MAJOR ETHICAL CHALLENGES IN HOSPITALITY INDUSTRY
6th, April, 2013
The hospitality industry today faces major challenges compared to the past decades, including high competition and the overall decreased travel levels in different regions, in addition to the present hard economic times. These factors might have detrimental effects to the industry if not well managed. Therefore, most hospitality companies struggle to cope with these challenges, and sometimes, have gone overboard in their struggle to overcome the challenges. According to Beck, Lazer, and Scmidgall (2007), these factors contribute to the “questionable and unethical management behavior” (p. 36), witnessed today in the hospitality industry. In addition, the hospitality industry has failed to address the ethical issues that concern it, appropriately.
Stevens and Fleckenstein (1999) consider that it is crucial for the hospitality industry to embrace ethics, compared to other industries, mainly because of its nature, as it is a service industry. Most companies in the hospitality industry invest heavily in a positive image, but this might count as loss, if they are involved in unethical practices that are uncovered publicly (Pettijohn, Pettijohn, and Taylor, 2008). Waddock & Smith (2000) and Dimitriou, Blum, Adams & Kim (2011) note that embracing ethical principles increases company profitability. Hammond & Slocum (1996) also noted the importance of companies embracing social responsibility, as part of their ethical values. Nonetheless, the hospitality industry, like other industries, has its own unique challenges, including ethical challenges. However, developing strategies of countering these challenges is important to ensure continued ethical operations, which are beneficial to a company. This essay will mainly address the ethical challenges in the hospitality industry, and how different companies attempt to address them. This also uses the ethical framework of utilitarianism to explain the case of ethics in the hospitality industry.
Ethics in business refers to the appropriate behavior, which a business must adhere to, in its interaction with customers, both individuals and in groups (Kapoor n.d). Various researches have shown that the hospitality industry, especially hotels, still lag behind in matters concerned with ethics, compared to other companies in different industries (Maximiliano 2011: Stevens n.d). Nonetheless, unethical practices in the hospitality industry affect the industry, employees, stakeholders, and the overall community.
Some of the ethical challenges facing the hospitality industry today include, but not limited to employee underpayment and the hiring of illegal immigrants (Holjevac 2008). All these are responsible for different problems in the companies’ host countries and global market. In the present hard economic times, underpaid employees and other victims of the companies’ unethical operations are influenced negatively. Like other companies, companies in the hospitality industry are after making huge profits and competing favorably in the highly competitive market. Therefore, ethical operations become a challenge to these companies when ethical acts lead to more costs in the company (Holjevac 2008). For instance, decent employees’ salaries require a company to incur extra costs; therefore, a company might choose to underpay its employees, which is unethical, to cut on costs. Nonetheless, such ethical challenges can be solved by appropriate financial and time management, which will result in a balance between profits and costs.
An important ethical challenge the hospitality industry faces is about environmental protection. Companies are responsible for playing their role in environmental conservation by ensuring that their actions do not lead to environmental degradation. This is a major ethical issue for the hospitality industry, as its operations rely more on the environment. Hotels use large quantities of water, electricity, and gas, among other natural resources. Therefore, they are supposed to ensure they regulate their use of these resources, in order to avoid depletion. This could be through water conservation, use of energy saving fluorescent bulbs and air conditioners, and using green programs for bedding. Most hotels have however, failed to put this into consideration, due to the great costs, which are incurred in implementing these (Hammond & Slocum 1996).
The human rights issue is another important ethical challenge facing the hospitality industry. According to the United Nations World Tourism Organization (UNWTO), human rights concerns for the hospitality industry include safety and health at the workplace, commercial exploitation of children, exploitation of immigrant workers, displacement of the native populations, discrimination in hotels, and child and bonded labour (Roner 2006). However, these ethical issues vary in different countries. Even though a hotel might incur extra costs while addressing these ethical issues, it is important to the world.
Emel & Yukselen (2010) conducted a study among the employees of different hotels in Edirne, Turkey to find out their views about unethical behaviors in the hotel industry. Similarly, Damitio & Schmidgall (1993) conducted a study among hotel controllers in Cornell Hotel and Restaurant about ethical issues in the industry. Overall, results showed that employees and managers considered economic crises, long working hours, low payment, high level of turnover of employees and managers, as being caused by unethical practices. The Human Resources in hospitality industry faces most ethical challenges (Damitio & Schmidgall 1993). In most hotels, the labour required is not proportional with employees’ number. Furthermore, when hotels switch to more labour-intensive programs, they do not hire more employees. This results in overworking of employees and more injuries at the workplace. Most hotels have neglected this, owing to the fact that hiring more employees increases costs (Emel & Yukselen 2010).
Stevens (2001) and Damitio & Schmidgall (2007) note that financial dishonesty is another ethical challenge in the hospitality industry. Managers might operate with off-balance books. An example is the case of the Enron Company some years ago. This involves quoting wrong profits in financial statements, normally exceeding what the company actually makes, with an aim of impressing investors and increasing stock prices. Another example is that of Chef Auguste Escoffier and manager Cesar Ritz of the Savoy hotel in London, who were fired for misuse of finances and extortion of money from the hotel’s suppliers (Stevens 2001). If revealed, such incidences cause a company to lose its investors and have a negative public image, which is detrimental to business.
Salaries and remunerations in the hospitality industry pose another ethical challenge. In most hotels, there are great disparities between the salaries of housekeepers and the executives’. The executives in most hotels are overpaid, while other employees are mostly underpaid. It is estimated that the salaries of CEOs today are approximately 400 times those of the housekeepers and the other production workers. This is compared to the 1980s when they were about 42 times higher. For example, in 2001, Henry Silverman, the past Chief Executive Officer of hotel Chain Cedant, was earning $36 million, while the housekeepers earned less than six dollars each hour (Hazard & Robert 2002).
Leadlay (2011) has identified the supply chain, customers, employees, and the local community, as major areas where ethical challenges abound in the hospitality industry. With regard to labour, Leadlay (2011) notes that most hotels exploit immigrant workers, while some have adopted forced labor in their supply chain. The hiring of illegal immigrants is another ethical challenge. For most hotels in the USA, labor provided by illegal immigrants is cheaper compared to that offered by citizens. This leads to displacement of USA citizens from the hotel labor market. There has been a constant debate in the USA, whether hiring illegal immigrants in the hospitality industry is ethical. Hotels however, engage in this in order to cut on costs and sustain their business functions. These cases have persisted in the United States, yet there are immigration and business laws, which are meant to address them. Furthermore, most local communities do not experience any form of economic benefit in hotel and tourism, yet are most affected by the environmental degradation caused by companies in the hospitality industry (Leadlay 2011).
Ethical challenges are hard to solve, since most lack clear solutions. Most companies, including those in the hospitality industry, struggle to strike a balance between successful business practices, which will result in large profits, and their business ethics. For successful adoption of business ethics, a company might experience extra costs, which will in turn compromise its profits. On the other hand, adoption of business ethics gives a company a positive public image. In the hospitality industry, this will develop a strong base for the company, and increase the loyalty of customers. McNeil and Pedigo (2001) note that most companies in the hospitality industry have faced a dilemma in choosing between making large profits while disregarding business ethics or making average profits while upholding business ethics standards. Consequently, most have chosen the former option, which continues to raise concerns in the hospitality industry today, making it lag behind in ethics, compared to other industries (Emel & Yukselen 2010). Nonetheless, it is imperative that companies in the hospitality industry embrace business ethics, since this gives a company a positive public image, as well as the opportunity for growth and prosperity.
According to Laudon (1995), ethics is important, as this helps humans to make the best decision, when faced with a dilemma. He argues that this moral authority exists in humans both at the individual level and at group level, including organizations, polity, or overall society. Nonetheless, there exist various schools of thought, which provide a framework for understanding and applying ethics in society. These are therefore, essential for companies and individuals, as they provide a moral framework for the adoption of ethics in different practices.
John Stuart Mills, a philosopher of the 19th Century, is famous for his utilitarianism school of thought that bases on concept of utility, which means the ability to satisfy human wants Prabakaran (n.d). According to Mill, an action is only ethical if it results in pleasure and not pain. If this is applied to the hospitality industry, what translates is that the companies in this industry have the obligation of ensuring that they have a pleasant effect on their customers, employees, local community, and overall society (Souffrant 2000).
Mills described four major principles in his utilitarianism approach. The first principle is consequentialism. This holds that all actions have consequences. In this case, good actions will result in positive consequences, while bad actions will lead to negative consequences (Potmore 2011). Businesses in the hospitality industry can adopt right actions, which will result in positive outcomes. In this case, the right actions are those that have ethical considerations, as opposed to the unethical acts, which have detrimental effects on businesses.
Mills also described hedonism, as a principle of utilitarianism. Hedonism mainly refers to a kind of pleasure, which results in the happiness of everyone (Potmore 2011). In this case, companies in the hospitality industry must struggle to ensure that their customers, employees, and stakeholders are happy with their services. This can only be achieved when a company embraces ethics in its operations. For instance, it is ethical for companies to pay their employees salaries that are proportional to their work input. This will make employees happy and ensure their job satisfaction. On the other hand, underpayment of employees is unethical, and this will result in unhappy employees, who will show less dedication to their work. Therefore, ethical deeds by a company will ensure happiness of the involved parties (Hai-yan & Baun 2006).
The third principle of utilitarianism is maximalism. This holds the notion that good acts must ensure benefits to all involved parties (Souffrant 2000). In this case, therefore, companies, as well as their customers must benefit equally from their business transactions. In the hospitality industry, companies should uphold ethics for instance, by ensuring honest financial reporting. As seen earlier, some companies might indicate large profits in their financial reporting, which are false in order to attract investors and increase their stock price. In this case, the companies will benefit, while the stockholders lose. Therefore, ethics demands that both the company and stockholders or customers experience maximum benefits.
Lastly, the utilitarianism principle of universalism states that, whatever is applicable in one country should be applicable in other countries too (Prabakaran, n.d). There is great relevance in this principle, considering the fact that the world today is highly globalized. In the case of ethics in the hospitality industry, it is more appropriate if the same code of ethics would apply in the global hospitality industry. This would prevent disparities in the treatment of different customers, employees, and stakeholders by companies in the hospitality industry. This can also ensure that the global hospitality industry embraces ethics, thus, making customers to be comfortable with the services of any company, despite its geographical location. Upchurch (1998) argued that ethical decision-making is important for managers in the hospitality industry. On the other hand, Tuna, Ghazzawi, Tuna & Ãatir (2011) note that managers in the hospitality industry must be transformational and uphold high moral and ethical standards. Therefore, using the principles of utilitarianism, managers in the hospitality industry might be able to uphold ethical practices.
All companies including those in the hospitality industry are required to have a code of ethics and a human rights policy. However, these are insufficient, and have not proved to be effective in addressing the ethical challenges the hospitality industry experiences (Frechtling & Boo 2012). Therefore, in order to address the ethical challenges in the hospitality industry adequately, individual companies and businesses must take the initiative of developing their own examples of how they have changed their practice of ethics, with regard to their customers, employees, and the local communities. Nonetheless, a number of companies have proved their concern for ethics and attempted to address most ethical challenges they face, by developing strategies based on ethical principles to counter the challenges (Brooks & Dunn 2009).
Although the hospitality industry faces many ethical challenges and still lags behind in ethical practices, compared to other companies, this industry has adopted different strategies to ensure that businesses comply with ethical operations, and overcome the ethical challenges they face. The United Nations identified the hospitality industry as having the most detrimental effects on its local communities and destinations. The UNWTO developed a code of ethics in 1999, which would apply to the entire tourism and hospitality sector in the globe, with an aim of lowering the detrimental effects of tourism on local communities. In 2011, the UNWTO held an international conference on ethics and tourism, which was the first of its kind. This had the purpose of evaluating any significant progress and adoption of the developed code of ethics by the industry (Leadlay 2011).
Different evidence show that the global hospitality industry is undertaking proactive measures to enhance ethical business practice (Brooks & Dunn 2009). Different hotels are attempting to incorporate human rights risk mapping, training employees on business ethics, and ensuring that the local communities benefit from the industry. For instance, different international hotels developed the Youth Career Initiative, a six-month education program, which involve youth from underprivileged backgrounds. The youth are trained to acquire work and life skills, as well as knowledge about career choice. This has contributed to the alleviation of the rate of youth unemployment and poverty. It is also a strategy, which the involved hotels are giving back to their local communities (Leadlay 2011).
In addition, various companies in the hospitality industry continue to promote the knowledge of business ethics among their employees. For instance, the Marriot International developed a program about business ethics awareness in the year 2010. This program comprises different tools, which help employees to identify different issues that are concerned with ethics and compliance. They are then expected to report such issues to their seniors. This also contains ways of preventing unethical practices at the workplace. This company also established training programs on human rights and child protection, for its employees. This was mainly intended to curb the unethical human rights issues and child exploitation issues, which might influence the company in an adverse manner (Leadlay 2011).
The Shangri-La Hotels, based in Hong Kong, have also taken proactive measures in addressing the ethical challenges they are faced with. The company developed a code of conduct for its suppliers in 2009. The management ensures to that the employees of its top suppliers are not underpaid. This is in addition to their safety and health, environmental considerations, and management systems, which all must embrace ethics. In addition, these hotels ensure that they benefit the local communities, through linking up with local schools or orphanages, where they train hotel skills (Leadlay 2011). Despite all these, Bonitto & Noriega (2012) argue that unethical practices in the hospitality industry have persisted and are on the increase today. Nonetheless, ethical challenges in the hospitality industry can be overcome if companies adopt right strategies and principles. It is important to ensure ethical operations, as these lead to satisfaction of employees, customers, stakeholders, the local community, as well as the overall business environment in which a company operates. This would therefore, ensure a harmonious and successful business environment for companies.
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