Academic journal article Australian Journal of Hospitality Management

Benchmarking in the Hospitality Industry: An Important but Misinterpreted Concept

Academic journal article Australian Journal of Hospitality Management

Benchmarking in the Hospitality Industry: An Important but Misinterpreted Concept

Article excerpt

Abstract

The concept and practice of benchmarking appeared in the late seventies with the meaning and implementation of this practice varying over time. In fact, confusion over the correct use of the concept has clouded the original meaning.

In studying the business performance of the accommodation sector, the researchers found that benchmarking is often confused with the practice of competitive comparison studies, which is simply a component of benchmarking. The key differences between the two methods lie in the final steps of the benchmarking process of gap identification.

This paper reviews the field of benchmarking in general, identifying the background to its growth, the benefits that can be derived and some of the barriers to its success. The paper then examines benchmarking in a hospitality context and reviews current industry studies to show that such studies do not embrace many of the fundamental components of benchmarking, particularly strategies to close performance gaps. These studies, which involve the motel sector, the restaurant and catering sector, and the attractions sector, are compared with other benchmarking studies. Finally, the paper proposes strategies that can be adopted to make better use of benchmarking in the hospitality industry.

Keywords: Benchmarking, Accommodation, Competition, Gap Identification, Australian Hospitality

What is Benchmarking?

Benchmarking is now a commonplace term in business and many definitions have been proposed for the term (see, for example, Spendolini 1992; Leibfried and McNair 1992; Ogden 1998; Elmuti 1998). One of the more succinct definitions of benchmarking is by Watson (cited in Ahmed and Rafiq 1998, p.228): `A continuous search for, and application of, significantly better practices that lead to superior competitive performance'.

Key Elements

An analysis of the various definitions used for the term `benchmarking' has identified three key characteristics:

1. measurement via comparison;

2. continuous improvement; and

3. systematic procedure in carrying out benchmarking activity.

(Ahmed and Rafiq 1998, p.228)

Ahmed et al (1998) believe that successful benchmarking not only needs to be regular and continuous but also needs to be conducted by different departments and at different levels of the larger organisation. The key to successful benchmarking is the implementation of improvement strategies, which is not merely internal analysis of performance and the gathering of information about external best practice or competitors. Benchmarking is part of continuous improvement processes and not a one-time project (Elmuti and Kathawala 1997) as on-going development is based on a cycle of identifying indicators, evaluation, problem/issue identification, rectifying action and continual review.

Benchmarking procedures should be applied to processes that are critical to the organisation's success. `A key feature of successful benchmarking is therefore the ability to only benchmark those processes that are critical to the organisation's goals' (Massheder and Finch 1998, p.2). Although some goals are more easily assessed than others, it is essential that some form of measurement be applied in order to identify performance gaps.

Benchmarking must be purposive, externally focused, measurement based, information intensive, objective, and action-generating (Leibfried and McNair 1992, p.56).

Origins of Benchmarking

The concept of benchmarking emerged from the Japanese practice of sending managers to visit other companies to improve their understanding of good business practices. Xerox is commonly associated with the development of the modem concept. In 1979, the Xerox Manufacturing Operations began a process of benchmarking in order to combat increasing competition. The company compared its unit manufacturing costs of copying machines with that of its competitors and used the data collected to identify performance gaps. …

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