Hong Kong Hotel Industry

Sample Dissertation: Hong Kong Hotel Industry

What the Hong Kong’s hotel industry has learned about crisis management after the SARS OUTBREAK?  


Unexpected and previously unknown outbreak of SARS negatively impacted tourism especially the hotel industry of the Hong Kong during the months of April to July 2003. During the short span of four months the hotel occupancy rate fell to 10 per cent from 80 per cent before the SARS outbreak. The financial impact on the industry was unrecoverable and the industry had to seek the government as well as that of banks help to recover from the huge losses. In order to help the hotel industry of Hong Kong, the Government had to announce a HK$1 billion package to rebuild its image and attract back tourists and business after SARS. These financial losses as well as overall panic situation amongst the hotel administration urges one to question as if there is any crisis management policies and strategies on the part of the hotel administration in order to avert any possible threats of the like syndromes. Having this very objective before, this exploratory quantitative and qualitative study presents the impacts of SARS outbreak on the hotel industry of Hong Kong and the lessons learned thereof relating to the crisis management. For this purpose, the researcher applied both self administrated questionnaire as well as semi-structured interview tools besides exploring relevant secondary data from all available sources in order to assess how did the administration manage to come out from the after-effects of the SARS, what are their strategies to combat future threats and how much they have prepared themselves for such pandemic disease outbreak.    
  1. Introduction
  Severe Acute Respiratory Syndrome (SARS) first appeared in February 2002 in China’s Guangdong Province. At first it was identified as an atypical pneumonia in Foshan City, Guangdong Province, China which eventually became known as Severe Respiratory Syndrome (SARS) four weeks after the first official report of 305 cases and five deaths to the world Health Organization (WHO) on February, 2003 (WHO, 2003).  It is an unexpected and unknown contagious disease and caught the world completely off-guarded. Despite the extra-ordinary efforts of the healthcare, it was months before the WHO announced the epidemic temporarily halted. From the day a doctor checked in the Metropole Hotel in Hong Kong till July 2003, 1044 deaths were reported in Hong Kong, hotel occupancy fell from 89% to 18 per cent and about 27,000 people connected with tourism lost their jobs over this short span of time. In May, Hong Kong retail sale were down 80 to 90 percent, restaurants and their suppliers were going broke and airlines were also severally impacted. These figures clearly depict the devastating impact of SARS on every sphere of life but the actual impact of it will never be known.   The impact of SARS on the hotel industry of Hong Kong invites many questions about their preparedness and crisis management strategies. It is true that SARS outbreak was quite unexpected, however, the impact of it on occupancy rate, forcing employees to leave their jobs and closing many of hotels warrants the need to discuss in detail the four R’s of crisis management, i.e., reduction, readiness, response and recovery in order to evaluate what lessons the hotel industry of Hong Kong has learned and how much it is ready to face any likely outbreak of contiguous disease in future. Thus, it is necessary to discuss how strategic management may benefit from an appreciation of these lessons and that the organizations should have a plan in place to reduce the influence of such crisis and to provide an operational manual in the event of a crisis.  

1.1       Background

  The SARS outbreak was an unknown epidemic in 2003, and it had a devastating impact over the hotel industry. The industry learned an important lesson of the outbreak – in order to minimize the negative impacts of business performance, each organization should work for its own crisis management plan.  According to Pacific Asia Travel Association (2003), crisis management can be broken down into four distinct phases, namely ‘Four Rs’ – reduction, readiness, response and recovery. At reduction stage, companies detect early warning signals by crisis management-led SWOT analysis and evaluate the likely impact on the organisation of a particular type of crisis. For stage two, companies work on strategic and communication plans, as well as conducting crisis response exercises. When crisis occurs, that is the response stage, at which operational and communication plans are executed. And after the crisis, organisations facilitate recovery, which drives business back to pre-crisis level. A crisis might be averted in future, by finding the causes of the crises and the ways to deal with it. During the SARS outbreak, the researcher worked in Hong Kong’s hotel industry, and she experienced the seriousness of the adversity. Hence, the researcher believes that the hotel industry should add on the crisis management planning for SARS so as to further enrich their capabilities to handle such crisis. In this paper, the researcher will pay a focus on examining the presence of SARS crisis management in the Hong Kong’s hotel industry. If hotels do have such a management approach, what is then in their crisis management programmes? And if not, what the reasons are behind. Based on the research data; conclusion will be drawn on whether it is beneficial to have crisis management for virulent diseases or other kinds of unknown crisis in the hotel industry of Hong Kong.  

1.2 Aims and objectives

  In order to evaluate what lessons the hotel industry of Hong Kong has learned from the SARS outbreak and what are their crisis management policy and strategies for future, this paper aims:
  1. to analyse the lessons learned from crisis management after the SARS outbreak in Hong Kong Hotel industry.
  • Examine the objectives and strategies for crisis management. This includes the ‘Four Rs’ of crisis management – reduction, readiness, response, recovery, the business continuity function, as well as the scenario-based exercises based on the above functions.
  • Explore different roles for human resources, public relations and marketing under the practice of crisis management for the SARS outbreak.
  1. To find out how the SARS outbreak can enrich hotels’ capabilities for future crises.
  • Examine how knowledge management and organisational learning enhance the industry’s capabilities for crises.
  1. To find out how the hotel industry can enrich their capabilities for future crises.
  • Discover ways to identify possible crises in the future, including crisis management-led SWOT analysis, and examine how the skills of anticipating crises can enrich industry’s capabilities for future crises.

1.3 Questions that the research is intended to answer once completed:

  1. Is there any linkage of crisis management theory and better company performance?
  2. Why do some hotels adopt proactive approaches towards the development of crisis management for SARS, while others just wait and see? What are the proactive and reactive reasons for Hong Kong hotels to manage crisis?
  3. Is the hotel industry ready for future crisis?
2.1 Introduction Brewton (1987) is of the view that the best time to deal with a crisis is before it occurs – by planning for one of many eventualities. This confirms the idea of Spariel (2003) who opines that crisis management is about being prepared to handle adversity, minimise impact effectively and facilitate the management process during chaos. Bean also (1992) backs up the idea that an organised catastrophe-management response makes a significant difference between a period of business interruption and a rapid recovery. These are contrary to the reality that during the SARS outbreak, from April to July 2003, some 2.34 million arrivals were lost compared with the same period in 2002, and average hotel occupancy fell to as low as 18%. (Hong Kong Tourism Board, 2003), which reflects the industry was not ready for unpredictable crisis. By assuming the theories of Brewton, Spariel and Bean are correct, Connolly (2003) argues that while most companies plan for crisis that happened before, there are still some incidents that business cannot plan for by simply referring to historic assumptions. Among them, unexpected consequence like SARS is one of the cases. Cited by anonymous (2003) the senior vice president of Accor China, Reggie Shiu, supported Connolly’s idea that in the case of the SARS outbreak, it was not the matter of making any changes to their crisis management plan, but to add a new chapter for it. According to Willis (2003) SARS was new respiratory illness, spreading through close person-to-person contact via respiratory droplets and contact with patients’ secretion. Hence, Ee (2003) thinks that companies, especially those with frontline staff, are more prone to the virus. And Ingram (2004) further explicated that the increasing regularity of international travel makes it easier for a regional outbreak to turn to global one. Vice president of finance HP services in Asia, Ponniah as cited in Leander, Ramos and Wood (2003) added the outbreak and spread of SARS has reinforced the notion ‘that the world, our region is more interconnected that we ever imagined’.   2.2 The SARS Outbreak Severe Acute Respiratory Syndrome (SARS) was first reported in China’s Guangdong province early in 2003. it was a highly communicable disease never experienced earlier, that is why medical professionals as well as others related to administrative fields and the people responsible for crisis management were not well prepared to handle it efficiently and effectively (WHO, 2003). For the first time, on 16 November 2002 it was identified as an atypical pneumonia in Foshan City, Guangdong Province, China which eventually became known as Severe Respiratory Syndrome (SARS) four weeks after the first official report of 305 cases and five deaths to the world Health Organization (WHO) on February, 2003 (WHO, 2003).   After spreading through the households, small clinics, and hospitals of Guangzhou in China’s Guangdong Province, the virus took a foothold in Hong Kong when on 21 February, a febrile medical doctor from Guangdong checked into ninth floor of the Metropole hotel Hong Kong and infected at least 12 other guests at the hotel (CDC, 2003).  From there, the disease quickly spread to Vietnam, Singapore, Toronto, Ireland, the United States, and neighboring areas of Hong Kong by guests and visitors of the hotel. This culminated in a global alert issued by the WHO on March 11, 2003 (WHO, 2003).   The consequences of this pandemic were disastrous. By July 2003, more than 1500 probable cases had been identified in Guangdong Province, and the number of SARS cases had grown to over 8000 with nearly 850 deaths in more than 30 countries worldwide (WHO, 2003). From a total population of around 7 million, Hong Kong had a total of 1,755 SARS cases, with 299 deaths. The public health ramifications of this pandemic cannot be understood. On 2 April, WHO recommended postponing all but essential travel to Hong Kong and Guangdong Province. However, after costing loss of millions of dollars and precious lives, Hong Kong was officially declared free of SARS by WHO on 23 June after 20 days of no transmissions of the disease and finally, on 5 July, WHO announced the SARS outbreak was contained worldwide. Meanwhile, the SARS outbreak had decreased 41% of tourism GDP and 27,000 tourism lost jobs. Table 1 illustrates month wise loss of human lives in Hong Kong:   Table I SARS cases
Date reported Cumulative cases New cases deaths Recovered
31 March 530 13
30 April 1,589 17 157 791
31 May 1,739 3 278 1,310
30 June 1,755 0 298 1,433
11 July 1,755 0 298 1,433  
Source: WHO Web-site www.who.int/csr/SARS/country/en/
Similarly, the SARS outbreak had very fatal affect on the economical front. The most severe affect of this pandemic disease was on the tourism filed of Hong Kong. As soon as the news spread about a doctor having infected more guests at Metropole hotel, the hotel industry had to be cautious of further spread of the disease and even the guests and tourists had to refrain from logging into hotels for fear of their lives. Thus, the occupancy rate fell dramatically from 89% in January to just 40% in June 2003. The data obtained from the Hong Kong Tourism Board (table II) presents the devastating affects of the SARS on tourism industry during this period. Table II Tourism statistics – January to June 2003
  Tourist arrival No. of airline passengers Average hotel occupancy %
No. Year-on-year % No. Year-on-year %
January 1,545,978 +31.0 538,904 +2.9 89
February 1,408,139 +26.2 546,490 +10.0 82
March 1,347,386 +3.9 546,490 -20.0 79
April 493,666 -64.8 106,555 -82.1 22
May 427,254 -67.9 56,729 -89.9 17
June 726,331 N/A 40  
Source: Hong Kong Tourism Board, 2003
  2.3 Impact on Hotel Industry   Although SARS impacted badly every sphere of life, tourism industry sustained much of its economical shocks during and after the outbreak. Due to harassments and fears of getting infected, many conventions were cancelled and companies called off business trips. Because of this, passenger traffic at Hong Kong International Airport saw a year-on-year decline of nearly 80 per cent. Considering this situation, the Government announced a HK$1 billion package to rebuild Hong Kong’s battered image and lure back tourists and business after SARS, including a KH$400 million tourism drive over the following nine months (Ray Pine and Bob McKercher, 2004). Free airline tickets, hotel offers and restaurants discounts would be available.   The hotel industry met the same fate and during the month of April and three neighboring hotels, Tsim Sha Tsui, had to close some of their floors and asked their staff to take voluntary non-paid holidays because of decreasing occupancy to 20 percent (see figure 1 for cost cutting HRM measures taken by the hotel industry). Figure 1: Cost cutting HRM Measures Adopted by the Hong Kong Hotel Industry   SARS Outbreak
Cost-cutting measures: ·         Stoppage of Recruitment ·         Termination of Staff / Casual Workers ·         voluntary non-paid holidays ·         Re-deployment of Staff ·         Closing unused floors ·         Shortened Business Hours ·         Temporary Suspension of Services ·         Renovation Works Re-scheduled ·         Processes Re-structured
  Besides, five other hotels were put up for sale due to this sudden decrease of occupancy and the average room rates being fallen by more than 10 percent year on year. Being unable to sustain the economical shocks and after-effects of the syndrome, the hotel owners had to seek assistance from the Government for the waiver of sewage and trade effluent charge, property rates and suspension of employer or employee MPF contribution which would only help to save about 7 per cent of total expenditure. The hotel administration also had to ask their employees to avail volunteer leaves and terminate probationers and temporary contracts besides stopping all overtime payments. Some hotels even had to close swimming pools, health and fitness centers, and reduce operating hours of restaurants.   The negative effects of the SARS syndrome were visible on Marco Polo Hong Kong Hotel as its occupancy rates fell to 10 per cent as compared with 83 per cent the previous year. Similarly the Great Eagle Hotel and Eaton Hotel had 7 to 8 per cent occupancy rates as compared with the previous month rates of 90 per cent during the months of April and May. However, the hotel industry gradually recovered from the economical setback and towards the end of May occupancy rates of Hongkong and Shanghai Hotels witnessed occupancy rate of 25 per cent because of and encouraging response to discounting and SARS being brought under control.   Whereas many other hotels had to sake their employees or urge them to avail volunteer unpaid leaves, the Marriott took the chance to review operations during the SARS outbreak. Instead of asking its employees to go on leave, the hotel administration redeployed the staff and involved them in extra cleaning measures. Because of this the hotel not only was successful in retaining its employees but also sent a message for the expected visitors to be sure of the extra-ordinary hygiene safety measures on behalf of the hotel staff. Sample Essay: Hong Kong Hotel Industry   2.4 Crisis Management:                As the belief by Ingram (2004), the financial impact of SARS suggests that a major epidemic, even one that causes relatively few deaths, can be as costly as a catastrophe as any hurricane, tornado or flood. Risk managers need to realise that the recent SARS scenario will likely be repeated in the coming years, and therefore they need to take a serious look at epidemics when considering disaster scenarios. From the SARS outbreak and devastation, a pattern of tourist behaviour has emerged suggesting that an increase in perceived risk management with a destination is reciprocal to its demand (Floyed et. al., 2004). However, McKercher & Hui (2004: 102) emphasise that fortunately, the most tourists have relatively short memories and will resume travelling when they fee the immediate threat has passed. This pattern of thinking on the part of tourists demonstrates that disasters tend to have no lasting impact on tourist flow. But in spite of this, orgaizations have to manage the disastrous events for the sake of providing their customers’ reliability, security, and peace of mind for visiting the destination again and again. Pacific Asia Travel Association (2003) regards the notion ‘it won’t happen to us!’ as one of the ten common weaknesses in crisis planning.  On the other hand, as considered by Gilley and Maycunich (2000), organisational learning is process that enhances organisational capacity when a crisis requires a company to test its assumptions about what works the best. Such an idea suggests that companies should have learned from the SARS crisis and to develop relative measures.   Gauthier (2003) claims SARS has forced many companies to reconsider their people management policies, and that he thinks it will help the companies deal with future crisis better. Similarly, Haworth (2005) also thinks that since SARS was an extended event with disastrous effect all over the world, the lessons learned from SARS would allow companies to work on the necessary procedures and training, as well as to add into their crisis management and business continuity planning. Companies should also frequently plan with scenario-based exercises and make sure that every member in the organisation understands it. Furthermore, in response to diseases that affect business, monitoring and gathering data from a wide variety of sources is a critical step. Through data collection, it will turn to valuable information for companies to develop policies to protect their staff, customers and stakeholders, yet at the same time mitigating the loss of business and reputation as well.   It is the tendency of many Asian organizations that they have preference towards reactive crisis management approach as opposed to proactive planning (Chien & Law, 2003; Henderson, 1999a, Henderson, 2003a; Henderson, 2003b; Sausmarez, 2004) This government sponsored approach focuses on a particular destination and an emphasis on information and communication management to foster effective coordination and collaboration amongst the relevant stakeholders. For Cushnahan (2004 such a contextualisation of crisis management is crucial as he highlights the importance of customising crisis management approach. Similarly, Ritchie et. al., (2004: 202) in line with Coombs (1999) note that ‘all crises are different and crisis managers need to tailor responses to individual crisis, rather than try to plan for every individual situation.’ Thus, it becomes clear that crisis management strategies have to be positioned in the context of the respective environment, including socio-cultural, economic, political and historic but also physical characteristics.   Common measures of reactive crisis management in the past have included government aid packages (e.g. for the accommodation and transports), the promotion of domestic tourism and in particular the marketing of specific niche products as well as the development of new forms of tourism such as sustainable tourism and ecotourism (Henderson, 2002a; 2003a). Coordination and collaboration between key stakeholders also appear to be crucial for the effective management of a crisis situation hereby the significant role played by the media in the associated information management and communication processes in the aftermath of a crisis. In particular concerning the destination image, a positive relationship with the mass media is regarded as critical in the recovery phase (Beeton 2005). In this context Ritchie et. al. (2004) points out that it particularly important to mange communication and perceptions through a crisis communication and marketing strategy.   Ee (2003) defines a typical contingency plan should consist of technology, manpower, critical document and an alternative site. Since the operating site was still available during the SARS outbreak, but manpower was not as some of them were quarantined; therefore traditional way of contingency planning may not be feasible under such situation. On the other hand, communicating the SARS contingency plan in a clear and transparent way is important. If an effective communication plan does not exist, then the contingency plan will not work as planned. Ee’s theory is further supported by Haworth (2005) that communication is important for companies because it helps companies convey their messages and requirements to staff, customers and stakeholders honestly and effectively. And to do this, intranet, e-mail and web- based channels play important roles.   Haworth (2005) also thinks that based on the lessons learned from the SARS outbreak, specific guidelines should be drafted for managing contagious diseases. As what Ee believes, Haworth supposes it will be designed differently from traditional contingency planning, which will be generic enough to adapt different fatal outbreaks in the future. By doing so, it is hoped that organisations will be better prepared for future crisis.   ‘It is for the public good, every organisation needs to review its employee management and emergency practices and incorporate what SARS has taught about responding to a public health crisis.’ (Orr, 2003).          

3. Research methodology


3.1. Qualitative methods

3.1.1 Case study

  Documentary analysis was carried out for Metropole Hotel Hong Kong, where the first SARS case was originated. Through this strategy the researcher was able to understanding better the hotel situation during the outbreak and how the hotel dealt with the challenge. For this purpose, an investigation report conducted by Immo Tilgner, P. Eng., WHPSP,   Ramon Flick, Virologist, NML, Allen Grolla, Laboratory Technician, NML, Heinz Feldmann, Microbiologist, NML, Health Canada of WHO will be discussed which was carried out in order to investigate the risk factors involved in the possible environmental transmission of ‘Severe Acute Respiratory Syndrome’ (SARS) at Metropole Hotel Hong Kong. This investigation was conducted in the context of assisting the Hong Kong authorities on 27th April 2003.  

        Semi-structured, face to face interviews

  It was intended by the researcher to conduct face to face interviews with the selected human resources managers. The researcher had conducted a research on the number of hotels in Hong Kong. According to the Hong Kong Hotels Association (2005), there are 78 member hotels. The reason for the researcher to focus on the member hotels of the hotels association was that tourism statistics in Hong Kong published by the Hong Kong Tourism Board only reflect business performance of the member hotels. Based on the hotel population, the researcher picked a member hotel of each hotel category for the sample group, so this meant that a total of five interviews would be conducted with hotels that belong to different star ratings. The reason for not selecting five hotels of a particular category to be interviewed is that the researcher found the result generated by such approach would not be useful in reflecting the real story of the Hong Kong’s hotel industry. And with the proposed approach, the researcher would also be able to draw necessary differences in the crisis management approach because of the hotel ratings. The researcher contacted the selected hotels for interview appointments. But unfortunately, no hotel administration replied positively to spare time for the proposed interviews owing to their preoccupations. Thus, no interview could be conducted in spite of every possible effort to gain insight from the human resource management of the selected hotels about the crisis management strategies they have adopted. From the semi-structured interviews, the researcher hoped to raise additional questions based on the interviewees’ answers, and the interactive discussions could help further explore the research questions and objectives from a variety of angles. In order to maintain the reliability of such approach, the researcher had practised the approach of questioning, usage of the right terminology; rehearsed for the interviews, and planned out as to which questions would be asked in the same way, with the same tone, so as to eliminate bias from both interviewer as well as the interviewees. But because no hotel manager was able to confirm the sechdule for the interview, the researcher could not conduct any proposed interviews with the hotel administration. Thus, the primary data sources are intended to be used for this papter instead of primary data.

3.2 Quantitative methods

3.2.1 Postal questionnaires

  Questionnaires, which aims to find out the level of implementation of crisis management and whether hotels do have crisis management planning for SARS, were also sent to the selected human resources managers and it was hoped that the data collected would help the researcher to find out the general applicability of crisis management in the industry. Before the questionnaires were sent, the researcher conduct pilot testing with family, former teachers and friends, so as to assure the questionnaire’s face validity. After pilot testing, the researcher performed the following steps:
  • Posted covering letters, questionnaires together with return envelopes.
  • One week after posting out the questionnaires, follow-up telephone calls were made to all recipients.
  • Second follow-up calls were also made to the hotels not responding after three weeks. New covering letters, questionnaires and return envelopes were mailed again.
But unfortunately, in spite of 35 emails and repeated attempts to assure their positive response, no hotel returned the questionares to the researcher. It clearly demonstrates disinterest for contributing knowledge for the crisis management on the part of hotel administration, a lack of interest which could help many others to have better understandings to cope with similar natural disasters in future. In order to make up this limitation and deficiency of non-availability of primary data, different other researches conducted on the same issue were consulted which will be discussed as secondary data on the topic in the next chapter.  
  1. Lessons Learned from SARS
  In the previous section the impact of SARS outbreak on the economy of Hong Kong with special focus on tourism and hotel industry has been highlight. Theoretically, the crisis management in the wake of such natural calamities has also been discussed. In this section, these crisis management theories will be presented in the context of any likely outbreak in future so as it could contribute to the knowledge of hotel administration for better preparedness.   Even though contagious diseases are well-known, and their fatal impact acknowledged, e.g. pneumonic plague, Spanish-flu and bubonic plague, the world was caught completely off-guard by the SARS outbreak. Due to the unexpected outbreak no department of the government as well as the private interprise was ready to cope with it in time, that is why, it was months (and many deaths) before the World Health Organization pronounced the epidemic temporarily halted. Due to its devastating impact on the economy, many businesses and strategic planners will have to incorporate crisis management strategies for future recovery. In this paper, it would be useful to delineate lessons that can be learned from the recent SARS outbreaks, and discuss how strategic management may benefit from an appreciation of these lessons. It is necessary for the organizations to have a plan in place to reduce the influence on the organization and provide an operation manual in preparation for unforeseen external events.  However, many organizations do not have a crisis-management plan at all (Hickman and Crandall, 1997). As has been witnessed in the case of SARS outbreak this lack of preparedness can have devastating effects on business and warrants inclusion in our business definition of a crisis. A crisis is defined as a low probability/high consequence event, caused by human actions, that threatens the most fundamental goals of an organization (Weick,1988). Mitroff and Pearson (1993) categorized crises according to two dimensions: normal to sever and technical/economic to human/social. However, their crisis analysis included only industrial health problems, not epidemics. Thus, there is a strong need to broaden the scope of crisis to include the natural calamities like epidemics and pandemics. This paper aims to provide its suggestions and conclusions in the background studies taken into the SARS outbreak which was certainly an unknown phenomenon and requires extensive research to cope with it in future. Considering the enormous impacts of SARS, it is essential that corporations are prepared for future contagious disease outbreaks. It is not clear if SARS will breakout again or can be eradicated. The disease could gain a toehold in the Southern Hemisphere, or it could lie low until cold weather returns (Regalado, 2003). As described by the Australian State Chamber of Commerce chief executive officer, Margy Osmond, “(t)he lack of preparation by many businesses in terms of handling workplace issues and risks arising from the (SARS) virus is . . . a concern”. She also notes that 23 percent of corporate respondents had a risk management plan to deal with potential disruptions created by SARS but only 4 percent had made this plan known to their staff. Benefits of a fast response can be seen in the fast reaction of the Canadian health authorities dealing with SARS preventing the outbreak from reaching unmanageable numbers. According to Castillo-Chavez, a mathematical epidemiologist at Cornell University, if the Canadian outbreak had been left to run unchecked it could easily have infected as many as 200,000 in the Toronto area (Brown, 2003). The Toronto SARS experience is a warning that even a giant thriving city can be laid low by a nasty and highly contagious disease (Vogel, 2003). Since emerging markets are increasingly important to the world economy and are at the same time susceptible to outbreaks of infectious diseases, there is a strong need to understand how and in what ways crisis management strategies can help organizations sustain the impacts of epidemics   It is informative to note the difference between epidemics and endemic diseases, though with the ease of modern travel and human contacts, the lines are somewhat blurred. Endemic diseases are those that are localized in certain regions. Unlike epidemics which really have no “home base,” so to speak, endemic diseases are associated with particular geographic locations (Surowiecki, 2003). Usually because of inadequate infrastructure, these jurisdictions are ill-equipped to stem the disease. The disease not only negates current economic growth but also acts as a barrier to future economic growth since investment flows tend to avoid these regions where companies remain concerned about the health of their employees.   Because of rapid globalization of business, large and small companies will encounter infectious diseases of both the epidemic and endemic varieties. In both cases, it may well be in business’s interest to work with local and global health officials to improve local infrastructures, such as hospitals and health services, not only as a means to generate goodwill and promote good corporate citizenship, but also as a way to help create a more hospitable operational environment. A good example of such a move is from the state-run China National Offshore Oil Corporation which donated 10 million renminbi (just over US$1 million) to aid research on SARS.   It is universally admitted fact that infectious diseases are a fact of life and will continue to impact human society time and again. Therefore, it is imperative that businesses should develop coherent strategies to deal with such diseases in order to avert any likely dangers. As the world has witnessed the catastrophes, now there should be no excuse for being “caught off-guard”.   4.1 Suggestions for contingency planning   AS we have recently witnessed during the course of SARS outbreak hardships, the areas of our unpreparedness and deficiencies in our crisis management planning, it is easy to chalk out several areas that a contingency plan should address. In the light of findings of this research and as evident from the literature review of SARS outbreak, there are the following key areas that a contingency plan should seek to address.   4.1.1 Inventory control and sourcing The hotel industry of Hong Kong needs to re-examine the level of inventory, so as to provide some level of buffer in case of emergency. Although it is difficult to spare the cost of doing business, but it is suggested that operationally this merely represents an additional variable in modeling the optimal level of inventory necessary. Furthermore, hotel industry will need to assess whether it is practicable to secure their supplies from more than one source. It is known by everyone that diversification spreads the risk. Therefore, as much as possible, the hotel industry needs to incorporate technology into their operations, and re-evaluate location attractiveness with an eye towards the ease of technology replication as well as emergency backups.   4.1.2 Human Resources Management When there are such likelihood of epidemic threat, the hotel industry should move and re-deploy their employees at different locations. These deployments and moves can be for short stints and this may help upper management in reestablishing their competitive advantage in an alternative location. As major epidemics such as SARS could not be foreseen, it is imperative that managers take an emergent approach to plowing through the problem. Hotels in the many emerging markets where government regulations and transparency are lacking may particularly need to do more than simply adopt the official government line regarding the effects of the epidemic.   4.1.3 Localize management and adopt open communication   To the extent possible, businesses should consider hiring local management talents as well as rotating key personnel to multiple locations of operations so as to build a solid base within the company from which local knowledge and expertise can be tapped. It is critical also that this knowledge is not only the exclusive domain of senior management, but that open communication be instituted throughout the company to enable workers at all level to know what is going on and what to expect. One of the unfortunate results of secrecy is that it often leads to unfounded rumors that only serve to aggravate a dangerous situation.   4.1.4 Health policies As the SARS epidemic is related closely to the health of human beings the hotel industry needs to revisit their health plan to consider the need to establish health policies for their customers and employees. The “we didn’t know” defense does not work too well any more in today’s world of instant communication. Hence, the hotel industry needs to not only have in place their own health policies related to epidemics, but should determine whether their employees and customers have adopted effective health policies to deal with such crises.
  1. Discussion and conclusion
  This paper has presented the outbreak of SARS, its impacts on human life, economy and especially the tourism and hotel industry. As the consequences of this epidemic were, every field of life was impacted and paralyzed even though for a short span of time. As it was quite unexpected and unknown before, the damages could not be controlled effectively. But once we have experienced the epidemic, we should be well prepared for any likely outbreak in future. In this paper, efforts have been made to highlight all necessary crisis management measures that may help the hotel administration to cope with such epidemics. However, the limitations of this paper are evident. As the hotel managers were reluctant for interviews and completing the questionnaires sent, their strategies to handle the future crisis could not be asserted. However, this limitation has been endeavored to make good of by utilizing the secondary sources available. In this direction, the researcher adopted generated a data-base of information about the SARS epidemic, its economic as well as its HRM implications, by using the internet, library resources and literature searches, taking into full account the limitations of official statistical sources, where used.   In spite of all this the researcher acknowledges the impossibility of predicting future events. Consequently, the hotel industry should not waste time and resources attempting to plan for patterns that are simply unpredictable. Rather, it is critical that the hotel industry pays appropriate attention to contingency planning (such as crisis management plans); the basis of which are already well understood. In this paper the importance of crisis management measures for handling future outbreak of the SARS epidemic has been highlighted. The researcher has looked at its impact on tourism and hotel industry in Hong Kong and drawn suggestions from this event. Crisis management plans must be robust enough to handle all forms of the unexpected. As events arise that give us insight into the unforeseen, it is essential that the hotel industry reexamines its crisis management plans to see if they are designed effectively enough to handle the unique features of our evolving environment. For those organizations that have operated without a crisis management plan, SARS is a reminder of the importance of designing such a plan. The SARS epidemic also shows how a crisis management plan must be integrally connected with an organization’s strategic planning, thus being emergent rather than static in structure.         Glossary     Pandemic disease:            A disease prevalent over a whole country or large part of the world.   Epidemic disease               Outbreak of contagious disease affecting an unusually large number of people or involving an extensive geographical area   Pneumonia:                         A disease of the lungs caused by infection or irritants and characterized by inflammation and consolidation of lung tissue.   Quarantine:                          The enforced isolation or restriction of free movement imposed to prevent the spread of a contagious disease.   Appendix “A”   Crisis Management Questionnaire 2007   Please take a moment to complete this questionnaire.  The purpose of this questionnaire is to help Liang Joseph So to assess and evaluate as how much the hotel administration of the Hong Kong hotel industry is prepared for any likely outbreak of pandemic syndromes after the outbreak of SARS. It is completely anonymous. Please be open and honest with your answers.   Please circle or tick mark your answer   Gender: Male / Female   Age:
  1. 20-30 years
  2. 30-40 years
  3. 40-50+ years
  Years in the Human Resource Field:
  1. Less than 5 years
  2. 5-10 years
  3. More than 10 years
  1. During the outbreak of SARS, the hotel administration
  1. was well prepared  for the crisis
  2. had no idea as what to do
  3. managed the situation easily
  4. faced difficulty to deal with the novel situation
  1. The hotel administration controlled the situation by
  1. asking the employees to quit their jobs
  2. avail un-paid leaves
  3. redeployment of the existing staff
  4. offering the customers attractive packages
  5. asking the Government for waiver of taxes
  1. Describe any unique experience or lesson you learned from that crisis
  1. If such pandemic disease breaks out again, our hotel
  1. will not be affected at all
  2. will sustain the impact and recover soon
  3. will not sustain because we don’t have any crisis management experience/planning
  4. will collapse and seek outer assistance
  1. If such pandemic disease breaks out again, our strategy is to
  1. Our crisis management strategy includes four R’s (Reduction, Readiness, Response, Recovery)
  1. Yes
  2. No
  3. Maybe
  4. Don’t know about this
  1. In case any unexpected pandemic disease breaks out, we will rely on
  1. our human resources
  2. our marketing planning
  3. our public relations
  4. financial aid from the Government
  5. none of the above
  1. Please describe any particular strategy you have adopted to manage such crisis in future.
I truly appreciate your cooperation for completing this questionnaire which will be very valuable and helpful to assess the crisis management strategies of the hotel administration in the backdrop of SARS outbreak. Thank you for taking the time to help me with this project. Please, after completing this questionnaire return it to Liang Joseph So……..



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