1

Cover Page

Evaluating Incentive programs in a 5 star hotel environment

Evidence-based Consultancy Report, 7002EHR, Evidence-based Practice in HRM

Author: Charles Audley

2

Contents Page

1 Executive Overview2 Aims and Scope3 Research Design4 Research Review5 Findings and Implications6 Conclusions and Recommendations7 References

Appendices

Appendix 1Appendix 2Appendix 3

3

Executive Overview

Charles Audley, s2158468.

Selected Option: Option 4, Head of HR, Multinational Hotel (5 star).

From: Head of HR, Multinational Hotel (5 star)

We have been thinking about using incentives to encourage our bar, restaurant and front counter staff to sell more and better products for many years, but never really followed it up. What is the “state of the art” on using incentives? I’ve always heard there is “dark side” to incentive rewards; we certainly wouldn’t want that! ...but if they’d improve performance, we’d be interested.

· context and industry informationI will be investigating luxury hotel incentive strategies, with a focus on Multinational companies that were founded in the USA, such as Marriott and Hilton hotel chains. I will discuss the costs in rolling out such incentive strategies and how this is best considered as a return on investment.

· nature of the problemI will be investigating the efficacy of incentive programs and how the can be best tailored to suit employees wants, rather than what managers think their’ employees want. I will also discuss how inflexible and poorly time-managed incentive programs are destined to fail.

· review of the evidenceI will be analysing the latest peer-reviewed literature on incentive programs, with a focus on food and beverage upselling, but also covering the upselling of hotel rooms and in-hotel services (spa treatments, valet parking etc.).

· analysis of optionsIn this section I will look at evidence-based solutions. I will critically analyse why certain strategies may or may not translate to improved sales in a multinational context, and provide reasons for my perspective. I will attempt to cover incentive programs that have either been validated with a luxury hotel brand or are suitable candidates.

· recommendationsMy recommendations will be based on the most up-to-date information available and consider factors such as employee demographics, location, age, family status

4

etc, to tailor the incentive program effectively. I will also discuss time frames and estimate costs for a typical location/area.

Aims and Scope

1 To explore incentive programs across sectors

2 To identify currently proven incentive programs in hotel setting

3 To focus on what’s working in luxury hotel chains

Must make mention on an incentive program which rewards signing up clients to a Loyalty program. This effectively results in a permanent upsell. Include data.

5

Research Design

Exploratory

Research Review

It is vital that the incentive program is not a replacement to a training need. Training in upselling is critical to the success of any incentive program aimed at increasing revenue from existing customers (Blumberg, 2005).

As part of a compensation strategy for hotel employees, rewards/incentive programs are increasingly being used (Fischer, Gross & Freidman, 2003).

Similarly, Quain, Sansbury and LeBruto (1999) suggest that increases in revenue are typically not derived from new sources, they come from your existing customers.

Quain, Sansbury and LeBruto (1999) suggest that rewarding the server is a top ten strategy for increasing profits in the restaurant industry.

According to Simons and Enz (1995), employees from different departments responded in a different way to the job rewards offered by the organization, suggesting that individual differences and individual-level variables should be considered when designing incentive programs (from Maroudas, Kyriakidou & Vacharis (2008).

Essentially, the incentive program needs to be something that the employees want, not necessarily cash, or what line managers think they want. Ideally, a choice is offered. The time frame is also particularly relevant, with short-term superior to long-term. Feedback is vital, and a real-time display is the most effective way of maintaining motivation. The desired change in behaviour should not be too difficult to obtain – it should not be a replacement for training required to carry out the function. Another consideration is how the incentive program is delivered; a massive roll-out will be less effective than a staggered or

6

incremental change, and the more that the idea is discussed and explained by all levels of management, the more likely it will be accepted by the target employees. Finally, the program needs to remain fresh, or employees will quickly lose focus. Considerations such as Return On Investment (ROI) are important, as well as having a clearly defined goal/s. Popular programs currently use gift certificates, travel/accommodation vouchers, an employee trophy that is passed around by employees, a points system which corresponds to a gift catalogue, providing opportunities to additional training/workshops, enabling staff to create their own roster for a week, a weekly/monthly newsletter - preferably with pictures, additional paid days off etc. Whatever the staff most wants (employee needs) will be the most effective reward for a given scenario. Maslow (1943)introduced the hierarchy of needs, and then McGregor (1960) introduced Theory X and Theory Y. Essentially, yes employees will become bored if not challenged on the job, but essentially their lower order needs are mostly being met (OH &S, minimum pay etc), so incentive programs should target higher order needs (MKV, 2008). Also include a few tables rating employee satisfaction with incentive programs.

Useful links:

http://www.hvs.com/Jump/?aid=2899

http://www.hvs.com/article/5030/why-is-upselling-important-how-can-hotels-improve-revenue/

http://scholarworks.umass.edu/cgi/viewcontent.cgi?article=1024&context=gradconf_hospitality&sei-redir=1&referer=http%3A%2F%2Fscholar.google.com.au%2Fscholar%3Fhl%3Den%26q%3Dreview%2Bhotel%2Bemployees%2Bincentive%2Bprograms%26btnG%3DSearch%26as_sdt%3D0%252C5%26as_ylo%3D2005%26as_vis%3D0%23search=%22review%20hotel%20employees%20incentive%20programs%22

Conclusions and Recommendations

Bottom line is, if the rollout of an incentive program is not offset by an increase in revenue, the program is a failure. Unfortunately, measuring the efficacy of an incentive program is not as straightforward as it might be.

7

References

Blumberg, S. (2005). Foodservice employee recognition programs. Journal of the American Dietetic Association, 105 (7). 1055-1056.

Fischer, K., Gross, S. E. and Friedman, H. M. (2003). Marriott makes the business case for an innovative total rewards strategy. Journal of Organizational Excellence, 22 (2), 19-24.

Quain, B., Sansbury, M. W. and LeBruto, S. M. (1999). Revenue Enhancement, part 4. Cornell Hospitality Quarterly, 40 (3), 38-47.

Simons, T. and Hinkin, T. (2001). The effect of employee turnover on hotel profits. Cornell Hotel and Restaurant Administration Quarterly, 42 (4), 65-69.

8