Decoding Hotel Management Structure

Separate or Same? Why the Ownership-Management Structure Matters

Does it make good economic sense for hotel owners to both hold the deeds and manage operations at their properties? Hui Liao, the Smith Dean’s Professor in Leadership and Management at the University of Maryland’s Robert H. Smith School of Business, believes it does. She and co-authors from Fordham University, Shanghai Jiaotong University and Cornell University took a hard look at that question in research published recently in the journal Human Resource Management.

They found that a hotel’s management structure can have a direct impact on its service and financial performance.

Organizations spend a lot of time and resources on human resources management. They know it can be the key to higher productivity and performance.

When big organizations consider their human resource management, they often look to the high-performance work systems, or HPWS, which encompass selective hiring, extensive training, performance appraisal, incentive compensation, employee participation and information sharing. Those practices have long been viewed as instrumental in helping to drive worker performance and motivation, contributing to better the organization’s strategic outcomes.

In their research, Liao and her co-authors sought to determine whether an organization’s ownership structure might influence the effects of those HPWS. They looked at the hotel industry’s two broad categories of ownership and management structures — one in which the ownership and management are the same, and the other where ownership and management are separate.

They hypothesized that HPWS for service quality, or HPWS-SQs, predict service performance, based on the hotel’s ownership structure. They theorized that when property ownership and management are aligned, HPWS-SQs would be more positively correlated to service performance.

Controlling for outside factors, the researchers studied surveys from hotel general managers and human resources managers, and analyzed archived data and reviews from Tripadvisor.com.

They found that HPWS-SQ showed a significant positive correlation to service performance only when hotels were owned and managed by brands.

The research also found that service performance didn’t automatically translate into profit but did demonstrate an inverted U-shaped relationship with hotel profit. “We hope this study prompts researchers toward further examination of the boundary conditions and influence processes of (human resource management) on other forms of performance and long-term profitability,” the paper says.

Though the research specifically addressed the management of hotels, its findings could have implications for other types of organizations, such as restaurants, retail companies and airlines, where ownership and management may be aligned or separate.

Read more: High Performance Work Systems for Service Quality: Boundary Conditions and Influence Processes is featured in Human Resources Management.