root causes of new hotel opening delays in greater china
TRANSCRIPT
Root Causes of New Hotel
Opening Delays in Greater China
a Hospitality Industry Perspectives
By Gert Noordzy, MBA, CAPM & Richard Whitfield, PhD
First Published by
The Center for Hospitality Research
Cornell University – School of Hotel Administration
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Introduction *
• Educational and professional background.
– “Nothing at hotel school had prepared me for the
rigours of opening a new hotel.”
• Previous and current jobs.
• How did I get into project management?
– “I used to be an accidental project manager.”
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My Current Job
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New Hotel Openings *
• This presentation will talk about an industry which
does not apply and has not embraced project
management. Yet.
• New hotel openings in China are almost always
delayed.
Are you surprised?
4
Global travel & tourism industry *
2012 Contribution
GDP US$ 6.6 trillion or 9.3% of total world GDP.
Employment 216 million jobs or 8.7% of total world
employment.
Capital investment Attracted US$765 billion or 4.7% of total global
investment.
Hotel pipeline
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China travel & tourism industry
2012 Contribution
GDP ¥4.7 trillion (US$ 717 billion) or 9.3%.
GDP growth Average of 8.7% over next 10 years.
Employment 64 million direct, indirect, induced jobs or 8.3% of
national employment.
Employment growth 10 million direct over the next 10 years.
Capital investment ¥655 billion (US$98 billion) or 2.8% of total
investment.
Capital investment
growth forecast
9.2% per annum over the next 10 years to ¥1.68
trillion (US$252 billion) by 2023. 6
China travel & tourism industry
2012 Contribution
Domestic trips 3 billion travelers.
Inbound trips 133 million visitors.
Tourism revenues US$ 412 billion.
Global ranking Second.
By 2023 China will overtake US as largest country in
terms of tourism & travel contribution to GDP
and size of outbound market.
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China travel & tourism industry
Infrastructure
Express Way
System
3 million KM length by 2020.
High-speed Rail
System
30,000 KM connecting 250 Chinese cities by
2020.
Airports
Currently 195, with plans to build 97 more
before 2020.
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China Hotel Development
• Implication: 3 new 150+ room hotels will open in
China every day for the next 25 years!
Hotel room inventory
Current * 2.3 million.
By 2025 6.1 million.
By 2039 9.1 million.
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China Hotel Development
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China Hotel Development
• Differences with US:
– US growth was less steep and took place over a
longer period of time.
– Several major hotel management companies
achieved current size through acquisition.
– The bulk of the openings in China will be
achieved through new built projects.
– Branding: North America 66% of inventory is
branded vs 22% in Asia.
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China Hotel Development Pipeline
2012 Asia Pacific pipeline *
• Total:
– 2’401 projects
– 557’505 rooms.
• China:
– 1’622 project
– 407’721 rooms.
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China Plans of Major Industry Players
Synopsis
IHG “Eightfold increase in rooms in Greater China in the next 20
years.”
Hilton “Quadruple the number of hotels in China before 2014.”
Marriott “Invest US$ 2B over the next three years to open new hotels
globally, 14% in China .”
Wyndham * “Our long-term vision is to have a footprint in China that rivals
our presence in the US.”
Accor “Open 100 hotels in China in the next 2-3 years, network of
400 hotels by 2014.”
Starwood “Open 20 new hotels in 2013.”
Home Inns “Plans to add 330 to 360 hotels annually in the coming three
years.” 13
China Pipelines of Top 10 Hotel Groups
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Key questions *
1. How do international hotel companies talk individual
owners into signing up with them?
2. How can international hotel management companies
execute their aggressive growth plans?
3. How can hotel operators open new properties on this
scale effectively and efficiently, and in a consistent
and predictable manner?
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How to open a hotel - Comparison
APM Bok V6 Project Lifecycle
1. Project Brief
2. Capturing project requirements
3. Preparing a business case
4. Securing corp. agreement & funding
5. Developing and implementing a
management plan for the project
6. Leading motivating project delivery
team
7. Managing the risks
8. Monitoring progress against plan
9. Managing the project budget
10.Maintaining communications with
stakeholders and the project
organisation
11.Provider management
12.Closing the project
Typical Hotel Opening in China
1.
2. Limited to hotel system standards.
3.
4. N.A.
5. Limited to hotel critical path only..
6. Limited to hotel team only.
7.
8. Limited to hotel opening efforts only.
9. Limited to hotel expenses only.
10. Limited extend.
11. Limited extend and HOES only.
12.
Hotel openings – status quo
• Project Management methodology and standards are
not applied in hotel industry!
• Use of isolated elements perceived as PM, such as
Critical Path, software and a vague, undocumented
notion of a Project Life Cycle.
• The Project Management Process Groups of
Initiating, Planning, Executing, Monitoring & Controlling
and Closing are not applied.
• APMBOK Delivery is not applied.
• These areas for improvement are huge and would
produce measureable positive results. Ex: Project Risk
Management would improve accuracy of forecasting.
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Hotel openings – status quo
• Hotel brand / management companies do not
physically own the real estate, therefore have no
control over construction, budgets, etc. *
• The relationship with the asset owner is based on a
TSA, HMA / FA and TLA. **
• Hotel opening efforts are driven by corporate
operations, supported by:
– Hotel General Manager.
– Property based task force.
– Corporate preopening support functions.
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Hotel openings – status quo
• Approach does not work on large scale and has severe
limitations:
– Not enough people in the existing hotels to assist.
– Projects run simultaneously, not concurrent.
– Hotel owner approval and incremental workload.
• Generally, the Hotel General Manager is “parachuted”
in, frequently “hits the ground running” and ends up
doing PM related tasks!
• Skill-set to open a hotel is very different from
managing ongoing hotel operations. *
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New hotel openings often delayed
• Delays in technical, operational and commercial
readiness are commonplace in China (average 1-12
months). *
• Consequences: **
– Incremental pre-opening expenses.
– Revenue disruptions.
– Opportunity costs.
– Tie up corporate resources.
– Damage to reputation and credibility.
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A survey to understand hotel opening delays
• Interviews with over 80 hospitality professionals:
– To better understand how international hotel companies
operating in Greater China approach new hotel openings.
– To better understand the nature and causes of these
delays.
• Respondents worked for one of 15 international and
regional hotel companies.
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Two questions:
1. “How does your company approach new hotel
opening processes?”
2. “In your view, which issues cause new hotel
openings to be delayed?”
A survey to understand hotel opening delays
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Observations on the respondents
• None were expert in the field of project management
and its methodology.
• None had received any formal project management
training. *
• None (property based) had experienced a new hotel
project which opened by the target opening date. **
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Observations on the respondents *
• None held any type of project management
certification.
• Only 1 respondent (with an engineering background)
had held PMI® certification in the past.
• About 95% (77) had never heard of the Project
Management Institute.
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Observations on the
hotel management companies
• Only 2 out of 15 hotel management companies had a
dedicated hotel opening support function.
• None of the hotel management companies employed
certified project managers.
• None of the hotel management companies had a
project management department.
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Perceived causes of
new hotel opening delays
• 81 Respondents raised 825 points, sorted into 51
subcategories and grouped into 10 categories, ranked
by using Pareto analysis:
1. 38%: Hotel design & construction.
2. 24%: Hotel owner.
3. 10%: Hotel operator.
4. 8%: Pre-opening activities & operational
readiness.
5. 4%: Procurement.
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Root Cause Analysis
RCA to determine the basic underlying reasons that
cause the problems:
Step 1: Review of sub-categories and categories to
determine direct * and intermediate causes. **
Step 2: Apply the 5 Whys technique to examine why
these causes would occur. ***
Step 3: Deduce the underlying reasons and formulate
the root causes.
Step 4: Map out the sequence of events and vectors, as
well as the relationships between direct, intermediate
and root causes.
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Root Cause Analysis & Causal Chain
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Root Cause Analysis & Causal Chain
Conclusions:
• Four sets of perceived causes are actually direct
causes:
– Delays in concept, design, construction, hand-over.
– Delays in preopening activities & poor execution.
– Delays in procurement process.
– Non-compliance with brand standards.
• Remaining six sets of perceived causes are
actually intermediate causes.
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Root Cause Analysis & Causal Chain
Conclusions:
• Actual root causes are: – Project investment motivation.
– No project management culture.
– Management company modus operandi.
• Delays can occur because of a single cause or multiple
causes.
• None of the identified root causes were mentioned by
the respondents.
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Root Cause Analysis & Causal Chain
Main Vector
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In Summary
Essential point to recognize:
• What the hotel industry perceives to be the causes of
new hotel opening delays are only symptoms of more
deep seated systemic problems.
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“So what if hotel openings are delayed…”
• Global hotel development pipeline of the Top 10
international hotel management companies: US$ 86
billion worth of fix asset projects. *
• In China this represents US$ 26 billion.
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Recommendations
A hotel opening is in fact a project!!!
• Standard PM methodology is well suited to hotel
opening projects on large scale:
– Processes involved in each hotel opening are virtually
identical,
– which allows for plans & schedules to be standardized. *
• To open new hotels on large scale effectively, the hotel
industry needs to significantly upgrade its
understanding of project management, methodology
and techniques.
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Hotel Industry Challenges
1. Limited understanding of Project Management as a
strategic competence. *
2. Few project management champions and no hotel
companies employ certified project managers. **
3. Hotel management companies are traditionally
conservative. ***
4. Most hotel management companies are set up as
functional rather than matrix organization.
5. General misunderstanding in the industry as to
what causes new hotel opening delays.
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The Way Forward
• The hotel industry seems not to link project delays to
the absence of project management culture and the
lack of an all-encompassing project management
methodology.
• Five Building Blocks to improve project performance.
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The Way Forward
Five Building Blocks * **
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Recap
• Hotel openings in China are always delayed and
causes are mainly self inflicted.
• Hoteliers do not link delays with a lack of project
management culture.
• There are hospitality industry challenges to embrace
project management.
• The solution is not “rocket science” and has been
applied in many other industries...
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My Mission
• Project management is now used in more than 85
occupations across a wide swathe of functions and
industries.
• Personal objective: help the hotel industry transform
itself and embrace Project Management as a Strategic
Competence.
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• “The dawning of a profession dedicated to a vision
of a world in which all projects succeed.”
My Mission
• One approach: enlist the help of APM:
“To provide leadership to the movement
of committed organisations and individuals
who share our passion for improving
project outcomes”
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The Last Slide
Q&A
Questions later?
www.hotelopeningprocesses.com
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