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An Examination of Hotel andMotel Manager Accuracy inDiscriminating Selected Legal -and Illegal ActionsRobin T. Peterson aa New Mexico State University , USAPublished online: 20 Oct 2008.

To cite this article: Robin T. Peterson (1998) An Examination of Hotel and MotelManager Accuracy in Discriminating Selected Legal - and Illegal Actions, Journal ofHospitality & Leisure Marketing, 5:1, 3-13, DOI: 10.1300/J150v05n01_02

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An Examination of Hotel and Motel Manager Accuracy

in Discriminating Selected Legal . and Illegal Actions

Robin T. Peterson

ABSTRACT. This study exanlined the ability of a sample of largc and small hotel and motel managers to judge the legality of a series of activities, in light of federal legislation. The rcspondents were queried by telephone and asked for their opinions as to the legitima- cy of a series of practices. The study uncovered some degree of lack of ability to correctly determine the legality of the practices. [Article copies available fir a fee Jot11 Tlre Haworlll Doc~rnerrl Delive~y Setvice: 1-800-342-9678. E-t11ai1 acldt~ss: ge/i~fo@ra~vo~~//~.cor,ll

INTRODUCTION

The present inquiry was designed to determine the extent to which hotel and motel managers are able to distinguish between legal and illcgal activities. Such howledge is becomingincreasingly important as iegal restrictions and the threat of litigation continue to grow in importance and frequency. Given the significance of this field, trhe present-inquiry was conducted to assess if hotel and motel managers werc Suficiently in- formed, or on the other hand, could benefit fro111 expanded insights.

Robin T. Peterson is Sunwest Financial Services Distinguished Professor at New Mexico State University. He received a PhD from the University of Wash- ington (Seattle) and has published articles and books in marketing, srnall busi- ness, and related fields.

Journal of Hospitality & Leisure Marketing, Vol. 5(1) 1997 O 1997 by The Haworth Press, Inc. All rights reserved. 3

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4 JOURNAL O F HOSPITALITY & LEISURE MARKETING

REVIEW OF THE LITERATURE

Federal laws have a major impact on a large proportion of the decisions made by hotel and motel managers. There arc regulations on such activi- ties as predatory pricing, deceiving consumers, discrimination in hiring, collusion with competitors, stealing trade secrets and inany other actions (Boedecker, Morgan, and Stoltman, 1991) (Klcvorick, 1993). Further, the composition of the legislation and the means by which judicial and admin- istrative parties carry thcm out changes with the passage of time (Litan, 1991) (Taylor, 1992). Hence, there is a need for a continual updating of the new positions which the authorities assume and the prioritics which they place upon enforcing particular statutes (California v. American Stores Co., 1990) (Heil and Langvardt, 1994).

Since these laws are sometimes unclear and can impose harsh conse- quences, managers arc well-advised to kcep thc~nsclves informed on the nature of these constraints and how they are administered (Hylton, 1991). This, of course, can be a very extensive intelligence-gathering process. Managers require knowledge of the law to circumvent possible fines, damage awards, injunctions, legal fees, out-of-court settlements, and even jail internment (Sack, 1985) (Bowers, 1991) (Bloom, Milne, and Adler, 1994). Given the severity of these negative consequences, thcre is a premium for being aware of and operating within the limits of federal law.

Of course, hotcl and motel managers cannot be expected to have an all-encompassing knowledge of the legislation and its implications. Attor- neys retained by the company will provide the needed insights when specialized. legal expertise is required (Morgan and Boedecker, 1980). However, hotel and motel managers should have some knowledge about the more significant regulations and be alert to situations where they should seek the expertise of attorneys (Sack, 1985) (Gundlach & Murphy, 1993):

Onc of the objectives of this study was to determine the degree to which a sample of hotel and motel managers were capable of accurately distin- guishing between legal and illegal business practices. A second objective was to measure differences between hotel and motel managers employed by large and small companies in their perceptions of which activities were legal and which were not. A set of written activities was presented to a sample of hotel and motel managers, who were asked to read the descrip- tions and to indicate the extent to which they believed each one to be legal or illegal. In turn, the analysis involved determining the extent to which the perceptions wcre or were not in error.

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THE STUDY

Four graduate students with training in marketing research conducted a telephone inquiry. The interviewers telephoned 500 randomly selected telephone numbers of hotels and motels from thc alphabetical listings in the yellow pages of tnctropolitan area telephone books. Each hotel or motel manager who was contacted was informed that the study was being undcrtaken by a university and responses would be held in strict confiden- tiality.

The sampling frame of tnetropolitan areas was selected in ordcr to provide geographic dispersion. These areas were Scattle, Los Angeles, Salt Lake City, Denver, DallasIFort Worth, Cleveland, Chicago, Boston, Atlanta, and Miami. In total, these encompass all of the Federal Reserve districts. The regions include the Pacific northwest, southern California, Rocky Mountain, southwest, midwest, Ncw England, and the southeast. Fifty hotels and motels were chosen from each of these cities. The respon- dents were the managers of the units in question.

The telephone calls elicited 314 completed interviews, producing a response rate of 62.8%. Of these 219 were small firms and 95 were large firms. Large firms were defined as those with more than 30 regular full-time employees, and small firms as those with thirty or less cm- ployees.

The interview guide listed twenty activities that hotel and motel manag- ers might undertake in the course of their daily work. The author con- ducted a content analysis of chapters dealing with laws, ethics, and social responsibility appearing in six top selling hotel and motel management textbooks, in ordcr to derive the actions. These were activities that are either illegal or potentially unethical, depending on the circumstances surrounding the activities. Half of thc activitics are specifically in viola- tion of laws at the federal level or have been interpreted by the courts as being in violation. Thc appendix sets forth a description of cach activity. The other half of the activities were not in violation with federal Icgisla- tion, despite the fact that some hotel and motel managers might perceive them to be unethical.

Thc respondents were asked to express their judgments about the activi- ties on a five point scale that was anchored by the terminology "obviously illegal," "probably illegal," "gray area," "probably Icgal," and "ob- viously legal," mcasurcd against federal laws. The respondents were only asked to respond to the legality issue. They were not asked to indicate if the activitics were ethical or not.

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Two hypotheses wcrc tested:

1. The hotel and motel managers will correctly identify eleven or more of the activities as legal or illegal.

2. The small hotel and motel managers will correctly identify a signifi- cantly smaller proportion of the activities than will the large hotel and motel managers.

I-Iypothesis one was based upon the premise that thosc who managed the units in question were substantially informed by their academic stud- ies, experience in the industry andlor training by the hotel or motel compa- ny that they had a grasp of important legal mattcrs affect~ng their industry and jobs. The federal laws are of such significance that it would be logical to presume that the managers are aware of these.

The second hypothesis is based on the presumption that small hotel and motel managers lack both the background and the ability to develop the same comprehension of the laws as do the large hotel and motel managers. Many managcrs of small firms have a wide variety of duties, many of which are more operational than they are managerial. As a conscqucnce, they do not have the time available to develop specialized knowledge in legal mattcrs. In many cases, these individuals do not have the same degrcc of formal education and company training as the larger company managers have. Hcncc, it appears logical that they would not be as aware of the federal legislation. Finally, largc companies tend to be more tightly scrutinized by regulatory authorities (Schiller, 1991). Managers are cogni- zant of this condition and can be expected to infonn themselves about the laws, as a rncans of mitigating the possibility of negative legal actions.

The results of this study were analyzed employing Tukey K tcsts. This procedure is appropriate when the sample sizes of the groups to bc compared are not too unequal, as is the case in the present study. Many researchers prefer the Tukey method over the Scheffe and Bonferroni procedures when the sample sizes are not too unequal (Milliken and John- son, 1992).

RESEARCH RESULTS

This scction sets forth the data which were collected and the output of the analysis. Each of the two hypotheses arc discusscd in turn.

Hypulhesis One

The responses of the sample members to the question of the legality of the issues on the intc~vicw guide were converted into means. Thus, there

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was a mean value for each of the twenty activities studied. Tablc I sets forth the mean values for the sample at large.

The decision rule was adopted that a mean value larger than 3.0 sig- naled that the respondents perceivcd it as illegal. Conversely, if the mean value was srnaller than 3.0 it was assumed that the respondents believed it to be legal. A mean of 3.0 identificd a condition of "no opinion," where there was no clear perception as to the legality of the activity. Significant

,differences between each mean value and 3.0 were assessed through Tukey K tests at the .05 level. The last column in thc table specifies the legal status of each activity set forth in the interview guide.

According to the table, the respondents, taken as a group, incorrectly perceived the legal status of ten activities. These were:

1. Predatory pricing on room rates. 2. Falsely telling guests that a security guard is in place. 3. Turning in incomplete reports to higher management. 4. Agreeing to charge lower room rates than rivals. 5. Telling guests they are getting a bargain when this is untrue. 6. Aiming the marketing effort only at high income guests. 7. Getting testimonials from people who have never been guests. 8. Preempting competition with room rates below costs. 9. Instigating false negative rumors about competitors.

10. Agrecing with rivals to assess identical phone charges.

A total of sevcn of these activities were illcgal but were perceived as legal by the respondents. Only three of the activities were legal but were per- ceived to be illegal. The principal bias, then, is toward being unaware of federal legislation, instead of incorrectly interpreting that various activities are not in compliance.

The hotel and motel managers madc accurate perceptions in ten cases. Hence, thcy correctly distinguished one half of the legality associations, suggesting that they do have insights into a considerable number of the constraints imposed upon them by federal statutes. However, their collec- tive response was incorrect in fifty percent of the cases and these inaccu- rate perceptions arc in the domain of regulations that contain substantial penalties. The data in Table 1 do not support hypothcsis 1.

A sccond line of analysis was to considcr the responses by size of firm. Table 2 sets forth the results of the inqui~y. The measures were treated to the same tests of significancc as those set forth in Tablc 1.

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TABLE 1. Perceptions ol the Legality of Various Activities'

Activity Mean Scale Value Legal Status

Collusion with competitors over 3.8 Illegal room rates

Charging higher room rates than 1.2 Legal rivals

Basing sales forecasts on personal 1.5 Legal opinion rather than objective methods

Predatory pricing on room rates 1.8" Illegal Falsely telling guests that a 2.4" Illegal

security guard is in place Turn in incomplete reports to 3.3" Legal

higher management Suggest that guests stay here on 1.7 Legal

their next visit Agree to charge lower room rates 2.2" Illegal

than rivals Steal trade secrets 4.5 Illegal Tell guests they are getting a 2.2" Illegal

bargain when this is untrue Fail to provide prompt 2.3 Legal

housekeeping service Aim the marketing effort only at 3.6" Legal

high income guests Get testimonials from people who 3.7" Legal

have never been guests Preempt competition with room 2.1" Illegal

rates below costs Instigate false negative rumors 2.2" Illegal

about competitors Maintain unsafe facilities 4.9 Illegal Agree with rivals to assess 2.2" Illegal

identical phone charges Keep room temperatures below 1.7 Legal

legally mandated limits Provide discounts to loyal guests 1.3 Legal Give room discounts to companies 2.0 Legal

who book our rooms frequently

The intewiew guides described each activity in detail. The descriptions appear in the appendix.

" Indicates that the respondents' mean value on the legality of an activity was in error. Signilicant differences between mean values and 3.0 were assessed by Tukey K tests at the .05 level.

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TABLE 2. Perceptions of the Legality of Various Activities* by Size of Company

Mean Scale Value Activity Larger Firm Small Firm Legal Status

Collusion with competitors over 4.0 3.5 Illegal room rates

Charging higher room rates than 1 .I 1.4 Legal rivals

Basing sales forecasts on personal 1.4 1.7 Legal opinion rather than objective methods

Predatory pricing on room rates 2.0' 1.5' Illegal Falsely telling guests that a 3.4 1.6' Illegal

security guard is in place Turn in incomplete reports to 2.9 3.7' Legal

higher management Suggest that guests stay here on 1.4 1.9 Legal

their next visit Agree to charge lower room rates 2.5' 2.0' Illegal

than rivals Steal trade secrets 4.6 4.4 Illegal Tell guests they are getting a 2.9 1.7' Illegal

bargain when this is untrue Fail to provide prompt 2.0 2.5 Legal

housekeeping service Aim the marketing effort only at 2.8 4.4' Legal

high income guests Get testimonials from people who 3.5' 3.9' Legal

have never been guests Preempt competition with room 2.4* 1.9' Illegal

rates below costs Instigate false negative rumors 2.8 1.6' Illegal

about competitors Maintain unsafe facilities 4.9 4.9 Illegal Agree with rivals to assess 2.7' 1.8' Illegal

identical phone charges Keep room temperatures below 1.5 1.9 Legal

legally mandated limits Provide discounts to loyal guests 1 .I 1.5 Legal Give room discounts to companies 1.7 2.2 Legal

who book our rooms frequently

The interview guides desclibed each activity in detail. The descriptions appear in the appendix.

" Indicates that the respondents' mean value on the legality of an activity was in enor. Significant dilferences between mean values and 3.0 were assessed by Tukey K tests at the .05 level.

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The mean scale values in the table confirm the hypothesis that hotel and motel managers employed by small firms are lcss accurate in their percep- tions than are those working for large companies. In the large firm sample, five of the mean scale values are of the magnitude that they signify erro- neous perceptions on the part of the sample at large. The corresponding number of inaccurate mean perceptions for small companies is ten. Twenty five pcrcent of the practices evaluated by large enterprise manag- ers and fifty pcrccnt evaluated by small company personnel were in error. Further, for activities where both large and small finns were in error, the mcan scalc valucs for thc smaller firms were further away in magnitude from the cutoff point for error. It appears that the largcr company represen- tatives are in possession of a superior knowledge of thc operation of the federal laws, as predicted by hypothesis 2.

Significantly, both the large and small firm rnanagcrs made a large proportion of their erroneous estimates of legality that pertained to the antitrust laws. It appears that there is considerable misinformation as to what the antitrust laws really prohibit, especially in the field of price collusion. This is somewhat surprising since price collusion is a topic that has received considerable attention in the literature and in the popular press.

SUMMARY AND CONCLUSIONS

This inquiry was undertaken to asscss thc extent to which a sample of hotel and motel managers employed by large and small companies could accurately differentiate legal from illegal practices, as set forth in federal Icgislation. For the sample at large, thc rnanagcrs were able to accurately delineate the practices in fifty percent of the cases. A contrast between large and small companies indicated that s~nall company managers were less accurate than large firm managers in identifying illegal and legal practices.

The results of the study suggest that hotel and motcl managers, particu- larly those who work for smaller companies, need more trainingleduca- tionlsupe~vision inputs into the area of federal regulation of business prac- tices. If this is not accomplished, the managers and their employers are susceptible to prosecution on the part of government prosecutors and lawsuits on the part of othcr parties, including colnpetitors and customers (Meyerwitz, 1989). Another potential undesirable consequence is the loss of goodwill resulting from negative publicity in the media.

The scope of this study was restricted to federal legislation. It is entirely possible, however, that hotel and motel managers are cqually not informed

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Robiri 7: Petersort 11

or even lcss informed as to the legality of business practices according to state and local regulations. Further inquiries-those which probe into thcir state of knowledge as regards these constraints-are recornmendcd.

Certainly, the superiors of hotel and motel managers in both large and small firms are well-advised to monitor the extent to which their em- ployees possess knowledge about the legality of federal, state, and local laws. Othcr regulations, in addition to thosc mentioned in this paper, could be covered by this measurement cffort, depending upon the particular legal environment confronting the finn. If shortcomings in knowledge are revealed, stcps could be takcn to correct the shortcomings. This could include education, training, more cxtensive supervision, and access to legal counsel. The outcome of well-conceived programs could be hotel and motel manager practices that are morc in congruence with the continu- ally-expanding scope and depth of federal regulation.

Those who supervise hotel and motel managers should take steps to insure that they have a reasonable knowledge of the federal law. This will decrease the probability that they will take actions in violation of the law and that they will guide their subordinates in directions that are legal. Thc supervisors are responsible for designing processes, as through training and supervising, that reducc the probability of legal violations by those undcr their command. In order for this to occur, however, the supervisors themselves must be knowledgeable about the legislation.

REFERENCES

Bloom, Paul N., George R. Milne and Robert Adler (1994), "Avoiding Misuse of New Information Technologies: Legal and Socictal Considerations," Jorlrrtal of Marketing 58 ( I ) , 98-1 10.

Boedecker, Karl A., Fred W. Morgan, and Jeffrey J. Stoltman (1991), "Legal Dimensions of Salespersons' Statements: A Review and Managerial Suggcs- tions," Jour~ml of Mar.keti11g 55 (I), 70-80.

Boedecker, Karl A., Fred W. Morgan, and Linda Berns Wright (1995), "The Evolution of First Amendment Protection for Commercial Speech," Jotrt.nnl of Marketirtg 59 (I), 38-47.

Bowers, Diane K. (1991), "The Privacy Challenge, Part I," Marketing Research 1 1 (2), 59-62.

California v. American Stores Co. (1990), CCH 69,003 (S. Ct. . , Apr. 1990); BNA ATRR No. 1464 (May 3, 1994), 674.

Guiltinan, Joseph P. and Gregory T. Gundlach (1996), "Aggressivc and Predatory Pricing: A Framework for Analysis," Jovrrtal of Marketing 60 (3), 87- 102.

Gundlach, Gregory and Patrick E. Murphy (1993), "Ethical and Legal Founda- tions of Relational Marketing Exchanges," Jour)tal of Mar,ketirrg 57 (4), 35-46.

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Hcil, Oliver. P. and Arlen W. Langvardt (l994), "The lntcrfacc Between Compet- itivc Market Signaling and Antitrust Law," Jour?lal of Marketing 58 (3), 8 1-96.

Hylton, Keith N. (1991). "Economic Rents and Essential Facilities," Briglratn Youttg Ut~iversily Law Review 191 (3), 1243-1289.

Klevorick, Alvin K. (1993), "The Currcnt State of the Law and Economics of Predatory Pricing," Anliwust arid lndirstrial Orgarlizatiorl 83 (2), 83, 162.

Litan, Robert E. (1991), "The Safety and Innovation Effects of U.S. Liability Law: The Evidence," A~rrericatl Ecot~orriic Review 8 1 (5), 59-64.

Meyerwitz, Steven A. (1989). "How to Protect Yourself from your Customers," Biisi~ress Markeling 74 (2). 76-78.

Milliken, George and Dallas E. Johnson (1 992), A~tal)~sis ofMessy Dola. London: Chapman & Hall, 36-38.

Morgan, Fred W. and Karl A. Boedecker (l980), "The Role of Personal Selling in Products Liability Legislation," Jolrrnal of Persotla1 Selli~lg & Sales Manage- rnet~t I (I), 34-40.

Sack, Steven Mitchell (1985), "The Risk of Dirty Tricks," Sales & Markelir~g Manageme~lt I32 (6), 56.

Sack, Steven Mitchell (1985), "Watch the Words," Sales & Marketing Matlage- nte!tt 132 (6). 57.

Schiller, 2achaiy (1991), "Procter & Gamble: On a Short Leash," Busitless Week 2562, pp. 76-78.

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APPENDIX

Written Descriptions of the Activities Studies (Providcd to each respondent)

1. Collusion with competitors over room rates: Making agreements with rival hotels or motels which stipulated the rates each competi- tor would charge to its guests.

2. Charging higher room rates than rivals: Assessing guests higher room rates than those assessed by competitors to their customers.

3. Basing sales forecasts on personal opinion rather than objectivc methods: Using subjective methods, rather than quantitative tech- niques, to derivc expected future sales.

4. Predatory pricing on room rates: Setting room rates at low levels in order to drive competitors out of business.

5. Falsely telling guests that a security guard is in place: Relating to guests that the firm uses security guards, when this is not the case.

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6. Turn in incomplete reports to higher management: Purposefully omitting important facts in a report or memorandum to a superior in the company.

7. Suggest that guests stay here on their next visit. Recommend that guests return to the motel or hotel on their next trip.

8. Agree to charge lower room rates than rivals: Reach an accord with rival hotels and motels where the cornpany will assess smaller room rates.

9. Steal trade secrets: Acquire important confidential knowledge pos- sessed by rivals without their knowledge or consent.

10. Tell guests they are getting a bargain when this is untrue: Falsely informing guests that they are receiving a room rate that is lower than that charged to other guests.

I I. Fail to provide prompt housekeeping service: Delay housekeeping beyond the time promised to guests.

12. Aim the marketing cffort only at high income guests: Spend most of your promotion money and effort on potential guests with large incomes.

13. Get testimonials from people who have ncver been guests: Quote endorsements from individuals who have ncver stayed at the hotel or motel.

14. Preempt competition with room rates below costs: Keep new hotels and motels from entering your market by pricing rooms below costs, making it impossible for new firms to make a profit.

15. Instigate false negative rumors about competitors: Start and spread untrue rumors about rivals that could harm their business.

16. Maintain unsafe facilities: Fail to provide structures, furniture, or equipment that protects the safety of guests.

17. Agree with rivals to assess identical phone charges: Enter into com- pacts with competitors, whereby all will charge the same amount for local or long distance calls.

18. Keep room temperatures below legally mandated limits: Fail to provide heating levels set forth in federal regulations.

19. Provide discounts to loyal guests: Furnish rate incentives for re- turning guests.

20. Give room discounts to companies who book our rooms frequently. Provide rate incentives to firms that use the hotel or motel on a multiple use basis.

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