Transcription

1

2 Introduction Rapid expansion of globalization, technological development as well as the management process have made performance measurement crucially important for survivals of organizations, most of which used only financial variables to measure their performance (Lebas, 1995). It was criticized that the use of such indicators was not in concordance with sustainable management because financial performance indicates the past rather than the future; attaches more importance to short-term performance; and the design of the indicators is too simple and does not go hand in hand with behavior of customers or employees. Furthermore, performance measurement in the past was not relevant to the present organizational needs and strategies. Therefore, at present, performance measurement puts more emphasis on variables that are non-financial such as customer satisfaction, and quality of products or services. The emphasis that has gained more importance is on indicators related to long-term performance such as competitiveness or innovation giving importance to stakeholders. The emphasis is also on indicators that are in accordance with organizational strategies from organizational vision, missions, goals, objectives to strategies. These are used in building the framework of critical success factors (CSF) and in creating performance measuring tools that are key performance indicators (KPI) to measure important performance of the organization that can be shown in figures to reflect efficiency and effectiveness of the organization and its internal units (Porter, 2008). Presently, hotel business is of importance for the tourism industry that attracts money from abroad, reduces deficit and makes balance of payments, creates employments, distributes incomes, and results in expansion of continuing business such as construction, transportation, restaurants, handicrafts, and other related services. In addition, hotel businesses try to increase their competitiveness by implementing new service development strategy, and price strategy taking into account critical success factors (CSF), and lastly, by evaluating their performance from the strategies that have been used in order to check their position to communicate the position, confirm priorities, and to monitor the compelling progress (Pasunon, 2008). The important question arising is why a change is needed. Every change shows that what exists is not good enough. The next question is what is wrong with the performance evaluation system for hotel business. In fact, performance of all aspects at present are subject to changes, whether they are environmental, social, economic, technological, or even cultural changes. Hence, it can be seen that performance measurement tools that were suitable in the past may not be suitable later on, and the performance evaluation system for hotel business is of no exception. If it is not changed, the hotel may become a backward organization and may not be able to continue its performance in the long run. And the important questions are what types of tools, procedures and factors should be used for performance evaluation of hotel business; what and how key performance indicators for each aspect should be the same or different; and what the problems and obstacles to the performance measurement are. As the structures of key performance indicators of each business are different, it is interesting to investigate and develop key performance indicators that are clear, suitable and reliable for hotel business so that hotel business and continuing businesses can apply and determine key performance indicators that are efficient and effective for their organizations. The objective of this study is to develop key performance indicators for hotel business so that entrepreneurs and managements of hotel businesses, service businesses or other continuing businesses will understand the characteristics of the tool, its procedure, and key factors in the design of key performance indicators of hotel business, and so that other academics Executive Journal 33

3

4

5 According to the concept of the balanced scorecard, there are four perspectives: financial perspective, customer perspective, internal process perspective, and learning and growth perspective. In order to have a balance between measurements of financial and non-financial performance, short-term and long-term performance, concordances of strategies and goals that take stakeholders into account, and the balance between internal and external factors when applied with hotel business evaluation, performance will be considered from the lower part of the business which is the learning and growth perspective to the financial perspective (Figure 1). Figure 1: Theoretical Framework (Kaplan & Norton, 1996) Learning and growth perspective From the learning and growth perspective, new service development (NSD) is considered an important long-term performance indicator (Ooncharoen, 2009). The four important hotel development innovations are: management innovation, external communication innovation, service scope innovation, and back office innovation (Orfila-Sintes & Mattsson, 2009). For learning and growth of the organization, job satisfaction is a performance indicator from internal factors that require importance in recruitment, training and development, and retention of good employees (Lam & Woo, 2001). These include colleagues, work atmosphere, financial and non-financial incentives and employee satisfactions which can have effects on learning and growth of the organization (Yang, 2010). Moreover, job satisfaction can also result in decreasing job change rate. Good attitudes towards the job can have effects on knowledge sharing in the organization, too. Another internal indicator is the communication channel which is part of organizational culture while the external indicator of learning and growth perspective is the corporate image which means the image of the organization on peopleûs mind including its management, products and services (Laphirattanakul, 1997). Therefore, the corporate image also has a broad meaning covering the business itself, its management and its products and services. In addition, another key indicator that reflects the learning and growth of the organization is competitiveness in which diversified capabilities are related in the same direction to business performance which has been improved (Yeund & Lau, 2005). Internal process perspective The internal process perspective shows the internal process or important activities of the organization that must be carried out to get the value or what the customer wants starting from organization commitment which means the personís feeling towards the organization that holds the person onto the organization consisting of affective, continuance, and normative (Allen & Meyer, 1990). Organization commitment has a positive relation with employeesû efficiency and behavior related to work including quality of work life (Zahra, 1984). Interactions between employees and clients, rationality of supervision, information delivery and standard operation procedure are indicators for important work procedure of service and hospitality business (Kuo & Chen, 2008). In addition, website management is also necessary for hotel business. The website should be composed of important information on hotel facilities, contact, room reservation and website management (Chung & Law, 2003). 36 Executive Journal

6 Customer perspective The customer perspective shows what the organization wants to see from its clients including perspective on value or what the customer wants from the organization linking the learning and growth perspective with the internal process perspective. The most important performance indicators for hotel business are service quality consisting of physical aspects which are stylish comfort, room quality, and other facilities while the other is non-physical or service experience which comprises high-quality employees, specific characteristics of employees, and quick service (Wilkin, Merrilees, & Berington, 2007). The service quality should be assessable according to the expectancy theory in terms of expectations and perceptions where the SERVQUAL technique can also be used. For hospitality business, important indicators in the customer perspective include service timing, customer satisfaction, customer growth rate, customer retention. Moreover, service quality, room quality, and value are three indicators that will make customers return to stay in the hotel again (Choi & Chu, 2001). In addition, every hotel should have guest comment cards (GCCs) to measure customer satisfaction (Su, 2004). Financial perspective The financial perspective shows the organizationûs financial performance related to three non-financial perspectives to answer questions about financial goals by comparing productivity of hotel business where there are value-added per labor and value added per room (Kaosa-ard et al., 2005). Important indicators for work performance comprise cost control, service quality, information delivery, and corporate image (Kuo & Chen, 2008). In fact, these are the most important indicators for work performance and benchmarking of hotels of different sizes by using value added performance to determine factors with high competency by comparing them with those of other hotels with different sizes. This is to use them as strategies for input management which can improve industrial productivity. Hotel business with fixed returns to scale, value-added business depends on capital factors and labor factors. Small-sized hotels should opt for labor factors in adding vale to the business while the value added for medium-sized hotels depend on the number of rooms ready for sale, and the value added for large-sized hotels depend on the management style (Brown & Dev, 2000). The average room rate (ARR) and occupancy rate can affect business strategy setting as a result of the number of room, hotel age, market conditions, and housekeeping staff per room. The number of room and housekeeping staff per room do not have effects on the low-level price-setting strategy but the hotel age and market conditions can have effects on the high-level price-setting strategy (Hung, Shang, & Wang, 2009). The low-level price strategy depends on cost system design, size, level of competitiveness, number of service variants, and management status (Pavlatos & Paggios, 2009). As for the sale growth rate (SGR) and profit growth rate (PGR), even though they are performance measurement for the past, they can reflect the trend and are still important indicators for hotel business performance measurement (Kuo & Chen, 2008). In addition, it is found that socialenvironmental responsibility (SER) can have positive effects on financial performance which can be measured with returns on assets (ROA). From studies on benchmarking hotel businesses in important tourist attractions in Thailand, it was found that when considering the basic performance indicators such as check-in rate, average room rate, and revenue per room, hotel businesses in Bangkok had the best performance. When comparing only five-star hotels, it was found that Chiangmai had a higher average room rate and revenue per room ready for sale than hotels in other major tourist attractions provinces. However, Chiangmai had a lower check-in rate than other major tourist attractions provinces. On comparing revenue indexes Executive Journal 37

7 of leading hotels in Thailand and those in other countries, it was found that the revenue index (daily revenue per room) for Thailand was lower than that of hotels in Europe and the United States of America. The revenue index for Thailand was about 20% lower which reflects the world hotel pricing structure where the average room price for hotels in Asia is lower but where the average check-in rate is more or less the same as worldûs leading hotels (Kaosa-ard et al., 2005). Conclusion and recommendations The study found that the goals of performance measurement are important and necessary for the organizationûs sustainable existence because the results of performance measurement are crucial information that enables all levels of management to evaluate activities that the organization has done including the past decisions that showed how much the organization had achieved according to the objectives. They also showed the weak points that need to be improved and future trends. Nowadays there is a widespread of many performance measuring tools and each tool can be divided into 6 indicators that are used to measure performance, namely: effectiveness, efficiency, quality, timely, productivity, and security which link strategies into practice by determining indicators for these levels: organization, division, and person. Development of performance indicators from the concept of balanced scorecard that link performance measurement in terms of finance and non-finance, short-term and long-term, in accordance with the organizationís strategies and goals, taking stakeholders into account, and balancing between internal and external factors are important components of the tool for modern management. It was found that the learning and growth perspective for hotel management must be linked with recruitments, personnel development, personnel retention, and organizational development to make it a learning organization with new innovations as goals for developing a sustainable organization. This consists of indicators for leadership of management at all levels; indicators for having mechanisms that provide relevant knowledge and skill development for personnel that is in accordance with the organizationûs vision and missions; indicators for employee satisfaction towards financial and non-financial returns; indicators for the turnover rate of employees which are related to indicators for the number or percentage of work development or new services. The learning and growth perspective is linked with the internal development process in which the indicators consist of indicators for the information perception process in the organization; indicators for the number of steps in work standards; indicators for the number or percentage of mistakes; indicators or percentage of work improvement which are related to indicators for common-value index or commitment to the organization. The learning and growth perspective and the internal process perspective can have effects on customer perspective where indicators consist of indicators for public relations; indicators for the differences between customersû expectations and satisfaction; indicators for the increasing and decreasing rates of new customers; indicators for the increasing and decreasing rates of existing customers; and indicators for organization image perceived by stakeholders which create a balance between internal and external factors. Lastly, the financial perspective with indicators for the average check-in rate; increase sale rate; profit increasing rate which reflects future trends of performance; the average net profit which reflects competency in attracting revenue and cost control; and indicators for the returns rate from assets which reflects the business competence in making profit. Most of the indicators mentioned in this article are indicators for output followed by the process which can explain the relationship between observed variables and latent variables (Figure 2). 38 Executive Journal

8 Figure 2: Conceptual Framework from Documentary Research It is recommended that for implementation of performance measurement, indicators must be clear according to the goals and plans must be in accordance with strategies. It is also necessary to test the indicators for which the managementûs experience in developing and improving the performance measurement style so that it is suitable for the organization. In implementing performance measurement, what should be taken into consideration about the indicators are: their feasibility, difficulty, correctness, the number of indicators that can affect information collection. Furthermore, the management and employees have to build creative atmosphere, see that development of indicators must be done continually; and internal communication must be carried out in the organization to make employees realize the importance of the development of indicators. As a result, a change can take place for the better to upgrade hotel business in Thailand so that it is more competitive. For further study, it is recommended that the concept of developing indicators should be tested with empirical research to confirm the development of key performance indicators for hotel business in Thailand. Executive Journal 39

9 References Akbaba, A. (2006). Measuring service quality in the hotel industry: A study in a business hotel in Turkey. International Journal of Hospitality Management, 25, Allen, N. J., & Mayer, J. P. (1990). The measurement and antecedents of affective, Continuance and normative commitment to the organization. Journal of Occupational Psychology, 63, 1-18 Brotherton, B., & Shaw, J. (1996). Towards an identification and classification of critical success factors in UK hotels plc. Journal of Hospitality Management, 15(2), Brown, R. J., & Dev, S. C. (2000). Improving productivity in a service business vidence from the hotel industry. Journal of Service Research, 2(4), Chaopraseart, C. (2003). Service Marketing. BKK: SE-EDUCATION Co.Plc. Choi, T.Y., & Chu, R. (2001). Determinants of hotel guestsû satisfaction and repeat patronage in the Hong Kong hotel industry. International Journal of Hospitality Management, 20(3), Chung, T., & Law, R. (2003). Developing a per formance indicator for hotel websites. International Journal of Hospitality Management, 22, Fernandez, M., & Bedia, A. (2004). Is the hotel classification system a good indicator of the hotel quality? An application in Spain. International Journal of Hospitality Management, 25, Getz, D., & Pertersen, T. (2005). Growth and profitoriented entrepreneurship among fam ily business owners in the tourism indus try. International Journal of Hospitality Management, 24, Gray, S. W., & Liguori, S. C. (2003). Hotel and motel management and operations. Pearson Education Indochina Ltd. Gray, S. W., & Siguori, S. C. (2004). Hotel management (Chatrungrueng, P. & Watanaleungarun, W., Trans.). BKK: Peason Education Indochina Ltd. Hung, W., Shang, J., & Wang, F. (2009, October 12). Pricing determinants in the hotel industry: Quantile regression analysis. International Journal of Hospitality Management. Kaplan, R., & Norton, D. (1992, Jan-Feb). The balanced scorecard measures that drive performance. Harvard Business Review, 70(1), Kaplan, R., & Norton, D. (1996, Jan-Feb). Using the balanced scorecard as a strategic management system. Harvard Business Review, 76. Kaosa-ard, M., Khrufoo, N., & Unthong, A. (2005). Thailand hotel industry. Social Research Institution. Chiang Mai University. Kinicki, A., & Williams, B. (2006). Management: A practical introduction. Mc Graw Hill International Enterprises Inc. Kritpon, V. (2010). Hotel Accounting. Bangkok. Chulalongkorn University. Kuo, Y, & Chen P. (2008). Constructing performance appraisal indicators for mobility of the service industries using Fuzzy Delphi Method. Expert Systems with Applications, 35, Lakanaadisorn, V. (2009). Balanced Scorecard. Bangkok. SE-EDUCATION Co.Plc. Lam, K., & Woo, S. (2001). Measuring service quality: a test-retest reliability investigation of SERVQUAL. Journal of the Market Research Society, 39(2), Laphirattanakul, W. (1997). Public Relationship. Bangkok. Chulalongkorn University. Lebas, M. J. (1995). Performance measurement and performance management. International Journal of Production Economics, 41, Executive Journal

10 McPhail, R., Herington, C., & Guilding C. (2008). Human resource managersû perceptions of the applications and merit of the balanced scorecard in hotels. International Journal of Hospitality Management, 27, Neely, A. (1998). Measuring Business Performance: Why, What and How. The economist in association with profile book Ltd. London. Ooncharoen, N. (2009). New service development (NSD) strategy, and its antecedents and consequences: An empirical examination of hotel business in Thailand. Journal of International Business and Economics, 9. Orfila-Sintes, F., & Mattsson, J. (2009). Innovation behavior in the hotel industry. The International Journal of Management Science, 37, Parasuraman, A., Zeithaml, V. A., & Berry, L.L. (1990). SERVQUAL: A multiple-item scale for measuring consumer perceptions of service quality. Journal of Retailing, 64(1), Pasunon, P. (2008). Data envelopment analysis. Thammasart Business Journal, 31, Pavlatos, O., & Paggios, L. (2009). A survey of factors influencing the cost system design in hotels. International Journal of Hospitality Management, 28, Phillips, A. P. (1999). Performance measurement systems and hotel: a new conceptual framework. International Journal of Hospitality Management, 18, Porter, M. E. (2008, Jan). The five competitive forces that shape strategy. Harvard Business Review Phrombuth, V., et al. (2007). KPIs Principle to Practice. Thailand Productivity Institute. SE-EDUCATION Co.Plc.. Rattanavirikul, K. (2551). Why Hotels Fail? Thai Hotel and Hospitality Management Associattion. Bangkok. Advanced Hospitality Consultant co. Su, Y. A. (2004). Customer satisfaction measurement practice in Taiwan hotels. International Journal of Hospitality Management, 23, Venkatraman, N., & Ramanujam, V. (1986). Measurement of business performance in strategy research: A Comparison of approaches. Academy of Management Review, 11(4), Wilkins, H., Merrilees, B., & Herington, C. (2007). Towards an understanding of total service quality in hotels. Hospitality Management. 26, Yang, J. (2009). Antecedents and consequences of job satisfaction in the hotel industry. International Journal of Hospitality Management. 29, Yang, J. (2010). Antecedents and consequences of knowledge sharing in international tourist hotels. International Journal of Hospitality Management, 29, Yeund, P., & Lau, C. (2005). Competitive actions and firm performance of hotels in Hong Kong. International Journal of Hospitality Management, 24, Yu, M., & Lee, B. (2009). Efficiency and effectiveness of service business: Evidence from international tourist hotels in Taiwan. Journal of Tourism Management, 30, Zahra, S. A. (1984). Antecedents and consequences of organizational commitment: An integrative approach. Akron Business and Economic Review, 15(3), Executive Journal 41