The Integrated Crisis Management Model for the Hotel Industry: Lowering Crisis Susceptibility and Strengthening Stakeholder Relationship Management

Keywordscrisis management hotel industry Hotel Organisation stakeholder relationship management

JEL Classification M10

Full Article

1. Introduction

Crises are an inevitable element of corporate life. According to Mitroff et al. “it is not a question of if or whether an organisation will experience a crisis; it is only a matter of what type of crisis will occur, what form it will take, an how and when it will happen.” (Mitroff, Pearson, and Harrington, 1996, p. 5) Structured crisis management may reduce the impact, duration and cost of a crisis.

The hotel industry being part of the vast tourism industry is “particularly prone to external shocks beyond the control of its managers” (Evans and Elphick, 2005, p. 135). Extreme and sudden decline in demand is one of the probable impacts of these external shocks. Several authors have outlined that despite possible severe negative impacts by crises and disasters, proactive planning still appears to be minimal within the hotel industry. However, with rising turbulence in the global environment, strategic thinking in hotel management becomes increasingly important. Hotel management research needs to consider advanced strategic approaches in order to successfully address challenges and opportunities. The fundamental conception of this research within the framework of a doctoral thesis is to consider a strategic approach to crisis management within the hotel industry with a focus on stakeholder relationship management. In management research, the cognition that no sustainable management without considering internal and external stakeholders and their respective needs and demands is possible, gained general acceptance. However, the hotel industry still seems reluctant in implementing profound concepts in general and considering crisis management in particular. The model evolved is based on in-depth literature review and supplemented by an extensive empirical analysis of both pre-requisites and status quo as well as of perceptions and demands. Hence the crisis management model and its elements focus on stakeholder relationship reliability and cooperation, business continuity, lower crisis impact, faster crisis resolution and an increase in customer retention. Therefore, this research and development of a structured model goes far beyond generally applied crisis management tools such as e.g. having a basic crisis management manual on file. Crisis management as interpreted in this context must not be understood as an necessary evil in overcoming crises but as a chance to reconsider operational processes, establish and enhance stakeholder relationships and if nothing else to enrich marketing activities.

The practical importance of this research is given by closing a research gap with respect to a subject inevitable for each hotel organization – the handling of corporate crises. Both, literature review and empirical analysis of the status quo revealed this gap. Based on an industry-specific crisis classification scheme developed by the author, the integrated crisis management model for the hotel industry was evolved. Applying an underlying forms set for the individualisation of the integrated crisis management model for the hotel industry, the model and its guidelines may be individualised by hotels of all sizes and conceptions. Therefore, this research offers direct practical implication to the hotel industry by lowering crisis susceptibility and crisis impact on the one hand and strengthening stakeholder relationship management on the other hand.

2. Literature Review

2.1. Crisis Management

Still, no single, universally accepted definition of (organisational resp. corporate) crisis exists. In general, a crisis represents a “turning point”. (Faulkner, 2001) In Chinese ideographs „crisis“(wei-ji) represents danger as well as opportunity. Although the term “crisis” therefore implies negative as well as positive outcomes, most certainly no manager would ever argue for the strategic creation of crises in order to advance organisational goals as an effective form of management. (Coombs, 2010) Consequently, in common business, a crisis can be defined as an “undesired, extraordinary, often unexpected and timely limited process with ambivalent development possibilities” (Glaesser, 2006, p. 14). Fink considers a crisis as not necessarily being bad but as merely being characterized by a certain degree of risk and uncertainty. (Fink, 2002)

Taking several crisis classification approaches into consideration, a crisis typology focusing the hotel industry and its specifications was evolved. Based on various authors’ frameworks for crisis typologies, hypernyms for a source-based categorization in the hotel industry have been defined as displayed in table 1 (Mitroff, 2000; Henderson, 2005; Coombs, 2004; Richardson, 1994; Mitroff et al., 1996; Luecke, 2004).

Table 1. Crisis Typology Survey

Source: author’s construction based on Mitroff; Glaesser; Henderson; Coombs; Richardson; Mitroff, Pearson, and Harrington; Luecke

Following this source-based approach, only by determining the specific crisis type, causes and impacts may be treated immediately and effectively. However, a crisis may fall into one or more categories at the same time. The introduced crisis typology will serve as an underlying scheme for the subsequent theoretical and empirical analysis. Wherever applicable, the crisis types will be further splitted into micro and macro parameters. Commonly, a crisis is characterized by the following conditions:

· time constraint,

· limited information (both in quality and quantity),

· decision load constraint. (Cosgrave, 1996)

Therefore, resources in crisis management are limited and reaction time is valuable. The first step in case of revelation of any possible crisis situation (to be) is to consider whether the source (internal or external) which brings the crisis situation to the organisation’s attention is powerful and/or credible. (Mitroff et al. 1996). In a next step, proactive and reactive response modes are balanced. The earlier signals of creeping crises are detected, the bigger the chance to neutralize them before growing and getting more expensive. (Luecke, 2004).

Generally acknowledged crisis management tools are the set-up of a crisis management team, crisis management plan, crisis management trainings as well as crisis communication.

2.2. Stakeholder Relationship Management

Pfeffer and Salancik claimed as early as in 1978 that “organisations survive to the extent that they are effective. Their effectiveness derives from the management of demands, particularly the demands of interest groups upon which the organisations depend for resources and support” (Freeman, 1984, p. 42). A modern stakeholder management approach can be interpreted as obtaining “optimal benefits for all identified stakeholder groups, without giving priority to one stakeholder’s interests over another. Under this philosophy, the entire purpose of the firm becomes the co-ordination of stakeholder interests” (Sautter and Leisen, 1999, p. 314). Kotler claims that companies can no longer operate as self-contained, fully capable units without dedicated partners, but they are increasingly dependent on their employees, their suppliers, their distributers and dealers, and their advertising company. (Freeman et al., 2010). While in the traditional perspective a company is seen as an economic entity, the stakeholder view sees it as a network of relationships among the firm and its stakeholders. In consequence, the stakeholder view does not attribute competitive advantage solely to best adapting to the company’s environment by taking advantage of strengths and opportunities and overcoming weaknesses and threats, but to a high degree to superior linkages to stakeholders leading to trust, goodwill, reduced uncertainty, improved business dealing, and ultimately higher firm performance (Enz 2010). Whereas managers still think first about what the organisation wants and needs to generate profit, true stakeholder engagement implies understanding of what stakeholders value and view as important (McEuen, 2011). Even before questioning if stakeholders are managed right, it should be questioned if the right stakeholders are managed. In 1963, the term “stakeholder” was introduced in an internal memorandum of the Stanford Research Institute (now SRI International, Inc.) (Freeman, 1984). In 1984, R. Edward Freeman published his landmark book “Strategic Management: A Stakeholder Approach” and defined a stakeholder as follows:

“A Stakeholder in an organisation is (by definition) any group or individual who can affect or is affected by the achievement of the organisation’s objectives.”(Freeman, 1984, p. 46)

“Stakeholders include employees, customers, suppliers, stockholders, banks, environmentalist, government and other groups who can help or hurt the corporation”.(Freeman, 1984, p. vi).

2.3. Current Approaches of Corporate Crisis Management considering the Stakeholder Relationship Management Approach

There is hardly any crisis situation imaginable which would not affect any stakeholder. On the contrary, typically multiple stakeholder groups are affected and involved – to a varying extent. On the contrary, in crisis situations, the number of stakeholders might increase or at least the stakes intensify: “During a crisis, another group that may join the functional publics is the victims. Victims may have been customers prior to the crisis; however, when customers are harmed, they become victims.” (Stephens, Malone, and Bailey, 2005, p. 395) From the stakeholder perspective, a crisis can be defined as an unpredictable event which threatens their expectancies and can seriously impact an organisation’s performance and generate negative outcomes. In addition, a crisis can threaten an organisations’ social legitimacy (the consistency between organisational and stakeholder values) as it violates stakeholder expectations of how an organisation should operate. Whereas an effective crisis management might result in a stronger organisation, “management by crises” would take a heavy toll on stakeholders. Provoking (physical, financial or psychological) harm to stakeholders is considered the most negative outcome in this context. The stakeholder perception is essential for defining a crisis situation. In this regard, crisis management aims to prevent or lessen the negative outcomes and thereby protect the stakeholders. The effectiveness of crisis management is frequently rated by stakeholders upon highly visible crisis responses (Coombs, 2010). Especially in times of crises it seems not sufficient to consider shareholder interests. Depending on the nature of the crisis type one or more stakeholders may be especially affected and need specific attention. The salience (i.e. the degree to which managers give priority to competing stakeholder claims’) of affected stakeholders may change dramatically during a crisis. Even if impossible for all imaginable crisis situations, managers should nevertheless simulate potential alterations of individual stakeholder saliences. (Alpaslan et al., 2009) As stakeholders have (by definition) a stake in the company, this company has at least a moral commitment to the inclusion of stakeholders into the crisis management process.

Conclusively, literature review reveals that both – corporate crisis management and stakeholder management – are surely promising managerial concepts but only if conducted strategically. This implies profound preparatory work, time and workforce dedication, regular training, control and enhancement and last but not least fierce support by the organisations’ leaders. E.g. corporate crises might only be overcome with as little impact as possible by considering various imaginable source-based scenarios even before the occurrence of the concrete crisis situation. The various crisis management phases and the respective crisis management tools have to be considered carefully. From the stakeholder relationship management point of view, a tailor-made stakeholder map corresponding to the organisations’ specifics has to be drawn and the stakeholders’ power, influence and urgency evaluated.

3. Research Premises

The hints given as well by the literature as by the fact of the hotel industry being part of the service industry on the one hand and the tourism industry on the other hand lead to the justification of adding the stakeholder relationship aspect to the model. As not all stakeholders and their respective perceptions and demands can be analysed by an empirical data analysis, the three decisive stakeholder groups (internal hotel stakeholders, hotel guests and Destination Management Organisations (DMOs)) will be analysed ceteris paribus. Furthermore, it became obvious that while the application of both management approaches – corporate crisis management and stakeholder relationship management – is more than justifiable due to the industry specifics the majority of organisations seem to apply them more intuitionally than strategically if they apply them at all. In relation to stakeholder relationship management many of them apply the approach without naming it explicitly. One reason for this non-professional application of both approaches may be found in the fact that the typical hotel organisation is attributed to SMEs. Within SMEs limited resources such as time and workforce have to be allocated to daily operational processes instead of strategic planning. These facts may be seen as a clear indication for the need of a general model which can be applied to the individual hotel organisation without great effort and profound academic knowledge.

4. Research Methodology

In order to determine the status quo of crisis management within the hotel industry, 18 semi-structured expert interviews (within the hotel industry as well as in related industries) were conducted in Germany, Austria and Italy within the time frame June to November 2013. An expert is defined by the existence of at least one of the following criteria:

· professional education and qualification related to crisis management,

· position within the organisation,

· long-time active crisis management experience.

All expert interviews were conducted either per mail, phone or personally. An introduction of the research topic was followed by structured and open questions and finalized by enquiring personal and company key data.

Simultaneously, three essential stakeholder groups were surveyed ceteris paribus within the time frame October 2013 to January 2014. Internal stakeholders as well as hotel guests represent the two fundamental stakeholder groups without whom hotel business would be non-existent. Destination Management Organisations (DMOs) represent a further major stakeholder group as they are marketing partner and regional crisis coordinator on the one hand and contact point to media, government, local community, suppliers, distribution partners, etc. on the other hand. The semi-structured questionnaire used consisted of an introduction to the research topic, structured questions based on comparable questions applying a 5-point-Likert-scale as well as of multiple choice questions and an enquiry of personal and company key data. Questions 1 to 8 and 10 were identical in order to achieve comparability of the answers. Question 9 as well as the personal and company key data were slightly adapted to the specific conditions of the stakeholder groups. The following numbers of questionnaires filled in were obtained:

· 81 hotel management students in a dual university programme in the perspective of internal stakeholders;

· 70 hotel guests;

· 84 DMOs.

All empirical data were analysed by content analysis and statistical evaluation – supported by SPSS. Wherever applicable, quantitative analysis of both quantitative and qualitative data was realized. The Shapiro-Wilk-Test of all metric-scale-questions of the survey results for all three stakeholder groups revealed that no normal distribution can be assumed. Therefore – where applicable – non-parametric tests were be applied. Hereinafter, an overview of the evaluation methods applied:

· content analysis – catchwords in the answers to open questions of expert interviews and questionnaires are evaluated and summarized,

· expert interview content certification scheme in order to evaluate the status quo of applied crisis management tools based on expert interviews,

· descriptive statistics via SPSS – fundamental data analysis of the data retrieved from the individual questions within expert interviews and questionnaires,

· weighted rankings – qualitative data retrieved from expert interviews and questionnaires is quantitatively analysed,

· cross tab and correlation analysis via SPSS – investigation on the influence of stakeholder characteristics on the answers to decisive questions,

· Kruskall-Wallis-test via SPSS – a non-parametrical test to analyse the homogeneity of stakeholder groups surveyed.

5. Analysis and Results

The empirical findings reveal that majority of hotel organisations invent a structured crisis management process only after having experienced a crisis situation. Therefore, the additional value for hotels inventing the model needs to be higher than the perceived cost and effort. Furthermore, the crisis awareness and crisis preparedness as generally rated by the stakeholder groups and experts surveyed may be subject to improvement. However, the results for internal stakeholders are the worst. This might either imply inadequate crisis management processes in place or the need of an image campaign which brings the crisis management process in place to light.

Chain hotels are perceived handling crisis situations better throughout expert and all stakeholder groups. Therefore, especially privately-owned hotels need to take advantage of a structured crisis management in place and by this take advantage of standards. E.g. regular crisis management trainings are suggested throughout experts and all stakeholder groups as most effective crisis management tool. They should be conducted based on a fixed scheme and maybe even communicated to external stakeholders.

Crisis communication is rated as an essential part within a strategic crisis management process. However, communication means and messages need to be adapted to the specific demands of the respective stakeholder groups. The results reveal as well that there exists a discrepancy in the perception of experts towards preferred crisis communication means and the actually preferred means.

Trust – either defined as enhanced guest and employee satisfaction or long-term business relationship may be achieved by inventing and applying a safety certificate. This certificate has to ensure applied crisis management standards on the one hand and may be used as a marketing tool on the other hand.

All stakeholder groups are convinced that active stakeholder engagement might possibly reduce crisis impact – the conviction is especially high for the post-crisis (= learning) stage. In particular, internal stakeholders need to be actively involved.

The calculated cross tabs and correlations reveal that for all stakeholder groups, personal traits have no significant influence on the answers.

Based both on theoretical foundations (a generally accepted fundamental crisis management process in particular) as well as on the prerequisites and underlying conditions revealed by empirical analysis the integrated crisis management model for the hotel industry was evolved. Within the display of the integrated crisis management model for the hotel industry in fig. 1, the icon representing the stakeholder map symbolizes a promising opportunity of co-operation with one or several stakeholder groups.

Figure 1. Integrated Crisis Management Model for the Hotel Industry

Source: author’s construction based on theoretical foundations and empirical findings

Besides the smooth resolution of crises and reduction of crisis impacts, the model has two major objectives as revealed by the content analysis of the qualitative research parts:

· development of a crisis management model which serves as a tool to enhance guest and employee satisfaction,

· development of a crisis management model which serves as a tool to enhance long-term business relationships with other external stakeholders.

6. Discussion, Main Conclusions, Main Suggestions and Recommendations

6.1. Discussion

By introducing the integrated crisis management model for the hotel industry, a theoretical framework is complemented by practical applications. The model hereby neutralizes the deficits and discrepancies revealed between general crisis management literature and status quo – respectively specific prerequisites for the hotel industry. Hereinafter, a number of summarizing major recommendations on how to apply the integrated crisis management model for the hotel industry is given:

· An underlying forms set for the individualisation of the integrated crisis management model for the hotel industry summarizing the configuration of the modules “stakeholder map”, “stakeholder matrix”, “crisis matrix” and “crisis scenarios” also evolved by the author allows an individualization of the general model to the specific prerequisites of a hotel organisation.

· The application of the model has to be understood as a continuous process instead of the accomplishment of a once-only task.

· Crisis management efforts have to be implemented into the organisational culture of the hotel organisation.

· The department heads have to take a vanguard role in implementing the individual modules of the model.

· Crisis management has to be considered a management tool instead of a necessary evil.

6.2. Main Conclusions

1) Modern media coverage does not allow any preparation time with respect to crisis communication any more. Unprofessional crisis communication might even enhance the crisis impact or add a reputational crisis. Furthermore, crisis communication regarding communication means and content need to be adapted for internal and external addressees or respective stakeholder groups. Generally, personal communication is preferred by all stakeholder groups surveyed.

2) Chain hotels are generally perceived to handle crisis situations better. The empirical research revealed that this is true to a certain extent. Nevertheless, some chain hotels have even less crisis management tools in place than the average privately-owned hotel. On the other hand, some privately-owned hotels have by far more crisis management tools in place than the average chain hotel. This finding pleads for industry-wide standards which ensure safety and security for employees, guests and all other stakeholders no matter if collaborating with a privately-owned or a chain hotel.

3) Besides these general conclusions, the analysis of empirical data revealed clear support of the main hypothesis of this doctoral thesis: “Crisis management as generally applied within the hotel industry at present is insufficient”. Generally, the perceived crisis awareness and crisis preparedness are in need of improvement. If a structured crisis management process is in place, a sensitive (focus honest interest instead of pure marketing; possible division into internal and external stakeholders) image campaign might enhance the perception. The conduct of management trainings followed by the existence of a detailed crisis management/contingency plan were rated the two most effective crisis management tools. These ratings contradict generally applied ad-hoc decisions. In addition, all stakeholder groups surveyed were convinced of active stakeholder engagement helping to reduce crisis impact in all crisis stages. At the same time, no crisis type was on average considered being “not at all” or “rather not” regarding both probability and impact level – another clear indicator for the need of an advanced and structured crisis management model which may lower probability and impact more efficiently than ad-hoc decisions.

4) The stakeholder groups’ characteristics do not correlate with the survey answers. This statement expresses the partly tentative support of the first hypothesis-based proposition which assumes homogeneity of stakeholder perceptions and demands towards crisis management within the hotel. Personal traits seem to have no significant influence on the answers of the survey questions. A light non-homogeneity was only indicated for the variables “perceived crisis awareness” and “perceived crisis preparedness” through the application of the Kruskall-Wallis-Test.

5) By emphasizing crisis awareness (analysis, evaluation, signal detection, protection) the second hypothesis-based proposition “The application of the reduction phase may avoid crisis-induced impact” is tentatively supported.

6) Crisis management trainings are perceived by experts and all stakeholder groups surveyed as most effective crisis management tool. Trainings need to be conducted on a regular basis, training methods need to be applied according to the training subject or scenario and participants might be additionally motivated by issuing participation certificates. Together with setting up a crisis management team and a crisis management plan, the third hypothesis-based proposition “the application of the readiness phase may avoid or reduce crisis induced impact” is tentatively supported.

7) As the integrated crisis management model for the hotel industry is based on the premises of effective crisis communication and business continuity, the fourth hypothesis-based proposition “The application of the response phase may reduce crisis-induced impact” is also tentatively supported.

8) Both by ensuring business continuity and setting an officially announced final point to the crisis situation, crisis-induced impact may be overcome faster and more fluently. Therefore, the fifth hypothesis-based proposition is tentatively supported.

9) The crisis learning process is essential for updating and elaborating the crisis management process and therefore has to be structured. Empirical research revealed that all stakeholder groups are convinced of possible impact reduction of crises by active stakeholder engagement – especially for the post-crisis (= learning) phase. This tentatively supports the sixth hypothesis-based proposition “The application of the learning phase may avoid or reduce further crisis-induced impact”.

10) The behaviour which is most associated trust in hotel organisations is two-minded: While internal stakeholders and hotel guests ranked “guest satisfaction” highest, the DMOs’ ranking “long-term business” points out to a different relationship quality. A safety certificate – which so far does not exist – is considered the most effective crisis management tool in increasing trust throughout all stakeholder groups surveyed. This possible safety certificate would also support the approach to standardize crisis management processes in order to enhance the perception of the handling of crisis situations by privately-owned hotels. By emphasizing the marketing aspect in general and the launch of a safety certificate in specific, the last hypothesis-based proposition “The application of the integrated crisis management model for the hotel industry may generate trust” is tentatively supported.

11) Essential for establishing a structured crisis management process are two preparatory work steps: First, identifying and prioritizing the organisation’s stakeholder groups and second, evaluating the introduced crisis types for the own organisation considering probability and impact, supplemented by the elaboration of one detailed crisis scenario per crisis type. Conclusively, the active involvement of internal stakeholders into brainstorming and making use of their broad variety of crisis experience seems a promising first step in establishing a structured crisis management process. In a second step, additional stakeholder groups may successfully be included. Their experiences in diverse fields may enrich the crisis learning phase.

6.3. Main Suggestions and Recommendations

6.3.1. Suggestions for Hotel Managers

1) Hotel organisations should conceptually prepare more crisis situations apart from the generally associated crisis situations “fire” and “economic crisis”.

2) The hotel organisation’s general management must not see the stakeholder relationship management approach to crisis management as a once only tactic but has to implement it as a paradigm shift.

3) The hotel organisation needs to identify all crucial stakeholders and draw a stakeholder map focusing on the tourism context. Both formal and informal agreements have to be considered. Networks and co-operations have to be established before and tightened in a crisis situation. It is too late to establish them in a crisis situation.

4) The crisis management team of hotel organisations should conduct a pre-crisis audit including interviews with both internal and external stakeholders in order to determine the crisis preparedness of an organisation.

5) The crisis management team of hotel organisations should apply the “underlying forms set for the individualisation of the integrated crisis management model for the hotel industry” as a foundation for setting up a structured crisis management process.

6) The crisis management team of hotel organisations needs to update the crisis management plans resp. contingency plans regularly, at least at the moment of changing contact information such as mobile numbers of department heads or doctors nearby or in the course of a post-crisis learning phase.

7) It seems advisable that the crisis management team of hotel organisations prepares a detailed crisis scenario for each crisis type defined for testing the crisis management plan. Best case and worst case scenarios should be implemented.

8)  “Training” should include general training, table-top exercises, workshops and real time and live simulations including flexible elements with the aim to test the organisation, communications and the teamwork of those concerned and the ability of individual actions. Trainings within hotel organisations need to be set up and executed under the supervision of the crisis management team of hotel organisations.

9) The crisis management team of hotel organisations should implement crisis management audits and training into business activity plans and reiterate them on a regular basis. External audits may be even more promising due to their neutrality. These external audits may be conducted by specialized crisis management consultants in order of the crisis management team of hotel organisations.

10) The learning process of the a hotel organisation’s own crisis history has to be extended by the learnings from the stakeholders’ crisis histories and documented in the corresponding updated versions of the hotel organisation’s crisis management plan.

11) “Safety or security management” might be a better term than “crisis management” for hotel organisations to use in external communication in order not to enhance fear and bad assumptions. (Zech, 2013)

6.3.2. Recommendations for Future Research

1) The set-up of scenario-based interviews in order to test model is recommended. The model can’t be tested in reality as no crisis situation may be evoked artificially nor can a naturally evoked crisis situation be handled both ways applying and non-applying the model at the same time. But, by conducting scenario-based interviews a crisis situation may be simulated applying the model and afterwards be evaluated by one or several experts.

2) One specific limitation which seems advisable to be neutralized in a potential future research is the limitation to “hotel industry”. It seems promising to widen the research to the “hospitality industry” as by doing so a multiple focus might be reached.

3) At this moment, the model is purely operationally focused. In a possible next step the financial aspect may be added. By doing so, the managerial relevance of applying the model might even be enhanced.

4) The development of a professional and standardized safety certificate focusing on crisis management processes within the hotel industry seems promising as this represents the most encouraging crisis management tool in order to increase stakeholder trust in a hotel organisation on the one hand and ensure standardized processes (e.g. enable minimising the perceived disadvantage of the handling of crisis of privately-owned hotels towards chain hotels) on the other hand.

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