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The Philippines’ Department of Tourism (DOT) is hell-bent on instituting a national government system to grade hotel quality. Although at first glance this seems like a reasonable idea, in fact NO OTHER NATIONAL GOVERNMENT IN THE WORLD has such a system. Therefore the DOT can be likened to a daredevil who proclaims that even though no one else has ever survived a free-fall jump without a parachute from the top of the Eiffel Tower, he will be the one to succeed.

If NO OTHER NATIONAL GOVERNMENT IN THE WORLD does something, maybe it’s not a good idea?

First of all, let’s understand what the DOT is claiming to do. It is claiming to give numerical quality grades to hotels, like calling a woman a 7 or a 10. Hundreds of parameters are evaluated. Each one is given a quality grade. For example, the food can be graded Acceptable (2 points), Good (4 points), Very Good (6 points), Excellent (8 points), or Outstanding (10 points). Sum up all the items graded, and if you have enough points, you are a 5-star hotel. A bit less, 4 stars. And so forth.

Sounds reasonable, right? So what’s the problem?

Plenty. There are problems at each and every step.

Problems of Economic Principle

Governments are not supposed to endorse some private enterprises over others – that’s interfering with the free market. Other than with safety or similar matters, governments are not supposed to dictate how a business is conducted, what capital equipment it should buy, or what services it should offer.

The essence of a democracy and of a free market economy is that buyers and sellers should be free to act and make decisions without the national government interfering. That’s why governments don’t give star ratings to auto manufacturers or fashion houses, newspapers or TV stations, nor even to airlines or hospitals. Why on earth should hotels be any different? Because the DOT says it’s needed to attract tourists? Then why not grade toothpastes to attract people to brush their teeth? The idea of the national government issuing star ratings to hotels is not compatible with any form of government other than Communist.

Problems of Arbitrariness

“Arbitrary” means that there is no indisputable or scientific reason for a measure or cutoff point. When we say that “paper will burn once it reaches 451 degress Fahrenheit”, that is a scientific fact, and is not arbitrary. When we say that 75 points is a Pass, and 74 a Fail, that is arbitrary.

Other than hard science, all rating and grading systems are arbitrary. They are just human constructs, essentially the personal opinion of those who set the system up. Some men grade women on a scale of 1 to 10. This is arbitrary. When reviewing movies, some critics give 1 to 4 stars; then other critics insert half-stars. Both are arbitrary. When recommending whether to take medication, some doctors will say “if your fasting blood sugar is over 100, you are diabetic”. This is arbitrary (years ago, the figure used was 180 – that was arbitrary, too).

The moment one begins to construct a system for grading hotels, one is immediately faced with insurmountable problems of arbitrariness. Why not a simple Pass-Fail? Why a total of 1000 points and not 980 or 5? Why should the room size be weighted at 2% of the score (what the Philippine DOT thinks), and not 10 to 20% (closer to what most customers would say)? Why does a hotel with 850 points get called 5 stars, but one with 849 points is only 4?

There is no resolution for these problems of arbitrariness. No matter what you do, in your struggle to represent a complex reality with a number or a label, you will be wrong in some respect. Thus, most governments decide not to go where angels fear to tread.

Problems of Relevance

In the US, a private company, Forbes Magazine, issues star ratings for hotels. One of their criteria is “fresh-cut flowers in the room – yes/no”. On the other hand, Forbes doesn’t rate “genuine staff smiles? yes/no”. And yet if you were to ask a typical customer which is the more important, guess which one they would choose. So Forbes, a respected rater of hotels, is already critically wrong, because it doesn’t focus on what is important in the real world to real customers. If Forbes is wrong, imagine how close the Philippines’ DOT comes to relevance.

No matter what items you include or don’t include in a ratings system, you will be wrong, or irrelevant, to some or perhaps many people.

Problems of Credibility and Adding to the Confusion

In the past, several governments have wanted to issue hotel stars “so that customers can be confident in the quality of hotels”. The problem with this idea is that it ignores the indisputable fact that there are already many public sources making exactly the same claim: travel books like Fodor’s and Lonely Planet; travel magazines like Travel & Leisure; TripAdvisor; online travel booking companies like Expedia, Agoda, Bookings, etc. There are also innumerable blogs online.

Each and every one of these issues some kind of rating of hotels. Some of them are based on “experts”, others on “customers”, others on “experienced travelers”. Compared with all of these, governments are the least credible, especially Third-World governments.

Furthermore, when a government issues star ratings, these will either (a) agree or (b) disagree with the other sources. If they agree, what did the government achieve by getting involved? Nothing. If they disagree, what did the government achieve? More confusion.

Thus, when a government says that its clerks and bureaucrats can come up with a more reliable rating than independent experts and actual customers, and that it is settling the matter once and for all, it is demonstrating Outstanding Stupidity (not “Very Good Stupidity" or “Excellent Stupidity”, but “Outstanding Stupidity”).

Problems of Expertise

Imagine grading an automobile tire. Does this require expertise? Yes. Now grade an entire car. Does this require more expertise? Assuredly. Is there any one person competent to grade an entire car, according to tires, brakes, metallurgy, ecological impact, aesthetics, ergonomics, sound system, drivetrain, air-conditioning and heating, cornering, etc., etc.? Not a chance. To even begin to rate a car according to multiple parameters, one would have to assemble a large team that includes experts in all these areas.

A hotel – almost any hotel – is about as complex as a car (more so, because it involves human nature and the “soft” arts and sciences at every turn), and involves numerous points of possible relevance to customers. To grade all these fairly, with any chance at all of being close to useful, one would have to be an expert in numerous disciplines such as psychology, fine arts, landscaping, engineering, restaurant design and service, Housekeeping operations, etc., etc.

In other words, to fairly grade a hotel, one needs many experts. To fairly grade all the hotels in a country, one would need several teams of experts, and they would have to spend a long, long time. There simply are not enough experts, and not enough time, to do this right.

Problems of Sampling Error

If you inspect one room and find it “nice”, should you conclude that all 550 rooms in the hotel are “nice”? Probably not.

When someone claims to inspect and grade a hotel, he is really saying that he is inspecting and grading a very small part of the hotel, a sample. From that sample, he will issue a general statement about the entire hotel. Therefore it is important to take enough samples so that one has high confidence that they fairly represent the quality of the entire hotel.

Mathematically, “confidence” in a grade cannot be measured until you have several samples, depending on whether the grades are similar or not. Not to get mired in complex statistical theory, if you inspect 5 rooms in a 550 room hotel and all of them are exactly the same in terms of your grade, good. You have high confidence that they fairly represent the whole hotel. If they are not the same, you need more samples, and will need to expand your reported grade from a single number (e.g., the score is 8 out of 10, with a 95% confidence) to a range (the score is between 5 and 9, with a 95% confidence).

To apply these principles to a largish hotel, you probably need to visit 5 times, on 5 different occasions, so that you can see different rooms and encounter different staff, before you can even decide whether you need to visit yet more times. Any system of grading hotels, that is dependent on a single night’s stay, has “unknown confidence level due to gross inadequacy of sampling population”. That is techno-talk for “we don’t know because we didn’t visit enough times or see enough rooms”. And, if the best you can say is “between 5 and 9”, is this going to clarify anything for anybody?

And that’s exactly what the Philippines DOT did: visited only once, for one night, didn’t see enough rooms. In the case of larger hotels, it certainly did not visit every restaurant or every facility, either.

Problems of Subjectivity

There is only one national government in the entire world that issues star ratings for hotels – Ireland. The Irish system, at least, is objective. It asks objective questions like “Is there 24-hour room service?” It doesn’t ask “Is the service good?” because this question cannot possibly be answered as a factual certainty.

The problem gets infinitely more intractable when you try, as the Philippines DOT does, to rate very subjective matters such as “Is the food Good / Very Good / Excellent / Outstanding?” Smart governments immediately figure out that there is no way to do this right, in a fair way, that actually reveals useful information to the public. So they leave the business of grading hotels to customers and private-sector reviewers.

The Philippines’ Department of Tourism, on the other hand, believes it is much smarter and wiser than all the other governments in the world, and can get around all the problems inherent in this idea, which are:

  1. Conflict with free-market economics
  2. Inescapable arbitrariness
  3. Issues of Relevance to real-world customers
  4. Lack of Credibility of governments, especially Third-World governments
  5. Lack of Available Expertise
  6. Insufficient time and thus not enough sample observations of the hotel, leading to large sampling error
  7. Inherent Subjectivity
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