We treat economic and social value as separate elements, often with competing objectives. One is claimed to sustain the business, the other to reflect its morals. And as we dissociate them, managers are expected to make trade-offs when tension emerges. But what if this is about business model design choices rather than trade-offs?
In Sapiens, Yuval Noah Harari reminds us that many of the systems that structure our societies only exist because we collectively believe in them. Corporations, justice, and the economy, to cite only a few examples, are shared social constructions.
Value creation in business is not exempt from this belief. In hospitality, especially, we have long designed organizations around the assumption that economic value sits apart from social, human, or environmental value. We therefore designed business models as mechanisms for optimizing financial performance first, while social impact is treated as secondary, external, or a consequence of economic value.
We drew a line in the sand, or rather in our minds, between economic value creation and other types of value (social, moral, environmental, etc.), which prevents us from apprehending our reality from new angles.
Should Hospitality Businesses Prioritize Profitability or Social Impact?
It is interesting to observe that a growing number of examples of social entrepreneurship in hospitality are challenging this logic entirely (Schwab Foundation for Social Entrepreneurship, 2024). Rather than balancing profitability against purpose, they are innovating. They are redesigning hospitality business models so that, by design, economic and social value creation reinforce one another.
This liberates us from the challenge of managing the tensions between economic and social objectives and, most importantly, opens a wide range of opportunities. Because businesses and managers exist to solve problems, and economics is ingrained in all problems, they operate in a context that involves social, environmental, and even religious factors.
Two social entrepreneurship examples:
As I curate the Impact Hospitality Directory, I had the pleasure of interacting with 2 hospitality social venture founders: Christine Merkelbagh of Label Gamelle and Alex Toselli of Albergo Etico.
Both ventures operate in highly demanding hospitality environments and compete in conventional markets. Yet both have built business models that integrate social inclusion directly into their operational logic. Both consider the social mission to be interconnected with their economic objectives and depart from treating the social impact as an external initiative.
Simply, they are free to manage the tension as they move from an add-on to a foundation for their profitability. As such, they focus on the problem they aim to address, with money as one of the founding elements of a system that serves a purpose.
Social enterprise business models: from trade-offs to new possibilities
Albergho etico
Albergo etico hotels operates its original Trattoria (in Asti, Italy), has a network of 10 hotels (in Italy, Australia, Albania, and Argentina), and the Academy of Independence. It stands for a society where inclusion is viewed as natural in all social aspects. Therefore, they ensure that people with mental and physical impairments have equal opportunities for training and employment. They rely on hospitality as a platform to prepare people with impairments for daily tasks and employment, while providing a distinctive 3-4-star hotel experience for their clients.
Label Gamelle
Label Gamelle is a social enterprise based in the suburbs of Paris that operates in the catering industry. Its slogan translates to: “it's not because we are poor that we necessarily have to eat bad food.” It combines high-quality food production with a strong social mission: providing training and employment opportunities to people in situations of exclusion, particularly refugees and individuals distant from the labor market. Through its catering activities, Label Gamelle delivers meals and builds pathways to professional integration, using hospitality as a platform for skills development, social inclusion, and economic participation.
What makes these ventures strategically interesting is not simply their mission. It is the architecture of their business models. They do not perceive social value creation as a constraint on economic value creation; quite the opposite, they see it as a pathway. As a result, they organize resources, partnerships, stakeholder relationships, and revenue mechanisms differently from conventional hospitality firms.
That is the definition of business model innovation (Freeman, 2010).
Business Model Innovation (Beyond CSR)
When discussing sustainability or social impact in hospitality, conversations often remain at the level of corporate responsibility initiatives. Additional programs are (often forcefully) layered onto traditional business models. But social entrepreneurship allows the model to redesign itself.
At first glance, the financial structures of these ventures may appear relatively conventional. Hotels still need occupancy. Catering companies still need clients. Service quality remains essential. Economic fundamentals do not disappear. But underneath the surface, the logic changes.
Different financial architecture
When I asked both founders how their P&L and Balance sheet differ from a conventional operation, they said: At first glance, it doesn't. Look closer, and a different architecture emerges. Staffing costs run higher than the industry average. Revenue streams are hybrid (combining commercial income, state contracts, and individual donations), and impact investors and value-related funding partners are involved, with little reliance on traditional bank financing. And beneath the financial statements lies something harder to quantify: a stakeholder web in which every relationship is designed to generate mutual value rather than extract it from somewhere else.
Simply put, they operate through highly interconnected stakeholder ecosystems. Competitors may become recruitment partners. Public actors become investors. Clients become contributors to social integration. Beneficiaries become employees, trainees, and independent economic contributors.
In other words, true to the stakeholder theory laid out by Edward Freeman (Freeman, 2010), these ventures reimagine and optimize relationships rather than manage transactions.
Management Reality: The Discipline of Complexity
For former corporate executives like Christine Merkelbagh and Alex Toselli, the shift to social enterprise leadership is a move into more complex management, one that demands a fundamentally different operating logic.
The standard hospitality playbook runs on standardization, efficiency, and predictable process cycles. Social enterprises, by contrast, operate in a landscape defined by human variability and non-linear timelines. The trade-off disappears, efficiency is a hard constraint for service quality, and the management challenge includes relationship optimization. That shift has real operational consequences.
The time cost of healing and integration
In a conventional hotel or catering operation, timelines are measured in shift rotations and quarterly targets. In an integrative business model, they are measured in human breakthroughs. Christine Merkelbagh names a critical and often invisible operational reality: the time required for beneficiaries to adjust is central to the process to be designed. Many beneficiaries carry trauma or deep-seated experiences of exclusion. The business model must accommodate grief, psychological adjustment, and the cognitive and emotional demands of entering a new professional environment.
Practically, this means training cycles are longer, supervision ratios are higher, and the ramp-up time for a new team member is significantly longer than industry norms. Crucially, the management logic inverts; it is no longer about fitting the human to the machine. It is about adapting the machine, workflow, schedule, and environment to fit the person. What can appear to be a drawback in trade-off logic becomes a strength.
At Albergo Etico, they designed the Academy of Independence, which became the backbone for their funding and training. At Gamelle Label, it coaches beneficiaries into stable employment, which in turn strengthens their reputation and market base.
The relationship architecture of the model
Both founders are explicit that their business models survive and scale through the quality of their stakeholder relationships. Albergo Etico's collaboration with larger hospitality chains is a case in point. What could be framed as competitive pressure- major brands recruiting from the same labor pool- is instead converted into a structural partnership. Trained graduates become a supply asset to the wider industry, and that collaboration, in turn, reinforces Albergo Etico's own training pipeline and market positioning. The boundary between competitors and partners is deliberately dissolved.
Label Gamelle operates within a similarly engineered ecosystem: the state as both funder and revenue source, clients who are also advocates, and a beneficiary population that is simultaneously the social mission and the commercial workforce. They are designed stakeholder configurations.
This maps onto what Freeman, Menghwar, and Clark-Hamel describe (Freeman et al., 2026) in their forthcoming work on stakeholder entrepreneurship: the capacity for creative imagination. This shared ability is to see beyond current roles, transactions, and constraints, and to jointly design relationships that did not previously exist. In practice, this is learnable and transferable outside of social ventures.
Key Takeaways from Hospitality Leaders
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Stop treating trade-offs as operational problems. Instead of trying to manage the trade-offs to eliminate tensions, shift the question to: “What alternative business model configuration could make the two objectives mutually reinforcing?”
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Look where value is created: Traditional hospitality management tends to concentrate its attention on a. customers and b. financial performance. Yet many social enterprises survive because they create value for a broader set of stakeholders, who in turn contribute resources, legitimacy, talent, partnerships, or market access.
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Consider business models as systems of relationships. Innovative ventures redesign stakeholder relationships to leverage them. They create new forms of value exchange, resource mobilization, and, of course, collaboration.
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Look for innovation at the margin of the industry. At the core of any industry, incumbents are the guardians of the assumptions. So, we need to look at less conventional players, such as social enterprises, those who are exploring alternative approaches to employment, sourcing, training, or service delivery.
Are These Business Models a Niche or a Signal?
After almost three years spent with social entrepreneurs in the hospitality industry, a question lingers: are these models marginal, or are they revealing where hospitality is heading?
In terms of size and other economic value measures, they remain a negligible fraction of a very fragmented industry. But in effect, they are transforming lives, from their beneficiaries and their families to their employees, their clients, and all their stakeholders. Most importantly, we know from strategy that industries rarely evolve because dominant players transform first. More often, change begins at the margins, where alternative business models emerge under different assumptions.
Social enterprises in hospitality are experimenting with precisely this: alternative assumptions about value creation, stakeholder relationships, and the purpose of business itself.
Whether these ventures remain niche actors or become signals of broader transformation remains uncertain. But they already reveal something important: the conventional separation between economic and social value may be less inevitable than hospitality management has long assumed.
And if that assumption changes, entirely new strategic possibilities emerge.
