Exploring the Factors Affecting Hotel Outsourcing: Taiwan Case
The purpose of this study was to examine factors affecting hotel outsourcing in
Taiwan. A series of two studies was performed. In study 1, content analyses of senior
hotel manager interviews were conducted to explore factors determining hotel
outsourcing, including jobs requiring capabilities and skills that may be difficult to
afford with the hotel’s tight or limited resources, a hotel’s resources and its business
scale, transaction costs, and jobs with standard operation procedures. A questionnaire
survey was used in study 2, and results indicated that the percentage of current
outsourcing and desired outsourcing for international tourist hotels in Taiwan was
very low, showing that strategic outsourcing has not received much attention among
Taiwanese international tourist hotels. The most outsourced hotel departments were
housekeeping, security, maintenance, and information systems. The findings of study
2 also showed that only hotel’s resources influence the outsourcing decision-making.
The effect of predicting outsourcing was not significant for transaction costs. The
results of this study provide both hotel management and outsourcing service providers
with insights of hotel outsourcing in Taiwan.
Keywords: Hotel outsourcing; transaction costs, valuable resources; asset specificity;
international tourist hotels
Introduction
Due to economic globalization, market maturity, technological change, and
fiercer competition, as well as the need to respond to the customers’ increasing
demands, today’s business environments have become unstable and unpredictable.
Many companies must focus on their core competencies and capabilities and turn to
external sources to achieve desired objectives. The outsourcing of materials, services
and components has been recognized as a source of competitive advantage when it
results in higher value for the organizations (Gupta and Zhender, 1994; Jennigs, 1997;
Espino-Rodriguez and Padron-Robaina, 2004). Recent years have seen increased
attention given to hotel outsourcing in the literature (Goldman & Eyster, 1992;
Hallam & Baum, 1996; Hemmington & King, 2000; Espino-Rodriguez & Gil-Padilla,
2005; Lam & Han, 2005). Espino-Rodriguez and Gil-Padilla (2005) determined the
factors affecting outsourcing of information system/information technology activities
in hotels, and Espino-Rodriguez and Padron-Robaina (2004) studied hotel outsourcing
and its impact on operational objectives and performance. However, little research has
been done to explore determinants of hotel outsourcing in Taiwan. This study attempts
to investigate factors affecting hotel outsourcing in Taiwan.
1
Literature Review
Strategic outsourcing
Strategic outsourcing refers to the company totally or partially outsourcing
activities or operations essential to the company that are not core competencies,
leading to medium or long-term cooperation with the suppliers. The companies would
then be able to concentrate on its core competencies that generate added value to
produce competitive advantage (Quinn, 1999). From review of theoretical and
empirical literature on the main strategic advantages of outsourcing (Ford & Farmer,
1986; Johnson, 1997; Saunders, Gelbet, & Qing, 1997; Espino-Rodriguez &
Gil-Padilla, 2005), ten advantages of hotel outsourcing were identified. Out sourcing
allowed hotels to:
(1) Acquire capabilities and skills that are difficult to access with hotel own
resources;
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Increase flexibility in performing hotel operations;
Focus on the hotel’s core activities;
Reduce investment;
Complement hotel resources and capabilities;
Access to more qualified, more experienced personnel;
Acquire the service more cheaply than if it were performed by the hotel;
Suppliers offer the hotel good services;
(9) Facilitate the performance of in-house hotel operations;
(10) Reduce hotel costs
Transaction cost and outsourcing
Transaction costs are comprised of the costs of seeking the suppliers, inspection
of goods and establishing and formalizing the terms of agreement, including the
means to both guarantee compliance with the terms and protect against the potential
expropriation of the investments made, to ensure that contract conditions are fulfilled
(Williamson, 1985).
Espino-Rodriguez and Gil-Padilla (2005) determined the factors affecting
outsourcing of information system/information technology activities in hotels from
the resource-based view of the firm. Results of their study indicate that the greater the
transaction costs, that is the greater the costs that information, negotiation and
supervision of compliance entail, the less the tendency to outsource the activity. Based
on the above, this study proposes that the greater the hotel’s transaction costs, the
more likely the hotel will be not outsourced.
Valuable resources and outsourcing
Recent studies are adopting a more strategic perspective to explain the
2
outsourcing decision (Teng, Cheon, & Grover, 1995; Poppo and Zenger, 1998). From
a strategic perspective, the resource and capabilities approach would seem to be an
appropriate framework for explaining the determining factors in hotel outsourcing
(Espino-Rodriguez & Gil-Padilla, 2005).
From the resource-based view, the core competences approach suggests that a
company must focus on those service operations that constitute the core competencies,
because they provide the company with growth and direction (Peteraf, 1993), and
outsource the other service operations (Quinn & Hilmer, 1994). Before the company
decides to outsource a service operation, it should evaluate the resources that sustain
that service operation.
The competitive value of a service operation is determined by the conditions that
make those resources sources of competitive advantage. Barney (1991) indicated that
sources of sustainable competitive advantage have to be valuable, rare, inimitable and
non-substitutable (Barney, 1986). Grant (1991) and Peteraf (1993) believe that, in
addition to fulfilling those requirements, resources must also comply with another
condition that allows the company to appropriate the rents generated by these strategic
resources: the resources must not be directly transferable on the market, thus making
it possible for the company to appropriate the rents generated by those resources and
capabilities.
Lamminmaki (2005) applied Williamson’s six dimensional typology of asset
specificity as a theoretical framework for appraising the nature of outsourcing
activities in hotels and indicated that the greater the asset specificity, the more likely a
transaction will be not outsourced. From the resource and capabilities perspective, the
decision to outsource depends on the extent to which these activities enable the
company’s knowledge, capabilities and organizational routines to be exploited. The
more specific those routines and skills are, the less likely that the company will
outsource them (Cox, 1996; Poppo and Zenger, 1998).
Espino-Rodriguez and Gil-Padilla (2005) determined factors affecting
outsourcing of information system/information technology activities in hotels from
the resource-based view of the firm. Results of their study indicate that the more
valuable the IS/IT activity of the hotel, the less it will be outsourced. Based on the
above, this study proposes that the greater the hotel’s resources, the more likely the
hotel will be outsourced.
Study 1
Method
Study 1 employed a qualitative method to determine hotel managers’ perceptions
3
toward outsourcing and explore the key factors affect the outsourcing
decision-making.
Subjects and Design
In-depth interviews were conducted with eight senior managers working in seven
hotels and two senior hotel consultants. The researchers have taken into account hotel
managers who are willing to share their experience and have time available to be
interviewed. Ten interviewees were introduced by hotel professionals and invited to
participate in the study. The interviewees were invited to talk in general terms about
their hotel’s degree of outsourcing and approach to outsourcing. They then were asked
to describe factors that influence their hotel’s decision of outsourcing. The emphasis
and level of detail on topics varied, depending on who was being interviewed, but in
every case the researcher encouraged interviewees to provide concrete examples of
their points. With many interviewees, the researcher conducted follow-up interviews
and phone calls to clarify issues. The researcher audio taped each interview
conversation and took handwritten notes, which were reviewed and edited following
the interview.
Results
The contents of interviews were recorded and written in transcript. Using content
analysis of dialogues, four major factors that influence hotel’s decision of outsourcing
were determined. The interviewees’ profile is shown on Table1. The four primary
factors were identified as: outsourcing jobs requiring specialized capabilities and
skills is not always feasible for hotels with small or tight budgets, a hotel’s resources
and its business scale, transaction costs, and jobs with standard operation procedures.
Four major factors influencing hotel’s decision of outsourcing
Outsourcing jobs requiring specialized capabilities and skills is not always feasible for
hotels with small or tight budgets.
All interviewees indicate that hotel management currently outsources those jobs
that require specialized professions such as kitchen sanitation, sewer cleaning, marble
floor shining, carpentry, cement work, plumbing, large construction, etc. For example,
subject 4 indicated that their hotel was “Outsourcing those jobs that cannot be done by
hotel employees.” “The investment return rate is key because it costs hotels a lot to
train employees to accomplish jobs that require special expertise.” “The engineering
department is responsible for electrical repair and routine maintenance and cannot
offer carpenter services to fix banquet chairs.” “Carpentry and cement work can be
outsourced for small scale hotels, and electrical rough-in can be outsourced for small
ones but may not be outsourced for larger ones.” “Boiler service is outsourced
because of its specialty and high risk.” “Gardening can be outsourced to save money.”
(Subject #4) “Hotel is outsourced because of its specialty and the investment cost.
4
The investment cost is too high to have uncertainty in return rate.” (Subject #4)
“Laundry is outsourced because of its high labor costs and use of the detergents
requires licenses.” (Subject #8) “The engineering department could outsource one
special construction project based on its specialty and the size of the project. The
routine maintenance and parts changing are not outsourced but the malfunction of a
boiler can be outsourced.” (Subject #6 and Subject #7) “Setting up a laundry within a
hotel is very difficult because it uses many kinds of chemicals and the regulations for
polluted water are very strict.” (Subject #9)
A hotel’s resources and its business scale
Four out of ten interviewees mentioned that the business scale of a hotel
determines the departments being outsourced and the extent of which is outsourced.
The operation services that may be outsourced include laundry, cleaning of the public
areas in the hotel, restaurant services, and in-store bakery. Generally speaking, most
of international tourist hotels are less outsourced because of their capacity. For
instance, Taipei Sheraton owns space, equipment, technology, and human resources,
so it has its own laundry. However, middle and small size hotels tend to have
laundry outsourced due to the labor costs and the shortage of specialty equipment.
The relationship between outsourcing and the business scale is not negative. For
example, if it is a small hotel and its public area is limited, the housekeeping
department is responsible for the cleaning. However, the job of cleaning the public
area is usually outsourced for most hotels. Restaurants in small and middle size hotels
are more likely to be outsourced than those in large hotels because of restaurants’
large labor costs. Table 2 summarizes representative dialogues expressing that a
hotel’s resources and its business scale are important factors of determining
outsourcing.
Transaction costs
All interviewees indicate that transaction costs are included as one of the major
factors when hotel management considers outsourcing. Most hotels evaluate the
transaction costs of itself and the supplier and select the most cost-effective one. The
outsourced service operations include the laundry, public area cleaning, and vehicles.
Vehicle service is considered a non-core service operation and is usually outsourced
for most hotels because of the great costs of purchasing, maintenance, and labor.
Four hotels currently outsource their vehicle service.
Jobs with standard operation procedures
Five out of ten interviewees indicated that jobs with specialization following
standard operation procedures are more likely to be outsourced. Hotels follow details
included in the contract to examine the suppliers’ performance. For example, details
written in the cleaning contract indicate the areas and frequency to be cleaned. Areas
5
to be cleaned include guest rooms, public areas, kitchens, and parking lots. Six out of
ten hotels have outsourced their public areas cleaning. In addition, Taipei Sheraton
has outsourced the cleaning of guest rooms in two of its towers.
Hotel outsourcing barriers in Taiwan
Using content analysis, three major barriers were identified by more than half of
the interviewees. They are customer-contact tasks, commercial secrets, and necessary
supervision.
Customer-contact tasks
All interviewees indicate that service operations, which require people skills, are
not outsourced such as front office, concierge and bellman service. Front office tasks
are hotel core services requiring service skills and language competency. Outsource
these service operations may result in loss of reputation and service quality. For those
service operations, which involve customer-contact, are usually not outsourced
because it is difficult to control personnel’s appearance, attitude, ethic, profession, and
service quality.
Commercial secrets
Six out of ten interviewees indicated that those jobs involved with commercial
secrets are not outsourced, including reservations, marketing and sales, finance,
human resources, purchasing, and information systems. Marketing and promotion
plans, customer survey reports, payroll systems, administration documents, employee
profiles, labor costs, purchasing specifications and prices, food costs, and profits are
all considered as hotel’s commercial secrets and cannot be externalized.
Necessary supervision
Four out of ten interviewees indicate that supervision tasks cannot be outsourced.
Supervision tasks include checking the quantity and quality of serving plates, utensils,
uniforms and table clothes as well as monitoring public areas and guestrooms
cleanliness. Outsourcing these service operations without supervision may result in a
loss of profit and reputation.
The trend of hotel outsourcing in Taiwan
More than half of the interviewees indicated that guestroom cleaning, restaurant
service, and employee recruiting tend to be outsourced in response to the more
professionalized future trend. Some interviewees believe that outsourcing
housekeeping operations can reduce the labor costs of hiring full-time housekeepers
and produce a higher quality of cleaning. However, hotel management has to establish
a standard operation procedure to ensure the quality and protect customers’ privacy.
Restaurant service reputation would be the first priority to promote the hotel when
outsourcing of restaurant service is considered. Hotel management can decrease the
burden of recruiting employees by outsourcing employee recruitment to a human
6
resource management company.
Study 2
Method
A questionnaire survey was used to examine the relationship between hotel
managers’ intentions and transaction costs as well as corporation resources while
making outsourcing decisions. The current outsourcing activities and activities that
are likely to be outsourced were compared.
Subjects and Design
The subjects in study 2 were department managers of 60 international tourist
hotels in Taiwan. Five copies of questionnaires were sent out to each hotel, and a
total of 148 valid responses were obtained after eliminating the missing and invalid
data. As a result, a response rate of 49% was reported. The respondents consisted of
unit directors (69%), directors (9%), assistant managers/general managers (9%), and
others (13%). One third of the respondents possessed six to ten years of work
experience (34%) and followed by eleven to fifteen years (20%), twenty one years or
above (16%), five or fewer years (16%), and sixteen to twenty years (14%) (Table 3).
The questionnaire developed includes three sections: measurement of transaction
costs, hotel resources, and propensity to outsource.
Transaction cost
According to Williamson (1985), there are two types of transaction costs:(i) the
ex-ante costs of the actions and tasks that take place when establishing the contract –
selection, evaluation, negotiation, drafting and agreement guarantee; and (ii) the
ex-post costs, or costs originating in administration, obtaining information,
supervision and enforcing the conditions of the contract. To be specific, transaction
costs comprise the costs of seeking the other party, inspection of goods and
establishing and formalizing the terms of agreement, including the means both to
guarantee compliance with the terms and to protect against potential expropriation of
investments made to ensure that the contract conditions are fulfilled.
Based on the transcripts of in-depth interviews conducted in study 1, nine
question items were generated for transaction costs measurement: 1) outsourcing can
produce labor cost reduction; 2) outsourcing can produce a cost reduction by
decreasing the capital investment required to purchase equipments; 3) hotel
management would consider time, capital investment, and labor costs while seeking
the right outsourcer; 4) hotel management would consider time, budget, and labor
costs while negotiating and drafting contracts; 5)hotel would consider outsourcing
when ex-ante costs are reduced; 6) hotel management would consider outsourcing
7
when ex-post costs are reduced; 7) hotel management would consider outsourcing
when transferred costs are reduced; 8) the transaction process while outsourcing
requires many human and material resources; 9)hotel management would consider
outsourcing if the quality produced by the outsourcer is the same as the quality carried
out in-house. A 7-point Likert scale anchored by extreme disagreement (1) and
extreme agreement (7) was used. The coefficient alpha for transaction cost was .83,
showing that the measurement had good internal consistency reliability. Coefficients
of internal consistency validity for each item ranged from .46 to .63, demonstrating
that each item measured the subjects’ perceptions in transaction costs.
Hotel resources
Hotel resources are defined as tangible and intangible resources (Lado & Wright
1992; Barney, 1991; Kotter, 1989; Bensaou, 1999; Lamminmaki, 2005). Question
items for measuring hotel resources were generated on the basis of the transcripts of
the in-depth interviews conducted in study 1. Thirteen items were designed to
measure the subjects’ perception of hotel resources. A 7-point Likert scale anchored
by extreme disagreement (1) and extreme agreement (7) was used. The coefficient
alpha for hotel resources was .83, showing that the measurement had good internal
consistency reliability. Coefficients of internal consistency validity for each item
ranged from .46 to .64, demonstrating that each item measured the subjects’
perceptions in hotel resources.
Propensity to outsourcing
The study attempts to assess not only a given hotel’s current level of outsourcing,
but also its inclination or desire to outsource, irrespective of whether it was actually
outsourcing at that particular moment. Based on the interviews carried out in study 1
and taking into account the service operations of departments that are frequently
carried out in the hotel and that are necessary to the hotel’s service, 13 different hotel
departments were determined: front office, housekeeping, food and beverage, human
resources, marketing & sales, purchasing, finance, information systems, membership
club, public relations, maintenance, and security. The outsourcing measurement was
generated from the transcripts of the in-depth interviews conducted in study 1 and by
modifying a questionnaire developed by Espino-Rodriguez and Padron-Robaina
(2004). Respondents were asked to indicate the level of outsourcing of the department
on a 6-point Likert scale, with 0 indicating “not resourced” and 6 “totally
outsourced”.
Results
Table 4 shows the average measurements of the inclination to outsource (present
and desired outsourcing) for each main service classified by hotel departments. As
seen in Table 4, the average number of outsourced departments of current
8
international tourist hotels is less than 2.5. Housekeeping is the most frequently
outsourced department among all hotel departments. In contrast, the finance
department is least likely to be outsourced. The hotel departments most often
outsourced are the ones related housekeeping, security, maintenance, and information
systems. The results are consistent with the study conducted by Espino-Rodriguez and
Padron-Robaina (2004). Furthermore, results show that the hotel managers would like
to outsource more departments than at present, as long as they were able to find
suppliers capable of offering good services. In contrast, departments displaying the
smallest tendency to be externalised are those related to finance, purchasing, human
resources, and front office, since these constitute the basic operations of the hotel. The
findings were the same with the study by Espino-Rodriguez and Padron-Robaina
(2004).
Multiple regression analyses were employed to analyze data. Transaction costs
and hotel resources were independent variables, while the average value of
departments outsourced at present was the dependent variable. Results of the multiple
regression-enter method are shown in Table 5. As seen in Table 5, the prediction of
the linear composition of independent variables to outsourcing decision-making is
significant (F(2, 145) = 4.54, P<.05). The coefficient is .21, and explanation is 4%.
Only hotel resources can predict outsourcing decision-making. The predicting effect
of transaction costs was not significant.
Discussion and Implications
The qualitative method applied in study 1 permits an in-depth examination of
complexity of reasons and organizational elements that could lead a hotel to outsource.
Using content analysis, study 1 examined the transcripts obtained from in-depth
interviews and identified four major factors influencing hotel outsourcing: jobs
requiring capabilities and skills that are difficult to access with the hotel’s resources, a
hotel’s resources and its business scale, transaction costs, and jobs with standard
operation procedures. Results support Lamminmaki’s study (2005) that asset
specificity represents an important construct that should be considered when
considering whether to outsource.
Attempting to make generalizable assertions, two factors – a hotel’s resources
and transaction costs – were adopted to predict outsourcing in study 2. The findings of
study 2 show that only a hotel’s resources influence its outsourcing decision-making.
It is noteworthy that the other two critical transaction attributes, uncertainty and
frequency, may be added to explore the effects in the future. The effect of predicting
outsourcing is not significant for transaction costs. A possible reason for this is that
9
the low percentage of currently outsourced services in hotels surveyed may produce
imprecise estimated transaction costs. In addition, transaction costs include the
ex-ante costs and the ex-post costs. It would be interesting if future research considers
these two costs separately in order to examine the individual effects.
Results of study 2 show the average measurements of inclination to outsource
(present and desired outsourcing) for each of the main services classified by hotel
departments. Compared to the study conducted by Espino-Rodriguez and
Padron-Robaina (2004), the percentage of current outsourcing and desired
outsourcing for international tourist hotels in Taiwan was much lower, showing that
strategic outsourcing has not received much attention in Taiwanese international
tourist hotels. The level of outsourcing was relatively low compared with the level
desired by hoteliers, which perhaps may be affected by the present trend of
outsourcing being fashionable. Therefore, there is a need for future research to
perform longitudinal studies that show a more stable situation once the initial impact
of current topics has passed.
The subjects and respondents used in this study are restricted to international
tourist hoteliers. Future research should extend the study to hoteliers in other hotel
types such as tourist hotels, boutique hotels and resort hotels in order to appreciate the
diversity of strategies followed in outsourcing decisions, and to make comparisons.
Moreover, this study only surveyed hoteliers; findings provided by this study would
be usefully extended by research that considers suppliers or subcontractors as research
subjects to examine outsourcing decisions from suppliers’ perspectives.
Further, to enable a more complete understanding of outsourcing in the hotel
industry, the issue of trust may also be added as a variable for investigation (Zaheer
and Venkartraman, 1995; Nooteboom, Berger, and Noorderhaven, 1997; Seal and
Vincent-Jones, 1997; Das and Teng, 1998, 2001).
References
Barney, J.B. (1986). Strategic factor markets: Expectations, luck, and business
strategy. Management Science, 32(4), 1231-1241.
Barney, J.B. (1991). Firm resources and sustained competitive advantage. Journal of
Management, 17(1), 99-120.
Bensaou, M. (1999). Portfolios of buyer-supplier relationships. Strategic Management
Review, Summer, 8-10.
Cox, A.W. (1996). Relational competence and strategic procurement management:
toward an entrepreneurial and contractual theory of the firm. European Journal
of Purchasing and Supply Management, 2(1), 57-70.
10
Das, T.K., & Teng, B. (1998). Trust, control and risk in strategic alliances: An
integrated framework. Organization Studies, 22(2), 251-283.
Espino-Rodriguez, T.F., & Gil-Padilla, A.M. (2005). Determinants of information
systems outsourcing in hotels from the resource-based view: An empirical study.
The International Journal of Tourism Research, 7(1), 35-47.
Espino-Rodriguez, T.F., & Padron-Robaina, V. (2004). Outsourcing and its impact on
operational objectives and performance: a study of hotels in the Canary Islands.
International Journal of Hospitality Management, 23, 287-306.
Ford, D., & Farmer, D. (1986). Make or buy: a key strategic issue. Long Range
Planning, 19(5), 54-62.
Grant, R.M. (1991). The resource-based theory of competitive advantage:
implications for strategy formulation. California Management Review, 33(2),
114-135.
Gupta, M., & Zhender, D. (1994). Outsourcing and its impact on operations strategy.
Production and Inventory Management Journal, 34, 70-76.
Goldman, K.L., & Eyster, J.J. (1992). Hotel F&B leases: The view from the restaurant.
The Cornell Hotel and Restaurant Administration Quarterly, 32, 72-83.
Hallam, G., & Baum, T. (1996). Contracting out food and beverage operations in
hotels: A comparative study of practice in North American and the United
Kingdom. International Journal of Hospitality Management, 15(1), 41-50.
Hemmington, N., & King, C. (2000). Key dimensions of the outsourcing hotel food
and beverage services. International Journal of Contemporary Hospitality
Management, 12(4), 256-261.
Jenning, D. (1997). Strategic guidelines for outsourcing decisions. Strategic Change,
6, 85-96.
Johnson, M. (1997). Outsourcing ……in Brief. Institute of Management Foundation,
Butterworth-Heinemann:Kidlington.
Kotter, J.P. (1989). Management external dependence. Academy of Management
Review, 4, 87-92.
Lado, A.A., & Wright, B.G.. (1992). A competency-based model of sustainable
competitive advantage: Toward a conceptual integration. Journal of
Management, 18(1), 77-92.
Lam, T., & Han, M. (2005). A study of outsourcing strategy: A case involving the
hotel industry in Shanghai, China. International Journal of Contemporary
Hospitality Management, 24, 41-56.
Lamminmaki, D. (2005). Why do hotels outsource? An investigation using asset
specificity. International Journal of Contemporary Hospitality Management,
17(6), 516-528.
11
Nooteboom, B., Berger, H., & Nooderhaven, N.G..(1997). Effects of trust and
governance on relation risk. Academy of Management Journal, 40(2), 308-338.
Peteraf, M.A. (1993). The cornerstone of the competitive advantage: a resource-based
view. Strategic Management Journal, 14, 179-191.
Poppo, L, & Zenger, T. (1998). Testing alternative theories of the firm: transaction
cost, knowledge-based, and measurement explanations for make-or-buy
decisions in information services. Strategic Management Journal, 19, 853-877.
Quinn, J.B. (1999). Strategic outsourcing: leveraging knowledge capabilities. Sloan
Management Review, 35, 43-55.
Quinn, J.B. & Hilmer, F.G.. (1994).Strategic outsourcing. Sloan Management Review,
35, 43-55.
Saunders, C., Gelbet, M., Qing, H. (1997). Achieving success in information systems
outsourcing. California Management Review, 39(2), 63-79.
Seal, W.B., & Vincent-Jones, P. (1997). Accounting and trust in the enabling on long
term relations. Accounting, Auditing and Accountability, 10(3), 406-432.
Teng, J., Cheon, M., Grover, V. (1995). Decisions to outsource information systems
functions: testing strategy-theoric-discrepancy model. Decision Science, 26(1),
75-103.
Williamson, O.E. (1985). The Economic Institutions of Capitalism: Firms, Markets
Relational Contracting, Free Press, New York, NY.
Zaheer, A., & Venkatraman, N. (1995). Relational governance as an
inter-organizational strategy: An empirical test of the role of trust in economic
exchange. Strategic Management Journal, 16, 373-392.
12
Table1 List of interview subjects
Subject Number
Gender
1
2
3
4
5
6
7
8
Male
Male
Male
Male
Female
Male
Female
Male
9
10
Male
Male
Position
Hotel Name
Senior hospitality consultant
Minxon Hotel Technology
Front office manager
Forte Hotel
Front office manager
Sheraton Taipei Hotel
Senior hospitality consultant
Hsu’s Restaurant Consulting Company
Hotel restaurant manager
The Ambassador Hotel Hsinchu
Housekeeping assistant manager Evergreen Plaza Hotel Tainan
Front office assistant manager
Evergreen Plaza Hotel Tainan
Front office manager
Freshfields Resort
Front office manager
Lakeshore Hotel Hsinchu
Consultant
Grand Hi-Lai Hotel
13
Table 2 Representative dialogue expressing a hotel’s resources and its business scale
being important factors of determining outsourcing
Subject Number
Dialogue
Our hotel has only about 100 rooms. In order to save labor costs and
money in purchasing required equipment, the laundry in our hotel is
outsourced. Receiving and issuing uniforms and table cloths are not
outsourced to avoid loss. Small hotels usually outsource the laundry
because of its capacity and required labor and equipment costs.
The public areas in our hotel are limited, so the cleaning of public
Subject 2
areas is not outsourced, and is done by housekeeping employees. I
know that larger hotels, such as Howard Plaza Hotel and Westin
Hotel, usually outsource the cleaning of its public areas.
Food and Beverage department can be outsourced. A restaurant’s
reputation and its popularity have been taken into account while
outsourcing. Because the labor cost of F&B is as three times as labor
cost of Front office & Housekeeping department, the possibility is
much greater to outsource food and beverage service operation in
small and middle scale hotel than in a large-scale hotel.
Subject 3
We do not outsource our laundry because we have the space,
equipment, technology, and manpower. The quantity of our laundry
is beyond supplier’s capability, and the quality is our major concern.
I think that the public area cleaning is outsourced in most cases. The
Subject 6 & 7 laundry is possibly outsourced due to space limitations, especially
for small hotels. The flower shop is also outsourced in small hotels.
14
Table 3 Profile of Respondents (N = 148)
Sex
Female
Male
Job Title
Unit director
Director
Assistant GM/GM
Other
Years of employment
5 or less
6-10
11-15
16-20
21 or more
15
Frequency
Percentage
52
96
35
65
102
14
13
69
9
9
19
13
23
16
50
30
21
24
34
20
14
16
Table 4 Propensity to outsource hotel operations
Outsourcing
Department
Hotel operations
Front office
Reception, reservations, operators
.84
.96
Housekeeping
Room cleaning, common area cleaning,
laundry
2.18
2.49
Food & beverage
Restaurants, bars, kitchen operation,
banquet, catering
.83
1.11
Human resources
Marketing & sales
Purchasing
Finance
Information systems
Membership club
Public relations
Recruiting, training & development
Marketing, promotion & advertising
Purchasing, receiving, storing & issuing
Accounting, payroll, cost control
Information systems
Membership sales
Public relations & publicity
.68
.51
.37
.22
.93
.98
.84
.90
.85
.53
.35
1.37
1.51
1.54
1.18
1.59
1.43
2.02
Engineering & maintenance Engineering basics, routine &
Security
preventive maintenance
Security, parking services
Current Desired
Note: A seven point scale, anchored by “not resourced” (0) to “totally outsourced” (6)
was used.
16
Table 5 Summary of Multiple Regression Analysis for Variables Predicting
Outsourcing Decision-Making (N = 148)
Predictors
Constant
Transaction costs
Hotel resources
R
R2
a
Unstandardized
Coefficient
.232
-.030
.179
.210
.042
SEa
.48
.096
.090
SE, standard error.
*p<0.05; **p<0.01.
17
Standardized
Coefficient
t-value
-.029
.189
-.308
1.996*