Hospitality companies, by-and-large, have traditionally defined their business as selling services and experiences. As such, their strategies have evolved around two classic world views in strategy – determining and defending a competitive advantage through market positioning and resource endowment. Hence, it is not surprising that hospitality strategy courses have largely adopted a firm-specific view. Yet, with the bourgeoning digitalization of large swaths of society, global supply chains and an increased integration of non-traditional market players into the hospitality value chain, this perspective is losing its relevance. In fact, the COVID-19 pandemic has highlighted the interconnectedness of the hospitality industry both within its industry boundaries and beyond. This calls for a shift from the current firm-level perspective to a more ecosystem-level perspective, which will offer additional opportunities for business model innovation and organizational resilience. This will become increasingly important during periods of decline, such as the one that is arising due to the repercussions of the pandemic.
De-emphasizing the firm-centric perspective
Already before COVID-19 the strategic shifts of hotel companies towards a more ecosystem perspective was a reflection of the diminished relevance of firm-specific strategic initiatives. Whether it is players like Accor, who have promoted their approach to ‘augmented hospitality’ or M-Beta, Marriott’s travel innovation lab that co-creates the next customer experience jointly with its clients – we see a move to integrated ecosystems of traditional and untraditional hospitality companies. In fact, the degree of interconnectedness of the hospitality industry is shown in the global breakdown of supply-chains or the effect of lockdowns in response to the pandemic.
As Jacobides (2019, p.128) points out “in a growing number of sectors the firm and even the industry have ceased to be meaningful units of strategic analysis. We must focus instead on competition between digitally enabled designed ecosystems that span traditional industry boundaries and offer complex and customizable product-service bundles".
Incorporating an ecosystem perspective into strategy teaching that understands hospitality players as part of an interconnected web of industry participants is necessary to equip next generation hospitality managers with a strategic thinking that is reflective of their new reality. Thinking in terms of ecosystems also challenges the underlying business models of hospitality companies.
Emphasizing new business models
At the core of any strategy lies some form of innovation. Central to the innovation discussion within the hospitality industry over the past decade has been the discourse around new business models, such as the proliferation of the asset-light model (Blal & Bianchi, 2019). In fact, the KPMG Global CEO Outlook reported in 2015 that 74% of all CEOs believed that their company’s future competitive advantage would be challenged by competitor’s business model innovations.
Johnson and Lafley (2010) provide further insight according to which the majority of 26 companies that entered the Fortune 500 list between 1997 and 2007 owed their success to business model innovation. As the COVID-19 pandemic unfolds many more traditional business models in the hospitality industry will be challenged, requiring a deeper understanding as to how business models are created or get innovated. In the aftermath of the crisis, where most companies will struggle to survive and resources are scarce, educating next general hospitality professionals in business model innovation will take a more central role in corporate strategy courses. These business models also need to respond to a new reality where hospitality no longer operates in growth markets, but amid an environment in steep decline.
Incorporating organizational resilience
In 2019 alone, the global travel and tourism industry grew by 3.5%, outpacing global economic growth (World Travel and Tourism Council, 2019). As an industry characterized as a growth case for decades, strategy courses in most hospitality programs have thus far concentrated on the development and implementation of strategies that tap into evolving opportunities. However, these educational programs rarely (if ever) integrate courses into the curriculum that focus on responses to internal or external shocks to an organization.
Shocks, like COVID-19, have forced many hospitality companies to engage in strategic change. In more dire cases, some firms have had to turn their business completely around in response to survival-threatening decline (Schmitt, Raub, Schmid, & Harrigan, 2019). Hence, strategic change – defined as a deliberate attempt to alter an organization’s fundamental structures, key activities, and/or objectives – has moved from being a topic of intense debate amongst researchers to the forefront of educational programs in hospitality.
Strategic change - not least due to its consequential bearing on long-term survival and ability to sustain a competitive advantage - is a central topic that requires integration into our teaching going forward. Equipping hospitality managers with the skill set to respond to abrupt shocks may make the difference for a hospitality company’s survival in the years of decline to come.
- Blal, I., & Bianchi, G. (2019). The asset light model: A blind spot in hospitality research. International Journal of Hospitality Management, 76, 39-42.
- Jacobides, M. G. (2019). In the Ecosystem Economy, What’s Your Strategy? Harvard Business Review, 97(5), 128-137.
- Johnson, M. W., & Lafley, A. G. (2010). Seizing the white space: Business model innovation for growth and renewal. Harvard Business Press.
- KPMG (2015). KPMG’s Global CEO Outlook: The growth imperative in a more competitive environment. May 2015. Retrieved 06/04/2020
- Schmitt, A., Raub, S., Schmid, S., & Harrigan, K. R. (2019). Changing tires on a moving car: the role of timing in hospitality and service turnaround processes. International Journal of Hospitality Management, 77, 549-561.
- World Travel and Tourism Council (2019). Press release.
This article was first published on Hospitality Net.