Changing Lessons
Posted: September 3, 2010
Learning Cornellian Steven Rowe reports on how his prestigious hotel school is keeping abreast of sustainability, globalization, and shifting consumer demands.
As a soon-to-be junior, I’m constantly thinking about life after the relatively carefree world of college. What do I want to do? What am I interested in? Should I go to graduate school? These are just a few of the questions that consume my classmates. So it makes sense that—despite our youth—we care about what’s going on in the world today and, more importantly, what’s going to happen in the future. For a while, the outlook was bleak. But recently, we’ve seen some signs of change we can believe in (if General Motors can pay off a $6.7 billion loan five years early, then something must be going right). However, what’s most important is that positive changes aren’t just a trend.
Effective change is like dieting; it requires a commitment. You can’t hope to lose 20 pounds in two weeks; you have to have long-term expectations. Nowadays, everything seems to be about doing things differently, doing them better, and doing them for the long haul. For my age group, this is a good thing.
The hospitality industry has certainly adopted this progressive attitude with open arms. Hotels were one of the first to feel the full effects of the economic downturn; many hotel projects in development have either been put on hold or completely shut down due to the severe dip in demand. Currently, average occupancy is down to around 55 percent from a norm of around 65 percent; the Average Daily Rate too has dropped by nearly 10 percent. Though the hospitality industry is cyclical, hotel companies are no longer just relying on pricing strategies to survive the temporary slump but rather are placing a greater focus on planning for both the near and distant future.
Cornell University’s School of Hotel Administration is doing the same. The SHA, which is currently performing a curriculum review, has always striven to remain up-to-date in its teaching philosophy and methods. Michael Johnson, in his fourth year as dean of the school, explains that “the importance of change, both in general and in our curriculum, is that we continue to adapt to what’s going on in the world, and we find a way to make ourselves scalable because, even if we don’t find a way to grow, the industry is going to continue to grow.” As the SHA is widely seen as the preeminent hospitality leadership development program in the world, it’s no surprise it’s well versed in the art of adaptation.
Over the past few years, the school has broadened its scope to include courses of study such as entrepreneurship and real estate. The Leland C. and Mary M. Pillsbury Institute for Hospitality Entrepreneurship was founded in 2006 “to help prepare students for a world where more of them are going to be creating their own realities, adapting to the change that’s going on,” according to Johnson. The school has also recently introduced a new minor in real estate. With these changes, Johnson believes the school offers “more of a first-class business education that’s grounded in the
industry to train tomorrow’s future industry leaders.”
Looking forward: entrepreneurship, sustainability, and globalization will surely play increasingly important roles in the new dynamic of the hospitality industry and consequently at the SHA
Entrepreneurship: With the establishment of the Pillsbury Institute, the SHA demonstrated its belief that innovation will be crucial to the future of the industry. Johnson explains that, now more than ever, “Everyone’s talking about how to be creative—how you use customer service and other aspects of your value proposition to be competitive in an environment that is and has been very price-driven. The decline in prices has slowed down, and prices should hit bottom in 2010. But you have to be creative. If we don’t get creative and do things in a more entrepreneurial fashion and come up with new things for this consumer set, then we run the risk of going the way of a lot of the airlines, which have been commoditized at low prices and are largely unable to differentiate themselves.”
The SHA has also recognized that the industry will emerge from the latest economic downturn differently than it has in the past. Significant changes in the way people travel will persist, due to the severity of the recession. “So the question now is that, as consumers in the U.S. and Europe are adjusting—this change in saving and spending patterns is going to happen in Europe as well, because it’s also a mature economy—what are the ultimate saving-spending preferences for these consumers?” Johnson asks. “Now those preferences are shifting, and you’ve got people wanting, for example, to take longer, less expensive, and more meaningful vacations with their families, as opposed to more frequent, shorter, and more expensive vacations. How is the industry going to adapt to those changing needs?”
By emphasizing the importance of innovation, the SHA hopes to provide its students with the ability to answer these questions creatively. “This school has always produced a lot of entrepreneurs in the industry and outside,” Johnson points out. “We really teach people how to run a business, and then they go out and develop their own businesses. You look at a lot of the concepts that were developed; there’s usually a Cornellian involved very early in the process.”
Sustainability: Green is the new black, and it’s hard not to notice. Johnson explains: “Sustainability is something that our students keep front and center for us. We offer a course now in sustainable hotel development, a junior/senior project seminar course that we teach jointly with faculty from the Center for Sustainable Global Enterprise in the Johnson School.”
Sustainability is of paramount importance to the majority of my generation. In recent years, the number of sustainability-related courses at colleges and universities across the United States has risen exponentially, and nowadays, you’d be hard-pressed to find a school without one. However, a universal shift toward sustainability has failed to generate a lot of steam in the industry. Regardless of sustainability’s environmental benefits, building green is “just good business,” says Johnson. “If you can conserve energy and do things with less waste, it lowers your costs. One of our alumni has produced the largest LEED–certified building in the world. His name is Brad Stone. He worked for Las Vegas Sands for many, many years, and he was in charge of the development of The Palazzo in Las Vegas, which is attached to The Venetian and is the largest LEED–certified building in the world. And he did it because millions of dollars spent up front would save millions more over the lifetime of the building.”
Globalization: The world continues to become a smaller and smaller place, almost relentlessly so. This isn’t news. Technology and the spread of English as the language of business have made it easier and faster to communicate with people around the globe. But even where language is not a barrier, cultural differences can be. “Though it’s a nice start, being able to speak another’s language does not ensure that two parties will understand each other on a business level,” says Johnson. “In some cultures, American directness may be met with silence, or with silent offense. It’s essential to understand the art of communication as it’s practiced in the culture where you want to do business.”
This is true—I know from personal experience. Being of Korean descent and having been born and raised in the United States, I’ve been immersed in two distinct cultures throughout my life and am constantly reminded of how different they can be. For example, I recently reconnected with a cousin I had not seen or spoken with for a number of years. He’s 10 years older and doesn’t let me forget it; I can’t simply say, “Hey, what’s up?” as I would to any of my friends. Rather, he insists that I say, “Hey, what’s up, hyung?” (Hyung is the Korean word for older brother and is a term of respect.) Multiply this single instance of offended cultural sensibilities to a global scale, and you’d have a full shelf enumerating potential cultural gaffes.
Also of great significance: the surge of growth markets in several regions of the developing world and how this is redefining the modern-day “traveler” in China, India, the Middle East, and parts of Central and South America.
“The biggest growth markets today,” Johnson notes, “are in places like China. I was in Shanghai last spring, and there is so much growth, not just in Shanghai and Beijing but also in the secondary and tertiary cities, that in four to five years there will be more hotel rooms in China than in the United States.” Today, nearly five million hotel rooms exist in the United States (second in the world for visits by international tourists, after France, according to the World Travel Organization), while China (the fourth most visited) has roughly three million. In five years, China is projected to roughly double that number.
These growth markets have made travel more diverse, Johnson explains. “The hospitality industry used to be a fairly homogeneous, affluent industry. It served mostly people from the United States and Western Europe, who were wealthy and well traveled. What’s happened over the past several decades is that tourism has become a global industry that’s economically and culturally diverse.” This means that hotels will have to cater to a more diverse group of customers with varying needs and preferences. The challenge to my generation will be to continue the pursuit of cultural awareness and understanding for the duration of our professional lives.
