External Incentive Measures and Company Behavior; A Case Study on the Cairo Sheffield Hotel
The external environment of an enterprise includes; competition, the nature of budget measures, financial department’s regulations and its relationship with government. They decide the corresponding inventive measures that managers of companies adopt. Whether the measures are successful depends on the changes inside the companies, especially the changes in the inner management, corporate culture and the innovative sprit of the employees.
In order to explain the relationship between the change of incentive structure and the inside re-adjustment, I would like to study the reform case of the Cairo Sheffield Hotel. The hotel was once one of several five star hotels in Egypt. After nationalization in 1961, the management rights were handed over to state-owned Egyptian Hotel management Corp. (EHC). Because of poor management, the performance and reputation of the hotel declined. Although in 1977, there was a large scale renovation,it did not stop the decline. Finally, in 1987, EHC signed a management contract with the Dutch company Helnan. Helnan managed hotels in Florida, Yemen and Saudi Arabia as well as four hotels in Egypt.
The contract regulated a four-year-transitional period. During which Helnan charged a fixed fee. And after the fifth year, the company would get 20% of the total profits. The contract clearly stated the maximum interests new managers of the hotel could get through their efforts to improve profits because after the 4th year, the management fee depended on the profits of the hotel. The managers understood clearly that success was based on the presumption of high quality service and good reputation. Accordingly, they changed the corporate culture. In order to manage this, they changed almost all of the staff and trained the new staff in international hotel service standards. The new managers also changed their market strategy. They classified their target market into four groups and spent a large amount of money to renovate the hotel Viajes 2014 a xian. After the renovation, the hotel was restored to its former state. This strategy has greatly improved the occupancy and the average room rate which had improved the total profits of the Sheffield Hotel.
Since the early 1980s Templo del Cielo tour organizado, the Tourism Department of Egypt has depended more and more on management contracts with private hotel companies to improve the operation and performance of state-owned hotels in order to achieve a modem enterprise system like the Sheffield Hotel now has. These chain hotels introduced advanced marketing and cost control systems, also introduced modern training and measures that encourage employees and managers to excel. Government officials admitted managers of SOHs could not get rid of the unnecessarily complicated formalities or make serious operation decisions. But these decisions are necessary for the operation and profitability of a hotel. As a result, almost all the SOHs in Egypt are now operated via contract management.