primary data initially gathered for a graduate student project. Additional data was gathered by the authors to supplement project data as needed. In addition to taped, semi-structured interviews with store managers and employees, content analysis was performed on various company documents, including restaurant menus, employee handbooks, and quarterly profit and loss statements. The names of individuals and the organization in the critical incident are disguised; however, all descriptions of location, costs, pricing and policies are factual.

Questions 1. What are the causes of employee turnover in Tastee Max's Jubilee Mall store? Which factors, if any, seem unique to Ronda's store?

2. What retention strategies can Tastee Max's corporate management adopt to address the turnover problem? Which of these do you recommend?

3. Use the information provided in the critical incident to calculate the direct cost of employee turnover in Tastee Max's Jubilee Mall store.

4. Use the information provided in the critical incident to identify and describe the indirect costs of employee turnover in Tastee Max's Jubilee Mall store.

5. What is the financial and strategic impact of employee turnover on the Tastee Max restaurant chain? Is this problem as insignificant as management assumes? Why or why not?

6. How many menu items must Tastee Max sell simply to cover the cost of one separated employee? Conduct a breakeven analysis to support your answer.

7. How can the data generated by your analysis be used to make a business case for remedial action within a firm? Illustrate by outlining the major points of a business case that Ronda can use to win managerial support for her plans.

Answers to Questions 1. What are the causes of employee turnover in Tastee Max's Jubilee Mall store? Which actors, if any, seem unique to Ronda's store?

Devising effective employee retention strategies requires firms to understand the drivers of turnover (separation) and retention in their business. Turnover occurs when employees leave an organization voluntarily or involuntarily (Anonymous, 2005). Both managers and human resource professionals must understand both why employees leave organizations and why they stay in order to successfully develop and implement targeted employee retention strategies (Daniel, 2009). Generally speaking, employees will stay with an organization as long as (1) the incentives it offers (e.g., pay, benefits, work climate, work/life balance, development opportunities, career advancement) are equal to or greater than the contributions required of the employee (e.g., time, effort, skill and knowledge, physical hardship) and (2) the opportunity costs of staying in one's current job are lower than the costs of working elsewhere. Thus, employee turnover and retention are functions of an employee's desire to leave the organization Cook, Hsu & Marqua, 5th ed.

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and the ease with which he/she can leave (Daniel, 2009).

Employees' desires to leave an organization are driven by numerous factors, including employee dissatisfaction with the terms and conditions of employment, leaving without a plan (i.e., terminating employment on impulse), pursuing better employment alternatives, and following an individual plan (leaving to start a family or study on a full-time basis, geographic relocation, etc.). Although it is difficult to be precise, it appears that the first three factors are primary drivers of turnover at the Jubilee Mall store. Students should be able to identify the following factors and explain how they have contributed to both voluntary and involuntary turnover.  Transportation problems: Because few crew members at Ronda's store own private vehicles, most use city busses to commute to and from work. Bus schedules are fixed and routes to the mall can be limited, particularly on weekends, holidays, nights, and other times when crew members must work. Consequently, employees occasionally leave their shift early or depart without finishing their work to catch a bus. Busses are also subject to delays due to poor weather, road construction, and accidents. When delays occurred, employees could be written up for arriving late, even though they were not personally responsible for the delay. A final transportation-related factor was the time, inconvenience, and cost of commuting to and from work on public transportation, which was not insignificant; Ronda Garvey reported that some employees rode busses for as long as two hours on their daily commute; spending four hours simply commuting to and from work takes a heavy toll on an individuals' work/life balance. The opportunity costs of making this journey on a regular basis quickly mount, spurring employees to separate on impulse (for example, by simply walking off the job to catch the bus) or seek employment opportunities closer to home. 

Failure to complete orientation: Turnover is often high among newly hired employees.

Socialization practices, particularly those delivered via a structured onboarding and assimilation program, reduce turnover by helping new employees become embedded in the organization quickly (Fyock, 2009). These programs typically include shared and individual learning experiences; familiarization with company rules, policies, and culture; formal and informal activities that allow new hires to become acquainted with co-workers and supervisors; and the assignment of experienced employees to act as mentors and role models (Daniel, 2009; Fyock, 2009). Although Tastee Max offered a structured, paid four-hour onboarding program, many new employees did not attend, possibly because the session was scheduled on a Saturday morning (with reduced bus schedules on weekends, children not in school, etc.). By making attendance at the onboarding session a mandatory condition for continued employment and possibly finding a more agreeable time for onboarding, the company could hasten the socialization process and improve motivation and productivity among new employees.



Inadequate training and development: If employees are not given opportunities to continuously upgrade their skills, or are expected to perform despite inadequate job training, job dissatisfaction and intention to leave are heightened (Daniel, 2009). While some managers at Tastee Max provide comprehensive classroom and on-the-job training

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for their employees, others do not. Employees who are allowed to "sink or swim" perform poorly, lower overall productivity of the store, and resent the lack of support from unit management. 

Compensation and benefits: Compensation/pay and benefits, particularly prescription drug benefits, are often cited as important sources of job satisfaction and intention to stay among hourly/non-exempt employees (Lockwood, 2004; Minton-Eversole, 2007). For example, a 2007 survey of office workers surveyed by online service provider Yahoo! reported that 36 percent of the workers polled would leave their jobs for a better salary (Gurchiek, 2007). Newly-hired employees receive only the New York State minimum wage, and very few work enough hours to qualify for the company's benefits.

Consequently, compensation and benefits—or, more accurately, the lack thereof could be a significant driver of low job satisfaction and employee turnover.



Supervision: That "employees join organizations and leave bosses" is a maxim grounded in fact. Indeed, several studies have suggested that fair, equitable, and respectful treatment from supervisors was the most important predictor of retention (for example, see Lockwood, 2004; Gorelick, 2007). Poor relationships with immediate supervisors can prompt employees to terminate employment on impulse or to seek other employment.

While the chain's low average turnover rate suggests that most Tastee Max store managers and supervisors enjoy positive relationships with their employees, the high turnover at Ronda's store is probably due, at least in part, to favoritism, arbitrary rule enforcement, and autocratic leadership style exhibited by some managers in that unit.



Scheduling of meetings: Scheduling training sessions for Saturday mornings and staff meetings on Sunday mornings—times when many employees have personal or family commitments and the availability of public transportation is sporadic—contributes to work/life balance and transportation problems for those employees who are required to attend.



Poor selection: Well-designed and implemented recruitment and selection processes identify and retain job candidates who represent a good fit with hiring criteria while screening out those candidates that represent a poor fit. High rates of absenteeism, errors on the job, disciplinary issues, and turnover among newly hired employees, particularly those who terminate six to twelve months after hire, are indicative of poorly designed and executed stalling procedures (Sullivan, 2002; Anonymous, 2005). High rates of voluntary and involuntary separation before the 90-day probation period suggests that Tastee Max's recruitment and selection process may be flawed in two basic ways: poor quality candidates are being hired (false positives) and good quality candidates are either not applying for jobs or are being screened out of the selection process (false negatives).



Job design: Jobs in the quick service restaurant industry have become culturally synonymous with boring, dead-end jobs. While this reputation may not be entirely deserved, it is true that jobs in this industry tend to be routine, fast-paced, emotionally

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demanding, and fairly unskilled (Hochschild, 2003). Many employees may find these jobs to be boring, unchallenging, and stressful, leading them to seek alternative employment or impulsively walk off the job if provoked.

2. What retention strategies can Tastee Max's corporate management adopt to address the turnover problem? Which of these do you recommend?

Development of retention strategies involves several key activities: knowing the kind of talent the organization needs to be successful, discovering what those employees really value at work, devising a retention strategy aimed at keeping desired employees, and providing the leadership and resources necessary to implement the strategy. To plan and design successful employee retention strategies, the following steps are recommended (Sullivan, 2002): a) Obtain executive commitment for an exploration of turnover and, if justified, resources for a coordinated retention effort. b) Improve efforts to collect data on segued employees- The goal is to discover when and why employees leave by identifying external, internal, and individual motives for separation. This information is typically obtained from exit interviews. The critical incident suggests that the company's success in obtaining information from employee exit interviews has been uneven.

Methods to improve the completion rate of exit interviews, as well as the accuracy and detail of their contents, should be explored. c) Analyze the organization's turnover rate by unit and job class. The goal is to identify who is leaving. For example, are employees in a certain job class more likely to leave than others? Are new hires more likely to leave than experienced employees? Is turnover concentrated in a particular unit (such as Ronda's store) or shift? This helps to determine how extensive the problem is and pinpoint likely trouble spots in the organization. d) Use quality-of-hire metrics to identify top performing employees and focus retention efforts on keeping these individuals. e) Find out why people stay with the organization. For example, what do employees like about working at the organization, and what factors lead them to stay? This information can be gathered from personal interviews, surveys, and 360-degree feedback from current employees. f) Use the information collected in previous steps to formulate the organization's employee value proposition (EVP). An EVP ".. is the holistic sum of everything people experience and receive while they are part of a company everything from the intrinsic satisfaction of the work to the environment, leadership, colleagues, compensation, and more" (Michaels, Handfield-Jones, and Axelrod, 2001). A firm's employee value proposition is analogous to a customer value proposition; its purpose is to provide current and future employees with compelling and attractive reasons to join and stay with the organization. The EVP forms the foundation of all recruitment and retention strategies. g) Finally, design and implement a retention strategy based on the organization's EVP. Some solutions to Tastee Max's turnover problem seem obvious, and students will quickly identify tactics for improving employee retention, such as assisting employees with transportation problems or ensuring that all employees complete orientation and training.

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However, instructors should caution students against recommending retention tactics in a one-off fashion. Retention tactics are unlikely to achieve desired outcomes unless they are part of a comprehensive retention strategy that identifies, verifies, and addresses all root causes of employee turnover. Issues like poor job performance, insubordination, tardiness, absenteeism, and turnover are symptomatic of an organizational problem—low levels of employee morale and job satisfaction. Job dissatisfaction is caused by multiple factors within the organization, such as poor management, non-competitive wages and benefits, and flawed recruitment and selection practices. To cure the problem, the drivers of low morale and job dissatisfaction must be accurately and fully diagnosed and treated by the organization's retention plan. Elements that might be included in Tastee Max's retention plan include the following: 

Improved Management Skills: Many of the drivers of turnover are associated with poor management at the store level. For example, some managers do not require newly-hired employees to attend the mandated orientation session, do not fully train new employees, exhibit favoritism among employees, and have trouble managing diverse employees.

Store managers could benefit from improved training in active listening and two-way communication, negotiation and conflict resolution, diversity management, employee motivation, coaching and feedback, employee discipline, and leadership skills. Store management should also be held accountable for orienting, training and properly developing all employees.



Compensation and Benefits: By conducting a wage and salary survey of local employers, Tastee Max can determine the competitiveness of the compensation and benefits offered to its employees relative to competitors and other employers recruiting from the same labor pools. If the chain's compensation is below-market, Tastee Max may consider introducing changes that make the company's EVP more attractive to job candidates.

Other possibilities include offering employee referral bonuses (bonuses paid to current employees who recommend successful new hires; for example, bonuses could be disbursed after the newly hired employee completes probation, remains with the company for one year, and so on) and bonus payments awarded to employees for longevity and perfect attendance. To be most effective, incentive pay should be offered to both unit management and crew members who perform well and remain with the company for specific periods of time. Part of unit management's performance evaluation and variable pay could be based on controlling absenteeism and turnover in their stores.



Improved Recruitment and Selection: Frequent turnover among newly-hired employees suggest that poor recruitment and selection may be a driver of turnover at Tastee Max. Staffing procedures should be carefully examined and "intent to stay" should become a key selection criterion for job candidates. Those candidates who have a history of frequently changing jobs may be downgraded within or eliminated from the candidate pool. Other useful selection technique is to carefully check and vet the references, employment history, and personal background of candidates, and to make all offers of employment contingent on successfully passing background checks and drug screenings.

This practice helps to screen out potential "problem employees"—those who are more

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likely to cause disciplinary problems—before they are hired. 

Improved Work/life Balance: Several of Tastee Max's policies, such as scheduling mandatory staff meetings on Sunday mornings and failing to offer assistance with long, difficult commutes, take a toll on employees' work/life balance. Consulting employees about the types of difficulties experienced and requesting suggestions for improvement may elicit creative ideas for improving work/life balance and, thus, lowering absenteeism and turnover. For example, the company could provide a subsidized shuttle service, organize car pooling, or offer low-cost loans to employees desiring to purchase a private vehicle. Rescheduling meetings for times less likely to clash with family and personal commitments could also reduce absenteeism and improve job satisfaction.



Job Design: Jobs in the quick service restaurant sector of the U.S. food service industry feature highly simplified, routine tasks that allow incumbents little discretion or control yet extract a heavy physical and emotional toll (Hochschild, 2003; Royle, 2001). Such jobs tend to be boring, repetitive, and stressful for incumbents, particularly when the work environment is fast-paced and customers are impatient or demanding. While job design is not expressly identified as a factor driving turnover, it seems reasonable to assume that the jobs of front line workers at this quick service restaurant chain are not too different from others in the industry. Jobs can be made more satisfying and intrinsically motivating by broadening job scope (increasing the number of tasks assigned to a particular job), increasing task variety (perhaps through job rotation and multi-skilling), sharing positive customer feedback with employees, and creating a fun atmosphere in the workplace (Corday and Parker, 2008).

Teaching Tip: It may be useful to assign this question in advance, and to allow students to discuss their retention plans in teams prior to discussion. The question's difficulty can be increased by pre-assigning qualifying conditions to acceptable retention tactics. For example, instructors can assign dollar costs to various tactics and assign students a "budget" that can be spent on their remedial strategy, with penalties assigned for going over budget. Similarly, instructors can explain that certain tactics have been tried in the past without success, thus making Tastee Max's management particularly skeptical of such interventions.

3. Use the information provided in the critical incident to calculate the direct cost of employee turnover in Tastee Max's Jubilee mall store.

Employers consistently report that finding and retaining good-quality employees to be among their greatest challenges, and 75 percent of all job searches in the U.S. are undertaken to replace departed workers (Cascio, 2005). Apart from the time and effort required, turnover is problematic because it is expensive. Cascio (2005) estimates that the average cost of turnover per employee is 150 times a worker's average annual compensation, although this figure will vary considerably by occupation. Because turnover is costly, high rates of employee turnover have a direct negative impact on an organization's profitability and competitiveness (Fitz-Enz, 2000; Becker, Huselid and Ulrich, 2001; Phillips and Connell, 2003; Cascio, 2005; Cox, 2008). By Cook, Hsu & Marqua, 5th ed.

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expressing the costs of employee turnover in financial terms, human resource professionals can quantify the financial impact of turnover on company profitability and create the sense of urgency needed to address underlying causes of turnover in the organization.

The direct costs of turnover are cost factors that are directly associated with the separation, replacement (temporary and permanent), and training of replacement employees. To measure the direct cost of employee turnover, sum the dollar costs of expenses in five categories: separation costs, replacement costs, orientation and training costs, vacancy costs (and savings), and productivity costs (Pinkovrtz, Moskal, and Green, 2006). These costs are defined as follows: 

Separation costs represent the time and money required to process and record an individual's exit from the organization. For voluntary turnover (quits, retirement), the costs include paid time spent on exit interviews (or fee per interview if outsourced) and processing paperwork. For involuntary quits separation costs are typically greater due to the costs associated with progressive discipline, such as paid time devoted to multiple meetings between the employee and management and completing written warnings (Anonymous, 2005).



Replacement costs include costs of time, materials, and other expenses associated with hiring a replacement for the separated employee, such as recruitment advertisements and job postings, employee referral payments, interviewer's time, and travel expenses.



Orientation and training costs include the onboarding and training costs for the replacement employee as well as trainer's, manager’s, and experienced employee's time (if on-the-job training under the supervision of experienced employees is used). Costs of an on-the-job trainer's lowered productivity due to supervising and instructing a new employee should also be included.



Vacancy costs are costs associated with having a vacant position within the organization.

Direct costs of vacancy include overtime pay or additional pay earned by current employees who must do the work of the vacant position and cost of temporary workers hired to do the work of the vacant position. Vacancy costs are balanced by the savings achieved by not paying separated employee's compensation and benefits; consequently, compensation and benefit costs saved due to the vacancy should be subtracted from total vacancy costs.



Productivity costs are the costs of lost business and low productivity caused by a vacancy. This category includes costs associated with lost revenue, low morale, and the performance differential of replacement employees until the new hire is fully trained and productive.

To calculate the direct costs of turnover at Ronda Garvey's store, students must sum all separation, replacement, orientation and training, vacancy, and productivity costs found in Tables 2, 3, and 4 in the critical incident. For the purposes of illustration, assume the separating Cook, Hsu & Marqua, 5th ed.

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employee is a new hire, that is, an employee who has not yet completed her or his 90-day probationary period (instructors can also direct students to calculate turnover costs for other employee ranks to compare costs; for example, students can calculate turnover costs using the average wage received by employees, or $ 7.75). Employee turnover at Tastee Max is calculated as follows (see Appendix, Table 1 for a detailed explanation of the costs listed below): Cost of Turnover/Employee = Separation + Replacement Training + Vacancy + Productivity Number of Employees Cost of Turnover/Employee = $38 70 + $ 72.84 + $760.30 + $276.25 + $43.50 1 Separated Employee Cost of Turnover/Employee = $1,191.59 Teaching Tip: While the calculations required to compute turnover costs are not difficult, the extensions and unit conversions involved can seem confusing and lead to errors. We recommend advising students to calculate costs by subcategory using separate table-like worksheets for separation, replacement, orientation and training, vacancy, and productivity costs; worksheets are provided in the Appendix for this purpose (see Teaching Note Appendix, Table 1). The subtotals from each category are easily summed to calculate the total cost of employee turnover. A blank table is provided with this teaching note for this purpose (see Teaching Note Appendix, Table 2).

4. Use the information provided in the critical incident to identify and describe the indirect costs of employee turnover in Tastee Max's Jubilee Mall store.

Employee turnover has both direct and indirect costs for an organization. Indirect costs are cost factors that are not directly associated with the separation, replacement (temporary and permanent), and training of replacement employees but nevertheless impact the overall costs of turnover to the organization. Although indirect costs are difficult to quantify and thus seldom calculated, they are nonetheless real and frequently outweigh direct costs. Consequently, indirect costs should be considered when analyzing the impact of turnover on an organization (Sullivan, 1948; Anonymous, 2005; Cox, 2008). Turnover costs—both direct and indirect—escalate substantially when the leaver is a "star performer," is in a key management position, is difficult to replace, or when the individual immediately accepts employment with a competitor. This is particularly true of indirect costs.

While most employees separating from Tastee Max are neither "star performers" nor difficult to replace, the firm is incurring some indirect costs as a result of their departure and students should be able to infer several from the critical incident. Indirect costs associated with employee turnover include, but are not limited to, the following: 

The cost of low morale and time lost to “water cooler grumbling" among remaining employees.

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       

     

Employees that are leaving soon and their recent replacements are “high maintenance" in the sense that they require more managerial time and attention.

New replacement employees are also more likely to commit errors in order-taking and food preparation, thereby increasing food costs, lowering product/service quality and decreasing customer satisfaction.

Team productivity suffers due to time and effort spent covering for a soon-to-beterminated or soon-to-quit employee who has mentally "checked out" but is still on the payroll.

Dissatisfied employees who are contemplating separation may commit sabotage, theft, or engage in other negative workplace behaviors.

High turnover rates, especially among customer contact employees, suggest to customers that the firm is weak or does not care about serving them.

Some departing employees may "steal" away some customers or spread negative information about their former employer among current and potential customers.

Product/service "time-to-market" can be significantly reduced by presence of new, inexperienced hires.

Employees who intend to terminate employment may stop producing weeks prior to leaving. They may also develop an "attitude," spend more time unproductively (taking breaks, gossiping, horseplay, etc.), and are more likely to be absent (to interview for replacement jobs, etc.).

Leavers may take other employees with them, particularly if the departing employee is the leader of an intact, cohesive team.

The replacement employee may prove to be a “bad hire," and ultimately be terminated, only to begin the staffing prods again.

The firm loses social capital and firm-specific knowledge—often very valuable and hardto-acquire expertise that is not replaced with a new hire, particularly if the knowledge is tacit; hence, the return on investment (ROI) on new hires is often low.

Anticipation of an open vacancy can escalate political conflict and activity among current employees if internal staffing is practiced. Employees not promoted may leave in frustration or be driven out by the newly-promoted "winner."

Human resource and management time and effort spent dealing with leavers and replacements could be better spent on new profit opportunities.

The employer's brand may suffer among potential job candidates due to frequent turnover and bad word-of-mouth spread by former employees. High turnover and large numbers of vacancies can also create a negative impression among current employees.

5. What is the financial and strategic impact of employee turnover on the Tastee Max restaurant chain? Is this problem as insignificant as management assumes? Why or why not?

This question asks students to assess the financial strategic impacts of the direct and indirect costs of employee turnover for Tastee Max. To calculate the financial impact of turnover on the company, average turnover for the chain must be estimated for a period of time (cost of annual Cook, Hsu & Marqua, 5th ed.

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turnover is used in this example). Because the exact number of separations is not given in the critical incident, some assumptions must be made. Using informed assumptions and estimates is common practice when measuring human resource outcomes, activities, and impact (particularly those elements that are indirect or intangible) but, to be credible, conservative estimates should be used and noted. To ensure uniformity in student responses, instructors may wish to establish and announce any assumptions used in turnover calculations to students when assigning this incident.  

 

Because each store features a staff of 25-30 people, assume an average of 27.5 employees per store.

Although turnover at Tastee Max occurs at all ranks and salary levels, use the lowest cost of turnover per employee (the cost of losing a newly hired crew member or $ 1,191.59) when calculating the financial impact on the company to arrive at a conservative estimate.

Use the turnover rates given in the critical incident to calculate financial impact: a 122.7 % annual employee turnover rate in Ronda Garvey's store and a 66.3 % annual employee turnover rate in Tastee Max's remaining eight restaurants.

People are not capable of being fragmented (there is no such thing as "half” a person), but FTEs can be parsed in this manner, it is important to use consistent units of measure throughout each costing problem. Metrics associated with employees or individuals are always rounded up.

Total Annual Cost of Turnover/Unit = Turnover Cost/employee x (# of Employees X turnover %) A. Ronda's Store = $1,191.59 x (27.5 employees x 122.7 % turnover rate) Ronda's Store = $1,191.59 x (33.37 employees separated per year [rounded up to 34 employees] x 1 store) Annual Cost of Turnover at Ronda's Store

$40,514.06

B. Other Stores = $1,191.59 x (27.5 employees x 66.3 % turnover rate) Other Stores = $1,191.59 x (18.23 employees separated per year [rounded up to 19 employees] x 8 stores) Annual Cost of Turnover at Tastee Max's Remaining Stores = $181,121.68 Total Annual Cost of Turnover = $ 40,514.06 + $ 181,121.68 Total Annual Cost of Employee Turnover at Tastee Max = $ 221,635.74 This sum is a partly controllable cost that is taking a toll on the chain's bottom line profits.

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The strategic impact of any organizational strength or weakness can be assessed by examining its effect on the company's ability to (1) create value for customers and (2) differentiate its products and services from those of competitors. Tastee Max endeavors to create value for customers and to differentiate itself by offering products of very high quality at competitive prices coupled with great customer service. Indeed, three of the nine core values embraced by the company emphasize the importance of customer service:   

The Golden Rule: Always treat customers and co-workers as you would like to be treated.

Customer Focus: Our success is directly tied to how customer focused and attentive we are. Always remember that the customer is the reason we are here.

Work Performance: Promotion and pay raises are based on work performance, teamwork, and customer service skills rather than seniority.

High rates of employee turnover impede achievement of these strategic goals. The costs incurred from constantly replacing separated employees increase pressure to increase sales even as it lowers firm profitability. Moreover, frequent turnover of crew members and store managers has a negative impact on customer service: newly-hired employees are more likely to make mistakes and interact poorly with customers, while inexperienced managers are in a weaker position to enforce company policies and service standards.

6. How many menu items must Tastee Max sell simply to cover the cost of one separated employee? Conduct a breakeven analysis to support your answer.

Although the financial impact can be determined by wing the direct costs of turnover, the impact on company profitability and sales revenues may be better appreciated by line and senior managers if costs are expressed in terms of sales revenue and/or units sold, as these are very meaningful concepts and goals for any manager with profit and loss responsibility. The costs of turnover can be expressed in terms of revenue or sales by conducting a breakeven analysis. A breakeven analysis allows students to determine how many additional dollars of sales revenue must be generated or how many additional items need to be sold to cover the costs of employee turnover. While senior managers and store managers may have trouble relating to turnover costs expressed in absolute dollar terms, they easily understand the financial impact of turnover when the expense is expressed in terms of sales revenue or additional items sold (see Sullivan, 2002; Cox, 2008). The formula for calculating the breakeven point is as follows: Breakeven point in sales revenues ($) = TCT/{l-([VC + FC]/P)}, where TCT = Total Cost of Turnover/employee VC = Variable Cost per unit sold FC = Fixed Cost per unit sold P = Price per unit sold Breakeven point in units sold = TCT/{P-(VC + FC)}, where Cook, Hsu & Marqua, 5th ed.

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TCT = Total Cost of Turnover/employee VC = Variable Cost per unit sold FC = Fixed Cost per unit sold P = Price per unit sold Using the information found Table 1 of the critical incident, students can calculate the additional dollars of sales revenue that must be generated to cover the cost of one separated employee ($1,191.59) or the number of additional food items that must be sold. The following example demonstrates (a) how many additional dollars in sales revenue from cheeseburgers and (b) the number of cheeseburgers that must be sold to cover the turnover costs associated with losing a single employee: A. Example: Sales Revenue from Cheeseburgers Total Cost of Turnover /Employee = $ 1,191.59 Variable Cost/unit = ($ 1.24 food cost + $ .38 paper cost + $ 1.16 labor cost) = $ 2.78 VC Fixed Cost/unit = $ .77 Total Cost per unit sold = Variable Cost + Fixed Cost = $3.55 Price/unit sold = $3.89 Breakeven Point ($) = TCT/{1-([VC+FC]/P)} = $ 1,191.59/(1—($ 2.78 + $ .77)/$ 3.89) = $ 1,191.59/(1– 3.55/ 3.89)) = $ 1,191.59/1 - .9126 = $ 1,191.59/.0874 = $13,633.75 = $13,633.35 must be generated by the sale of cheeseburgers alone to cover the cost of losing a single employee at Tastee Max. B. Example: Number of Cheeseburgers that Must Be Sold Total Cost of Turnover/employee = $ 1,191.59 Variable Cost/unit = ($ 1.24 food cost + $ .38 paper cost + $ 1.16 labor cost) = $ 2.78 VC Fixed Costs/unit = $ .77 Total Cost = Variable Cost + Fixed Cost = $2.78 + $.77 = $3.55 Price/Unit Sold = $ 3.89 Breakeven Point (in units) = TCT/{P- (VC+FC) } = $ 1,191.59/{$3.89 –$3.55} = $ 1,191.59/$.34 = 3505 cheeseburgers must be sold to cover the turnover costs incurred from the loss of a single employee.

Employee turnover costs may seem abstract and relatively unimportant to line managers and/or senior executives who are unaccustomed to managing or not held accountable for that expense.

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focused and concerned when turnover costs are expressed in terms of sales revenues or number of items sold, for both groups can readily relate to the amount of effort and time needed to produce and sell the additional 3,505 cheeseburgers needed to cover the cost of losing a single employee. Consequently, expressing employee turnover costs in this way is a very effective means of gaining management's attention and support for retention initiatives (and for human resource initiatives in general).

Teaching Tip: If analyzing the case in student groups, instructors may wish to assign breakeven analysis of different menu items to each group, or require that every student conduct breakeven analysis on every menu item to provide more practice.

7. How can the data generated by your analysis be used to make a business case for remedial action within a firm? Illustrate by outlining the major points of a business case that Ronda can use to win managerial support for her plans.

Establishing credibility with and gaining support from senior leadership has traditionally been challenging for human resource professionals. Both Sullivan (2002) and Cascio (2005) suggest that the problem is essentially one of communication: human resource practitioners have traditionally spoken the language of human behavior and attitudes (often expressed in the limn simple statistics or correlation coefficients) while senior leadership and financial professionals speak the language of finance (expressed in the form of dollars or financial ratios). In order to gain the credibility and support needed to introduce human resource initiatives, human resource professionals must learn to express the costs and benefits of their work and projects in terms of dollars, not percentages or correlation coefficients (Cascio, 2005: 1). By calculating and expressing the positive return on investment for a retention strategy, Ronda Garvey is in a stronger position to win managerial support for her ideas.

The process of "pitching" or "selling" ideas or initiatives using the language of finance referred to as making a business case. According to Sullivan, "a business case is an argument, using primarily numbers, which highlights the economic benefits of an RR program for the company" (2002, p. 175). A strong business ease exhibits several characteristics: • • • • •

Uses business logic to sell an idea or opinion.

Proves business results of a proposed initiative using common business financial metrics and ratios.

Identifies and addresses decision making criteria that key executives use.

Employs effective word-smithing.

Is delivered in a short but powerful presentation, accompanied by a detailed supporting document and compelling strategic and financial data.

The previous questions provide ample evidence and data for building a business case in support of an employee retention strategy at Tastee Max. While the business cases outlined by students will vary, all should demonstrate that the retention program (1) will help the firm meet its goals (particularly financial and strategic goals), (2) represents a good fit with the company's culture, Cook, Hsu & Marqua, 5th ed.

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and (3) will improve the firm's competitive position. The following points might be included in such a proposal: • •

Reducing employee turnover will have a direct, positive impact on company profitability.

Because they will spend less time separating and replacing employees, reducing employee turnover will allow unit managers and human resource professionals to spend more time on profit-generating activities.

Because reducing turnover will improve customer service, product/service quality, and the work climate in stores, a retention program is consistent with the company's core values and culture.

Experienced crew members and managers are better able to anticipate, meet or exceed customer expectations regarding product/service quality.

Experienced crew members and managers are better able to avoid or resolve errors and service-related problems.

Improved employee retention will have a positive impact on job satisfaction, employee morale and productivity. Satisfied employees are more likely to refer promising job candidates to store managers and speak positively about their work experience, thus strengthening the company's employer brand.

•

• • •

Teaching Tip: This case offers an excellent opportunity for individuals or teams of students to build and "pitch" a business. As part of the assignment, students should be instructed to design and deliver a business case in a formal presentation using supporting documents, PowerPoint slides, and the like. The instructor and peers can act in the role of Tastee Max senior management by questioning and critiquing the presenting group.

8. In addition to calculating employee turnover by store/unit, what other types of human resource metrics should Tastee Max use to better understand the employee turnover problem? How can these metrics be incorporated into a retention strategy?

Performance metrics (or measurements) in human resource management can be used in five basic ways (Sullivan, 2002):  





Diagnostic Performance Measures: Metrics are used to identify where performancerelated problems exist in the organization- “in what stores/units is employee turnover the highest?"

Baseline Performance Measures: Metrics are used to establish a baseline for current performance, which subsequently forte a basis for all subsequent measures of human resource-related performance—"Where are we starting from? What is our current employee turnover?"

Trending Performance Measures: These metrics show how something is doing over time by comparing something—an activity or accomplishment—with a predetermined baseline measure— “Has the firm's employee turnover rate changed over the last 12 months and, if so, how has it changed?"

Control Performance Measures: These metrics show whether the firm is staying within

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

some acceptable, predetermined boundary; performance that falls outside of acceptable boundaries indicates that the firm has failed to meet required performance goals— "Is turnover among key talent pools within acceptable ranges, or is it excessively high?"

Planning Performance Measures: These predictive measures help organizations plan for the future by developing "what-if?" scenario--- "If we introduce a tenure-based incentive system, how much will employee turnover decrease?"

Tastee Max appears to be using employee turnover rates in a diagnostic manner by calculating and comparing employee turnover on a store- or unit-basis. This analysis helps the firm to identify which units have higher-than-average employee turnover rates. While this application is useful, it tells us little about whether each store's performance is improving or worsening over time, why the problem might be occurring, who is leaving, what the desirable rate of employee turnover is, or whether individual store managers are meeting goals for managing employee turnover. By employing some additional performance measures, the company can more easily answer these questions.

Specifically, by "drilling down" or examining turnover on a more detailed level in problem stores (for example, examining turnover by shift, by manager, by employee rank, etc.), a more detailed diagnostic analysis of employee turnover and its true costs and possible causes can be ascertained. By establishing acceptable levels of employee turnover on a per unit basis and performance goals for store managers regarding the management of employee turnover, employee turnover rates can be used to monitor and control this problem (such measures are particularly important—and effective—if performance goals for managing turnover are linked to store managements' performance evaluation and variable pay). Monitoring employee turnover over time—particularly comparing rates before and after retention strategies/tactics have been introduced—allows senior managers to evaluate the effectiveness of retention initiatives. All of these measures should ideally be incorporated into action plans used to implement retention strategies.

References Anonymous (2005). Cost of turnover. SHRM" Briefly Stated ROI Series.

Http://www.shrm.org/Research?Articles/Articles/Pages/ROI_20Series_20Cost_20of_20T urnover.asp. [Accessed on retrieved on October 10, 2009].

Cascio, W. (2005). Costing Human Resources (5th ed). Cincinnati, OH South-Western.

Cordery, J. and Parker, SK.. (2008). Work organization. The Oxford Handbook of Human Resource Management, by P. Boxall, L Purcell, and P. Wright (Eds.), Oxford University Press, pp. 187-209.

Cox, J L (2008). Smart steps for creating an employee retention strategy. ARM White Paper.

Http://www.shrm.org/Research?Articles/Articles/Pages/Creatingan EmployeeRetentionStrategy.asp. [Accessed on October 10, 2009].

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Daniel, T.1 (2009). Managing for employee retention- SHRM White Paper.

Http.//www.shrm.org/Research?Articles/Articles/Pages/ManagingforEmployeeRetention. aspx. [Accessed on October 10, 2009].

Fitz-Enz J. (2000). The ROl of Human Captial: Measuring the Economic Value of Employee Performance. New York: AMACOM. Fyock, C.D. (2009). Managing the onboarding and assimilation process. SIIRM White Paper.

Http://www.shrm.org/Research/Articles/Articles/Pages/ManagingtOnboardingandAssimi ation.Aspx. [Accessed on October 10, 2009].

Gurchiek, K. (2008). Boss factor can make or break retention. Human Resource News.

Http://www.shrm.org/Publications/HRNews/Pages/BossFactorandRetention.aspx.

[Accessed on October 10, 2009].

Hochschild, A.K. (2003). The Managed Heart: Commercialization of Human Feeling, 2nd Ed. University of California Press.

Lockwood, N. R. (2004). The three secrets of retention: respect, rewards, and recognition.

SHRM Research Translations.

Http://www.shrm.org/Research?Articles/Pages/The_20Three_20Secrets_20of_20Retenti on.asp. [Accessed on October 10, 2009].

Phillips, J.J. and Connell, A.O. (2003). Managing Employee Retention: A Strategic Approach.

London: Butterworth-Heinemann.

Pinkovitz, W., Meskal, J. and Green, G. (2006). How much does your employee turnover cost?

University of Wisconsin Cooperative Extension.

Http://www.uwex.edu/ces/economic/turn.cmf. [Accessed on May 20, 2008].

Royle, T. (2001). Working for McDonalds: The Unequal Struggle? London: Routledge.

Sullivan, J. (1998). The cost factors and business impact of turnover.

Http://ourworld.compuserve.homepages.gately/pp15js10.htm. [Accessed on May 16, 2008].

Sullivan, J. (2002). HR Metrics the World-class Way. Peterborough, NH: Kennedy Information.

U.S. Bureau of Labor Statistics (2009). Job openings and labor turnover summary.

Http://www.b1s.gov/news.release/jolt.nro.htm. [Accessed on October 15, 2009].

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Appendix A Table 1: Breakdown of Costs Related to Employee Turnover at Tastee Max Restaurants SEPARATION COST CALCULATION TOTAL COST Exit Interview, Unit Manager .5 hours per interview X $ 7.04 ($11.00/hour X 1.28 benefit cost) Exit Interview, Experienced .5 hours per interview X $ 3.87 Crew Member* $ 7.75/hour Exit Interview, Separated .5 hours per interview X $ 3.62 New Employee* $ 7.25/hour Completion of Separation .5 hours per separated $ 7.04 Paperwork, Unit Manager employee X ($11.00/hour X 1.28 benefit cost) Completion of Separation .75 hours per separated $ 17.13 Paperwork, Human employee X ( { [$ 35,000 per Resources Manager year ÷ 49 weeks] ÷ 40 hours per week} X 1.28 benefit cost) $ 38.70 SUBTOTAL *Exit interviews are typically prior to the departing employee's separation, so this time must be paid.

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REPLACEMINT COST CALCULATION TOTAL COST Review of Job Applications, .25 hours per applicant X $ 3.52 Unit Manager ($11.00/hour X 1.28 benefit cost) Telephone Screening of .25 hours per applicant X $ 3.52 Applicants, Unit Manager ($ 11.00/hour X 1.28 benefit cost) Review Notes from .25 hours per applicant X $ 3.52 Telephone Screening, Unit ($11.00/hour X 128 benefit Manager cost) Interview of Job Candidate, 1 hour per applicant X $14.08 Unit Manager ($11.00/hour X 1.28 benefit cost) One Experienced Crew 1 hour per applicant X $ 7.75 Member $ 7.75/hour Make Hiring Decision, Unit .5 hours per applicant X $ 7.04 Manager ($ 11.00/ hour X 1.28 benefit cost) Make Job Offer, Unit .25 hours per applicant X $ 3.52 Manager ($11.00/hour X 128 benefit cost) Completion of Paperwork, .5 hours per interview X $ 7.04 Unit Manager ($11.00/hour X 1.28 benefit cost) $ 22.85 Completion of Paperwork, 1 hour per newly hired Human Resources Manager employee X ( { [$ 35,000 per year ÷ 49 weeks] ÷ 40 hours per week} X 1.28 benefit cost) $ 72.84 SUBTOTAL

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TRAINING AND ORIENTATION COST New Hire Orientation, New Employee New Hire Orientation, Trainer In-store Training, New Employee In-store Training, Assistant Manager In-store Training, Experienced Employee In-store Training, Lost Productivity of Experienced Employee SUBTOTAL

CALCULATION

TOTAL COST

4 hours X $ 7.25/hour

$ 29.00

4 hours X $ 22.85

$ 91.40

20 hours X $ 7.25/hour

$ 145.00

20 hours X ($ 10.25/hour X $ 262.40 1.28 benefit cost) 20 hours X $ 7.75/hour $ 155.00 10 hours X $ 7.75/hour

$ 77.50

$ 760.30

VACANCY COST Overtime Pay, Experienced Crew Member

CALCULATION TOTAL COST 20 hours per separated $ 232.50 employee X ( $ 7.75 X 1.50)* Additional Experienced 5 hours per separated $ 43.75 Crew Member "Borrowed" employee X ($ 7.75/hour + from Another Store to Cover $ 1.00) Vacancy $ 276.25 SUBTOTAL *The calculations above reflect overtime pay of 1.5 times employees' hourly wage for every hour worked over forty/week, as mandated by the Fair Labor Standards Act. This role could also be filled by employees who have completed training but not the 90-day probation period. Instructors can split this cost between new hires/experienced crew members and experienced crew members working for different rates of pay, if desired.

PRODUCTIVITY COST Estimated Cost of Reduced Crew Productivity for 2 Weeks Less the Cost of Separated Employee's Wages SUBTOTAL

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CALCULATION TOTAL COST 14 days X ($ 7.25/hour X 4 $ 406.00 hours/day) 25 hours per week/separated <$ 362.50> employee X 2 weeks X $ 7.25/hour $ 43.50

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Table 2: Sample Worksheets for Calculating Employee Turnover at Tastee Max Restaurants TRAINING AND ORIENTATION COST

CALCULATION

TOTAL COST

CALCULATION

TOTAL COST

CALCULATION

TOTAL COST

SUBTOTAL VACANCY COST SUBTOTAL PRODUCTIVITY COST SUBTOTAL

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SEPARATION COST

CALCULATION

TOTAL COST

CALCULATION

TOTAL COST

SUBTOTAL REPLACEMENT COST

SUBTOTAL

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Teaching Note Boss or Friend Overview This decision case puts students in the shoes of a newly promoted manager of a bustling restaurant, a manager who now finds herself having to supervise her two close friends. All three of the young women attend the same business school together and spend a lot of their free time together, or at least they used to. As a result of her promotion and one of the friends’ demotion, the newly-minted manager finds herself having to navigate the chilly waters of professional and personal life. To make matters more awkward, after the restaurant’s owner takes a trip out of the country, the manager has to handle the fallout of what would seem to be a relatively uneventful management decision, putting one of the friends in charge of inventory.

Learning Objectives 1. To gain knowledge about and expertise in the concept and application of servant leadership.

2. Evaluate the factors that impact a person’s early career as a manager.

3. Advise on how a leader can build credibility in the eyes on his or her constituents.

4. Recommend conflict management strategies regarding leading one’s friends at work.

1.

2.

3.

4.

1.

Questions for Discussion How could Rachel Maddox demonstrate servant leadership in telling her peers she was promoted without sounding pompous or giving the impression she is now better than they are?

Use Super’s concept of Career Maturity (Life Roles) to explain what Rachel could do to ensure an easy transition from server to manager?

What can Rachel do to build credibility in the eyes of her staff and friends?

How can Rachel resolve the conflict Mary and Joanie’s responses to delegating the restaurant’s inventory created?

Answers to Questions How could Rachel Maddox demonstrate servant leadership in telling her peers she was promoted without sounding pompous or giving the impression she is now better than they are?

Rachel can find the tenants of servant leadership appropriate and useful in a few ways. Effective communication with her peers, humility and peer involvement in setting a way forward in this new professional working relationship, can go a long way in creating a conducive environment for unity in getting the job done right. Genleaf’s (1977) understanding of a servant leader might be summarized as an individual who (a) possesses a natural inclination to serve others, (b) chooses to exercise leadership as a form of service to others, and (c) servant-leads by persistently addressing others’ highest priority needs and by facilitating others’ development. Given the Cook, Hsu & Marqua, 5th ed.

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leadership-as-influence-process definition advocated by Yukl (2002) and Northouse (2004), servant leadership represents an influence process (i.e., leadership) undertaken by an individual resulting from his or her commitment to serving others’ needs and development (i.e., a servant).

Greenleaf (1977) proposed that communication is a crucial component of servant leadership. He suggested that the leader's communicative patterns comprised of listening and persuasion influences followers to attribute servant qualities to the leader. Following Greenleaf (1977), the literature has supported both the general notion that communication is an important topic for servant leadership research and the specific consideration that listening and persuasion are paramount to servant leadership.

New leaders are often overwhelmed at the prospect of giving performance evaluations, negative feedback or discipline to their former peers and friends; this might make them go about it the wrong way altogether. The first thing that Rachel should do after she gets promoted is to have a discussion meeting with her work friends in an effort to influence and persuade that to embrace her vision. Talk with them and explain how things are going to have to change in the relationship. You don't want to be perceived as playing favorites, so cutting down on the daily get together on the job with your work friends and giving all of your staff the opportunity to prove themselves will help her develop and keep relationships, both professional and personal ones. Further, the notion of servant leadership encourages collaboration, trust, foresight, listening, and the ethical use of power and empowerment (Spears, 1995). Servant leadership thrives on the theory of reciprocity. In doing so, the servant as leader rises to the occasion to build a community of practice that motivates members to create shared knowledge and shared ways of knowing (Drath & Palus, 1994). The servant leader is willing to take risks to achieve a higher good. This leader is committed to serving others through a cause, a crusade, a movement, and a campaign with humanitarian, not materialistic goals (Williams, 1998). The servant leader is guided by an overarching, prophetic, transforming vision that is carefully conceived and simply articulated (Williams, 1998). By precept and example, this leader guides others toward that vision, converting followers one by one through singular acts of bravery, courage, and determination. The servant leader is also attuned to inner qualities, such as intuition, foresight, awareness, and perception, all which aid in decision-making (Williams, 1998). This form of leadership should facilitate interaction among Rachel and her peers and friends.

Leaders must be aware of the possibility of allowing relationships to sour their ability to manage their responsibilities and make the difficult choices they face; otherwise they may become tainted with the dreaded brush of favoritism. Rachel needs to reassure everybody that she has to treat them the same. The rule of thumb here is to discipline your friends the same way you'd discipline anyone else, but to come at it in a way that shows you're there to help, rather than hurt them. If someone isn't taking discipline seriously, recognize that it might not be any different if it's a friend or not. When you're reprimanding a friend, you're working with a level of trust you might not have with other staff members. If you ensure from the start of your promotion that you have their best interests at heart, they will understand your intentions are positive and that you're just trying to do your job. You can overcome this by engaging positively and directly with your friends and talking to them about how much you value and how much you've learned from their key skills and qualities. By making them an integral part of your success, you will impress upon Cook, Hsu & Marqua, 5th ed.

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them the importance of their role as both a friend and a colleague. Servant leader characteristics, such as a keen sense of vision and direction, strong sense of efficacy, dedication to community building, collaborative leadership styles, and commitment to the mission all these can serve Rachel well in her new leadership position.

2.

Use Super’s concept of Career Maturity (Life Roles) to explain what Rachel could do to ensure an easy transition from server to manager?

As we progress through our lives, we take on a variety of roles (Super, 1957; 1980; 1990).

Rachel is facing a series of role changes, from friend to supervisor, from server to manager, from sub-adult to adult. The roles we play throughout our careers are influenced by a variety of elements including: biographical (needs, values and interests), psychological (intelligence, aptitudes), and socioeconomic (community, school, family, peers) determinants. Super’s Concept of Career Maturity states that humans progress through a series of predictable life stages alongside elements related to a life-long process of aging.

Super names common life roles that most humans take on at some point in their lives (1980): child, student, leisurite, citizen, worker, spouse, homemaker or parent, and pensioner. These life phases affect career achievements and impact other role dimensions. We take on these roles as they arise, although they are impacted by age, to some extent.

Lifestyle factors impact our career phases such as: situational determinants (historical & socioeconomic), personal determinants (psychological and biological), and environmental determinants (labor market and employment practices) (Super, 1957). Developmental stages from childhood to adulthood also impact career phase development and include five life stages: Growth/Birth (to age 14), Exploration (ages 15 to 24), Establishment (ages 25 to 44), Maintenance (ages 45 to 64), and Decline (age 65 and over).

In short, each human is unique, and is uniquely influenced by the above listed factors. Super connects all these elements into a Vocational Development (Super, Savicka & Super, 1996) approach which combines the notion of aging and life roles with career development: 1) Crystallization 14-18 Developing and planning a tentative vocational goal 2) Specification 18-21 Firming the vocational goal 3) Implementation 21-24 Training for and obtaining employment 4) Stabilization 24-35 Working and confirming career choice 5) Consolidation 35 + Advancement in career Thus, our careers develop through the above five stages as influenced by our unique set of lifestyle factors, life roles, and life stages. Super states that as we progress through each of these developmental phases we experience a great deal of stress. In fact, each time we reach such an inflection point, we are faced with a great deal of challenge, as can be seen in Rachel’s situation.

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determinant), a constrained labor market driven by a slow economy (environmental determinants), a life stage transition (from exploration to establishment), and her upcoming graduation from the University of Central Missouri (Implementation stage of vocational development). She is clearly dealing with multiple inflection points, so she is facing multiple role changes, both in her career and in her personal life. Table 1 below helps to summarize what Rachel is facing at this point in her life.

Table 1 - Rachel’s Role Change Matrix Life Role From: Student To: Worker

Lifestyle Factor Situational: Make Money Environmental: Slow Economy

Developmental Stage From: Exploration

Vocational Development From: Firming

To: Establishment

To: Training

3. What can Rachel do to build credibility in the eyes of her staff and friends?

Kouzes and Posner’s “Leadership Challenge” (2007) addresses five Exemplary Leadership Practices that build credibility in a leader with their co-workers. The five practices include modeling the way, inspiring a shared vision, challenging the process, enabling others to act, and encouraging the heart. Rachel used all 5 of these exemplary practices to help her gain respect along with credibility between her staff and friends.

A) Model the Way:  “Titles are granted, but it’s your behavior that wins respect.” Rachel modeled the behavior she wanted to see in others. Her main objective was to lead by example and demonstrate her commitment to her beliefs.  It’s very important to clarify your values and let others know what you believe is important. Finding your own voice is key to clarify values, however; leaders are not representing themselves. They are speaking in regard to the whole organization, therefore; it is important to form common principles and ideas.

B) Inspire a Shared Vision  Rachel inspired a shared vision by looking into the future, and envision possibilities and seeing the ideas that could be achieved. True leaders have a desire to make things happen, change the way things are, or even create something new and exciting. Rachel’s vision was to create an excellent work environment and build her leadership skills.  It is important that leaders listen to those around them. People want to understand that leaders are listening to them and that what they say is heard. Rachel did this by expressing her opinion and letting others express their opinions as well. Her ideas along with others’ ideas were used together in creating the values within the work place.

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

Leaders should always be willing to step out into the unknown. Rachel challenged the process in the very beginning by taking on the role of managing her friends. But, she continued to challenge the process by searching for opportunities to innovate, grow, and improve. There is always room for improvement in any organization.

“Leadership is learning by doing, adapting to actual conditions. Leaders are constantly learning from their errors and failures.” Leadership requires a lot of listening to those around you and trial and error. No one is perfect, and mistakes are going to happen. The main thing is how you come back from the mistakes and turning it into a learning objective. You must learn from both your successes and your failures. Try, fail, learn, try, fail, learn.

D) Enable Others to Act  One single person cannot achieve grand dreams alone; it must be a team effort. Leaders must build credibility and trust with their employees to achieve extraordinary things.

Rachel was able to do this by letting others voice their opinions and show that she really cared and was interested in what they had to say. She applied others’ ideas and not just her own.  Leaders need to make their employees feel strong and capable. Employees must feel a sense of personal power and ownership. It’s about delegating and letting them take some of the power off your shoulders. “Exemplary leaders strengthen everyone’s capacity to deliver on the promises they make.”

E) Encourage the Heart  Employees want to know they are appreciated. Rachel constantly complimented people for the things they were doing right. It’s extremely important to keep the morale up in the work place. Often, Rachel would implement a reward system for things such as selling the most desserts.  When leaders want to raise quality within the work place, it is important to let people see the benefit of their behaviors aligned with the values of the company. Sometimes sending a personal thank you note can mean much more to someone than just sending an email.

The small things can be what counts.

4. How can Rachel resolve the conflict Mary and Joanie’s responses to delegating the restaurant’s inventory created?

Clearly, there is some conflict between Rachel, Mary, and Joanie. Rachel, by being uncomfortable with Mary’s comments, clearly feels the conflict may lead negative consequences: excessive stress, goal distortion, waste, or loss of common ground (Putzel, 2010).

However, not all conflict is dysfunctional; in fact, research shows that conflict can lead to increases in effort, creativity, feedback, and cohesiveness (Putzel, 2010). To better understand what is happening, Rachel needs to determine the source of this conflict in order to develop a strategy for dealing with the conflict. Three common causes of conflict in organizations include work interdependence, goal differences, and perceptual differences (Ivanecevich, Konopaske, & Matterson; 2011) and can serve as a means for identifying the causes of conflict.

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Work interdependence refers to the extent to which work teams (or individuals) are dependent on each other to achieve a task, or goal. The more interdependent employees are, the more likely there will be conflict. While individuals want the same end-result, the path to achieve this end state can be a source of conflict. Clearly, as far as the inventory management system is concerned at the Copper Coyote, Rachel and Mary are not on the same page and they are in conflict as to how the inventory should be accounted.

Goal differences are differences that occur because employees do not each other’s goals. Put simply, the goal my department has is not the same as the goal your department has and we are likely to vie for the same resources, with very different goals in mind. Often the resolution to such conflict is simply ensuring that employees are clear on each other’s goals. Rachel does not appear to be facing this kind of difference, so goal differences do not seem to be a large factor at the Copper Coyote as everyone understands that the inventory must be taken on a nightly basis.

On the other hand, Rachel may want to reinforce the importance of taking inventory.

Perceptual differences occur when employees knowingly conflict over different goals. In other words, they know that each team or department has a different goal, but choose to conflict anyhow. The reasons can be manifold, but individuals with different goals often see each other as intentionally obstructing, much like Rachel may be feeling that Mary is obstructing her ability to delegate.

So, Rachel needs to resolve conflict that finds its basis in work interdependence and perceptual differences. The resolution to any conflict finds itself in three relatively simple skills and tips: 1) set goals, 2) tackle personal, group, and emotional issues separately from work issues, and 3) work the process (Putzel, 2010).

1) Set Goals. Rachel should hold a meeting with all of her staff to reiterate the importance of taking inventory. She needs to reset that goal and explain her position of needing someone other than management to take inventory since she, just like many of her employees, needs to get home to study for classes. In short, she needs to clearly state that she trusts them to do the work.

2) This statement of trust should also go a long way to showing that she wants to keep the inventory system a work issue, separate and distinct from any emotional or personal issues that she may be having with Mary and Joanie. Prior to this staff meeting, she needs to meet with both women to ensure that they understand she is bringing up trust as an issue because she, in fact, does trust them. She truly needs to be “hard on the problem, soft on the people” (Maravelas, 2005). By focusing on the problems, Rachel will quite naturally transition from being perceived as a friend to being perceived as the restaurant manager. By being soft on the people, she should be able to rebuild her personal relationships with Mary and Joanie.

3) Work the process. Rachel must not panic, she needs to become comfortable with the conflict surrounding the inventory system and realize that given how she became restaurant manager, she is likely to enter into quite a bit more conflict. The key is that some conflict is healthy, so she Cook, Hsu & Marqua, 5th ed.

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will want to keep some creative tension between and with her staff at all times and be open to the feedback that comes along with this tension. It is critical for her to work through the personal issues associated with this inventory conflict, since her reaction will set the tone for future conflicts. Her reasoned, people-soft reaction, will also be a clear signal to the rest of the staff that there is a very good reason why Rachel is the manager now: she is their leader and can be trusted to have their best interests in mind when she makes decisions.

Epilogue What follows is a direct quote from Rachel Maddox, as she submitted in a management class assignment asking students to reflect on her most difficult leadership challenge to date. Because the authors believe it is a strong example of Kouzes and Posner’s Exemplary Leadership Practices in action, as much as possible of the original wording has been retained: “I knew I had to start separating work from my personal life. It had to be established that when I was at work, I was Mary and Joanie’s boss; but, when we were outside of work, I was their friend. A thin but fine line was established, and it helped. I never pushed them to come to me with things; I wanted them to come to me on their own. Instead, I would ask their opinions about things that were going on at work and how they felt about situations. I was hoping that if they felt included in my decisions and how I was choosing to run things they would soon develop trust in me and start coming to me with their issues or ideas. This approach did actually work.

In order to address the inventory situation, I sat all my staff down explaining to them that my job as a manager was to ensure everything got done, and if that meant delegating some of the responsibility, well that was part of my job. I also tried to put in to perspective everything I do, and why I could not fully be in charge of inventory. I talked about how important teamwork was and that if they helped me I promised to help them whenever they needed or be there when they needed something taken care of. By the end of the meeting, I had two volunteers to help me out with inventory, which helped make my life much easier! I think that the meeting was really good for most of the staff, however; there are always going to be the few that you won’t be able to get through to.

I knew that if I did not start to step-up more into my management position, and if I did nothing to try to separate work from my personal life, Mary and Joanie would never look up to me as their manager. I think that by me letting them come to me and by making sure I always kept them involved in my decision-making, it greatly helped increase everyone’s trust and willingness to come to me with their problems. I believe that if I would have tried to push my promotion on the staff, and Mary and Joanie, and force them into coming to me, they would have retaliated. I am sure I could have lost friendships along the way.

I learned that it’s better to be patient and understanding than to get upset and jump to conclusions. In the beginning, it really hurt my feelings that Mary and Joanie were refusing to come me as their manager and I was very fast to jump to conclusions on what they were thinking or feeling. But when I decided to take a step back, I put myself into their shoes and tried to see where they were coming from. In return, this led to me having patience [so that they could] come Cook, Hsu & Marqua, 5th ed.

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to me when they were ready. They now all treat me as their manager, trust me, and we all remain friends. More importantly, I finally earned Mary’s and Joanie’s trust, and it made my life a lot easier! My professor, Eric Nelson, once told me if I could manage my friends, I could manage anyone. He was not kidding!”

References Cleary v. American Airlines, Inc., 111 Cal.App3d 443 (Cal.App. 1980), overruled on grounds unrelated to the decision’s holding that an implied covenant of good faith exists in employment contracts, even where there is no written contract or a stated length of employment. Foley v.

Interactive Data Corp., 47 Cal.3d 654 (Cal. 1988).

Drath, W. H., & Palus, C. J. (1994). Making common sense: Leadership as meaning-making in a community of practice. Greensboro, NC: Center for Creative Leadership.

Dunn v. Enterprise Rent-A-Car Co. 170 S.W.3d 1 (Mo.App. 2005).

Greenleaf, R. K. (1977). Servant leadership: A journey into the nature of legitimate power and greatness. Ramsey, New Jersey: Paulist Press.

Hughes v. Freeman Health System, 283 S.W.3d 797 (Mo.App. 2009).

Ivanecevich, J., Konopaske, R. & Matteson, M. (2011). Organizational behavior and management. New York: McGraw-Holl Irwin.

Kouzes, J. & Posner, B. (2007). The leadership challenge (4th Ed.). San Francisco: Jossey-Bass.

Maravelas, A. (2005). How to reduce workplace conflict and stress. CITY: Career Press.

Muhi, C. (2001). The employment at will doctrine: three major exceptions. Monthly labor review, January 2001.

Northouse, P. G. (2004). Leadership: Theory and practice (3rd ed.). Thousand Oaks, CA: Sage.

Posner, R. (1995) Overcoming law. Cambridge: Harvard University Press.

Putzel, R (2010). XB: A manual for a learning organization (3.2 ed.). Colchester, Vermont: Saint Michael’s College.

Spears, L. C. (Ed.). (1995). Reflections on servant leadership. New York: John Wiley & Sons, Inc. Summers, C. (2000). Employment at will in the united states: The divine right of employers. 3 U. Pa. J. Lab. & Emp. L. 65.

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Super, D. E. (1957). The psychology of careers. New York: Harper and Row. Super, D. E. (1980). “A life-span, life space approach to career development.” Journal of Vocational Behavior 16, no. 3.

Super, D. E. (1980). “Career and life development.” in Career choice and development: Applying contemporary theories to practice, (2d Ed.). San Francisco: Jossey-Bass, 1990.

Super, D. E.; Savickas, M. L.; and Super, C. M. (1996). “The life-span, life-space approach to careers.” in Career choice and development: Applying contemporary theories to practice, (3d ed.). San Francisco: Jossey-Bass.

Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e, et seq. (West, 2009).

Toussaint v. Blue Cross & Blue Shield of Michigan, 282 N.W.2d 990 (Mich. 1980).

Wendelin v. The Beatrice Mantor, Inc., 712 N.W.2d 226 (Neb. 2006).

Williams, L. E. (1998). Servants of the people: The 1960's legacy of African American Leadership. New York: St. Martin's Press.

Yukl, G. (2002). Leadership in organizations (5th ed.). Upper Saddle River, NJ: Prentice-Hall.

Boss or Friend Teaching Note Leave here as a place holder, Eric will send.

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Teaching Note 100% SATISFACTION GUARANTEED

By Roy A. Cook, Laura J. Yale and John E. Cave ABSTRACT This critical incident describes an apparently unsatisfactory service encounter involving a hotel that had a published 100% satisfaction guarantee policy. The details of this encounter and subsequent correspondence between the customer and hotel representatives highlight both the human and systems failures that resulted in a series of service breaks and resultant customer dissatisfaction. Through the information provided in the incident and the epilogue, opportunities are provided to generate a lively discussion about service recovery strategies and appropriate measures to ensure these types of problems do not reoccur. This critical incident would be appropriate for management, marketing, services, hospitality and tourism courses.

TEACHING OBJECTIVES 1. To make students aware that as a manager, people and/or system failures will occur.

2. That as a manager, they will be faced with the challenge of providing for service recovery after a service delivery failure.

3. To decide upon action steps to be taken to a) correct system failures, b) correct "human" failures.

4. To consider the effects (outcomes), both positive and negative, of publishing a 100% satisfaction guarantee.

5. To analyze the costs and benefits of various service recovery choices.

DISCUSSION QUESTIONS 1.

What should a "100% Satisfaction Guarantee" mean in the case of a hotel? What did it appear to mean in the case of El Primo Inns?

The 100% Satisfaction Guarantee should mean that there are no breaks in the service script that would cause the customer any form of dissatisfaction. In the event a service break occurred, sufficient measures would be taken to reconcile the problem for a customer in such a way that the service break would create an opportunity to make the customer even more satisfied, perhaps even delighted about the service provided.

It appeared that the 100% satisfaction guarantee was just a slogan that had absolutely no operational meaning whatsoever in this particular case. There were 10 explicit service failures by El Primo Inns in serving Dan O'Brien. There were absolutely zero attempts on the part of El Cook, Hsu & Marqua, 5th ed.

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Primo Inns to rectify the service failures. The only attempts to reconcile the problems were statements of "I'm sorry" by the General Manager and by the Assistant General Manager, Jason Studebaker. The statement of "I'm sorry" with no attempt at appeasement is hollow indeed. In fact, the service breaks were compounded by Mr. Studebaker's letter, beginning with the improper use of Mr. O'Brien's name. (He was referred to as Mr. Daniel as can be seen in the Epilogue.) Again the only attempt at appeasement was an apology and a statement that they were committed to preventing this again by talking with the front desk staff. It is interesting that the statement in Mr. Studebaker's letter literally says "Let us provide the quality service and accommodations you have come to expect from El Primo Inns". The service and accommodations that Mr. O'Brien has come to expect were all negative. Does Mr. Studebaker indeed mean that this is in fact the quality service level that they provide?

2

How many breaks from the service script occurred according to Mr. O'Brien's letter?

1) Assurance of airport shuttle 2) lost reservation 3) reservation @ different property 4) miscommunication on shuttle schedule 5) $16 for cab 6) request to call original airport location - clerk's response 7) no solution offered by GM 8) no appeasement offered by GM 9) rate discrepancy $69 to $79 10) poor response from GM - 2nd time

3.

What service recovery measures should have been taken?

The following list of service recovery measures should have been taken: 1) An attempt by the Manager on Duty to find a room at the airport location, even if it meant using a different hotel property.

2) A profound apology for the miscommunication and lost reservation.

3) A voucher to pay for the cab fare to another location.

4) An offer to call any other parties or use the telephone with a free long distance call for Mr. O'Brien to make the appropriate phone calls.

5) An appeasement in the form of a free room.

6) An offer of a free room or some other form of accommodation from Mr. Studebaker in his response to Mr. O'Brien.

4.

If you were Mr. Simmons, what would your response(s) be in this situation?

Mr. Simmons should have personally written a letter to Mr. O'Brien, or called him, or both. Mr. Simmons should have apologized for what happened and offered the appropriate appeasements to the service recovery measures listed above. Students should be required to write a letter to Mr. O'Brien. This will give the students an opportunity to construct a letter, therefore practicing their Cook, Hsu & Marqua, 5th ed.

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writing skills and to practice their skills at constructing a letter, which would address the service breaks that occurred in accommodating Dan O'Brien's stay. A sample letter follows:

Dear Mr. O'Brien, Let me begin by offering my sincere apologies for the many difficulties that you experienced with your recent stay at El Primo Inns. I offer no excuses, except to say that we'll make every attempt to ensure that you and future customers actually receive our 100% satisfaction guaranteed promise. It is clear that somehow, both our personnel and systems failed when we lost your reservation and we had to schedule your accommodation at a different property. Further, it is obvious that we failed to communicate to you that the shuttle was not running after your arrival. We should have requested a cab for you. We are also working with our front desk staff to ensure that their responses are appropriate along with the local property managers so they can develop the necessary attitude and skills to fulfill our customer promise.

Enclosed, you will find a check from El Primo Inns in the amount of $25 to cover your lost cab fare along with a voucher for a free weekend stay at any El Primo Inn at a location of your choice. This offer is valid for you and your spouse or guest.

Again, I apologize for our poor service and offer you my promise as CEO of El Primo Inns that we will take every measure necessary to ensure that this poor service level does not occur again for any other customer. I look forward to hearing from you about future stays at our properties and hope that we can retain you as a customer.

Sincerely, Mr. Simmons CEO, El Primo Inns 5.

Should Mr. Simmons follow-up on his letter to Mr. O'Brien? If so, what kind of followup? What should he say?

Yes, Mr. Simmons should follow-up. If he does not he will never know if he was successful in retaining Mr. O'Brien as a satisfied customer. I would suggest a personal phone call, since the first follow-up was in letter form. This will establish whether Mr. O'Brien actually received his letter and what his response was. In his personal conversation, Mr. Simmons can determine if his attempts to satisfy Mr. O'Brien have been successful, and if not, what additional remediation should occur. He may also learn of other ways that El Primo Inns can improve their service. In his phone call, he should ask Mr. O'Brien if he received his letter. Then he should ask for Mr. Cook, Hsu & Marqua, 5th ed.

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O'Brien's response to the letter and perhaps explain any further measures Mr. Simmons has taken to remedy the system and personnel problems that occurred. He may also then find out from Mr. O'Brien if there was anything else that needed to be done. This form of follow-up should impress Mr. O'Brien since customers rarely receive a call from a CEO of a major firm addressing their problem.

GENERAL DISCUSSION The tourism industry is one of close customer contact, and every interaction between a service employee and a customer becomes a service encounter. 1 These service encounters are frequently called “moments of truth” because it is through these encounters that customers derive their quality impressions about a service. Service organizations depend on everyone from the frontline to the boardroom to deliver customer satisfaction. Guests will perceive, judge and value their experiences based on the culmination of dozens, even hundreds, of one-on-one service encounters over the course of a visit. Although management must always remain focused on price, market share and cost savings strategies, they are now more dependent than ever on everyone in the organization to deliver on their behalf.

Studies have found that customers who are highly satisfied become more valuable customers.

First, delighted customers tend to pass along many more positive word-of-mouth messages than do customers who are just satisfied. Second, these highly satisfied customers are also more likely to purchase again and spend more in the future than are customers whose expectations were met but not exceeded. Finally, highly satisfied customers are unlikely to pay attention to competitor’s advertising and promotional offers. Customers who are merely satisfied are more willing to try out a competitor’s service to see if it might just be better than the service they have been using. 2 1. Service Mistakes As illustrated in this critical incident, although management and employees are operating under a policy of 100% customer satisfaction, problems can occur. Fortunately, most consumers are willing to forgive “service mistakes” when appropriate responses to them occur. What constitutes a service mistake that can result in a guest being dissatisfied? In simple terms, a mistake occurs when the customer’s expectations are not met—when a customer’s “service script” 3 is broken. When customers experience an unexpected change from their expected script, it is called a “break from the script.”

A tourism-focused research study investigated these breaks from customers’ scripts. 4 Interestingly, the researchers found that there were two categories of breaks from a script. The first type of break is a positive change from what the customer expects. For example, a particularly cheerful and efficient front desk clerk who provides a suggestion for a good, inexpensive place to dine that evening might be perceived as a pleasant change from the Cook, Hsu & Marqua, 5th ed.

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expected script—a “positive break” from the script. Positive breaks lead to highly memorable and highly satisfying service encounters that guests enjoy recounting to friends.

Unfortunately, the opposite type of break also can occur. When a change from the expected script is negative, the customer will be dissatisfied. If a front desk clerk doesn’t look up from the TV program he is watching when a guest approaches the desk, the guest is likely to perceive this behavior as a negative break from her expected script and be more than a little annoyed at the lack of service!

Researchers found that common negative breaks from the script occur from (1) failures in the core service (a lost reservation, a missed wake up call, or no hot water in the morning); (2) unwillingness to accommodate a customer’s special need or request (to locate an elderly guest on the ground floor of a hotel, to modify an entree to fit a patron’s special dietary needs); and (3) unsolicited tourism employee actions (inattention, rudeness, or thievery on the part of an employee).

Fortunately, the research team discovered that all is not lost when a negative break from a script occurs. Customers will often give tourism providers a chance to make things right. When a tourism encounter is less than satisfactory, the tourism employee can right the situation and “turn the guest’s frown upside down.” This reversal of a service problem is called service recovery. 5 However, if a mistake is made and the employee does not make a sincere effort to better the guest’s situation, highly memorable dissatisfaction occurs.

So the bad news is that mistakes are inevitable in tourism businesses. The good news is that, with proper handling, a negative break from the guest’s script can be reversed and turned into an extra satisfying, memorable service encounter. Keep in mind that satisfied guests represent potential future flows of revenues and profits while dissatisfied guests represent future losses because they fail to return and they pass negative word-of-mouth comments to others.

But we know that sometimes service will fail. What can be done then to try to retain the customer? Fortunately, there are several ways. When a customer complains or a service employee somehow senses that a service mistake has occurred, what happens next is critical to customer satisfaction. If the problem is ignored, the customer is likely to be furious and subsequently spread negative comments about the company. If the problem is handled but not to the customer’s complete satisfaction, the customer is still likely to be dissatisfied and also speak ill of the experience. However, if the problem is solved, the guest is likely to be pleased and recount the story of the incident to anyone who will listen. In this way, tourism service providers can take a bad situation and make it positive.

“Making things right” for most customers usually involves doing a few simple things. Customers want acknowledgment that the problem exists. They also like to be told why the problem arose in the first place. Next, they want a sincere apology. Finally, customers want to be made “whole” again. In other words, they want some form of compensation that will lessen the cost of the problem to them. They need to be compensated for any bother or annoyance they perceived or Cook, Hsu & Marqua, 5th ed.

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experienced because of the problem.

2. Service Guarantees One way to instill more confidence in guests regarding quality of service is by using a customer satisfaction guarantee that has five important features. 6 1. The guarantee should be unconditional with regard to the elements that are under the control of the management and employees. Airlines and other transportation providers cannot control the weather but they can control most other aspects of your flight or ride experience.

2. The service guarantee should be easy to understand and communicate to guests. It should be brief and worded very simply. Fine print and legal language should not be used to confuse the customer.

3. The guarantee should be meaningful, guaranteeing an important quality aspect to guests. For example, if speed of service (responsiveness) is an important element of quality to lunch-time restaurant patrons, the restaurant might use the following guarantee: “Your meal in just 5 minutes or it’s free!”

4. The guarantee should be easy to collect. The customer should not have to “jump through hoops” to collect, and no guilt should be heaped on the guest for asking for the guaranteed restitution.

5. Compensation should be appropriate. How does management decide what is appropriate compensation for a service failure? Management needs to consider the price of the service to the customer in money but also the seriousness of the failure in inconvenience or other bother. Finally, but probably most important, what does the customer think is fair given the problem?

Companies that are excellent at problem-solving give the customer a list of problem solution choices or ask the customer what would make him or her happy. In that way, the customer decides what the guarantee pay-out should be.

EPILOGUE The following is the actual response Mr. O’Brien received. Mr. O’Brien sent his letter on June 3, 2000. The errors and omissions are those included in the response and are not contrived for pedagogical purposes. Students will find it fun to critique after a general discussion of the situation has been completed.

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July 31,2000 Ms. Daniel O’Brien 1234 Elm St. Palm Springs, CA Dear Mr. Daniel: Thank you for taking the time to share your thoughts with us regarding your recent stay at our Veterans location in Metairie, Lousiana.

Please accept our apologies for the unprofessional service you encountered during your recent stay with us. We were very concerned with your comments and have already discussed this matter with our front desk staff. We are committed to preventing this from happening again.

We appreciate the time you have taken to share your thoughts with us Mr. Daniel. We hope you will give us another try. Let us provide the quality service and accommodations you have come to expect from El Primo Inns.

Looking forward to your future stays with us.

Sincerely,

Jason Y. Studebaker Assistant General Manager DISCLAIMER This critical incident and teaching note was prepared by Roy A. Cook, Laura J. Yale and John E. Cave of Fort Lewis College, and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of the situation. The name of the organization, the individuals, and locations have been disguised to preserve the organization's desire for anonymity. Copyright © 2000 by Roy A. Cook, Laura J. Yale and John E. Cave.

ENDNOTES 1

Solomon, Michael R., Surprenant, Carol, Czepiel, John A., & Gutman, Evelyn G. (1985). A Role Theory Perspective On Dyadic Interactions: The Service Encounter. Journal of Marketing, 49, 99–111.

2

Zeithaml, Valarie, Parasuraman, A., & Berry, Leonard L. (1990). Delivering Quality Service.

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New York: The Free Press.

3

Solomon, Surprenant, Czepiel, & Gutman, 1985, 49, 99–111.

4

Bitner, Mary Jo, Booms, Bernard H., & Tetreault, Mary Stanfield (1990). The Service Encounter: Diagnosing Favorable And Unfavorable Incidents. Journal of Marketing, 54, 71–84.

5

Hart, Christopher W.L., Heskett, James L., & Sasser, W. Earl, (1990). The Profitable Art Of Service Recovery. Harvard Business Review, 68, 148–156.

6

Hart, Christopher W.L. (1988). The Power Of Unconditional Service Guarantees. Harvard Business Review, 66, 54–62.

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Chapter Six Outline Transportation i. Quote: Robert Louis Stevenson ii. Chapter Opener: The Graduation Gift I. Introduction A. Transportation a necessity for tourism to occur B. Surface and Air categories, and intermodal itineraries C. 24-hour clock is the standard for transportation timetables (Teaching Hint. Have students open to Figure 6.1 and ask them to list the modes of transportation used during a major trip they have taken. Ask them to think about and list the advantages of using a travel agent in instances where multiple modes are used).

II. Surface Transportation A. Plying the waves: History of water travel 1. Sailing vessels were at the mercy of the wind 2. Steamships allowed scheduled travel 3. Cruise ships 4. Importance of ferry service to certain regions B. Riding the rails: History of railroads 1. Developed in the 1800s 2. Importance of George Pullman and Fred Harvey in increasing long-distance rail travel 3. Passenger rail service began to decline in ‘40s a. Increase in auto ownership and highway systems b. Increase in airlines c. Railroads did not maintain/improve track and customer service C. Canada and the United States follow similar tracks for rail services 1. Government intervention saved rail systems in U.S. (1971) and Canada (1978) a. AMTRAK: Marketing name for the combination of U.S. passenger rail services b. VIA Rail Canada: Marketing name for Canada’s passenger train network 2. Need for government subsidies makes their future uncertain 3. Marketing (especially packaging and rail passes) have increased ridership for both 4. Enhanced speed and service makes travel time less by rail than air for some city pairs D. Asian and European rail service blazes ahead 1. Rail travel still very important in Europe and Asia a. High-speed trains carry passengers between large population centers b. Often train travel is faster and cheaper than air travel c. Chunnel allows travelers to travel between Europe and U.K. all by train d. Importance of Eurailpass to non-European international travelers Cook, Hsu, & Marqua, 5th ed.

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e. Specialty trains hold a special place in tourism history (Mention “Murder on the Orient Express” movie) 2. Trend toward privatizing government-owned rail systems (Teaching Hint. Ask for show of hands for students who have ridden passenger trains.

Then ask them in what countries they rode those trains. Have students discuss why so few have ridden in North America and why it is so common to do so internationally. You can repeat this exercise with motorcoaches.)

E. Scenic railroads cater to nostalgia through the preservation of historic trains.

III. Cruising the Highways and Byways A. Development of national highway systems increased auto travel B. Automobiles 1. 84 percent of all overnight weekend travel by U.S. residents is by auto 2. Reasons for preference; cost, convenience, ability to explore/change route 3. U.S. and Canada have funded highways instead of rail track 4. Growth in rental car market a. Dominated by business travelers but there is growth in the leisure market b. Fleet utilization and logistics most important variables in success C. Motorcoaches 1. Scheduled intercity travel and charter/ tour group travel 2. Intercity bus travel has declined, while group motorcoach travel has increased 3. New designs have increased comfort, services available, and capacity (Teaching Hint. Here is some fun information you might want to share with your class).

Reading the Signs along the Road (Facts about the U.S. interstate highway system) East-west interstate highways are even-numbered.

North-south are odd-numbered.

Interstate highways that go through or around major metro areas are numbered with three digits, the first digit being even.

Interstate highways that lead directly to a major metro center without rejoining the main interstate are numbered with three digits, the first digit being odd.

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Mileage markers alongside east-west interstates ascend as one travels east.

Mileage markers alongside north-south interstates ascend as one travels north.

IV. Important Transportation Links A. Many modes of transportation which complete the picture B. Primarily final destination modes such as taxis, lightrail, subways and intracity buses C. Airport shuttle service increasingly important V. Soaring Through the Skies A. Air travel is a 20th century mode of travel: jet travel only in second half of century B. Cooperative organizations make the industry more efficient 1. ATA (Air Transport Association): U.S. domestic airline alliance 2. IATA (International Air Transport Association): International alliance 3. These associations make it possible for passengers to purchase a single ticket although they may travel on planes owned and operated by several companies in a single trip C. Marketing muscle of frequent-flyer programs, pioneered by American Airlines D. Airlines operate on thin profit margins, so controlling costs and maximizing revenues is a major concern E. Operating in a deregulated environment 1. Airline travel was deregulated in U.S. in 1978 2. Changes due to deregulation a. Competition on price b. Increase in number of airlines serving any city c. Airlines enter and leave airport service at will d. Airlines can package and market tours 3. U.S. Department of Transportation and Federal Aviation Administration still oversee certain limited operations (marketing practices and safety) 4. Hub and Spoke system reduces cost of operation and increases load factors (Teaching Hint. Divide students into small groups and give each group a brown bag full of miscellaneous contents. Then instruct each group to use the contents of the bag to illustrate the hub-and-spoke concept by using all of the objects in the bag (or as many as possible). In addition, the groups need to appoint a representative to explain their design to the rest of the class. This explanation needs to be clear as to how their design represents or supports the huband-spoke concept. The bags can be filled with any variety of small items, e. g. candy, string, tape, dominoes, playing cards, rubber bands, paper clips, pencils, [use your imagination and select anything that might resemble a route, airplane, airports or passengers] etc.). This teaching hint is based on a presentation made by Randall Baker and Cynthia Messer at the 2011 ISTTE Conference in Miami, FL. Cook, Hsu, & Marqua, 5th ed.

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5. Use of code-share agreements link regional carriers to national lines 6. Problems exist in hub-spoke system vs. point-to-point flights 7. New smaller, regional jets (RJs) are being tried to increase direct flights F. Decoding the language of the airline world 1. Each airline has a two-letter identification code 2. Each city with scheduled air service has three-letter code 3. Classes of service have codes 4. Types of flights have special names, e.g., direct, non-stop, etc.

5. Passenger trip type are given special terms, e.g., round-trip, open-jaw VI. Summary You Decide Major Topic: Making multiple reservations Suggestions for In-class Discussion: This “You Decide” deals with a fairly common practice among frequent flyers, booking multiple reservations for the same day, with the intention of only using one of these reservations. This practice is one reason airlines overbook flights, attempting to fill all seats and gain the most “yield” per flight. As students are well aware, overbooking sometimes leads to denying boarding to passengers.

Is anyone being hurt when Meredith reserves seats on more than one flight?

How do Meredith’s actions affect the airlines? How can actions like these affect yield management programs?

How many different sources is Meredith using to make reservations? Give specific examples.

Should penalties be imposed on passengers who make multiple reservations for the same day?

Why or why not?

Can the airline industry do anything to protect itself from these types of actions?

Discussion Questions 1. What are the major modes of transportation, and why are each of these modes important to the current and future success of the tourism industry?

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Water transportation ― steamships, cruise ships, ferries, misc. water craft Important because cruises have become a major form of tourism and are used to a limited degree as the mode of transport between points; ferries are an important form of transportation in many regions where water lies between centers of population.

Air transportation Important because of the speed and economy it affords the people of the world to travel great distances.

Rail transportation Important form of passenger transportation in Asia and Europe. Fast and accessible to many people in small and large towns and cities in many regions of the world. Passes available to international tourists increase usage as a form of tourist transportation.

Highway transportation ― automobiles, motorcoaches, miscellaneous Autos are the major form of transportation in North America and are of major importance; and they are becoming a more common mode in other areas. They represent the form of transport that allows the greatest flexibility of itinerary to travelers.

Motorcoaches are mostly used for group tours, but in recent years are gaining in popularity due to higher airline prices and fuel costs for automobile travel.

Miscellaneous forms such as taxis and scheduled bus service add to the breadth of options available to travelers, especially within metro areas.

2. Why do many travelers, especially based on geographic location, rely on water transportation to meet their transportation needs?

In many regions of the world, geography gives water the advantage as a transportation mode.

Waterways provide an existing transportation system. Rivers, canals, and other bodies of water provide a means for carrying passengers between points without the expense of road or rail development. Water transportation, especially in the form of ferries, also serves as an important link between other modes of transportation.

3. Why is passenger rail service more efficient and effective outside Canada and the United States?

Conditions in Canada and the U.S. merged to decrease the use of the rail system.  High auto ownership and the widespread highway system make the auto the preferred form of transportation in the U.S. and Canada.  Domestic air transportation is widely available and affordable in the U.S. and Canada.

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 The railroads did not maintain their tracks or customer services.

In many other countries, the train system was constantly improved so that it retained its viability as a competitive form of transportation. Stations were built and maintained in virtually all population centers, track and technology were all maintained and improved so millions of residents still use trains as their major form of transport. The systems are therefore available to tourists to use as well.

4. Why are automobiles the dominant form of tourism traffic in North America?

Auto ownership is very common in North America and offers several benefits when traveling.

Some of these benefits are: cost, especially for families and small groups, convenience of having a vehicle at the final destination, and the ability to explore an area and change route to or from the destination. In addition, the U.S. and Canada have funded highways instead of rail track during the last half of the 20th century.

5. Why are motorcoaches experiencing renewed growth as a transportation source?

Motorcoaches are an excellent means of carrying groups of travelers substantial distances due to their flexibility and economy. Many individual travelers as well as groups are turning to motorcoaches as they have become more price competitive with other forms of transportation. To meet the special needs of groups, motorcoaches have been improved and are now larger, more comfortable, and feature many amenities, such as galleys and entertainment technology.

6. Discuss some of the many changes that have occurred since the deregulation of the U.S. airline industry.

Deregulation had incalculable effects on the airline industry, both in the U.S. and abroad.  Airlines began competing on price.  There was an increase (or decrease) in the number of airlines serving any city because airlines were given the right to enter and leave airport service at will.  Airlines were granted the right to package and market tours.  Airlines developed the Hub and Spoke system to reduce cost of operation and increase load factors.  Airlines began to partner with domestic and international airlines through the use of code- share agreements.

If you need to travel long distances in short time periods, airlines are the obvious choice. For business travelers, other than high speed rail service, airlines are the obvious choice for maximizing time. With airlines it becomes a question of time rather than miles.

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enormous sums of money into the infrastructure to make fast and efficient movement of people a reality. In addition, air passenger traffic feeds many other tourism services such as car rentals and lodging.

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Hastings C Mini-case on Hastings and Fear of Flying [If students have not previously read and discussed mini-cases Hastings A and B, they should do so before discussing Hastings C.] Remember the Hastings from the mini-cases of Chapters 2 and 3? They want to travel to Great Britain but they have never traveled by airplane before. Mr. and Mrs. Hastings are very apprehensive about the safety of air transportation. Their fears have been heightened because they must travel from the small airport in their hometown to a large regional hub. The idea of flying into a large, unfamiliar airport on a small plane and passing through security checkpoints and customs has only served to heighten their anxiety. Mrs. Hastings is especially concerned about what she has heard about how personal the security screening process can be.

What additional fears might they have? What information could their travel consultant, Marie, provide to help alleviate their fears and make their encounter with the entire air transportation system less threatening?

Teaching Suggestions for Hastings C Hastings C serves as a good prompt for students to concentrate on the ins and outs of air travel and the system that has evolved to serve air travelers’ needs. One way to start students off is to have them list all of the transportation modes that the Hastings will need to use (or could use) to arrive in London to begin their trip. For example, students should recognize that even getting to the airport involves choices and anxiety. The Hastings could drive themselves, have a friend or relative drive them, take a taxi or use a special airport shuttle. Concerns about driving themselves include how to get to the airport, what to do with the car, what are the parking options, transporting their luggage from the car to the gate, etc. Students may also realize that there may not be a special shuttle service for such a small airport but there may be a shuttle that goes from the Hastings’ town to the regional airport.

Next, students should list all of the fears and anxieties that they can imagine the Hastings may have. Concerns could include those of getting to the airport mentioned above as well as a host of others from how much luggage they can take, finding the right gate, security screenings, to losing luggage, to being hijacked! Encourage students to place themselves in the Hastings’ shoes and be as thorough as possible in their list of fears.

Finally, students should try to develop a transportation plan that would limit the fears of the Hastings and make it more likely that they will have a pleasant trip from their doorstep to the front door of their London area lodging place. By considering the detailed list of intermodal travel options and list of concerns, students should be able to “advise” Marie about how best to serve the Hastings. For example, a shuttle to the major airport would likely reduce much of the Cook, Hsu, & Marqua, 5th ed.

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strain the Hastings feel by allowing them to forego the “puddle jumper” flight from the local airport and deliver them right to the door of the terminal at the regional hub. A direct flight, if available, would also be the best choice so they would not have to change flights and it would also reduce their worries about lost luggage.

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Short Answer Questions 1. Describe the concept of intermodal transportation and why this is important to the tourism industry.

2. Why has passenger rail service flourished in Europe but declined in the United States and Canada?

3. Why are rental car companies captive to airline traffic for much of their business?

4. Why has intercity bus travel and motorcoach usage increased?

5. Describe the impacts of deregulation on airline operations.

6. Explain the benefits and the problems derived from hub-and-spoke operations.

7. Why are airlines increasing their use of RJs? 8. Describe how code share agreements operate.

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Chapter Seven Outline Accommodations i. Quote: Homer ii. Opener: Expect the Unexpected II. Introduction: Brief history of accommodations A. Age-old profession B. Started as way stations for travelers needing safe shelter for the night C. Evolved into local gathering places for meetings and entertainment D. Inns expanded in size and became hotels E. Development of lodging facilities closely followed improvements in transportation (If students are familiar with the musical, Les Miserables, they have seen an example of the unscrupulous innkeeper. The words to “Master of the House” illustrate the many ways that some innkeepers could bilk their guests.)

II. Oh So Many Choices!

A. Accommodations grouped under the umbrella term lodging B. Many forms of transportation include “accommodations” as part of their service C. Resort properties and cruise ships will be covered in Chapter 10, Destinations D. Distinctive forms of accommodations 1. Bed and breakfasts (B&B): No two are exactly alike a. Started in small towns and similar to early small inns b. B&Bs exist worldwide, often supplementing family income c. Wide variety of B&B establishments 1) B&B homes (one to three rooms) 2) B&B inns (four to twenty rooms) 3) B&B hotels (over twenty rooms, sometimes including a restaurant) 4) French term “pension” is used in some regions d) Referral organizations have evolved to assist B&B owners in marketing e) Internet has proven to be especially effective for reservation booking f) Personal attention and breakfast are major distinctions of B&Bs 4. Time-share condominiums: Same Time, same place? a. Usually have amenities similar to a luxury apartment b. Vacation ownership is appealing to people who can plan in advance and want to be assured of accommodations at set times at specific locations c. Fee-simple or right-to-use basis d. Flexibility through ability to swap occupancy rights with other owners at different locations e. Point system is new way to sell time-shares and make swapping easier Cook, Hsu, & Marqua, 5th ed.

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f. Destinations and week of year vary in popularity g. Alternative to time-share is purchase of condo in resort area and participation in rental pool when owner is not using condo (Teaching Hint. Most students are not familiar with resort ownership or timeshare concept. As a short research assignment, have students investigate the pros and cons of purchasing and selling time-shares).

5. Living, Learning and Leisure a. Accommodations built to serve the needs of meeting attendees b. Service is designed to enhance the meeting experience 6. Campgrounds and RV parks: Enjoying the great outdoors a. Camping is no longer “roughing it”; often find amenities similar to other forms of accommodations b. Add additional “rooms” during the tourist season c. Shift the capital investment burden to the traveler 1. Rooms, Rooms, and More A. Brief history of hotel development 1. Boston’s Tremont House, 1829, first hotel 2. Brown Palace in Denver, 1892, first atrium 3. Statler Hotel, 1908, added many services and amenities 4. Great Depression, began in 1929, resulted in 85 percent of hotels going bankrupt 5. End of WWII gave rise to new development but mainly in the form of motels a. Investment in interstate highway system and mass production of autos b. Precursor of motel was tourist court, small roadside wooden structures c. Holiday Inns the first major national motel company d. Hyatt started the renaissance of downtown business hotels by building many hotels with atriums and a great deal of public space 6. Recent decades a period of growth and high profits a. Addition of new brands of properties to target specific segments; e.g., extended stay b. Nine companies now dominate the U.S. lodging industry B. Making sense of classifications and ratings systems 1. Organizations such as American Hotel and Motel Association have developed rating systems to clarify the amenities and services at a type of lodging property 2. Seven typical categories a. Limited-service budget motels b. Limited-service economy motels c. Full-service mid-priced hotels and motels d. Full-service upscale hotels e. Luxury hotels f. All-suite hotels Cook, Hsu, & Marqua, 5th ed.

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g. Extended-stay hotels 3. Classification systems provide managers with reference groups and benchmarks against which they can evaluate performance Best practices have been identified for a variety of hotel operations; e.g., check-in C. Lodging lexicon 1. Lodging has its own set of terms 2. Some terms are industry-wide, while others may be unique to certain companies 2. Organizing for successful operations A. Five types of ownership/management are typical B. Going it alone: Small independent properties, managed by owner 1. Not bound by corporate policies so have complete decision-making authority 2. No corporate support/resources C. Franchising 1. Provide use of brand name, reservation system, and management systems from parent company in return for royalties and fees 2. Franchisee gives up some decision-making freedom 3. Franchising in the lodging business is still rare in Europe and Asia D. Management contracts 1. Owners of lodging property hire a company to manage/operate the property 2. Management company receives percent of revenue as compensation 3. Owners retain all financial obligations E. Chain operations 1. Chain operations have common ownership or management 2. Chains provide similar benefits as franchises 3. Variety of ways to create a chain a. Through franchising agreements with one or more lodging companies b. Through management contracts with one or more lodging companies c. Through purchase/development of own units d. Combination of these three methods F. Strength in numbers: Referral associations 1. Referral organizations offer freedom of going it alone plus some benefits of chains 2. Marketing, especially through central reservations system and widely distributed member directory, is the primary benefit 3. May also offer operational benefits such as cooperative purchasing and training V. It All Begins with Sales A. Goal of lodging sales is to attract future bookings of individual and/or group business B. Can use a variety of methods to gain sales including toll-free/Internet reservation system, travel agents, tour operators, convention and visitors bureau, in-house sales staff C. All employees are involved in sales through recommendations of related services Mini-Lector or Practical Application Experience Cook, Hsu, & Marqua, 5th ed.

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The Sales Blitz No one knows for sure who came up with the idea of a sales blitz, but the blitz (a sudden massive attack) has proven to be a very effective marketing tool for a wide variety of lodging properties. The sales blitz is a coordinated effort to reach as many past, current, and potential customers in as short a period of time as possible. A sales blitz is typically conducted over one or two days although it can be stretched over a week. Whether they are conducted through personal calls or telemarketing; planning, organizing, directing, and controlling are the keys to achieving the following potential objectives of sales blitzes:  Introducing potential customers to the array of services offered by the lodging property,  Personalizing the sales process and creating ties among organization members and target market customers,  Developing goodwill and positive word-of-mouth comments among present customers, and  Creating top-of-mind name awareness and recognition among past, present, and potential customers.

Planning the sales blitz begins with determining whether the effort will be achieved through personal calls or telemarketing. Personal calls will limit the number of contacts that can be made, while telemarketing provides the opportunity to reach a wider audience. Personal calls can be an effective means of generating sales leads or engaging in one-on-one service recovery.

Telemarketing can be an effective means of attracting potential customers to come and visit the property when combined with some type of festive activity designed to show off the facilities and services.

When the objectives and the most effective approach have been identified, the total number and types of accounts can be determined. The number of contacts to be made by the sales blitz team will depend on the objectives and size of teams.

A sales blitz designed to say “thank you” to current customers can be accomplished by many short visits which can be made in one day. The same objective can also be accomplished by contacting prospects over the phone and inviting them to attend a celebration function. However, a sales blitz designed to generate new business leads will require personal calls and more time at each location.

The number of contacts will also be limited by the number of individuals who can participate in the blitz and the amount of time that will be spent on each phone contact or at each target location. Chain operations may send sales managers Cook, Hsu, & Marqua, 5th ed.

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from several properties to one location (an office complex, a city, or a small part of a large city) for a blitz, or employees from any functional area of a property can be enlisted and trained to be part of a sales blitz team.

When the objectives and number of individuals who are needed to conduct an effective sales blitz have been determined, attention shifts to directing the program. Identifying small geographic areas on a city map and assigning a team to each of these areas ensure proper coverage and coordinated efforts. Each blitz team that is making personal calls should consist of an experienced sales manager and one or two other members. Telephone blitzes should also be organized on a team basis for support and encouragement. Sales blitz teams are an excellent venue for introducing employees to the concept that everyone is in the business of sales.

Before the teams are placed on the telephones or sent out to make their calls, they must be trained. This training does not need to be extensive. However, it should include, at a minimum, basic instruction on business etiquette, familiarization with collateral materials, a script of the basic information they are supposed to present, an overview of property programs and services, and the names of contact people for additional information. Armed with a list of targeted contacts, an organized list of telephone contacts or routes on a map (or floors in a large building), and basic training on what to say with each contact, the teams are ready to begin their calls.

Telephone contacts will be followed up with a letter including some type of offer and other collateral materials. Personal callers will carry brochures and business cards which are always presented. In addition, on personal calls each blitz team should also present a small gift as a way of introducing themselves and breaking the ice at each location. These gifts may range from key chains and fresh baked cookies to discount coupons and certificates to dine in property restaurants, depending on the objectives of the calls.

Controlling the sales blitz process requires evaluating the outcomes and making adjustments as necessary. At the end of each day, a debriefing period should be scheduled. Each team leader should present an overview of the day’s activities.

This overview should include leads that have been generated for future contacts, positive and negative comments that were obtained, and recommendations for improving the process for the next day or future sales blitz efforts.

The accompanying sales blitz report form can be used or modified for recordkeeping and control purposes. This form has been designed for a sales blitz aimed at developing leads for sleeping rooms and banquet and meeting room business.

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A sales blitz should be approached as a fun activity. Therefore, a time of celebration with a party or recognition dinner is a great way to end a day or two of intense sales calls!

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SALES BLITZ REPORT Organization Contacted: __________________________________________ Address: _____________________________________________ _____________________________________________ _____________________________________________ _____________________________________________ Decision Maker: (Name)_____________________________ (Title)_______________ Phone: (___) __________ Fax: (___) __________ E-Mail: ____________________ Decision Maker: (Name)_____________________________ (Title)_______________ Phone: (___) __________ Fax: (___) __________ E-Mail: ____________________ Decision Maker: (Name)_____________________________ (Title)_______________ Phone: (___) __________ Fax: (___) __________ E-mail: ____________________ Who makes overnight room reservations? ___________________________________ How many reservations are made per month? ___________________________ What properties do they currently reserve rooms with? ____________________ What price range do they pay for rooms? ______________________________ Why do they use these properties? __________________________________ Who makes meeting/food function reservations? _____________________________ How many meetings/functions held per year? ___________________________ When are meetings/functions held? ___________________________________ What are their needs? _____________________________________________ What properties do they currently use? ________________________________ Why do they use these properties? ___________________________________

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D. Providing a Home Away From Home 1. Lodging properties use a variety of employees to fulfill guest needs 2. Front-of-the-house such as Front Office, Food & Beverage, and back-of-the-house, such as Housekeeping 3. Larger properties often include personnel devoted to marketing, accounting, human resource, maintenance, purchasing, and security 4. General Manager (GM) is top manager with ultimate responsibility 5. Larger properties have many middle managers in charge of functional areas (Teaching Hint. Take this opportunity to discuss the many career choices both entry-level and mid-management in lodging, by using Figure 7.2 to show the multitude of positions in a typical large hotel property).

G. Meeting guests’ needs 1. Front Office is “heart” of lodging property, acting as first contact point and nerve/information center 2. Housekeeping is critical support function, working closely with front office to assure cleanliness and maintenance of property H. Achieving profitable operations 1. Occupancy rates and average daily rates are key to profitability 2. Break-even occupancy must be exceeded to make a profit 3. Profit margins tend to be thin due to capital and labor intensity.

4. Use of revenue management is now being used to maximize occupancy and rates a. Rack rate is walk-in rate, non-discounted and most profitable b. Long-term contracts, least profitable but consistent source of revenue c. Small discounts often given to attract certain segments; e.g., seniors d. Pay commissions to travel agents and tour operators, reducing profits e. Other special prices for government employees and conventioneers 5. Overbooking and walking are problems that can arise from revenue management

Mini-Lecture Mini-Lecture on Pricing Considerations Many lodging properties are affected by seasonality. Not only are they affected by economic and industry trends, they are affected by the seasons, and guests’ preferences for seasonal activities. For example, if you were the general manager of a ski resort lodging property, would you charge the same room rate in December as you would in May? Not if you want to stay in business. But how do you accurately decide on the services you will offer and the price range for the services so that they can stay competitive and attractive? Many general managers Cook, Hsu, & Marqua, 5th ed.

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use a process they undertake at least on a continual basis known as product-andpricing.

Product-and-pricing involves three major steps: 1. Tracking competitors’ prices regularly.

2. Analyzing customer segments and what they expect of the property and the services offered.

3. Comparing desired price relative to cost structure and profit expectations.

Tracking your competitors’ pricing is the first step in evaluating whether or not your prices are reasonable and defining your position in the market. For example, is your market and competition mid-price or luxury lodging, and are your prices consistent with that image?

Next, you would need to decide what service packages to offer, a task that requires you to know who your customers are and what they expect of your property. For example, if in the summer, group bookings disappear and the majority of your market is leisure travelers, you might offer packages that appeal to the leisure traveler, such as:  Magnificent Mountain Golf; a three-night package including greens fees  Fly Fishing Fling; a two-night stay including guiding services  The High Country Experience; a three-night package with a choice of two activities; jeep tour, rafting, or horseback riding But suppose lodging capacity is overbuilt in your geographic region. What other considerations might you have to think about in order to meet guest expectations and remain competitive? How are your competitors rated in the industry? Will earning a three diamond rating distinguish you from your competition? How will the higher rating affect guests’ expectations of your property, and what upgrades would you have to make to be awarded it; e.g., improved room amenities, upgraded phone service, airport transfer service, or expanded concierge service?

Finally you have to compare your ideal price against your cost structure and profit expectations. Now that you are adding some additional room amenities, installing a new phone system, providing airport transportation, and expanding concierge services, is there any way to lower your costs elsewhere in order to maintain your cost structure? Would a safety program reduce worker’s compensation insurance? Would co-op advertising and direct e-mailing lower your marketing costs and still be effective? Can you lower costs by subcontracting laundering and linens or by refinancing debt? How will your decisions affect your breakeven occupancy, ADR (average daily rates), and average occupancy? After answering Cook, Hsu, & Marqua, 5th ed.

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these questions and finalizing your product-and-pricing, in six months you are ready to start all over again!

VI. Summary You Decide Major Topic: Ethical decision-making Suggestions for In-class discussion: In this You Decide, students have the opportunity to develop and defend a set of recommendations based on their understanding of ethics. Nancy is faced with the dilemma of responding to a competitor’s actions which are questionable from both a legal and ethical perspective.

Which behavior(s) do you consider to be unethical? Why? What impact do you think Nancy’s actions will have on future decision-making at the Forest Park Hotel?

Should Nancy have included Rich in the decision-making process?

Does the Forest Park Hotel own its trash?

Note: Students will need help with this question. Most jurisdictions accept the traditional corporate theory which recognizes a corporation as a “legal person” against whom a crime may be committed. Thus, a crime can be committed against a corporation. However, the property law of most states classifies property that has been discarded by the true owner with no intention of claiming title to it as abandoned property. Therefore, someone who finds abandoned property acquires title to it and such title is good against everyone else including the original owner, i.e., finders keepers. Companies would be wise to shred confidential material before it is placed in the trash.

Footnote: A 1997 U.S. Supreme Court case ruled that trash on one’s property is not abandoned or available to search without a warrant.

Discussion Questions 1. Identify and describe each of the major types of accommodations.

See outline sections IID and IIIB for types and details.

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2. Explain how time-shares (vacation ownerships) operate.

Property owners sell fee simple or right-to-use shares in their lodging property to vacationers who purchase weeks’ usage of a condominium type. Unit prices vary primarily by which weeks are purchased and the size and amenities of the unit. In addition, purchasers now typically receive a certain amount of points that they can use to trade time periods and location. Demand for the location, time period, and luxuriousness of the property/condominium drive demand and therefore price and points of the time-share.

3. Describe the differences among independent, chain, franchise, and management contract properties.

Independent properties are single lodging properties which are not affiliated in any way with any other property. Franchise properties are owned by one company that is affiliated with a lodging company that provides marketing and management services for a fee and royalty.

Management contract properties are owned by one company and managed by another that is in charge of operating the facility. The management company is paid a fee and percent of revenues as compensation. Chain properties are multi-property organizations which can be formed through purchase of properties and affiliation through a combination of franchise and management contract.

4. Explain the importance of this statement: “It all begins with sales.”

Lodging properties generate revenues through bookings and the money spent on services by guests of their establishments. Occupancy rates are key to profitability, and sales efforts are key to increasing occupancy rates. Once guests have “checked in,” all employees are involved in sales by suggesting use of all of the services the property has to offer.

5. Identify and describe key front-of-the-house and back-of-the-house functions.

Key front-of-the-house functions are the front desk and bell, concierge, and valet services.

Front-of-the-house services are charged with welcoming the guest upon arrival and helping him get settled in the hotel. Back-of-the-house services are performed by housekeeping, which is in charge of the cleanliness of both guest rooms and all of the public areas of the property. Laundry, maintenance, and security are also back-of-the-house functions.

6. Describe how different rates can affect hotel revenues.

Room rates are a key factor in achieving profitable operations for a lodging company. Room rates affect occupancy rates which affect total revenues and profits. Companies now use yield management to maximize both occupancy rate and average daily rates. Various rates that are commonly used are: Cook, Hsu, & Marqua, 5th ed.

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 Rack rate: The walk-in rate, non-discounted and most profitable for the property  Long-term contracts: Least profitable but consistent source of revenue  Discounted rates: Given to attract certain segments; e.g., seniors  Special rates for government employees and conventioneers

Short Answer Questions 1.

2.

3.

4.

5.

6.

7.

8.

9.

Explain why most B&B operations are not profitable.

Describe how the timeshare concept works from both a developer and consumer perspective.

How has architecture played a historical role in lodging development?

Why have classification systems been developed to categorize lodging properties?

Explain how management contracts benefit both real estate development companies and hotel operators.

What are the advantages and disadvantages of operating a lodging property under a franchise agreement?

Describe the basic operating functions that would be required in any size or style of lodging property.

Explain the differences between back-of-the-house and front-of-the-house operations in a lodging property.

Explain how the technological power of property management systems can improve the efficiency and effectiveness of lodging operations.

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Chapter Eight Outline Food and Beverage i. Quote: George Bernard Shaw ii. Chapter Opener: Sometimes It’s More Difficult Than It Seems I. Introduction A. Provision of food and beverages is key to fulfilling basic human needs 1. Physiological need (nourishment) is obvious 2. Social need often also fulfilled while dining B. Tourists provide important source of revenues to some but not all food service operations 1. Depends on location and targeted segments 2. Some establishments rely virtually entirely on local customers 3. Personal tastes are particularly important in food and beverage service but basics are consistent II. Major Influences on the Development of Food and Beverages A. Travel and discovery 1. Quest to explore led to spread of food and beverage offerings 2. Discovery of new foods, especially spices, were one of the reasons for exploration 3. Roman Empire was particularly important in the development cuisine 4. Travel after the end of the Dark Ages added foods from distant lands 5. Colonization increased popularity of regional cuisines 6. Now food preferences serve to motivate travel to destinations B. Science and technology 1. Science and technology have made highly perishable foods available worldwide all year long 2. Refrigeration and freezing technologies allow foods to be stored and transported without decreasing their original quality 3. New cooking technologies have increased yields and quality III. Building a Culinary Heritage A. Food and beverage (F & B) operations vary 1. Commercial restaurant operations vary from quick service to elegant, full service 2. Food service establishments also include employee and institutional food service B. The beginnings of modern foodservice practices 1. France is credited with the first restaurant 2. French Revolution led to the opening of many restaurants by the former chefs of the slain nobility 3. Most early lodging places and restaurants offered simple table d’hote Cook, Hsu, & Marqua, 5th ed.

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4. Marie-Antoine Careme’s grand cuisine led to the a la carte restaurant which features a list of suggestions 5. Escoffier working in the Savoy and Carlton Hotels changed the methods and organization of foodservice and kitchens a. Refined the concept of courses, a sequence of dishes during a meal b. Developed the station concept, eliminating the duplication of effort and improving efficiency in the kitchen C. Planning to meet guest expectations IV. Guest experience involves interrelated factors; e.g., menu design, place setting, plate presentation, style of service V. Consider target segments and their desires in designing menu VI. Choice of service ware and place settings VII.Artistry of food presentation on plate VIII.Style of guest service; e.g., self-serve, Russian A. Rhythm, timing, and flow 1. Brigade system, developed by Escoffier, assigns set tasks to specific personnel 2. Rhythm, timing, and flow of production lead to excellence in food service a. Rhythm: Coordination of each required task and activity b. Timing: Sequencing of each task/activity to produce desired result c. Flow: Mix of rhythm and timing resulting in smooth, efficient operation B. Adding value to food and beverage experiences 1. Successful food and beverage operators differentiate their operations by focusing on guest service, price/quality value, unique foods, or dining experiences 2. Two typical designs to delivering food and beverages a. Designed to serve “captive” audience; e.g., ski resort patrons b. Designed to attract guests who have many providers to choose from 3. Food and beverage operations may be used to attract guests to a hotel or resort property a. By creating a desired public image and defining place in the market b. By attracting desired business; e.g., meetings c. By creating new business opportunities; e.g., brunches, wine tastings 4. Food and beverages may be offered merely to fulfill need for food but often are used to increase the overall profitability of the property/organization Teaching Hint. We use the following exercise to focus students’ attention on the importance of food and beverage operations in all types of hospitality and tourism services.

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Students may need more convincing about the importance of food and beverage as a sector of the tourism industry and the importance of tourism to many food and beverage operations. The following questions should help highlight the issue and also serve to illustrate the dynamics of the industry. This works well as a small group exercise. Break the class into groups of four, allow them to meet for fifteen to thirty minutes, then call the class back together and have one student from each group report that group’s opinions/experiences.

Approximately what percent of your travel budget goes to the purchase of food and beverages? About what percent of the mature traveler’s budget goes to the purchase of food and beverages?

During your last major trip, how important were food and beverage service offerings to the overall success (or failure) of the trip?

How many of you have worked in a restaurant/bar/other food service establishment?

About what percent of the patrons of these establishments were travelers?

How did these patrons differ from local patrons in their behaviors?

What skills did you acquire from these jobs that are generally applicable to the tourism industry?

How would travel experiences be different if only “necessary nourishment” were provided to visitors? (What form would this hypothetical option take?) How would the business of the various components of tourism change if this were the case? For example, how would tours be marketed/operated? Cruises? Golf resorts?

C. From ten to ten thousand 1. Many unique challenges to feeding groups on a one-time basis 2. Most properties have multi-purpose rooms for catering and banquets 3. Catering sales managers work with planners to develop a banquet event order that provides the details of satisfying the group’s food and beverage needs IX. Building Profitable Operations A. Food and beverage industry faces thin profit margins and fierce competition B. Highest failure rate of all types of business C. Owners often do not have the necessary business skills to succeed D. Benchmarks used to measure performance; e.g., sales per seat, sales per employee, and number of times a seat turns in one day E. Balancing payroll costs with productivity Labor and food the two largest controllable expenses of F & B operations High employee turnover/need to find and train new employees is constant challenge for Cook, Hsu, & Marqua, 5th ed.

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food service managers F. Food quality and food costs are the results of effective purchasing 1. Food cost is large expense of F & B operations 2. Purchasing, receiving, and inventory control procedures help reduce costs 3. Prime vendor agreements link operators to suppliers to negotiate price and secure consistent supply and quality of products Teaching Hint. We use the following Exercise/Mini-Lecture to highlight the importance of managing food costs while keeping an eye on quality.

Do You Think all Food is the Same The following exercise/mini-lecture can be used to highlight operational and cost considerations for food and beverage operations.

Cutting Cans Materials Needed. In order to complete this exercise you will need three similar size cans of green beans or peas of varying quality (we use # 303 cans) from different processors (different labels on the cans), three large white plates (we use 10” plates), three clear glasses, and a can opener. Be sure to purchase cans from the same location.

Procedures Followed. Remove the labels from the cans prior to class and number the bottom of each can to correspond to the appropriate label. Be sure to note the price of each can. Arrange the demonstration area so that each can has an accompanying plate and glass. Select either one student or a small group of students to open each can. Then have them pour out the liquid from each can into the glass. Next, have them pour out the contents of the can onto the plate.

Evaluation. All students should now have the opportunity to evaluate the quantity and quality of each can’s contents. We have used the following worksheet for this exercise. Please modify to meet your learning objectives.

Student Name(s): _________________________________________________ Attributes

Can 1

Can 2

Can 3

Amount of Liquid Color of Liquid Uniformity of Contents Cook, Hsu, & Marqua, 5th ed.

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Color of Contents Texture of Contents Overall Evaluation of Contents Rank each can with one being the most expensive to three being the least expensive Once students have evaluated the contents have them select which one they would recommend for specific foodservice settings, e.g. institutions, fast food, fine dining. Next, reveal the label and the price of each can and have students discuss the implications of the matches they have made.

X. An Ounce of Prevention Is Worth a Pound of Cure A. Food safety and sanitation are the responsibility of managers and employees B. Employee training and work procedures plus properly maintained equipment lead to a safe food service environment XI. Beverages A. Alcoholic beverages are often used in foods to enhance flavor B. Beverages serve as a compliment to food and the dining experience C. In many countries, alcoholic beverages are more commonly part of dining than in North America 1. Beer with the Big Mac in Germany 2. Vending machines providing sake and beer in Japan D. Beverage operations 1. Successful beverage operations depend on the same business principles as food service operations 2. Operators have turned to automated pour systems to help control costs E. Keeping spirits under control 1. Legal liability of third-party injuries after serving a guest alcohol 2. Society’s closer focus on driving and drinking 3. Need for training of employees to recognize drunk customers and respond with appropriate tactics F. Coffee, Tea or?

1. Times have changed and non-alcoholic beverages have gained in importance due to their financial significance.

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2. Pairings of non-alcoholic beverages and foods should also be taken into consideration when designing and pricing menus.

XII.Summary

You Decide Major Topic: Expense accounts and restaurant bills Suggestions for In-class discussion: This You Decide focuses on the difference between business and personal expenses. Business travelers can be reimbursed for travel expenses, especially meals, on a per diem basis, or they may be reimbursed for actual expenses based on receipts they submit. Many organizations will reimburse travelers for meals but not for alcoholic beverages. This issue is raised when the patron wishes to be given a handwritten receipt that hides the expense he incurred for the alcoholic beverages he consumed at the restaurant.

Since Jim is a loyal customer, should the cashier bend the rules and give him a handwritten receipt? Why or why not?

Should the cashier explain the problem to the manager and ask him or her what to do?

Is Jim being dishonest by asking for a receipt that does not break out the charges for alcoholic beverages?

Should the manager at the Bull and Bear have the computer program changed so that customers receive receipts that show only a total amount?

This is an excellent You Decide to generate differing opinions. Often students who have worked in bars and restaurants will differ in their opinions from those who have not. Students also should think about the “root” of the problem and how it could be handled. There are really four players in this scenario; Jim, his company, the restaurant and its employees, and society. What are the benefits and harm to each?

Discussion Questions 1. How has travel expanded our acceptance of different food and beverages?

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immigration also introduced millions of people to foods from other countries and cultures.

2. How have scientific and technological advances increased the availability and variety of foods and beverages?

Developments in science and technology have allowed preservation of foods that allows them to be stored for lengthy periods of time and transported long distances. New methods of production, such as aquaculture, has also made certain foods more abundant and, therefore, less costly.

3. Why are the concepts of rhythm, timing, and flow important in food service operations?

Coordination (rhythm), sequencing (timing), and flow of operations are needed to produce meals that are high in quality and served at appropriate times. These concepts allow a party of four to dine on very different entrees, etc., but to all eat at the same time, therefore helping fulfill the group’s social needs as well as their nutritional needs.

4. How can food and beverage operations be used as a marketing tool?

The type of food and beverage offered by a property helps define the property within the marketplace. The availability of food service can attract revenue to other departments of the property; for example, rooms. Conferences and other meetings usually require food service and, therefore, a hotel must supply F & B in order to gain conference or meeting business.

Food and beverages can also generate new business. For example, offering poolside snacks for guests increases revenue by providing added services for the guests to purchase.

5. Why must food service operators pay attention to detail and watch every penny?

F & B is a highly competitive business and profit margins are very thin. Labor and food costs are high and difficult to control due to turnover and perishability. Standard operating procedures in hiring, training, purchasing, and inventory control are crucial to ensure that the operation can cover costs and show a profit.

6. Why is sanitation such an important issue in food service operations?

Food service sanitation is necessary to keep the food and beverages served to guests safe for human consumption. Illness, bacteria, and disease can be transferred from employees to guests through improper food and equipment handling. In addition, bacteria exist within all foods and can grow to lethal levels if food is not prepared and stored in a sanitary manner.

Health inspections are mandatory for all food service establishments, and operations can be shut down if conditions are deemed unsanitary.

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1. Since food and beverage experiences are very personal, how do food service managers design programs that will please customers and keep them coming back?

2. How have advances in science and technology improved the efficiency and effectiveness of foodservice operations?

3. Why has the brigade system withstood the test of time?

4. What considerations are involved in planning menus?

5. Explain the meaning of the statement “It all comes down to rhythm, timing, and flow.”

6. How do foodservice operators distinguish their operations from other outlets and offerings?

7. Why is it so difficult to run a profitable foodservice operation?

8. Describe the legal and social concerns that influence the decisions managers of establishment which serve alcoholic beverages must consider.

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Chapter Nine Outline Attractions and Entertainment i.

Quote: St. Augustine

ii. Chapter Opener: So Many Things to Do and So Little Time III.

Introduction A. People have always traveled to experience the special attraction of distant places B. Attractions and entertainment (A & E) are only two of many ways we can choose to spend our leisure time

(Teaching Hint. Mention that attractions and entertainment [A & E] options can be the reason for a trip to a certain location; for example, Orlando, FL and its increase in visitation numbers; or attractions may be visited to fill leisure time while visiting the area for some other reason; e.g., business, visit friends/relatives. A & E options serve to retain visitors in an area for a longer period of time so that they then spend more on hotels, restaurants, etc., in the area.)

II.

A World of Opportunities A. Attractions and entertainments will be grouped into heritage attractions, commercial attractions, and live entertainment B. Recreational activities discussed in Chapter 10

(Teaching Hint. Before going into details in this chapter, we have found the following exercise to be very effective in engaging students in the chapter.)

Identifying and Classifying Leisure-Time Tourism Activities We have devoted two chapters (8 and 9) to exploring the wide array of leisure-time activities from which travelers may chose. After several semesters of presenting this material to students, we have found it to be helpful to begin our discussion by critically thinking about the differences between attraction and entertainment alternatives and recreational activities. We have found that students enthusiastically participate and gain valuable knowledge from the following exercise.

You can set the stage by introducing students to the idea that tourists have a finite amount of leisure time. Although tourists who are traveling on vacation will have a great deal more leisure time than business and professional travelers, they are still faced with choices about what to do with their available leisure time. As professionals in the tourism industry, we are interested in (1) providing a selection of alternatives which meet tourists’ needs and wants, (2) communicating the availability of these alternatives, and/or (3) understanding why leisure-time choices are made.

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The balance beam diagram can be used to depict the fact that tourists must make leisure-time choices. On one end of the balance beam, you will find the major categories of attractions and entertainment options presented in Chapter 8 — heritage attractions, commercial attractions and live entertainment. On the other end of the balance beam, you will find recreational activities which are presented in Chapter 9.

Once again, it is important for students to recognize that travelers are faced with decisions about how to use their leisure time.

The accompanying worksheet has been designed to allow students to practice their understanding of these different categories. You can either use brochures from a selected destination or tap into the Internet to highlight a favorite location. Based on available information, students can begin filling in the worksheet by indicating the “Tour Destination” and themselves as the “Tour Planners.” Next, they are challenged to place all the available alternatives into three categories – heritage attractions, commercial attractions, and live entertainment. Point out that recreational activities are not included on this list.

As students think about the placement of each attraction and entertainment venue into these categories, they will begin to discover similarities and differences. Encourage them to review the information provided in Chapter 8 to assist in making placement decisions. After your students have completed their explanation at the bottom of the worksheet, have them share their thoughts with the rest of the class.

We have found it helpful to create a bit of competition, encouraging students to find as many examples as possible. In small classes, this is an effective individual assignment. Consider using groups in large classes. We encourage you to use several different locations to highlight the wide array of choices facing travelers.

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Tour Destination Tour Planners Planned Visitation to Attractions and Entertainment Venues

Heritage Attractions

Commercial Attractions

Live Entertainment

Explain the similarities and differences among the attraction and entertainment alternatives you have placed in each of the three categories.

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III.

Foundations for Understanding Attractions and Entertainment A. Attractions: Natural locations, objects, or constructed facilities that have a special appeal B. Entertainment alternatives are usually temporary: Events are always temporary C. Seasonality often a major characteristic of demand for attractions 1. When seasonality is severe, attractions may only operate during part of the year 2. Managers try to increase attendance during shoulder and off-season 3. Recruiting, training, and retaining employees is a special challenge for highly seasonal attractions 4. Cash flow needs to be carefully planned to have funds when operating expenses are incurred 5. Mature travelers and year-round-education families are attractive target segments when managers try to boost non-peak season revenues 6. Managers also add complementary activities to try to generate visitors; e.g., mountain biking at ski resorts 7. Strategies for staffing for seasonality a. Implement wage scales which increase as season progresses b. Pay season-completion bonuses to retain employees for entire season c. Hire retirees who want to supplement retirement income 8. Strategies for seasonal cash flow management a. Sell season passes at a discount when purchased at close of previous season b. Negotiate lines of credit and extended payment terms with suppliers

IV.

Heritage Attractions A. Museums and historical sites 1. Societies display collections of goods to pass important information to future generations and “outsiders” 2. Number of museums increasing and come in all shapes and sizes, displaying a vast array of history from art to science 3. Curators often use large number of volunteers (docents) to staff museums B. Zoos and Aquariums 1. Zoos were major attractions during ancient times and are still popular today 2. Many zoos are nonprofit preservation societies, but many U.S. operations are forprofit tourist attractions including Animal Kingdom at Walt Disney World 3. Aquariums have been increasing in number, size, and attendance a. Like zoos, many aquariums are nonprofit societies, but some are for-profit enterprises, such as the new Ocean Journey in Denver, CO b. Recently, cities have been funding aquariums to revitalize waterfront areas and draw tourists and residents C. Parks and preserves 1. Each park/preserve is different in appearance and purpose but all are dedicated to protecting natural beauty and flora and fauna

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2. National parks are the most important parks and preserves in countries of the world; many are the most important tourist attractions of their respective countries 3. National parks are funded with government funds and revenues generated through fees and the sale of services and concessions 4. Botanical gardens are a special type of park dedicated to live displays of plants D. Fairs and festivals 1. Fairs and festivals contain some heritage attractions, commercial attractions, and live entertainment 2. Originally fairs were a temporary marketplace while festivals were gatherings at a time of celebration 3. Both fairs and festivals feature food, shows, and musical entertainment 4. World’s fairs bring together exhibitors and visitors from all over the world 5. More frequent are county, state/provincial, or regional fairs which still revolve around agricultural and livestock displays 6. Festivals are focused on some special occasion such as a religious holiday or some annual occurrence; e.g., Mardi Gras, winter carnivals, strawberry festivals V.

Commercial Attractions A. Amusement parks 1. Amusement parks evolved from pleasure garden parks, often located at the end of trolley lines 2. Invention of Ferris wheel heightened interest in amusement parks 3. When cars replaced trolleys, amusement parks lost business 4. Traveling carnivals an extension of amusement park idea, popular in first half of 20th century 5. Disneyland’s opening in 1955 ushered in the theme park B. Theme parks 1. Theme parks are more planned, simulated environments than amusement parks 2. New rides, food, and entertainment are crucial ingredients to park success

VI.

Gaming A. Gaming has become increasingly accessible and popular in North America B. Five primary reasons for the increase 1. Voters have viewed gaming as a voluntary tax 2. More people view gaming as an acceptable leisure activity 3. Retirees are the single largest gaming segment and their number is increasing 4. Casinos are appealing to segments other than the traditional “high rollers” 5. Casinos are now located near more and more populations centers C. Four broad categories of gaming alternatives 1. Traditional full-scale casino gaming; e.g., Las Vegas, Atlantic City 2. Historic, limited-stakes operations; e.g., Colorado’s mining towns 3. Dockside (riverboat) casinos 4. Native American reservation gaming operations which vary from small to largescale Vegas-style casinos; e.g., Foxwoods in Connecticut

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D. Gaming regulated at local, state/provincial, and federal level E. Gaming segments 1. High rollers: Sophisticated gamblers who often play internationally and focus on games of skill rather than luck 2. Day-trippers: Typically retirees, making short-duration trips to operations within easy driving distance, and tend to play slots and video gaming options 3. Low-stakes/new adopters: Both baby boomers and Generation Xers who have recently accepted gaming as a leisure alternative 4. Family vacationers: Families who gamble as an off-shoot to other family vacation activities provided at gaming venues F. Gaming attractions have much higher profit margins with margins approaching 35 percent (Teaching Hint. Mini-Lecture on responsible gaming fits well here.)

Mini-Lecture Responsible Gaming With the phenomenal increase in gaming since the 1990s have come major economic impacts in the form of job creation and tax revenues. Unfortunately, another result of the escalation of gaming is problem gambling.

A Harvard Medical School study found that approximately 1 percent of North American adults are addicted gamblers, while the rate among young people is about 6 percent. The high rate of addictive (or compulsive) gambling among the youth is especially alarming because, prior to the 1990s, the problem was almost unheard of among young people. While in the past gambling was rarely shown in the media (except for a James Bond movie or two), now gaming is portrayed through all advertising media as an exciting, even exotic, adult pastime that can yield instantaneous wealth, power, freedom, and status. The increase in gaming’s popularity continent-wide has, unfortunately, increased its popularity with those who are not yet of age to play.

Sociologists suggest some teens become compulsive gamblers for the same reasons many drink and use drugs: 1. Problems at home and with role modeling, 2. Low self-esteem, and 3. Avoidance of pain and grief.

In response to problem gambling, especially among the underage, government officials and industry members have joined forces to educate the public about responsible gaming practices. Some of the solutions being tried include:  Public education/awareness campaigns Cook, Hsu, & Marqua, 5th ed.

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 Training and certification for select gaming industry staff in recognizing problem gamblers and the resources available to help them  Development of “800” number help lines staffed by professionals who provide referral services  Distribution of brochures and news releases which outline the warning signs of problem gambling  Arranging for knowledgeable speakers to discuss the issue on talk programs and newscasts  Provision of educational materials to school districts and youth programs For more information, see: Fortune, E.E., & Goodie, A.S. (2010). The relationship between pathological gambling and sensation seeking: The role of subscale scores. Journal of Gambling Studies, 26, 331-346.

Hodgins, D. C., Currie, S. R., & el-Guebaly, N. (2001). Motivational enhancement and self-help treatments for problem gambling. Journal of Consulting & Clinical Psychology, 69, 50-57.

Howard S., Hall, M. and Vanderbilt, J. (1997). Estimating the Prevalence of Disordered Gambling Behavior in the United States and Canada: A MetaAnalysis, publication of Harvard Medical School’s Division on Addictions.

Thygesen, K., & Hodgins, D. C. (2003).Quitting again: Motivations and strategies for terminating gambling relapses. Electronic Journal of Gambling Issues, 9, 1-21.

VII.

Shopping A. Shopping can be one part of traveling or the reason for a trip B. Foreign travelers to U.S. very likely to shop during their visit (89 percent) C. Many malls are transforming themselves into tourist attractions by adding rides and other entertainment attractions 1. Canada’s West Edmonton Mall 2. Minnesota’s Mall of America is the #1 attraction of MN 3. Mega-malls in Asia

VIII.

Live Entertainment A. Sporting activities 1. Long history of the attraction of sports; e.g., Greeks and the Olympics 2. Professional and intercollegiate sporting events draw millions of visitors each year 3. Special sporting events are fought for by host communities to gain the vast

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revenues generated by attendees 4. Non-team sporting activities are also important tourist draws 5. Stock car racing the fastest growing spectator sport in the U.S. B. Performing arts 1. Performing arts also has a long history of popularity 2. Classical performing arts a. Live theater b. Ballet c. Opera d. Concerts (including symphony) 3. Contemporary performing arts a. Contemporary versions of all of the above b. Comedy shows c. Musical concerts, band appearances 4. Performing arts can be performed in specially designed facilities or simply large capacity halls or arenas IX.

Summary You Decide

Major Topic: Casino marketing to groups Suggestions for In-class Discussion: This You Decide describes a common marketing practice by many casinos. It is common, especially with senior citizens clubs, for casinos to pay a “bounty” on the number of group members who come to play at the casino. The bounty increases as the size of the group increases.

Restrictions are placed on the members, primarily, that they remain in the casino for a certain length of time, often 5 hours. To ensure that group members are captive for that period, groups are brought to the casino by bus.

As stated, some groups use the bounty money to raise money for the group or some worthy cause. However, the casino pays the group leader who may do as he or she sees fit with the cash.

Frequently group members do not know that the organizer is making money off of their participation.

There are several ethical dilemmas in the situation described.

Is it ethical for the Pot O’ Gold casino to pay a bounty for players?

Is it ethical to require players to remain in the casino during their visit?

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Is it ethical to give people money with the express purpose of tempting them to gamble, especially since most groups are composed of senior citizens, many on fixed incomes?

Should group leaders tell their group members that the leader received cash for organizing the outing? Should the leader turn the bounty money over to the group?

Discussion Questions 1. Why are attractions and entertainment important components of the tourism industry?

Attractions and entertainment options serve as reasons to travel to certain locations.

Travelers, whether for business or pleasure, have some amount of leisure time that they often fill by visiting attractions and entertainment venues. Attractions and entertainment options entice visitors to stay in an area for additional days, thereby generating more revenues for hotels, restaurants, souvenir shops, etc.

2. How does seasonality create marketing, management, and financial challenges for attraction and entertainment operators?

When seasonality is severe, attractions may only operate during part of the year. Demand fluctuations mean that managers need to try to increase attendance during shoulder and offseasons. Mature travelers and year-round-education families are attractive target segments when managers try to boost nonpeak season revenues. Managers also add complementary activities to try to generate visitors; e.g., mountain biking at ski resorts.

In addition, recruiting, training, and retaining employees becomes a special challenge.

Strategies for staffing for seasonality include implementing wage scales which increase as the season progresses, paying season-completion bonuses to retain employees for the entire season, and hiring retirees who want to supplement retirement income with part-year jobs.

Cash flow also needs to be carefully planned to have funds available when operating expenses come due. To generate funds early, businesses sell season passes at a discount and negotiate lines of credit and extended payment terms with suppliers.

3. Explain the similarities and differences between heritage attractions and commercial attractions.

Heritage attractions exist to preserve the past or to preserve the present for those of the future.

They are often nonprofit organizations although more and more for-profit attractions are arising because of the increased interest in this type of attraction.

Commercial attractions can be heritage attractions or other forms of attractions, such as theme parks. The key difference is the primary goal of the enterprise that owns the operation.

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Commercial attractions exist to make a profit.

4. Why has gaming experienced a surge in growth and participation?

There are five primary reasons for the increase in gaming.

1. Voters have viewed gaming as a voluntary tax.

2. More people view gaming as an acceptable leisure activity.

3. Retirees are the single largest gaming segment and their number is increasing.

4. Casinos are appealing to segments other than the traditional “high rollers.”

5. Casinos are now located near more and more population centers.

5. How have shopping malls been turned into tourism attractions?

Malls have been adding more forms of attractions and entertainment to their mix of retailers.

Malls are now offering such a wide variety of services that some have become destinations in and of themselves; e.g., West Edmonton Mall. Many of the attractions noted in this chapter can be found at mall locations.

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Short Answer Questions 1. Describe the difference between attractions and entertainment.

2. Explain why seasonality has such a significant impact on attraction marketing and operations.

3. Describe the primary revenue sources for parks and preserves. How do these disparate revenue sources impact managerial decisions?

4. Describe the basic requirements that must be present for a successful theme park.

5. Why does gaming continue to grow in popularity?

6. Why should sporting activities and shopping opportunities be considered for marketing synergies?

7. Describe the differences between classical and contemporary performing arts. Do both categories of performing arts attract the same segments of tourists? Why or why not?

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Chapter Ten Destinations i. Quote: Philip Andrew Adams ii. Chapter Opener: Dreams Can Come True IV.

Introduction A. Destinations bring together the services of a variety of tourism suppliers in one place B. Those locations, communities, and properties with a primary goal of serving vacationers C. Include locales featuring natural beauty, special weather conditions, and/or an abundance of entertainment or recreational opportunities D. Usually are easily accessible and close to heavily populated areas

II.

From Resorts to Urban Destinations A. Early Roman resorts, and those of U.S. and Europe, were health spas B. Appeal of resorts has been transferred from rest to recreation C. A resort is a “specific place to enjoy in its own right in addition to serving as a gateway to other resources” D. Resort destinations, e.g., Vail, CO, vs destination resorts, e.g., Walt Disney World

III.

Classifying Destinations A. Seasonality classification system (old system): Summer resorts, winter resorts, winter vacation resorts, and four-season resorts B. Trip type classification system: Cruise, beach, casino, ski, summer country resorts C. Umbrella classifications: Integrated resorts, town resorts, retreat resorts 1. Integrated resorts: Self-contained developments planned around natural settings or recreational activities 2. Town resorts: Communities that focus on resort activities 3. Retreat resorts: Small-scale operations located in remote areas (Teaching Hint. Have class members name a resort with which they are familiar.

Then have them describe it to the class or use small groups if you are teaching a large section. After making a list of as many descriptors as possible [we usually allocate about five minutes] have students classify these example resorts using each of the classification schemes introduced. You may want to mix it up by pairing groups to see if they agree on the designated classifications.)

D. Seasonality is a complex concept 1. Season/weather at destination 2. Season/weather of target segments’ home towns 3. Life patterns of target segments; e.g., school vacations, traditional vacation season

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(Teaching Hint. We have found that this is a good time to highlight some of staffing difficulties that are associated with seasonal staffing. The following two mini-lectures are provided to help you begin this discussion.)

Mini-Lecture Employment Problems/Solutions of Seasonal Resorts Most resorts are faced with seasonal trends in occupancy to the degree that it affects staffing levels for the property. So, just before the height of the season(s), the property’s management finds itself putting on job fairs in order to quickly increase staffing levels and then finds itself shutting down departments; e.g., golf and tennis, just before the off-season.

Seasonal situations can be hard on management, employees and guests. So how do resorts proactively approach the situation? They manage by a formula that is one part understanding of employee and guest needs, expectations and values, one part imagination, and one part duty.

Although during the height of the season many positions require full-time staffing, positions don’t necessarily need to be staffed by full-time employees.

Many properties respond with the use of part-time employees and job sharing programs. Part-time positions are desirable to students, mothers with school-age children, and seniors.

Another strategy used by resort properties to respond to seasonal staffing requirements is relationship building with “snow-birds.” Many people migrate to moderate climates; e.g., spending the summer in Colorado and the winters in Arizona. Resort properties form reciprocal relationships with other resorts and sister properties for the snow-birds, ensuring them year-round employment and retaining valuable employees.

A similar strategy is used for positions such as tennis or golf pro. The employees travel between sister properties or properties having cooperative relationships.

Employees are also cross-trained; for example, tennis pro by summer and ski shop manager by winter, or grounds worker by summer and snow-groomer operator by winter.

It is important to realize that cooperative relationships often extend beyond property or even resort-to-resort relationships. For example, a ski resort needs maintenance and equipment operators in the winter at the same time that the county road and bridge department is laying off workers with those same skills – a perfect fit that allows for full-year employment for the employees and employee Cook, Hsu, & Marqua. 5th. ed.

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retention for both the county and the resort.

These are only a few examples of win/win solutions to the problems of seasonal staffing. Employees win with year-round employment, expanded skills sets, and the benefits of job rotation. Resorts win by retaining proven and valuable employees, reaping more from their training investment, increased productivity, and guest satisfaction. The opportunities to respond proactively to seasonal staffing issues are often only limited by a lack of understanding, imagination, and duty.

What Are the Seasons to Hire Smart?

Ask this question to the general manger of a lodging property in a seasonal market and the guaranteed answer will be “always.” Then, ask if his/her property always uses smart hiring practices and the general manager is likely to hesitate and respond “Well, we try.” If it makes common sense, why isn’t it common practice?

First, what are “smart hiring practices”?  Know the “Job Fit”: What are the character traits needed for the job? What skills set does the job require?  Select Accordingly: Determine what media will reach those prospective applicants with the skills, etc., that are required. Write job advertisements that attract them.  Employee Selection and Compliance System: Use the job fit criteria to create an employment application and an effective interview that complies with state and federal laws.  Employee Background Checks: Use all the information available to better gauge the applicant’s skill set and character traits. Include individual credit reports, driver’s license checks, education checks, past employment checks, reference checks, and worker’s compensation reports. Compare resume and application details with information derived from all these checks. If the prospective applicant will have access to guests and their property, a check for any criminal record is prudent.  Skills testing: Test to determine the applicant’s skills; e.g., role playing for guest services, competency tests to determine computer skills.  Orientation: Saturate new employees in the vision, mission, and values of the Cook, Hsu, & Marqua. 5th. ed.

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property. Clearly define expectations.  Job and Skills Training and Team Performance Skills Training: Use training to further involve employees. Skills should be demonstrated and tested before allowing the employee to fulfill a job.  Monitor Hiring Results: Track the effectiveness of new hire and rehire practices and continuously improve on them. Track key ratios, such as turnover and productivity, by position and department.

Let’s consider some of the challenges that prevent common sense hiring systems from being common practice.  Seasonal Workforce: If employees cannot be retained year-round, they are forced to look for new jobs and employers.  Time: Department heads seldom evaluate the job fit – character traits and skill sets necessary to be effective in each position – so they use instinct or emotion while hiring. Hiring also tends to happen as close to employment start dates as possible in an effort to control labor costs. Time constraints also prevent thorough background checks, skills testing, and development of adequate orientation and training programs.  Financial Constraints: Hiring tends to happen when financial resources are most strained and usually the first things to go are background checks, skills testing, and training.

When it comes right down to it, most managers feel that they don’t practice smart hiring systems because of time and budgetary constraints. The results are high turnover, poor job fits, and lack of productivity – which then further takes away from the manager’s time and budget. So the answer is for managers to change what they are doing. Develop smart hiring systems and deploy them. Stop reacting to the present circumstances. The cost of a short-changed hiring system can be staggering.

Conservative Estimate of the Cost of Turnover Recruiting/Training/ Low Productivity Cost (A) Benefits Cost (B) Cook, Hsu, & Marqua. 5th. ed.

Annual Wage _____ X .25 = _____ Annual Wage _____ X .30 = _____ X .25 = _____ Page 148

Total Cost of Turnover per employee (A + B + C) _____ Total Number of Employees who Left (D)

_____

Total Cost of Turnover (C X D)

_____

For example, the cost of turnover for a $7 per hour employee is estimated at $4732 per incident.

Hidden Costs of Turnover Staff Morale Guest Satisfaction and Repeat Visits Productivity Team Performance Employee Retention E. Cook and Yale “strategic groupings” provide useful framework for understanding similarities and differences among destinations IV.

Far From the Maddening Crowds A. Significantly affected by changes in weather yet have little commercial development 1. Hunting and fishing lodges 2. Retreats and guest ranches 3. Basic, or even rustic, buildings used only during the season B. Challenges faced by this seasonal, low commercialization resorts 1. Hire and train staff in a very short period of time 2. “Open” the resort each season a. Order and receive complete inventory b. Prepare grounds and guest rooms for the season 3. Often difficult to obtain necessary supplies and services due to location

V.

Links to the Past A. Primarily consist of religious and heritage sites B. May or may not be affected by season C. By definition, have less modern commercial development D. Some experts believe heritage tourism is the “hottest trend” in the industry

VI.

Seasonal Delights A. Some effect due to weather but greater commercialization 1. Mountain resorts 2. Seaside resorts

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VII.

VIII.

3. Summer resorts B. These were the traditional resorts but now attempt to gain visitors during longer period of time than the traditional season C. All offer escape from summer heat and provide a variety of warm weather recreational opportunities D. Have seen an expansion of the attractions/recreation possibilities in these resort areas 1. Try to attract visitors in secondary season 2. Have increased marketing efforts to bring in travelers for more months Spotlight on Sporting Activities A. Significantly affected by seasonal weather and are high in commercial development 1. Focus on recreational activities best played during one season 2. Need high level of equipment and lodging, etc., to satisfy target market B. Snow holiday resorts 1. At the mercy of unpredictable weather patterns for snow 2. Reduce risk by investing in snow-making and grooming equipment 3. Operational issues related to running a remote, on-mountain location 4. Have faced opposition to expansion from environmental groups 5. Many have added other snow-related recreational opportunities to augment skiing 6. Many now offer summer recreational opportunities; e.g., mountain bike trails, golf, tennis C. Golf resorts 1. Seen an explosion in number of participants 2. Fueled growth in number of courses and golf resorts 3. Golf is both a recreational activity and a social event 4. Golf is the sporting activity that has an influence on meeting planners’ site selection decision 5. Course design is a key factor to success 6. Greens fees and other golf support services are important source of resort revenue 7. Most golf resorts also offer amenities for non-golfers Year-Round Playgrounds A. Only slightly affected by seasonal changes and highly developed B. Offer a complex blend of facilities and services C. Spas 1. A resort specializing in the rejuvenation of mind and body 2. Often a piece of a larger resort but also find stand-alone spa resorts 3. Key feature is complete guest pampering D. Cruise ships 1. Fast growing segment of the travel industry 2. Caribbean, Europe, Alaska, and Mexico most popular cruise itineraries 3. Most cruises now represent floating destination resorts in consumers' minds 4. Ship types vary greatly a. Megaships: Huge, floating resorts b. Midsize ships: Smaller, often more luxurious versions of above

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c. d. e. f.

Small ships: Often used for niche markets, such as adventure cruises Sailing ships: Cruising the original way, with sails Riverboats: Nostalgia versions or modern versions to cruise rivers Multi-purpose: Cruising on ships used for some other purpose, such as freighters g. Super-yachts: Small but luxurious suites throughout, average of 200 passengers 5. Great variety to the types of jobs available on cruise ships 6. Operational advantage of repositioning to move to good weather and most marketable locations 7. Cruises offer all the features of a resort at an all-inclusive price 8. Achieve profitability through profit centers such as spas, casinos, alcoholic beverage sales, shopping, shore excursions, and pre- and post-cruise packages (Teaching Hint. This is a good place to add the Mini-Lecture on cruising.)

Mini-Lecture Important Terms and Facts about Cruising One of the most informative handbooks regarding the cruise segment of the tourism industry is Fielding’s Worldwide Cruises, published and updated annually. Written by Shirley Slater and Harry Bacsh, it provides extensive information on terminology, each cruise line and its fleet, and major ports of call for the most popular cruise itineraries. There are also hundreds of helpful hints for the prospective cruise consumer. Here are just a few of the important terms and facts provided by the Fielding guide.

Ratings Cruise ships are given ratings by different publishers and critics. Often the ratings are given in terms of stars or anchors. Star ratings range from 1 to 6 stars:  Six stars indicate the cruise offers the ultimate in pampering  Five stars indicate the cruise offers a premium quality experience  Four stars mean the cruise is of high quality  Three stars denote a cruise of average quality  Two star ships offer a good budget cruise experience  One star indicates a ship whose time has past Anchor ratings are used when the ship offers a cruise that focuses on adventure and uniqueness rather than the physical amenities of the ship itself.

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ratings. Some cruise ships carry both star and anchor ratings. For example, The Yankee Clipper, a four-masted schooner that sails for the Windjammer Barefoot Cruises line, boasts a four anchor rating. The Sea Bird, an expedition vessel that travels in the Sea of Cortez, carries both a two star rating and a four anchor rating, providing prospective passengers with information about its amenities and its level of adventure.

Cruise Terminology Cabin: Equivalent to a hotel room, but most ship cabins are considerably smaller than a typical hotel or motel room. Cabins are categorized based on location (both outside vs. inside and which deck), size, and cabin amenities.

Generally, outside cabins and higher decks are priced higher than inside cabins and lower decks. Time of year is also a major price consideration.

PPPD: Average price per person per day based on double occupancy. All food and most shipboard activities and entertainment options are included in the price quoted.

GRT : Gross registered tonnage, not the weight of a ship, but a measure of its enclosed cubic space used for producing revenues (used for the purpose of harbor dues).

PSR: Passenger space ratio.

Seating: Time at which a formal meal is served. Most ships have two seatings: an early and a late seating; e.g., early dinner seating is often 6:00 p.m. while late dinner seating is usually 8:30 p.m.

Passengers-Cabins Full: The maximum number of passengers the ship can accommodate when all berths are occupied.

Passengers-2/Cabin: The number of passengers the ship can accommodate in the most common configuration.

Refit: The remodeling of a ship, often performed when a ship is sold to another cruise line. For example, the Norwegian Cruise Line ship, the Norway, was originally built as a transatlantic ocean liner called the France. It was refit for its most recent incarnation, including the addition of two decks.

Cruise Venues World: Some ships travel around the globe as their normal itinerary.

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cruise aficionados stay on board for the entire circumnavigation.

Alaska: An increasingly popular cruise region, offered primarily during the summer months. Several cruise lines incorporate a land tour with the coastal cruise.

Caribbean itineraries: The Caribbean is the most popular cruise destination in the world, and includes the following countries or regions;  Bahamas  Bermuda (not quite in the Caribbean but in that general direction)  Eastern Caribbean (often incorporates ports at the top of South America)  Western Caribbean (often with port visits on the Yucatan peninsula of Mexico)  Panama Canal (many itineraries include some of the ports of the Caribbean and then a trip into or through the Panama Canal, often ending (or starting) at a port in western Mexico, for example, Acapulco).

Canada/ New England: Summer and autumn cruise dates West Africa and Canary Islands East and South Africa Greek Islands and Turkey Hawaii/Tahiti Mediterranean Mexico’s West Coast: Now called the Mexican Riviera Orient/Asia Scandinavia and Baltic South America South Pacific Coastal/River Expeditions, including Arctic and Antarctica Cook, Hsu, & Marqua. 5th. ed.

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E. Casino resorts 1. Have added non-gaming activities to transform casino into resort 2. Spread of gaming resorts throughout U.S. and Canada 3. Mega-resort theme park/casinos appeal to families and just about everyone F. Integrated resorts 1. Located so that they can be appealing all year round; e.g., Hawaii, Bahamas 2. See some peaks and valleys in demand 3. Similar to cruises in the variety of activities, services offered IX.

Bright Lights and City Sights A. Urban areas that have developed into tourist destinations B. Urban destination has an image/character that sets it apart from other urban areas

X.

Building on Success A. Greater affluence worldwide will increase travel to resorts B. More targeted marketing will also increase demand C. Gaining year-round business by targeting groups and conventions

XI.

Summary

You Decide Major Topic: Cruise line wages and working conditions Suggestions for In-class discussion: This You Decide should generate a good debate. To help students think more critically, ask them to develop a list of those who benefit and those who suffer from the conditions described.

What are the jobs and conditions in the countries from which most of the employees come?

How do the cruise jobs compare? Why? Should the U.S. and other countries try to regulate cruise lines by forcing them to comply with labor laws? How could this be accomplished? What would it mean to the consumer, to the worker, and to the cruise line?

Discussion Questions 1. Describe the various tourism supply components that must be brought together to create a successful tourist destination.

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area, from the physiological basics to self-actualizing activities. All of the various tourism service suppliers, or at least the services they provide, must be available; transportation, lodging, food and beverage service, attractions, entertainment, and recreational activities.

2. What are the major classifications of tourist destinations and the similarities and differences among these classifications?  Seasonality classification system (old system): Summer resorts, winter resorts, winter vacation resorts, and four-season resorts  Trip type classification system: Cruise, beach, casino, ski, summer country resorts  Umbrella classifications: Integrated resorts, urban resorts, retreat resorts  Cook and Yale system: Classification based on seasonality and level of commercial development All but the umbrella classification system implies a seasonal component to destination distinction. To some degree, the umbrella classification also implies the level of commercialization that Cook and Yale use. Only the Cook and Yale scheme uses an organizing pair of factors to classify destinations.

3. Why are tourist destinations attempting to attract more visitors outside of prime seasons?

Generating revenues outside of the prime season is becoming financially necessary for most destinations. The development necessary to satisfy consumers is expensive and lenders are demanding that these resources be useful more than a short part of the year. Seasonality also causes management problems (employee turnover, for example) that are at least somewhat alleviated if revenues can be more consistent throughout the year.

4. Describe the factors that impact the survival and success of a seasonal tourist destination like a winter ski resort.

To some degree, these destinations are at the mercy of Mother Nature, either for snow or beautiful weather. Access to substantial capital is also a must because these resorts usually are required to provide visitors with expensive services and amenities. Ski resorts must, for example, provide snow-making, grooming, on-mountain food service, and apres-ski activities and amenities. These destinations also require a great deal of upkeep in terms of grounds and services. To generate income during their traditional “off-season,” many of these destinations have added services and amenities to increase their appeal to other market segments; for example, meetings and conventions attendees.

5. Why are cruise ships called “floating resorts”?

Although cruise ships are obviously a form of transportation, their primary benefit is now the vast array of services and amenities that they offer. Their all-inclusive, one “superior class” service also makes them fit the resort description better than the transportation label.

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6. What is it that sets some large urban areas apart from others and makes them stand out as special tourist destinations?

Partly, the leaders of these urban areas have a desire to attract and serve visitors. The areas also have a special character that makes them unique in some way. They may have a special setting, distinctive history or architecture, a reputation for great food, or simply warm and friendly people. Whatever it is, tourists give them some special position in their minds that sets them apart from other cities.

Short Answer Questions 1. Explain how and why destinations are classified.

2. How does seasonality impact destinations?

3. What types of sporting activities anchor destinations? Which of these activities can be combined in a single destination? How? 4. How can cash flows be smoothed out through the year at snow holiday resorts?

5. Although they may differ in their operating focus, what basic ingredients will be found at a spa destination?

6. Why is cruising booming?

7. Why is gaming continuing to increase in popularity?

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Part II Integrative Cases Using Cases to Teach Tourism Included at the end of each major section of the textbook are four integrative cases related to topics covered in the section. These cases can be used in a variety of ways to augment your course. (They can also be omitted if time does not permit their use.) For example, the cases can be used: 1. as thorough examples of real situations which the students read to understand the reality of the tourism business world; 2. to illustrate specific concepts from the textbook and generate class discussion of the concepts exemplified by each case; 3. as critical-thinking/problem-solving exercises in which students take on the role of a tourism service manager, critiquing the situation and problems faced and then suggesting possible solutions and courses of action that could be followed; and 4. as examination material for students to apply the knowledge they have learned.

Cases are a frequently used teaching tool, especially in business courses. Cases are an efficient means for providing students with a glimpse of the depth of details and issues that are faced by managers every day. Some cases may be straightforward while others may include a wide variety of issues from which the instructor can choose to focus class discussion.

When using cases as a pedagogical tool, you should feel free to utilize them in a variety of ways. No single format is ideal or “the right way” to present a case. In fact, varying how they are used keeps students interested and challenged. The goal of cases in teaching is to provide students with platforms on which they can practice the knowledge they are acquiring and build their critical-thinking skills.

Using Cases to Develop Problem-Solving Skills One common approach to the use of cases employs the problem-solving framework. This approach can be used by freshman and sophomore students in a rudimentary way, but probably works best with junior and senior students who have already substantially developed critical-thinking skills and feel more comfortable with ambiguous learning situations that are provided by cases.

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The goal of case teaching is not for students (or instructors) to come up with the one best answer/solution, but to learn and exchange ideas in pursuit of a solution or course of action. Through careful reading and pre-class thought followed by lively in-class discussion, students learn that there is rarely one best answer in a situation but they do come to realize that some analyses and actions are better than others. Cases are, in essence, vehicles for class discussion through which the instructor and the students challenge each other to think more critically.

Suggested Formats for Class Discussion of Cases In the ideal case discussion situation, the instructor plays a minor role while the students enthusiastically debate each other and generate new topics for discussion. In reality, the instructor often must take an active role to keep discussion focused and to highlight the important topics represented in the case.

We have intentionally excluded questions at the end of the case descriptions in the textbook. If you are teaching students who are inexperienced in case analysis, you may choose to supply them with some of the questions we provide in the teaching notes of this Instructor’s Manual. Students who are accustomed to the case method should not need the extra input of questions before they begin their analysis. More experienced students should be comfortable working with the cases without questions to guide them.

When using a case to illustrate chapter topics, the instructor usually needs to generate class discussion by asking some questions which focus the students’ thinking and comments. We have provided a variety of discussion question possibilities with each case teaching note, but you should feel free to add others, even taking the case into a completely different direction.

When using cases to prompt students to practice problem-solving skills, instructors often use a team approach. Students are placed in teams (three to five is a good number) and then the teams work on the assigned case outside of class to be prepared to lead class discussion during the class period. Some instructors also like to use case presentations. A team is selected to present their analysis in front of the class, and then other teams ask questions and comment about the analysis presented.

You may also find that to ensure thorough reading and pre-class preparation students need to write a short paper on a case. A danger in the use of cases is that all students may arrive to class ill-prepared, on the belief that other students will provide the needed discussion. If each student is held responsible for a case “write-up,” lively class discussion is virtually ensured. Write-ups can be brief and to the point (one or two pages), or you may require them to be more complete (five to ten pages). With freshmen and sophomore students the write-up can simply be a list of concepts illustrated in the case. For higher level Cook, Hsu, & Marqua. 5th. ed.

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students, one commonly used case write-up format is listed below.

1.

2.

3.

4.

5.

Situation Problem statement (there may be more than one which you choose to limit) Possible alternative courses of action Pros and cons of each alternative Selection of preferred alternative, logic for selection, and plan of action

From cases students learn about real situations facing managers. In addition, students learn that others may approach a situation differently and that individuals analyze problems from differing perspectives and with differing values and assumptions. Students therefore can begin to develop the important skills of listening, understanding, and debating through the use of cases. Students often begin to realize that in the face of argument (that is well supported by evidence) they will need to modify their positions.

Cases provide the instructor with an added means of educating students and also a means of opening their minds to the thoughts of others. With practice, both instructors and students find cases a rich addition to the education process.

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Flying the Competitive Skies: U.S. Airline Industry Teaching Note

by Dale Krueger and Denise Bartles, Missouri Western State University

Note: Instructors may want to ask students to update the information provided in this teaching note as many things have changed relative to specific airlines since it was written.

Case Overview The airline industry illustrates how the external (remote) environment, the industry environment and the operating environment can have a dramatic effect on the companies within the industry. Airline companies, their creditors, the unions, and the suppliers have become tangled in a complex managerial situation with few options.

From the remote environment, the economic, social, political, technological, and ecological environments play a significant role in determining the survival of major airline companies both nationally and internationally. Entry barriers for the airlines are moderate with Jet Blue as a recent startup. Supplier power and buyer power are tied up in a tangle of financial implications that creditors, unions, and manufacturers have to unravel and to paste together to survive.

Competitive rivalry has remained intense and the airline industry suffers with overcapacity and cost structures that vary considerably from one airline to another making industry forecasting very difficult for airline executives.

With this case, students have the opportunity to analyze the external environment, the industry environment and the operating environment of the airline industry to gain an understanding of the components that impact the industry projections and direction.

Learning Objectives After reading and studying this case, students should be able to: 1. Analyze the impact the external environment (remote) variables have on an industry from an economic, political, social, technological, international, and ecological viewpoint.

2. Understand the competitive structure of the airline industry including the advantages and disadvantages of the hub and spoke operating strategy versus the point-to-point operating strategy.

3. Give an overview of the total travel industry and the airline industry’s effect on economic development of regional areas.

4. Forecast various strategies and scenarios for the airlines regarding whether to consolidate or Cook, Hsu, & Marqua. 5th. ed.

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merge, downsize, recover, maintain sales and market share, grow or get out.

5. Describe the airline industry’s financial position and its operating environment using Porter’s Five Forces Model _______________________________________________________________________ Presented to and accepted by the Society for Case Research. All rights reserved to SCR.

4 The case study is applicable to strategic management and entrepreneurship classes. del.

Assignment Questions and Possible Responses 1. What effect does the economy have on the airline industry?

For the airline industry, the economic projections improve with increases in Gross National Product. The airline growth prospects when bench marked against GNP remain positive, but the projected percentage of growth is expected to vary between two and five percent per year.

Economists classify the travel industry demand as extremely price sensitive. This price sensitivity means that as GNP and personal income increase, the travel and airline industries have to rely on increases in demand before price increases can be passed on to the consumer.

Historically, external shocks to the travel industry, such as a sudden rise in fuel costs daily or weekly, does not permit the travel and airline industry to adjust prices quickly enough to avoid financial losses. For example, some airlines have increased fares $2-$5 on outbound and inbound travel to help cover the dramatic increase in oil prices, but losses continued until 2006, when demand permitted a 10.3% price increase in the industry.

For the discount airlines, hedging fuel costs for the next year previously allowed them to remain around the breakeven point, but for the major carriers their financial position (cash resources) in the industry did not permit them to take advantage of the hedging option. Since travel has been a price sensitive service and not a commodity, the airline industry and the overall travel industry did not have the volatility and flexibility in pricing that commodity markets, such as oil, had. However, most airlines now have a fuel surcharge, which can be changed periodically to reflect the oil prices.

Ecologically, the airline industry is subject to Environmental Protection Agency regulations in regard to fuel storage at airports. Recently, water standards were implemented and agreed to between the federal government and the airlines. These additional safety procedures certainly impact the bottom line.

2. Explain the political factors that can impact the airline industry?

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Agency, Department of Defense, and the Federal Aviation Agency. The Aviation Transportation Security Act required the airlines to be able to screen all luggage for explosive devices since 2003. These mandates have cost the airlines millions of dollars. Also, the taxes imposed on air travel exceed $15 billion per year. These additional costs leave the airlines with little short-term flexibility in adjusting to a variety of political regulations imposed on the industry. For example, 9/11 and possible terrorist threats required certain costly, mandated security procedures and added to the industry’s insurance costs and kept the industry from funding the pension plans that management and labor had worked out over decades of negotiations.

3. Describe the social factors that possibly can have an important effect on the airline industry?

The social environment has had an immediate effect on the airline industry. SARS, avian flu, and other dangerous communicable diseases have at times interrupted international flights. To anticipate possible catastrophic events, worst case scenarios have been developed with the help of the Federal Government. For example, special rooms have been designated at international airports to handle possible contagious diseases such as the bird flu and SARS. These rooms are for passengers who need to be quarantined.

As airlines increase prices because of losses, overall demand may be adversely affected by the public choosing to drive rather than fly, particularly over shorter distances. Price increases and the extra time it takes to get through security makes driving a less costly option. To offset price increases, the airlines try to focus on differentiating their customer service.

4. What impact does technology have on the airline industry?

Technologically, the airlines also had to devote resources to upgrading their computer systems with boarding pass scanners, e-ticket kiosks, internet reservations, online check-ins, and baggage scanning equipment, which initially increased costs, but over the long term promoted efficiency and reduced labor costs. At the same time, the airlines had to maintain lists of possible terrorists using the computer and to develop better ways of identifying terrorists at the terminal.

These security costs negatively impacted net income.

Technologically, the Boeing Dreamliner, which is manufactured with 80% plastics, could have a major impact on saving fuel costs, but at the same time the airlines are strapped with cash shortages and debt. Therefore, the U.S. owned airlines may not be immediate buyers of the Dreamliner because of the lack of profits, and airline lessors could oppose the purchase of newer planes until present leases give out on the current aircraft in service. They do not want unused, obsolete aircraft sitting idle before the leases expire.

5. What are the advantages and disadvantages associated with the hub-and-spoke business model and with the point-to-point business model?

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these passengers can board larger planes to major metropolitan areas. This permits the airlines that follow this model to increase load factors and save on fuel costs.

The disadvantage of the hub-and-spoke-model is the lack of flexibility between metropolitan areas both large and small. For example, flying from Chicago to a Dallas hub in order to board a flight to Omaha is costly for the passenger and the airline. However, flying to and from Dallas to a smaller Texas town on a smaller aircraft is more cost efficient.

Airlines that fly from point-to-point do not fly into smaller cities, but fly from one metropolitan area to another. To control costs, they fly into older airports where gate leases are less expensive. For example, at Chicago’s Midway Airport gate leases are lower than Chicago’s O’Hare International Airport.

6. What is the financial position of the companies in the airline industry including the impact on airline suppliers (lessors), manufacturers and unions?

Because of soft economic conditions in the industry, sales increases have not kept pace with rising fuel costs, security costs and insurance costs. The industry, therefore, has suffered substantial losses during the past five years. Only Southwest, Jet Blue, and America West posted a profit for 2003 and succeeding years.

In September 2005, Delta filed for bankruptcy. United Airlines planned to come out of bankruptcy in the fall 2005, and with the wage rollbacks, the United Airlines president believed the company would be profitable in 2006. U.S. Airways returned to bankruptcy after the 9/11 government loan and recently consolidated with America West Airlines.

Overall, the airline industry finances were not healthy with the quick ratio and current ratio of .7 and .8 in 2004, which was well below the S and P standard of 1.2 and 1.5, respectively.

This financial situation continued to deteriorate with Southwest, America West and Jet Blue being the only major airlines posting a profit. These financial limitations act as a constraint on possible future airline growth nationally and adversely affected the sales of the two manufacturers of aircraft Airbus and Boeing.

7. Is the airline industry subject to the possibility of consolidation?

According to an article in Fortune Magazine, three of the six major airlines will be gone in five years. Therefore, the question is: What are the ramifications of consolidation for those carriers left in the industry? Most airlines in the US are short of cash and may not be able to add routes and planes with their present resources and debt obligations. Labor costs are inflexible because of the high degree of unionization unless bankruptcy allows companies to lower costs through wage reductions. In addition, there are concerns regarding fuel costs, industry overcapacity, insurance costs, security costs and fierce price competition making survival a major issue in the airline industry.

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Consolidating in the form of mergers rather than through acquisition becomes an option. For example, the U.S. Airways consolidation with America West Airlines permits both airlines to benefit because U.S. Airways has its routes principally on the Eastern United States and America West focus is on the U.S. West Coast. Other possible airline consolidations would require considerable downsizing. Where hubs do not overlap, consolidation becomes more of an option.

Delta and Northwest hubs do not overlap and their consolidation remains a possibility.

8. Describe the importance of the airline industry to the travel industry and economic development?

Economically, airline transportation plays an enormous role for many sections of the country in linking the travel industry with the economic development of a city, state and region. For example, America West is the largest employer in Phoenix (its hub), and also it has a significant economic development role for Las Vegas, as well as some West Coast cities. Similarly, Delta, Northwest, United, and American play a similar role in various cities: Delta in Atlanta, Ga., Northwest in Minneapolis and Detroit, United in Denver and Chicago, and American in Chicago and Dallas. The spin off for the travel industry is economically beneficial. Therefore, more airline downsizing leads to more job losses and less economic development for these cities.

9. What is the power of the buyer and supplier in the airline industry?

As long as the industry struggles toward economic recovery, the negotiating power of both buyer and supplier remains moderate between the airlines and the leasing companies. Airplane leasing companies, for example, lack the ability to negotiate favorable leases with the airlines given the industry losses in the past few years and the downsizing that has taken place. As a result of this uncertainty, the demand for new airplanes remains unpredictable. Therefore, the airlines buying power with the leasing companies has remained favorable, especially since interest rates were at historic lows and had not increased in the last year. But the risk factors associated with airline survival may counteract any advantage an airline might have in negotiations with leasing companies and manufacturers since both leasing companies and the lessees are trying to recover and avoid bankruptcy as well.

As buyers, consumers are the ones actually “in the driver’s seat.” They can purchase low cost airline tickets by choosing to use the Internet sites and choosing to fly with a discount airline or choosing not to fly at all by altering vacation plans and business plans and using an alternative means of transportation. When customers are flying regionally, they may find it takes the same amount of time, or less, to drive to their destination due to the amount of time spent waiting at the airport being screened, searched.

10. What is the overall industry forecast for the airline industry?

The airline industry’s overcapacity and competitive rivalry has required some of the major airlines to declare bankruptcy, for example, Northwest, United, Delta, and US Airways. These airlines have high debt, unfunded pension plans, high wage levels, and costly medical programs.

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Their only recourse to survive is to downsize, which means eliminating marginal and unprofitable routes; to lay off employees; and to lower wage levels in order to compete with Southwest and Jet Blue. At the same time, these airlines want to practice a differentiation strategy with first-class, aisle and window seating. Furthermore, bankruptcy permits these air carriers the opportunity to streamline their operations, but creditors (airplane lessors), because of the high debt level, may have to accept stock in lieu of cash. This debt level adversely affects the creditor’s ability to purchase new planes to lease and, in turn, affects Airbus and Boeing in terms of new plane sales.

Even with the bankruptcy provisions, a question of survival after bankruptcy remains. Fuel cost volatility immediately affects the industry’s bottom line and external shocks of any sort, whether economic, political, social, technological, or ecological, could sink one or all of the major airlines that are presently in bankruptcy, and could adversely affect creditors such as General Electric and Morgan Stanley. In turn, the two manufacturers, Airbus and Boeing, could develop financial problems.

Assuming some of the airlines do not survive, competitors can easily take over gates and lease planes to fill any gaps in service. However, airline prices remain unpredictable because of uncontrollable external conditions. Any substantial increase in airline prices quickly decreases the demand for travel; therefore, industry price projections and future airline profitability contains a high degree of risk. The expectation would be that some moderate price level increases are a distinct possibility for the industry. However, the strategic options for the airlines are to consolidate, merge, maintain a position in the industry, downsize, recover or get out. To succeed the airlines have to rewrite union contracts to reduce wages, eliminate debt and unfunded pension obligations, increase workloads, and differentiate their service to find a niche in the market place.

11. What are possible scenarios in the airline industry?

Fuel costs might stabilize for 2007 as the U.S. economy attempts a soft landing.

Some airlines may have to merge in order to survive or go out of business as predicted by the Fortune article. The expectation would be that Delta and Northwest would merge, although there has been talk in the industry that U.S. Airways is interested in a merger. These mergers can save on labor costs and allow companies to design more efficient route structures, whether they are based on a point-to-point operating strategy, the hub-and-spoke, or both. Other possible mergers may include Continental Airlines or United with some of the airlines still having trouble surviving, such as Delta and Northwest. If mergers do not take place, the prediction is that some of the airlines will not survive and the surviving airlines will pickup profitable vacated routes.

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GEORGIA’S RESTAURNT BUSINESSES CHALLENGES OF FAMILY ENTREPRENEURSHIP TEACHING NOTE — Sambhavi Lakshminarayanan Case Overview Georgia, the daughter of immigrant parents, made the move from IT professional to food entrepreneur and became the owner of a successful “diner” style restaurant in a major metropolis. She then entered into a partnership with five others to open a restaurant that was similar, although positioned more as an upscale dining experience. The partners were her brother and her husband, and three other men who were business acquaintances of her brother.

However, the second venture was beset with challenges. There were continuing operational issues that required Georgia’s almost constant intervention. There were also issues of strategic confusion and lack of cohesive vision. The partners could not articulate a complete and cohesive business and marketing strategy for the business. Despite its extremely advantageous location and available pools of potential customers, the restaurant was struggling. Moreover, the partners appeared to be losing the will to continue with the business; Georgia and her husband appeared to be the only ones willing to continue investing in it. Georgia had begun wondering what the end result would be of the business and whether the partnership could be salvaged and made effective.

Learning Objectives After reading and analyzing the case, students should be able to: 1. Understand factors that make partnerships an attractive option as a form of business ownership and challenges in making a partnership successful; 2. Analyze how entrepreneurs can grow their business portfolios; 3. List characteristics that make partnerships successful; 4. List advantages and challenges of including family and friends as business partners; 5. Analyze the role of leadership in a business partnership, particularly in the context of women and culture; and 6. Identify changes in organizational structure as organizations grow and develop.

Application This case has been prepared to use in primarily undergraduate courses in – tourism, hospitality, management, small business management, entrepreneurship, family business, women in business and leadership. Different threads of discussion could be for illustrating forms of business ownership, challenges of mixing family and business and women taking on leadership roles in small business. Students can either be asked to analyze the case assignment or do an in-class group discussion. This case is also conducive to role playing, with different students taking on Cook, Hsu, & Marqua. 5th. ed.

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the roles of different partners, and employees. For instance students could enact a partners meeting. Since the case is left open-ended, students can be asked to propose different courses of action for the main protagonist, Georgia, and make the case for their recommendations.

Suggested Questions 1. What made a partnership an attractive choice for ownership of-Upside Down? In general, what are different forms of business ownership for a small business owner? On what basis would a business person choose among them?

2. Do you think that Georgia made the right decision to quit her IT job, along with her husband? What are considerations in making a successful move from working for an organization to owning one's business and running it?

3. What factors should an entrepreneur keep in mind in growing the business?

4. What were the challenges and advantages for Georgia in entering into a partnership in owning Upside Down? In this case, would Upside Down have been run better if there had been fewer partners?

5. Was it a good idea for Georgia to have agreed to form the partnership with family and friends, or should she have looked for other partners where the relationship would have been only a professional one? What could Georgia have done to ensure that the partnership was successful?

6. Perform a SWOT analysis for Upside Down.

7. Is it necessary for the partnership at Upside Down to have a leader?

8. What are different types of leadership and management in small businesses? How would you categorize Georgia's style?

9. Should Georgia have taken on a leadership role in the partnership?

10. What are the challenges for women to become leaders in small business partnerships, particularly in those involving family members?

11. Develop an organizational chart for the partnership at Upside Down.

Suggested Answers 1. What made a partnership an attractive choice for ownership of Upside Down? In general, what are different forms of business ownership for a small business? On what basis would a business person choose among them?

In general, there are four main forms of ownership for entrepreneurs: • Sole proprietorship • Partnership (limited liability partnership) • Corporation • Limited Liability Company (lvancevich & Duening, 2004) The criteria for choosing among different forms of ownership include – ease of formation, ease of raising capital, financial liability, taxation rates and, finally, management skills and control.

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Each criterion favors a certain structure and is unfavorable to others. The decision to choose a particular ownership structure is driven by the business needs and opportunities available. In particular, the advantages of a partnership are that it is easy to form to font" and enables more access to capital than sole proprietorship. Also, partners can contribute to intellectual and social capital for the venture in terms of talent, experience and professional expertise. However, a major drawback is loss of control, since in most situations partners have a say in strategic and tactical decisions and this can easily give rise to disagreements between partners. Both the advantages and drawbacks are illustrated in the case. For a partnership, it is important to note that not all partners are, or need to be, equal in terms of influence — indeed, power in a partnership need not be distributed equally and need not be proportional to direct investment.

In the case of Georgia, the most practical choices she considered for the first venture were a partnership with her husband, a sole proprietorship or incorporation. There were similar choices for Upside Down. Due to circumstances, mainly driven by family pressures and financial commitment needs, the only choice she considered was a partnership in the case of Upside Down. However, since it is very similar to Food Station, a similar ownership structure would probably work well.

2. Do you think that Georgia made the right decision to quit her IT job, along with her husband?

What are considerations in making a successful move from an organization to owning one's business and running it?

In recent years, there has been discussion about the change in "social contract” between organizations and individuals, with a trend towards decreasing commitment on both sides.

Individuals increasingly switch several organizations over the course of their careers. Indeed, individuals in many organizations may function almost like entrepreneurs with respect to the effort they put in and work outcomes they look for. In times of economic turmoil, as employees are laid off and lose jobs, many look to start their own businesses. Often people make the switch from what had been a satisfying corporate career to entrepreneurship when things go bad. An example often cited is the number of ex-employees of Enron who became entrepreneurs after that debacle.

In general moving away from working for an organization, even to another organization, or to owning one’s own business, takes a certain amount of adjustment (Bridge, O’Neill and Cromie, 2003). An individual goes through several stages of adjustment. These include – being taken aback by the turn of events, in a state of shock and not taking any action; dealing with feelings of negativity, and being depressed, with an added degree of denial; moving into accepting that things would not go back to how they were; and finally considering new possibilities.

Individuals who can successfully go through these stages have an easier time and can adjust faster to new situations.

Being successful in an organization is quite different from being an entrepreneur. An organizational employee usually has a narrow set of expert skills and has to function within the parameters of organizational policies and practices within a relatively stable environment. An Cook, Hsu, & Marqua. 5th. ed.

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entrepreneur has to set his or her own boundaries, have broad skill sets and many have to make changes on the fly. The most significant difference between entrepreneurs and organizational employees is their attitude towards authority (Nelson and Quick, 2008, p. 17).

According to these authors, five factors that are important for small business owners are – drive, thinking ability, human relations ability, communications ability and technical knowledge.

Individuals who have these characteristics and have exhibited them in an organizational setting will find that these skills and competencies carry over well.

Some special challenges for individuals moving from working in an organization, whether small or large, to owning their own business include:    

Change in thinking – from and “employee” to an “employer” mindset; Treating financial matters from profit rather than a salary point of view; Moving from doing to being an evaluator or being evaluated, to making decisions of various kinds and degrees of importance; and Having to function as a generalist rather than a specialist.

In Georgia and Michael’s case, their leaving the organization at a relatively high note meant that they were psychologically more optimistic and prepared for a new career. In concrete terms, the move was prescient since their old office was downsized and finally shut down by 2000.

All entrepreneurs are not the same. One way is to broadly classify them into one of two types (Bridge, O’Neill and Cromie, 2003, p. 259): 

Business Professional: the driving force behind this entrepreneur is to be successful and this person has an idealization of a “perfect” business. This type of business person aims for the business to achieve its maximum potential.



Small Business Proprietor: the aim is for this business person is to derive certain benefits from the business; getting financial returns that would enable a desirable lifestyle and degree of comfort is equally important, and the goal need not be to push the business towards the extreme of maximum achievement.

Given the experience and description of Food Station, indeed even their choice of running this type of business, it would seem that Georgia and Michael are the second type of entrepreneurs.

Another factor to consider is that Georgia and Michael left their jobs to jump into the business venture. This could be considered risky by many couples. Since most business enterprises are risky, with failure rate of about 30% in the first year and about 70% over ten years, couples might make the decision that one spouse heads up a new venture while the other holds a steady job. Since neither Georgia nor Michael had been in danger of immediate termination, one of them could have continued working as an IT professional in the large corporation, at least until the new business was established.

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On the other hand, there are advantages to starting a family, even couples, business. Although couples typically face special challenges in separating personal and professional lives, some couples have built successful businesses, for example, Andy and Kate Spade of "Kate Spade" (Tischler, 2005). In general, research indicates that small businesses are often more successful, and profitable, when they are family owned. One reason could be that family members can be more committed and contribute (often counting as unpaid) work in order to make the business a success.

Since Georgia and Michael had well-coordinated visions and we1l-developed ability to work together, it was the right idea for them to quit and start a new venture together. In retrospect, we can say that they exemplify the statement: “Family companies offer family members the opportunity for more fulfilling career paths than do outside companies” (Collins and Lazier, 1995).

3. What factors should an entrepreneur keep in mind in growing the business?

Bridge, O'Neill and Cromie (2003) identify three types of small business growth and development:   

Those with a short life span (and so never grow), which is most business ventures; Those that survive but remain small, not growing much; this includes most of the businesses that do survive; and Those that experience very rapid growth; this is a very small percentage of business ventures.

Since Food Station is a successful and stable business, it seems that Georgia and Michael fall into the second category.

Once entrepreneurs have established themselves, they can choose to expand in many different ways (Bridge, O’Neill and Cromie, 2003). Some are first time entrepreneurs and remain in the learning stage: they can be called “novices”. Typically, as an entrepreneur gains confidence, he or she starts new ventures. Some entrepreneurs manage several different businesses at the same time; these are “portfolio” entrepreneurs. Others may start new ventures, but then give up the old one, so that they manage only one venture at a time, and are called “serial” entrepreneurs.

Some business expansions may be replicating the old one that is a similar business, where as others might be completely different.

Growth in a small business situation is different from large businesses, primarily due to the challenges that are placed on management. Larger businesses may grow in planned and controlled increments, which could be small or large, where as small business growth typically might be large in terms of the business, often through doubling (Stegall, Steinmetz and Klein, 1976). A key factor in small business growth and success is management talent. This is Cook, Hsu, & Marqua. 5th. ed.

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illustrated in the case as well, where the partners have expertise but overall management talent is spread very thin in the new enterprise.

The question might be, “how should growth of a business be measured?” Bridge, O’Neill, and Cromie (2003) identify assets as a key indicator of small business growth, and include both hard (tangible, financial) and soft (expertise, goodwill) assets in the mix. Based on increase in assets, they identify several stages of growth and development over time. These run from accessing resources to start the business, mobilizing and generating them, all the way to accumulating resources and maturity, when the business is self-sustaining. At any time, there is a risk that the business might have to close, driven by both internal and external reasons.

The factors for success in a business venture vary, as do the paths to growing. One way that many businesses have grown in the past is through franchising. Typically, this involves giving up control and may not be the preferred route for many small businesses. Others replicate themselves exactly at another location (such as Amy’s Bread in New York City). An example of replication in a new city is Palm, an Italian restaurant that originally had only a Second Avenue location in New York City. On the urging of customers, Palm was opened in Washington, D. C. in 1972 and late on, in locations in other cities. It is interesting that through this process of expansion, the original family ownership has been maintained. This is in contrast to the franchise format that was adopted by some other businesses, where ownership is shared with several other business owners.

If the process of growing includes a new venture that is only similar, but not the same, as the existing one, the owner(s) would attempt to utilize all advantages and learned experiences. A completely unrelated venture might be undertaken to take advantage of an opportunity, and might be challenging since prior knowledge and expertise may not be useful.

Thus consideration in growing are – management talent, available assets and access to more, utilizing prior experience and, finally, taking advantage of opportunities. Georgia and Michael were ready to expand into a similar or same business. There was certainly an opportunity in terms of Upside Down, with possible financial assets of the partners becoming available for investment. By inclination, neither Georgia nor Michael wanted to try out something risky, so Upside Down was a good way for them to expand.

4. What were the challenges and advantages for Georgia in entereing into a partnership in owning Upside Down? In this case, would Upside Down have been run better if there had been fewer partners?

Many would agree with the statement “a partnership is the most challenging form of business structure” (Applegate, 2000). Certainly there is enough scope and several reasons for a partnership to fail. Apart from general reasons that might affect any business, such as customer demand for the product or the economy, there are those that are particular to this type of ownership. When partners work together towards a common and shared vision the chances of success increase for the business venture. However, there are some common and recurring Cook, Hsu, & Marqua. 5th. ed.

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problems with a partnership, such as conflicting visions, differences in opinions on roles performed, controversy about the amount of investment each partner is to make and relative contributions of members. Partners often have to work at making the partnership function smoothly, and even these efforts may not be sufficient to save a partnership. In particular, issues of leadership and role allocation need to be clarified. Thruston (1986) suggested that “don’t set up a partnership in which two or more people have equal ownership and power in decision making. If two or more partners are to work together, establish at the onset, who is in charge”.

Power distribution and role differences may emerge and evolve over time for some partnerships.

The number of partners in a partnership varies widely. There are reasons for inter-industry variation; Dyke, Fischer and Reuber (1992) noted that an industry that is capital intensive (for example: manufacturing) would typically have more number of partners in business enterprises than one that is not (for example: food retail). Within industries, the number of partners depends on local business conditions, demand, financing availability and very specific, personal reasons. For instance, in the hospitality industry, there are many mom-and-pop motels that may be sole proprietorships, couple owned or small family businesses. At the other end of the spectrum is La Quinta Inns, chain of “motor lodges” that was an LLP with several hundred partners. A general rule of thumb would say that it is not the number of partners as much as what they contribute and how they work together that is the factor that impacts on the success or failure of a business.

The challenges and benefits of a partnership are illustrated in the case. One reason that Georgia entered into the partnership was the initial commitment of the partners to share in financing the venture. At that time, Georgia did not have any plan to expand her business portfolio. However, the partners needed some to share the financial and management burdens, and approached her.

Without partners to share these commitments, Georgia would never have thought to own Upside Down. The expertise and experience of the partners could have worked to great benefit at Upside Down. The biggest challenge has been the lack of cohesion among the partners regarding vision and direction the venture should take. In this case, we can say that the number of partners is close to ideal. It is not so many that the partnership would break up into smaller groups in times of challenge. At the same time, it was large enough to provide sufficient management talent, human and social capital and for possible role divisions.

5. Was it a good idea for Georgia to have agreed to form the partnership with family and friends, or should she have looked for other partners where the relationship would have been only a professional one? What could Georgia have done to ensure that the partnership was successful?

Sometimes, it is easiest to enter into business with family since they are often the most supportive and willing to invest in a new business venture, for purely personal and emotional reasons. For instance, Amazon chief Jeff Bezos started his venture with initial investment from his parents and their friends. We should note that researchers have extended the definition for “family” beyond members of the actual family to include members who share similar values and where a “sense of family” permeates the business. There are advantages to running a business as Cook, Hsu, & Marqua. 5th. ed.

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a family enterprise with active involvement of members. These are – fast decision making (since family members are assumed to be united towards family success as a goal), the availability of family as labor at cheaper or no cost and low turnover of employees. On the other hand, there are also some serious concerns, such as when the business becomes too family-centric to the detriment of the enterprise. In many family businesses, top management positions are limited to the family, the family controls too much of the cash flow and the business begins to rely more on family power instead of social power (Anderson, Reeb 2003, and Quick 2008. p361).

Collins and Lazier (1995) state that, “when it is a well-run enterprise, a family company is a fundamentally strong and enduring institution”. The key phrase might well be “well-run”. In literature, there has been conflicting evidence about the success of family businesses compared to non-family ones. Early evidence had suggested that family owned businesses outperform nonfamily owned ones (Anderson and Reeb, 2003). However, later studies suggested that the success rate might be related to size and that the rate is higher when the size is smaller, which would seem to indicate, that entering into a partnership with family and friends is a good idea for a small business.

A challenge in family owned businesses is the overlap between personal and professional lives.

Thurston (1986) states that: “a falling out among family members carries an extra dimension of cost”. As exemplified in the case, Georgia was unable to stand up to her brother and demand that the partners take on their share of the responsibility. Georgia and Michael were able to work this out beautifully between themselves and had a seamless transition from personal to professional (at Food Station) where each took on instinctively the role that came naturally. In the case of Upside Down, both Bernard and Malcolm took advantage of the leverage that being `"Stephen's” people gave them. In Malcolm's case, since he had initially understood that he would be a silent partner, it was simply reluctance to invest time rather than money into the enterprise. However, Bernard was a weak partner and it seemed clear that he was looking at Upside Down as easy money. Although he had the time, and no other major sources of revenue, and could have worked at Upside Down for a salary or even in lieu of financial investment, he flatly refused. It was only his link to Stephen that kept him on.

For success in a family enterprise, it is recommended that roles and responsibilities be clearly defined and accountability be there for the job performed. The partners, specifically Georgia since she was thrust into a leader role, needed to ensure clarity and insert structure that would make for clear distinctions in roles and authority. When successful, this would make sure that there was a fair sharing of effort and that each individual would be held responsible for their actions. That being said, it is often difficult if not impossible to "fire” family and friends.

6. Perform a SWOT analysis for Upside Down.

Strengths — location of the restaurant and its ambience, experience and expertise of partners in industry and in running same type of restaurant, available pools of customers, lack of competitors in area.

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Weaknesses — lack of vision among partners, lack of strategy, actions that were uncoordinated and did not go in the same direction, lack of marketing focus in a business that is highly sensitive to marketing, lack of management skills in day-to-day running of the restaurant.

Opportunities — lack of competition gives time to position itself as it chooses in the most profitable manner, ability to utilize scale of volume (from partner's other businesses) to get better prices from suppliers, ability to transfer human and social capital (from partners' other businesses) for example send over competent managers and employees to train those at Upside Down.

Threats: — erosion of reputation if restaurant does not improve over time — customers may give up on the restaurant, setting in of a sense of hopelessness among employees and even partners, competitors.

7. Is it necessary for the partnership at Upside Down to have a leader?

As Collins and Lazier (1995) state: "The number one responsibility for the leader of a small to medium company is to catalyze a clear and shared vision for the company and to secure commitment to and vigorous pursuit of that vision”.

This shows not only the importance of a strong vision, but also the implicit assumption about the presence of a well-identified leader. In the case of Upside Down, lack of a clearly identified vision, which could be interpreted as lack of leadership, led to confusion about goals and strategies.

According to literature, a successful small business manager and leader works through an organization, and ought not to do everything by himself or herself. Stegall, Steinmetz and Kleir (1976) identified reasons for small business managers to fail at managing – wasting time, reluctance or avoidance of certain duties, reluctance to delegate or assign work to others, indulging in self pity and attributing setbacks to lack of luck and finally, behaving like a follower and not like a leader.

Any organization, irrespective of size, needs a leader. Leadership in small businesses may have different dimensions, since there are typically fewer layers and the job differences may not be dramatically different between employees and top management. In the case of sole proprietorships, there is no question as to who the leader is. In the case of partnerships, that might need to be resolved.

A smoothly running partnership need not have a well-defined leader. For instance, in running Food Station, Georgia and Michael were equal partners and co-leaders. However, not all partnerships run smoothly. Often there is conflict and disagreement. When the partners do not have a coordinated vision or business views, there needs to be a leader to break ties and make Cook, Hsu, & Marqua. 5th. ed.

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hard choices. If not, every decision could be swayed by different partners resulting in uncoordinated and ineffective actions, such as what happened at Upside Down. For instance, when Stephen was present, he dominated and took on the leadership role in making decision, such as in firing a manager, unilaterally. However, he was not present most of the time, and in this case, did not install a manager in the place of the one fired. The person that Georgia hired could conceivably also not be to Stephen’s liking. The other members, when they were present, would make decisions on a majority basis, but were not there to support major marketing initiatives. In such a situation, it seemed imperative that a leader be appointed.

8. What are different types of leadership and management in small businesses? How would you categorize Georgia’s style?

Leadership in organizations is well-researched and there have been several models, both descriptive and prescriptive, in this field (Yukl, 2006). Most of them apply to large businesses.

The main dimensions of difference with small businesses are the levels of hierarchy, size and related job and role differences and other issues. Small businesses pose specific challenges to leaders. Often, the business owner is the de-facto leader, as in the case of a sole proprietorship.

The situation gets more complicated when there are partners, or a board, or if it is a family business where an offspring may not be at the highest levels of management, but is clearly the anointed leader.

Research based on surveys conducted indicated that qualities considered important to be an effective leader in a small business include "the ability to get each employee to take ownership" and "to resolve problems in a timely manner with professionalism" (Contractors Discuss 2004).

In a broader sense, according to a Management Review Magazine article, attributes that a small business leader needs include - vision, communication, integrity and trust. In terms of management and leadership styles, six have been identified for entrepreneurs: a. Classic: where the founder / manager is knowledgeable about and involved in every aspect of the business. An example is a hair salon owner. b. Coordinator: where the manager simply coordinates the work, but there are no employees and all work is outsourced. An example is a travel agent. c. Craftsman: this is opposite of coordinator, the manager does everything by himself or herself, and there may be no employees. An example is an accountant or a lawyer. d. Entrepreneur and employee team: this is more like large businesses; the manager delegates authority to key employees. An example is a bakery where the owner might set strategy but baking, packaging and delivery is done by employees. This might also be the case when the owner has expanded to multiple locations or businesses. e. Small partnership: where there are partners, although the number is limited. The manager has to give up control to others who are equal owners. All partners could have a say in important tactical and strategic decisions. f. Big team venture: this is where the main focus of the business is to raise capital to invest in other businesses and other opportunities. These are venture capital firms, typically active where there is a nexus of innovation such as in Silicon Valley.

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In the case of Food Station, Georgia was a classic manager. However, situation at Upside Down is the small partnership one. The partners were certainly involved in all decisions, in the sense that Georgia could not make key decisions on her own without consulting them and had to accept their choices as well. One way to handle the situation is for Georgia to take on leadership, in a "coordinating- sense,” allocate specific responsibilities to partners and ensure that those were being fulfilled. For instance, she could distribute partnership responsibilities as "inside- jobs” (operational decisions, day-to-day management, employee dealings) and "outside- jobs” (marketing, hiring management, raising capital).

9. Should Georgia have taken on a leadership role in the partnership?

To paraphrase Shakespeare from Twelfth Night, ''Some are born leaders, some become leaders and some have leadership thrust upon them”. Georgia did not want to be the main decision maker or functioning head at Upside Down, but that role was thrust upon her. It is debatable whether she could be considered as the leader of the group.

Since Georgia believed strongly in the viability and potential for success of the enterprise she did that the job willingly, to a certain extent. However, Georgia soon felt that despite the time and effort she was putting in, there was not much progress in the business. The same kind of problems would arise over and over again. Her effectiveness as a leader and key decision maker was hampered by the relationship dynamics among the partners. Under different circumstances, Georgia would have made a strong move to take on a leadership role.

Although by nature a very cooperative and emotionally mature person, Georgia is also very pragmatic. She would not have hesitated to push back for making the right decisions, if she felt that was in the best interest of the business. In the case of Upside Down, her extreme reluctance was largely due to the fact that Stephen was one of the partners and that the other partners were “family friends”. The weight of her family history was strong on her, to the extent that she wanted to accommodate and indulge Stephen’s wishes (as in the choice of partners like Bernard).

Also, since the other partners were from the same community or business circles, it would be awkward not to have smooth relationships with them. Finally, the cultural context is important too, as the community that Georgia and most partners belong to is "high context" (Nelson and Quick, 2008), where it is as important to maintain relationships as it is to have business success.

Being the daughter of immigrants, she is particularly aware of the need to integrate into the community.

Georgia is certainly in a leadership-like position. She needs to choose a style that is effective for the business and also resonates with important issues like family ties and friendships. However, Georgia has only a limited amount of her most precious resource -- time. This might motivate her to take a stronger stand and insist that others pick up the slack, as she keeps in mind Collins and Lazier’s (1995) advice to small business owners: "manage time, not work".

10. What are the challenges for women to become leaders in small business partnerships, Cook, Hsu, & Marqua. 5th. ed.

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particularly in those involving family members?

The issue of whether gender makes a difference in leadership has been studied (Yukl, 2006). In the case of small businesses, ownership is often a conduit for leadership. Initial studies seemed to indicate that women-owned businesses may not be as successful as men-owned businesses.

The reasons attributed were lack of "human capital" (specific skills, etc.) as well as systematic challenges such as in obtaining finances. However, that gap could be closed or closing fast.

Women increasingly own their own businesses even in "old world cultures" where women's roles in society are strong limited roles – as exemplified by the success of “Grameen Banks” in Bangladesh. Many of these are highly successful ventures.

In the case where women are not sole proprietors, research discusses women contributing "unpaid labor" in family businesses, which implicitly implies that they are not in leadership roles. In the case of partnerships, women can get relegated to supporting or subsidiary roles — merely performing the work but having no real power in decision making. The situation can then become similar to large organizations and gender related issues therein.

At Upside Down, along with gender the complicating factor there was the presence of family and friends in the mix. Georgia was also hampered by cultural factors since in her community, which had a tradition of entrepreneurship, there was an equally strong tradition that women either did not participate or take charge in business matters. Women either worked in organizations as professionals or supported the family businesses. Since Michael was highly atypical, they functioned as equals at Food Station. At Upside Down, Georgia was forced to revert back to a culturally acceptable stereotype.

11. Develop an organizational chart for the partnership at Upside Down.

It became clear that there needed to be clearly understood delineation of roles and responsibilities at Upside Down. This would ensure that decision making authority was clearly understood and respected, that different owners did not make decisions that were contradictory to one another and that decisions were not constantly changed. A structure would impose order and more stability into the organization, as compared with the situation of “too many cooks".

A proposed organizational chart with delineation could be:

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Epilogue As of the time of this writing, the situation at Upside Down continued to worsen. Stephen decided to wind up all his businesses and moved to another country with his family, where he quickly established new businesses. His focus was on rapidly dissolving developing his portfolio of all old businesses including Upside Down. That affected Bernard immediately since he had been Stephen’s business partner in the old businesses; he could not continue with Upside Down.

Nobody wanted to bring in new partners. The remaining partners decided that there was no future in continuing the current partnership at Upside Down and agreed to put the business up for sale. However there was a need to keep the business running in good condition in order to get a good price for the business. Given the already reluctant attitude of partners, it became even more of a challenge to get any monetary or time commitments from them.

References Anderson, R. C. & Reeb, D. M. (2003). Founding Family Ownership and Firm Performance — Evidence from S&P 500. Journal of Finance. 58, 1301-1328.

Applegate„ J. (2000, May 15). Succeeding in Small Business. Enterprise/ Salt Lake City, 29 (46), 13.

Bridge, S., O'Neill, K. & Cromie, S. (2003). Understanding Enterprise: Entrepreneurship and Small Business. UK: Palgrav e Macmillan.

Collins, J. C. & Lazier W. C. (1995). Managing the Small to Mid Sized: Concepts and Cases.

USA: Irwin.

Contractors Discuss how to be a More Effective leaders. Contractors’ Business Management Cook, Hsu, & Marqua. 5th. ed.

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Report. 2004 (9), 1-15.

Dyke, L S., Fischer, E M. & Reuber, R., (1992). An Inter-Industry Examination of the Impact of Small Business Management Owner Experience on Firm Performance. Journal of Small Business Management, 30(4), 72-87.

Ivancelich, J. M. & Duening, T. N. (2004). Business and Management: Principles Guidelines.

Atomic Dog Publishing.

Nelson, D. L. & Quick, J. C. (2008). Organizational Behavior: Foundation, Realities and Challenges. Thomson South Western Publishers.

Stegall, D. P., Steinmetz, L. L & Kline, J. B. (1976). Managing the Small Business, Richard P. Irwin Inc. Thruston, P. H (1986). When Partners Fall Out. Harvard Business Review, 64(6), 24-29.

Tischler., L. (2005). Power Couple. Fast Company, 92, 44-51.

Yukl, G. (2006). Leadership in Organizations (6th Edition). Pearson Education, Printed in India.

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“Winter Snowsport Resorts Overview The operating landscape for winter snowsport resorts is changing and operators will need to adjust to these changes to survive and prosper. As competition has increased and annual skier visits flatten, ski resorts have expanded snow making, improved snow grooming, and added high speed, detachable quad chair lifts and other high cost equipment. With these investments in infrastructure, new revenue sources were sought and real estate development became a common practice to generate needed cash flow.

This case study explores the changing demographic shifts that must be addressed in the future by industry participants. The challenge for winter snowsport resorts becomes one of meeting differing needs for differing segments of visitors. One of the most significant challenges the winter snowsport industry faces is how to convince these varied market segments that skiing and snowboarding provide what consumers are looking for in a vacation.

Learning Objectives After reading and analyzing this case study, students should be able to: 1.

2.

Understand the importance of segmenting the tourism market, Understand how marketers use segmentation to meet the differing needs of snow boarders and skiers, and 3.

Evaluate differing segmentation approaches for reaching today’s snowsport participants.

Application This case study can be used in either undergraduate or graduate courses in tourism and resort management, services marketing and hospitality management.

Questions 1.

2.

3.

4.

How can marketers please differing winter snowsports customer segments?

How can marketers reach untapped segments?

Can winter snowsport resorts evolve into year-round playgrounds?

How can winter snowsport resorts be positioned into year-round playgrounds?

Suggested Answers

1.

How can marketers please differing winter snowsports customer segments?

This case study clearly shows that the winter snowsport customer is not one homogeneous group.

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The first step in segmentation would be to identify an acceptable approach, e.g. geographic, demographic, psychographic and/or product-related. Students will have varying answers to which approach to take. Although some may suggest a geographic approach, this does not address the current problem faced by resort operators as both ski and snow board riders come from the same geographic locations. In addition, targeting new geographic areas would be cost prohibitive and limited by the existing airline lift capacity from new markets. Any of the other three approaches to segmentation can be defended.

Demographic segmentation could be used by appealing to snow board riders who are typically a younger demographic than skiers and information about these groups is easy to collect and widely available. By collecting and analyzing this data, distinct segments can be identified. For example, 18-24 year old single males would be looking for different mountain amenities than 2535 year old married couples. The most potential appears to be with the Gen X market and the underserved Asian American and Hispanic markets.

From a psychographic segmentation approach it is interesting to note that snow board riders are interested in all types of extreme sports and risk taking. Runs and related activities that appeal to these thrill seeking tendencies will be attractive to this segment. Product-related segmentation would rely on promoting new and improved equipment and clothing that would differentiate the resort and the clientele enjoying the resort.

Depending on the backgrounds of your students, you will be presented with several different approaches and justifications. We have found it useful to use small groups at the start of discussing this case to get the greatest level of involvement and creativity for this and all of the following questions.

2.

How can marketers reach untapped segments?

The primary untapped segments are Asian American and Hispanics. The first step in reaching these markets would be to identify traditional communication touch points and then to target advertising in media sources that appeals to these markets including newspapers, magazines, radio, television outlets as well as web pages and blogs. Although these would be obvious choices, any strategy would need to be supported by a public relations program and strong social media presence. Celebrity endorsements and special events could also be used to establish a beach head in any of these markets.

3.

Can winter snowsport resorts evolve into year-round playgrounds?

The interests expressed by Gen X’ers and Echo Boomers in all kinds of engaging and thrilling outdoor activities bode well for attracting these segments to participate in a variety of non-snow activities. Downhill biking trails, alpine slides (similar to street lugeing), skate board parks, and sky surfing activities can all be promoted during “off-season” months. One difficulty that will always pose a problem for mountain resorts will be the “shoulder seasons” when there is no snow and the mountains have not been clothed in their summer beauty. Golf, tennis, horseback Cook, Hsu, & Marqua. 5th. ed.

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riding and other traditional activities will also be attractive to the mass markets.

Challenge students to develop a list of ideas for activities that would be appealing to them or their friends. We have found it to be a useful activity to list these ideas on the board and then give students three votes each to rank them. This is a simple and fun involvement exercise as students are asked to come to the board and put one of their votes as a “tick mark” beside each of their top three choices. Every time we used this approach, clear winners emerge.

4.

How can winter snowsport resorts be positioned into year-round playgrounds?

Getting the word out that there is more to the mountains than just the snow in winter is a start.

Hosting a variety of activities from mountain bike races and trail runs to music, art and food festivals will introduce the mountain to potential customers. A constant stream of current and planned activities and events on social media outlets will create a buzz and energy that will attract visitors. Providing fun and entertaining food and beverage outlets and venues will create an environment that keep them coming back and spreading the word about the beauty and fun the mountain has to offer no matter what the season. The idea behind any of these activities, events or amenities is to create the perception and reality of a “year-round playground”.

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TAKING A DIVE Teaching Note Case Overview After years of dreaming and planning, the long awaited dive trip to the Caribbean was finally happening. Roger and Julie headed off with some close friends for a fun-filled week in the sun.

But from the moment they arrived at their highly touted resort destination, Julie was ill and it was obvious that she would not be able to dive. “No problem,” thought Roger; he would just amend their dive package as he had been told would be possible.

However, attempts to make changes turned out to be anything but easy. To make matters worse, their room was burglarized. Resort personnel and the travel agency shunned any responsibility and committed one service blunder after another. The final service mistake occurred when they returned their prepaid rental car and were forced to pay for it again.

As they waited to board their plane for the trip home, Roger and Julie began to ponder the service problems they encountered and whether their contract disputes and burglary losses constituted legally actionable events.

This case is suitable for use in a variety of undergraduate and graduate classes. It can be used either for in-class discussion or as a written assignment. The case can be used effectively in hospitality, tourism and recreation law, management, services, and tourism courses.

Learning Objectives 1. To provide students with an opportunity to evaluate service delivery failures.

2. To develop and evaluate alternatives for service recovery after a service delivery failure.

3. To demonstrate the relationships among tourism service providers in multi-channel distribution system.

4. To introduce students to international dimensions of business relationships.

5. To provide students an opportunity to analyze an agency relationship in a complex situation involving a travel agent, a resort, and travelers or clients.

6. To develop an understanding of the business invitee rule and how it operates in the tourism industry.

7. To provide students an opportunity to analyze a contractual dispute involving a possible modification by an agent.

Discussion Questions

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1. Identify the service breaks that occurred in this case.

From a service provider's perspective, it has been found that, "Most service unreliability is rooted in poorly designed service processes, inattention to detail, and simple carelessness". 1 However, it must be recognized that both tourism service suppliers and customers bring expectations to every service encounter. These expectations are shaped by past experiences, which in Roger's situation would be based on his previously positive experiences in Bonaire.

Employees at both the resort and travel agency must be made aware that mistakes as well as misunderstandings can always occur in service settings so that corrective action can be taken. To take corrective actions, employees must first recognize service breaks.

There are numerous service breaks and apparent misunderstandings in this case, some of which may be legally actionable. Some of the more obvious service breaks are listed below: * Failure of the desk clerk to tell Roger and Julie that the time for orientation had been moved from early morning to the afternoon. * Not accurately telling Roger who had authority to make changes in their dive package arrangements, “passing the buck.” * Not informing guests of vandalism and theft problems. * Resort personnel showing no apparent concern for their guests’ losses. * Resort security deflecting responsibility for the break-ins to the guests and for very slow response time. * Resort personnel speaking in Dutch to prevent Roger from understanding what they were saying. * Misinforming Roger as to when changes could be made in the dive package. * No record of payment by rental car agency and no ability of rental agency to interact with travel agency outside of normal business hours. * Travel agent stating that they do not make refunds, but that they might in this situation. * Travel agent placing Roger and Harrison on hold when they were already demonstrating frustration and dissatisfaction.

Instructors should encourage students to identify additional service breaks based not only on their understanding of the participants’ levels of travel sophistication and expectations, but also their own expectations.

2. What service recovery measures should have been taken?

Research has shown that customers will often give tourism service providers an opportunity to make things right through service recovery efforts. 2 All that is needed on the part of service employees to initiate this service recovery process is a sincere effort to make the guest's situation Cook, Hsu, & Marqua. 5th. ed.

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better. "'Making things right" for most customers simply involves doing a few simple things.

Customers want acknowledgment that the problem exists. They also like to be told why the problem arose in the first place. Next, they want a sincere apology. Finally, customers want to be made whole. 3 Recognizing these key steps, the following list of service recovery measures should have been taken: * Resolution as to who could make a decision about Roger’s request and provide a timely decision. * An apology from appropriate representatives at the resort and the travel agency for the apparent miscommunications. * Notification of guests at the resort to take extra care in safe guarding their rooms as there was a documented vandalism and/or theft problem. * Appeasement from the resort in the form of a reduced charge for services or some token of atonement such as a complimentary dining voucher. * Appeasement from the travel agency in the form of a fee waiver or reduction when booking another trip. * Increased resort security to provide a sense of security for guests, as well as to reduce the probability of theft from guest rooms. * Communication from resort personnel on the status of their “investigations.”

Instructors should encourage students to identify additional service recovery alternatives, especially those that involve little or no cost. With each service recovery alternative, challenge students to discuss how satisfied they would be. Instructors may want to take the opportunity at this point to use role playing to bring the importance of the service recovery process to life.

3. How should Tropical Dive follow-up on service failures encountered by Roger at Ultimate Scuba and the rental car agency?

Timing is important. Tropical Dive should act on information regarding service breaks as soon as it comes to their attention (i.e. when the call was made from Ultimate Scuba to Tropical Dive) rather than reacting only after completion of the trip and a subsequent contact was initiated by dissatisfied customers.

Tropical Dive needs to follow-up with both the resort and the car rental agency, as their reputations depend on the quality of services delivered. All correspondence should provide specifics as to service breaks including dates, times, and individuals involved. Since they deal with these organizations on a regular basis, a request should be made for refunds or adjustments.

These refunds or adjustments should then be passed on to Roger. In addition, Tropical Dive should write to Roger explaining the steps they have taken to keep the same types of problems from happening to other clients. This communication should include an attempt to resell Roger Cook, Hsu, & Marqua. 5th. ed.

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and Harrison on future trips by emphasizing a commitment to quality and satisfaction.

4. What is the agency relationship between Ultimate Scuba and Tropical Dive? If Tropical Dive was Ultimate Scuba’s agent, would Tropical Dive be liable for Ultimate Scubas’ torts?

The agency relationship in a case involving a travel agent, third party suppliers, and clienttravelers is complicated. The general principles of agency should be applied to the facts of this case. An agency is a consensual relationship in which one person (the agent) is authorized to act on behalf of another (the principal). When an agency exists, and the agent has dealings with third parties, the principal is bound as long as the agent had actual or apparent authority to do what he/she did. Apparent authority arises from something that the principal did, which leads the third party to believe that the agent had authority to act on behalf of the principal in the matter at hand.

The test to determine whether an agency has been created involves analysis of the following factors: the extent of control the principal can exercise over the agent, whether the person is employed in a distinct business separate from that of the principal, whether the work is a type usually done by a specialist without supervision or under the direction of the principal, skill required to perform, whether the principal supplies the necessary materials and tools, length of employment, method of payment, whether the work is part of the normal business of the principal, and whether the parties believe they are creating a “master-servant” relationship. In the master-servant relationship (what we generally call the agency), the principal has the right to control the agent. The master servant relationship requires the utmost in loyalty and obedience by the servant to the master. Where the purported agent is not under tight controls, can choose the manner in which the work is completed, and may work for competitors of the principal, the relationship is one of independent contractor-principal, in which the independent contractor cannot bind the principal.

In this case, students should be encouraged to work through the agency factors to determine the exact nature of the agency relationship. They should conclude that Tropical Dive, as a travel agent, is the agent of Roger, Julie, Harrison and Sheena. 4 They should recognize the inherent conflict in allowing a dual agency to exist if Tropical Dive were also to be found to be Ultimate Scuba’s agent. 5 To whom would Tropical Dive owe the duty of loyalty? Can loyalty be divided?

Most courts find that travel agents are not agents to third party suppliers like Ultimate Scuba (or the Holiday Inn), but are actually brokers. 6 Students should find this analysis challenging but fun.

Tropical Dive does not appear to be Ultimate Scuba’s agent. But even if it were found to be so, agents are never liable for crimes or torts that are committed by their principal.

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5. Did Ultimate Scuba have any legal responsibility to notify incoming guests that the resort had experienced problems with break-in and vandalism? Does Ultimate Scuba have any legal responsibility to pay for the losses suffered by Roger, Julie, Harrison, and Sheena as a result of the theft?

Students should realize that this is a dispute involving foreign laws, because it took place outside of the territory of the United States. As a result, United States law will not apply.

Sovereigns, like Bonaire, have the right to have their own laws apply to activities that take place within their territory. Thus, Ultimate Scuba will be liable for not warning Roger and Julie of past incidents of theft only if Bonaire law dictates. Students can begin to view the world from a different perspective when they realize that other countries have different legal systems and different laws. Students should also begin to distinguish between international law, such as the Warsaw Convention, and foreign law, like the law of Bonaire. Tourism can give rise to a multitude of thorny legal problems, involving international law, foreign law and domestic law.

Although a thorough treatment of this area of law is outside the scope of this case, students should be encouraged to consider the ramifications. First, assuming foreign law (here the law of Bonaire) allows recovery on these facts, where would Roger and Julie sue? Second, given the likely necessity of having to sue in Bonaire, what are the disadvantages for Roger and Julie?

Assuming that this was a dispute involving domestic law, students should consider what options Roger, Julie, Harrison and Sheena have to sue Ultimate Scuba for theft damages they suffered as a result of Ultimate Scuba negligence in not warning them of past criminal conduct at the resort under United States law. This case presents an excellent opportunity to examine how the law in this area has evolved. In the past, hotelkeepers were absolutely liable for any loss of guest property that occurred on hotel premises. 7 Inns of old were not always safe, and more often than not, the lack of security was due to innkeeper theft. Today, on clothes and other items that would not be suitable for storage in the inn’s safe, the majority view is that innkeepers are liable if their negligence caused the loss. 8 In determining whether Ultimate Scuba would be liable for Roger, Julie, Harrison and Sheena’s losses, students should consider what it is that the hotel did that would be considered negligence at law. Since it is a case of omission, establishing that Ultimate Scuba was negligent for failing to protect its business invitees would appear to be the best option. 9 The business invitee rule requires land owners to protect their patrons—all individuals invited onto the land for business purposes—from dangers of which the land owner knows or should know, and which are not likely to be discovered by the invitees. Students should be asked to analyze the case to determine whether Ultimate Scuba was negligent for failing to protect Roger and Julie.

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First, was there a danger? Students should recognize that break-ins and vandalism constitute danger on the land, because the vandal is present on the premises. Second, did Ultimate Scuba know of the danger, and if not, should they have known? This is an excellent opportunity for students to examine two different legal standards for determining state of mind. In this case, Roger and Julie will argue that Ultimate Scuba actually did know of the past incidents. Other resort guests had experienced similar problems, and many said they had heard of the problems through the “grapevine.” Students should recognize that while this type of evidence may be persuasive, it will not prove that Ultimate Scuba knew of the danger. The other guests would have had to have reported the prior incidents for Ultimate Scuba to actually know of them.

Students should consider other facts that help establish Ultimate Scuba state of mind. Also circumstantial would be the fact that the management seemed unconcerned, as if it happens so often that they no longer become alarmed. Another fact would be the guest welcome manual which stated that “it was the responsibility of guests to completely secure all of their possessions before leaving their rooms.” Roger and Julie would argue that Ultimate Scuba was warning guests because they “knew” of the danger. 10 In any event, Roger and Julie can argue that even if Ultimate Scuba did not actually know of past incidents, they should have known because everyone else did. 11 Ask students how they would assess these facts if they were jurors in this case. Do they believe that Ultimate Scuba knew? Do they believe that Ultimate Scuba should have known? Or do they think that the evidence is too weak to decide?

Finally, can Roger and Julie establish that they, as business invitees, would be unlikely to discover the danger for themselves? Students should be encouraged to argue both ways. On one hand, it is a fairly expensive resort, so perhaps Roger and Julie would feel safe staying there. On the other hand, Roger and Julie are seasoned travelers abroad. Perhaps they should anticipate that this type of incident happens often to travelers on foreign shores. Emphasize that this case could go either way on the business invitee argument.

Ultimate Scuba would argue that they met their duty to protect guests by inserting the language about securing personal items in the welcome manual. Students should consider whether a non-conspicuous, non-specific warning of this type would suffice to make guests aware of the danger of break-ins and vandalism. Draw an analogy to Walmart putting out the “wet floor” sign. Whereas the Walmart sign would protect patrons from the danger of slipping on a wet floor, it is unlikely that Ultimate Scuba warning would protect guests.

Failing to convince the trier of fact that it met its duty to Roger, Julie, Harrison and Sheena, Ultimate Scuba would try to set up the defenses of contributory negligence and/or assumption of Cook, Hsu, & Marqua. 5th. ed.

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risk. Students should analyze the defenses from both perspectives.

6. Since Roger was dealing with a new travel agency in purchasing this vacation package, how could he have protected himself and the rest of his party?

Roger should have asked some basic questions in dealing with a new travel agency. At a minimum, these questions should include the following: * What are the agencies and the agents qualifications? Ask about industry affiliations as well as credentials. Travel agents will have credentials certifying their knowledge by outside accrediting agencies. * What are the agencies and the agents relationships with specific industry members?

Travel agency may represent many different industry providers or only a few. This may result in extra benefits as a preferred agency or the agency may just push a certain set of providers. * What will the agency charge and what is received for any fees? Find out the charges before booking and what is to be received for these charges. If this agent has booked numerous trips during the past several months to Ultimate Scuba, service fees should be worth the money and in order. * What are the agency and agents contact information? Agents or other representatives from the agency should be available to handle emergencies or solve problems. Agencies and agents that are worth using will always be able to help no matter where or when they are needed by their clients (Loftus, 2003: 18).

As a preventative measure Roger and Harrison could have purchased travel insurance policies with their travel packages. Travel insurance policies can cover both trip-cancellations and trip-interruptions. In this case, since Julie had a medical problem (medical documentation would be needed), some reimbursement may have been possible. However, as with any legal document, purchasers must always read the fine print and note the exclusions.

7. Did Tropical Dive have any legal responsibility to notify clients of a theft problem? Does Tropical Dive have any legal responsibility to pay for the losses suffered by Roger, Julie, Harrison, and Sheena as a result of the theft?

Roger, Julie, Harrison and Sheena have an interest in finding a theory of liability for Tropical Dive, because they could then use domestic law and sue Tropical Dive in the United States.

However, travel agents are never liable for the negligence of their third party suppliers. So, unless Tropical Dive was negligent in failing to foresee criminal conduct at the resort, or in failing to investigate Ultimate Scuba before recommending the resort to Roger, Julie, Harrison and Sheena where investigation would have revealed the prior incidents of criminal conduct, or Cook, Hsu, & Marqua. 5th. ed.

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in selecting Ultimate Scuba for this trip, there is no basis for holding the travel agent liable. An excellent case to share with students to develop these theories is Wilson v. American Trans Air, Inc. 12 \ 8. Is there any liability for breach of contract on the part of either Ultimate Scuba or Tropical Dive for not allowing Roger and Julie to change their dive package?

Roger and Julie entered into a contract with Tropical Dive for a twelve dive package, but later, due to Julie’s cold, wanted to change to a less expensive six dive package. Students should recognize that a contract is a contract unless there is a separate oral agreement made that is not barred by the parole evidence rule, or the agreement is subsequently modified.

Both Roger and Harrison recall that Heidi at Tropical Dive told them that they could change packages at a later date if they wanted to. More facts are needed to determine whether oral statements to this effect by Heidi would be part of the contract, or whether they would be barred by the parole evidence rule. Nevertheless, unless barred, Tropical Dive would be bound by oral statements made by their agent, Heidi, at the time the contract was made. If the statements were made later, there is an argument that can be made that the original agreement was modified.

Students will also note that Ultimate Scuba told Roger that he could make changes anytime prior to his first boat dive. It looks as though Ultimate Scuba read the contract about making changes before beginning the package to mean before making the first dive. In any event, Roger could argue that Tropical Dive was Ultimate Scuba’s agent, and that therefore, Ultimate Scuba as the principal had full authority to modify the contract terms and did so by telling Roger he could make changes any time before the first dive.

General Discussion The tourism industry is one of close customer contact, and every interaction between a service employee and a customer becomes a service encounter. 13 These service encounters are frequently called “moments of truth” because it is through these encounters that customers derive their impressions about service quality. Service organizations depend on everyone from the front-line to the boardroom to deliver customer satisfaction. Guests will perceive, judge and value their experiences based on the culmination of dozens, even hundreds, of one-on-one service encounters over the course of a visit.

Service Mistakes Fortunately, most consumers are willing to forgive “service mistakes” when appropriate Cook, Hsu, & Marqua. 5th. ed.

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responses to them occur. What constitutes a service mistake that can result in a guest being dissatisfied? In simple terms, a mistake occurs when the customer’s expectations are not met— when a customer’s “service script” 14 is broken. When customers experience an unexpected change from their expected script, it is called a “break from the script.”

When a tourism encounter is less than satisfactory, the tourism employee can right the situation and “turn the guest’s frown upside down.” This reversal of a service problem is called service recovery. 15 However, if a mistake is made and the employee does not make a sincere effort to better the guest’s situation, highly memorable dissatisfaction occurs.

So the bad news is that mistakes are inevitable in tourism businesses. The good news is that, with proper handling, a negative break from the guest’s script can be reversed and turned into a satisfying, memorable service encounter. Keep in mind that satisfied guests represent potential future flows of revenues and profits, while dissatisfied guests represent future losses because they fail to return and they pass negative word-of-mouth comments to others.

“Making things right” for most customers usually involves doing a few simple things.

Customers want acknowledgment that a problem exists. They also like to be told why the problem arose in the first place. Next, they want a sincere apology. Finally, customers want to be made “whole” again. In other words, they want some form of compensation that will lessen the cost of the problem to them. They need to be compensated for any bother or annoyance they perceived or experienced because of the problem.

The responses provided by each of the service suppliers in this case indicate problems in their service recovery processes. First, the resort failed to provide a timely and accurate response to Roger’s requests. They indicated that a remedy was possible, when in fact, that was not the case. Resort personnel attempt to obfuscate the customer rather than deal with problems.

Second, the car rental agency assumed that the “problem” could be attributed to Roger and not the travel agency that made the booking. Although an offer was made to call the travel agency, the rental representative made no real attempt to solve the problem. In fact, the agent dealt with the customers as if he would only be dealing with them this one time. Finally, the travel agency appeared to “wash its hands” of any responsibility for service gaps or failures that were created by their recommended service suppliers. This is troubling, as they are agents for these service suppliers and are being compensated for booking services with them.

None of the suppliers asked Roger what he thought would be appropriate remedies. Most customers have some type of remedy in mind when a service failure occurs. They may simply want recognition that a mistake has occurred and then an apology. Or, they may want some type Cook, Hsu, & Marqua. 5th. ed.

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of restitution. Involving the customer in the solution can be a very effective component of a service recovery strategy. Customer comments and complaints should be solicited so that problems can be identified and corrected.

Epilogue Continuing the conversation after reviewing the file, Heidi confirmed that the car had been included in their package deal.

Heidi: How much did you have to pay the car rental agency?”

Roger: “$249, on my credit card.”

Heidi: “OK, we’ll get that refunded, though we’ll have to do it on Harrison’s credit card as he is the one who paid us for the trip.”

Roger: “OK, we’ll work that out between us, but what about the diving? We could not do the 12 dive package and it kind of tarnished the trip for us, by not being able to get that resolved even though we both tried many times to comply with what we’d been told.”

Heidi: “Well, we just don’t make refunds, but it seems like this might be an exception. Let me see, if I can get management to approve it, how much would that be? Hold on, I’ll be right back.” After a few minutes: “Well it would save you $102 per person.”

Roger: “Yes, that’s about what Lucinda figured at Ultimate Scuba, but she said she couldn’t make the change. It’s not much, but thank you. It sure would have been nice if we could have gotten this resolved at the resort the day we arrived. But thanks again, at least we don’t have to pay for something we didn’t get.”

Heidi: “Oh, wait. I can’t do that much. I made a mistake, it’s only $64.”

Roger: “Really?”

Heidi: “Yes, $64 is the best I can do.”

After Heidi hung up, Harrison and Roger stayed on the line.

Harrison: “Roger, are you ok with that?”

Roger: “Well, it’s less than I expected and less than normal for the difference between 6 and 12 boat dive packages, but I guess part of a loaf is better than no loaf at all.

Disclaimer This teaching note was prepared by Suzanne L. Wilhelm, Reed McKnight and Roy A. Cook of Fort Lewis College, and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of the situation. The names of the organizations, the individuals, and locations have been disguised to preserve their desire for anonymity.

Endnotes Cook, Hsu, & Marqua. 5th. ed.

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Cook, R. A., Yale. Laura J. and Marqua, Joseph J. Tourism: The Business of Travel. 3rd ed., Upper Saddle River, NJ: Prentice Hall.

2 Zeithaml, Valaue, Parasuraman, A. and Berry, Leonard. (1990). Delivery Quality Service. New York: Free Press.

3 Cook, et al., 2006:94.

4 Simpson v.Compagnie Nationale Air France, 248 N.E. 2d 117 (Ill. 1969).

5 Rosen v. DePorter-Butterworth Tours, Inc., 379 N.E. 2d 407 (Ill.1978).

6 Simpson, supra, 7 For an excellent discussion of the evolution of this area of law see generally Hotel, Restaurant and Travel Law, Cournoyer, Marshall, and Morris (Delmar Learning).

8 . Zaldin v. Concord Hotel, 421 N.Y.S. 2d 858 (1979).

9 On the business invitee rule, see Love v. Hardee’s Food Systems, Inc., 16 S.W. 3d 739 (E.D. Mo. 2000).

10 . Note that a non-specific, non conspicuous warning to secure personal items would not.

11 Simms v. Prime Hospitality Corp., 700 So.2d 167 (Fl. 1997). In the Simms case, the hotel had been the victim of many crimes, but the duty to protect patrons from criminal conduct may be required by even just one prior incident.

12 9. 874 F.2d 386 (7th Cir., 1989).

13 Solomon, Michael R., Surprenant, Carol, Czepiel, John A. & Gutman, Evelyn G. (1985). A Role Theory Perspective on Dyadic Interactions: The Service Encounter. Journal of Marketing, 49, 99-111.

14 . Solomon, Surprenant, Czepiel & Gutman (1985). 49, 99-111.

1

15

Hart, Christopher, W.L., Heskett, James L. & Sasser, W. Earl, (1990). The profitable Art of Service Recovery.

Harvard Business Review, 68, 148-156.

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Chapter Eleven Economic and Political Impacts of Tourism i.

Quote: Yogi Berra

ii.

Chapter Opener: Chamber Director Headache #1456

I.

Introduction A. Tourism is one of the top five exports for over ¾ of world’s countries.

B. Several factors interact to make international travel attractive.

1. Increased disposable income 2. Increase in leisure time 3. Destination attractiveness 4. Local exchange rates C. Estimates of tourism activity are from the estimate of number of arrivals times the estimate of average expenditure per visitor D. Estimates can vary widely depending on the method used to approximate number of arrivals and average expenditure E. Definitions of who is identified as a tourist also differ 1. Need overnight stay (or not) 2. Number of miles away from home (as little as 50 to 200 is used)

II.

Looking to Tourism for Economic Growth and Vitality A. Development of tourism offers a country a means of increasing economic well-being B. Economics: The social science that seeks to understand the choices people make in using their scarce resources to meet their wants 1. For tourists, resources are money, time, and physical energy 2. For tourism suppliers, resources are human and financial 3. For communities and countries, resources are natural and human 4. For governments, resources are primarily financial (tax revenues); to develop natural and human resources and to pay for government services C. Concept of comparative advantage 1. Tourism has comparative advantage over other industries if it yields a better return on the region’s human and natural resource inputs 2. Tourism is likely to have a comparative advantage for a region if: a. It has features that are highly attractive to visitors b. It is easily accessible to potential tourists c. It has necessary infrastructure and abundant labor force 3. Tourism may have comparative advantage if the region has no other industry alternatives D. Tourism and foreign exchange rates 1. Relative exchange rate of currency is one of the most important factors in determining the level of international tourism to (and from) a country a. Strong dollar in mid-1980s resulted in record number of Americans traveling

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abroad b. Weak dollar in recent years made U.S. bargain for Europeans and Canadians 2. Exchange rates can and have fluctuated widely within a five to ten year period, drastically changing the international appeal of a country as a destination 3. The spread of the Euro has lessened effect of foreign exchange in Europe (Teaching Hint. The following Mini-Lecture on currency exchange will highlight the important of exchange rates on international tourism.)

Mini-Lecture Currency Exchange Mini-Lecture The major currencies of the world are traded in the international currency market, which allows for easier investment and trading among countries. Obviously, the ability to purchase currency of another nation is mandatory for high levels of international tourism.

Exchange rates vary daily. The Wall Street Journal (and the Internet) is a good source of exchange rates. An eye-opening exercise for students is to research ten years of rate fluctuations. Then, assign each student (or team) a major currency to analyze. They then need to determine which country or countries use the currency and provide a table of the annual fluctuations the currency has experienced against the U.S. dollar (or other major currency) over the past decade.

To increase the educational value of the exercise you might also have them calculate and graph the change in price of a hypothetical tour or a hotel room in some country, e.g., Great Britain. Be sure to make the point that tour operators often must bear the risk of currency fluctuations because they purchase or agree to pay a certain price for certain supplier services at a certain date.

For example, suppose a packaged motorcoach tour of Great Britain is priced at 650 pounds on January 1, 200X, and the tour operator prints brochures to be distributed in the U.S. with a guaranteed price for the tour of $975 (assuming the pound will be valued at $1.50). If the pound decreases in value by July 200X to $1.40, the tour wholesaler would see additional profits (given that he is paid in stronger dollars but only has to pay his suppliers in the weakened pound). The opposite may also happen: The dollar could weaken against the pound; e.g., $1.75. Then the tour operator would be paid in weak dollars but have to pay in stronger pounds.

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example, through the practice of hedging or forward currency buying (among other techniques).

You are likely to need to demonstrate the algebra of currency rates to your students. The use of ratios and cross multiplication should be understandable to most. An example you could use would be the hypothetical example of Canadian dollars to U.S. dollars given below. (It is a nice touch to find out the actual exchange rates for the day you lecture on Chapter 11 and use those numbers rather than the contrived ones used below.)

“If the Euro is equal to $1.60 U.S., how many Euros would a U.S. tourist receive for a U.S. dollar?”

Euro 1.60 = Euro 1 U.S. .1 X U.S.

1.6 X = 1 or 1/1.6

X = .625

So a U.S. traveler to Germany in our hypothetical example would receive .625 Euros for his U.S. dollar. After this calculation is made you might have students calculate the cost in U.S. dollars of various tourist services, for example, a restaurant bill of €35 or a hotel room night price of €115.

III.

The Multiplier Concept A. Multiplier Concept: One of the most common measures of the economic impact of tourism 1. Money spent by tourists in a region is “added” to its economy, is new money 2. Money is then respent within the region, it multiplies B. Export perspective: International tourism is considered an export for the destination country 2. Export: A good or service produced in one country that is purchased by a resident of another country 3. Exports add money to one economy and deduct it from the other C. Regional perspective: Domestic tourists bring new money to other region of country D. Multiplier aspect 1. Tourist dollars are spent to purchase some tourist service; e.g., meal 2. Dollars to pay for service are then respent by tourism providers to pay for local goods and services 3. Dollars are spent and respent until 100 percent of dollars are leaked from the local economy a. Leakage occurs primarily when dollars are spent on exports to the area b. The faster the leakage, the lower the multiplier effect E. Economists derive multipliers for a number of variables 1. Income 2. Employment 3. Output/Sales/Transactions

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4. Government revenue (taxes) 5. Imports F. Estimate direct, indirect, and induced effects 1. Direct effects – from first round of tourist spending 2. Indirect effects – second-round from increase in purchases of tourism suppliers 3. Induced effects – other increases in economic activity G. Tracking the impact of tourism expenditures 1. High end: 2.5 Canadian estimate ($2.50 total economic effect for each $1 tourist spends) 2. Low end: .39 Western Samoan estimate (due to high level of imports to support the tourism industry) 3. Tracking economic impact takes a massive amount of data.

IV.

Other Economic Impacts A. Positive economic impacts 1. Tourism provides a stable source of income to a region due to its historic ability to weather recessions well 2. Provides diversity to an economy and offers a variety of employment a. Entry-level employment opportunities b. Skilled craftsperson, employment; e.g., chefs, artists c. Professional level career opportunities 3. Provide economic incentive to improve infrastructure that can be used by locals 4. Many opportunities for small business ownership/entrepreneurship B. Potential problems in tourism-based economies 1. Area can become overdependent on tourism so that major decline in tourism has devastating effect (crisis) on entire economy; e.g., islands and hurricanes 2. Five types of crises a. International war or conflict b. Acts of terrorism c. Major criminal act or crime wave d. Natural disaster that damages tourism resources e. Epidemic of contagious disease 3. September 11, 2001 attacks in the U.S. had worldwide impact on tourism demand 4. Problem of too much of a good thing, attracting too many visitors a. Increases prices for goods, services, land and housing b. Strains natural resources, utilities, and government services C. Tourism in the economic balance 1. Use of cost/benefit analysis to determine the total economic impact of tourism a. Dollar values assigned to benefits and costs b. If dollar value of benefits is higher than costs, positive total impact c. If dollar value of costs is higher, negative total impact 2. Attempts are now made to quantify difficult to value pluses and minuses; e.g., increased entertainment options for locals and increased crowding and traffic

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V.

Tourism and Politics A. Politics: How decisions are made; “Politics is about power, who gets what, where, how, and why.”

1. Politics about tourism is usually about how decisions concerning use of scarce resources are made 2. Development of tourism often leads to political debates and tugs of war among constituent groups B. The role of government in tourism 1. Governments (local through national) often play a role in tourism development and promotion a. Want to encourage the job creation from tourism b. Want the multiplier effect those jobs create c. Want the additional tax revenues that tourists fund (shift tax burden from locals to tourists) 2. Government support of tourism comes in a variety of forms a. Collection of tourism information that is helpful to tourism suppliers b. Regulation of tourism businesses c. Promotion of tourism, especially of the area as a destination d. Source of funding; of necessary infrastructure, government-backed loans e. Development of tourism policy and planning f. Own and manage important tourism resources/businesses; e.g., U.S. National Park System g. Seen as a move to privatization of government-owned tourism enterprises C. Tourism promotion agencies 1. Governments often have an agency that promotes tourism 2. National tourism organization/office (NTO) 3. State/provincial agency 4. Two primary functions of these organizations a. Collect visitor and industry information/statistics, often at welcome centers run by the government b. Promote the entire destination 5. Tourism promotion agencies often in charge of projecting a distinctive image; the detailed impression a segment has of the destination 6. Linked to destination image is destination position a. Image of one destination relative to competitors b. Goal is to reinforce the positive, correct the negative, or create an entirely new ideal position

VI.

Public/Private Organizations A. Organizations whose membership includes both public and private entities whose funding is generated from both public and private sources 1. Often public partner is instrumental in funding infrastructure, private partners fund superstructure 2. Jointly they promote the destination area using funds generated from private

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contributions and tourism-related taxes B. Chambers of Commerce and Convention and Visitors Bureaus (C&VB) 1. Tourism to smaller towns or cities is often promoted by Chamber of Commerce 2. Large cities often have separate tourism promotion agency (C&VB) 3. Goal of these agencies is to educate prospective travelers about the area C. Convention centers 1. Can be public, private, or public/private joint ventures; funded by taxes, private business fees and convention center services sold to meeting attendees 2. Building or expanding city convention center is increasingly popular form of tourism development 3. Goal is to attract and serve the “meetings” market; conventions and trade shows 4. Designed around special needs of meetings/shows, especially large versions 5. Cities engaging in a “space race” to increase size and capacity of convention facilities 6. Prize is the tens of millions of tourism dollars that centers can attract for their city 7. Most centers lose money but generate millions for tourism-related private businesses and in tax revenues for cities and states VII.

Tourism Planning A. Planning: Predicting the future, setting objectives, and outlining and implementing actions needed to attain objectives B. Planning for such a diverse industry is difficult C. Decisions that need to be made in tourism planning 1. Timing of development 2. Size of infrastructure and superstructure 3. Targeting of promotional efforts 4. Enhancement and preservation of resources, natural and man-made D. Government usually must take the responsibility for tourism planning, often conducting the necessary research as input to planning E. Goal of planning sometimes is to spread tourism development throughout a region, to encourage travelers visiting the primary tourism area to venture to more remote areas F. Planning is constant process that needs continuing research and then modification of plans and objectives to maintain and enhance tourism resources

VIII.

Political “Tugs of War” A. Tourism generates large number of constituent groups who all want their say in how decisions are made and resources are used B. Each group has its own set of priorities, especially about spending of tax dollars and what factors enhance quality of life for area citizens 1. Tourism business owners: Want increase in number of tourists to area 2. Employees: Want job security and fair wages 3. Non-tourism business owners, employees: Want growth of their industries 4. Government officials: Want strong local economy and reelection 5. Taxpayers: Want variety of government services and bearable taxes

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6. Local residents: Want clean, safe community with high quality of life 7. Tourists: Want enjoyable, safe places to visit with a full range of services C. Difficult to maximize all constituents’ desires D. International political tugs of war also affect tourism; e.g., terrorist attacks (Teaching Hint. An in-class debate could be waged by assigning the differing constituent roles to student groups and having them debate a proposal to have the town fund a conference center, partially funded by income and property tax revenues. How much of the costs of building and operating such a center should be supported by taxes on tourism services, e. g. lodging taxes, restaurant taxes, rental car taxes, etc.?)

(To some degree, the recent controversies over taxpayer funding of major sports stadiums are akin to taxpayer-funded tourism development. Student experiences and opinions about the stadium issue are likely to vary widely. Students or teams could research one of the recent attempts by cities to gain taxpayer funding of a new stadium.)

IX.

Summary You Decide

Major Topic: Conflicting letters to the editor Suggestions for In-class Discussion: This You Decide already features a debate! Students should be able to list the impacts implied in the two letters to the editor and to deduce the likely political tugs of war that are probably occurring in the fictitious town.

Students can also be asked to mock-up a cost-benefit analysis based on the statements made by the two letter writers. There is likely to be disagreement among students on whether the overall impact of tourism to the town is positive or negative (frequently depending on a student’s personal experiences living in a resort area).

This You Decide goes well with the reading “Resorts Go Up...And Down” and it may be worth using this You Decide again after Chapter 13 has been covered.

Discussion Questions 1. In what ways can tourism benefit the economy of an area?

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skilled to professional opportunities. The facilities developed to attract and serve visitors can also be enjoyed by residents. Tourism provides entrepreneurial possibilities for the start up of small business ownership/entrepreneurship.

2. Why are tourism receipts from international visitors considered exports?

When international travelers visit another country they spend the money they earned in their homeland on goods and services produced in the visited land. In this way, the homeland country “loses” purchasing power while the visited nation gains it.

3. How does the multiplier concept work? Why do island countries have small tourism multipliers?

Tourists purchase some tourism-related service or good. The money spent is then used by the tourism service supplier to pay for labor, purchases, taxes, etc. These payments are then used in turn to make additional purchases. In this way, the money “multiplies” within the economy. However, when the money is spent on imports the funds leak out of the economy and eventually the effect ends when all of the purchasing power has leaked out, is no longer being re-spent within the local area.

Island countries tend to have low multipliers because they have to import such a high percentage of the goods needed to service tourists, often including basic foods and most construction materials. Therefore the level of leakage is high and fast.

4. What are some of the negative effects that can come from tourism development?

Areas can become too dependent on tourism for their economic well-being. If an economy is not diversified, any major effect on tourism will have a massive effect on the economic wellbeing of the area’s residents. For example, Hawaii and many island countries are disproportionately dependent on tourism’s revenues for their survival. In addition, tourism can generate too many visitors and new residents so that the resources of an area are strained to the breaking point and the quality of tourism services and quality of life declines.

5. What are the various roles that governments can play in supporting the tourism industry?

Government support of tourism comes in a variety of forms:      

Collection of tourism information that is helpful to tourism suppliers Regulation of tourism businesses Promotion of tourism, especially of the area as a destination Source of funding; of necessary infrastructure, government-backed loans Development of tourism policy and planning Ownership and management of important tourism resources/businesses, e.g., U.S. National Park System

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6. How do convention centers add to the economic activity of an area? How can they be funded and managed?

Convention centers attract large groups of visitors who spend money on visitor services while they attend meetings, conventions, and trade shows. Area businesses who sell these services receive revenues and the government (local, state, and national) receives tax revenues related to these expenditures.

Convention centers can be funded and managed as entirely public entities, as a form of public/private joint venture, or as entirely private enterprises. Funds can be generated in the following ways; taxes, membership fees, and sale of center services to meeting attendees.

7. What steps are needed to develop a tourism plan?

A tourism plan starts by predicting the future (based on research), determining appropriate tourism-related objectives, developing plans of action to meet these objectives, and then implementing the actions. Monitoring of tourism needs to follow so that plans can be modified and additional objectives and actions made.

8. Why can political tugs of war arise over decisions concerning tourism development?

Different constituent groups will have differing opinions about the benefits and costs of tourism and who should bear the costs of tourism development and promotion. All constituent groups have different priorities concerning the use of taxes and the keys to quality of life. It is impossible to satisfy all groups with the same policy so trade-offs need to be made.

Short Answer Questions 1. Why is the U. S. growing in popularity as a destination for international travelers?

2. How do researchers arrive at estimates of tourism activity?

3. Discuss tourism’s comparative advantages compared to manufacturing.

4. Why is tourism considered an export industry?

5. Describe the types of events that can quickly and severely diminish tourism activities.

6. Why do governments devote scarce resources to fund the promotion and development of tourism?

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7. Why do cities continue to engage in a “space race” by building larger and larger convention facilities?

8. What steps must be taken to build a comprehensive tourism plan?

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Chapter Twelve Environmental and Social/Cultural Impacts of Tourism i.

Quote: Edward Manning/T. David Dougherty

ii. Chapter Opener: Reflecting on the Future II.

Introduction A. Economic impacts are not the only important impacts tourism can have B. Nature, peoples, and cultures also affected

II.

Tourism and the Environment A. Tourism can be used to help preserve the environment 4. Through management, education and appreciation 5. To help finance preservation (revenues from entrance fees, etc.)

6. Creation of national parks B. Defining carrying capacity 7. Physical capacity: The limit on the number of users that can be accommodated in a region 8. Environmental capacity: The limit on the number of users that can be accommodated before visitors perceive a decline in desirability

(Teaching Hint. To illustrate the subjectivity of this type of carrying capacity, ask students to define what the limit is to them for a variety of tourism facilities; e.g., ski area, beach, theme park. For this exercise, we have found it helpful to pick one or two facilities that fit with the learning objective of your course and then have students write down their answers. Give the class about three minutes to jot down their thoughts and then have them share their answers with those around them. What for reactions and ask those students who have widely varying opinions to share their responses and explanations.)

9. Ecological capacity: Maximum level of users that an area can accommodate before ecological damage is incurred a. Affected by type of use; e.g., hiking vs. four-wheel drive treks b. Also depends on type of environment; i.e., how inherently fragile C. Determine carrying capacities 1. Number of visitors 2. Amount or type of use by average visitor 3. Quality of resource management and facility development/design 4. Number of area residents and their quality-of-life needs 5. Number of other users; e.g., industrial users, agricultural users D. Carrying capacity changes when any one or more of above variables changes III.

Environmental Impacts of Tourism

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A. Tourism development requires a foundation of infrastructure; i.e., roads, ports and airports, utilities B. Also requires development of superstructure: Those facilities directly associated with serving visitors' needs; e.g., welcome centers, hotels, restaurants C. These structures impact the environment more or less depending on their design D. Pollution and other damage can develop with increases in visitors 1. Land erosion 2. Air pollution 3. Noise pollution 4. Decimation of flora and fauna and heritage sites (Teaching Hint. Encourage students to provide examples of each in areas/attractions they know. With large class sections you will need to use small groups.)

E. Efforts are being taken to reduce impacts 1. Egypt excavating more pyramids 2. New Orleans stopping tour buses entry into the French Quarter 3. Zion National Park ban on almost all cars IV.

Social and Cultural Impacts of Tourism A. Society is a community, nation, or broad grouping of people who have common traditions, institutions, activities, and interests B. Culture is the practices of a society; its customary beliefs, social roles, material objects that are passed down from generation to generation C. Host community concept: The community a tourist visits; that shares its resources with visitors 10. Resource 1: The local residents who serve and interact with guests 11. Resource 2: Community's economic system 12. Resource 3: Community's infrastructure and government services 13. Resource 4: Natural resource of the community and its outlying area D. Social and cultural benefits of tourism 1. Learn about each other (visitors and host community members) 2. Sharing of tastes and different ways of thinking 3. Tourism can generate "critical mass" of interest to support native arts 4. Improved standard of living, especially for women and young people 5. Preservation of area's natural and historical sites E. Using culture to attract tourists

(Teaching Hint. To show the commonness of cross-cultural appreciation in tourism services, ask students to list all of the restaurants they remember dining at within the past three months.

Then have them classify each by ethnicity/nationality of dishes served. Tally the frequency of each ethnic style to determine the class's "favorite food cultures.")

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14. Three forms of culture that attract tourists a. Material goods; e.g., distinctive arts and crafts b. Daily life activities; e.g., food, language, ways of living c. Special expressions of culture; e.g., history, architecture, and special traditions 15. Infinite number of destinations and attractions is based on culture (Teaching Hint. If the following mini-lecture fits your class format, please feel free to use it.)

Native American Graves Protection and Repatriation Act, 1990 Many heritage attractions featured exhibits of Native American human remains and other burial artifacts. Skeletons and objects found at burial sites were considered to be of scientific and historical interest and, therefore, were given their place in historical, educational, and scientific institutions. Although Native Americans had opposed this practice for hundreds of years, it was not until the 1970s and 1980s that their opposition was taken seriously. In 1990, Congress passed the Native American Graves Protection and Repatriation Act (several states had enacted similar laws somewhat earlier).

A great deal of controversy surrounded the law when it was proposed. Curators and scientists from museums and other research institutions argued that Indian remains hold incalculable scientific and educational value and, therefore, should be available for study and education. Tribes, on the other hand, asserted that their dead should be afforded the same protection against desecration that was given to non-natives within American culture and society.

The Act reversed a previous act, the Antiquities Act of 1906, which defended Native American dead (and accompanying objects) buried on federal lands as "archeological resources" and "federal property." The Antiquities Act had allowed scientists to apply for government permits to dig up Indian dead "for the permanent preservation in public museums."

The 1990 Act makes it a crime to disturb graves on federal and tribal lands and to sell Native American remains and associated objects. The act also required any institution that received federal funds to conduct, within five years of the law's enact ion, an inventory of its collection of human remains and, upon request of the appropriate tribe, to return for reburial any remains and associated burial artifacts linked to that tribe by a "preponderance of evidence." Scientists are still allowed to conduct research using Indian remains when they are given express permission by the associated tribe. Typically, upon conclusion of any research, remains are returned to the tribe for reburial. Tribes may also "relinquish" remains and objects if they see fit.

An excellent source of background information on this topic can be found in an Cook, Hsu, & Marqua. 5th. ed.

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article by Jack F. Trope and Walter R. Echo-Hawk, "The Native American Graves Protection and Repatriation Act: Background and Legislative History," published in the Spring 1992 issue (V. 24, no. 1) of the Arizona State Law Journal, pp. 3577.

Students can learn more about the issue by reading a mystery novel by Tony Hillerman entitled Talking God. The U.S. Smithsonian Institution is one of the settings of the novel.

V.

Unintended Consequences of Tourism on Culture A. Social carrying capacity: Number of people that a society can bear without substantial damage to its culture B. Consequences to industrialized, high-income cultures 1. Overcrowding problems 2. Clash of unfamiliar behaviors 3. Resentment of residents from need to share resources with visitors C. Demonstration effect 1. Perception of all tourists as wealthy 2. Envy of tourists' material goods 3. Especially likely to create desires in youth of the culture 4. Disproportionate wages from tourism as compared to traditional occupations 5. Youth may cast away the traditions of their culture and embrace the ways of the visitors, which causes generational conflicts 6. Foreign ownership gives rise to class system, where expatriates fill all highskilled tourism jobs and locals all low-level, more menial jobs D. External Influences and Internal Problems 1. Government develops infrastructure and superstructure that is used by visitors but not available for use by locals 2. Problem of crime a. Due to increase in number of potential victims b. Due to resentment and envy of visitors c. Correlation between number of tourists and amount of crime d. Larger number of visitors increases criminal's potential gain and decreases chance of being caught e. Increases cost of police protection and raises fear 3. Decline in moral conduct of local people 4. Effect on native language

VI.

Summary You Decide

Major Topic: Environmental and social impacts of cruise ships and their passengers visiting Alaskan ports.

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Suggestions for In-class Discussion: This case focuses on the enormous impact cruise ships and their passengers are having on small Alaskan port cities. The 800,000 plus passengers that descend on the states 600,000 population definitely is noticeable in both terms of sheer numbers and in economic impacts. These inflows are seen as being both good and bad.

How does the influx of cruise line visitors impact the economy of Alaskan ports’ economy?

How does the influx of cruise line passengers impact the social structure of Alaskan ports?

How much more tourism can Alaskan ports support from cruise lines?

Discussion Questions 16. How can tourism aid in the preservation of societies, cultures, and natural environments?

Tourism can be used to help preserve societies, cultures, and natural environments by educating visitors to increase their awareness and appreciation for what makes places special.

In addition, tourism revenues (revenues from entrance fees, donations, etc.) can be used to help finance preservation efforts.

17.

What host community resources are shared by both visitors and local residents?

Anything and everything that tourists use and enjoy can be shared by local residents. This includes everything from infrastructure items such as airports, roads, water and sewer systems to attractions, entertainment venues, hotels, restaurants, and more.

18. What are the major factors that determine an area's carrying capacity?

The major factors that determine an area's carrying capacity are:  The number of visitors to the area  The amount or type of use by the average visitor  The quality of resource management and facility development/design  The number of area residents and their quality-of-life needs  The number of other users; e.g., industrial or agricultural users Carrying capacity changes when any one or more of the above variables changes. For example, an increase in the number of residents in an area will reduce the number of visitors that the area can "carry."

19.

How can culture be used to attract tourists?

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As we saw in Chapter 1, travelers have always been interested in seeing and experiencing new and different cultures. Travel can open minds when visitors slow down and experience their environments. By accentuating what is culturally unique about a community or location, visitor interest can be created.

20. What negative effects has tourism had on cultures and the natural environment?

The most noticeable impact tourism has had on cultures is what has been referred to as the demonstration effect. When tourists bring their cultural practices and wealth with them to unique cultural settings they expose those with whom they interact to new ways and possible the desire to emulate practices or desires to obtain new possessions. Tourism can also commoditize cultures as performances and practices are “packaged” so that tourists can experience cultures.

Unfortunately, tourism can often cause pollution and other forms degradation when an area sees a substantial increase in visitors. Harmful effects include:  Land erosion  Air pollution  Noise pollution  Decimation of flora and fauna and heritage sites 21. How can tourism be used to benefit a culture? What are some of the cultural problems that can result from large numbers of visitors?

Social and cultural benefits of tourism include:  Learning about each other (visitors and host community members)  Sharing of tastes and different ways of thinking  Creation of a "critical mass" of interest to support native arts  Improved standard of living  Preservation of the area's natural and historical sites However, tourism can also give rise to problems for a culture, such as: 1. Overcrowding problems 2. Clash of unfamiliar behaviors 3. Resentment of residents from need to share resources with visitors 4. Demonstration effects 5. Disproportionate wages from tourism as compared to traditional occupations 6. Casting away the traditions of the native culture 7. Foreign ownership gives rise to class system 8. Government development of infrastructure and superstructure that is used by visitors but not available for use by locals 9. Increased level of crime and costs of crime prevention and law enforcement 10. Decline in moral conduct of local people Cook, Hsu, & Marqua. 5th. ed.

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11. Detrimental effect on native language 22.

What are the potential unintended consequences of tourism?

The most evident unintended consequences of tourism activities are the demonstration effect, overcrowding, encroachment on natural environments, increasing crime rates, potential declines in moral conduct, and dilution of native languages. All of these negatives are related to increasing numbers of visitors; however, with planning they can be mitigated.

Short Answer Questions

1. How can tourism be used to preserve the social, cultural, and natural environment?

2. How can tourism managers and planners determine how much tourism an area can handle?

3. Why is understanding the concept of carrying capacity important to tourism management?

4. Describe how culture can be used to attract tourism.

5. Describe the four components of a host community.

6. Describe how the “demonstration effect” created by tourists can be detrimental to host communities, regions, or countries.

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Chapter Thirteen Sustaining Tourism’s Benefits i.

Quote: Marshall McLuhan

ii. Chapter Opener: Green’s the Dream III. II.

Introduction When is Tourism too Much of a Good Thing?

A. Mass Tourism Costs 1. Architectural pollution 2. Herding of tourists like cattle 3. Disruption of traditional cultural events and occupations 4. Diminished natural beauty and environment 5. Low priority paid to locals' needs with government instead funding tourism amenities to keep community competitive 6. Economic gains short-lived but damage long-term 7. Developers abandon area when growth ceases B. The Irridex – levels of irritation locals may feel with the influx of tourists 1. Stage one – euphoria over economic boon 2. Stage two – apathy when take tourism for granted 3. Stage three – annoyance as residents become saturated and start to see downside 4. Last stage – antagonism when locals treat tourists poorly because tourists seen as root of area problems

Teaching Tip: Have students analyze your town or a town of their choosing. We have found this to be an excellent small group activity with each group sharing and discussing their results with the entire class.

III. Ecotourism A. Form/philosophy of tourism that emphasizes need to develop tourism that minimizes environmental impacts and maximizes economic and cultural benefits B. Travel to sensitive natural and cultural environments to observe and learn and participate in "low-impact" sports such as canoeing C. Ecotravelers generally desire to mingle with local people and have needs filled by locals in the culture's traditional ways D. Five basic principles to ecotourism development 1. Tourism should blend with the environment and local culture 2. Tourist experience should focus on host community's existing scenic and activity opportunities 3. Locals should own and manage all or most services 4. A high proportion of local materials should be used in fulfilling tourist needs Cook, Hsu, & Marqua. 5th. ed.

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5. Ecotechniques should be used to conserve resources E. Mass tourism tends to strain environment from more development and increased number of tourists.

IV.

V.

Establishing Standards A. Abuse of term to market to growing segment B. Goals of ecotourism standards 1. Provide clear definitions 2. Establish measurable criteria 3. Measure and report compliance 4. Promote consistency in use of terminology 5. Create defined marketing program

Ecotourism in the 21st century A. 21st century view of ecotourism encompasses three core elements (Weaver) 1.

Nature-based attractions 2.

Emphasis on learning 3.

High desire for sustainability of natural attractions and native peoples B. Ecotourism encompasses hard to soft activities 1. Hard – rugged and uncomfortable 2. Soft – short duration side trips on mass tourism travel by “mass ecotourists” C. Developing and fully developed destinations can both use ecotechniques to try to minimize negative impacts.

VI. What’s in a Name?

A. Popularity of sustainability B. No universal set of standards for use of sustainability C. WCED: Meeting the needs of the present without compromising the ability of future generations to meet their own needs.

D. Differences between sustainable and conventional practices (Table 13.3) E. The epitome of sustainability – farm-to-fork VII. Putting Sustainability into Perspective A. Going green 1.

Transfer of ecotourism philosophy to mass tourism 2.

Tourism that does not threaten the economic, social, cultural or environmental integrity of the tourist destination over the long term.

3.

Four R’s: Reuse, Recycle, Reduce, and buy Recycled products B. Ecotechniques being used by tourism suppliers C. Use of formal planning processes for future development D. Gains from sustainable practices 1.

More income for more locals 2.

Promotion of understanding between locals and visitors 3.

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4.

5.

6.

7.

Provision of financial incentive to protect natural/cultural resources Resource conservation to alleviate strain Dispersion of tourists throughout larger area to reduce crowding Limitations on number of visitors and types of usage

E. LEED (Leadership in Energy and Environmental Design) certification from the nonprofit U.S. Green Building Council. Four levels of certification; starting at certified and then moving up through silver and gold, finally reaching the ultimate level, platinum.

Each of these levels is reached by accumulating points in eight categories.

1. Sustainable Sites – consideration for the entire ecosystem including land and water.

2. Water Efficiency – consideration for water consumption.

3. Energy and Atmosphere – consideration for energy sources and use.

4. Materials and Resources – consideration for sourcing, transportation, and waste.

5. Indoor Environmental Quality – consideration for air and light quality and sound control.

6. Location and Linkages -- consideration for design choices that include interrelationships with local surrounding.

7. Innovation and Design – consideration for use of innovative technologies and design.

8. Regional Priority – consideration for specific regional concerns Teaching tip: We have found that students are very interested in exploring their local tourism service suppliers to identify those who are lead certified (and at what level) and then discussing how this certification differentiates them from other service suppliers in the same industry grouping.

VIII.

A future of sustainability A. Geotourism concept (Jonathan Tourtellot, National Geographic Traveler Magazine) B. Focus on unique culture and heritage of a location.

C. Increase awareness, preservation and protection of resources.

IX.

Summary You Decide

Major Topic: Sustainable tourism practices in a hospitality chain.

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and marketing purposes. Since competitors were using terms like “green,” “sustainable,” and “earth friendly” there was the temptation to get on the join the crowd and promote these same qualities even if they had not been embraced by all of the properties in the chain.

How can the use of terms that indicate sustainable practices impact the image of hospitality operations?

Should there be a difference in sustainable practices between resort and metropolitan locations?

How do you determine is a lodging property is following sustainable practices?

Should there be standards by which sustainability can be measured and reported?

Discussion Questions 23. When can tourism be too much of a good thing?

Tourism can be too much of a good thing when environmental, social, and cultural costs outweigh the benefits created by these activities. Specifically, critics have pointed to the following problems:     

The architectural pollution of tourist strips; The herding of tourists as if they were cattle, The disruption of traditional cultural events and occupations; The diminished natural environment and beauty of the area; and The low priority paid to local needs with funds used instead to increase tourism amenities to keep the community competitive in the marketplace.

24. What are the major principles of ecotourism?

The major principles of ecotourism are:  Tourism should be blended with, or assimilated into, the environment and the local culture of an area.  There should be local ownership and management of all or most services.  Tourist needs should be filled by local businesspeople and local employees rather than foreign investors or managers.  A high proportion of local materials should be used to fulfill tourists’ needs, from construction materials to foodstuffs.  The importance of conservation of resources must be emphasized.

25. Why is it important to establish standards for the use of terms such as “eco?”

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Unfortunately, terms that have been adopted to describe sustainability in tourism operations have often been misused. By establishing standards, governments and other tourism organizations can:     

Provide clear definitions, Establish measurable criteria, Measure and report compliance, Promote consistency in use of terminology, and Create defined marketing plans.

26. How can tourism hotel and resort operators create sustainable practices?

To achieve true sustainability everything from the host community and buildings to staffing and marketing efforts must be considered. For a detailed answer to this question, please refer to Table 13.3.

5. What benefits may be achieved by a host community through the use of ecotourism practices?

Ecotourism is a form or philosophy of tourism that emphasizes the need to develop tourism that minimizes environmental impacts and maximizes economic and cultural benefits.

Ecotourism is probably only a dream for large cities since ecotourism primarily involves travel to sensitive natural and cultural environments to observe and learn and participate in "low-impact" activities and mingle with local people. However, the concept of preserving those things that make a community special and attractive to visitors can be applied to communities of any size from large to small. Even in the midst of a metropolis such as New York City, both visitors and locals can enjoy corners of tranquility in Central Park.

Specific benefits that a host community may achieve through use of ecotourism principles are: 1. More income for more locals; 2. Promotion of understanding between locals and visitors; 3. Education of locals on matters of health, education, business, and conservation; 4. Provision of financial incentive to protect natural/cultural resources; and 5. Resource conservation to alleviate strain.

6. How can destinations move from mass tourism to sustainable tourism practices?

If sustainability is to be achieved, there is a limit to the number of tourist that can be accommodated in any setting. Planners and operators must consider what is good for the planet, good for people, and good for long-term profitability. Therefore, the starting point is to identify and adopt sustainable practices even if it negatively impacts short-term profitability.

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Sustaining Tourism: The Case of Banff Many communities, recognizing the detrimental impacts that tourism can have, are trying to determine what should be done to sustain tourism to their area and retain the quality of life they desire. But the task is daunting. One such area that is experiencing sustainability problems is the Banff Bow Valley region in Alberta, Canada.

A survey of 400 Calgary residents (conducted by students of Dr. J.R. Brent Ritchie of the University of Calgary) revealed the differences of opinion that can exist when changes are being considered. Here are some interesting results:  About 60 percent of the respondents believe that the Banff area is over-developed  Only 25 percent believe the rest of the national park area is over-developed  87 percent support the limitation of future development in the Town of Banff  83 percent support the limitation of development in the rest of the national park A number of recommendations concerning the future of Banff were suggested in a report called The Government of Canada Task Force Study on the future of the Banff Bow Valley region. Survey respondents illustrate the conflicting opinions that exist when options for sustainability are proposed. For example,  Over 60 percent of the respondents agreed that the population of the town should be capped at 10,000  A similar 61 percent believed that there should be no new commercial leases granted Yet,  Almost 62 percent did not support closing skiing on Lake Louise during the summer  Only 52 percent were in favor of imposing quotas on the hiking trails in the area  Only 36 percent agreed that there should be a quota set on the number of visitors  49 percent were against replacing private auto travel with public transportation within the town  Interestingly, 60 percent of respondents were opposed to charging foreign visitors higher fees than those required of Canadian citizens Of all of the approaches to managing visitation levels, only increased entrance fees, limiting sizes of tours, and imposing highway tolls were supported by a majority of survey respondents.

Most respondents opposed the following options:  Restriction of accommodations  Requiring permits  Limiting parking  Temporary park closures  Compulsory guiding  Use of a reservation system  Use of a lottery or auction for right of entry This case illustrates that although there may be wide agreement on the need to make changes to sustain tourism and an area's well-being, there is often much less agreement on how Cook, Hsu, & Marqua. 5th. ed.

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sustainability should be accomplished.

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Short Answer Questions 7. When is tourism too much of a good thing?

8. Explain what is meant by the term “ecotourism.”

9. How do individual tourists threaten the natural environment?

10. What are the differences between hard and soft ecotourists?

11. How can host communities receive many of the economic benefits of mass tourism while still striving to attain the benefits of ecotourism?

12. What is geotourism?

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Chapter Fourteen Outline Exploring the Future of Tourism i.

Quote: Alphonse Karl

ii. Chapter Opener: On the Road Again IV.

Introduction A. Based on foundation of knowledge, can make some informed guesses of the future B. Thinking about the future allows one to plan for it C. Always will be need for talented, well-educated professionals in tourism organizations (Teaching Hint. A mind-expanding class exercise is to use the nominal group technique to have students guess the future of some of the tourism sectors discussed in this text. Choose a sector of the industry; e.g., tour operators, travel agencies, rail transportation, lodging, food and beverage; then have students [individually] jot down a list of future changes they think might occur in that sector. Encourage them to be creative. After the short time you allow each student to think and jot, go around the class, one by one, and have students voice one of their suggestions. Write the suggestions on the board. Each student must come up with a different idea, not repeat one that has already been made. Caution students that they are not to critique the projections made by any student: The entire idea is to allow their minds to open and their creativity to flow. Repeat the process two or three times until no more new ideas arise. Then try the exercise with another sector. With a class of 30-40 students this exercise will take about thirty minutes. With larger class sizes, you will need to use small groups.)

II.

The Shape of Coming Tourism Markets (Teaching Hint. The following mini-lecture will continue to expand students’ thinking about the future of tourism.)

Mini-Lecture Estimates of Tourism’s Future The World Tourism Organization (WTO) projects that there will be 1.6 billion international tourist arrivals in the year 2020, almost three times the recent number. These tourists will spend the equivalent of $2 trillion during their trips, five times the estimated spending of 1995. Amazingly, the WTO calls tourism “an industry in its infancy” in its report Tourism 2020 Vision.

Some of the predictions made in the report are:  The development of “Space Tourism”

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 Greater visitation to Asia, Africa, and the Middle East  China will emerge by 2020 as the world’s most popular destination  The United States will be the second most popular  The Chinese will turn into the fourth largest national group of travelers, behind Germans, Japanese, and Americans Ask students what trends and evidence support these predictions and which suggest the predictions may be wrong. For example, the increasing number and fury of the civil wars in Africa cast serious doubt on the prediction that Africa will see major gains in tourist numbers.

A. Two macro-scenarios will unfold 1. Increase in mass markets due to new affluence of developing countries 2. Need for specialized service offerings for niche segments to satisfy the sophisticated travelers from industrialized countries B. Demographic shifts: Two macro-scenarios will unfold 27. Increasing size of mature traveler segment due to aging of Baby Boomers (BB) in all of the industrialized nations a. BB mature travelers will already have traveled a great deal b. Will use computers as a source of travel information c. High interest in health, exercise, and the great outdoors d. Place more importance on doing rather than simply seeing e. Desire new places and experiences f. High desire to travel with their children and grandchildren g. More likely to be single in their senior years 28. Traditional family travel will get a boost from the baby boomlet and echo boom 29. Shift in the countries visited as homelands: Away from western Europe and to Asia and Central and South America and eastern Europe 30. These shifts will adversely affect some sectors; e.g., ski resorts, theme parks C. Disabled travelers 31. Percent of world population that is disabled likely to grow 32. U.S. has made the greatest strides towards accessibility for travelers 33. 70% of disabled travel at least once per year 34. Many Internet sources of information and some specialty providers for disabled D. Changes in business, professional, and conference (B, P & C) travel 35. Conflicting trends support increase and decrease in B, P & C travel a. Advances in communications indicate B, P & C travel will be less necessary b. Increase in international business generates need for travel for building trusting relationships 36. Best guess is that people will still desire to meet so B, P & C travel will increase even though may have many communications advances 37. The most popular types of conferences in future will not be business-related but focus on personal lifestyles and interests Cook, Hsu, & Marqua. 5th. ed.

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III.

Emerging Tourism Markets A. Slow tourism 1. Trips with slower pace, experiencing everyday life 2. Increase in demand for spas and rural destinations 3. Increase in single destination trips B. Adventure/extreme tourism will increase 1. Originally defined as activities that involved above-average physical risk; now focus on experiencing 2. Includes many common forms of soft adventure outdoor activity; e.g., walking, canoeing 3. Most mass tourism will include soft adventure component C. Extreme tourism (a subset of adventure tourism) 1. Encompasses activities that have above-average physical challenge and risk 2. Response to overly secure daily life 3. Generation X has largest percent of this segment 4. Typically wilderness activities, often linked to ecotourism D. Growth in medical tourism E. Vocation and Real Estate Tourism 1. Vocation tourism: Travel to try a new career 2. Real Estate tourism: Travel to acquire information about real estate investment.

F. Achievement of space tourism

IV.

Meeting Future Tourists’ Needs A. Use of microsegmentation to better meet visitors’ needs 1. Segmenting the market into even smaller, more defined groups 2. To compete more effectively, design four p’s for special interest groups B. Use of mass customization (MC) to meet individual consumer’s unique needs 1. Offer services customized to fulfill unique needs; e.g., special tour package 2. MC focuses on the empathy component of service quality

V.

Transportation transformations A. Air travel changes 1. Super jumbo double-decker jets 2. No air traffic control centers 3. Pilotless flights?

4. Shorter or no runways?

5. Hypersonic flight being tested B. Auto travel will still be #1, but more efficient C. More ferry traffic D. High speed (maglev) trains will become more common E. Connector trains from city to distant airport

VI.

Moving Into an Era of Competitive Cooperation A. Will see an increasing number of mergers, acquisitions, alliances, and cooperative

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agreements 1. Consolidation increases efficiency and increases market share 2. Have seen such combinations already in airlines and cruise lines 3. Airlines have used cooperative alliances to enter new markets and provide “seamless service” for passengers B. Foodservice suppliers are using vertical alliances to reduce operating costs 38. Called efficient foodservice response (EFR) 39. Partnership agreements between food purveyors and restaurants C. Will see increase in subcontracting of many guest support functions, such as food service, laundry, janitorial 1. Contractors who supply management and labor only 2. Contractors who lease space and supply all equipment, management, and labor 3. Example of fast-food outlets in hotels, airports, theme parks, service stations VII.

Service Enhancements A. Amplifying guests’ experiences 1. Technology will be used to reduce customer burden, for example, via auto-checkin 2. Provision of detailed personal preference information on computer chip 2.

B. Security and safety strides 1. Terrorism will continue so travelers will accept a decrease in privacy 2. High tech surveillance systems will be common 3. ID will shift to retina scan 4. Rise of global standard ID cards 5. More specialty freight companies for “toys” 6. Become cashless travel society C. Keeping the Human Touch?

1. To reduce labor costs, continue to automate services a. Electronic concierges b. ATM style motel registration, airport check-in 2. Depersonalizes service encounter, but will see an increase in “do-it-yourselfers” 3. Shrinking number of workers will lead to better pay and benefits D. The green frontier 40. Recycling will become more important as disposal costs increase 41. Increase in number of properties that are “green”; e.g., change cleaning practices to reduce water use and other pollutants

(Teaching Hint. This exercise provides an opportunity not only to explore the breadth of the tourism industry, but also to utilize the internet along with other resources to catalog service offerings for a specific area.)

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As a first step in completing this exercise, have students perform an internet search to begin filling in the blanks. Remind them that the number of rows under each heading can be expanded to accommodate their findings.

You can limit the scope of this exercise by assigning distant locations. We have found that if you assign locations with which they are familiar or they can visit, they will spend time in visual observations.

You may assign students to complete all or selected parts of this exercise individually or in teams. We have used it as a free standing assignment and also as a long-term project as we cover materials in Chapters 6 through 11 to create a semester long project. You will also find this exercise in the supporting materials for Chapter 14 as we have used it as a final assignment as well.

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Tourism and Related Tourism Service Providers for (insert appropriate location descriptor) 42.

44.

Name of Tourism Service or Related Tourism Service Provider

Address/Location of Service Provider

Prepared by 43. (insert your name) 45.

46.

Description of Service: seasonal or non-seasonal, target market, pricing, features and benefits.

Website Evaluation: ease of navigation, quantity, and quality of information provided.

Service Limitations. Is there something not being provided that would create a competitive opportunity?

Travel Agencies Tour Packages Offered to Area Transportation Accommodations Restaurants and other Food Service Providers Historical Attractions Parks and Preserves Fairs, Festivals, Pageants, and Events Museums Commercial Attractions

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Retail Establishments carrying related products Tourism supporting governmental and non-profit agencies

VIII.

IX.

Tourism Research A.

Types of Tourism Research

B.

Who Conducts Tourism Research?

C.

Who Needs and Uses Tourism Research?

D.

When, Where, and How is Tourism Research Conducted?

E.

Tourism Research is Hard to Do

Conclusion You Decide

Major Topic: Love Boat Loan program as form of microsegmentation Suggestions for In-class discussion: Students frequently do not see the issue raised in this You Decide. Most are routine credit card borrowers and see the Love Boat Loan as an option to the use of credit cards. The instructor can focus on the issue by asking the following questions: Why has Princess Cruises begun the Love Boat Loan program?

What segments are they likely targeting with the program? Are these microsegments?

Have other companies been criticized for targeting microsegments?

(Students may or may not recall that tobacco companies were criticized for targeting young women with special brands, such as Dakota, and alcohol producers have been criticized for targeting high alcohol-content malt liquors to inner city African-American men.)

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How is the Love Boat Loan program similar to/different from borrowing from a local bank or using one’s credit card to travel? How is it promoted in comparison to these other forms of borrowing?

What are the benefits and problems with the Love Boat Loan?

Discussion Questions 1. Based on your knowledge of the tourism industry, do you think services will be developed to serve mass markets or specific market niches?

Both types of services are likely to see an increase in the 21st century. Less-traveled world citizens will be introduced to travel and tourism using traditional mass market services, while the worldly, experienced traveler is likely to desire more specialized travel encounters.

[Students may provide a variety of opinions and “facts/trends” to support their thoughts.]

2. Based on your knowledge of the tourism industry, which of the following groups holds the most promise for future growth; mature travelers, international travelers, or business and professional travelers?

Using the information presented in Chapter 2 and Chapter 14, students will differ on their answers to this question. Obviously, any of the groups could be selected as the group with the most promise. Possibly the mature traveler makes the “best” answer because s/he will be represented in the other groups as well as the mature segment. Baby boomers will likely do more international travel than previous generations and many (both men and women) will continue to travel for business and professional reasons well into their seventies.

3. What roles do you think travel agents will play in the future of the tourism industry?

There is no question that there will always be a role for the services of true professionals who hold travel agent positions to meet the needs of travelers. There is also no question that the days of “order-takers” who simply seek out the best price and make reservation is fading. As more and more information is made available and travelers are pressed for time, travel agents can perform many value adding services that can enhance the travel experience.

4. As speeds and efficiencies in trains and airplanes increase, do you think travelers will shift their trips to one or the other of these transportation modes?

Student answers to this question will vary based on both location and concerns for safety.

Students who live and travel in highly populated transportation corridors will probably have a preference for train travel if high speed options are available. However, students who think about long distances will opt for air travel. In either situation, concerns about increasing security which may increase delays will also impact their answers.

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5. Why will the number of suppliers in the tourism industry decrease, and how will this consolidation of suppliers take place?

The need to remain competitive in the face of growing worldwide competition will lead to increasing consolidation in the number of tourism service suppliers. Consolidation will take place through mergers, acquisitions, and competitive alliances.

6. Will advances in technology replace the need for the human touch in the tourism industry?

Students may have differing opinions about how much the human touch can be replaced and which segments will value efficiency over personalization. Certainly there are areas where automation is appropriate; e.g., the electronic concierge, ATM-style rental car kiosks.

However, they should also realize that the empathy component of service quality is a key factor to many, if not most, market segments. Even the businessman who values efficiency while he is on a sales trip probably enjoys some pleasant human contact at the end of his day and when he is on vacation with his family. After all, cruise lines have not been experiencing their phenomenal growth due to their efficiency! It is the first class pampering that their guests seek and that the cruise lines deliver.

Short Answer Questions 1. Why is it predicted that there will always be the need for talented professionals in the tourism industry?

2. Why will the mature traveler segment be so significant to the future of the tourism industry?

3. What changes will we see in the future at snow holiday resorts?

4. How will virtual conferencing influence future business and professional travel?

5. What tourist activities will be the favored pastime in the future?

6. How can data mining be used to meet travelers’ needs?

7. How will the role of travel agents change in the future?

8. How will the tourism industry respond to the continuing threat of tourism?

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` Part III Integrative Cases Using Cases to Teach Hospitality and Tourism Included at the end of each major section of the textbook are four integrative cases related to topics covered in the section. These cases can be used in a variety of ways to augment your course. (They can also be omitted if time does not permit their use.) For example, the cases can be used: 1. as thorough examples of real situations which the students read to understand the reality of the tourism business world; 2. to illustrate specific concepts from the textbook and generate class discussion of the concepts exemplified by each case; 3. as critical-thinking/problem-solving exercises in which students take on the role of a tourism service manager, critiquing the situation and problems faced and then suggesting possible solutions and courses of action that could be followed; and 4. as examination material for students to apply the knowledge they have learned.

Cases are a frequently used teaching tool, especially in business courses. Cases are an efficient means for providing students with a glimpse of the depth of details and issues that are faced by managers every day. Some cases may be straightforward while others may include a wide variety of issues from which the instructor can choose to focus class discussion.

When using cases as a pedagogical tool, you should feel free to utilize them in a variety of ways. No single format is ideal or “the right way” to present a case. In fact, varying how they are used keeps students interested and challenged. The goal of cases in teaching is to provide students with platforms on which they can practice the knowledge they are acquiring and build their critical-thinking skills.

Using Cases to Develop Problem-Solving Skills One common approach to the use of cases employs the problem-solving framework. This approach can be used by freshman and sophomore students in a rudimentary way, but probably works best with junior and senior students who have already substantially developed critical-thinking skills and feel more comfortable with ambiguous learning situations that are provided by cases.

The goal of case teaching is not for students (or instructors) to come up with the one best answer/solution, but to learn and exchange ideas in pursuit of a solution or course of action. Through careful reading and pre-class thought followed by lively in-class discussion, students learn that there is Cook, Hsu, & Marqua. 5th. ed.

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rarely one best answer in a situation but they do come to realize that some analyses and actions are better than others. Cases are, in essence, vehicles for class discussion through which the instructor and the students challenge each other to think more critically.

Suggested Formats for Class Discussion of Cases In the ideal case discussion situation, the instructor plays a minor role while the students enthusiastically debate each other and generate new topics for discussion. In reality, the instructor often must take an active role to keep discussion focused and to highlight the important topics represented in the case.

We have intentionally excluded questions at the end of the case descriptions in the textbook. If you are teaching students who are inexperienced in case analysis, you may choose to supply them with some of the questions we provide in the teaching notes of this Instructor’s Manual. Students who are accustomed to the case method should not need the extra input of questions before they begin their analysis. More experienced students should be comfortable working with the cases without questions to guide them.

When using a case to illustrate chapter topics, the instructor usually needs to generate class discussion by asking some questions which focus the students’ thinking and comments. We have provided a variety of discussion question possibilities with each case teaching note, but you should feel free to add others, even taking the case into a completely different direction.

When using cases to prompt students to practice problem-solving skills, instructors often use a team approach. Students are placed in teams (three to five is a good number) and then the teams work on the assigned case outside of class to be prepared to lead class discussion during the class period. Some instructors also like to use case presentations. A team is selected to present their analysis in front of the class, and then other teams ask questions and comment about the analysis presented.

You may also find that to ensure thorough reading and pre-class preparation students need to write a short paper on a case. A danger in the use of cases is that all students may arrive to class ill-prepared, on the belief that other students will provide the needed discussion. If each student is held responsible for a case “write-up,” lively class discussion is virtually ensured. Write-ups can be brief and to the point (one or two pages), or you may require them to be more complete (five to ten pages). With freshmen and sophomore students the write-up can simply be a list of concepts illustrated in the case. For higher level students, one commonly used case write-up format is listed below.

1.

2.

3.

4.

5.

Situation Problem statement (there may be more than one which you choose to limit) Possible alternative courses of action Pros and cons of each alternative Selection of preferred alternative, logic for selection, and plan of action

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and with differing values and assumptions. Students therefore can begin to develop the important skills of listening, understanding, and debating through the use of cases. Students often begin to realize that in the face of argument (that is well supported by evidence) they will need to modify their positions.

Cases provide the instructor with an added means of educating students and also a means of opening their minds to the thoughts of others. With practice, both instructors and students find cases a rich addition to the education process.

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A Overview Coyote Pass Hospitality has been in business since 1992, offering guests a unique cultural experience. This experience includes not only a visit to ancient archeological sites learning about the Anasazi, but also the opportunity to stay with a traditional Navajo family in a serene mountain setting. Guests are encouraged to collect edibles and help the family prepare dinner while learning about Navajo religion, politics, ceremonies, economic development strategies, and cultural tourism through candid discussions.

Since there are no operating standards or codes of ethics for sustainable cultural tourism among the Navajo, it is up to the Tsoie family to decide what standards they will follow. The detailed description provided in this article of the Coyote Pass Hospitality experience provides a platform for discussing a variety of issues related to cultural tourism.

Learning Objectives After reading this case study, students should be able to:    

Understand the significance of carrying capacity, Understand the importance of culture as a tourist attraction, Analyze the negative impacts of tourism activities, and Formulate strategies to create and maintain sustainable tourism practices.

Questions

1. How would members of the Navajo Nation determine the carrying impact for activities such as Coyote Pass Hospitality?

Coyote Pass Hospitality is located in the arid and sparsely populated Southwest region of the U.S. so both physical and cultural carrying capacities should be of critical concern to the Tsosie family and their neighbors. Will and his family are comfortable with hosting small groups of visitors, ranging in size from four to fifteen. Groups of this size can be managed and their impacts can be controlled.

It would be tempting to host larger groups, say the size of tour bus capacities, as they would generate more revenue. However, if larger groups are hosted, it would change the intimate relationships of the experience. As stated in the case study, “Although most of Coyote Pass Hospitality’s activities involve cultural interactions and sightseeing, The Tsosies are very careful not to overly impact fragile environmental areas and cultural sites.” Therefore, when taking into consideration both physical and cultural carrying capacities, group sizes would need to be constrained to be keep the experience authentic and sustainable.

2. What are the cultural aspects of Coyote Pass Hospitality that are being used to attract tourists?

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Culture is key to the attractiveness and continued viability of Coyote Pass Hospitality. As their brochure states, “Your guides [Will Tsosie and family] will shepherd your through many facets of Navajo life – oral tradition, ethnographic interpretation, ceremonies, herbology, and philosophy. Sit with a rug weaver while she works or watch a silversmith at his craft. You may expand your knowledge to include neighboring tribes; our guides are most knowledgeable about other Native American cultures in the Southwest.”

Guests often request to be involved or witness activities which are sacred and secret to the Navajo people. Although witnessing these activities could be arranged and potentially be very lucrative, it would be culturally unethical to bring visitors to these ceremonies. “Since there are no operating standards or codes of ethics for sustainable cultural tourism among the Navajo, it is up to Will and his family to decide from what standards they wish to work.”

3.

Although Coyote Pass Hospitality sounds like a good idea, what are the potential negative impacts of this activity on the Tsosie family and the Navajo people?

The economic benefits of the export characteristics of Coyote Pass Hospitality are obvious for this economically stressed region. It would be tempting simply to look at the positive economic benefits and ignore the potential negative impacts of the Tsosie family business, but this would be short-sighted. Simply stated, Coyote Pass Hospitality could be the “goose that lays golden eggs or it could be the alligator that eats the same goose.”

Students will bring up many potential negative consequences, but the following list can be used as a starting point for discussion.     

Fragile environmental areas could be damaged or destroyed, Cultural and archeological sites could be damaged or destroyed, Envy could appear and crime could increase due to the “demonstration effect”, Expanding to a more mass tourism market could take away from the experience as infra and super structure development would be needed, and Others’ cultural demands and beliefs may not be compatible with those of the Navajos.

4. Can Coyote Pass Hospitality meet the criteria needed to remain an eco-friendly tourism operation?

The answer to this question can be “yes” and it can be “no”. To generate the greatest amount of discussion, we recommend that you divide the class into two groups, one “yes” and the other “no”. The “yes’s” should focus on current practices and the “no’s” should focus on what would happen if these practices were altered.

On the positive side, guests are educated about the Navajo people and the environment in which they live. These cultural interactions bring much needed revenue to the Tsosie family.

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dilemmas for the Tsosie family.

Teaching Hint. Since the topic of culture can generate emotional comments, we suggest discussing this case study in small groups or using it as an exam question. One of the authors has had the opportunity to teach this case in a class with several Native American students and found that all students we enthralled with the ensuing discussion.

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Teaching Note Coping with Crisis

CASE OVERVIEW Here's an opportunity to place your students in a decision-making role in the midst of a crisis. This case examines the dilemma faced by Durango & Silverton Narrow Gauge (D&SNG) Railroad’s Chief Executive Officer (CEO), Allen Harper. The Four-Corners area, like much of the United States, had not recovered from the economic downturn or the effects of 9/11 on the tourism industry. Thousands of people travel to Durango, Colorado, to ride the D&SNG to the historic mining town of Silverton each year from May to October.

As summer 2002 dawned, one of the largest forest fires in its history ravaged Colorado.

The Missionary Ridge fire north of Durango had already consumed some 60,000 acres and cinders from the steam-powered trains threatened to start more fires. Homes and other structures had been destroyed. Many business owners in Durango and Silverton considered the tourist traffic generated by the D&SNG to be critical to their economic survival.

TEACHING OBJECTIVES The learning objectives of this case are to: 1.

2.

3.

4.

Allow students an opportunity to analyze a situation which may be described as a crisis.

Identify the components that led to the crisis.

Analyze the various stakeholders that must be considered in dealing with the crisis.

Discuss options in managing a crisis.

The authors envision that this case incident could be used in business/government/society, tourism management, introductory management, public relations, and policy/strategy courses at the undergraduate level.

QUESTIONS 1.

What constitutes a crisis?

This case was prepared by Edwin C. Leonard, Jr. of Indiana University - Purdue Fort Wayne and Roy A. Cook of Fort Lewis College and is intended to be used as a basis for class discussion. The views represented here are those of the authors and do not necessarily reflect the views of the Society for Case Research. Authors' views are based on their own professional judgments.

Copyright © 2003 by Edwin C. Leonard, Jr. and Roy A. Cook.

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A crisis, by definition, is an unstable or crucial state of events. The types of crises faced by business decision makers range from the immediate and unexpected, to those that are sustained, based on either facts or rumors. There have been many of these types of business crises in recent years, and it may help to remind students of some of the more notable ones as you begin discussing this incident. There are several to choose from, but the following can provide a springboard for thought:  the grounding of the Exxon Valdez in Prince William Sound in Alaska, resulting in the spillage of over ten million of gallons of crude oil,  the nation-wide recall of Tylenol capsules by Johnson & Johnson's McNeil Laboratories after seven cyanide-related deaths due to product-tampering in Chicago,  the recall of 16 million pounds of e-coli contaminated ground meat by ConAgra, and/or  the persistent rumor that the Proctor & Gamble logo is related to devil worship.

2.

How should organizations respond to crises?

If a crisis is not handled properly, it can lead to the failure of an organization. For example, ValueJet was never able to recover from the fatal crash of one of its jets in the Florida Everglades. Therefore, crises action plans are a necessary part of business.

First, when faced with a crisis, identify each of the potentially impacted groups and assess how they might be impacted. Second, determine if it is possible to mitigate the impacts.

Third, management must demonstrate that it is in command of the situation. A clear plan of action must be communicated. The response or plan of action must be distributed as rapidly as possible. This will allow management to establish credibility and become the source for information.

3.

Who has a stake in this crisis? Differentiate between primary and secondary stakeholders. What is the extent of their stake?

There are many individuals and organizations that will be impacted by this crisis. The most obvious or primary stakeholders are:    

The D&SNG, Employees of the D&SNG, Tourists who have purchased or plan to purchase tickets, and The forest service, firefighters, and other emergency personnel.

The list of secondary stakeholders who are impacted by this crisis is almost mind boggling and includes: Cook, Hsu, & Marqua. 5th. ed.

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    

Hotels, motels, and campgrounds; Restaurants and grocery stores; Retail establishments; Governmental agencies at the national, state, county, and city level; and Other businesses that supply the D&SNG or rely on the multiplier effect of the dollars generated by the train or its employees and riders.

The primary stakeholder will be immediately impacted either by the loss of revenue (while many of their expenses continue), the immediate disruption of their travel plans, or the resources required to fight the fire. The secondary stakeholders may be impacted by some loss in revenues, as some travelers plan to visit alternate destinations and tourism dollars fail to enter the economy. This loss of tourism dollars will also affect tertiary stakeholders who depend on the revenues generated by tourism expenditures. The group of tertiary stakeholders can be as large as your students' imaginations since there is a multiplier effect with tourism expenditures and every business, non-profit organization, and governmental agency will eventually be impacted by a softer economy.

4.

What are some of the factors that D&SNG’s CEO Allen Harper should consider before making a decision?

His deliberations could follow two different but interrelated paths. One would be purely economic and the other involves social responsibility. From an economic perspective, he would consider:  The survival of his business, and  The welfare of his employees.

From a social responsibility perspective, he would consider:     5.

The impact of his decision on the businesses in Durango and Silverton, The impact of his decision on the towns of Durango and Silverton, The impact on the governmental agencies fighting the fire, and The potential damage that additional fires could cause to the environment.

If you were the CEO, Allen Harper, what would you do? Why?

Some students may argue there is no way that Allen Harper could have anticipated a forest fire of this magnitude, therefore he would not have been able to plan for such a crisis.

However, crisis management involves a great deal of public relations efforts and an understanding of an organization's stakeholders. Problems should therefore be anticipated and planned for in any organization.

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because it was created by an out-of-control wildfire of historic proportions. His decision could be critical to the survival of his organization. Tourism is a business of people and where people are involved, things can and do go wrong. Some of the obvious things that could go wrong with a tourist railroad include:      

a train derailment due to track failure; a fire or explosion on the train since it is steam-powered by coal fire; a flood washing out tracks; a grass or forest fire starting along the tracks due to a wayward cinder; worker violence; or food poisoning from a concession item.

Recognizing the inevitability of crises in tourism businesses, whether they are large or small, should lead to the development of a crisis plan. A typical crisis plan would include:  Channeling all inquiries to designated individuals in the organization; communicating who these contact points are to everyone in the organization; and providing training to contact individuals in proper responses and establish regular media briefings. In this situation, the contact person should be either Jeff Jackson or Allen Harper.

Because of their leadership roles, they have the knowledge of operations to handle all questions and provide the media with updates on the train's activities.  Not speculating on outcomes. By not withholding details and being honest and upfront, an information vacuum is avoided, therefore eliminating a natural human tendency to fill in the blanks with whatever information sounds interesting whether or not it is true.  Staying on-call every day, 24/7. As is indicated in the case, Allen Harper came to Durango and stayed in a hotel so that he could be personally accessible during the crisis.  Meeting regularly as a management team to assess the situation and debrief.

Information is not available in the case to know whether or not this happened.  Not responding to inquiries with "no comment" or making comments "off the record." Either of these statements creates a climate of distrust. None of these statements were evident in the case.  Finally, remembering that a crisis is a crisis and, at some point, it will be over. Plan for the resumption of normal operations. As you will see in the Epilogue, this is what happened.

6.

What options does the CEO have to resolve the problem?

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The following alternatives should serve as a springboard for discussion. Students will probably develop some viable alternatives, some of which may be on the wacky side.      

Shut down all operations; Curtail operations to a safe operating zone only; Refund ticket purchases; Offer ticket holders future reservations with other incentives; Offer free rides to ticket holders on the Thomas the Tank Engine Train; and/or Provide transportation to Silverton on the company bus at a reduced cost.

Student Activity Decision support systems are available to provide managers with assistance in dealing with semi-structured problems, such as the one illustrated in this case. Have students prepare a decision tree for the CEO. This case illustrates the dilemma faced by CEO Harper as he contemplates what to do – keep the train running and risk starting additional fires or temporarily cease operations and further weaken an already anemic tourism economy. The situation also creates an excellent opportunity for students to role-play the key stakeholders in the decision-making process.

Epilogue Late Wednesday afternoon, June 19, 2002, railroad officials announced that the Silverton train trips would be suspended immediately. This announcement sent ripples throughout the Durango-Silverton tourism industry. The next day, Thursday, June 20, 2002, Mary Jo Rakowski, marketing manager of the D&SNG, said the railroad tentatively planned to have the trains running again on the Fourth of July. The railroad announced they would run several daily bus tours from Durango to Silverton while the narrow gauge service was halted (Lofholm, 2002).

The D&SNG suspended operations to Silverton for three weeks, resulting in an estimated $2.2 million loss in revenues to the train and $23.5 million to the city of Durango. Because the train represents such a critical component of the local economy, emergency loans were granted from the state and local economic development agencies to keep the train running (Kostka, 2002; Sluis, 2002). These funds were needed to meet operating costs.

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Teaching Note Any City Can be a Tourist Destination Roy A. Cook, Professor Emeritus, Fort Lewis College Barbara H. Nemecek, Dean, Robert B. Willumstad School of Business, Adelphi University Case Overview People are naturally attracted to destinations that are easy to access, are blessed with natural beauty, have well developed entertainment offerings, or offer consistently mild climates. What do you do if you are in a location that is devoid of all of these natural attractors?

That was the question faced by decision-makers in Wichita Falls, Texas. When the city leaders first embarked on their attempts to lure more tourists to this non-descript secondary Texas city, there was a great deal of skepticism. Wichita Falls is not known for its location, beauty, noteworthy attractions, dining or recreation opportunities.

Learning Objectives Understand the importance of tourism to the economic health of a city or region.

Identify key stakeholders in tourism planning Evaluate the tourism planning process Recommend courses of action for future growth Questions 1. What did leaders in Wichita Falls need to do to lay the foundation for tourism growth?

2. What were the key components of the “Pride in the Falls” campaign that supported the image and growth of tourism?

3. How would you evaluate the success or failure of the “Pride in the Falls” campaign?

4. What future actions would you recommend to city planners to continue tourism growth?

Questions and Answers 1. What did leaders in Wichita Falls need to do to lay the foundation for tourism growth?

As you begin discussing this case with students, encourage them to think about their own home town. Some will come from cities that are natural tourist destinations and others will come from cities that they think has little to offer tourists. By the time they finish analyzing this case, they are almost all surprised at how much they have to be proud of no matter where they call home.

Faced with location and amenity challenges; city leaders including governmental employees, the Chamber of Commerce & Industry, the Convention and Visitors Bureau and Downtown Development, set about to reposition the city as a tourism destination. Because tourism is a conglomeration of many industries and needs the coordination of a wide variety of enterprises and agencies to cooperate, planning is never easy.

The city had a long history of ups and downs in economic activity based on its historic dependence on transportation (the railroads), oil, manufacturing and government (Sheppard Air Cook, Hsu, & Marqua. 5th. ed.

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Force Base). Tourism was always present, but seemed to just be an after-thought. To lay the foundation for potential success, evaluation and planning was needed to support all the engines of economic growth. It takes a vibrant community to support tourism activities. With that in mind, the basic steps in tourism planning involve answering the following questions.  Who are your stakeholders?  What is the role of tourism in your community?  What will be the image of tourism in your community?  How will tourism growth be funded?  How will tourism be marketed?  How can tourism be maintained and sustained?

The obvious stakeholders mentioned in the case are governmental agencies and offices, transportation providers, lodging establishments, restaurants, retail establishments, CVBs/Chambers of Commerce, attractions, arts and entertainment, and community members themselves. The maybe not so obvious stakeholders are the media, education, parks and recreation, economic development authorities/agencies. Based on the information presented in the case, students will also identify other stakeholders.

The role of tourism in the city can be assessed by taking inventory and evaluating what the city and region has to offer tourists. Although there is little in the way of natural beauty or urban amenities to attract visitors, the city does host a variety of events throughout the year. Some of these events include the: Red River Wine Festival Rodeo Western Swing Music Festival Ballet Theater Texas-Oklahoma Oil Bowl Downtown Strolls Texas Ranch Roundup and Festival Wichita Falls Symphony Hotter ‘N Hell Hundred Bike Race Kemp Center for the Arts Downtown City Lights Festival Cajun Fest Midwest State Univ.-Burns Lights Display in December. Cinco de Mayo Celebration In addition, visitors will also find a water park, a Wichita Falls Water Falls (with Niagara Falls rock), and a variety of museums and historic buildings. While in Wichita Falls, visitors can choose from 26 lodging properties with a total of 2200 rooms. Wichita Falls is mainly a drive market, but the city does have minimal and improving air service. Students will find other items to add to this list based on the information provided in the case.

The initial campaign was called “Pride in the Falls”. The first three years of the campaign were backed with $500,000 in funding for each year, which is not a great deal of money. However, by using these funds cautiously, the city was able to launch and maintain a successful campaign that was supported via social media, television, radio and billboard advertising. When analyzing this case, draw students’ attention to the fact that the majority of the marketing money during the first year was spent locally. In dealing with the type of situation faced by the city, it was important to tell the “tourism story” to the locals. If the citizens of a city don’t think they have anything to offer they need to first be aware of what their city has to offer and then develop pride in those offerings so that they want to share their city with others.

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On several occasions, when discussing destinations, we either have students fill out the following forms based on facts in the case or expand the discussion by encouraging students to think about their own home towns and then share these results with the class.

Destination Assessment Facilities/Superstructure Transportation Visitors Center Lodging Food and Beverage Meeting/Convention Facilities Sports Venues Other

Attractions and Entertainment Natural Heritage/Cultural Commercial Events/Entertainment Sports Friends and Relatives/Professional and Affinity Groups Other Depending on how much time you decide to devote to this case, you might want to start the discussion with the students’ home towns and then move to Wichita Falls. We have found that starting with students’ home towns and then moving to Wichita Falls creates a more lively discussion with later questions.

2. What were the key components of the “Pride in the Falls” campaign that supported the image and growth of tourism?

The plan focused on development of four key areas and was supported with specific strategies.

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development, and image and marketing. First, the downtown area was badly in need of revitalization. Changes in commercial development patterns in conjunction with a weakening of the city’s oil sector had resulted in decline and decay of a once thriving downtown commercial center. Second, attracting and nurturing talent was perhaps the most fundamental issue facing the city in its efforts to create a long-term sustainable economic vitality. Third, the assessment of industry considered the full complement of economic activities, ranging from traditional industrial employers to services, as well as the physical infrastructure and the business climate to support those activities. Opportunities for expansion of existing companies, the potential of entrepreneurship, and the importance of the service sector were recognized as building blocks for sustainability and growth. Finally, there was a need to improve the community’s image – both internally and externally. It was difficult to draw people to Wichita Falls, but it was soon recognized that if they liked it when visited, they would come again or even relocate.

Table 1 in the case provides an extensive list of strategies that were developed to achieve these goals and we encourage instructors to have students evaluate each of these strategies form a tourism perspective. What students begin to see through this type of analysis and discussion is that tourism does not exist in isolation, but that it is part of the fabric of a community.

Hiring a professional manager to oversee all of these activities was a positive move as it not only demonstrated commitment, but it also created a focal point for discussion and future development. It is also important to note the high level of community involvement.

The meetings, discussions and the development of a plan took over a year and involved input from over 2000 people in the community. They spent a great deal of time defining “who” Wichita Falls was, and “what” they wanted to be. The end result was a Logo, a Brand, and a Marketing Plan for the Community. This campaign was called “Pride in the Falls” – Blue Skies – Green Spaces – Golden Opportunities. Many of the first campaign items touted: “Best of ____________(you fill in the blank)”. Or, slogans like, “Quirky, interesting people and places -- only a couple of hours from _________”(you fill in the blank). Another idea that gathered a lot of attention among residents was the T-Shirt Campaign. These tee-shirts sported slogans such as, “We’re Not in Kansas ---- Never Were: Wichita Falls, TX”, “Red Draw – Not an Art Project: Wichita Falls, TX”, and “It’s OK to have a cow: Wichita Falls, TX”.

3. How would you evaluate the success or failure of the “Pride in the Falls” campaign?

From all of the information presented in the case, it appears as if the campaign was a success.

Maybe a better question for discussion is: Why was the campaign a success? As you begin discussing this question make sure to highlight the fact that in the initial phase, 60% of the advertising and promotional funds were focused on the citizens of Wichita Falls and that, even in the later phases, 40% of these funds were still focused internally. The campaign truly was focused on “Pride in the Falls”. Based on cultivating this pride, other good things happened.

The importance of pride cannot be underestimated in a situation like this, one in which there are few obvious features or attractions which locals can point to that sets their town apart from others.

With a great deal of focus on bringing tourists to the city and hard work, the skeptics were proven wrong and Wichita Falls saw an increase in tourism traffic. One simple metric that can measure this increase was the change in lodging tax receipts. These receipts increased from $1,429,656 in 2009 to $1,564,204 in 2011. This is was an over nine percent increase during Cook, Hsu, & Marqua. 5th. ed.

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extremely difficult times.

Since launching the “Pride in the Falls” campaign, in addition to a noticeable increase in tourist visits as measured by lodging tax receipts, there have been other noticeable results of the campaign including:  83.4% of citizens surveyed said they noticed an increase in community pride,  Texas Governor Rick Perry made a special trip to Wichita Falls to recognize the campaign,  Seven regional and state-wide awards have been received for the campaign, and  Positive press in National Geographic Traveler, Travel + Leisure, Texas Monthly, Bike Magazine, American Cowboy Magazine, Outside, USA Today, and The Wall Street Journal.

Having unified logos and placements kept the program and goals in a “top of mind” awareness mode for everyone in the community. This is important for any city as it attempts to not only maintain, but also grow the number of events and the tourism traffic these events generate.

4. What future actions would you recommend to city planners to continue tourism growth?

The citizens of Wichita Falls demonstrated that any city, no matter what the obstacles, can be a tourist destination. The first phase of the “Pride in the Falls” campaign has done an excellent job of building general awareness of what the city has to offer and what its citizens can point to with pride. The next phase of the campaign needs to focus on building a more specific message that focuses in on what makes Wichita Falls special.

With that thought in mind, one of the themes that would appear to hold many specific benefits for the city is to solidify its designation as the “Extreme Sports Capital of Texas”. No pun intended, but riding on the growing recognition and prominence of the “Hotter-than-Hell” bicycle race and the “Oil Bowl” for both Texas and Oklahoma high school football players the city already hosts two signature events. Both of these events focus on the extreme theme providing the city with not only regional recognition, but also national attention which has been demonstrated by recent widespread media coverage. These two signature events are also supported by the presence of a minor league hockey team and a semi-professional football team.

At this point in the case discussion we encourage students to go back through the list of events the city is currently hosting to identify others that could be marketed as extreme. To get this discussion going, take a few minutes and ask students to write down two or three ideas for events and then, have them share those ideas with others sitting around them. Although some of the ideas will be silly, but there always seem to be enough serious ones to get a good discussion started. Some the more common suggested possibilities that have come up for consideration during these discussions center around rodeos, tornadoes, and red dirt. The city could easily sponsor a signature rodeo event such as bull, saddle or bare back riding. During the height of tornado season, a demolition derby or any other event focused on destruction could be hosted.

The idea of “red dirt” offers many possibilities including dirt bike or monster truck races, mud runs, mud football games, or any other event that sounds messy.

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base and retail. The city has the potential to tap the growing medical tourism segment since it can offer quality medical large in a large but not overwhelming metropolitan area with things for friends and family to do and see when loved ones are receiving care. The air force base offers a great deal of potential for visitors, both official and friends and family. The idea of “destination retail” also offers a great deal of potential as the city serves a large geographic area. Students will have other recommendations based on their own experiences.

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Teaching Note Resorts Go Up . . . And Down Overview Marketing professor August St. John has developed a comprehensive theory to explain what he believes is an inevitable cycle experienced by all tourist towns. This cycle is composed of five stages that begins with welcoming tourists and then moves through development, resentment, confrontation, and, eventually, destruction. The most controversial of these stages is the final one, destruction. Although it has some negative connotations, according to St. John it can actually be positive as communities realize they have lost the appeal that once drew tourists and begin to think about methods to bring them back.

Perhaps most important in the concept of cycles is that tourist-oriented resort communities must collectively realize their towns are constantly in a state of flux. Therefore, active planning can go a long way towards helping to preserve those community attributes that attracted tourists in the first place.

Learning Objectives After reading and analyzing this case study, students should be able to:   

Identify the positive and negative economic benefits of tourism activities, Analyze how a community can move from one stage in the resort life cycle to another, and Describe how much tourism activity is desirable for a community or region.

Questions

1. What are the positive and negative economic benefits of tourism for Manchester, VT? Tourism, at least in the early stages and in desirable locations, brings in more and more people, so the economic benefits are positive. Growing demand for lodging, restaurants, gas stations, grocery stores, lift tickets, etc. generates more revenues for not only these service providers, but also brings in more tax revenues for needed governmental services.

However, as tourism volumes grow, congestion begins to strain the very systems that both tourist and locals rely upon. At the same time the patience of host community members is also tested as tourist compete for some of the same resources. Whereas may have once been viewed as, “the goose that laid the golden eggs”, they may now be looked upon with skepticism as they are viewed as the “alligator who may be eating the goose that laid the golden eggs”.

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Growing tourism typically leads to new, expanded or updated infra- and super-structure, but if it grows too fast or too much, systems can become strained or at time completely overwhelmed.

The positives then turn into negatives once the benefits are no longer perceived as beneficial and visitors are viewed as a nuisance and a burden by members of the host community.

2. How could Manchester bring itself back from the resentment, confrontation or destruction stage?

Even before visitors begin to be viewed with resentment, destination stakeholders must be engaged in planning and education programs designed to harvest the best from tourism. Through planning, limits as to potential capacity and utilization can be identified and steps can be taken to impose acceptable controls as well as additions and improvements to support systems.

Simple steps such as creating remote parking, enhancing public transportation, updating signage codes, creating pedestrian friendly areas, etc. can be taken to avoid the sense of crowding.

Having employers provide housing and/or subsidies can ease economic strains on workers who may sense that they are being pushed out of the community by those who they serve. By involving, listening to, and responding to all stakeholders (tourists, employers, employees, citizens, governmental agencies, etc.) plans can be formulated to meet a variety of often competing and divergent demands.

3. Do you think tourism in the Manchester, Vermont area has become too much of a good thing? Why or why not?

We have found that students enjoy discussing this question and often become animated as they do. Those students who come from towns that are heavily dependent on tourism for economic vitality are often more vocal than those who come from agriculture, manufacturing, or other service oriented locations. This question creates another opportunity for small group or class debates. Divide your class into groups with opposing viewpoints and have them develop a list of arguments to make their point.

Teaching Note: We have used this case study and descriptions in many settings and always find that it engages participants. Students find it interesting to select a community or area with which they are familiar and complete the rating system described by Professor St. John. Divide your audience or class into small groups and have them complete the rating. Then have each group write their rating on the board or a flip chart and discuss. What is always amazing is how close the analysis and rating will be.

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