The Role of Capacity Management in Hospitality Term Paper

A number of industries with a global dimension have embarked on serious capacity management approaches. Hospitality and tourism industries have been more concerned with enhancing capacity management with an aim of regulating demand and supply of their services (Pullman & Rodgers, 2009).Several socio-economic factors play a major role in shaping the supply and demand for hospitality services. The hospitality industry is a very wide field which includes various service providing industries like hotels, lodging facilities, restaurants, transportation, and other fields in the tourism sector. The constitution of a hospitality unit includes direct service providers, marketers, facility maintenance, and the human resource in general.According to Pullman and Rodgers (2009), capacity management refers to the ability of a given industry to balance demand from clients as well as the potential of the service providers to offer quality services. With this in mind, the essay seeks to address the question of whether the role of capacity management in hospitality is to match supply with demand or to match demand with supply. It also explores, with relevant examples, the extent to which each case is true.Given the large scope of services offered in the hospitality industry, the need to regulate the usage rate of the various sectors is crucial to the success of the industry. It is therefore the role of capacity management to match supply with demand.Since the hospitality industry deals with people, it is necessary to match the services supplied with the number of clients served. Let us take an example of Western Australian (WA) hotel industry which recently was faced with accommodation capacity problem. The hotels rely heavily on the number of tourists from all over the world who visit the State.The fluctuating economic performance in the developed countries and particularly in Asia has had significant impact on the number of tourists visiting Australia (Pullman & Rodgers, 2009). This is despite the fact that WA has been developing ultramodern hotel properties. This caused a considerable oversupply of facilities which implied underutilization of available resources.The fixed cost for hotel properties have remained high in most parts of the world and the greatest challenge faced by managers is to maximize the available facilities at all times. The imbalance between supply and demand in WA caused a short-term decline in occupancy rates and hence low income for the industry.During low demand periods, the management should make adjustments to the various costs in order to cover up for the high fixed costs with an aim of avoiding excess supply. Managers should be sensitive when ensuring maximum resource productivity so as not to compromise customer satisfaction (Pullman & Rodgers, 2009).However, with the high certainty of economic stabilization, capacity management had to match supply with the demand that comes with increased number of tourists. The balancing of supply and demand in the hospitality industry is very crucial due to the characteristics of services offered. Most of the services are intangible, real-time, and perishable. Capacity management should therefore be in a position to match demand with supply.In the hotel industry, management has to balance between room capacity and the cost per room which should match demand. The factor to be considered here is the perishability of the service. When a room is not occupied for one night, it directly translates to loss of revenue and cannot be recovered otherwise. The management therefore ought to match the expected volume of business output with the ability of the sector to offer services.The paper has presented two but closely related arguments on the role of capacity management. It is evident that various situations call for different approaches of addressing them. Capacity management therefore demands that there be a balance between demand and supply for the good of both the hospitality industry owners and the customers.


Pullman, M. G. & Rodgers, S. A. (2009). Understanding capacity management in the hospitality industry (3rd ed). McGraw-Hill

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