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CRITICALLY ANALYZE DIFFERING APPROACHES TO CORPORATE SOCIAL RESPONSIBILITY IN HOSPITALITY INDUSTRY

Table of Contents 1. Introduction .................................................................................................................................. 3 2. Industry overview and scope ....................................................................................................... 3 3. Overview of hospitality companies ............................................................................................. 5 3.1 Overview of Hilton Hotels .................................................................................................... 5 3.2 Overview of IHG hotels ........................................................................................................ 7 4. CSR and its importance in hospitality industry ........................................................................... 8 4.1 Defining CSR ......................................................................................................................... 8 4.2 Importance of CSR in hospitality industry ............................................................................ 9 5. Characterization of CSR ............................................................................................................ 10 6. Impact of globalisation and shock events .................................................................................. 11 7. Conclusion ................................................................................................................................. 13 Reference List ................................................................................................................................ 14 Appendices .................................................................................................................................... 17 Appendix 1: Hilton’s approach to environment-friendly operations ......................................... 17

1. Introduction Corporate Social responsibility (CSR) is vital to the Hospitality industry’s strategic operations. As per the views of Rhou and Singal (2020), CSR can be defined as responsible corporate operations that extend to stakeholders. Although there are many definitions available, there are three central aspects of social responsibility. The first is the economy. Environment and Society. Franco et al., (2020) opined that in the case of the hospitality industry, CSR, by attaining benefits to the bottom line, assures company profitability. In that aspect, the demand for business strategies and regulations regarding CSR is increasing. The report here aims to define the CSR characteristics and impacts in the Hospitality industry by referring to the case of Hilton and IHG hotels. The report aims to study the importance of CSR by referring to the case of IHG and Hilton Hotels and define the impact of globalisation on the CSR operations in the hospitality industry. Nature and scope of CSR within the respective industry. 2. Industry overview and scope The hospitality industry is a vast yet growing sector that includes a wide variety of businesses like hotels, restaurants, resorts, and associated services. The industry has a significant role in the global economy as well as social development by providing employment opportunities and attracting tourists. In terms of revenue, the global hospitality industry gained 409.97 billion USD in the fiscal year 2023.

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Figure 1: Revenue growth forecast of Hospitality industry (Source: Statista, 2023) The figure 1 above illustrates the future revenue growth of the industry and predicts in 2027 the industry will attain 483.42 million USD (Statista, 2023). Rhou and Singal (2020) argues that hospitality industry is a highly competitive industry and is keep evolving according to the market needs which contributes to the industry growth. Furthermore, global events like the Covid-19 and technological advancement also shapes the performance of the hospitality industry swiftly. The hospitality industry is expected to have 10.43% CAGR in 2028 when the industry value is expected to reach 7997647.2 million USD. Franzoni et al., (2021) stated that the hospitality industry’s growth potentials are fuelled via increased international travel and investment in the tourism industry all over the globe. Yet, the industry is facing challenges in adapting sustainable operations which affects the CSR of the industry. Peña‐Miranda et al., (2022) argues that CSR is associated to increased operational costs in the hospitality industry. Hence, often, companies to cut costs focus less on sustainable operations. However, Gonzalez-De-la-Rosa et al., (2022) argues that industry leaders like Hilton and IHG has taken initiatives that supports sustainable

development goals and responsibility to attain CSR. As per Hilton’s declaration, the company took initiatives to support the environment-friendly processes to limit its carbon footprint (See Appendix 1) . On the other hand, IHG Hotels also takes responsible operations to satisfy social and economic business needs. This indicates the industry's dedication to CSR. 3. Overview of hospitality companies The hospitality industry and its scope for operations are discussed in this segment based on two companies, Hilton and IHG Hotels. The financial information, along with a strategic overview of the companies, are presented in the report in the following segments. 3.1 Overview of Hilton Hotels Hilton is a multinational company based in America and works in the hospitality industry. It is a hotel chain that was founded in 1919 which has headquarter in Virginia. Hilton operates as a luxury brand Maily and targets both business and leisure travellers in the industry. The company mainly targets city centres and capitals. As per the company statement, Hilton hotel's brand pillars are based on integrity, teamwork, hospitality and leadership (Hilton, 2023). That being said, the financial position of the brand is quite impressive, as it has shown steady growth over the years.

Figure 1: Revenue over the years, Hilton group of hotels (Source: Statista, 2024) As the figure illustrates, the company has represented a steady growth in revenue over the years. Currently, the business attained revenue of 8.77 Billion USD in 2022, which is close to the company's post-pandemic revenue of 9.14 Billion USD (Statista, 2024). The company's gross profit accounted for 8.927 Billion USD in 2022, a 23.42% increase from the previous year. The company in the year 2022 opened its 7000th hotel globally which welcomed over 200 million guests in the year. In aspect of the company mission, Hilton groups state that "To fill the earth with the light and warmth of hospitality –by delivering exceptional experiences – every hotel, every guest, every time" (Hilton, 2024). This defines the company's approach to its business in the global market, guiding its core strategy and operational approach. Franzoni (2021) opined that company vision and mission statement is a vital part of business management as it governs the strategic approach to business performance management. On that note, it can be stated that the company’s mission statement is well-articulated to detail on its operational approach in the society. Further, the

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vision statement of “fill the earth with the light and warmth of hospitality” in Hilton defines its strategic approach to operational mission. 3.2 Overview of IHG hotels InterContinental Hotels Group (IHG) is a widely popular brand in the hospitality industry and operates over 2000 locations across the globe. It has more than 345000 employees and operates in over 100 countries. The recent revenue of the company was 1.84 billion USD which shows the post pandemic growth of the company in the respective industry (IHG, 2024). Figure 2: Revenue of IHG (Source: Statista, 2023) The company's net profit margin is 25.79%, which also indicates its stable financial performance over the years. The mission of the company in the industry is to offer true hospitality to everyone globally. On the other hand the vision of the company is to become world's greatest company. Compared to Hilton, the vision and mission of IHG is more focused on industry leadership and profitability. However, both companies in the hospitality industry aims to provide high quality value to their consumers respectively.

4. CSR and its importance in hospitality industry 4.1 Defining CSR Corporate Social Responsibility, as discussed prior, it an important aspect of the hospitality industry around the globe. It is an approach that is adopted by companies to ensure the operations are socially and environmentally responsible by all means (Adib et al, 2021). On the contrary, Rank and Contreras (2021) argued that CSR can be defined as a way for companies to identify and recognize their business impacts across economy, society, and environment. Drawing from the Tripple Bottom Line theory, it can be stated that CSR is defined as a beneficial part of a hospitality business that promotes ethical and sustainable business development. Figure 3: Triple Bottom Line Framework (Source: Lu et al., 2021) According to the views of Lu et al., (2021), CSR involves a wide range of activities which includes but are not limited to ethical business practice, social commitment, and ethical

resourcing practices. Furthermore, reducing carbon emissions, conserving natural resources, and supporting local communities are also included in the activities under CSR. Henceforth, CSR can be seen as a central part of any hospitality business’s sustainable operations. In the recent years, it has become a part of effective business strategy along with competitive strategy of a business. It is defined as a core strategy that can establish trust among stakeholders and also strengthen business reputations. Therefore, it can be seen as an important part of business growth and management. 4.2 Importance of CSR in hospitality industry Due to the growing awareness regarding social and environmental issues in the hospitality industry, CSR strategies have become increasingly important for the respective industry players. As stated by Rank and Contreras (2021), CSR operations include engaging in activities which are beneficial to society, the environment, as well as the economy while simultaneously pursuing the company's goals regarding global development. In the hospitality industry, CSR initiatives can include reducing carbon emissions, conserving natural resources, supporting local communities, and promoting diversity and inclusion. Zou et al., (2021) argues that CSR is important in the hospitality industry due to its ability to develop business trust and relations. In light of the Stakeholder Management Theory, it can be stated that the development of trust among the stakeholders is important to improve business operations. On that note, CSR’s ability to improve stakeholder trust benefits the hospitality industry by increasing its profits and hence is deemed as important. Many of the businesses in the industry including Hilton and IHG have adapted the strategy to develop responsible business and improve stakeholder trust. As a multinational company, its CSR adaptation was important in terms of its business growth and brand image development. Further, CSR can be seen as a suitable approach for sustainable business operations in the hospitality industry that is becoming important in today's globe. Adib et al, (2021) opined that consumers become more aware of environmental and social issues like carbon emission and pupations and therefore they are looking for hotels and resorts that are committed to making a positive impact. By engaging in CSR initiatives, hospitality businesses like Hilton and IHG differentiates its businesses among the competitors to attract new consumers and retain loyal consumers in same time.

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5. Characterization of CSR CSR can mainly be characterised into Voluntary, Beyond philanthropy, practice and Value, Stakeholder Management, and strategic CSR, which includes alignment of responsibilities and management of externalities. Based on the industry operations in hospitality industry, the segment discusses the characterisation of CSR in the industry based on cases of Hilton and IHG hotels. Voluntary: responsibility of CSR includes various sustainable activities. On that term, it can be stated that the companies eyeing the profits, adapt to it voluntarily. Gonzalez-De-la-Rosa et al. (2023) opined that CSR responsibilities are taken by the organizations voluntarily, which is the operational responsibility and mission. For example, Hilton Hotels has integrated sustainable operations into its operational mission. This helps the company voluntarily participate in the CSR activity. It can be stated that environmental responsibility taken voluntarily by a company in order to protect the environment and reduce its carbon footprint defines its involvement in CSR. This also might incorporate activities like reducing waste, conserving energy, along with using sustainable resources. CSR externalities: This refers to different factors associated with the decision-making process of CSR. For example, environmental resource prevention and conservation is regarded as one of the processes under CSR externalities which influences the approaches. In case of IHG, such characteristics of CSR is seen as the company moulds its business performance according to the environmental conservations. Further, Hilton also taken actions like preventing pollutions and investing in sustainable operations which supports the goals strategically. Alignment of responsibility: Alignment of responsibility involves balancing stakeholder’s interests alongside the businesses. It sustains the operations of the CSR objectives of a company and supports the operational growth effectively. Peña‐Miranda et al., (2022) opined that alignment of responsibilities helps to guide the CSR responsibility and hence it is a key characteristic of successful CSR adaptation in a business. A similar case can be seen in the case

of Hilton as well as IHG, as both businesses have their goals aligned with sustainable development with CSR goals. Both companies responsibly operate across the businesses to sustain competitive advantages. Alignment of social responsibilities in the hospitality industry is seen as a core part of CSR (Achmad and Yuliana, 2022). The social responsibility that contributes in the well-being of society including supporting social causes, charitable activities, and promoting ethical practices define the characteristics of CSR. Hilton and IHG delivers to society by providing safe and healthy working conditions for their employees, supporting local communities, and promoting diversity and inclusion (Gonzalez-De-la-Rosa et al., 2023). Value and practice: CSR is all about business values adapted by the businesses to sustain competency. Gonzalez-De-la-Rosa et al. (2023) opined that value-based business is the core characteristic of CSR. A business that is aware of the values and the ethics are effective is developing CSR outcome positively. On similar note, Franzoni et al., (2021) opined that business values like societal commitment and contribution to locality are dependent on the core values of the business under CSR. On that term, it can be concluded that value based practise are important to operate CSR practices regulating the business. Similar case can be seen in aspect of Hilton hotels. It is detailed in the company’s report that it contributes in the local community development. It defines the company’s value and practices which ethically supports its development under CSR. On that aspect it can be stated that value-based practice or ethical practices are core characteristics of CSR. Beyond philanthropy: Some defines CSR as beyond Philanthropic responsibility and makes it a part of policies of operations. The process is characterised as such as CSR benefits are not limited to social and environmental factors but also influences the aspects like marketing, investment and logistics. On that note, CSR can be defined as a beyond philanthropic aspect of a business in hospitality industry. 6. Impact of globalisation and shock events The impact of Globalisation on different industry is evident from its shift to digitalisation. It was the primary cause of increased competitiveness among the hospitality industry and shaped its outcome globally. This has increased demand of CSR practices globally in order to differentiate

the business and development brand image. Asante Antwi, et al., (2021) opined that globalisation of business has taken the businesses in the hand of the consumers. They can see, evaluate and compare businesses in the hospitality industry with a click and touch. Therefore, developing competency has become a priority of the businesses leading to the demand of CSR. Carroll (2021) on similar note added that . As companies expand their operations to different parts of the world, they are expected to comply with different social and environmental regulations. This has led to the development of new CSR practices that are tailored to the needs of different regions. On the other hand, globalisation can be associated with increased awareness of social and environmental issues. People are more aware of the environmental impacts of a business in hospitality industry and values the company that has positive impact on the globe. Hence, hotels like Hilton have taken initiatives by introducing new policies that uses less energy and water to prevent resource wastage. It helps the companies to address the issues while also developing business profitability successfully. It creates a positive image of the brand and thus supports its development. Furthermore, Tworzydło et al., (2021) added that , globalization has contributed in the development of CSR initiatives world-wide. It has bought companies, governments, and NGOs together in order to address social economic and environmental issues on a global scale. For example, the United Nations Global Compact is a global initiative that encourages companies to adopt sustainable and socially responsible policies and practices in hospitality industry. Therefore, it can be concurred from the analysis that globalization has improved focus on CSR in the hospitality industry globally. It is now expected from the companies in the industry to take a responsible approach to CSRwhich integrate it into their overall business strategy. This has led to the development of new CSR practices and initiatives that are tailored to the needs of different regions and stakeholders. In terms of Global shocks for example natural calamities, economic depletion, and pandemics had a significant impact on the corporate social responsibility (CSR) initiatives of the hospitality industry. In order to address these shocks the companies had taken cost cutting measures that has negatively influenced their CSR activity prioritisation. For instance, during the COVID-19 pandemic, many hotels and resorts had to shut down, resulting in massive revenue losses. In such a scenario, CSR initiatives might take a backseat as the company’s focus on keeping their

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operations afloat. However, such events had presented the industry with new opportunity to expand its business and develop its innovative operations successfully (Zou et al., 2021). For example, during Covid-19, Hilton and IHG has taken initiatives such as sterilizing the property and innovating their process of services minimising contact. It assured quality service and innovated the operational model for the industry for positive growth. Overall, global shocks have a significant impact on the CSR initiatives of the hospitality industry, and companies need to balance their financial constraints with their commitment to social responsibility. 7. Conclusion In conclusion, Corporate Social Responsibility (CSR) is an essential aspect of the Hospitality industry's strategic operations. The hospitality industry is a vast yet growing sector that includes a wide variety of businesses like hotels, restaurants, resorts, and associated services. The industry has a significant role in the global economy as well as social development by providing employment opportunities and attracting tourists. The report referred to the cases of Hilton and IHG hotels to study the importance of CSR and globalisation's impact on the CSR operations in the hospitality industry. The financial information, along with a strategic overview of the companies, was presented in the report. It is an approach that is adopted by companies to ensure the operations are socially and environmentally responsible by all means. The report identified that the industry leaders like Hilton and IHG have taken initiatives that support sustainable development goals and responsibility to attain CSR. However, the industry still faces challenges in adapting sustainable operations, which affects the CSR of the industry. Nonetheless, the hospitality industry's growth potentials are fuelled by increased international travel and investment in the tourism industry all over the globe.

Reference List Achmad, W. and Yuliana, Y., 2022. Corporate social responsibility of the hospitality industry in realizing sustainable tourism development. Enrichment: Journal of Management , 12 (2), pp.1610-1616. Available at: https://enrichment.iocspublisher.org/index.php/enrichment/article/ download/447/332 Adib, M., Zhang, X., AA Zaid, M. and Sahyouni, A., 2021. Management control system for corporate social responsibility implementation–a stakeholder perspective. Corporate Governance: The International Journal of Business in Society , 21 (3), pp.410-432. Available at: https://www.researchgate.net/profile/Mohammad-A-A-Zaid/publication/ 346732383_Management_control_system_for_corporate_social_responsibility_implementation_ -a_stakeholder_perspective/links/640e0c80a1b72772e4ee76a7/Management-control-system-for- corporate-social-responsibility-implementation-a-stakeholder-perspective.pdf Asante Antwi, H., Zhou, L., Xu, X. and Mustafa, T., 2021, April. Beyond COVID-19 pandemic: an integrative review of global health crisis influencing the evolution and practice of corporate social responsibility. In Healthcare (Vol. 9, No. 4, p. 453). MDPI. Available at: https://www.mdpi.com/2227-9032/9/4/453/pdf Carroll, A.B., 2021. Corporate social responsibility: Perspectives on the CSR construct’s development and future. Business & Society , 60 (6), pp.1258-1278. Available at: https://www.researchgate.net/profile/Archie-Carroll/publication/352029873_Corporate_Social_R esponsibility_Perspectives_on_the_CSR_Construct%27s_Development_and_Future/links/ 632f533686b22d3db4dbe95b/Corporate-Social-Responsibility-Perspectives-on-the-CSR- Constructs-Development-and-Future.pdf Franco, S., Caroli, M.G., Cappa, F. and Del Chiappa, G., 2020. Are you good enough? CSR, quality management and corporate financial performance in the hospitality industry. International Journal of Hospitality Management , 88 , p.102395. Available at: https://www.academia.edu/download/87021926/j.ijhm.2019.10239520220605-1-1tddj5a.pdf

Franzoni, S., Sarwar, H. and Ishaq, M.I., 2021. The Mediating Role of HRM in the Relationship between CSR and Performance in the Hospitality Industry. Sustainability , 13 (24), p.13699. Available at: https://www.mdpi.com/2071-1050/13/24/13699/pdf Gonzalez-De-la-Rosa, M., Armas-Cruz, Y., Dorta-Afonso, D. and García-Rodríguez, F.J., 2023. The impact of employee-oriented CSR on quality of life: Evidence from the hospitality industry. Tourism Management , 97 , p.104740. Available at: https://www.sciencedirect.com/science/article/pii/S0261517723000225 Hilton, 2024. Travel With Purpose. [Online]. Available at: https://esg.hilton.com/ Lu, J., Liang, M., Zhang, C., Rong, D., Guan, H., Mazeikaite, K. and Streimikis, J., 2021. Assessment of corporate social responsibility by addressing sustainable development goals. Corporate Social Responsibility and Environmental Management , 28 (2), pp.686-703. Available at: https://onlinelibrary.wiley.com/doi/abs/10.1002/csr.2081 Peña‐Miranda, D.D., Guevara‐Plaza, A., Fraiz‐Brea, J.A. and Camilleri, M.A., 2022. Corporate social responsibility model for a competitive and resilient hospitality industry. Sustainable Development , 30 (3), pp.433-446. Available at: https://www.um.edu.mt/library/oar/bitstream/123456789/82676/1/Corporate%20social %20responsibility%20model%20for%20a%20competitive%20and%20resilient%20hospitality %20industry.pdf Rank, S. and Contreras, F., 2021. Do millennials pay attention to corporate social responsibility in comparison to previous generations? Are they motivated to lead in times of transformation? A qualitative review of generations, CSR and work motivation. International Journal of Corporate Social Responsibility , 6 , pp.1-13. Available at: https://link.springer.com/content/pdf/10.1186/s40991-020-00058-y.pdf Rhou, Y. and Singal, M., 2020. A review of the business case for CSR in the hospitality industry. International Journal of Hospitality Management , 84 , p.102330. Available at: https://e- tarjome.com/storage/panel/fileuploads/2019-12-09/1575883567_gh41.pdf

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Statista. 2023. Revenue of the InterContinental Hotels Group 2007-2022 [online]. Available at: https://www.statista.com/statistics/273254/revenue-of-the-intercontinental-hotels-group/ #:~:text=Revenue%20of%20the%20InterContinental%20Hotels%20Group %202007%2D2022&text=UK%2Dbased%20multinational%20hotel%20company,of %201.39%20billion%20U.S.%20dollars . Statista. 2024. Revenue of Hilton Worldwide Holdings from 2009 to 2022 [online]Available at: https://www.statista.com/statistics/297760/revenue-of-hilton-worldwide-holdings-inc/ #:~:text=International%20hotel%20company%20Hilton%20Worldwide,year's%20total%20of %205.79%20billion . Tworzydło, D., Gawroński, S. and Szuba, P., 2021. Importance and role of CSR and stakeholder engagement strategy in polish companies in the context of activities of experts handling public relations. Corporate Social Responsibility and Environmental Management , 28 (1), pp.64-70. Available at: https://www.researchgate.net/profile/Dariusz-Tworzydlo/publication/ 344015136_Importance_and_role_of_CSR_and_stakeholder_engagement_strategy_in_polish_co mpanies_in_the_context_of_activities_of_experts_handling_public_relations/links/ 6069610a299bf1252e28e0dd/Importance-and-role-of-CSR-and-stakeholder-engagement- strategy-in-polish-companies-in-the-context-of-activities-of-experts-handling-public- relations.pdf Zou, Z., Liu, Y., Ahmad, N., Sial, M.S., Badulescu, A., Zia-Ud-Din, M. and Badulescu, D., 2021. What prompts small and medium enterprises to implement CSR? A qualitative insight from an emerging economy. Sustainability , 13 (2), p.952. Available at: https://www.mdpi.com/2071- 1050/13/2/952/pdf

Appendices Appendix 1: Hilton’s approach to environment-friendly operations (Source: Hilton, 2024)

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