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School of Hotel and Tourism Management

The Healing Power of Trust

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The Healing Power of Trust - TRAVELINDEXHong Kong, Hong Kong SAR, April 28, 2022 / TRAVELINDEX / In today’s globalised world, more and more hotel firms are expanding their business overseas. Yet success in the international arena may not translate into success at home, warn Dr Alice H. Y. Hon and Mr Emmanuel Gamor of the School of Hotel and Tourism Management (SHTM) at The Hong Kong Polytechnic University. With skilled managers from overseas paid 10 times more than local employees, frontline and service-oriented hotel workers are feeling increasingly disillusioned. With service standards falling, how can multinational hotel corporations build harmony between their local and overseas employees? The answer lies in trust, say the researchers, whose study offers timely and important insights for the Chinese hospitality industry.

The last four decades of globalisation have seen radical changes in the organisational management and human resource composition of hotel firms in China. To compete in the international service market, firms are increasingly filling key strategic positions with skilled workers from abroad. “In the modern hospitality industry, multinational hotel corporations rely on expatriate managers to succeed”, say the researchers.

To attract, motivate and retain these valuable employees from overseas, it is standard practice to set their wages to the market conditions in their home country. Their salaries can be an astounding 10 times higher than those of local workers, whose pay is calculated according to local labour market conditions. Unsurprisingly, note the authors, this can lead to “perceived injustice among employees,” especially given that compensation goes beyond money—it can represent an employee’s worth, status and power.

The problem of disgruntled local employees is not trivial, and multinational hospitality corporations should not underestimate the extent to which this might threaten their own survival. Local employees who resent their expatriate superiors and the organisation are less satisfied, motivated and committed. They may engage in “deviant behaviours, service sabotage, or antisocial behaviours affecting service quality”, report the researchers. Faced with this problem, multinational hotel companies must find ways to mitigate the negative effects of the compensation gap on local employees’ work-related outcomes.

In multicultural environments with a vast chasm in pay grades between local and overseas employees, it can be challenging to develop and maintain local employees’ trust in their expatriate superiors – and even in the organisation as a whole. Companies must satisfy the salary expectations of highly skilled expatriate managers while addressing any potential bitterness felt by local employees. Successfully fostering trust can reduce the negative outcomes associated with a sense of inequity. High levels of trust “can positively influence several work outcomes, such as job performance, organisational citizenship behaviour, and productiveness”, say the authors.

Referring to well-established theories of the different forms of trust, the researchers surmised that trust in expatriate supervisors and the organisation can be knowledge-driven or emotion-driven. Knowledge-driven “cognitive trust” is based on a track record of competence, reliability and fair treatment, and might allow local employees to see beyond the pay gap. The researchers reasoned that instilling cognitive trust “gives the impression that expatriate managers have the competency, key knowledge, and ability to work at a high level, and so it is right that they receive more compensation than local employees”.

Emotion-driven “affective trust” is born from an interpersonal connectedness, through which local employees feel cared for by their expatriate managers. Affective trust in expatriate managers can be formed via friendly interactions and expressions of personal concern in local employees’ well-being, which “weakens uncertainty and increases psychological safety among employees”, explain the authors. Recognising the potential for these two dimensions of trust to curtail the negative effects resulting from compensation gaps, the researchers set out to define their influence on various work-related outcomes.

To capture real-world experiences and attitudes, the authors approached team members of multinational hotel corporations in Xian, China. They included 286 front-line or low-level local employees and 32 of their expatriate supervisors, who were middle- or upper-level managers. Most of the local employees interviewed had been supervised by an expatriate manager for 1 to 5 years. The expatriate supervisors were primarily from Hong Kong or Taiwan, Europe, and North America, and 68.1% of them had lived in China for at least 6 years.

The local employees completed a comprehensive questionnaire that measured their perceptions of the compensation gap between local and expatriate employees, as well as their cognitive and affective trust in their expatriate superiors, their satisfaction with their expatriate supervisors, general work satisfaction, and commitment to their organisation.

As well as collecting these valuable data from local employees, the authors asked the expatriate supervisors to give scores for the local employees’ altruism, by reporting their willingness to offer help in the workplace. A sample item was “This individual is inclined to help me find solutions to work-related problems”.

The next step was to conduct a thorough statistical analysis of the interview data to measure the precise connections between compensation, work attitudes and trust among local and expatriate employees.

As expected, when the local employees perceived the compensation gap to be larger, they were more dissatisfied with their expatriate supervisors and less willing to help them. They were also less satisfied with their jobs and – most strikingly – less committed to their organisations. This, report the researchers, confirms the previous finding that “the compensation gap is one of the main contributors to counterproductive work outcomes among employees in the hospitality industry”. Interestingly, however, local employees’ resentment was mostly directed towards the organisation, rather than towards their expatriate managers.

“This may cause local employees to leave organizations with a greater perceived unjust compensation gap”, warn the authors, “contributing to high labour turnover in the hospitality industry”. This finding underlines the urgent need for multinational hospitality corporations to generate a sense of fairness that counteracts the negative effects of substantial pay gaps. One possibility is the introduction of non-financial perks for local employees, such as additional training and insurance.

The researchers also found that stronger cognitive trust weakened the negative effect of a wide compensation gap on the local employees’ job satisfaction and organisational commitment. Clearly, multinational hotel corporations need to develop strategies to boost local employees’ faith in the abilities of expatriate managers. “Management must ensure that expatriates maintain high levels of competence, reliability, skills, professionalism, and honesty”, say the authors, “by enforcing checks and balances through staff feedback and evaluation”.

Affective trust also moderated the negative effects of a compensation gap. Local employees who felt more cared for by their expatriate managers reported greater satisfaction and showed more altruistic behaviour. “The management of multinational hotel corporations should encourage expatriates to show a genuinely welcoming, kind, and caring attitude towards the local employees they supervise”, suggest the researchers. “Expatriates should remind subordinates of their roles, celebrate their achievements, and show how much they care about them”. This will help to foster affective trust and mitigate local employees’ sense of injustice.

In the modern hospitality industry, multinational hotel firms rely on expatriate managers to succeed. The findings of this novel study offer profound insights for Chinese hotel firms operating overseas, which must find effective ways to legitimise the pay gap between local workers and their expatriate superiors. This could come in the form of trust-building policies, especially those that capitalise on the distinct effects of cognitive and affective trust. Strategies for instilling cognitive trust can enhance task-related work outcomes, while promoting affective trust can improve personal work outcomes. “Trust should be considered carefully in strategic planning and academic inquiry,” conclude the researchers. This will become ever more important as China’s hospitality firms continue to expand overseas.

Hon, Alice H.Y. and Gamor, Emmanuel (2021). When My Pay is Lower than My Expatriate Colleagues: Where Do the Hospitality Managers Go from Here? International Journal of Hospitality Management, Vol. 95, 102953.

First published at TravelNewsHub.com – Global Travel News

Light at the End of the Tunnel

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Light at the End of the Tunnel - TRAVELINDEXTourism around the world is reeling from the impact of the COVID-19 pandemic, and Hong Kong’s once vibrant industry is no exception. The path to recovery is unclear. In such extreme circumstances, is it even possible for tourism businesses to plan for the future? The answer is yes, say Ms Hanyuan Zhang and Professor Haiyan Song of the School of Hotel and Tourism Management (SHTM) at The Hong Kong Polytechnic University – but only if we can predict the unpredictable. In a study offering new hope for an industry on its knees, they and two researchers developed a pioneering method of forecasting tourism demand in times of crisis. Crisis brings opportunities as well as challenges. Thanks to this game-changing new forecasting approach, the tourism industry may even emerge from the pandemic stronger than before.

In 2020, the outbreak of COVID-19 spelled disaster for societies worldwide, leaving no industry untouched. With travel bans and lockdown measures rapidly implemented across continents, tourism received a crushing blow. In Hong Kong, COVID-19 hit an industry already weakened by recent social unrest. Within just a few months, the number of visitors arriving in the city had fallen by more than 80%. Travellers’ confidence in Hong Kong as a destination was at an all-time low.

Events like the pandemic – incredibly rare and unpredictable, with the power to change the course of world history – are known as “black swan” events. The tourism industry is no stranger to their devastating effects. “Despite its importance,” the researchers warn, “tourism is also one of the most vulnerable industries”. In recent decades, for example, Hong Kong tourism has suffered major losses due to black swan events such as financial crises and the SARS epidemic.

Because they are so rare, black swan events are almost impossible to prepare for. Recovery is equally challenging, because what lies ahead is so unpredictable. This is a serious problem for the tourism industry, the researchers tell us, because “tourism businesses and organisations rely on recovery forecasting when preparing their crisis recovery plans”. Most importantly, they need to know how and when travellers are likely to return.

Normally, organisations facing difficulties look to the past for guidance. They use forecasts generated by traditional approaches, which are based on historical data, to inform their decisions on everything from budgeting to sales. However, old roadmaps are of little use in a landscape transformed by crisis. “Statistical methodologies,” the researchers warn, “cannot capture the impacts of sudden unanticipated events, such as diseases, disasters, or other crises.”

In such cases, the human touch is needed. Working quickly to assess the fast-moving situation, a panel of experts use their wisdom and discretion to adjust statistical forecasts. This is known as judgemental forecasting. However, this method also has drawbacks. For example, the researchers note, “it might be biased by the panel members’ optimism or pessimism”.

Clearly, in the wake of black swan events like the pandemic, traditional methods of forecasting are simply not good enough. In these uniquely turbulent times, the researchers realised, what the tourism industry needs is “a more systematic and reliable forecasting method that incorporates the advantages of existing forecasting methods”.

Faced with this challenge, the researchers offered a ground-breaking solution. “We describe the first attempt to combine three methods”, they explain, “to generate ex ante forecasts of the recovery of tourism demand in response to the unanticipated effects of crises”. Their novel “belt and braces” approach not only combines the strengths of statistical and judgemental forecasting but also minimises sources of human bias, such as wishful thinking.

Focusing on Hong Kong, the researchers first created baseline statistical forecasts based on past data: how many tourists would have arrived if the pandemic had not happened? They took into account the cost of holidaying in Hong Kong, the cost of travelling to alternative destinations, the income levels of tourists from different source markets, and other unique characteristics of these source markets.

Next, the researchers presented their baseline forecasts to a carefully selected panel of tourism experts, including both academics and practitioners. The experts were invited to adjust the researchers’ statistical forecasts based on their first-hand knowledge of the COVID-19 pandemic. Focusing on three scenarios, mild, medium and severe, they indicated when they thought Hong Kong’s tourist numbers would reach their lowest point, when visitor arrivals would recover, and why.

Shining a light on the path ahead for Hong Kong tourism, the researchers’ analysis revealed that the industry “will likely begin to recover gradually from the crisis in 2022”. Using their novel forecasting approach, “the specific recovery speed associated with each origin market could be projected”. Nearby markets such as Macau, mainland China, and Taiwan will be the first to bounce back, once Hong Kong’s entry and exit restrictions are relaxed. Other short-haul markets in Asia will follow, and finally Hong Kong will welcome back travellers from long-haul markets such as the US.

“From a crisis management perspective”, say the researchers, “this study provides several suggestions for business planners and policymakers regarding the recovery of tourism demand after a crisis”. Due to the uncertainty and volatility created by COVID-19, caution is needed. “Tourism recovery should involve a gradual process based on a phased-action plan aimed at corresponding markets”, the researchers explain.

Offering discounts on airline tickets and accommodation will be a good start. With travellers’ confidence in Hong Kong already dented by social unrest, destination marketers should invest in promoting the city’s attractions via social media. For now, they should focus on short-haul visitors, who represent Hong Kong’s largest market. Above all, the researchers advise, “timely and effective crisis management strategies” will help build resilience to future black swan events.

With crisis comes change. Although COVID-19 has dealt an unprecedented blow to the tourism industry, the authors remind us, “it has also provided practitioners with opportunities to consider tourism reform and innovation, international cooperation, and regional communication”. With the help of the researchers’ novel forecasting approach, tourism businesses will be well placed to identify and seize these opportunities in the months and years ahead.

Already, say the researchers, policymakers worldwide are finding new and exciting ways to rebuild and reimagine tourism. They are “promoting smart and digital tourism, rebuilding confidence in tourist sectors, providing financial support and stimulating consumption markets”. Unprecedented times call for creative new measures, and the researchers’ innovative forecasting method will be at the heart of these efforts. Fortunately, they note, “tourists have a strong desire to travel to relieve the depression associated with epidemic fatigue”.

Recovery does not mean going back to how things were. As the world inches out of crisis, it is becoming clear that COVID-19 has changed our lives for good. Thanks to this ground-breaking study, Hong Kong’s tourism industry now has the toolset it needs to predict, understand, and adapt to future changes in travellers’ behaviour. But Hong Kong will not be the only beneficiary. “The method proposed in this study”, the researchers explain, “could be generalized and used to forecast the recovery of travel demand at other destinations facing major crises”. As their integrated approach shows, collaboration – between humans and computers, scholars and practitioners – will be key to helping the global tourism industry survive and thrive in the post-pandemic world. With its outstanding researchers and deep links to local and global tourism, the SHTM is perfectly placed to lead this recovery.

Hanyuan Zhang, Haiyan Song, Long Wen and Chang Liu (2021). Forecasting Tourism Recovery amid COVID-19. Annals of Tourism Research, Vol. 87, 103149.

First published at TravelNewsHub.com – Global Travel News