In recent years, managers within the hospitality industry have witnessed a proliferation of expectations that must be met for businesses to remain relevant in the current competitive environment (Jones & Lockwood 2002). Hotel and resort managers, in particular, are often called upon to balance between the service expectations of customers and the financial expectations of the hotel owners.
The balancing of priorities has led managers to adopt a plethora of performance measurement models, including the balanced scorecard and the bottom-line approach (Phillips 2007).
The present paper purposes to demonstrate the suitability of the balanced scorecard in assisting hotel and resort managers to balance their priorities, hence refuting the claim that adopting the bottom-line approach is the way to go for these managers in balancing service quality expectations and financial demands of the owners.
Extant management literature shows that the balanced scorecard evaluates an organisation’s performance through four perspectives namely “financial, customer, internal operating processes and learning and growth, and lays emphasis on the comprehensiveness and integrity of evaluation” (Wang et al 2013, p. 25).
The bottom-line approach focuses more on an organisation’s net income and financial reports to determine its strengths and weaknesses (Jones & Lockwood 2002).
Owing to the increasing competitive phenomenon of the hotel and resort industry (Lau et al 2005), an effective and efficient measurement tool must draw on both qualitative and quantitative perspectives (Phillips 2007).
More importantly, such a measurement tool must have the capacity to expressively assess service quality attributes (Namkung & Jang 2008), as well as the financial performance based on the fact that financial management is the backbone of any business (Tsai et al 2011).
In this light, the balanced scorecard is better placed to assist hotel and resort managers balance the service expectations of their customers and the financial expectations of hotel owners as it employs multiple perspectives not only to measure organisational success but also to assist in the implementation of effective strategies for future success (O’Fallon & Rutherford 2010).
Unlike in the bottom-line approach which deals with a single indicator to measure operational success (Jones & Lockwood 2002), all the four perspectives of the balanced scorecard can be used to assist hotel and resort managers deal with the conflicting priorities that are largely predicated upon customer service expectations and the financial expectations of hotel owners.
For instance, under the financial dimension of the balanced scorecard model, hotel and resort managers should be able to know what types of financial performance they should provide to hotel owners and other stakeholders so as to be successful financially (Evans 2005).
Under the customer perspective, managers should be able to develop customer and service quality standards that enhance the vision and strategy of their respective service organisations (Cruz 2007). Again, under the internal business perspective of the balanced scorecard model, managers must have the capacity to develop and implement business processes that will enhance customer satisfaction and service quality.
Lastly, under the innovation and learning perspective, managers must develop strategies that will not only ensure the organisation’s ability to change and improve, but also its capacity to enhance service quality offerings and the attainment of financial expectations set by stakeholders (Evans 2005).
Available management literature demonstrates that excellent service quality within the hospitality industry not only enables an organisation to differentiate itself from its competitors in the marketplace, but also to achieve a sustainable competitive advantage and promote customer repeat intentions (Ladhari 2009).
Arguably, therefore, the bottom-line approach cannot be used by firms within the hotel and resort industry to evaluate these qualitative values since it concerns itself with measuring quantitative (financial) attributes at the expense of service quality attributes (Jones & Lockwood 2002).
Although the measurement tool has received praise for capturing the financial performance of an organisation, hence effectively serving the interests of owners (Tsai et al 2011), it is one-dimensional and backward-looking for its lack to include other performance indicators such as service quality and customer satisfaction (Evans 2005).
In the hotel and resort industry, it is imperative for any performance measurement tool to effectively illuminate the service quality and expectations of customers.
Available literature demonstrates that “the benefits of service quality include increased customer satisfaction, improved customer retention, positive word of mouth, reduced staff turnover, decreased operating costs, enlarged market share, increased profitability, and improved financial performance” (Ladhari 2009, p. 308).
The customer dimension of the balanced scorecard effectively measures five core variables that are intrinsically related to service quality, namely “customer satisfaction, customer winning, customer retention, customer profitability, and market and customer shares in the target segmentation” (Wang et al 2013, p. 26).
In contrast, the bottom-line approach has no capacity to measure service quality attributes despite the fact that they are immensely important in the hotel and resort industry, especially with regard to the factors and benefits mentioned above.
To conclude, it is important to underline the argument that the balanced scorecard is a more suitable measurement tool for hotel and resort managers, hence this paper refutes the claim that the hotel and resort industry is becoming increasingly bottom-line focussed.
While the bottom-line approach is only able to fulfil the financial expectations of the owners through its financial measures, the balanced scorecard takes into account the financial expectations as well as a host of other qualitative indicators, including service quality and customer satisfaction.
Reference List
Cruz, I 2007, ‘How might hospitality organisations optimise their performance measurement systems?’ International Journal of Contemporary Hospitality Management, vol. 19 no. 7, pp. 574-588.
Evans, N 2005, ‘Assessing the balanced scorecard as a management tool for hotels’, International Journal of Contemporary Hospitality Management, vol. 17 no. 5, pp. 376-390.
Jones, P & Lockwood, A 2002, The management of hotel operations, Cengage Learning, Stamford, CT.
Ladhari, R 2009, ‘Service quality, emotional satisfaction, and behavioural intentions: A study in the hotel industry’, Managing Service Quality, vol. 19 no. 3, pp. 308-331.
Lau, PM, Akbar, AK, & Fie, DYG 2005, ‘Service quality: A study of the luxury hotels in Malaysia’, Journal of American Academy of Business, Cambridge, vol. 7 no. 2, pp. 46-55.
Namkung, Y & Jang, S 2008, ‘Are highly satisfied restaurant customers really different? A quality perception perspective’, International Journal of Contemporary Hospitality Management, vol. 20 no. 2, pp. 142-155.
O’Fallon, MJ & Rutherford, DG 2010, Hotel management and operations, John Wiley & Sons, Hoboken, NJ.
Phillips, PA 2007, ‘The balanced scorecard and strategic control: A hotel case study analysis’, The Service Industries Journal, vol. 27 no. 6, pp. 731-746.
Tsai, H, Pan, S & Lee, J 2011, ‘Recent research in hospitality financial management’, International Journal of Contemporary Hospitality Management, vol. 23 no. 7, pp. 941-971.
Wang, YG, Li, YM, Jan, CL & Chang, KW 2013, ‘Evaluating firm performance with balanced scorecard and data envelopment analysis’, WSEAS Transactions on Business & Economics, vol. 10 no. 1, pp. 24-39.