Open Innovation as a Growing Trend in the Hotel and Tourism Industry

Town and Country Resort-San Diego

Innovation is increasingly seen as one method of improving upon the economic fundamentals within industries. As businesses develop new products and services they become more competitive and able to succeed in a highly competitive global environment. Research by Artic (2013) helps shed light on the potential for open innovation and economic improvement of the hard hit hotel industry in Slovenia. Their findings highlight potential uses of open innovation in meeting customer needs and expectations.

The author separates innovative societies from non-innovative societies. Innovative societies are those that seek to enhance their markets by developing new products and services that in turn can influence jobs and economics. Routine societies try and maintain existing systems without creative destruction whereby economic growth become stagnant. Stagnation means eventual decline as other countries zoom to fill market gaps.

Open innovation is defined by Chesbrough (2003, pg. 12) as, “a model that assumes that companies can improve their business to use external and internal ideas, and the internal and external paths to market, which will contribute to their development”.  This process occurs when participants, whether corporate or individual, brings forward ideas and technology to increase the value added nature of products/services. These improved products/services make companies more competitive in the global marketplace. 

According to Sloane (2011), open innovation reduces costs, improves productivity, generates innovative ideas and reduces the time it takes to put new products on the market. In the hotel industry, open innovation solicits ideas from both customers as well as other industry stakeholders to improve upon the overall development of the industry. The ideas and suggestions are used to develop better services and service management to raise the value of the hotel experience.

The author contends that open innovation seeks to foster synergy of stakeholders, resources, and competitive advantage. Stakeholders are seen as suppliers, related businesses, inventors, etc. while resources are generally seen as knowledge and information. Competitive advantage is fostered as new products and services hit the market at a faster rate thereby maximizing profits. 

The researcher used 35 Slovenian hotels in an attempt to understand the hotels understandings of their demographics, the macroeconomic environment and open innovation. The found that 63% of participants believe that entrepreneurship and globalization dictate trends of development, 75% that innovation is a major developmental force and 75% believe that it will be even more important in the future to understand the needs of guests. Only 38% of hotel administrators heard of the concept of open innovation but more than half were sure they were using it. 

The author’s study focused on open innovation awareness and use in the Slovenian hotel industry. The study was limited to customers alone. There are other factors of open innovation which could include cross-industry use for major product/service development, supplier collaboration for transactional efficiency, governmental usage for community building in addition to customer usage. The study does highlight how open innovation can increase the competitive stance of companies by encouraging new product/service development as well as reduce time to bring those products/services to market. 

Artic, N. (2013). Open innovation as a chance to overcome economic crisis in hotel industry. Tourism in South East Europe, 2.

 

Chesbrough, H. (2003). The era of open innovation.  MIT Sloan Management Review,  44 (3). pp. 35-41.

Sloane, P. (2011). The brave new world of open innovation. Strategic Direction, 27 (5), pp. 3-4.

NLRB and Arbitration Analysis in the Hospitality Industry

The hospitality industry has drawn new interest due to the economies dynamic shift into a service society. Such industries employee a large percentage of employees and have become ripe for unionization. With attempts to unionize hospitality workers employers are seeking methods of avoiding such practices. Once unionization has occurred both the employer and the employees, become bound to the collective bargaining agreements (CBA). Research by LaVan and & Katz helps to understand some of the strategic considerations employers may ponder when involved in contract interpretation disputes.

The hospitality industry is growing at a rapid rate and has drawn additional interest from research. Since 2002, the hospitality industry has been expanding at appropriately 12% a year while other sectors of the economy were on the decline (Bureau of Labor Statistics, 2012). The food and beverage industry is also expected to grow at this same rate until at least 2020. 

With such growth, the hospitality industry is a prime target for unionization. The Unite-Here union being one of the largest unions seeking representation in bars, restaurants, resorts, casinos, fast food and many other similar type of companies. Because of this growing interest in unionization within this industry, employers have been actively seeking ways to avoid having third party entities negotiate on behalf of their employees. 

Of course, unionization becomes more likely when there are poor management viewpoints that create a lack of trust between the employer and the employee. Strong unionization avoidance advice may include, “… good employers who do right by their employees don’t need a third party in their relationships” (Smith, 2011). Unionization then becomes a symptom of these poor relationships versus any inherent need of employees to negotiate on their behalf. 

When possible a truer economic relationship between the individual and the organization can foster through this creation of trust. However, these relationships can only exist to the extent that management listens to, engages with, and views employees as valuable contributors to the organization. A higher level of personal connection, transactional justice and mutual self-interest fosters the belief in the management and employer reducing the likelihood that employees will seek outside representation. 

When disputes between the employee (and union representation) and the organization does occur a grievance procedure and possible arbitration agreement comes into play. The grievance procedure attempts to allow for a mutual discussion and potential solution. When this conversation fails an arbitration or NLRB case may ensue. Since 90% of collective bargaining agreements contain arbitration clauses (Gould, 2006) this becomes a common method of dispute resolution.

LaVan and & Katz conducted an analysis of 66 NLRB cases and 104 arbitration cases and came to some interesting conclusions (2012). All of the cases were from the hospitality industry and published between 2001 and 2010. Sources for the information came from the databases of the Bureau of National Affairs, American Arbitration Association and IntelliConnect. 

Results:

-NLRB cases mostly included discipline, work rule violations, disorderly conduct, poor performance and employee theft.

-NLRB cases included hotels 35, restaurants 14, casinos 10, food services 10, and resorts 9.

-NLRB issues revolved around group issues rather than individual ones. Most of cases involved contract interpretation. 18 discharges, 4 suspensions and 2 disciplines.

-In arbitration cases, the employer prevailed most often while in NLRB cases the employee prevailed most often.

-In arbitration cases 61 involved changes to the grievance process, 23 involved management rights and 21 cases involved computation of wages.

In arbitration cases, the employer prevailed in 78% of all cases, 67% of benefits, 63% of grievance, and 50% in wage and overtime. 

Analysis and Business Application:

The research helps to highlight the concept that when given a choice between arbitration and NLRB it is much more advantageous to seek arbitration as rulings are predominately in favor of the employer. On the other hand, unions may be more open to NLRB cases as their highest chances of success are in this venue. The research also helped to provide a stronger theoretical basis for understanding unionization and contractual interpretations in the hospitality industry. NLRB filings are more focused on perceived group injustices as such cases are more expensive than arbitration cases. When the issues deal with particular employee grievances arbitration offers a more affordable choice.

Bureau of Labor Statistics (2012): Food and beverage serving and related workers. Retrieved May 5th, 2013, from http://www.bls.gov/ooh/foodpreparation-and-serving/food-and-beverage-serving-and-relatedworkers.

Lavan, H. & Katz, M. (2012). Current state of management/union relations in the hospitality sector. FIU Hospitality Review, 30 (2).

Smith, D. (2011). Union leaders aren't giving up on your crew. QSR Magazine Retrieved May 5^th, 2013 from http://www.qsrmagazine.com/store/union-leaders-arent-givingyour-crew.