There are no companies nowadays that have not questioned whether outsourcing would be an asset or not in their activity. The concern for fixed costs reduction and its flexibility, resources and revenue optimization leads us exactly to this question.
We have all noticed that hotels and accommodation properties are increasingly flexible, adapting to the increasingly distinct business realities that have invaded our country. It is now time for them to answer back to the market by basing their core activities on what is essential and a critical success factor. In this assumption, they are based on well-known business models like Airbnb.
On the other hand, the technological requirements of the sector require large and unbearable investments for most small properties, which do not have the necessary human resources, know-how or other resources.
Administrative services virtualization of this type of small-scale organizations can be seen as a major competitive advantage.
Transforming fixed into variable costs, depending solely and exclusively on your core business financial flow. Service Outsourcing drastically reduces risk and boosts operating income in the medium term.
But what is really Outsourcing and what are its implications?
As the term indicates, outsourcing means subcontracting, seeking out. We turn to an outside company to meet service needs, whether temporary or permanent. Through this hiring process, a company hires another to perform activities that it cannot or has no interest in performing.
With the current demands of the markets where we operate, we are forced to focus on truly vital areas in which we dominate the processes. Commonly we see examples of outsourcing in services like housekeeping, room-service, kitchen, security, laundry or maintenance. But it is not limited to this, we can use external services in the most diverse areas such as human resources, financial, strategic, marketing, sales, administrative, legal, production, logistics or even tax residence and physical offices.
10 main benefits that lead companies or sole proprietors to use third parties
1- Reduction and control of operating costs with transformation of fixed costs into variables
2- Access to highly specialized professionals, inaccessible if hired directly
3- Reduction of the staff, as well as the expenses inherent to it
4- Increase the company's focus and its operational competitiveness
5- Free human resources for company main activities
6- Increase efficiency on time consuming tasks
7- Empowering services and adding value to the organization
8- Perform activities difficult to control or manage
9- Sharing of risks and their liability with the partner / provider
10- Acquisition of new skills, know-how and technological capability of systems
But these reasons are not enough to reach the decision of contracting these types of services, before proceeding with an outsourcing strategy of a certain service, a detailed and meticulous analysis should be carried out, knowing in advance the appropriate partner to our business type and possible disadvantages if not applied correctly.
5 most common disadvantages in an outsourcing process that is not adjusted to the reality of the hotel and lodging business:
1- Little involvement of the partner and little identification with the project
2- Less control of activities and greater difficulty in information flow
3- Poor alignment with company culture and strategy
4- Costs may be higher if they do not produce results
5- Greater administrative dependence
It is undoubtedly a strategy that brings many benefits, but only if well applied and well implemented can produce the desired results for all parties involved.
It is not only the outsourcing service provider that has to adapt to the implementation of new processes or realities, the contracting company must also reflect and facilitate the necessary conditions for the smooth running of the activities.
Five phases are identified in a Outsourcing services implementation process:
1- Opportunities diagnosis and identification
At this stage we define the company's strategy and its competitive advantages. Here we will know what are the company strengths, its key competencies, keep their execution, under penalty of losing competitiveness.
2- Opportunity evaluation
After identifying the opportunities mentioned in the previous point, we must evaluate the quality of the cost / benefit in the way they are currently carried out in the company. We need a complete description of the activity that you want to subcontract, as well as tools for evaluating the performance and desired level of the activity. Based on the comparison of values between the two scenarios, we can proceed to the next phase.
3- Identification and selection of service provider for the business area
After researching and identifying potential service providers, you must establish the conditions under which the new partnership will be created and the requirements of these providers. With all the information in hand and after an evaluation of the proposals, you can choose which guarantees the best service.
4- Implementation of new outsourcing processes
Never neglecting the company focus and service, we must elaborate a plan of action duly scheduled, so that all the processes are carefully created, promoting a fluid communication and a cohesive interconnection with the other company processes.
5- Monitoring and evaluation of all parties performances (Contractor and Subcontractor)
Based on the tools created to evaluate partnership performance, we must analyze and adjust the plan / conditions of this partnership in order to maximize this opportunity. After a predetermined period, within the assigned goals you must evaluate whether you will bet on continuity or not.
Main types of Outsourcing services in Hospitality and local accommodation
Transport rental or creating covenants with specific suppliers is a constant in this type of business. Several types of companies already make formal or informal agreements with taxis companies, transfers, uber, etc. so that they direct customers to those companies. These practices are common in restaurants, hotels or local accommodation spaces.
It is common to see outsourcing services such as housekeeping, room service, kitchen, security, laundry or maintenance. In these operating areas, some properties choose to subcontract because of the high fixed costs of purchasing specialized workers (maintenance) or high values of space in urban centres per m2 which may make it unfeasible to have non-productive areas (laundries, etc.)
3- Marketing and sales
In the area of marketing and sales, due to lack of technical skills with the increasing business digitalization, hotels feel many difficulties to follow the technological evolution opting for companies of software and marketing.
5- Revenue Management
Outsourcing Revenue Management services in Portugal is relatively recent, however in other countries it is common to make this type of contracts in exchange for a percentage on sales and is being a development area in the telework because of its characteristics. When synchronized with the IT, Marketing and Sales areas, they can produce truly amazing results.
6- Information Technology (IT)
This is perhaps one of the most common areas nowadays due to the latest legal changes in consumer privacy and growing technological need.
7- Administrative services
The area of administrative services is perhaps one of the oldest in outsourcing, for example accounting services, finance, salary processing, human resources, etc.
8- Facilities rental, parking, virtual offices or tax residence
These points correspond to one of the most recent market needs, with the explosion of local accommodation spaces and the rising costs per m2, many companies are choosing to their businesses by not having their physical offices installed. They prefer to turn spaces into productive areas where they can make additional revenue rather than making room for the administrative services. On the other hand, the space constraint of local accommodation requires having virtual offices in places other than the premises of the dwellings themselves, for example in private houses or other unconventional solutions. With the emergence of new solutions these entrepreneurs find themselves professionalizing their services, changing their tax residence to coworking companies or virtual offices.
The interesting thing is when we find in the market a globalized solution that can fit all these valences or most of them in one service, as is our case in Revmanager. Talk with us and request your quotation here.
Key Points for a Successful Partnership:
- Clear mission and vision, shared with the provider partner
- Planning and strategic vision
- Selection of the appropriate partner according to the area of activity
- Relationship management
- Clear and well-structured contractual conditions between the parties
- Open communication with interested parties
- Attention to questions of personnel and teams
- Assignment of a contact person with the provider to cover your absence
- Involvement and support of the executive team
- Mid-term financial evaluation
Outsourcing is no solution for every company or business. This solution offers unquestionable financial and operational advantages, but these only occur when several conditions, based on values, planning, as well as in choosing the ideal partner for the type of business in question, are met.