By Harald Eustachius Tomintz on Mises.org
The Austrian school and perspectives on economic theory apply very well to businesses in general, as seen in the thoughts of Clay Miller and articles by Hunter Hastings and Peter Klein, especially when it comes to developing advantages for responsive businesses in a dynamic environment. To expand on this, it would be good to look at how such perspectives can concretely be applied in certain industries, and for this article, we shall look at some specific applications of Austrian perspectives to tourism and hospitality.
The Value of Time
When on vacation, time is of the essence! Anyone who has been on an enjoyable holiday knows the importance of spending limited leisure time wisely. It is normal to expect that a tourist would want to maximize the time they have by any means necessary. Likewise, on the side of the businesses catering to the desires of tourists, coordinating the schedules of their clients can lead to better practices and more efficient methods of generating profit.
Concretely, knowing the expected times when guests arrive at, stay in, and leave a hotel, for instance, allows one to make highly effective decisions. A simple example would be that if a hotelier knows —because they asked— that a guest will be out of their room at 3:00 P.M. and won’t be back until late in the evening, then that is an opportune time window to have the room cleaned. This shows how knowledge of the way a particular client spends their time would lead to a better allocation of services.
The technical term for doing this on a grand scale in the hospitality industry is called “revenue management”. A more complex example of revenue management would be in anticipating how many guests will arrive in the hotel. Once the hotelier knows how many bookings are made, as well as the personal preferences of each booking, the rooms can be allocated to them according to their needs, ideally also in such a way that the rooms are filled so as to minimize the time and effort made to prepare these rooms according to specific preferences. After these rooms have been assigned, the remaining rooms can be sold to maximize the inventory. In doing so, profit is generated while loss is minimized, all through coordinating the times when these assets are used.
Running a hotel is a complex mechanism, not unlike the gears of a clock. If everything runs perfectly well against the hands of time, coordinated so that as guests arrive, rooms are cleaned and filled, technical issues are resolved, quality services are provided, and so on, the coming together of the system can generate maximum efficiency and profit. The opposite is a nightmare: if time preferences of the guests are unknown, the desired rooms are not available in a coordinated manner, technical issues don’t get resolved promptly, and services don’t know when and how to cater to clients, then time is effectively lost, and value is lost in the process.
The Value of Subjectivity
On the other hand, customer feedback in the world of hospitality is of vital importance. How else can one provide the best possible custom service to clients if we don’t ask them about their specific preferences? Of course, ultimately, each client is different, and has different reasons for, say, booking at a hotel: attending a business conference, having a romantic getaway, visiting friends and family, merely passing through as a stopover, and so on. That said, regardless of whether said hotel is in Vienna’s Altstadt or in Manila’s Intramuros, the principle remains the same, and understanding what each guest values allows for both customization and optimization.
Knowing the specific wishes of guests can also make things easier on the level of decisions made and in strategically allocating resources. Suppose that our theoretical guest mentioned earlier —the one whom the hotelier knows will be out of their hotel room at 3:00 P.M. and won’t be back until late in the evening— doesn’t want their room cleaned at all. Knowing this, a judicious hotelier would do well to ensure that housekeeping doesn’t clean the room, for not only is it against the desires of the guest, it is also a rather pointless opportunity cost: the resources and time of the housekeeping staff could be used to clean another room of another guest who wants it instead.
Being aware of customer preferences goes hand-in-hand with understanding how they value their own time. It allows the hotelier more opportunity to sell them services they would appreciate, as well as plan around specific requests, such as having a late check-out, which would affect how that room is prepared for the next guest. It is the burden of businesses to be able to provide and cater to these requests, but that doesn’t have to mean that the granting of these specific wants would be mutually exclusive of equally bespoke considerations towards other guests as well.
Lastly, the subjective experiences of guests are the ultimate standards by which their idea of a great vacation or excellent service was given or not. It is, as Hunter Hastings writes, about continuous value perception on the end of the customer, and as Mark Packard’s model shows us, empathy is a necessary skill to predict value on the end of the service provider.
Because everyone has a different notion of what a fantastic experience is, and what a worthwhile way to spend time entails, a hotelier must be willing to provide, to the best of their ability, a wide variety of potential services and a great degree of flexibility. This is so that every individual served in the tourism industry would feel that their own personal desires are being fulfilled for them, developing loyalty and patronage, which is the hallmark of any great service provider, regardless of the nature of their business.