Poor project management undermines China's growth targets

You can say one thing about the Chinese: they don’t lack ambition when it comes to delivering projects.

China’s massive programme of hotel construction has opened hundreds of properties with thousands of rooms – an unprecedented accomplishment that is projected to continue for the next two decades. The available development pipeline data indicate that at least three 150-plus-room hotels will be opened in China every day for the next 25 years. Because such a rate of hotel growth has never been seen before, the methods used to open these hotels must be focused and methodical.

The main problem is that most new hotel openings are consistently delayed. The status quo seems to be that the hotel industry accepts these opening delays as part of the landscape. Every day of delay hurts hotel owners and operators alike. Both suffer increased pre-opening expenses, delayed cash-flow generation, delayed business ramp-up, GOP, and ROI, delayed owner and operator income, missed business opportunities and negative impact on the brand. Therefore, it is clear that more effective and efficient ways to open hotels on a large scale are needed.

However, as my research has found, the scale of China’s ambition is not matched by the robustness of its project management processes. 

Interviews with 81 professionals working in 15 hotel chains revealed a large set of proximate causes for delays to planned hotel openings, including last-minute design changes, delays in appointing a contractor, and failure to acquire necessary permits. Deeper analysis of these causes revealed that a lack of understanding and adaptation of project management concepts and techniques were the root causes of these issues.

A root cause analysis of this survey into the perceived causes revealed that what the hospitality industry perceives to be the causes of hotel opening delays are actually symptoms of more deep-seated systemic problems. The causal chain analysis demonstrates that the origins of the problem lie in the absence of project management culture in the hospitality industry and the modus operandi of hotel companies.

The responses collected from the 81 informants were grouped into 10 categories. These categories are actually direct causes and intermediate causes. The direct causes include delays in procurement process, non-compliance with brand standards, delays in pre-opening activities and poor execution, and delays in the licenses and permits application process. The remaining six sets of perceived causes are intermediate causes. These include late hiring of the hotel management, failure to align opening processes with the opening date, poor understanding by stakeholders, no project management plan, no project manager, and no project management methodology. 
 
If the hotel industry is to embrace project management as a strategic competence and get better at managing the delivery of projects, then fundamental changes will have to be made.

Following are five building blocks to achieve this

1. Project management needs to be made part of company culture and embedded in the corporate DNA. To do so successfully, it will need to be driven from the very top down.
    
2. Structural aspects of project management must be reviewed, including best practice such as having a PMO, certification of project managers and key personnel, and clearly defined roles and responsibilities.
    
3. Training and continuous development must take place to upgrade the knowledge and skills of the dedicated hotel opening (support) teams. When these fundamental components have been addressed, the technical components can be implemented.
    
4. Project management methodologies need to be implemented.
    
5. Well-defined project management standards need to be established that will enable companies to consistently deliver superior project results.

Easier said than done: there are a number of hotel industry challenges…

The hotel industry faces several major challenges in adopting project management methodologies for new hotel openings.

1. Senior leadership has limited understanding of project management as a strategic competence.
    
2. The hotel industry has few “internal project management champions. Although various hotel management companies employ a specialised hotel opening function or use components of project management, none have embraced and institutionalised project management as a corporate culture.
    
3. Third, hotel management companies are traditionally conservative in embracing new technologies and disciplines, as occurred with revenue management and total quality management.
    
4. Most hotel management companies are set up as functional rather than matrix organisations. This often prevents effective project integration management, which is the implementation of processes required to ensure that all project components are coordinated.
    
5. There is a general misunderstanding in the industry as to what causes new hotel opening project delays.

In summary major hotel management companies need to strengthen their project management capabilities if they hope to meet their ambitious China growth targets.

The full report is available here or from The Center for Hospitality Research, Cornell University, School of Hotel Administration via this link.

Gert Noordzij is an international hotelier and hotel opening specialist, and author of 'Project Management of Hotel Opening Processes - Exploring better ways to manage new hotel openings' published by CreateSpace.