Commoditization in the Lodging Industry

COMMODITIZATION IN THE LODGING INDUSTRY:

EXAMINING THE PERCEPTIONS OF HOTEL MANAGERS

Tiffany Danielle Francis

A thesis submitted to the Faculty of the University of Delaware in partial fulfillment of the requirements for the degree of Master of Science in Hospitality Information Management

Spring 2010

EXAMINING THE PERCEPTIONS OF HOTEL MANAGERS

Tiffany Danielle Francis

Approved: ______Srikanth Beldona, Ph.D. Professor in charge of thesis on behalf of the Advisory Committee

Approved: ______Robert R. Nelson, Ph.D. Chair of the Department of Hotel, Restaurant, and Institutional Management

Approved: ______Conrado M. Gempesaw II, Ph.D. Dean of the College of Business and Economics

Approved: ______

Debra Hess Norris, M.S. Vice Provost for Graduate and Professional Education

I certify that I have read this thesis and that in my opinion it meets the academic and professional standard required by the University as a thesis for the degree of Master of Science.

Signed: ______Srikanth Beldona, Ph.D. Professor in charge of thesis

I certify that I have read this thesis and that in my opinion it meets the academic and professional standard required by the University as a thesis for the degree of Master of Science.

Signed: ______Brian Miller, Ed.D. Member of thesis committee

I certify that I have read this thesis and that in my opinion it meets the academic and professional standard required by the University as a thesis for the degree of Master of Science.

Signed: ______Ron Cole, M.S. Member of thesis committee

ACKNOWLEDGMENTS

It is a rewarding feeling to reach a milestone such as completing your

Master’s Thesis. However, this moment would not have been possible without the love and support of numerous individuals.

I must thank my mother, Karen Francis, and my grandparents, Mr. & Mrs.

Williams. Thorough the years they have done so much for me. From the beginning they have always instilled education as a pillar to my existence. I could not be more grateful for their decision and could never thank them enough for the sacrifices that they have made on my behalf. The Saturday NOBCChe classes, additional educational supplements, and insight on the importance of education have not been in vain. Unsure of how I will ever repay them, I hope my achievements will continue to make them proud. Additionally, I must also thank the members of my family who have personally encouraged my efforts and supported me in my decisions. Thank you for the continued love and support.

Dr. Srikanth Beldona, Dr. Brian Miller, and Professor Ron Cole, are the members of my outstanding Thesis committee. There are many thanks to the efforts that they have put forth towards the completion of this thesis. Each member spent an extensive amount of time to make sure I was on track with the goals of this process.

They collectively understood what I hoped to attempt with this research and guided me in the appropriate direction. I couldn’t have selected a better committee.

I would also like to thank my past educators who took notice of me and encouraged my continued success. I sincerely thank Mr. James Bell, Mrs. Margaret

“Mickey” Harris, Mr. Ali Barimani, Dr. William Dadson, and Mr. Fidelis Omuyeh, for taking a personal and professional interest in my well-being.

A special thank you is reserved for the friends who have encouraged me throughout this process. To Ms. Caramba-Coker and Ms. Buchanan, I could not thank them enough for the support that they have shown. The “you can do it” and “get it done” speeches were always delivered at the most needed times. I am glad we were able to traverse this process together. When the time comes, I will provide the same support that they have provided for me. To Mr. Lenair-Webb, Mr. Padgett, and G.W., I thank you for your understanding and encouragement. When I needed someone to discuss the day’s events or find light hearted banter, someone was always available. When I needed a brief respite to complete the arduous task at hand, you each gave me the time I needed with great understanding. I thank you all for your part in the completion of my task.

Lastly, this endeavor was undertaken as a testament for the past, my present, and our future.

TABLE OF CONTENTS LIST OF TABLES ...... viii LIST OF FIGURES ...... ix Abstract ...... x

CHAPTER

1 INTRODUCTION ...... 1 1.1. Background/ Importance of Research ...... 1 1.2. Purpose of Study ...... 2 1.3. Research Questions ...... 4 1.4. Organization of the Paper ...... 5 1.5. Terms and Abbreviations ...... 6 1.6. Abbreviations and Acronyms ...... 8

CHAPTER 2 LITERATURE REVIEW ...... 9 2.1. Introduction ...... 9 2.2. Market Competitors and Competition ...... 10 2.3. Competitive Positioning ...... 11 2.4. Commoditization ...... 14 2.5. Channels of Distribution: Internet and Electronic Distribution ...... 17 2.6. Hotel-Consumer Relationships ...... 20 2.7. Consumer Quality Perceptions ...... 21 2.8. Marketing Strategies: Product Differentiation & Market Segmentation ...... 24 2.8.1. Product Differentiation ...... 25 2.8.2. Market Segmentation ...... 26 2.9. Creating Value Disciplines ...... 27 2.10. Operational Excellence ...... 29 2.11. Product/Service Leadership ...... 29

2.12. Customer Intimacy ...... 30 2.13. Conclusion ...... 31

CHAPTER 3 RESEARCH METHODS & DESIGN ...... 32 3.1. Introduction ...... 32 3.2. Research Model ...... 33 3.3. Research Constructs ...... 34 3.4. The Sample ...... 36 3.5. The Research Instrument ...... 37 3.6. Quantitative Data Collection ...... 38 3.7. Data Analysis ...... 39

CHAPTER 4 THE RESULTS ...... 40 4.1. Introduction ...... 40 4.2. Descriptive Statistics ...... 41 4.3. Descriptive Statistics of Property ...... 47 4.4. Research Constructs ...... 52 4.5. Construct Correlation ...... 57 4.6. Summary of Results ...... 61

CHAPTER 5 DISCUSSION AND CONCLUSIONS ...... 64 5.1. Conclusions ...... 64 5.2. Limitations ...... 69 5.3. Future Research Areas ...... 72

APPENDIX A ...... 73 APPENDIX B ...... 74 WORKS CITED ...... 80

vii

LIST OF TABLES

Table 1. Frequency of Respondents’ Gender 41 Table 2. Frequency of Respondents’ Age 42 Table 3. Frequency of Job Designations 44 Table 4. Frequency of Years in Industry 45 Table 5. Frequency of the Respondents’ Highest Education Level 46 Table 6. Frequency of Representative Hotel Types 47 Table 7. Frequency of Respondents’ Direct Employer 48 Table 8. Frequency of Hotel Segments 49 Table 9. Frequency of Hotel Locations 50 Table 10. State Locations of Properties 51 Table 11. Construct Reliability Alpha, Mean, and Standard Deviation 53 Table 12. Paired t-Test Statistics 1 59 Table 13. Paired t-Test Statistics 2 60

viii

LIST OF FIGURES Figure 1. Hotel Hierarchy of Consumer Needs 21 Figure 2. Maslow’s Hierarchy of Needs 22 Figure 3. Customer Value Triad 23 Figure 4. Strategies for Sustaining in a Competitive Environment 28 Figure 5. Research Key Constructs 33 Figure 6. The Identified Reliable Constructs 56 Figure 7. t-Test Pairing for Commoditization 61 Figure 8. t-Test Pairing for Value Disciplines 62

Abstract

The U.S. lodging industry is largely considered to be highly matured and intensely competitive to the extent that the lodging product itself is believed to be sliding down the path of commoditization. Commoditization as a phenomenon occurs when competing firms offer products and/or services that consumers deem as having limited differential attributes (Riemann, Schilke, & Thomas, 2009). Consumers and firms alike depend on price to indicate the differentiation between the offerings.

This study examines perceptions of lodging executives regarding commoditization as well as evaluating operational /strategic initiatives being undertaken to negate the effects of commoditization. Adapted from previous research by Riemann,

Schilke, and Thomas, this study examines the phenomenon based on the four dimensions of commoditization namely, product homogeneity, price sensitivity, switching cost, and industry stability. The value disciplines of operational excellence, product/service leadership, and customer intimacy have been determined as initiatives that seek to negate the effects of commoditization. The study further examines managerial perceptions’ on their firm’s implementation of these initiatives.

Findings show that high price sensitivity is the strongest driver of commoditization as perceived by lodging executives. This was closely followed by low switching costs for consumers and product homogeneity at a distant third. Interestingly, when it came to operational / strategic initiatives to negate the effects of commoditization, operational excellence (focuses on cost control practices) ranked the

highest. At a distant second stood customer intimacy which focuses on building greater customer loyalty and is more effective towards combating commoditization. This combined finding clearly indicates that firms seek to attribute the phenomenon of commoditization more on the consumer (price sensitivity and low switching costs) as opposed to firm related factors namely product homogeneity. Additionally, firms focus relatively more on operational excellence as opposed to reaching out the customer and leveraging service superiority as way of combating the phenomenon more directly. The findings serve as a pointer for industry to reprioritize, while simultaneously working towards differentiating their core offerings through greater innovation.

Keywords: Commoditization, Value, Product Homogeneity, Competitive Market

Environment, Lodging Competition, Hotel Commodity, Price Wars, Differentiation

Chapter 1

INTRODUCTION

1.1. Background/ Importance of Research

Having evolved from the nineteenth and twentieth centuries, the current United

States hotel/lodging industry has entered an exceedingly mature and competitive market environment (Bowie & Buttle, 2004, p. 86). Combinations of external and internal factors influence hotel/lodging firms as they strive for business success. Aside from a sometimes “sluggish economy” and an “overabundance of properties”, there also exists the cyclical shifts in the industry’s supply and demand relationship

(Culligan, 1990; Yavas & Babakus, 2005, p. 29). At a cyclical high, firms typically tend to add to the supply by building more properties, and these open when the economy begins its decline (Bowie & Buttle, 2004). This creates an overabundance of lodging supply that consumers are unable to match with their level of demand (Bowie

& Buttle, 2004). Consumers now have various options when selecting a lodging location to satisfy their accommodation needs. There are numerous competing hotel firms with their assortments of brands spread over many hotel market segments, and the alternative where potential consumers opt to stay with acquaintances (Culligan,

1990). These external factors place hoteliers in a position to make strategic plans that will further benefit their firm in response to the market environment and economic conditions.

As this industry continues to mature, one of the significant internal threats includes the homogenization of the core products and services offered by competing hotel firms (Riemann, Schilke, & Thomas, 2009). This phenomenon is known as commoditization and it significantly impacts the industry in many ways. (Riemann & al, 2009). Commoditization instigates price wars between firms and increases the competitive nature of the market environment. Evaluating and improving market strategy is a practice that firms utilize to combat the affects of this phenomenon. Hotel operational managers, who obtain the direct knowledge about the daily business procedures, influence the selected strategy combination based on their perceptions of the functioning firm. Accurate managerial perceptions support a firm in selecting and implementing organization practices, actions, and strategies that are expected to alleviate the threats in their competitive environment (Garrigos-Simon, Palacios-

Marques, and Narangajavana, 2007, p.36).

1.2. Purpose of Study

The purpose of this study is to conduct exploratory research that examines the hotel/lodging industry’s commoditization level from the perspective of lodging managers/executives. The research aims to identify the relative importance of commoditization dimensions as perceived by lodging managers/executives.

Additionally, the research is set to examine the value disciplines of operational excellence, product/service leadership, and customer intimacy strategies as they relate to the deterring commoditization within the industry. These disciplines are expected to

explore standards of service performance that hotel managers report they are utilizing to respond to the effects of a competitive market environment affected by the so-called

“commoditization phenomenon.”

It is intended that this research will make reasonable contributions to the hospitality literature by: (1) improving current knowledge about commoditization within the lodging industry, (2) adding to the knowledge of managerial perceptions about the competitive environment of the hotel industry, and (3) analyzing hotel business strategy in response to the threats and opportunities of commoditization.

1.3. Research Questions

After reviewing the existing literature about commoditization, it is determined that there is a lack of theoretical or empirical reports of commoditization knowledge as it directly pertains to the hotel/lodging industry. The existing literature explains the phenomena of commoditization but does not thoroughly express any benchmark practices that competing firms are successfully utilizing. In the current research several questions were identified as being important to this study. These questions include:

Q1. Do lodging professionals have distinguishable differences in their perceptions of commoditization?

Q2. Do hoteliers perceive their firms as implementing the highest level of operational procedures?

Q3. Do the lodging professionals perceive their firms as being in the forefront of product/service leadership by providing enhanced products and services to improve their guest’s quality of stay?

Q4. Do lodging professionals perceive their firm as providing a superior level of customized products and services to cater to the needs and requests of their individual guests?

1.4. Organization of the Paper The subsequent chapters of this document aim to explain the process that was taken to examine hotelier perceptions of commoditization and related constructs.

Chapter Two is the Literature Review and it compiles all of the found knowledge and literature on the topics of commoditization and the competitive market environment.

Chapter Three details the Methodology that was utilized and defines the research instrument and constructs that were tested. Chapter Four is reserved for a comprehensive presentation of the results from the data collection. Chapter Five is the final chapter and it details the discussion and conclusions of the entire research.

1.5. Terms and Abbreviations Commodity: A good that is easily imitated by competing firms. The good has limited attributes that distinguish it from being different from competing offerings. Typically the foundation for selection is based solely on price.

Service Commodities: An intangible homogenous activity that utilizes a tangible good

(core product), which firms conduct to meet the needs of a client/consumer (Pine &

Gilmore, 1999, p. 8). The ease for a firm to “imitate and improve on a competitor’s product [and service]” increases the competitiveness of the market environment in which they are sold (Riemann & et al., 2009, p. 1). Consumers often value the service commodity more than the goods used to complete the service (Pine & Gilmore, 1999).

Commoditization: The phenomenon where a product or service is imitated among various firms. It exists as the core products become homogenized and consumers become price-sensitive in defining their value (Riemann & al, 2009). The products and services are then involved in an intense “buyer/seller negotiation” (Murphy & Enis,

1986, p. 26). Firms impacted by commoditization are referred to as being in the

“commoditization trap”.

Core Products: “The core product delivers the fundamental functional benefits that the customer is seeking” (Bowie & Buttle, 2004, p. 116). In the hotel/lodging industry the combination of “a place to sleep” and sometimes food represent the core product offerings.

Differentiation: The attributes that consumers perceive as different and adding value to competing products or services; a function of consumer perceptions (Fischer, 1991).

The attributes can be “real or artificial”, “rational or irrational” and “implicit or explicit” (Trout & Rivkin, 2008, pp. 12-13 & 22-23). The attributes add memory markers when the consumer participates in buying decisions (Trout & Rivkin, 2008).

Operational Procedure: represents the variations in tasks that aid the hotel in delivering service.

Operational Excellence: “Describes a specific strategic approach to the production and delivery of products and services” (Treacy & Wiersema, 1993, p. 85). It pertains to the firm as they aim “to achieve efficiency and cost reduction in operations” (Riemann

& al, 2009).

Product/Service Leadership: The actions a firm participates in as they “strive to produce a continuous stream of state-of-the-art products and services” (Treacy &

Wiersema, 1993, p. 89). It relates to all aspects related to enhancing the core products and services offered to guests.

Customer Intimacy: Actions by a firm to “continually tailor and shape products and services to fit an increasingly fine definition of the customer” (Treacy & Wiersema,

1993).

1.6. Abbreviations and Acronyms

AH&LA: American Hotel & Lodging Association

HFTP: Hospitality Financial & Technology Professionals

HSMAI: hospitality Sales and Marketing Association International

Chapter 2

LITERATURE REVIEW 2.1. Introduction In the area of business and economics, a market is defined as an environment where consumers and producers engage in a relationship. The relationship allows consumers to express their needs and wants while the producers use their resources to supply the consumers more efficiently than their competitors (Bowie & Buttle, 2004).

The producer will make an effort to understand the consumers’ needs and to determine the ways their products or services can match those needs (Selnes & Johnson, 2004, p

118). The consumer will strive towards finding the firm which can fulfill their needs at the lowest cost (financially, emotionally, or physically) and greatest benefit to them

(Selnes & Johnson, 2004). As new competitors and consumers enter a given market several factors begin to influence the market’s characteristics. The lodging industry participates in a market, which is affected by numerous external factors. Some of the most prevalent include: firm competition, channels of product/service distribution, and changes in consumer demographics (Forsyth, 2009 & Bowie & Buttle, 2004). Firms that hope to remain active in the market will need to identify solutions that will

“defend against the forces of change in its industry” (Shenkman, 1992, p. xiii).

Instituting specific strategic market plans may be used to add a buffer to these factors and ideally contribute in their continued success.

2.2. Market Competitors and Competition

The hotel/lodging industry has since existed in an extremely competitive market environment. As the industry progresses it becomes even more “turbulent, chaotic, and rapidly changing” (Naumann, 1995, pg. 15). One of the main concerns of hotel management focuses on the market’s over saturation and maturation of hotel products and services. In terms of market saturation, every lodging property has a variety of competitors that compete in either macro- or micro-competition (Bowie &

Buttle, 2004). The macro-competition is related to all products or services that were developed for purchase using the same disposable income. In the lodging industry there are several hundred facilities located within the United States and abroad that offer accommodation for a given consumer (Bowie & Buttle, 2004). Additionally, these mass lodging markets are continuously being segmented into various business structures that represent the micro-competition (Bowie & Buttle, 2004 & Naumann,

1995). The micro-competition pertains to the lodging “units that compete directly with a similar product and similar price, and target the same customer in the same location”

(Bowie & Buttle, 2004, pg 95). Many lodging firms have established segmented service offerings that compete in various levels of the micro-competition.

David Bowie and Francis Buttle, authors of Hospitality Marketing, suggest that there are practically no substantial differences between core products that are offered by competitors in the same market segment. Each segment has a target group of customers and offer similar amenities within the same price range. It is further

suggested that a hotel service or product can be defined by distinguishing the core product from its tangible and extended attributes (Bowie & Buttle, 2004). In the lodging industry a firm’s core product is providing temporary accommodation. The tangible service products extend to the type of offerings related to “a bed, a meal, [and] a drink” (Bowie & Buttle, 2004, pg 102). The extended lodging attributes relate to the elements that enhance the tangible products (i.e. a pillow top for a bed or specialty meal and drink offering). Even though each competing facility offers the fundamental core products and tangible services, the extended attributes of these offerings vary between the numerous properties. By lodging facilities providing these fundamental service offerings in similar market segments, the business environment is initially competitive. As firms continue to strive towards excellency in their market segment and industry the level of competitiveness deepens.

The various competitive environments make it more difficult for firms to be successful within the hospitality industry. Ugar Yavas and Emin Babakus explain that hoteliers aiming for a successful business must be aware of their firm’s competitive positioning within the market environment (2005). It is further suggested by Porter that firms should continuously aim to increase and improve their positioning with various repositioning strategies (1980).

2.3. Competitive Positioning

A firm’s market positioning becomes competitive when it is a “distinctive and favorable position in the minds of target markets [when] compared to competitors”

(Bowie & Buttle, 2004, p. 103). The firms’ competitive positioning is important to its continued success (Brown & Ragsdale, 2002). Acquiring knowledge about the competitive environment is a tactic that can aid in the better understanding of the firm’s positioning. Understanding the target market and competitors’ positioning can also guide a firm into improving their own competitive standing. Porter suggests that hotel firms should highly consider their “strengths and weaknesses” and determine how they can apply them to the current market environment (Porter, 1980, p. 30).

Identifying weak areas in the market environment will allow firms to modify their current market strategies so they may reposition the firm as a new or improved competitor. Repositioning strategies aim to increase the value of the firms’ hotel product or service in comparison to their competitors (Yavas & Babakus, 2005). This opportunity to further propel themselves in the environment will come from objective or subjective repositioning (Bowie & Buttle, 2004). Objective repositioning refers to the improvement of tangible products or attributes of the hotel product/service. These strategies have “measurable and verifiable superiority on some predetermined ideal standard or standards” (Zeithaml, 1988, p. 4). Subjective repositioning includes the improvement of the intangible aspects of the firm. This level of repositioning is based on revisions to the perceived quality of service or brand characteristics. Repositioning is also expected to enhance the firm by allowing them to provide competitive products and services to a target market in greater demand for their offerings (Porter, 1980). By knowing their position in the environment, hoteliers will be better equipped to identify

and provide advantages that their competitors have yet to acquire (Yavas & Babakus,

2005).

Profitability in the competitive hotel/lodging industry relies on the very basic economic principle of supply and demand. In the lodging industry, the available supply is referred to as the market capacity and the market’s consumer demand is considered the market demand (Bowie & Buttle, 2004, p. 5). Market capacity can be determined from the combination of existing hotel facilities, “additions to the competitive hotel

[facility] supply”, and “the removal of rooms from the competitive supply” (Culligan,

1990, pg. 32). The industry’s market demand is defined as the numerous factors that influence the consumers’ need or interest in purchasing accommodation (Culligan,

1990). When the available lodging supply becomes overwhelmingly greater than the consumer demand a power shift will ensue. An imperfect competitive market results as hoteliers attempt to shift consumer demand towards their available room supply

(Smith, 1956). In this environment the determination of product and service valuation is shifted from the hotelier to the consumer. This phenomenon is considered commoditization.

According to research conducted by Riemann, Schilke, and Thomas, commoditization results where there is industry stability (2009). The stability permits consumers and competitors to further attribute to the commoditization phenomena.

Consumers become more aware of buying practices and their firm and brand loyalty begin to diminish (Blois, 2005, p. 51). New competitors are able to enter the market as

the environment has limited barriers to entry (Blois, 2005). In the lodging industry, commoditization is described as an occurrence when hotel properties offer uniformity in “underlying concepts that dominate their physical design and operational procedures” (Gilmore & Pine, 2002, p.88). As the hotel product and services further become homogeneous, consumers increase in their price-sensitivity to the service offerings (Riemann & al, 2009). Consumers begin to perceive that hotel products and services are the same except for differences that add minimal value in determining differentiation. Consumer purchases of these products and services become increasingly based on price (Gilmore & Pine, 2002; Riemann, et al., 2009). Price becomes the attribute that becomes “an indicator and a measure of quality, particularly in the absence of other cues” (Bowie & Buttle, 2004, p. 150). Without intervention, the firm will continue to provide the product or service based on consumer price demands.

Consumer dependability on price indicators begins to gradually deteriorate the switching costs that they would forfeit to utilize the products and services of a competing lodging firm (Riemann et al, 2009). This type of consumer-producer relationship has been identified as a firm having entered the Commoditization Trap

(Trout & Rivkin, 2008).

2.4. Commoditization

Riemann, Schilke, and Thomas have concluded that the commoditization phenomenon is multi-dimensional. It has been defined by four dimensions which determine the severity of the commoditization that is affecting a given industry. These

dimensions include product homogeneity, price sensitivity, switching cost, and industry stability.

2.4.1. Product Homogeneity

The product homogeneity dimension refers to the given product or service having been deemed a commodity. In comparison to competing firm offerings, the product or service is perceived as being similar in quality and performance (Riemann,

Schilke, & Thomas, 2009). This influences consumers to believe the offerings are interchangeable amongst competing firms (Riemann, Schilke, & Thomas, 2009, p. 3).

2.4.2. Price Sensitivity

The dimension for price sensitivity is the result of consumers searching for the

“best price for a standard product [and service] on the assumption that the products and services are equivalent in quality and function” (Riemann, Schilke, & Thomas, 2009, p. 3). Consumers’ knowledge or awareness of substitute products further influences the environment’s sensitivity (Heil & Helsen, 2001). In a price sensitive environment, consumers will purchase a given brand’s offering based on the product or services’ price fluctuation amongst competing firms (Tellis, 1988). Firms will participate in

“significant price fluctuations” to maintain or attract consumers to their offerings

(Riemann, Schilke, & Thomas, 2009, p. 3). This often leads to price wars where firms engage in a series of “successive moves and countermoves in an attempt to gain an advantage or to resist any advantage gained” by competing firms (Heil & Helsen,

2001, p. 2). Starkov and Price’s (2007) industry insight suggests that the introduction of the Internet and third-party online-intermediaries were direct influences of the

“unprecedented price transparency and price-driven marketing” (p. 3) that persuade the industry. The combination of these attributes continue to affect the levels of commoditization that may presently engage a hotel firm.

2.4.3. Switching Cost

The dimension for switching cost represents the amount of risk that is associated with the consumer switching between the offerings of competing brands.

There exist monetary and non-monetary risks which the consumer must consider

(Wang, 2010). These risks include the costs associated with: “economic risk, evaluation, learning, set-up, benefit loss, monetary loss, personal relationship loss, and brand relationship loss” (Riemann, Schilke, & Thomas, 2009, p. 3). As consumers perceive an increased level of switching cost, they will be less likely to switch between competing offerings (Wang, 2010). The risk associated with switching will “outweigh the perceived benefits” of utilizing a competing offering (Wang, 2010, p. 255).

Research by Wang further suggests that a consumer’s valuation of a product and the level of switching costs will significantly influence a consumer’s faithfulness to a given brand (2010).

2.4.4. Industry Stability

The industry stability dimension reflects the continued unchanged competition within a highly competitive environment. Commoditization exists where the market environment’s level of competitiveness remains stable (Riemann & et al., 2009).

2.5. Channels of Distribution: Internet and Electronic Distribution

The Internet provided a greater information medium for hoteliers and a quick access resource for consumers. Hoteliers were able to present accurate and readily available information about their property. The consumers were now able to independently access this information and conveniently compare the qualities of one property to another. As a “marketing communication medium”, the Internet would “kill distance, homogenize time, and make location irrelevant” in the information search and

delivery process (Pitt, Berthon, & Berthon, 1999, p. 20). This greater level of information sharing led the way for hoteliers to increase their marketing strategies and for consumers to make informed decisions when attempting to select a hotel property.

The Internet allowed consumers to learn of the various properties that extended their existing knowledge. Years later the Internet provided a medium for electronic distribution systems and third-party online-intermediaries. These distribution strategies gave hoteliers a greater opportunity to promote and sell their inventory “with short lead times and the potential [for] immediate nonrefundable payments” (Kang, Brewer, &

Baloglu, 2007, p. 38). The online-intermediaries were able to provide the consumer with “the right quantities of the right product or service available at the right place, at the right time” (Pitt et al., 1999, p. 19). They helped to reduce the uncertainty between the producers of lodging products and services and the potential lodging consumer.

Initially the producer didn’t know of the consumer’s needs that expanded beyond the core product offerings. Likewise, the consumers were unknowing to all of the needs, which the producer could provide (Pitt et al., 1999).

With electronic distribution, consumers were granted the ability to search a large quantity of hotel products and services to find a selection that was appropriate

(Pitt et al. 1999). According to research by Selnes and Johnson, this newly enhanced

“exchange relationship” would better connect a consumer’s needs with a supplier’s resources and offerings (2004, p 118). However, this also began the shift towards unprecedented price transparency (Starkov, 2007). The online intermediaries facilitated

consumer desires for more efficient searching. They were now able to view the property information of multiple lodging facilities. The consumer could then conduct rate parity of the core offerings between comparable hotels and single property rooms

(Starkov, 2007; Selnes & Johnson, 2007). If the consumer researched a particular quality of hotel room, often the consumer’s only discriminating attribute would be the rate parity (McGuire, 2009).

2.6. Hotel-Consumer Relationships

Hoteliers began to see a need for offering adjusted room rates in an attempt to stay competitive. They sought to develop better customer relationships by utilizing various differentiation strategies. One strategy was to change the existing and potential customer’s perceptions about the given hotel product or service. Adjusting room rates gave the perception of property value differentiation. A considerable pricing war has existed between competing hoteliers and third-party intermediaries. This price war has further influenced consumers commoditizing hotel services. Essentially, commoditization results from the consumer having a lesser threshold in establishing differentiation between hotel choices. It is believed that the consumer “can’t or won’t understand the difference and value” presented between hotel firms (Capelin, 2005).

More importantly, participating in a price competition as a strategic advantage “is an almost certain way to shorten the life” of a company (Zetlin, 1994, p. 75). Shugan and

Jeuland explain that the role of the channel distribution must be better understood so hoteliers can recognize the pricing decisions of competitors and consumers (1988, pg.

236).

2.7. Consumer Quality Perceptions

Hotel firms have the business objective of utilizing core products to provide five foundational needs to their guests. Conley and Friedenwald-Fishman describe a comfortable and clean bed, a quiet and safe room, responsive staff service, feeling like a VIP, and identity refreshment as the characteristics that guests expect from a hotel firm (2006, p. 62). These expectations fulfill the guests’ needs for self-actualization, esteem, social/belonging, safety, and physiological desires. Each of these needs have been derived from psychologist Abraham Maslow’s hierarchy of humanistic needs

(Conley & Friedenwald-Fishman, 2006, p. 61).

Figure 1. Hotel Hierarchy of Consumer Needs From [Adapted from] Marketing that matters: 10 practices to profit your change business and change the world (p. 62), by C. Conley, 2006, San Francisco: Berrett Koehler.

Figure 2. Maslow’s Hierarchy of Needs

From [Adapted from] Marketing that matters: 10 practices to profit your change business and change the world (p. 61), by C. Conley, 2006, San Francisco: Berrett Koehler.

It would be expected that lodging facilities having met these needs would garner higher value and higher quality consumer perceptions of their product and/or service offerings. In contrary, hotel facilities must first establish what their consumers consider when determining hotel value (Naumann, 1995). Zeithmal suggests that hotel firms need to look towards adjusting the consumers’ “judgment about a product’s overall excellence or superiority” oppose to relinquishing to lower room rates (1988, p.

4). Naumann suggests that businesses should focus on maximizing their product and service offerings’ value in attempts to improve their consumer’s perceived differentiation of the offering (1995). It is further suggested that business operations should include reevaluating and applying strategies that will enhance management styles and business structures (Naumann, 1995). McGuire suggests that hoteliers can combat commoditization by maintaining service levels and brand focus (2009). The

Customer Value Triad presents product and service quality as the drivers to consumer value-based pricing (Naumann, 1995, pg 17).

Figure 3. Customer Value Triad From [Adapted from] Creating Customer Value: The Path to Sustainable Competitive Advantage (p. 17), by E. Naumann, 1995, Boise, ID: Thomas Executive Press.

Improvements to a firm’s product and service quality are necessary to influence consumers in selecting lodgining options based on value oppose to price

(Naumann, 1995). Consumers of a commoditized market will eventually consider a firm’s dedication to customer focus as the most important factor for determining if a given service should be selected (Issacs, 2007). This presents hoteliers with a great challenge and even greater opportunity to satisfy the demands of their consumers

(Nykiel, 2007). Since lodging facilities require a level of quality credence, consumers often have varied levels of perceived hotel facility value.

2.8. Marketing Strategies: Product Differentiation & Market Segmentation

Product differentiation and market segmentation have been considered managerial strategies that have been used to combat the affects of a competitive market

(Dickson & Ginter, 1987). The strategies are enacted to create equilibrium where the market demand is closer to the available market supply (Smith, 1956). These strategies have been viewed as firms attempting to “change the consumer’s ideal point on an attribute, to a location nearer to that of [their] offering” (Dickson & Ginter, 1987).

Smith suggests that product differentiation is utilized by firms attempting to secure their position in the market (1956). Whereas market segmentation, it is used to access a greater share of the market (Smith, 1956). Fischer (1991) concludes that firms should aim to develop market strategies that can preserve their products and services from competing firms’ imitation or superiority.

2.8.1. Product Differentiation

Product differentiation is a concept that is used to improve the positioning strategy of a given firm (Bowie & Buttle, 2004). It has been considered one of “the most important strategic and tactical activities in which companies must constantly engage” (Trout & Rivkin, 2008, p. 25). Developing differentiation strategies help a firm to gain competitive advantage by enhancing or promoting quality which competitor offerings are perceived to be without (Bowie & Buttle, 2004). It creates competitive barriers that aid in establishing and maintaining consumer loyalty by deferring brand switching (Porter, 1980; Fisher, 1991). Dickson and Ginter (1987) establish that differentiation promotes qualities which are important to the consumer.

Therefore, the products and services should be differentiated according to consumers’ needs and expectations (Trout & Rivkin, 2008). The slight modifications to existing firm offerings are to enhance product or services without adding significant effects to their production costs (Shugan & Jeuland, 1988). These differentiated qualities can be real or artificial (Dickson & Ginter, 1987). Dickson and Ginter refer to artificial differences as pseudo-differentiation (1987). To each consumer there exist varying qualities, which they personally perceive as establishing difference in the core hotel products or services of competing firms. Brown and Ragsdale suggested that the perceived quality becomes a function of “satisfaction and value” that consumers derive from tangible products or services of the firm (2002, p. 335).

There are several factors that can aid in the differentiation of a hotel service or product. Three of these factors include: (1) variations in the production of the service or product, (2) utilizing superior resources to produce the service or product, and (3) laggard competition (Smith, 1956). An outcome of effective product or service differentiation is “a reduction in cross-price elasticity of demand” (Fischer, 1991). This is when the consumer becomes less willing to accept switching costs if they were to switch to a competing firm (Fischer, 1991). According to Fischer, hoteliers are then able to “alter the price/quantity relationship and increase profitability” (1991, p. 20).

2.8.2. Market Segmentation

Hotel consumers are varied in a number of aspects. Their respective differences often provide a challenge for firms trying to meet and exceed consumer product/service expectations. Smith (1956) defines market segmentation as a competition defense mechanism in response to differing consumer demand. It allows a firm to divide a heterogeneous market of products and services into smaller homogenous units (Smith, 1956). The segment identifies existing and potential consumers and aligns them with the products and services that may satisfy a greater number of their specific needs (Smith, 1956 & Forsyth, 2009). An industry with a segmented market allows for the examination of the intrinsic and extrinsic factors that can influence the consumer’s decision making in reference to the given product or service. Implementing market segmentation strategies are expected to allow the firm to better target their consumers.

2.9. Creating Value Disciplines

To combat the effects of a competitive market environment, Treacy and

Wiersema suggest three value disciplines which firms should focus their operation

(1995). The disciplines, Operational Excellence, Product/Service Leadership, and

Customer Intimacy, have been identified as adding valuable attributes to the perceptions of their consumers (Treacy & Wiersema, 1995). Porter echoes these value disciplines but refers to them as Generic Competitive Strategies (1980). He suggests that firms implementing these strategies will need to utilize “total commitment and organizational arrangement” if they expect to see a favorable outcome (Porter, 1980, p.

35). The value disciplines aid the firms by helping them to focus their plans and decisions regarding the direction of the firm (Treacy & Wiersema, 1995).

Each discipline is intended for a strategic target and provides a strategic advantage. Operational Excellence proves to be a planning strategy that promotes cost savings throughout the industry for the consumer and firm. Product/Service Leadership increases the consumer’s perceived differentiation among competing offerings. This planning strategy also affects the entire industry. The last discipline, Customer

Intimacy, promotes a greater perception of offering differentiation and cost savings.

Unlike the former disciplines, its strategic target is localized to its given market segment. Any firm existing in a competitive market environment is encouraged to

“develop its strategy in at least one” of the disciplines (Porter, 1980, p. 41).

Figure 4. Strategies for Sustaining in a Competitive Environment From [Adapted from] Competitive Strategy (p. 39), by M. Porter, 1980, Boise, ID: Thomas Executive Press.

2.10. Operational Excellence Operational Excellence pertains to the firm’s ability to provide “middle-of-the- market products at the best price with the least inconvenience” to the consumer

(Treacy & Wiersema, 1995, p. xii). A firm focusing on this discipline will utilize a

“cost reduction in operations” while still providing reliable products and services at a competitive price (Riemann & et al, 2009, p. 4). The firm’s managers must pay close attention to cost controls if they seek to achieve an optimized business process

(Riemann & et al, 2009; Porter, 1980). A firm utilizing lower costing operational procedures will yield greater returns when compared to their competitors (Porter,

1980).

2.11. Product/Service Leadership

Product/Service Leadership references how the firm strives to offer the best available product or service (Treacy & Wiersema, 1995). This value discipline relates to the differentiation strategies that the firm may implement. The offered product or service may exceed competing offerings by “design, technology, features, customer service,” or other complex element (Porter, 1980, p. 36). Strategies focused around product/service leadership allow the firm to narrow their business focus to providing the best available offerings to improve their leadership position (Treacy & Wiersema,

1995). A lodging firm utilizing enhanced products and services is further attempting to improve the consumer’s quality of stay (Riemann & et al, 2009). This value discipline is expected to yield “above-average returns” as it encourages consumer “brand loyalty”

and a lower threshold for price sensitivity (Porter, 1980, p.38). The firm develops a competitive advantage by being at the forefront of product or service innovation

(Treacy & Wiersema, 1995).

2.12. Customer Intimacy Customer Intimacy references the firm’s ability to provide customizable products and services that cater to the needs and requests of their individual guests

(Riemann & et al, 2009). This value discipline is focused on “serving a particular target [market] very well” (Porter, 1980, p. 38). The firm strategically works towards providing a consumer solution oppose to a service (Treacy & Wiersema, 1995).

Establishing and maintaining intimate consumer relationships is important to this discipline (Treacy & Wiersema, 1995). The firm recognizes the consumers’ “lifetime value” and attempts to establish lasting consumer loyalty (Treacy & Wiersema, 1995, p. 41). The market strategies developed around this discipline aim to provide products and services that meet or exceed the specific needs of the consumer. McGuire suggests that firms should strive towards these strategies as they aid the consumer in understanding and differentiating the uniqueness between competing firms (2009).

2.13. Conclusion The competitiveness of the lodging industry has created several challenges for hoteliers striving for continued success. As the industry continues to mature, there are numerous obstacles presented by competing firms and consumers that aggressively influence the market environment. Competing firms continuously increase the competitiveness of market competition by establishing new properties, developing new market segments, and employing marketing tactics that influence the way their competitors respond. While the consumers, they are becoming more aware of the various lodging properties available for their selection. This allows them to become more selective when opting for a property to fulfill their lodging needs.

The cyclical shifts of property supply and consumer demand have been contributors to the level of commoditization affecting the industry. To minimize the effects of a commoditized competitive market, three value disciplines have been identified as providing strategic advantage. Figure 5 presents the four dimensions of commoditization and three value disciplines which lodging professionals should consider when competing in a commoditized competitive market.

Chapter 3

RESEARCH METHODS & DESIGN

3.1. Introduction This study was undertaken to further the understanding of the level of commoditization in the hotel/lodging industry. Unlike previous research, this study examined commoditization based on the perceptions of front line managers. The research is to identify the factors that managers most concern themselves as they strive for optimum profits and performance. The results of this study provide hoteliers a tool in determining benchmarks as to how their firm can avoid the “commoditization trap”.

3.2. Research Model After a review of the existing literature, it was determined that commoditization is the result of several external factors that affect a given market environment. Firms that manage the overall intensity of these factors have continued their business operation within their industry. This research sets to examine four multi-dimensions of commoditization (product homogeneity, price sensitivity, switching costs, and industry stability) based on managerial perceptions of the market environment. It further observes how the managers are utilizing value disciplines (operational excellence, product/service leadership, and customer intimacy) that have been determined to offer barriers to the industry’s competitive effects. This research model is of an exploratory nature and seeks to gain an understanding about the current market environment of the lodging industry.

Product Homogenity

Price Sensitvity Commoditization Switching Cost

Operational Excellence Industry Key Constructs Stability Product/Service Leadership

Customer Intimacy

Figure 5. Research Key Constructs

3.3. Research Constructs

There were several key constructs that this research addressed in the realm of the lodging industry. The initial construct was to determine hotel managers’ perceptions of commoditization in the market environment. The research focused on the dimensions of product homogeneity, price sensitivity, switching costs, and industry stability as addressing commoditization. The subsequent constructs included the value discipline of operational excellence, product/service leadership, and customer intimacy. Brief explanations of the key constructs are as follows:

 Industry Commoditization – Measuring the perceptions of the effects of

commoditization in the lodging industry.

Product Homogeneity – Identifying the level of perceived similarity

between competing firms’ products and services.

Price Sensitivity – Interpreting consumer and competitor responsiveness

to the industry’s pricing of products and services.

Switching Cost – Identifying the level of the consumer’s risk in choosing

product and service offerings between competing firms.

Industry Stability – Interpreting the competitiveness of the industry and

competitors engaging in counter activity.

 Operational Excellence – Measuring the perceptions of a firm’s capacity to

provide reliable products and services at competitive prices (Treacy &

Wiersema, 1993).

 Product/Service Leadership – Examining a firm’s perception in their offering

of enhanced products and services to improve their guest’s experience.

 Customer Intimacy – Examining firm perceptions in their ability to provide

customizable products and services to cater to the needs and requests of their

individual guests.

3.4. The Sample The population of the study comprises hotel executives and managers in the

United States.. To identify the potential research participants, members of several prominent hospitality organizations were contacted. The sample included active members (as of December 2009) of the American Hotel & Lodging Association

(AH&LA), the Hospitality Sales and Marketing International (HSMAI), and

Hospitality Financial and Technology Professionals (HFTP) organizations. From

HSMAI and HFTP, only the members who indicated that they were current general managers in their member profiles were included.

3.5. The Research Instrument

To complete this analysis, it was determined that a well formulated questionnaire would serve as the research instrument. The questionnaire was adapted from previous research that was conducted by Riemann, Schilke, and Thomas in the area of cross-industry commoditization levels. There existed two versions of the questionnaire, an electronic copy and a paper copy. A survey invitation and electronic copy were emailed to all of the members of the sample. The paper copy was personally delivered by the author to several of the members whose properties were in the

Northern Delaware and Southeastern Pennsylvania area.

The questionnaire was sectioned into three specific areas: property details, research data, and respondent demographics. The property details section included several questions that would aid in segmenting the results based on similar typed hotel firms. The majority of the questionnaire was reserved for the research data section.

This section contained statements that would aid in the reliability and validity of the constructs: commoditization level, operational excellency, product/service leadership, and customer intimacy. Each statement allowed for a response based on a 7-point

Likert scale (a copy of the questionnaire can be found in the Appendix). The remaining section of the questionnaire was for respondent demographics. These responses were expected to aid in analyzing if the perceptions had any relation to the type of respondents.

3.6. Quantitative Data Collection

The research instrument was initially dispersed using an online survey & questionnaire software. Once the final instrument was composed it was then input into the survey software. From the AH&LA contact list of 1947 members, a potential 692 survey participants were identified. These participants were selected because their properties were located in the United States and they had an available email address.

Using the survey & questionnaire software, an invitation email was sent on February 3,

2010. The invitation asked the members to participate in a survey of hotel lodging professionals to gain understanding on the competitiveness of the hotel product (a copy of the survey invitation can be found in the Appendix). Once the first set of invitations had been distributed, some of the firms responded with notices that they could not or would not participate in the study. With those firms removed, on February 8, 2010 a survey reminder was sent to the remaining contacts. A number of invites were responded by notices that the intended participant was no longer a member of the firm.

This reduced the potential number of participants to 649. Members of HSMAI and

HFTP were added to the potential participation list. The participant list increased by 59 and 25 more potential participants respectively. The total number of distributed surveys was 733. The final survey reminder was sent February 17, 2010 to further encourage the AHLA members to participate in the study. By March 17, 2010, the data collection was complete. A total of 85 responses were received from the electronic and hard-copy surveys. Of the responses, 16 electronic records were removed due to

the respondent not answering any of the research data questions. The overall response rate for the study was therefore 11.6%.

3.7. Data Analysis

It was determined that SPSS statistical software would be used to analyze the data. The software would more efficiently conclude the response frequency rate for each variable and questionnaire construct. SPSS was would also be used to conduct a paired T-test for Independent Samples to identify differences in dimensions of commoditization as well as value disciplines. A significant difference will be identified by tested constructs producing a probability value that is less than 0.05 (p < 0.05).

This would indicate that the perception of lodging managers differed within the context of the differences tested. Alternatively, if the tested differences have a probability value that is greater than 0.05 (p > 0.05), then this will indicate that lodging managers did not perceive any significant difference between the constructs in context.

Chapter 4

THE RESULTS

4.1. Introduction

This study was undertaken to further the understanding of the level of commoditization in the lodging industry. Unlike previous research, this study seeks to examine commoditization based on the perceptions of front line managers. The research is aimed at highlighting the factors that managers are most concerned as they strive for optimum profits and performance. Hoteliers are expected to be able to use this study as a tool in determining benchmarks as to how their firm can avoid the

“commoditization trap”.

4.2. Descriptive Statistics After analyzing the data, the survey instrument’s respondent demographics section generated an overall representation of the respondents. The survey instrument measured five demographic variables including: gender, age, job designation, number of years in the industry, and highest education level. Table 1 presents the frequency of the male and female respondents. Of the total 69 survey participants, 87% indicated their gender while 13.0% did not respond. The majority of the respondents, 78.3%, were male and the remaining, 21.7%, were female.

Table 1. Frequency of Respondents’ Gender

Frequency Percent Valid Percent

Male 47 68.1 78.3

Female 13 18.8 21.7

Total 60 87.0 100.0

No Response 9 13.0

Total 69 100.0

The respondents were also asked to indicate their age range. The survey instrument presented them with seven ranges for them to select between. Table 2 presents the frequency of the age groups having responded to the survey invitation. Of the total 67 survey participants, 86.6 % indicated their age range while 13.4% did not

respond. The measurements, by ascending age range, display the following frequencies: 3.4% of the respondents indicated 18-25 years old, 10.3% indicated 26-33 years old, 22.4% indicated 34-41 years old, 20.7% indicated 42-49 years old, 22.4% indicated 50-57 years old, and 20.7% indicated they were 58 or more years older. The frequency shows that the majority of the respondents were from the age range 50 – 57 years old.

Table 2. Frequency of Respondents’ Age

Frequency Percent Valid Percent

18 – 25 2 2.9 3.3

26 - 33 6 8.7 10.0

34 - 41 13 18.8 21.7

42 - 49 12 17.4 20.0

50 - 57 15 21.7 25.0

> 58 12 17.4 20.0

Total 60 87.0 100.0

No Response 9 13.0

Total 69 100.0

Table 3 indicates the job designations which the respondents input. The respondents were able to type or write their designation based on the format of the survey which they participated. From the 69 total respondents, 82.6% indicated their designation while 17.4% did not. The research sought to attract participants who were of general manager designation. However, a multitude of designees other than general manager also responded. Of the 69 total respondents, 63.2 percent were not of general manager designation. This can be attributed to general managers directing someone else to complete the survey on their behalf.

The indicated job designations were analyzed and then grouped by similar functions. The finalized designation groups included: Owner; Vice President;

President/CEO; General Manager, Manager, Senior Manager; Managing

Partner/Company Principal; HR Administrator; Director of Market Strategy/Sales;

Vice President of Operations, Director of Operations; Vice President of Development; and Controller. The percentages for each group included: 7% indicated Owner, 14% indicated Vice President, 7.0% indicated President/CEO, 36.8% indicated General

Manager et al., 3.5% indicated Managing Partner/Company Principal, 1.8% indicating

Human Resource Administrator, 5.3% indicating Director of Market Strategy or Sales,

19.3% indicating vice President or Director of Operations, 1.8% indicating Vice

President of Development, and 3.5% indicating Controller. The majority of the respondents had job designations as some form of management. The second largest designation group was for those indicating positions in hotel operations.

Table 3. Frequency of Job Designations

Frequency Percent Valid Percent

Owner 4 5.8 7.0

Vice President 8 11.6 14.0

President/CEO 4 5.8 7.0

General Manager, Manager, 21 30.4 36.8 Senior Manager

Managing Partner/Company 2 2.9 3.5 Principal

HR Administrator 1 1.4 1.8

Director of Market 3 4.3 5.3 Strategy/Sales

Vice President/Director of 11 15.9 19.3 Operations

Vice President of 1 1.4 1.8 Development

Controller 2 2.9 3.5

Total 57 82.6 100.0

No Response 12 17.4

Total 69 100.0

The next respondent demographic was to determine the number of years that the respondent had been in the industry. Table 4 displays the frequency of the respondents’ years of experience in the industry. From the 69 total respondents, 82.6% indicated their total number of years in the industry. The remaining 15.9% did not respond. The highest frequency was 55.2% which was indicated for respondents having at least twenty years experience in the industry. The second highest frequency was for the indication of sixteen to twenty years of industry experience. The data emphasizes that the majority of the respondents were seasoned professionals having over ten years of industry experience.

Table 4. Frequency of Years in Industry

Valid Frequency Percent Percent < = 5 4 5.8 6.9 6 - 10 7 10.1 12.1 11 - 15 6 8.7 10.3 16 - 20 9 13.0 15.5 > = 20 32 46.4 55.2 Total 58 84.1 100.0 No Response 11 15.9

Total 69 100.0

The last construct for the respondent demographic section was to determine the highest education level that the respondents had received. Table 5 displays the frequencies for the respondents’ education levels. From the 69 total respondents, 87%

indicated their education level while 13% did not. The survey instrument listed three education options: High School or Less, Bachelor’s Degree, and Post Graduate. For the option “High School or Less”, 10.4% indicated that this was their highest education level. The “Bachelor’s Degree” option was indicated by 55.2% of the respondents. The remaining 20.9% indicated “Post Graduate” as their highest level of education. The majority of the respondents obtained Bachelor’s Degrees as their highest level of education.

Table 5. Frequency of the Respondents’ Highest Education Level

Frequency Percent Valid Percent

High School or 7 10.1 11.7 Less

Bachelor’s Degree 38 55.1 63.3

Post Graduate 15 21.7 25.0

Total 60 87.0 100.0

No Response 9 13.0

Total 69 100.0

4.3. Descriptive Statistics of Property Descriptive statistics about the respondents’ properties were also collected.

This information was collected from the third section of the research tool. The research tool asked questions about the hotel type, ownership, segment, and location. The following tables present the information as indicated by the respondents. The frequency for each representative hotel type is presented in Table 6. There were 69 respondents and the majority, 53.6 percent, indicated their property was franchised.

The second largest frequency was 34.8 percent which was indicated for independently owned properties. The least included hotel type was company-owned which had an

11.6 percent response.

Table 6. Frequency of Representative Hotel Types

Frequency Percent Independent 24 34.8 Franchised 37 53.6 Company - Owned 8 11.6 Total 69 100.0 0 0 No Response 69 100.0 Total

The respondents were also asked to indicate their direct employer; Table 7 indicates their response frequency. From the 69 respondents, 62.3% indicated that they were employed by the owner of the property. The remaining respondents, 37.7%, were employed by the property’s management company.

Table 7. Frequency of Respondents’ Direct Employer

Frequency Percent Owner 43 62.3 26 37.7 Management Company

Total 69 100.0 0 0 No Response 69 100.0 Total

The respondents also indicated the hotel segment which they were representing.

The research tool had four options for the respondents to choose including: economy, mid-scale, first class, and boutique. The segment choices were adapted from the terms utilized by Smith Travel Research. Table 8 displays the frequencies for the indicated hotel segments. The greatest frequency was 47.8% and it indicated the mid-scale properties. The second largest indicated frequency was 29.0% for the first class segment. Economy and Boutique were equally indicated by 11.0% of the respondents.

Table 8. Frequency of Hotel Segments

Frequency Percent Economy 8 11.6 Mid-Scale 33 47.8 First Class 20 29.0 Boutique 8 11.6 Total 69 100.0 No Response 0 0

Total 69 100.0

The next descriptive variable to reference the property was for the indication of the property’s location type. There were five locations, highway, suburban, resort, urban, and airport to choose. Table 9 indicates the frequencies for each property location type. The most frequently indicated locations were “suburban” and “urban”.

Both locations yield a 29.0 % response rate. “Resort” was the second largest frequency with a value of 21.7 percent. The location “highway” was indicated by 17.4 percent.

The last location was for airport but the 2.9 percent response was omitted as it negatively skewed the data.

Table 9. Frequency of Hotel Locations

Frequency Percent Highway 12 17.4 Suburban 20 29.0 Resort 15 21.7 Urban 20 29.0 Total 67 97.1 No Response 2 2.9

Total 69 100.0

The final descriptive property variable was for the state location. Table 10 indicates the states and frequencies in which the respondent’s properties were located.

Twenty-two state locations were represented by the respondents. Delaware,

Pennsylvania, California, and New York had the three highest indications per state.

Delaware and Pennsylvania response rates of 13.0 % and 11.6% respectively.

California and New York were both indicated by 8.7 % of the respondents. Texas and

Florida were indicated by 5.8% of the respondents. The District of Columbia,

Michigan, and South Dakota all had response rates of 2.9 %. The remaining states of

Colorado, Connecticut, Illinois, Maryland, Maine, Minnesota, Missouri, Nevada, Ohio,

Virginia, Washington, and Wisconsin all yield a 1.4% response rate. The remaining

15.9% of respondents did not indicate the state in which their property was located.

Table 10. State Locations of Properties

Frequency Percent CA 6 8.7 CO 1 1.4 CT 1 1.4 DC 2 2.9 DE 9 13.0 FL 4 5.8 IL 1 1.4 MA 3 4.3 MD 1 1.4 ME 1 1.4 MI 2 2.9 MN 1 1.4 MO 1 1.4 NV 1 1.4 NY 6 8.7 OH 1 1.4 PA 8 11.6 SD 2 2.9 TX 4 5.8 VA 1 1.4 WA 1 1.4 WI 1 1.4 Total 58 84.1 No Response 11 15.9 Total 69 100.0

4.4. Research Constructs To effectively analyze the data it was necessary to test the “internal consistency reliability” of the research tool’s constructs (Leech, Barrett, & Morgan, 2005, p. 63).

The reliability for each of the latent constructs’ (Commoditization, Operational

Excellence, Product/Service Leadership, and Customer Intimacy) indicators were tested using Cronbach's coefficient alpha. To test the reliability of the commoditization construct, its multi-dimensions of product homogeneity, price sensitivity, switching cost, and industry stability were also tested using Cronbach’s coefficient alpha. The Cronbach’s coefficient alpha was selected to test and indicate the construct reliability by measuring the average correlation between the construct indicator responses (Leech et al, 2005). Each response was structured by a 7-point

Likert scale with measurements ranging from 1 which equaled “Strongly Disagree” to

7 which equaled “Strongly Agree”. The mean of the Likert responses provided a correlation alpha value that was then compared to a selected reliable cutoff value.

For this research the minimum cut-off for reliability was an alpha value of 0.60.

A cut-off value between the range of 0.60 and 0.75 is considered within the lower limit of research acceptability (Garson, 2008). The 0.60 value was accepted as indicating correlation due to the exploratory nature of this research (Garson, 2008). Constructs with a Cronbach’s alpha value equal to or greater than 0.60 were included in the result summary. The dimension sets were analyzed in the order of (1) dimensions of commoditization, (2) operational excellence, (3) product/service leadership, and (4)

customer intimacy. The Cronbach’s coefficient alpha, mean, and standard deviation for

each construct were compiled into Table 11.

Table 11. Construct Reliability Alpha, Mean, and Standard Deviation

Indicator Reliability Mean SD Factor Alpha Product Most hotel brands have no intrinsic 3.29 2.04 Homogeneity differences. Hotel product offerings are highly 4.44 1.76 standardized. 0.89 Hotel service standards are quite identical 3.55 1.93 (homogenous). Most hotel brands are identical in quality and 2.97 1.79 performance. Price Sensitivity Most guests check prices even when it 6.07 1.24 comes to lower tier hotel brands. Guests buy the lowest priced hotel stays 0.68 4.84 1.65 that will suit their needs. Guests rely heavily on price when it comes to 5.10 1.55 choosing a hotel to stay. Switching Cost The guests’ costs for switching to another 4.96 1.60 hotel brand are low.1 0.48 The process of switching to a new hotel brand 5.12 1.68 is quick and easy for the guest. Industry Stability There are no frequent changes in guest 4.01 1.60 preferences. There are no frequent changes in service 3.78 1.70 levels by hotel brands. 0.51 Technology changes are slow and predictable. 3.65 1.60

Brand obsolescence is low, meaning that 4.78 1.53 brands do not die off quickly. Operational We continuously improve our processes in 5.30 1.36 Excellence order to keep costs low. 0.77 We are constantly improving our 5.77 1.04 operating efficiency.

We continuously strive for service cost 5.3 1.54 reduction. Product/Service We continuously refine and improve Leadership 5.48 1.20 existing products. We have a high share of new hotel brands 3.97 1.91 in our product portfolio. We undertake new product development 4.27 1.93 above industry average.

The design and functionality of our 0.54 products is crucial for our competitive 5.45 1.47 positioning. Our brand is different from other brands in terms of overall perceived quality 5.23 1.37 (including non-tangible, psychological perceptions of the guest). Customer Our company’s strategy to achieve Intimacy competitive advantage is based on our 5.46 1.43 thorough understanding of our guests’ needs.

We design or produce our products to order. 4.15 1.63

Orders are packaged and shipped in a way 3.90 1.61 appropriate to each guest. A key criterion to evaluate our employees 0.67

who come in contact with our guests is the 5.56 1.39 quality of the guest relationships. Our employees are encouraged to focus on 6.10 1.30 guest relationships. We conduct advertising above industry 3.73 1.77 average.

We conduct promotions above the industry 3.93 1.61 average.

It was determined that not all of the constructs were reliable for this research.

For the commoditization construct, all of the multi-dimensions did not prove reliable.

One of the indicators for switching cost presented a discrepancy. The indicator decreased the construct’s alpha value below the cut off criteria . Therefore, switching cost indicator one, “The guests’ costs for switching to another hotel brand are low” was identified as unreliable and omitted from further analysis. Additionally, price sensitivity indicator four also proved to be unreliable to the construct. Omitting indicator four increased the price sensitivity alpha value to an acceptable 0.70. The four statements that were included for the construct industry stability also proved to be unreliable. The Cronbach’s alpha for this construct was 0.51, well below the accepted

0.60 required for exploratory scales (Garson, 2008). The entire construct was omitted from further analysis. The last construct proving unreliable was product/service leadership. None of the construct’s indicators improved the Cronbach's alpha value to be greater than 0.60. This indicated that the construct should also be omitted from further analysis. Figure 6 displays the reliable and unreliable constructs for this research.

Product Homogenity*

Price Sensitvity*1 Commoditization Switching Cost*1 Operational Excellence* Industry *2 Key Constructs Stability Product/Service Leadership*2

Customer Intimacy*

* Bold constructs indicate they are reliable because of acceptable Chronbach Alpha values.

*1 Lightly shaded constructs indicate reliability with the omission of at least one indicator.

*2 Heavily shaded constructs indicate unreliability because of unacceptable Chronbach Alpha values.

Figure 6. The Identified Reliable Constructs

In Figure 6, the constructs with bold typeface have been identified as reliable in their original form from the research tool. These indicators are product homogeneity, operational excellence, and customer intimacy. Each construct had reached an acceptable alpha value utilizing all of their indicators. The lightly shaded constructs have reached an acceptable alpha value with the omission of one of their indicators.

These constructs include price sensitivity and switching cost. The heavily shaded constructs have been identified as unreliable and omitted from further analysis. The omitted constructs were product/service leadership and industry stability

4.5. Construct Correlation A paired t-test was used to examine the correlation between the constructs. The t-test compared the construct means based on paired groupings with a 95% confidence interval. The constructs which had been determined reliable were included in the paired groupings. The first grouping paired the reliable dimensions for commoditization (product homogeneity, price sensitivity, and switching cost indicator

2) and produced three paired t-test results. The second grouping compared the means of operational excellence and customer intimacy. This grouping produced one paired t-test result.

The results of the paired t-test are displayed in Table 12 and Table 13. These tables present the means and standard deviations for each construct comparison. The first t-Test, Pair 1, compared the means of product homogeneity and price sensitivity.

This difference was statistically significant at the α= .05 level (t=-7.32, df=68,

Sig.=.000). Price sensitivity yield a mean of 5.34, the greatest between the comparing constructs. This indicated that the professionals perceived the industry to be more price-sensitive than they believed their product/services to be homogenous. The second t-Test, Pair 2, compared the means of product homogeneity with switching cost indicator 2. This difference was statistically significant at the α= .05 level (t=-6.17,

df=68, Sig.=.000). Switching cost indicator 2 yield the highest mean by having a 4.96 value. This indicates that the professionals recognize there are low barriers to consumer switching cost. They perceive the low barriers to switching costs more so than the homogenous nature of their product/service. The third t-test, Pair 3, compared the means of price sensitivity with switching cost indicator 2. This difference was not statistically significant at the α= .05 level (t=1.84, df=68, Sig.=.070). The final t-Test,

Pair 4, compared the means of operational excellence and customer intimacy. This difference was statistically significant at the α= .05 level (t=4.37, df=59, Sig.=.000).

Operational excellence had the greater mean between the two constructs and this indicated that professionals are more so participating in operational excellence strategies than customer intimacy. The professionals are more inclined to improve their product/service processes than work towards providing customized products and services.

Table 12. Paired t-Test Statistics 1

Mean SD t df Sig.

Pair 1 Product Homogeneity Mean -1.77 2.01 -7.32 68 .000

Price Sensitivity Mean

Pair 2 Product Homogeneity Mean -1.39 1.88 -6.17 68 .000

Switching Cost Mean (Indicator 2)

Pair 3 Price Sensitivity Mean 0.38 1.72 1.84 68 .070

Switching Cost Mean (Indicator 2)

Pair 4 Operational Excellence Mean 0.74 1.31 4.37 59 .000

Customer Intimacy Mean

Significant at ∝ < 0.05 level.

Table 13. Paired t-Test Statistics 2

Std. Error Mean SD Mean

Pair 1 Product Homogeneity Mean 3.57 1.61 0.19

Price Sensitivity Mean 5.34 1.17 0.14

Pair 2 Product Homogeneity Mean 3.57 1.61 0.19

Switching Cost Mean (Indicator 2) 4.96 1.58 0.19

Pair 3 Price Sensitivity Mean 5.34 1.17 0.14

Switching Cost Mean (Indicator 2) 4.96 1.58 0.19

Pair 4 Operational Excellence Mean 5.44 1.08 0.14

Customer Intimacy Mean 4.70 0.88 0.11

4.6. Summary of Results The first paired t-Test grouping compared the dimensions of commoditization.

Each dimension’s mean was compared with the mean of the remaining dimensions.

The results of the t-Test group display which dimensions of commoditization the lodging professionals perceive as highly affecting their industry.

Figure 7. t-Test Pairing for Commoditization

The paired t-Test amongst the commoditization dimensions indicated that the lodging professionals did not unanimously agree about the construct’s effects within the industry. Some of the dimensions were perceived as being major contributors to the industry commoditization while others at a lesser degree. The t-Test indicated that lodging professionals were most aware of the industry’s price sensitivity. The professionals made high indications when responding to the dimension’s indicators.

This dimension produced a mean value of 5.34 from a maximum indication of 7.00.

The second highest indicated dimension was for the switching cost indicator.

The lodging professionals indicated that the barriers to consumer switching had indeed

been weakened. They perceived their consumers as having to forgo a limited amount of risk when switching between competing offerings. The switching cost indicator produced a mean value of 4.96 from a maximum indication of 7.00.

The remaining dimension was for product homogeneity. The lodging professionals indicated a mean value of 3.57 (from a maximum of 7.00) amongst its indicators. This indicates that the professionals do acknowledge that competing firms are supplying similar core products and services. However, they perceive their firm as providing significant differentiation to attract and maintain consumers.

The second paired t-Test grouping compared the constructs for the value disciplines. The two construct means were compared to provide indication of the participating lodging firm’s utilization of the discipline. These constructs indicated the firm’s direction in providing additional value to their product and service offerings.

Figure 8. t-Test Pairing for Value Disciplines

The paired t-Test for the value disciplines indicated that the lodging professionals perceived their firms to be utilizing both measures to some degree. The professionals indicated that they perceive their firm as focusing on operational excellence strategies more so than customer intimacy. The construct for operational excellence produced a mean value of 5.44 compared to the maximum of 7.00. The construct for customer intimacy produced a mean value of 4.70 also compared to the maximum of 7.00. Both constructs produced a sizeable mean value and this indicated that the firms have perceived both disciplines as being valuable to their firm business objectives.

The results of the t-Test groupings indicate that the lodging professionals perceive significant effects of commoditization to their industry. The professionals indicated price sensitivity, switching costs, and product homogeneity as adding to the competition in their market environment. Based on their perceptions of the competitive environment, their firms’ have focused on specific value disciplines to deter the aforementioned affects. The results further indicate that the lodging firms have put more focus towards providing reliable lower costing products and services than implementing initiatives to provide customized offerings per individual consumer.

Chapter 5

DISCUSSION AND CONCLUSIONS

5.1. Conclusions This research sought to examine if the industry competitors realized that their industry had been affected by commoditization and if they understood its implications to their market environment. Both of these perceptions are important because any inaccuracies might cause error in the selection and implementation of operational strategies (Garrigos-Simon, et al. 2007, p.36). Due to the competitiveness of the lodging industry’s market environment, careful consideration must be applied when determining the solutions that will “defend [firms] against the forces of change”

(Shenkman, 1992, p. xiii). The research determined that lodging professionals are aware of the industry’s commoditization. However, the professionals did differ in their indications of the extent of commoditization’s effects. These perceptions may be influencing the firms’ implementation of the value discipline.

The data analysis determined that of the three dimensions, the managers were most aware of price sensitivity and switching costs. Both of these factors have been previously identified as driving forces in the commoditization of an industry. The analysis found that lodging professionals perceived their hotel products and services to be susceptible to consumer and competitor price sensitivity. This finding coincides with Starkov and Price who acknowledge that the Internet and online intermediaries are furthering the use of price-driven marketing. Technology continues to improve on a

technical and information availability level. This is allowing consumers to further conduct rate parity amongst similar lodging products and services. Some competing firms are resorting to price fluctuations to attract or maintain consumers. The actions and counteractions of both parties will continue to increase the pricing sensitivity of the products.

The lodging professionals also acknowledge the deterioration of the industry’s switching costs that would traditionally deterred a consumer from utilizing a competing lodging offer. Lodging professionals utilize switching costs to maintain competitive advantage. When the barrier begins to weaken, consumers may begin to lose their faithfulness to a given firm. Price sensitivity is one area that may be attributing to this commoditization effect. As consumers are witnessing the lodging product’s price fluctuations, they may be anticipating that a less expensive option will always be available to them. This translates to consumers associating less risk and greater benefits when switching amongst competing firms. It is suggested that firms continue to improve their differentiation and valuable attributes (consumer perceived) to reinforce the weakened switching costs.

The remaining dimension for commoditization was product homogeneity. The lodging professionals did not highly believe that their firm’s offerings were homogenous with their competitors. This perception goes against the existing lodging literature which suggests that the industry’s core products and services do not offer substantial differences. Even though their firms offer the same core

products and services the professionals are not considering this a threat to their firm.

The literature further suggests that the combination of tangible and extended attributes offer the differentiation or value which is passed onto the consumer. This would indicate that the lodging professionals believe their firm produces a lodging supply which provides further beyond the core lodging product.

The evaluation of the given commoditization dimensions indicate that lodging professionals perceive price sensitivity as a main factor continuing the commoditization within the industry. This doesn’t suggest that the other dimensions are not apparent. Instead, it indicates that lodging professionals are more aware of this industry threat and would be more likely to establish strategies to combat its effects.

Switching cost and product homogeneity are also indicated as affecting the industry.

However, the lodging professionals did not indicate either one as being the main factor continuing the industry’s competitive nature. This was an interesting finding since a main characteristic of commoditization is the similarity in the offerings of competing firms. If the firms are providing significantly differentiated lodging products and services, then the switching costs would be of a greater risk. Since the lodging professionals indicated that the switching costs were no longer at a high level, there must be a disconnection between the actual and perceived differentiation of lodging offerings. If the consumers are easily able to switch between competing offerings based on price, then the lodging product must be similar enough that they have yet to

encounter a significant switching cost (such as a loss of customer service, defining product, or need previously filled by competing firm).

Aside from the industry’s commoditization level, the data also revealed the lodging professionals perceptions about their firm’s current procedures. The lodging professionals believed their firm to be implementing higher levels of operational excellence strategies. A firm utilizing strategies focused around operational excellence would be in the mindset of providing a cost efficient product that remains reliable enough to satisfy the consumers’ needs. The professionals perceive their firms to be effectively using their tangible resources to provide a competitive product to their consumers. The benefits to this value discipline are the cost savings to the firm and the increased profitability from the consumer’s purchase (Riemann & et al, 2009; Porter,

1980).

Adversely, the professionals revealed that they did not think their firm was employing the highest level of customer intimacy. Customer intimacy allows the firm to focus on providing customizable offerings that cater to the needs and requests of their guests. This discipline works towards establishing and maintaining consumer loyalty. For the lodging professionals to indicate that their firm is not working towards a high level of customer intimacy is counterproductive to their business objectives.

Initially, the professionals indicated that the lodging industry was competitive and consumers encountered low switching costs. Implementing strategies focused on an

enhanced product and customer service would create a complex switching barrier that may retain more consumers.

In an industry that has been identified as being commoditized, it is interesting to note that industry competitors are not employing all value disciplines at their highest level. These are the same value disciplines that had been previously recognized as combating the commoditization phenomenon. Deciding to implement these value disciplines would allow a firm to place their offerings’ reputation on the discipline’s characteristics (Treacy & Wiersema, 1995). Applying greater tactics in operational excellency and customer intimacy may be the needed attributes which would propel a firm to the forefront of market competition. If these attributes are a part of the equation for continued success, there must remain unknown factors as to why the firms are not further utilizing them to improve their market positioning.

5.2. Limitations The major limitation to this study was the lower than expected response rate. The research invitation was extended to over 700 potential participants from the

United States. It was expected to gain a minimum of thirty percent in responses. At the completion of this study the response rate had only achieved nine percent. This response rate was attributed to two factors: (1) the intended target of the sample and (2) the lack of incentive for completing the research tool. The target for this study was to reach lodging managers. It was determined that the majority of the lodging managers were unable or unwilling to dedicate the indicated 8-10 minutes to complete the survey. Instead, the survey was completed by lodging professionals. This group of respondents includes a rich selection of lodging industry employees (i.e. lodging owners, directors of operations, managers, etc.). To receive a better response rate, it was taken into consideration that an incentive greater than a copy of the research results should have been included with the research instrument.

In addition, sixteen response records had to be omitted from the useable data. This was due to substantial amounts of missing data. These records were removed because the respondent did not indicate any values past the descriptive sections of the research tool. This effect further attributed to the collected and useable data.

After reviewing the descriptive data, it was determined that the responses were from a homogenous mixture of lodging professionals. Even though the sample was

composed of a heterogeneous mixture of potential participants, the survey did not always reach the intended respondent. The research sample was composed of lodging managers from a recent (updated December 2009) database of lodging professionals from across the world. However, the industry’s employee turnover rate was not taken into consideration for this study. Some of the surveys delivered through online distribution (email) were often responded by a notice that the intended respondent was no longer with the lodging firm. These surveys either went unanswered or completed by another party. Due to the homogeneous nature of the respondents, there may be an impact to the generalizability of the sought after lodging perceptions.

Though the sample population targeted respondents from various property types it remained that the majority of the respondents represented the mid-scale lodging segment. The overrepresentation of the one segment poses a threat to the population validity. However, it is also noted that the respondents represent various years within the industry. It is taken into consideration that the respondents may have perceptions based on their experiences throughout the industry which may include multiple lodging segments.

The sample contained hotel/lodging properties from across the United States that represented various market segments, property locations, and management operations.

Though the sample population targeted respondents from various property types it remained that the majority of the respondents represented the mid-scale lodging segment and seemed to have converged from the Delaware and Pennsylvania areas.

These response demographics are being considered as the result of the lower than expected survey response rate. The overrepresentation of the one segment and localized property locations pose threats to the population validity of the study.

However, it is also noted that the respondents represent various years within the industry. It is taken into consideration that the respondents may have perceptions based on their experiences throughout the industry which may include multiple lodging segments. The findings for this research cannot be generalized to represent the entire industry.

5.3. Future Research Areas

It is suggested that the study is replicated to improve upon the research findings. With the necessary revisions it is possible that this study can further obtain a clearer understanding about managerial perceptions of commoditization in the lodging industry. The first necessary revision would be to modify the construct indicators that the respondents evaluate. In this study the indicators were derived from previous research about commoditization among various industries. It was expected that the previous research’s indicators would prove reliable in gathering the managerial perceptions about the constructs pertaining to this industry. Evident in this study, some of the indicators remained unreliable and the constructs had to be removed from further analysis. It is important to include reliable indicators so that all of the constructs can be evaluated for accurate perceptions.

The second revision would be to continue data collection until a greater amount of dispersed respondents is achieved. An ideal data set would include respondents from each of the fifty states and contain properties across the various lodging segments and locations. The study could then be extended to include international lodging properties. The data sets from the United States and international properties could then be compared to determine if the industry perceptions extend into other cultures.

APPENDIX A

APPENDIX B Research Instrument

Survey of Hotel Industry Professionals

This survey is being conducted for the purpose of examining the competitive nature of the hotel product from the perspective of front line hotel managers. Please note that the data from this survey will be reported in the aggregate and cannot be identified to any particular individual or firm. The survey should take about 8 - 10 minutes to complete and your participation is voluntary. Your responses are very important and will remain 100% confidential and totally anonymous.

In case of any questions or concerns about the administration of this survey, you can contact the Human Subjects Review Board at the University of Delaware at hsrb- [email protected].

If you wish to have a copy of the descriptive summary of findings, please send an email to [email protected] upon completing this survey. The descriptive summary should be ready for dispatch at the end of March, 2010.

Again, thank you for all of your help.

Tiffany Francis Research Associate Alfred Lerner College of Business and Economics University of Delaware Ph: 1-302-831-6184

Sri Beldona, Ph.D. Associate Professor – Hospitality Marketing Associate Director – Hospitality Associates for Research and Training Alfred Lerner College of Business and Economics University of Delaware Ph: 1-302-831-6912 http://www.buec.udel.edu

The hotel you represent is:

 Independent

 Franchised

 Company Owned

Your direct employer is:

 Owner  Management Company  Franchisor

The hotel brand you represent is:

 Economy  Mid –Scale  First Class  Boutique

In which state is your hotel located?

The location type of your hotel is:

 Airport  Highway  Suburban  Resort  Urban

Strongly Strongly Disagree Agree When compared with competing offerings, (1) (2) (3) (4) (5) (6) (7)

Most hotel brands have no intrinsic differences. [ ] [ ] [ ] [ ] [ ] [ ] [ ]

Hotel product offerings are highly standardized. [ ] [ ] [ ] [ ] [ ] [ ] [ ] Hotel service standards are quite identical (homogenous). [ ] [ ] [ ] [ ] [ ] [ ] [ ]

Most hotel brands are identical in quality and performance. [ ] [ ] [ ] [ ] [ ] [ ] [ ]

Strongly Strongly When it comes to consumer behavior specific to the Disagree Agree hotel industry, (2) (3) (4) (5) (6) (1) (7) Most guests check prices even when it comes to lower [ ] [ ] [ ] [ ] [ ] [ ] [ ] tier hotel brands. Guests buy the lowest priced hotel stays that will suit [ ] [ ] [ ] [ ] [ ] [ ] [ ] their needs. Guests rely heavily on price when it comes to choosing [ ] [ ] [ ] [ ] [ ] [ ] [ ] a hotel to stay. Most hotel brands are identical in quality and [ ] [ ] [ ] [ ] [ ] [ ] [ ] performance.

Strongly Strongly

In the hotel industry, Disagree Agree (2) (3) (4) (5) (6) (1) (7) The guests’ costs for switching to another hotel brand [ ] [ ] [ ] [ ] [ ] [ ] [ ] are low. The process of switching to a new hotel brand is quick [ ] [ ] [ ] [ ] [ ] [ ] [ ] and easy for the guest.

There are no frequent changes in guest preferences. [ ] [ ] [ ] [ ] [ ] [ ] [ ]

There are no frequent changes in service levels by hotel [ ] [ ] [ ] [ ] [ ] [ ] [ ] brands. Technology changes are slow and predictable. [ ] [ ] [ ] [ ] [ ] [ ] [ ]

Brand obsolescence is low, meaning that brands do not [ ] [ ] [ ] [ ] [ ] [ ] [ ] die off quickly.

Strongly Strongly

When it comes to the hotel brand that I work for, Disagree Agree (1) (2) (3) (4) (5) (6) (7)

We continuously improve our processes in order to [ ] [ ] [ ] [ ] [ ] [ ] [ ] keep costs low.

We are constantly improving our operating efficiency. [ ] [ ] [ ] [ ] [ ] [ ] [ ]

We continuously strive for service cost reduction. [ ] [ ] [ ] [ ] [ ] [ ] [ ]

We continuously refine and improve existing products. [ ] [ ] [ ] [ ] [ ] [ ] [ ]

We have a high share of new hotel brands in our [ ] [ ] [ ] [ ] [ ] [ ] [ ] product portfolio.

We undertake new product development above [ ] [ ] [ ] [ ] [ ] [ ] [ ] industry average.

The design and functionality of our products is crucial [ ] [ ] [ ] [ ] [ ] [ ] [ ] for our competitive positioning.

Strongly Strongly When it comes to the hotel brand that I work for, Disagree Agree (2) (3) (4) (5) (6) (1) (7)

Our brand is different from other brands in terms of overall perceived quality (including non-tangible, [ ] [ ] [ ] [ ] [ ] [ ] [ ] psychological perceptions of the guest).

Our company’s strategy to achieve competitive advantage is based on our thorough understanding of [ ] [ ] [ ] [ ] [ ] [ ] [ ] our guests’ needs.

We design or produce our products to order. [ ] [ ] [ ] [ ] [ ] [ ] [ ]

Orders are packaged and shipped in a way appropriate [ ] [ ] [ ] [ ] [ ] [ ] [ ] to each guest.

A key criterion to evaluate our employees who come in contact with our guests is the quality of the guest [ ] [ ] [ ] [ ] [ ] [ ] [ ] relationships. Our employees are encouraged to focus on guest [ ] [ ] [ ] [ ] [ ] [ ] [ ] relationships.

We conduct advertising above industry average. [ ] [ ] [ ] [ ] [ ] [ ] [ ]

We conduct promotions above the industry average. [ ] [ ] [ ] [ ] [ ] [ ] [ ]

Please indicate your age range:

 18 - 25

 26 - 33

 34 - 41

 42 - 49

 50 – 57

 58 or greater

Please indicate:

 Male

 Female

Please indicate your highest level of education:

 High School or Less

 Bachelor’s Degree

 Post graduate Indicate your job designation: Indicate the number of yeas you have spent in the lodging industry:

 < = 5

 6 – 10

 11 -15

 16 – 20

 20

Thank You for Taking This Survey

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