The Center for Hospitality Research - Hotel School Research Review

Hotel operators should invest more in their front-line service employees if they want to earn greater future revenue. A study of 563 hotels in the United States published by the Cornell University Center for Hospitality Research (CHR) found that investments in intellectual capital, including spending on service employees, brand affiliation, and management firms, show up subsequently as improvements in revenue. The study, “Intellectual Capital: A Key Driver of Hotel Performance,” was written by Cornell professors Cathy A. Enz, Ph.D., Linda Canina, Ph.D., and Kate Walsh, Ph.D., all of the Cornell University School of Hotel Administration. It is available at no charge from the Center for Hospitality Research (http://www.hotelschool.cornell.edu/research/chr/pubs/reports/).

“The hotel industry has long suspected that investments in intellectual capital pay off, but this study finally establishes the direct link between investing in employees and improved revenue,” said Enz, who is associate dean for industry research and affairs and Lewis G. Schaeneman Jr. Professor of Innovation and Dynamic Management at the Hotel School. She added: “What’s important to note here is that the employee investment that really creates a return is added spending on customer-contact employees. However, additional investments in professional personnel and support staff did not improve revenues.”

The authors tested the effects on income of three components of intellectual capital. As an indicator of customer capital, the researchers examined investments in the hotel brand; as a measure of systems capital, they tested the effects of management company fees; and, to measure human capital, they looked at the effects of additional salaries and wages of three types of property-level employees (i.e., service, support, and professional workers).

The study’s findings held for both full-service hotels and limited-service properties. That is, the greater the expense incurred—or investment made—on an operating company and brand affiliation, the higher a hotel’s profitability. Enz, Canina, and Walsh controlled for other factors that influence hotel revenue, such as the size of the hotel and its location. By examining those physical factors, the study found that in addition to purchasing or developing intellectual capital, physical assets are a significant predictor of performance for full-service hotels, but that is not so for limited-service hotels.

PricewaterhouseCoopers LLP (PwC) and the Cornell Hotel School’s Center for Hospitality Research announced today that Scott Berman, US Advisory leader of the Hospitality & Leisure Practice of PricewaterhouseCoopers and a principal in the Miami office, has joined the Center’s Advisory Board.

“We support the mission of Cornell’s Center for Hospitality Research to shape the global knowledge base in hospitality management,” said Scott Berman. “This represents a continued strengthening of the relationship between PwC's hospitality advisory practice and Cornell University’s School of Hotel Administration.”

“We are pleased to welcome Scott Berman to the Advisory Board,” said David Sherwyn, J.D., a professor at the Cornell Hotel School and academic director of the Center for Hospitality Research. “We have an established relationship with PricewaterhouseCoopers, and we look forward to a long and productive collaboration that will help us further explore our industry’s strategic, managerial and operating practices.”

PricewaterhouseCoopers’ Hospitality and Leisure practice offers specialized industry experience in the hospitality and leisure industry and is recognized for its econometric and statistical research. Its global business advisory capabilities include: services related to strategic research, due diligence, market research, financial analysis, business plans, economic impact, franchise, management and lease negotiation, tourism studies, performance improvement and litigation and arbitration.

The third Human Resources Roundtable, co-sponsored by Cornell's Center for Hospitality Research, eCornell, and Cornell's School of Industrial and Labor Relations will be held September 28-29, 2006, at the Statler Hotel, Cornell School of Hotel Administration. The Roundtable, chaired by Associate Professor J. Bruce Tracey, Ph.D., will be attended by over 20 executives from various sectors of the hospitality industry. Please contact Joe Strodel, Jr., at 607-255-4646, if you are interested in sponsoring this event.

The Lodging Conference, celebrating its 12th year, is a high-level event - bringing together the top minds in hotel finance, development and operations. The 2006 Lodging Conference is scheduled for September 18th - 21st at the luxurious Arizona Biltmore Resort & Spa in Phoenix, Arizona

With record attendance in Monte Carlo in 2005, the 4th Annual International Hotel Conference moves to the spectacular Rome Cavalieri Hilton from 11-13 October 2006. The conference, co-sponsored by the Cornell School of Hotel Administration, focuses on hotel financing, development and management in Europe and beyond. The program will feature superb networking, deal making, and 100 industry expert speakers presenting 40 interactive sessions designed to engage the audience of executive level hoteliers, managers, owners, developers, lenders, members of the media, and those who service the hotel industry.

Cathy A. Enz, Ph.D. will be presenting at the conference. Additional information about the event, registration, sponsorships, and related activities can be found at the event’s web site www.internationalhotelconference.com,or by contacting the conference organizers, Morris Lasky and Mary Lou Koys of Lodging Unlimited, Inc. at mlasky@aol.com.

Thayer Lodging Group, formed in 1991, is a real estate venture capital firm that sponsors private equity funds focused on the hospitality industry. Clients include Fortune 50 companies, public and private pension funds, endowments, and family offices. The company has delivered returns in excess of 30% since inception. Currently active funds own in excess of $2 Billion of hotel real estate and hold approximately $800 million in available investment capacity. Thayer Lodging Group is headquartered in Annapolis Maryland. For more information, visit www.ThayerLodging.com.