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A key factor in the success of the top-ranking companies operating in the hospitality sector is their emphasis on development as an ongoing process of adaptation and improvement. Unfortunately, not all business executives realize the importance of organizational development (OD) and change in fast-paced environments of hospitality settings (Burnes & Cooke, 2012). Some managers are not capable of leveraging the relationship between their skill sets and OD, thereby failing to create innovative teams, build ethical strength, and elevate and extend transformative practices within their organizations.
This paper aims to analyze Choice Hotels International from an OD point of view. The paper will explain in detail how Lewin’s change model can be used to improve the effectiveness of the organization.
Choice Hotels International is a successful lodging holding corporation headquartered in Rockville, Maryland (About Choice hotels, n.d.). The company’s portfolio of brands includes Comfort Inn, Clarion, Sleep Inn, Econo Lodge, Suburban Extended Stay Hotel, and MainStay Suites among others (Form 10-K, 2016). Choice Hotels International owns more than 6, 400 hotels in more than 40 countries and territories around the world (Investor Information, n.d.).
The growth of hotel room supply is one of the chief concerns of the company’s management. Therefore, in 2016, the organization offered its customers more than 500, 000 rooms in the economy, mid-scale, and up-scale price segments (Investor Information, n.d.). As of 2016, Choice Hotels International had 745 properties in development, which represented more than 15 percent of the total national number of hotels in the development pipeline (Monthly number, 2017).
In terms of revenue per available room (RevPAR), the franchisor’s fee-for-service business model is also performing well. In 2016, the company’s RevPAR was $81.19 (Form 10-K, 2016). However, the rate of RevPAR growth has slowed down in recent years, which indicates that there is still room for improvement. A similar trend can be traced in other financial data of the organization such as operating income and total revenues.
The company’s revenue stream comes from franchise fees of its eleven brands. The organization’s business strategy is to “conduct direct franchising in those international markets where franchising is an accepted business model” (Form 10-K, 2016, p. 11).
It means that to generate more revenues, Choice Hotels International has to increase the number of its franchisees. To this end, the organization has to enter into new and untapped markets. Currently, the majority of the company’s master-franchise agreements are restricted to domestic operations. It is clear that the limited master-franchise area negatively affects the organization’s financial performance. There is ample evidence pointing to the fact that internalization through franchising is an effective method of increasing profit margins (Hoffman, Watson, & Preble, 2016).
Lewin’s change model or the unfreeze-change-refreeze model is a prominent approach to planned change that revolves around the diagnostic aspect of OD (Al-Haddad & Kotnour, 2015). The effectiveness of the model is underscored by the fact that many OD practitioners recognize its seminal nature and claim that all theories of change can be reduced to three phases of Lewin’s model (Cummings, Bridgman, & Brown, 2016).
The paradigm for managing change developed by Lewin consists of three stages: unfreeze, change, and refreeze (Bartunek & Woodman, 2015). The first stage presupposes the preparation of a company for future change. The second stage requires relevant stakeholders of an organization to embrace change and move in a new direction. The third stage necessitates the return to equilibrium, which allows employees to regain a sense of stability.
The application of Lewin’s model to Choice Hotels International will help to alter its operations, thereby achieving a higher rate of revenue growth, which can translate into longer-term adaption outcomes. The first step in the paradigm for change management necessities the reduction of the intensity of forces supporting the status quo. It follows that to help the organization to develop new approaches to revenue management, it is necessary to prepare key stakeholders to change, effectively communicate change, and create an atmosphere of psychological safety (Heuvel, Demerouti, Bakker, & Schaufeli, 2013).
It has to be born in mind that the most important element of the first step in the model is the creation of “a sense of urgency around the need for change.” (Heuvel et al., 2013, p. 12). Therefore, when tailoring a change message and developing new revenue generation strategies for Choice Hotels International, an OD practitioner has to understand driving and restraining forces operating within the organization. To this end, it is necessary to conduct a force-field analysis.
Force-field analysis is a method for qualitative data evaluation that is utilized by OD practitioners who base their approaches to change management on Lewin’s theory of planned change (Swanson & Creed, 2014). The analysis, which has been learned in this unit, is based on the categorization of data garnered with the help of interviews, questionnaires, and observations into two groups: forces that drive change and forces directed at the preservation of the status quo. Therefore, to better understand how to overcome opposition to change in Choice Hotels International, it is necessary to engage in internal data gathering.
Taking into consideration a lack of access to key stakeholders of the organization who can provide the inquirer with an invaluable insight into factors maintaining a low level of international franchising in the company, it is necessary to review the extant literature on the topic to conduct preliminary force-field analysis. Alon, Ni, and Wang (2012) who examined the preconditions for hotel chain expansion argue that a level of domestic market saturation and potential in emerging markets are factors that can either stimulate or inhibit international franchising. It should be noted that domestic and international franchisers differ in their time of operations, size, and equity capital (Alon et al., 2012).
After carefully examining Choice Hotels International’s structural and functional qualities, it becomes clear that the organization’s size, equity capital, and experience allow expanding its chain’s portfolio beyond the domestic market.
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Even though the organization’s key characteristics are suitable for international orientation, the company’s management is unwilling to embrace the change. Therefore, it is clear that several constraints prevent Choice Hotels International from moving in a new direction. When it comes to domestic market saturation, the three-star and five-star segments, in which the company operates, constitute the largest market share in the US (Analysis, 2015). However, the segments are associated with a high level of saturation, which means that the company cannot achieve further growth without expanding overseas (Lee, Upneja, Ozdemir, & Sun, 2014). Therefore, it can be argued that the current state of market saturation functions as a driving force.
The potential in emerging markets is a valuable predictor of international diffusion in the hospitality industry. A study conducted by Baena (2013) shows that the Asia Pacific region is characterized by an increasingly large level of international franchise expansion. A similar trend can be observed in the countries of the post-Soviet sphere (Engvall, 2015). It follows that potential in emerging markets is a driving force that should be explored by an OD practitioner to increase the company’s earning capacity.
Having assessed potential driving forces of change in Choice Hotels International, it is necessary to understand forces directed at the preservation of the status quo within the organization. A lack of monitoring skills is an important agency variable that might stop the franchisor from internalizing its outlets. Another rationale for resisting expansion overseas is a cultural distance between a foreign and a domestic market (Alon et al., 2012).
By basing an intervention on Lewin’s theory of planned change, it is possible to ensure that organizational change initiatives are not impeded by forces of resistance. The company’s management should be delivered a change message during a series of confrontation meetings. These meetings must have the following elements: climate setting, information collection, information sets, priority setting, organization action plan, and progress review (Cummings & Worley, 2014).
By engaging Choice Hotels International’s executives during such conferences, an OD specialist can mobilize the company’s resources necessary for changing its strategic orientation. The application of Lewin’s model will help to make sure that international franchising is accepted by key stakeholders of the company and does not cause unnecessary turmoil. The model can also be used to achieve higher levels of RevPAR growth in the company, which will lead to higher royalty rates. By doing so, Choice Hotels International will be able to control its two main earnings drivers, thereby increasing its capacity to withstand negative economic cycles.
The paper has analyzed the performance of Choice Hotels International from an OD perspective. It has been argued that by applying key concepts and theories of change management such as Lewin’s change model, Lewin’s theory of planned change, and force-field analysis to the development of the organization, it is possible to substantially increase its effectiveness. The analytical focus of the paper was on an increased international presence as a means of generating additional franchising fees for the company.
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