مقاله انگلیسی رایگان در مورد استراتژی ALFO و انتخاب قرارداد برای حمایت از آن – الزویر ۲۰۲۲

Abstract

     Although franchise and management contracts constitute the dominant way of organizing business-to-business relationships within hotel chains, no study has compared their relative performance. This paper aims to explain their differences and assess their impact on online scores, currently a key performance indicator in the hotel industry. We argue that franchises are less effective than management contracts for operating upscale hotels due to the relative advantages that the latter have in transferring and enforcing tacit knowledge, typically embedded in skilled staff and very relevant in such quality-tier hotels. Conversely, franchising is better for large hotels because, first, its incentive structure better addresses managerial shirking (typically more severe as hotel size increases) and, second, it offers advantages when the standardization of business procedures is key to success (as is true for large establishments). Our empirical findings broadly support these arguments in a dataset of 467 Spanish hotels, also providing evidence that no single organizational solution fits all situations.

Introduction

     Like the tourism industry, the hotel sector has grown significantly in recent decades. According to the World Tourism Organization, international tourist arrivals rose worldwide from 686 million in 2000 to 1461 million in 2019.1 This growth has facilitated hotel firm specialization, driving companies to focus on fewer supply chain stages (Stigler, 1951). A clear example is the move by the world’s leading hotel groups to divest properties (i.e., real estate business) and specialize in hotel operations and brand management (Blal & Bianchi, 2019).

     This tendency has resulted in the so-called asset-light and fee-oriented (ALFO) strategy (Li & Singal, 2019; Sohn, Tang and Jang, 2013, Sohn, Tang and Jang, 2014), which relies critically on the development of effective business-to-business relationships between hoteliers. Started years ago by US market leaders, such as Marriot and Hilton, the ALFO strategy is currently a dominant industry trend (Balyozyan, Perret, & Martin, 2017; Mercier, 2020). Its aim is to grow by developing brands and business concepts and then incorporating affiliated hotels that pay a fee for their use. However, this affiliation means that several independent firms must cooperate by contributing the assets that are necessary to offer a full lodging service.

Conclusion, managerial implications, and limitations

     In sum, this work shows that differences in performance exist between the two main business-to-business organizational solutions that constitute the ALFO strategy, so one size does not fit all (i.e., solutions are contingent on organizational problems). Management contracts prove more effective than franchising in upscale hotels. We argue that this is because transferring tacit knowledge within the organization (as management contracts do) is less costly than transferring it between companies (as franchising does). Conversely, we also find that franchise agreements outperform management contracts for operating large hotels in terms of online scores, arguably because they provide high-powered incentives to prevent managerial shirking and facilitate the standardization and codification of business procedures.

     The theoretical implication of this work is that to explain the choice of the business-to-business relationship, it is necessary to understand not only the problem we want to solve (the replication of a business concept without large capital investments) but also the comparative advantages of the organizational solutions applied (i.e., management contract vs. franchising). Hua et al. (2020) have recently shown that management contracts provide value, and we qualify this by stating that part of this added value is because they guarantee the transfer of tacit knowledge better than a franchise contract does. Overall, a deeper analysis of governance choice is necessary to disentangle the still fuzzy category of so-called hybrid governance solutions (Williamson, 1991). Studies comparing extreme governance mechanisms (i.e., hierarchy and market) with specific hybrid solutions are relatively frequent. However, the delimitation of hybrids and their differences have been much less studied (Cuypers et al., 2021). In this sense, these results help advance understanding of the two leading hybrid solutions of the hotel industry (ALFO).