Category: Free Essays

Customer Relationship Management, or CRM, has many perspectives and definitions that illustrate its fundamental thrust, that of trying to present a holistic strategy for managing customer relationships by getting to know the customers and their needs better, communicating with them more effectively and trying to fulfil these needs (Payne, 2005, Pp. 1 – 2). Because CRM is about getting to know customers and their needs better, it is about implementing specific Information and Communication technology projects within an organisation to process organisational data to deliver knowledge about customers and their needs. It is now possible for organisations to implement more effective and sophisticated technology solutions for processing customer related data because computers are now far more powerful and cheaper compared to what they used to be, with a vastly increased storage capacity. In addition, businesses and organisations can now store vast amounts of data about their customers on computerised systems that can communicate more effectively with individuals and other computer systems using technologies for the Internet. Companies in all sectors, including the hospitality and tourism sector, now routinely engage their customers on the World Wide Web and process customer data to deliver more useful products and services at competitive rates (Gretzel, 2010, Pp. 1 – 48 & 63 – 72). Thus, CRM presents opportunities leading to higher profitability and superior competitive advantage (Roberts, 2005, Pp. 315 – 316).

It is important for modern hospitality organisations to try to increase customer occupancy rates and customer experience in a tough and rapidly changing business environment that presents intense competition (Minghetti, 2003, Pp. 141 – 143). Thus, managers associated with the hospitality sector, including the hotels and tourism sector must have a deep knowledge of customers’ needs, behaviours, and preferences to offer services that deliver value to create customer retention, value and loyalty. In addition, it is important to try to communicate effectively with customers in a timely manner and to encourage them to engage in a dialogue with an organisation that can benefit everyone. Thus, customer-centric information systems are important for the hospitality industry, which must use these systems to develop effective relationships with customers to serve them better, encourage them to use more offerings from an organisation and to get to know about their needs in order to satisfy them and to retain them. It is important to understand that customers are the lifeblood of an organisation and without customers, there will be no revenues and no organisation. Customers who are not satisfied or fulfilled leave to benefit from others who can offer more and this means that efforts directed towards trying to maintain effective customer relationships are now essential for all organisations, including those operating within the hospitality and tourism sectors. It is far more expensive to try to get a new customer than it is to retain and to earn from an existing customer (Buttle, 1996, Pp. 155). The collection and use of customer information, its effective analysis and use for delivering to customers are now more important than ever before (Minghetti, 2003, Pp. 1 – 2).

To understand better the importance of CRM in hospitality industries, it makes sense to try to carry out an in-depth investigation into the topic of discussion from the perspectives of customers, managers and other stakeholders, including employees, from within the context of a place with established hospitality industry that has achieved a reputation for excellence around the world. Edinburgh, in Scotland is a suitable location for such an investigation, not only because the author of this dissertation studies nearby, but also because in addition to being the United Kingdom’s favourite domestic holiday destination, Edinburgh is now a world renowned destination for its festivals, events and conferences (Susan, 2008, “Scotland – A World Class Product”).

Susan (2008, “Scotland – A World Class Product”) goes further to state that Edinburgh is the most favourite city in the United Kingdom to hold a conference and the demand for rooms for guests is fast outstripping supply. Edinburgh is at the forefront of hospitality and tourism in terms of innovation and quality and the hospitality sector in this city employs 31,000 people, which is nine percent of the workforce (Edinburgh Tourism Action Group, 2010, “Edinburgh Tourism Framework for Growth 2007-15”). According to the previously mentioned publication, Edinburgh won the Guardian / Observer Travel Award as the UK best city for seven consecutive years and tourism generates more than ? 1.7 billion expenditure in this city. Efforts are ongoing to maintain Edinburgh as a competitive tourism destination of world class and to try to expand on its potential. Thus, it makes sense to try to examine how the hospitality industry in Edinburgh uses CRM to attract customers and to deliver more to Edinburgh and its tourists.

The research presented in this dissertation attempts to examine the importance of CRM for the hospitality industry in Edinburgh by presenting a review of selected literature, a customer survey, insights from senior managers and executives from the hospitality and tourism industry in Edinburgh and opinions from those who have the real ground-level knowledge, the employees working within the hospitality sector.

1.1 A Discussion of the Problem for Research

Marketing is important for the hospitality industry and for marketing for a successful hospitality organisation should touch the customer (Buttle, 1996, Pp. 155 – 157). The hospitality product is highly personalised with a substantial intangible content judged on experience. Relationship marketing is important for hospitality because the hospitality market with its ongoing and periodic demand in the face of competition presents a greater need for relational efforts and an understanding of the needs of customers. A need for the personal touch exists in hospitality and information technology provides opportunities for using information about customers to deliver the personal touch in novel ways. However, it is important to deliver correctly the CRM effort, based on the right information analytics and using the right channels to make a positive impact for the customer and the hospitality organisation. Despite the fact, that CRM has continued to present a promise of effecting improvements in corporate profitability, performance, customer retention and customer satisfaction, the proper implementation of CRM in an organisation is essential for success (Van Bentum, 2005, Pp. 28). CRM literature not only reports successes, it also reports a large number of failures in situations when well thought ought CRM solutions were not implemented correctly to impact the customer and to benefit an organisation. Thus, it is important to try to find out how the hospitality industry in Edinburgh is effectively making use of CRM in its efforts to compete with destinations from the rest of the United Kingdom, Europe and the world.

It is far easier to articulate CRM than it is to implement it (Dickinson, 1999, Pp. 11 – 12). Today, the hospitality industry needs exceptional marketing that has the capacity for delivering the long-term customer who profits the business over time to emerge as a business partner. Thus, it is important to know the right way for CRM in hospitality and to get to know how the winners are making use of this new marketing reality for hospitality. For the small business operator in the hospitality sector, a customer information database that has evolved over time is likely to serve well using personal computers and internet connectivity if business continuity persists. However, for a large luxury hotel chain, resort or hotels involved with hosting and arranging conferences, the equation becomes more complex. In the present day and age, the design of CRM system emphasises linking knowledge management in organisations with CRM to try to enhance operational and strategic efficiencies (Xu, 2005, Pp. 955 – 956). Thus, hospitality organisations and businesses must not only try to use CRM implementations effectively, but it must also be ensured that the right CRM implementation is serving an organisation by capturing the right data to perform the right analysis to present the most useful of results. With the passage of time, the lifestyles and preferences of customers change, customers become more demanding, new customers become involved with organisations and the business environment places new demands on businesses. Thus, it is not possible to say that knowledge acquisition for CRM in hospitality will be a once only exercise that will not be required on a continuous basis. A requirement exists for understanding CRM implementations, processes, practices and techniques with a view for making projections for the future to benefit most from this essential and important component of hospitality marketing.

1.2 Rationale for the Study

It is important to consider the fundamental reason or reasons serving to account for something, or a statement of reasons when contemplating a research study because such an approach serves to elucidate, the aims of a research project or that which is required to be researched. For this dissertation, rationale for undertaking research into CRM in hospitality industries in Edinburgh is important because this influences the thrust of research into the topic of discussion.

Clearly, an understanding of CRM and its implementation is not only of importance to the researcher who intends to make a career in the hospitality management, but it is also important for Edinburgh, Scotland and all destinations with an interest in enlarging and enhancing hospitality and tourism industries. Thus, a research project involving CRM in hospitality will benefit the industry and the place where the research is carried out to present new insights into what hospitality management should aim for in the future. Many of the more successful and ambitious hospitality establishments from around the world have practices in place to manage customer relationships (Lo, 2010, Pp. 139 – 156) and (Pechruttanamunee, 2008, Pp. 134 – 142). Not only is it likely that the more traditional forms of CRM will continue to play an important role in the evolution and success of hospitality organizations, but it is also likely that eCRM, which is made possible by advances in computer and communication technologies, will present a new global meaning to marketing for hospitality at a destination. Thus, the right way to deliver, manage and to drive the CRM effort in hospitality will make the difference and is worth researching in depth.

1.3 Significance of the Study

An examination of literature available in learned journals and books on the subject suggests that a very large body of published literature is available for CRM in organisations and the number of published research studies on CRM in hospitality is increasing. However, although a keen interest exists in Edinburgh and Scotland for promoting and further enhancing the hard won competitive advantage in hospitality and tourism for this city, little is available in terms of what role CRM plays in hospitality industries in Scotland and how better, more effective CRM strategies may be implemented for greater success. Thus, it is likely that this study will not only serve to add to the knowledge about CRM in hospitality, but it will also serve to highlight and to emphasise the importance of CRM in the hospitality industries of Edinburgh and Scotland. It is very likely that an effort to examine CRM practices and implementations in the hospitality industry in Edinburgh will present new insights and ideas that will be use to all with an interest in the management of hospitality and tourism.

1.4 Purpose and Research Questions

The following research questions are of interest in the research presented for this dissertation:

What is the thrust of CRM strategies in the hospitality industries of Edinburgh?

What impact has CRM made on the hospitality industries in Edinburgh and is it possible to improve or to innovate further?

What are the critical factors that influence deployment, development, planning and implementation of CRM in the hospitality industry in Edinburgh?

What role does technology play in the delivery and implementation of CRM in the hospitality sector in Edinburgh?

How has CRM shaped the corporate culture and vision for the hospitality sector in Edinburgh?

What rewards has CRM presented to the hospitality sector in Edinburgh?

How has CRM influenced the design and delivery of competitive and superior services for the hospitality sector in Edinburgh?

What essential framework for the implementation of CRM has emerged in the hospitality sector for Edinburgh?

What is the alignment that characterises CRM success for hospitality industries and businesses in Edinburgh?

A literature review that attempts to examine and to present relevant perspectives on the importance of CRM in hospitality industries is in the next chapter.

Chapter 2 – Review of Relevant Literature and Research

In the tourism and hospitality industries in general and the hotel industry in particular, Customer Relationship Management (CRM) becomes important as travellers become more price sensitive, less brand loyal and more sophisticated (Sigala, 2005, Pp. 391 – 392). In the present day and age, information technologies have made it possible for shoppers to make instant comparisons between hospitality and tourism offerings on websites and this means that it is important to implement CRM efforts to ret to retain customers and to provide them with better than what the competitors offer. The hotel industry around the world in particular is experiencing increased globalisation, competition, higher customer turnover, growing customer acquisition costs and rising customer expectations not only because the financial recession and competition but also because prospective customers can quickly make comparisons. Depending on the nature of hospitality business in which an organisation is involved, processes for automated data collection and analysis for influencing engagement with the customers are possible.

Ryals (2001, Pp. 531 – 535) states that CRM in hospitality and service industries is important because efforts directed towards trying to enhance customer relationships pay in terms of offsetting high customer acquisition costs for those customers that use certain types of service offerings frequently. After covering acquisition costs, a stream of profit flows emerges for the previously mentioned customer and the longer a customer stays with a hospitality firm, the higher the profit. Thus, CRM helps to offset acquisition costs and to generate higher profits. In addition, the return from CRM increases even further when satisfied customers refer other potential customers who add to the bottom line for an organisation. Because efforts to develop a relationship with customers have generally positive effects on customers, a relationship with a hospitality organisation has a value for customers who associate with a brand to become price insensitive.

The impact of efforts to enhance CRM in hospitality organisations are likely to result in the following (Ryals, 2001, Pp. 535):

Long-term retention of selected customers

Gathering and integrating information on customers

An emphasis on data mining and analysis of customer data

An emphasis on customer segmentation in terms of lifetime value

Identification and micro-segmentation of markets for types of offerings

Efforts towards enhanced customer value creation

An emphasis on the delivery of customer value through channels optimised for serving various market segments

A shift in emphasis from management of product portfolios to the management of portfolios of customers, resulting in efforts directed towards optimising an organisation to serve better customer segments

Sigala (2005, Pp. 409 – 410) goes further to suggest that profound change in service marketing, including marketing for hospitality and tourism, demands that an emphasis exist for customer retention, customisation of products and customer focused processes that incorporate Information and Communication Technologies (ICT) for collecting and processing customer data. Processed data is required to deliver customer insights, superior customer relationships and design of superior products and services. The previously mentioned author suggests an integration of ICT, knowledge management and CRM for hotels and the hospitality industry. However, CRM can and does exist in small hospitality and tourism establishments without the implementation of elaborate ICT applications, and it is important to try to have a good fit between the CRM implementation and the business. It is important to understand that with a good fit, the integrated CRM system will present opportunities for improving staff skills, competencies, the working environment and services in addition to enhancing customer relationships.

The advent of e-commerce has meant that online intermediaries on the web present a threat to hospitality operators because although such intermediaries do present opportunities to customers to select after comparing a number of offerings, they do not always correctly depict the true value of offerings (O’Conner, 2004, Pp. 474 – 476). By implementing CRM efforts, hospitality establishments are in direct contact with customers and they can try to sell the value of their offerings to customers with a personal touch that is missing with online intermediaries. To illustrate the point, it is possible to suggest that by mailing a hotel magazine to selected customers who qualify, it will be possible for a hotel to keep customers informed about developments and at the same time to offer new or discounted products to try to maintain and enhance customer interest. In the age of Internet and the World Wide Web, post visit presentations, including magazines or other advertising literature from hospitality establishments will neither be expensive to deliver nor late in a fast changing world full of new developments. CRM in the hospitality industry has the potential for reducing marketing expenditure and for increasing sales, but it is important to ensure that potential data-ownership dilemmas are in control so that CRM can work optimally at the brand level (O’Conner, 2004, Pp. 480 – 481). Effective data mining using artificial intelligence and sophisticated statistical techniques for data analysis on warehoused data is important for CRM, especially for the large hospitality organisations. However, the previously mentioned author suggests that the regional proliferation of Internet and interest in web-based interactions determines how effective eCRM will be when focusing on a region. The developed world with a more prolific proliferation of the Internet is far more suited to eCRM compared to regions in the developing world with limited access to ICT. In addition, large multinational hotel chains must practice and present effective knowledge sharing for international hotel joint ventures (Magnini, 2008, Pp. 249 – 252). Hence, clearly CRM implementations in hospitality present both risks and opportunities. O’Conner (2004, Pp. 482) states that the hospitality industry spends millions of dollars on information technology acquisitions every year, but not much published material exists about the management of acquired information technology resources.

According to Ozgener (2006, Pp. 1356 – 1358), senior management commitment and adequate budgets are important for CRM implementations in the hospitality industries. CRM implementations in the small and medium hospitality firms are likely to feel the effects of innovation quality, customer relations, communication-distribution infrastructure and business dynamics. Business dynamics, which refers to change imposed on businesses due to economic, social, technological and environmental change, is important for CRM because it is such change that demands new offerings from businesses to retain customers in the face of competition. Although the smaller hospitality firms will have less to spend on CRM, they are likely to be more interested in having CRM systems because existing customers are far more important to the smaller businesses compared to the larger ones. Thus, within the context of the hospitality industries existing in a city or a region, CRM implementation within small and large hospitality businesses may vary, depending on the peculiarities of the place. The previously mentioned, together with barriers for the implementation of CRM in hospitality, is likely to be something that will be worth investigating in the small-scale research project for the importance of CRM in Edinburgh. In addition, the more important goals for implementing CRM in hospitality are also worth investigating because the relative reasons for an interest in CRM are likely to differ. It is possible to use CRM systems in hospitality firms for decreasing costs, sustaining competitive advantage, improving customer services, improving customer retention, acquiring new customers or for increasing profits. However, the relative priority reasons for CRM implementation may vary from firm to firm.

Oronsky (2007, Pp. 944) suggests that CRM implementations in hospitality industries are not just limited to hotels, resorts, airlines or travel agencies because it is possible for restaurants to benefit from such implementations and a strategic thrust for CRM. The previously mentioned author suggests that chain restaurants and independent full-service restaurants may benefit from information technology and CRM implementations that effectively use IT for engaging customers and better understanding their needs. Within the restaurant sector, information technology has made an impact on the dining experience of customers and the way in which meals are prepared, even though according to the previously mentioned authors, some researchers suggest that the hospitality industry is not technology oriented. However, it is clear that if information technology for implementing CRM systems can benefit large hotel chains, then there is no reason why the same technology cannot benefit chain restaurants. Oronsky (2007, Pp. 942) states that within the restaurant industry, information technology has the potential for minimising costs, providing support for superior employee and revenue management, enabling analysis of customer preferences and optimising menus for target costs that will appeal more to customers. Thus, despite reservations expressed by some researchers about hospitality not being a technology industry, other researchers suggest that it is likely that more than 50% of the change that will have an impact food service within the hospitality sector will involve technology influences. Thus, it is clear that a potential exists for using information technology and CRM systems within the food service sector in hospitality organisations.

According to Oronsky (2007, Pp. 944), customer feedback and analysis of customer needs is as important for restaurants as it is for any other hospitality operation. Like hotels, airlines and tour operators, restaurants too can engage customers using websites and receive comments, feedback, suggestions or survey results presented on the web. For large restaurant chains, it is possible to implement systems for deciding about how well menu items are doing across the entire chain, and it is possible to enhance customer relationships by using imaginative ways, including deal offerings, special promotions, joint offerings with other businesses or offerings related to food events, etc. Thus, clearly technology facilitates information management, knowledge management and engagement with the customer even in the food service sector.

In the business environment that prevails today, CRM is as important for airlines as it is for other hospitality industries because serving and having the customer counts and influences the bottom line (Cheng, 2008, Pp. 487 – 490). CRM is likely to make a difference for airlines in their effort to retain and attract the frequent flyers because relationship marketing emphasises maintaining long-lasting relationships with customers and a significant proportion of airline customers, even during the tough economic times, are business travellers who fly more frequently than tourists do. Thus, it is clear that the character of airline service offers many opportunities for practicing the relationship marketing approach and many airlines do maintain frequent flyer databases that are useful for deciding about customer requirements and for engaging the customer. Because airline operations present a substantial dependence on computers and information technology for reservation systems, scheduling and maintenance activities, it is quite possible to incorporate effectively CRM implementations as an addition to existing information technology support systems.

For airline CRM that delivers results, it is important to ascertain what keeps customers loyal to airlines and how airlines can respond better to offerings presented by competitors (Cheng, 2008, Pp. 488 – 489). Loyal customers do appreciate rewards for patronage by loyal customers if airlines present competitively priced offerings that are comparable in quality to offerings from competitors. Although, it is very likely that the touch, the thoughtfulness, benefits and the effort will count in CRM for airlines, customers must be satisfied with the price for quality and type of service offerings. Thus, enrolling customers in frequent flyer programs is not a guarantee of customer loyalty because service quality and service recovery policies in case of service disruption are important for frequent flyers. Clearly, a frequent flyer is likely to prefer an airline that checks them into a decent hotel and presents meals instead of leaving them to wait it out in a departure lounge if a substantial flight delay persists. A balance must exist between rewards for frequent flyers with the care that airlines can offer to such customers who must constantly be on the move to attend to important business matters. In the present day and age, the digital market on the World Wide Web made possible by the Internet is important for airlines, and it is important that airlines lean closer to their customers to try to cut off agents and other intermediaries. In addition, the previously mentioned author suggests that airlines need to emphasise customer orientation, domain expertise, interpersonal relationships, service recovery performance and the judicious use of information technology to make an impact with customers that will result in superior relationship quality. From a customer perspective, domain orientation or the quality of offerings made by an airline and the quality of its employees are of the greatest importance to customers and this means that it is important to tune the CRM system for presenting superior offerings that benefit customers most.

2.1
2.2
2.3
2.4
2.5
2.6

The chapter, which follows, presents a discussion about the methodology for this dissertation.

Chapter 3 – Methodology / Methods Used
3.1 Research Approach for the Thesis
3.2 Preparation of a Literature Review
Chapter 4 –
Chapter 5 – Discussion

A discussion about the conclusions derived from the results of the literature review and the interviews are in the next chapter.

Chapter 6 – Conclusion, Recommendations and Suggestions for Further Work
Appendix A –
(This page intentionally left blank)

In today’s world economy, information technology (IT) has driven fundamental changes in the nature and also the application of technologies in a business. The use of IT in its value chain provides the company a very strong strategically and tactical tools. If these tool are properly applied and used could bring great advantages in promoting and strengthening the competitive advantages.

In order to gain more market share and sustain its competitive advantages to be very low cost carrier in these days high demanding environment, Air Asia tries to develop new ways of make the customers, suppliers loyal. Focus on supplier and alliances and the customer will drive positive values to Air Asia can achieve. Customer relationship management application will be one of the areas of strategic implementation that company can focus to achieve high values to both Shareholders and Customers.

Customer Relationship Management (CRM)

In order to long term, customer relationship should be fostered for company to maintain competitive advantage and profitability. When planning and implementing CRM application, management is recommended the following approaches:

Customer segmentation-mileage- based segmentation is inadequate, rather should focused on value-based and needs-based approaches can be guide investment decision and drive greater insight into needs of high-value customer.

CRM initiative development-to different from the other competitors’ approach e.g. installing kiosks for the fast check in. Air Asia should implement CRM program in favour of investing in initiatives with a high return, which respond to the needs and desires of their own customers.

Organizational design and management-Air Asia needs to train the employees’ empowerment them with a complete view of the customer and clearly fluent the employees’ role in the CRM strategy.

Advanced and classy CRM information system should include the key functions that are;

Travelling Planning:

Site personalization for on line customer to create travel plan, bundled services information, flights notification systems, and gate information displays etc.

Reservation and Ticketing:

ITA search engines, roving agent check-in, kiosks, internet check-in, and phone check in systems etc.

Frequently Flyer Program:

Membership based or point based rewarding scheme offering to the applicable customer.

Campaign Management:

Email campaigns and promotion system are used for marketing.

Customer Care:

Web based self services such as e-ticket booking and reservation, online baggage tracing. RFID baggage tags, internet lounge, and in air internet services.

Business intelligence:

Dynamic update and multidimensional reports that helps management to do analytics in various areas, such as customer profile.

To justify the investment and implementation scope of the CRM program, Air Asia is recommended to look into the ROI and financial impact to the shareholder value driven by each of the CRM initiatives.

By taking the steps to implement a truly consumer-centric approach to relationship management, Air Asia will be in better position to attain , develop, and hold on to high value of the clients

Company wants to be the lowest short-haul airline in every market it goes, that why they are using some strategies such as Lean cost structure, different ways of promotion, keeping safety, satisfying guests and developing human resource very strongly these days. Air Asia always tries to keep their operations as simple as they can.

SWOT Analysis:

To figure out the internal factors such as Strengths and Weakness, and external Opportunities and Threats to business objective, a SWOT analysis of Air Asia can be conducted;

Strengths:

Low cost operation

Fewer management level, effective, focused and aggressive management

Simple proven business model that consistently distribute that the lower fares

Penetrate and motivate to the potential markets

And multi skilled staff means efficient and incentive workforce

Single type of Air buses minimize the maintenance cost and easy for pilot dispatch

Streamline Operation: making sure that the processes are as simple as possible, that customer can approach and use it with no difficulty

Lean Distribution System: offering a wide and innovative rang of distribution channels to make a booking and take a step toward a travelling easy

Point to point network: applying the point to point network keeps operation simple and low cost, that it connect the booking offices with call centres

Partnering with the world’s most renowned maintenance provider company and complying with the airline operation in the world.

Implementing the regions fastest turnaround at 25 minutes only, assuring lower cost and higher productivity

Weaknesses:

Due to lower costs the services possessions are limited, so someone can think that Air Asia cannot serve as well as they advertise

During irregular situations the company could not handle them well with limited number of personals

Government interference and regulation on airport deals and passenger compensation

Non central location for secondary airports

Its low cost strategy makes the brand critical for market position and development is always a challenge for Air Asia’s management

One of the weak point is that the company trust heavily on outsourcing, it shows the Air Asia depends on other for some of their tasks and seems not good for company’s repute in the customer’s mind

New entrance to provide the price sensitive services

Providing guests with the choice of modify services without compromising on quality and services.

Opportunities:

Long haul flights an experiment to get underdeveloped market share, which is better for the company’s growth.

The Air Asia can differentiate from traditional Low Cost Carrier model by adding customer services or operating as a full services airline with low fare for the haul flights.

Ongoing industry consideration has opened up projection for new routes and airports deals, by making such kind of deals the company expand his business

High inflation rate and also fuel prices will pinch out unprofitable competitors

Threats:

Keeping in view the current economic situations the full services airline cut their cost to compete.

Other companies like Virgin etc may think towards Low Cost Carriers (LCCs)

In the coming time the high rates of fuel decrease the yield of the company is a big threat for them

Accident, terrorist attack and disaster affect customer confidence.

For example on 28 July 2010 a plane crash in Pakistan and almost one month later on 24 of august 2010 there is a another plane crash in China, these kind of accident creates a doubt in the mind of customers. Due to their (Air Asia) low cost model the people may think about that there is risk involve like services and safe journey. I think this is a major threat in these days that Air Asia can face.

Aviation regulation and government policy, Air Asia’s ongoing business in long haul flights have always threat for the changing policies of the those countries and day to day changes in the regulations of the international airport authorities

Increase in operation cost in producing value added services, as Air Asia X using value added services by long haul flights so it results in increase their operation and value added cost.

As Air Asia policy from the January 2002, company belief online seat reservation and also online flight schedule but a threat is always there that the system disorder can arise big problem for Air Asia’s online system

Economical factor of Air Asia

According to the profit and loss account of company it was good in 2009, weather it receive loss in 2008 due to fuel hedging and the crisis situation in Bangkok. The company bear a heavy loss upon their short and long contracts when fuel price shot through to the roof before collapsing around the end of year. On November 2008 the company abolish fuel surcharges. It is the first air line in the world to abolish fuel surcharge. As other air lines are downsize with decreasing in travel, because of global economic circumstances. In 2009 and in 2010 Air Asia expands its operations. The companies target to get around one Million customers in 2008, adding new plans and also introducing new destinations like India etc. At the end of 2009 and start of 2010 Air Asia targets get 5.1 million in 2009 that is 4.2 million up that was in 2008. The new plans were operate usefully towards new destinations like India, China etc.

Current Activities:

The Air Asia invited the customer to come and take part in photography competition in a sense of making journey Happy with Them(AIR ASIA), the winner of this competition will be awarded a ticket to Bangkok with accommodation and other offers such like that to get market penetration.

From 2009 the company starts scholarship for students related to pilot courses this is another try to get more market penetration in term of Air Asia’s sales and make the customer interested in their new routes and keep the existing and as well as new customers.

These Air Asia using Social security checks for buying ticket on special prices.

Red Megastore. They start red megastore for online services for the purpose of make more ease for the new and little educated customers to buy Air Asia’s offered facilities. As we know the target customer of Air Asia is less educated, Middle class and small business men’s, so this plan works very fruitful for the company.

Customer Satisfaction of Air Asia:

The customer satisfaction on company depends on four variables that are Safety, Service Quality, Price and Promotion;

Safety:

The safety factor is related to the Engine and other parts operate during flight

Take a good care of the hand caries and make sure that there is better place for them without any disturbance

The company have much focus on the insurance of passengers while they travel

Service Quality:

Good manners of attendance during flight

The flight attendants’ are very skilled , knowledgeable and charming

The Attendant’s must offer their services with keeping in mind of serving

Price:

Equality of ticket price

Offer the low comparative price

Promotion:

Air Asia was very care while lunching promotions they should be Interesting, After a reasonable time and also good frequency of lunching promotions

FINDINGS & DISCUSSSIONS
Customer awareness, taken as a dependent variable and customer preference towards Thomas Cook taken as the independent variable, showed that the former has no significant impact on the latter (as described in the analysis of the first hypothesis where the null hypothesis was accepted and the alternate hypothesis was rejected). Therefore, it can be concluded from the first hypothesis that customer awareness does have a significant impact on customers’ preference towards Thomas Cook. This can be attributed to a variety of reasons, none of them conclusive however, with the lack of further research on the subject.

Keeping in mind that the sample respondents reside mainly in Bangalore, it is possible that despite customers being aware that Thomas Cook is a travel management company, they do not prefer it because in Bangalore it does not provide good or satisfactory service. Customers may be unhappy or dissatisfied with the services that are provided by the Thomas Cook branches in Bangalore. Here again it cannot be said that Thomas Cook does not provide good service overall because it is still one of the top travel management companies in the world.

Another possibility as to why customers do not prefer Thomas Cook despite being aware of the services can be the price factor. Thomas Cook provides its services at a premium price and customers might see this as too expensive and/or not worth the price that they have been asked for the service. In a country like India where disposable income is not an abundant resource that companies can exploit, it becomes difficult to market a premium service that the customers can easily look upon as an unnecessary luxury. Services such as premium tourism services may not appeal to the common man.

Another possible reason for this is that the sample customers, a majority of whom do travel via a travel agency at least some of the time, are already satisfied with the travel agency they currently employ and find no reason thereof to shift to another agency despite knowing that another agency exists which perhaps provides slightly better services. These consumers are “set in their ways” so to speak and are happy with the current agency of their preference. They find no good enough reason to shift to Thomas Cook for their travel needs.

Thomas Cook offers a variety of value added services. The specific value added services that were taken in this study are:

Inbound and outbound travel reservations
Foreign Exchange
Travel insurance
Travel packages
Visa and passport services
Reservations for car and hotel
Foreign Exchange

These services combine the core functions and services that Thomas Cook offers with added value to give them a uniqueness. This research found that there is a significant difference in these services and that consumers, when asked to rate these services, have a variety of views of these services, that is to say, the services that are provided for foreign exchange are of different quality than those that are offered for travel packages or travel insurance.

It was found in this research that most of the sample do use Thomas Cook for their foreign exchange services and these were rated the best. Indeed, the foreign exchange services of Thomas Cook have been rated to be amongst the best in the world, and in fact, most people identify Thomas Cook only for their foreign exchange services and not their travel packages, which is in fact the company’s core business.

It is shown in the hypothesis that the various services of Thomas Cook vary in quality, as per the respondents view.

In the third hypothesis, it was found that there is a significant difference in customers’ preferences with respect to customers’ awareness about travel agencies. In other words, it is apparent that despite their knowledge about many travel agencies and their services, there is still a lot of variations in what the customers prefer to choose as the travel agency for their travel needs. This shows that customers have their own reasons to choose a specific travel agency and awareness of the services is not the only factor that they take into consideration.

Customer preference for an agency is not a factor that can be easily studied or examined. For each customer, the deciding factor is different, and for each factor of customer preference that is taken, there is another that is left out. Studying customer psychology is an in depth with infinite variables that need to be considered, and it still may not be accurate due to the fact that human nature itself is unpredictable.

The fourth hypothesis showed that there is no significant relation between the nature of the travel and the agency preference that a customer has. Here, the null hypothesis was accepted and the alternative hypothesis was rejected. This shows that whether a customer needs to travel for business or wants to travel for leisure does not determine the choice of travel management company that the customer makes. There can be a variety of other reasons that can be deduced to find out what other things may determine the customers’ choice of travel management company. Again, none of these are conclusive and need to be looked into with further research on the topic.

Social status is one factor that is likely to have a significant relationship to agency preference. The higher up a customer is on the social ladder, the more premium will be the nature of his agency preference. When customers can afford something they have a tendency to show that they can afford it by very publicly using that product or service. This is human nature, and very likely to have an impact on agency preference.

Affordability is a very important factor that needs to be considered in terms of preference for an agency. A premium agency may be unattainable by those who cannot afford its services no matter how much they may be aware of it, or no matter what the nature of their travel may be. Affordability and purchasing power of the customer are likely to have a strong relationship with the travel agency that they prefer. Expense is always an important factor that needs to be considered when measuring or trying to ascertain customer preference. Expense was not a factor that was given enough significance in this study.

Social sentiments also need to be considered when looking into the customer preference towards any product or service. Certain customers from India may not choose Thomas Cook because despite its being registered in India as Thomas Cook (India) Limited and is now owned by Fairfax (Canada), its name is Thomas Cook, and was originally a company from England. On the other hand, certain customers may choose it for exactly that reason. There are a variety of social sentiments that have a strong relationship with and impact on customer preference towards an agency. They should not be disregarded if the company intends to survive in the environment.

It is apparent from the research (hypothesis 5) that customers’ preference towards an agency and the value added service that they prefer have a strong relationship. This relationship can be easily envisioned. Customers will do their research on which travel agency provides which services and which value added services. With the advent of the internet, there is an enormous amount of information available to the customers at their fingertips and in this day and age customers are not easily fooled or misleaded. Customers will accordingly filter travel agencies according to the service that appeal to them and ultimately choose the one that best suits their needs. This will become the agency that they prefer and use for all their various travel needs.

Hence, preference of travel agency and the value added services that they prefer have a strong, unmistakable relationship, which marketers can soon look to exploit.

The sixth hypothesis works to find out whether or not there is any difference between the value added services and those services which offer mainly the core functions. Here the null hypothesis was rejected and the alternative hypothesis was accepted. Therefore a conclusion can be made that there is a significant difference between the satisfaction levels of the services that are offered by Thomas Cook that is, value added and non-value added.

On further inspection of the analysis and the questionnaire it is abundantly clear that the value added services are much more profitable, than other services, in the sense that the customers of Thomas Cook are much more satisfied with these services and perhaps don’t mind paying a bit more for these services than the others.

The seventh hypothesis finds that there is a significant difference in the customer preference with regards to the services that are offered by an agency. This means that customers prefer certain services provided by certain agencies and there is not necessarily any one agency which provides all the services that the customers prefer. Even in the agency that they prefer, the satisfaction levels of various services provided and the customers’ preference towards those services are not uniform throughout but vary.

One service provided by one agency may good and another service may be better in another agency. Therefore, most of the sample respondents use more than one travel agency for their travel needs instead of sticking to one

1

Lists of different places with different prices whether it is cheap or expensive or either it has a hotel or car package for the customers’ flights. It helps the customers to choose what they really like or what they can afford. British Airways did this because they knew that people have different taste, different needs and status in life.

*British Airways achieved their customers’ expectations and needs by serving the main expectations and needs of their customers. E.g. they gave you an opportunity to book a flight; choose from their list of different places with different prices; you can change your booking and etc.

They EXCEED their customers’ expectations and needs by doing things like:

BA on your mobile -The British Airways app gives you all the information you need about your next flight in the palm of your hand- you can check in for flights; download and use mobile boarding passes; view the latest arrival and departure information; see upgrade offers for future flights; track any British Airways flight and Book a new flight by just using your phone.

Mobile boarding pass

All British Airways customers can now download a boarding pass on their phone, within 24 hours of flight departure. There is no need to print it as all the details are in the mobile boarding pass. The barcode is scanned as you move through the airport.

With their mobile boarding pass, you will be able to store your boarding pass in your clear security; access British Airways lounges and board the aircraft

*British Airways exceed the customers’ expectations and needs by giving their customers an easy way to access some informations about British Airways like they can book a new flight by just using their phone plus they can now download a boarding pass on their phone which is convenient for their customers. That was also unique for the customers because not all of the airlines have that kind of customer service.

Information at the airport -London Heathrow, London Gatwick, London City and other airports
Making a smooth getaway

They know how busy any airport can be so they give a few pieces of information that could help ease the experience for their customers.

Information that include:

Where you can find their lounges

Whether you want to catch up on work before you travel, enjoy a snack or simply unwind, you’ll find an area in one of their lounges to relax away from the busy airport environment with Wireless broadband provided by Spectrum Interactive is free in all British Airways UK lounges.

Safety and security
Checking-In

They’ve made checking in fast and easy so you can spend more time doing what you want to do.

-Mobile check-in

. You can check in whilst travelling to the airport, or choose seats for tomorrow’s flight home without leaving the beach by just using your phone.

*They exceed customer service by telling to their customers where can they see the lounges which is convenient for their customer because it can also allow them to surf internet and eat while waiting for their flight. It is useful especially for the business men/women and to the people rushing just to go to the airport so they can do their work by not just wasting time waiting for their flight and they can eat especially for the people who rushed to go to the airport that don’t have time to eat.

For their airports and other airports

Terminals

Check-in facilities at the airport

Bag drop desks

Terminal map

Flight connections

Transport links

*They exceed their customer service by giving informations like where are their terminals checks in facilities, bag drop desks and terminal map which is really helpful for their customers because sometimes customers got lost at the airport because they don’t know where they would go. In addition, usually instead of just waiting for their flights customers were still looking for their destinations at the airport to check in so it was an exceeding customer service and need especially when they also gave informations on some airports where customers over stop.

On Board
Children’s activities on board

They understand that keeping your children happy will play a large part in making your flight as relaxing and enjoyable as possible. They have a number of activities designed to keep them entertained whilst flying with them.

*They exceed their customer service by helping the parents of the children to make their children happy that really helps the parents to just relax and enjoy their flights without having some concerns that their children might get bored and irritated because usually children cried and got irritated during the flight that can cause an unpleasant experience for the parents. It was also an unusual customer service.

In-flight meals

All of their meals are carefully created by leading chefs, and wherever they can they incorporate seasonal produce in their dishes to ensure they use the freshest ingredients with the fullest flavour.

Special and medical meals

If you have special dietary requirements, you can let them know in advance and they will provide you with a suitable meal. You can request a special or medical meal through Manage My Booking.

Travelling with food allergies

They’re passionate about their food and work hard to ensure the meals you enjoy with them are prepared to the highest standard and with the finest ingredients. That includes providing a wide range of special meal options to cater for many food sensitivities and clear labelling of all their meals.

*They exceed their customer service by automatically giving the customer a special/dietary food that access foods that they require. This exceeds the customers’ expectations as the customer needs have been met without the customer requesting or having to ask as the proactive thinking of the staff have already acted on the customers’ needs before they have needed to ask or they can also ask you what are your dietary foods or foods that are not allowed for you.

Travel Preparation

Disability assistance

To help us provide you with the necessary service for your needs please let us know how we can help you

-Mobility assistance at the airport and in-flight
-Mobility assistance provided at the airport
Visually impaired passengers

If you are visually impaired, they can offer:

An escort to and from the aircraft.

Individual safety briefings and assistance during the flight.

Hearing impaired passengers

If you are hearing impaired, they can offer:

An escort to and from the aircraft.

Separate briefings about safety procedures.

Subtitles on the English version of the in-flight safety video.

Induction loop facilities are available at most airports and on board through their in-flight headphones.

Headphones compatible with standard hearing aids switched to the ‘T’ position.

Transporting your pet

When you want to transport your pet, you can rest assured that they will take the very best care of them. Pets must be booked to travel with British Airways World Cargo, and they will be carried in the aircraft hold.

-Travelling with a Guide/Assistance Dog

They will make special arrangements for your Guide/Assistance Dog, to ensure they are able to travel with you in the aircraft cabin.

Certified Assistance Dogs for blind, deaf or disabled passengers travel free of charge in the aircraft cabin on most flights from the UK; and provided dogs are compliant with the Pet Travel Scheme, on all British Airways routes approved by DEFRA to the UK.

*Automatically booking the customers that have disabilities into a suit that has access facilities that they require. This exceeds the customers’ expectations as the customer needs have been met without the customer requesting any assistance or having to ask as the proactive thinking of the staff have already acted on the customers’ needs before they have needed to ask. They can also do that for the customers’ pets like dog/ cat.

Flying with confidence
The UK’s most experienced fear of flying course. Is fear of flying holding you back?
They can help you

The Flying With Confidence courses are run by British Airways people who want to help you conquer your fear of flying. Their courses have been running for more than 25 years and have helped more than 45,000 people like you. Customer feedback shows that they have a 98% success rate in helping people like you to overcome their fear of flying.

-Stop worrying, start flying

Their one day course caters for many different needs, whether you have mild anxiety about flying or are unable to set foot on an aircraft. The courses are run by experienced British Airways pilots and crew as well as a Clinical Psychologist.

At the end of the course, you will join others in conquering your fear of flying on a short flight with their team of experts.

*It is an exceeding customer service because they not just booking you a flight but they also helping you to conquer your fear of flying which is really helpful. It helps because it makes their customer enjoy their flight without having a fear especially for those who has an anxiety of flying. The good thing is the effect of their help affect you throughout your life which really helps you to enjoy travelling without having a fear. This is not just a service for them but they also concern that your fear of flying can affect your work and life especially for business men/women because they are more likely to travel often and for the outgoing people that afraid to travel by a plane.

Thorpe Park
They MEET their customers’ expectations and needs by doing things like:
Full Ride Listing

THORPE PARK has so many awesome rides that we have had to stick them in a big list for your viewing pleasure.

Book a Ticket Online/Phone and Book a ticket with Hotel
Ticket Deals
Opening Times

*They meet their customers’ expectations and needs by serving the main expectations and needs of their customers. E.g. they gave you different ticket deals; look at the list of their rides; you can book a ticket with hotel; look at their opening hours and etc.

They EXCEED their customers’ expectations and needs by doing things like:
Park Map

*Thorpe park exceed their customer service by giving/allowing their customers to print out a Park Map which help them to know the locations of the rides, food and drink stalls. It helps the customers to easily find the rides, toilets, food and drink stalls. Usually, for some amusement parks do not give a map of their amusement park that makes a hard time for the customers to find the rides, food and drink stalls. Therefore it is an exceeding customer service that they actually giving a park map to the customers without the request of the customers.

Thorpe Park official APP

THORPE PARK brings you the official iPhone and iPod Touch App. It’s packed full of features to keep you entertained and informed at the nation’s Thrill Capital.

You can also grab exclusive offers like:

Park Map

Interactive Park map that shows your exact location in relation to the rides, food and retail units, cash points, toilets and lockers…all via the iPhone’s GPS

Ride Information

See all the extreme thrills waiting for you on their rides, as well as videos and photos to really get the adrenaline pumping in anticipation.

Offers

Exclusive discounts and promotions to the Park as well as at the retail and food units.

Park Info

Information on THORPE PARK, including: opening times, upcoming events and directions to the Park.

* Thorpe Park exceed the customers’ expectations and needs by giving their customers an easy way to access some informations about Thorpe Park like Park Map, ride information, offer and other park info. It really helps the customers because they can now browse some informations about Thorpe Park by just using their phone which is really accessible. Thorpe Park exceeds it by browsing the informations about Thorpe Park by just using a phone which is really preferable for their customers.

DISABLED GUIDES

BEFORE YOU ENTER THE PARK
Parking

Those holding a blue disability badge are required to pay ?3 for car parking. When a guest displays a blue disability badge, they can park in the disabled area of the car park, next to the Admissions area on a first come first served basis.

Ticket Concessions

We offer a concessionary admission price for disabled guests and one accompanying helper. We will require proof of entitlement before the concessionary rate is given. Such proof includes a blue/orange badge, Attendance Allowance book etc. Please note this is for Admission to the Park only and does not guarantee entitlement to a disabled Ride Access Pass from Guest Services.

If you require any assistance when purchasing your tickets, please do not hesitate to speak to a staff member in the Admissions area. Guests using wheelchairs who have not pre-booked tickets in advance should use the access ramp at the Annual Pass Building to purchase tickets for THORPE PARK . When entering the Park please use the right hand gates at the turnstiles which have a wider access point.

Annual Pass Holders with a registered disability have the option of a free helper pass. Please see ENJOYING YOUR DAY AT THORPE PARK

Ride Access Passes

Disabled guests who are unable to queue may be eligible for a Ride Access Pass for themselves and one helper. The wristband given will allow the disabled person and the helper to bypass the queuing system usually via the exit or designated entrance designed for ease of access. Proof of entitlement will be required before the Ride Access Passes are given. Such proof includes:

Documentary evidence in the form of a letter from a GP or hospital consultant, which details reasons that the guest is unable to queue. Please note this must be seen by THORPE PARK every year, and this is different documentation to that required for admission to the Park.

In certain situations (such as extreme weather conditions, mechanical problems or power interruptions) it may be necessary for guests to be evacuated from the rides, possibly from the highest point. We ask that any helpers are a minimum of 14 years old, and physically able to assist in the event of an evacuation. We can advise but it will always be up to the individual guest to decide whether or not they should ride.

Ride Safety

Several rides are unsuitable for guests with heart, back, or neck conditions, or expectant mothers and we strongly recommend those guests who have had recent surgery or an injury do not ride some of our more Thrilling attractions. On many of our rides guests need to have the ability to brace themselves in an upright position, and all rides require guests to keep their arms and legs inside the ride carriages, and remain seated at all times.

Not all of our rides are suitable for all guests. Each ride has a strict operating requirements that all riders must meet. Please do not ask our staff to break these rules as they are there for your safety. As well as taking note of the ride restrictions, we also strongly suggest that you watch our rides in motion before making a decision on whether to ride.

Toilet

All toilet locations around the Park have access for guests with disabilities, and we operate the Nationally recognised RADAR key system to access them. If you don’t have your own key, you can hire one from Guest Services for a ?10 refundable deposit.

Guest Services

Located in the lower level of the Dome, we are able to offer advice on ride access and restrictions along with offering guests with disabilities several options to make their experience at THORPE PARK both enjoyable and comfortable.

*Thorpe Park automatically recommends the customers that have disabilities into a suit that has access facilities that they require. Thorpe Park recommends the annual pass and the wristband that allow them to park in the disabled area of the car park and allow those who are unable to queue may be qualified for a Ride Access Pass for themselves and one helper that they may be able to bypass the queuing system usually via the exit or designated entrance designed for ease of access. In addition, they tell what rides are suitable for them; all their toilets have access for guests with disabilities; they tell where the disabled toilet is and they offering several options for guests with disabilities. This exceeds the customers’ expectations as the customer needs have been met without the customer requesting any assistance or having to ask as the proactive thinking of the staff have already acted on the customers’ needs before they have needed to ask plus they really concern about the security and safety of their guests.

Customer loyalty and satisfaction are important in any service industry; however, they are especially important in the hotel industry. When a customer is satisfied with their experience at a hotel, then they will then refer that hotel to their friends and family, as well as continue to use the hotel themselves, therein being thus remaining loyal to the hotel. Customer satisfaction and loyalty is are not always an easy tasks for hotels and requires extensive work and research to achieve. Customer surveys are conducted in order to understand what the customer wants and how to implement that into the hotel’s training programs to try to ensure that the customers are satisfied with their hotel experience. Many employee programs implement apply the suggestions by employee survey and comment cards, as well as expert advice on how to satisfy the customer.

Introduction

Customer loyalty and satisfaction can make or break any business, and, in particular, a hotel. When a customer is not unsatisfied, they will not return to the hotel and will spread share their bad experience with everyone they know; but however, when a customer is very satisfied with a hotel, they will tend to be loyal and keep coming back, as well as share the information with friends and family. Customer loyalty is more than continuing to patronize the hotel; it can also include referring friends and family, using the hotel for business functions, and patronizing supporting the “sister” hotels that are within the same chain. A customer becomes loyal by continuing to be satisfied with the hotel chain, either by through being listened to by the staff when there is a problem, through being treated with respect, or even through something as simple as having fresh towels in the room on a daily basis. Many customer surveys are conducted to receive feedback as to how satisfied a customer is with a hotel and what the hotel can do to either keep the customer satisfied or make the customer more satisfied. The hotels use this feedback from the customers to implement new training programs, as well as include expert advice in their employee training. The following literature review of these features of customer loyalty and satisfaction in the hotel industry supports the hypothesis that customer loyalty and satisfaction are imperative to running a successful hotel.

Customer Satisfaction

We all know that customer satisfaction is a key point in having a successful business, but what is customer satisfaction? (Too personal and assuming) Before continuing with the review, the definition of “customer satisfaction” needs to be explored. Customer satisfaction can be defined in several different ways. Many people believe that customer satisfaction is just that: a satisfied and happy customer; however, Engel and Blackwell (as stated by cited in Back, 2001, p. 23) define customer satisfaction as “an evaluation rendered that the consumption experience was at least as good as it was supposed to be beliefs with respect to alternative.” Back defines customer satisfaction as “the consumer’s overall judgment, including service features, the service product, sales personnel, or other situational variables,” (2001, p. 24). While all of these definitions are correct, the fact still stands that it is imperative in hotel management that the customer is fully satisfied in order to retain their business. Customer satisfaction can be achieved in through a variety of methods. Some of these methods include meeting customer expectations in regards to comfort, offering excellent customer service through effective employee training methods, and utilizing customer surveys and comment cards.

Meeting Customer Expectations

Meeting customer expectations regarding comfort can be compiled into five different categories: product, staff, arrival, value, and location. Product comfort can be a variety of items to the customer. According to Barsky and Nash (2003) “when describing comfort products, guests most often commented about their room-in particular the room’s design, a comfortable bed and room, room and hotel cleanliness, and convenient and special amenities.” Being comfortable with hotel staff members can have an impact on customer satisfaction as well. The staffs’ knowledge, attitude, and helpfulness enhance the customers’ comfort when staying in a hotel. Also In addition, “guests felt comfortable knowing that they can trust the staff with their safety, belongings, messages, and wake-up calls” (Barsky and Nash, 2003). When a guest arrives at a hotel, they want to feel instantly comfortable with their choice in hotel. Upon arrival “using courteous words, repeating the guest’s name, and treating the guest warmly makes the guests feel comfortable,” (Barsky, and Nash, 2003). Value is an important aspect in regards to customers being comfortable with their hotel choice. According to a study by Valerie Zeithaml in 1987 (as stated by Gordon, 1999, p. 18-19) value can be categorized into four groups:

Value is low price – the perceived value is based solely on paying a low price.

Value is getting what I want in a product – the perceived value is based on the benefits the consumer receives for a product.

Value is the quality I get for the price I pay – the perceived value is defined as affordable quality.

Value is what I get for what I give – the value is defined as the trade-off between what is received versus what is given up. Some common examples could be time or money.

Finally, the guests will find comfort in the location of the hotel because of the proximity of the hotel is to the guests’ interests. Bull indicates (as stated by cited in Lee, 2003, p. 18) “the location of a lodging property not only includes the distance from, or access to one or more specific attractions, but it also consists of qualities such as quietness, views from rooms, and the nature of the property’s surroundings.”

Customer Service

Customer service given by hotel employees can be a deciding factor if in whether or not a customer stays at a hotel or not. The hotel employees are the face of the hotel, and how the customer is treated when staying at the hotel impacts how the customer remembers on their stay. “The research group’s index [Market Matrix] of customer satisfaction in the lodging business indicates that a growing number of guests are unhappy with the levels of service they’re getting,” (Watkins, 2005). Customer service is more than the front desk employees or the bellhop; customer service includes the reservation agents through the call-in line as well as the web-agents. “No matter how they contact you walk in, call a reservation agent or visit your Web site – frequent guests should experience consistent customer service from each channel,” (Sparkes, 2004). Kirwin states, “Common sense tells us that satisfied customers are more likely to return than those who’ve had a bad experience,” (1991). Also, both Keaveney and Lewis advise (as stated by cited in Lee, 2003, p. 13) that “poor employee performance has been linked to increased customer complaints and the likelihood of switching to a competing service.” Customers associate their experience of one hotel with the similar hotels within the same chain. For instance, if a customer has a bad experience with the cleanliness of a room with a Comfort Inn, they will associate that bad experience with all hotels within the Choice Hotels chain. According to Crosby, Evans, and Cowles (as stated by cited in Lee, 2003, p 13), “the behavior and attitudes of contact personnel are indicative of the level and quality of services offered by the service firm, and they exert a strong influence on customer satisfaction.” Adequate training will help to ensure that employees treat customers with respect and courtesy even through something as simple as telephone etiquette.

If a hotel does not provide effective customer service through something as simple as a phone call, then the customer will then chose to take their business elsewhere. Kennedy (2010) outlines some reasons why a hotel should focus on telephone hospitality:

Hotels typically have many important customers who never visit – their only personal experience is over the telephone. This includes travel agents, meeting planners and administrative assistants from local corporate accounts.

Family, friends and colleagues of your in-house guests who call during their stay will form first impressions from how their calls were handled.

Even guests who booked online and later call with a question or special request form first impressions from their telephone experiences. If the impression is not good, they may very well decide to cancel.

A training session may be needed for employees to ensure the best phone customer service is given and to reiterate that customer calls are not the nuisance that some people believe, but that they are the voice of the hotel. The following are ways suggested by Kennedy (2010) that the employees can be trained on to give excellent telephone service:

Answer the “know at the door” of a ringing phone line with a proper greeting

Speak slowly and clearly.

Pay attention to inflection

Convey energy and enthusiasm

Ask for the caller’s name, if not provided.

Ask permission to place the call on hold, politely explaining why it is necessary.

Thank callers for holding and apologize for the delay, especially if the time was significant

Use the transfer button judiciously

End the call correctly. Just as a positive first impression starts the call off on a good note, ending the call correctly will leave a memorable lasting impression as well.

No matter how well a hotel is run, there are always going to be mistakes by the staff; it’s just it is human nature. The issue is not the mistake per se; rather, the issue is how the mistake is handled by the staff and management. Many hotels now have employee training programs as to how to handle cope with upset or irate guests. “Programs aimed at training employees in handling guest complaints and providing value-added service are essential to developing an effective staff,” (Kirwin, 1991). Of course, hotels do not intentionally make errors and will try to fix them in any way they can possible. “No lodging business likes mistakes or shortcomings, yet occasional service failures are inevitable regardless of how rigorous standards and procedures are or how much employee training is regimented,” explained by Hart, Heskett, & Sasser, Johnson & Fern, and Lovelock (as stated by cited in Fu, 2003, p. 2). Even though mistakes are inevitable, they can also be useful to a hotel to in identifying problems that need to be addressed. Brown (as stated by cited in Fu, 2003, p.3) advises that “service failures help a business to detect the causes of poor performance and to improve its service procedures and employee training.” The customer will appreciate the effort by the hotel when they can accept their mistake and provide a solution. Bitner, Booms, & Tetreault explain (as stated by cited in Fu, 2003, p.3) “a study of consumers in the airline, hotel, and restaurant industries found that most customers who received apologies, attentive assistance, and compensation from service employees after encountering service failures actually perceived the experience as very favorable.” Customer satisfaction can be measured by customers vocalizing their opinion on their stay by through speaking face-to-face with a customer service agent, through customer comment cards, or by through surveys conducted for the industry.

Comment Cards and Surveys

Comment cards and surveys are very important essential to hotels to understand what customers are thinking and feeling about their hotel and how to improve their business. “To identify the operational and marketing issues that influence satisfaction and loyalty, most hotels survey their guests in some way,” (Schall, 2003). Comment cards and surveys can convey both positive and negative customer feedback and should not be taken lightly by the hotel. “Most hotels have quest satisfaction surveys that enable them to build upon strengths and target areas for improvement,” (Carlstead, 2004, p.18). Schindlerhof Hotel (SH) is an example of a hotel that provides comment cards to their guests and takes the information very seriously. “SH tries to gain information from the incident to identify company structural and process weaknesses (weak spots) and to discover new market chances,” (Voss, 2005). Comment cards should be placed throughout the hotel to ensure that customers have easy access to them and can return them easily as well. In SH, “guests can find the cards on every table in the restaurant, in every room and in the foyer of the conference rooms,” (Voss, 2005).

Many hotel surveys are done industry wide by companies such as JD Power and Associates, PricewaterhouseCoopers (PwC), and American Demographics and are measured through the Market Matrix Hospitality Index and the American Customer Satisfaction Index (ACSI). These surveys are done conducted to gather information from customers on their satisfaction with hotels and what improvements can be made. JD Power and Associates conducted the 2008 North America hotel Guest Satisfaction Index Study and based their findings on responses from more 53,000 guests over 12 months (Baker, 2008). According to Baker “hotels are rated on seven measures: reservations, check in and check out, guest rooms, food and beverage service, hotel services, hotel facilities, and costs and fees,” (2008). The study indicates that the overall satisfaction in every category dropped, except for luxury and extended stay, from the previous year (Baker, 2008). JD Power and Associates conducted the same study in 2009 and “maintained the industry overall has improved in guest satisfaction year-over-year; Market Matrix showed the first big drop in its quarterly guest satisfaction numbers since the recession began; and ACSI offered mixed results among brands, but showed the industry overall was maintaining customer satisfaction,” (Crowell, 2009).

Customer satisfaction is one of the most widely surveyed categories in the hotel industry and is important when reviewing policies within hotels. Krantz indicates “Last year [2006], hotel customer satisfaction measured 75 on the American Customer Service Index (ACSI) – the highest since 1995 – while at the same time the number of employees per occupied room declined more than 10 percent, PwC’s hospitality practice reported,” (2007). Another way that customer satisfaction can be surveyed is by going through customer letters and comment cards and tallying the complaints and compliments to help understand what the customers want. “American Demographics sifted through a generous sampling of the nearly 2,000 letters submitted by consumers last year [2002] to hotels and resorts through Planetfeedback.com, a division of Cincinnati-based market research firm Intelliseek,” (Anonymous, 2003). The most effective way to create customer satisfaction is by having a friendly and helpful staff. “In fact, the highest percentage of satisfactory letters (44 percent) fell into the “hotel staff performance” category,” (Anonymous, 2003). The most important thing to remember when reviewing customer comment cards and surveys is that, without the customer, the business would not survive. As stated by Carlstead “in general, these are used for the concrete purpose of informing practices that will enhance guest satisfaction and loyalty,” (2004 p. 18).

Customer Loyalty

A common misconception is that when a customer is satisfied with a business they will be loyal; however, this is not always the case. “A customer may be completely satisfied but may not purchase again because of factors unrelated to satisfaction,” (Gordon, 1999, p. 13). Customers require more than satisfaction with a hotel in order to be loyal. Waller (as stated by cited in Strauss, 2004) states:

Mere satisfaction does not create loyalty. We expect to be satisfied. It takes delight-recognition, feeling valued, being made to fee special. If the business traveler is just another guest, and is not recognized, he or she will jump to another hotel on the next trip with no hesitation, no matter how satisfied their stay.

Sigauw advises (as stated by cited in Strauss, 2004), “While satisfaction is normally a precursor to return, there needs to be something more. Hotel companies need to establish an emotional connection.” Hampton Inn franchises are one example of this connection. Hampton Inn offers their customers a “100% satisfaction guarantee” and has offered it for over 20 years. This guarantee states “if for any reason a guest isn’t completely satisfied, that guest isn’t expected to pay,” (Anonymous, 2009). This may seem like a gimmick to some people, but for Hampton Inn, it works to help retain customers and keep them satisfied. “This 20-year promise of satisfaction has kept Hampton among the top performing hotel brands in customer loyalty and satisfaction year after year and will continue to guarantee satisfaction when you find yourself staying with Hampton,” (Anonymous, 2009). Other hotels try to retain customers with “loyalty programs” when which give points or free rooms to customers for staying at their hotel who are joined in the loyal program.

Loyalty programs are becoming more and more popular among businesses and especially in hotels. The issue is, though, do these “loyalty programs” really give hotels loyal customers or are they just gimmicks? Mattila states as an example of hotel loyalty programs, “Hilton HHonors program makes it easy to achieve an elite status, while Hyatt’s Gold Passport program offers a free stay after two stays charged to a MasterCard,” (2006). People are not concerned with how many points they have earn at a certain hotel; they are interested in what the hotel can do for them for being a “loyal” customer. “Hotel points mean very little, but recognition and in-stay perks like upgrades, expedited check-in, late check-out and so on are highly valued,” advises Waller (as stated by Strauss, 2004).

Hotels create these “loyalty programs” because they know that it is harder to gain new customers than it is to retain current ones and need to find ways to ensure their customers keep coming back. “During difficult economic times hotels are reminded of a fundamental lesson: building guest loyalty is the only way to compete without sacrificing revenue,” (Sullivan, 2004). Torres and Kline also understand the importance of keeping customers loyal with their observation in the industry that “companies are a also realizing that loosing a customer means loosing more than a single sale: it means loosing the entire stream of purchases that the customer would have made over a lifetime of purchase,” (2006).

Other than loyalty programs, below are some ways that hotels can build a more loyal customer base:

Develop a customer centric communications strategy. Treat people as individuals.

Personalize your communications and talk to guests on a one to one basis.

Don’t over communicate. Remove “email blast” from your marketing lexicon.

Surprise and delight loyal customers with perks, rewards, and value-adds.

Seriously consider using an outside communications firm with direct marketing specialists on staff who know how to:

Segment your database

Develop relevant content and compelling offers

Nurture and deepen the relationship over time (Pratt, 2010).

The image of a hotel can have a substantial impact on customer satisfaction and loyalty. Ostrowsky, O’Brien, and Gordon indicate (as stated by Kandampully and Suhartanto, 2000) “previous studies show that the image of the location, employee attitude, facilities, and services of a hotel constitute important factors in determining customer loyalty.” The way a customer perceives a hotel’s image can be a deciding factor of if the customer keeps returning or not. Kandampully and Hu explain that “those firms who have developed strategies and systems to ensure that the entire firm’s focus remains directed on assisting and supporting customers not only gain positive influence on the firms’ image but will also gain customer loyalty,” (2007).

Conclusion

Customer service and loyalty are not always complementary of each other; however they are both essential to the success of the hotel industry. Hotels realize that satisfying the customer is one of, if not the most, important factors in keeping their business alive. Satisfying customers can be include something as little as listening to their problem and finding a solution or as large as giving a “100% satisfaction guarantee” and not charging the customer for not being satisfied fully. (Conducting customer surveys and offering comment cards are essential tools for determining whether or not a hotel is serving their clientele as needed. By ensuring that customers are satisfied, hotels and other businesses can create customer loyalty; after all, satisfied customers often share their experiences with friends and family. A well-trained staff can make or break a hotel’s image; a friendly smile at the front desk, helpful staff members throughout the hotel, and amazing facilities are key factors in gaining and keeping clientele. Remaining aware of the staff’s attitude, maintaining the hotel’s property, and conducting research as to customer satisfaction will help hotel management to uphold all the standards necessary to retain customer loyalty.)

The hotel that I have chosen is Hilton London Green Park Hotel. This hotel is situated approximately 45 minutes from Heathrow airport via tube and is located within the easy reach of all the local tourist attractions and major business centres a perfect combination of business as well as for tourist visit in London.(55)

It majorly lies between two streets that is the oxford street and the Edgware road which connects to majority of the streets leading to central London and other parts. This makes it convenient for the people who want to go for meetings and or visit a potential business site. The interiors of the hotel are very classy and make it easy for a business traveller to get the max of what he wants, the entire hotel is non-smoking one and has a business centre to hold meetings right at the comfort of the hotel.

Majority of the guests that frequent this hotel are tourist as this hotel lies exactly at the heart of London and majority of the tourist attractions like the Hyde Park, Kensington Gardens, Trafalgar square, oxford circus, etc are within the easy reach. The hotel has a full fledged concierge service which assists the guests in finding the best possible routes for guests and also gives them suggestions on which place they should visit and how can they go about. But many of the tourists don’t like the fact that the entire hotel is a non-smoking hotel and also it has only 1 restaurant and 1 bar and has no other variety which the guest can see or experience, but just because of its brand and the location it still goes ahead and attracts a lot of people. (295)

Customer care involves putting systems in place to maximise your customers’ satisfaction with your business. It should be a prime consideration for every business – your sales and profitability depends on keeping your customers happy. (Business Link). What is customer care. Customer Care Policies are an integral part of any functioning business, there has to be some set rules and procedure which will act like a guide in fulfilling the goals and objectives of the hotel and more importantly lead to a customer satisfaction which is the top priority of any organisation. Depending on the type of organisation the types of services that may be offered might differ which includes but is not limited to telephone, help desks, after sales, service recovery, or may be a simple face to face conversation but all that matters is that the guests problems are given a ear and that they feel important and worth the stay.

Today the market is very competent and the guests have a variety of choice to make so it is very important that companies have to go ahead and capture a major stake in the market and that is possible only if you retain the guest. Retention is only possible when the guest is satisfied and to be more elaborate the company today has to go beyond expectations or rather exceed expectations and that is possible only with strong customer care policies and it needs to be strictly adhered to and practiced devotionally. Abraham Lincoln once said “I never had a policy; I just tried to do my very best each and every day” so sometimes it’s not only about the policy but it’s on how you go beyond the policy to help the guests and that’s what makes a lasting impression on the guests minds and he will certainly be a repeat guest for you.(400)

Three customer care policies in Hilton London Green Park Hotel

Quick and fast: – As mentioned earlier this hotel usually caters to the needs of the business travellers and clients and hence they lay more emphasis on the needs of these guests by providing them quick check-ins and taking pre-authorisations (if required). Some of the basic things that they pay attention to are:-

Giving them quite rooms away from the city roads, elevators and areas from where noise can be expected as these guests usually just come in for a night take rest and then leave for another destination.

Providing them with the facilities of early breakfast in their rooms and giving them express check out facilities.

Business travellers and guests are given more attention in terms of any grievances that they may have and hence service recovery procedures are in place which includes giving them free wine bottle, upgrades, or may even include a free night depending on the situation.

Feel like home: – It is said a hotel is a “home away from home” and hence this hotel emphasises on all the guest coming to this hotel for leisure and recreation purposes and hence the guest is preferably given a room which faces towards the city or has a park view but in either case the guest is asked for the preference of his/her room. The beds are designed in such a way that a family of three (including a kid) can easily manage to sleep on the bed. Local sightseeing and local runs are arranged by the concierge as per request. The facility to provide an extra bed/cot at a nominal rate is also available. What makes it more competitive and interesting is that all the children aged 18yrs and below get to stay free if they are accompanied by their parents or grandparents and children aged 10 years and below get their meals and drinks free plus there is a garden where the kids can spend their time.

Feel like a king: – This is one policy that Hilton hotel always emphasises on, knowing what the guest wants or expects and that too at the right time makes you a winner in the market segment. The hotel maintains a proper guest profile which includes some personal information about their choices and also about their birthdates etc. So if the guest is staying with them on their birthdays or their anniversary then they send them greeting cards, some gift hampers or a simple wine bottle to say “we are happy for you”. The gifts might not be that expensive in terms of the investment done by the guests but yes this is enough to “wow” a guest and will make him feel a part of the family. Also the long stayers and frequent visitors are contacted on regular basis and they are informed of any special promotions or offers that the hotel might be running at the moment.

Effectiveness of customer care policies in the hotel

Whenever a policy is in place it is of utmost importance that it needs to be evaluated for its effectiveness and whether that particular policy is really working for the organisation or not. Now this could be done in variety of ways which included taking customer feedback, polls, opinion surveys, etc these things makes the organisation realise where exactly they stand and what best could be done to prevent that. Most of the hotels usually focus on retaining the guests but Sarah Cook in her book Customer Care Excellence mentions that it is equally important to record the customer retention rate and also to analyse it on frequent basis.

Hilton establishes a system called Hilton honours in which it can find out responses from its guests and what they are expecting in terms of hospitality organisation and also another program called Satisfaction and Loyalty Tracking (SALT) where they keep a constant track on how many guests returned back home satisfied and how many of them will be coming back to the hotel. This helps in identifying where they currently stand and how it is going to affect their business in the long run.

INTRODUCTION

Kampala Sheraton Hotel is an international hotel in Kampala, Uganda. It is situated on Ternan Avenue in the central division of Kampala. Sheraton Hotel Kampala is part of the Starwood Hotels and Resorts Worldwide Incorporation. Sheraton is located at the heart of Kampala. Sheraton Kampala serves the needs of upscale business and leisure travelers worldwide. For over 75 years this full-service, iconic brand has welcomed guests, becoming a trusted friend to travelers and one of the world’s most recognized hotel brands. It has also stepped into major international markets all over the world.

What is customer care? The customer care operates in markets whose tastes change as times change. The hospitality industry is greatly affected by these changes and this means that the customer care has to change accordingly. Customer care services at Sheraton Hotel Kampala include reliable services, security, parking space, front desk services, upscale frontiers, attractiveness, beauty, speed that comes with service delivery, attention to customers, anticipation of customer needs, honesty and a decent attitude towards customers. These services are intended to make customers comfortable, create memories they can ponder about, create satisfaction that will cause them to pay for the services and thereby retain the customers. Every business hopes to create and serve but the challenge is actually meeting the motive.

Sheraton Hotel has also provided quality services for its customer base. The hotel has a customer care service policy which caters for customer activities. These policies include exclusive accommodation, efficient and timely delivery of services, hotel guides, security, customer attention, parking space, 24hour front desk services, and anticipation of customer services. Despite Sheraton Kampala’s efforts to provide the best services to its customers, the hotel has competitors in the hotel industry like Serena. Unfortunately, the company can barely do much in creating a new market. This is due to the average to low standards of living of people in Uganda.

PROCEDURE

The target study population was the customers and staff of Sheraton Kampala. The study involved 75 respondents, 50 of which were customers of the hotel and 25 were part of the staff at Sheraton Kampala. Non statistical methods were used for example the nature of field respondents and other field situations.

A descriptive study was undertaken in order to determine the characteristics of interest at Sheraton Kampala. The qualitative and quantitative data acquired from both primary and secondary sources was analyzed. The study was majorly based on customer’s views, opinions and preferences in order to make judgments, conclusions and recommendations. The primary sources of information were acquired from the staff and the customers of the hotel. The secondary information was acquired from Internet, newspapers, journals, sales report and invoices.

Questionnaires were given out to the customers in order to seek their opinions, views and preferences. Observation of the customers was conducted in order to verify that the customers’ actions were a lot like their views.

MAIN RESULTS AND FINDINGS

These are the finding concerning the demographic characteristics of employees at the Sheraton Kampala.

There were more female employee respondents than male respondents. This precisely means that females are more attractive in the hotel service industry because of they are presumed to be better at customer care in comparison with males.

From the above illustration, most of the workers are aged between 30 and 39 followed by 20-29, then 40-45 and lastly 50 and above.

From the results above, all the employees are educated and have the capability to respond to the questionnaires given out.

The hotel customer care service recruits people who are old and mature of which most are married.

The only explicable reason for the outlook of the results is mainly because Christianity dominates as a religion in Uganda.

This means that conclusions can be based on the views of the employees for they have gained a sizeable amount of work experience.

These are findings concerning the customer care strategies employed by Sheraton Kampala.

44% of the employees agreed that tour guides and other services are the best strategies employed by the hotel. 28% of the employees recommended training of the employees. 20% and 8% of the employees suggested that motivation of the employees and after sales services would be a great strategies. This is so because this would attract customers which in turn brings about customer retention and increased sales.

28% of the customers agreed that they work hand in hand with the top management in order to improve customer care for the purposes of customer satisfaction. This is more or less induction training of the employees. 44% of the employees were not sure about if the top management works hand in hand.

One can then conclude that the activities ensure quality of customer care and customer satisfaction.

56% of the customers acknowledge that for customer care services to be successful, the customer’s needs should be at heart in order to achieve customer satisfaction while the others are not sure or carry a different opinion.

These are findings concerning customer care services.

A TABLE SHOWING THE RATING OF ASPECTS OF CUSTOMER CARE AT SHERATON KAMPALA.
Rating
Clean
Friendly
Helpful
Efficient
Polite and courteous
%
%
%
%
%

Good

60

32

68

60

90

Fair

40

68

28

24

10

Poor

0

0

4

16

0

On critical analysis of the above findings, one can rate the customer care services at Sheraton Kampala as generally good.

A TABLE SHOWING THE RATING OF CUSTOMER CARE SERVICES AT SHERATON KAMPALA.
Rating
Parking space
Security
Front Desk Service
Hotel guides
Customer attention
%
%
%
%
%

Good

90

86

88

36

92

Fair

10

14

12

40

8

Poor

0

0

0

24

0

Regarding the above results, it is no wonder why people go to Sheraton Kampala. This is because of their good services despite some flaws faced in some areas especially with the hotel guides.

Most of the customers appreciated the services that were offered so the services at Sheraton Kampala are creditable.

ANALYSIS AND DISCUSSION.

SWOT analysis is a form of strategic analysis that identifies and analyses the main internal strengths and weaknesses and external opportunities and threats that will influence future direction and success of the business.

Strengths
Weaknesses
Internal

Location of the business

Recruitment of unskilled workers that require training.

Strong brand reputation

Poor services offered by hotel guides

Good customer care policy

Few services offered to customers

Fair management efficiency

High prices charged for quality services.

Focus on customer satisfaction

Opportunities
Threats
External

Undifferentiated products and services in relation to competitors like Serena

A new competitor i.e. Serena Hotel

A new international market

Price wars with competitors

Taxation is increased on the services.

CONCULUSION

From the findings, it can be deduced that Sheraton Hotel Kampala has a good performance level especially towards employees. Some of their substantial customer care services include training of employees on customer service handling, complaint handling, seeking customer attention, avenues of customer’s complaints, transport services and replacement. Employee motivation has been a stimulant to the growing number of customers at Sheraton Kampala. However, training and motivation should be enforced in order to maximize the customer care delivery. From the research findings, the customer care services are generally good as acknowledged by hotel customers. However Sheraton hasn’t created an interface for customer’s complaints that can air out their views on the services provided.

It is also important to note that a significant relationship between customer care delivery and customer satisfaction exists. The two variables are directly proportional to each other. The better the customer care delivery, the improved satisfaction of the customer and vice versa.

RECOMMENDATIONS

The hotel should arrange and present streamlined hotel guides who are more knowledgeable about the hotel. When a few of the hotel guides were asked about the hotel, they were only conversant with the dining and resting rooms avenues. This is a limitation to Sheraton Kampala.

The complaints of the customers should be highly regarded. A customer complaint desk should be established. The hotel will then be more open to external ideas if they handle the ideas.

As the core focus of Sheraton Kampala is the customer satisfaction. The management of the hotel should involve the customers while designing the customer care policies.

The employees of Sheraton should be involved in the designing of the customer care policies as their creativity will be tapped and more ideas will be sprought up.

AREAS OF FURTHER RESEARCH.

Research should be carried out on the employee performance and customer satisfaction.

Research should be carried out on the impact of customer care services on sales volume.

Research should be carried out comparing customer care services of other hotels.

Introduction

In contemporary international business with an increasingly open market, many local enterprises are facing severe competition from large scale international company. In the case of disparities in overall strengths, it is quite essential and necessary for local business to explore new development ideas as well as new space for development.

With its continuing effort on re-engineering these years, Hong Kong Ocean Park has turned a profit of 95.7 HK$ millions in 2004. However, with the coming opening of Hong Kong Disneyland, Hong Kong Ocean Park should be well prepared for the challenge from its main competitor by starting from its own characteristics, repositioning, identifying its absolute advantages, carrying out redevelopment plan with the support from its partners and local government.

This report is mainly focused on the statement of the current situation of Hong Kong Ocean Park and discussion about its future development. To begin with, there will be some basic introduction of Hong Kong Ocean Park like its mission, vision and so on. Next goes the analysis of external and internal environment. After that, strategic choices will be discussed. And finally, suggestion and recommendation are proposed to the CEO and Board of Ocean Park.

1. Strategy concepts and vocabulary

Mission: “Ocean Park provides all guests with memorable experiences that combine entertainment and education, while inspiring lifelong learning and conservation advocacy. Our aim is to maintain a healthy financial status, while striving to deliver the highest standards of safety, animal care, products and guest service” (Ocean Park Hong Kong, 2010).

Goals and objectives:

-boost the number of annual visitors from four million in 2004 to five million by 2010;

-to make a 0.5 per cent contribution to Hong Kong’s gross domestic product (GDP) in 2010.

Vision:

“Ocean Park aspires to be a world leader in providing excellent guest experiences in a theme park environment connecting people with nature” (Ocean Park Hong Kong, 2010). And, more specified, its vision is to become number one marine-based park for each family not only from Hong-Kong but also from mainland China.

The main performance measures to determine the success of Ocean Park are the following:

Firstly, it has high reputation in both Hong Kong and mainland China. As it has been operated for more than 28 years, it become a long-time favorite of several generations, many local people were sympathetic to Ocean Park. Thus, people who had visited the park as children were now bringing their own children to it. Secondly, it had become a fixture of Hong Kong’s cultural heritage. Thirdly, the number of visitors in 2004 is 4 m of people (with daily maximum capacity 35 000 people); total revenue in 2004 was 536.2 HK$ m comparing to 428.3 HK$ m in 2003, surplus for 2004 year was 95.7 HK$ m comparing to deficit 4.1 HK$ m in 2003. And finally, its new brand (Whiskers) is recognizable at every house in China and plays a major role in the success of Hong Kong Ocean Park.

On one hand, we have stakeholders, who help to achieve park’s purpose and mission, such as Hong Kong government, Home Affairs Bureau and the Tourism Board, employees of Ocean Park corporation and park’s visitors (customers). On other hand, we have those, who interfere with achieving park’s purpose and mission, such as activist groups (certain environmental groups and animal rights activists), who insist on forbidding of buying and transportation exotic animals to park, trade associations and unions (bus companies and taxi drivers), who are against building a mass transit railway (MTR), and competitors, who want to regain the market share.

2. External Environment
Key driving forces and their ranking

Raise and spend HK$5.55 billion from private and government loans to revamp park’s well-worn product line (approval of development plan)

Global changing in tourism for Hong-Kong and Asia-Pacific region (development of tourism in region)

Disneyland’s arrival – worldwide success of main competitor-Disneyland, coming to Hong Kong (Disney’s success or failure)

PESTEL ANALYSIS
FIVE FORCES ANALYSIS for amusement park industry
1) Threat of new entry

As entertainment and theme park industry requires a lot of money (for park equipment, human resources maintenance), the entry barrier is high. Also lots of time is required for park’s planning, construction, development and launching, a lot of licenses and legalization is needed (safety, sanitary, security etc). Besides this, a large space of land is essential to the development of the amusement park, especially in Hong Kong, where the land price in real estate market is high.

2) Threat of rivalry

With low differentiation of products visitors’ choice will be based on price and service only. As a result, there is an additional pressure on the price and service competition.

Ocean Park needs to carry out different plans and activities such as redevelopment and introduction of new attractions. There are no rivals with exactly the same range of products. Disney’s arrival is only expected.

3) Threat of substitution

In the family’s leisure activities segment, where Ocean Park is operated, many organizations provide different kind of services. These include Cultural Center, Zoo and Botanic gardens. Thus, Hong Kong, as a metropolis, has a variety of cinemas, karaoke clubs, family cafes, concert halls and museums. Such services can’t offer full range of activities, which Ocean Park provides, but they have an impact on number of customers, especially during the days of unique events, such as blockbuster’s premieres or festivals.

4) Bargaining power of buyers (visitors)

As Ocean Park successfully established and positioned its image with unique attractions, it has become a “must see” place for foreign visitors. The tourist bargaining power is low due to it is hard for visitors to get the same experience at any other place as they have had in Ocean Park.

Local residents have a high buying power as they have many other choices for leisure. For instance, they can go to Wetland Park for ecotourism and nature and wildlife experience, they can also go to movies or fitness club for entertainment purpose. Moreover, the switching cost is relatively low for them.

5) The power of suppliers

Suppliers have quite high power. Thus, construction elements of amusement rides are huge and complicated, that’s why park is highly tied with supplier. Additionally, supplier is responsible for maintenance of objects he has developed for park. This caused in higher dependence of selected constructor. Otherwise, this market is developed and the choice of suppliers is become greater now. While constructing buildings (hotels, etc) with particular contractor park can’t easily change to another contractor because of high switching cost). The situation with the exotic animals is such as Ocean Park can buy in particular country only.

The underlying dynamics, which are driving five forces

1) Aftermath of economic crises and increasing in number of suppliers will decrease supplier power.

2) Disney’s arrival decrease entry threat in entertainment park industry and increase competitors’ rivalry.

3) Developing of new technologies will affect rising of substitutes. Also competitors with new technologies will win (in this aspect Disney has an advantage)

4) Disney’s arrival increase demands in diversification of Ocean Park’s products.

5) Ticket price advantages (185 HK$ for adult ticket at Ocean Park compared to 295HK$ for the same ticket at Disney).

6) The main rival (Disney) is also same market oriented (families with children), therefore, this could rise buyer’s power.

Based on the five forces analysis, the main dominant force of industry is substitutes. Less importance has suppliers and further – buyers.

Looking forward, the five forces will change in this way:

-Rivalry will increase with Disney’s arrival;

-Buyer power will increase slightly;

-Substitute threat will also increase;

-Entry threat decrease dramatically;

-Supplier power will also decrease.

Five forces much more affect Wetland Park – Ocean Park’s key competitor, located at the northern part of Tin Shui Wai, in Yuen Long, than Ocean Park itself, because Wetland park’s products are less differentiated. It has “a 10,000m2 visitor centre, Wetland Interactive World, and a 60-hectare Wetland Reserve” (Hong Kong Wetland Park, 2010). Arrival of other competitor – Disney and its substitutes – doesn’t affect much Ocean Park because it has its own niche.

More differentiation of new products, directed mainly to Chinese native culture will affect rivalry, substitutes and buyers. Unique high-quality products and services also will influence buyers. For seeking suppliers big impact will have Internet and special web-sites with best quality of service, characteristics, recommendations and prices.

Strategic group/space analysis for Ocean Park

There are 2 key competitors for Ocean Park:

1) Hong Kong Wetland Park, mentioned above. It is a conservation, education and tourism facility, consisted of large visitor centre, Wetland Interactive World and a Wetland Reserve. This park provided visitors with opportunities to observe wildlife, awareness and understanding the values of wetlands throughout the East Asian Region and beyond, wetlands conservation. So, it’s mainly about wetlands. The Hong Kong Wetland Park is also going to “be a world-class ecotourism facility to serve both local residents and overseas tourists” (Hong Kong Wetland Park, 2010).

Compare to Disneyland and Ocean Park, Hong Kong Wetland Park has different facilities and product range (such as themed exhibition galleries, a theatre, a souvenir shop, an indoor play area), provide different services and thus, like Disney and Ocean Park, has its own niche. The range of facilities provided is the narrowest among 3 parks. Therefore, Wetland Park can’t meet demand of those visitors, who are looking for excitements and extreme pleasure, which can be found on a rides at 2 other parks.

2) Hong Kong Disneyland, arriving in a nearest future.

After 28 years of operating as a near monopoly, Ocean Park would soon have to compete with one of the biggest names in the entertainment and theme park industry. Moreover, Disneyland targets the same group of park’s customers – families with children.

It has well-known brand and reputation. It’s the world leader in terms of entertainment. Several of Disney’s characters (Mickey Mouse, Donald Duck and Winnie the Pooh) were household names all over the world, including in Hong Kong. Image, which Disney company holds almost for a century (The Walt Disney Company was founded in 1923) and Disneyland itself (first park was opened in 1955) for half a century (compared to 28 years of Ocean park) helps to attract visitors not only from Hong Kong and midland China, but also from different part of the globe, especially those who are from the USA and Europe (The Walt Disney Company, 2010).

But, despite of distinguish of Chinese culture, Disney characters may be not as popular in Hong Kong as Ocean Park’s mascot, Whiskeys.

Among other advantages of Disneyland are:

– location (it could be reached in just 10 minutes from Hong Kong’s airport and less than 30 minutes from downtown Hong Kong);

– the price claimed to be the least expensive among the five Disney amusement parks throughout the world;

– the area of Disneyland is 310 acres compared to 215 acres of Ocean Park;

– 5 times greater investment than for Ocean Park;

– world-renowned innovation;

– high customer service standards.

Strategic groups within the entertainment and theme park industry in Hong Kong

Broad

Ocean
Park
Disneyland

Product range

Narrow

Wetland Park

Global

Local

Geographical Scope

On one hand, Ocean Park is a part of entertainment and theme industry. Its market is families with children. On other hand, Disneyland, its future competitor, applies to the same market. Despite of this, Ocean Park has its own niche with visitors from mainland China and products range, combining entertainment and leisure as well as education.

3. Internal Environment
Ocean Park’s resources

1) Tangible:

– financial – private and government loans; expected HK$5.55 billion investment; HK$145 billion economic effectiveness; surplus from operations in 2004 was HK$182.2 million on revenues of HK$536.2 million; net current assets – HK$283.2.

– physical – Sea World, marine life and real animals: 35 rides and attractions; favorable and convenient location on the southern side of Hong Kong Island; wide range of new activities, such as the Abyss Turbo Drop thrill ride, seasonal and special events (Chinese New Year, Easter Holiday, Summer Holiday, Halloween and Christmas), popular water-related activities, interactive activities with animals, “edutainment” programs, successful Sea Jelly Spectacular and so on.

2) Intangible:

– long-time reputation of park with government, customers;

– new brand – sea lion named Whiskers;

– cultural heritage of Hong Kong;

– great number of repeated visitors.

3) Human:

– 37 100 employees, their skills and knowledge;

– Thomas Mehrmann, new CEO of Ocean Park, and his previous experience at US-based Six Flags Corporation.

Main capabilities of Ocean Park

1) New products, facilities and services development capability – continually adding new features and attractions. Therefore, in a nearest future Ocean Park will become one of the best marine-based theme park with strong connection with nature.

2) Research and development, marketing and sales capabilities: plan to refurbish and rename Ocean Park’s 2 major areas (the Lowland and the Highland), new hotels to be developed, including a five-star boutique, spa-type hotel, plan to open offices in the major urban areas of Guangzhou, Beijing and Shanghai to enhance promotional activities in Hong Kong and attract more mainland visitors.

3) New incentive compensation that linked employee compensation to the financial performance of park.

The competences of Ocean Park

– local market loyalty, customer’s trust and love

– long-term reputation, distinct Chinese characteristics

– recognizable brand

– education in combination with recreation

– cost and differentiation of product, encouraged visitors to return to the park

– distinctive work culture, with its own norms and practices

Competitive Advantages of Ocean Park over Disneyland

– cultural heritage of Hong Kong, orientation mostly on visitors from midland China

– first-mover advantages

– primary focus of Ocean Park on real nature and wildlife in contrast to Disney’s strengths in cartoon characters, castles, virtual reality and fantasy

– no need to engage in high-profile advertising and publicity, rely more on word-of-mouth

– more diverse and wide range of products

– price advantage: the admission price for Disneyland is expected more than twice higher for child and one and a half higher for adult than price of Ocean park. And visitors from mainland China are very price sensitive. SmartFun Annual Pass program with unlimited admission to the park for its holders within a year, and discounted prices for food, souvenirs

– orientation not only on entertainment, but also on education of visitors

– special events for traditional Chinese holidays (Chinese New Year) besides events for western holidays (Halloween)

Despite Ocean Park build its strategy on its resources, capabilities and competences, it can’t relay only on them – they need to be developed, innovated and refreshed, because they may begin to look dated and shabby for their visitors. For example, it can import more species, construct water/sea-related facilities and hotels. Overall, Ocean Park resources are sustainable, with some exception such as, the impact on these resources from environmental groups’ opposition.

SWOT ANALYSIS
Positive impact
Negative impact
Internal environment
Strengths

-diversified and wide range of amusements (thrills, animals, seasonal and special events)

-product line revamp

-highly linked with culture of mainland Chinese visitors, knows their demands and behavior

-the main, oldest and most famous amusement park in the country, hometown favorite

-28 years of operating as a near monopoly

-no need to engage in high-profile advertising and publicity, rely more on word-of-mouth

-strong business connection to the local government (support from the government of Hong Kong and mainland China)

-previous experience of Thomas Mehrmann (new CEO of Ocean Park) in theme park industry (at US-based Six Flags Corporation)

-local market loyalty

-positive image of park

Weaknesses

-located on a hills-hard to get to some riders-that’s why visitors experienced rides only once

-different facilities are old and un-attractive and need renovation

-a lot of activities depend on weather

-no substantial capital investment

External environment
Opportunities

-focusing on delivering mainland China’s visitors as well as foreign visitors

-plan to build a mass transit railway (MTR) station to connect Ocean Park to the subway grid

-the development and improvement of the amusement machinery, which can impact the services and features of the organization and its relationship to their foreign visitors

-raise the standards of park with Disneyland arrival

– fostering sponsorships

-plan for building new hotels (boutique and spa-type) – orientation on new luxury tourism market segment

Threats

-economical instability (such as the Asian financial crisis of 1999-2001, lasted for 3 difficult years for Ocean Park), outbreak of different diseases, such as Severe Acute Respiratory Syndrome (SARS) in 2003 (Both these factors can affect number of visitors and their buying behavior, worsening the park financial situation)

-arrival of Disneyland Hong Kong

-location on valuable real estate: it could be shut down and its land could be sold off for other recreational or commercial purposes.

4. Strategic Choices
Business-level strategy

Hong Kong Ocean Park uses hybrid strategy, which “seeks simultaneously to achieve differentiation and low price relative to competitors” (Johnson, Scholes, Whittington, 2008). Most activities were carried out based on this Strategy.

1) Hong Kong Ocean Park’s admission fee is Adult HK$185, Child HK$95 which is lower that of Disney’s: Adult HK$295(weekdays) HK$350(holidays); Child HK$210(weekdays), HK$250(holidays).

2) Hong Kong Ocean Park did not spend too much on new fixed-asset attractions due to short life circles of them and difficulty in coming up with an encore.

3) It keeps part attractions fresh, novel and exciting while minimize costs. Instead of buying in new attractions, Hong Kong Ocean Park focused on culture innovation. Some relative low-cost ideas proved successful: Seasonal and special events attracted repeat visits every year.

4) Hong Kong Ocean Park did not take part in highly cost advertising campaign. Compared to its competitors, Hong Kong Ocean Park tended to rely more on word-of-mouth to generate additional business. Since Hong Kong Ocean Park was the local residents’ favorite theme park and had high reputation in Hong Kong even in Asia. Hong Kong Ocean Park had profound influence on several generations in Hong Kong, people who had visited the park as children were now bringing their own children to visit the park. Actually, Hong Kong Ocean Park was locally born and bred and had become a fixture of Hong Kong’s cultural heritage.

5) Hong Kong Ocean Park had a clear organizational structure, no too much redundancy. It can save labor cost.

6) Hong Kong Ocean Park had identified its strategic customers clearly; those are Local tourists and Mainland Tourists. So, it carried out several plans to attract its key customers.

a) It hosts several festival events and activities to complement its park offerings with distinct features, like Chinese New Year. It had distinct Chinese characteristics that reflected its roots in Hong Kong, a quintessentially Chinese city.

b) Retained its unique SmartFun Annual Pass Program and tactically reviewed and developed value-added benefits to build sales and local customers’ loyalty. This program encouraged annual pass holders to visit the park repeatedly. Visitors to the park would spend money in other areas to boost revenue beyond the admission fees.

7) Hong Kong Ocean Park’s had clear and definite position; that was to become “the best marine-based theme park in the world” – need a source here!!, to provide customers with a place for recreation and education about marine life and environmental conservation. This unique strategic position is differentiated Hong Kong Ocean Park from its competitors and ensure its advantages over the main competitors.

Competitive strategies of Hong Kong Ocean Park’s competitor

Disneyland was regarded as Hong Kong Ocean Park’s main competitor and it adopted a differentiation strategy. With a differentiation strategy, a company provides products or services that offer more benefits than those of its competitors which are widely valued by buyers. The aim is to make a company advantageous over its competitors by offering better products or services at the same price or increasing profits by a slightly higher price (Johnson, Scholes, Whittington, 2008).

More specifically, Disneyland took below action plans in line with its differentiation strategy:

1) The selling points of Disneyland were Disney cartoon characters, fantasy world and famous Americans brands, 23 rides and attractions.

2) Disney has strong abilities to create fantasy and virtual situations, and it was going to leverage the benefits of animation into its amusement parks.

3) There would be two hotels in Hong Kong Disneyland which could provide guests with better recreation facilities.

4) There was going to be a subway station linking Disneyland to other parts of Hong Kong which enable Disneyland to has convenient transportation advantage over its competitors.

5) Unique Disney World-styled wedding ceremony was offered to guests in Disneyland.

Strategic direction

In 2005 Ocean Park had good business characteristics – it became profitable, with significant market share, effective management team and successful recognizable brand.

Otherwise, arriving of Disneyland could negatively impact on success of a company. To avoid this, Ocean Park must define a right strategic direction. Most preferable direction is product development. This means that Ocean Park need to improve its products range and number of additional services. Thus, by offering new wide set of entertainment and educational products for all target groups, the company can gain advantages to harden its brand, attract new consumers and retrieve lost customers, who not engaged with old facilities and services any more.

Despite the international tourists is a minor group in customers totals, company could start to develop a new markets. This development includes marketing campaign directed to tourists from selected countries and making contracts with tour agents. Realization of these methods helps to increase tourists share when local citizens’ share will decline after Disneyland coming.

International Strategy

International Strategy for Ocean Park is limited to marketing policy for preferable countries. The main reason of this limitation is that Ocean Park can’t be expanded to other countries like Disneyland does, for example. It’s based on local flora and fauna and strongly attached to Chinese culture. Also other countries may not have such resources. Ocean Park is a unique, not common product. Not every country even needs it. Thus, expansion is considered in case of marketing development only, such as connection with potential tourists, opening of offices, TV advertising and so on, which helps to enhance promotional activities in Hong Kong and attract visitors.

CAGE FRAMEWORK for Ocean Park

Cultural distance: With increasing popularity of the Ocean Park, the CEO and Broad of Ocean Park need to think about it attractiveness to tourists in case of the whole world. Indeed, Ocean Park activities are affected by cultural heritage, but it only helps park to attract tourists not only from Asia, but also from all over the world. High priorities should be given to those countries, from where the number of tourist is significant.

Administrative and political distance: It’s important to consider at first countries with good and stable relationships with China and Hong Kong.

Geographic distance: High priority should be given to those countries, from which the number of tourist is significant, then to neighbor countries. Therefore, Ocean Park need to make agreements with tour agents in these countries, organize different sales and advertising, so, expand its marketing presence in these countries.

Economic distance: The economic circumstances of a country is an important factor when carrying out international strategy. Therefore, the amusement theme park can’t be developed well in the countries with bad economic circumstances. Thus, the main orientation of Ocean Park will be on countries with high income per capita or high level of consumer wealth.

5. General introduction and future of development Hong Kong Tourism

Since the reunification (except during the SARS outbreak in), the Hong Kong tourism industry has performed well. In 2004, Hong Kong tourism industry reached new heights, with 21810630 tourists, increasing by 40.4% compared to the figures of 15536839 in 2003 (subject to SARS impact), meanwhile, the revenue of tourism amounted to 91.8 billion Hong Kong dollars, up to 9.6% over 2003 (http://www.discoverhongkong.com).

Hong Kong government has always been thinking of a new positioning and development direction. In the Government’s “policy report”, it is identified that “Hong Kong to be Backed by the Mainland and towards the world, to be an international metropolis providing quality services”, and it is clearly stated the new policy as “Market Leads, Government Facilitates”. – need a source here!! Tourism is the most robust momentum in services industries, one of the pillar industries of Hong Kong and is paid high attention by Hong Kong government. In the new situation and new policy paradigm, the Government begins to make overall planning for the tourism industry, which means that the Government will take more proactive measures to promote the development of tourism (http://www.gov.hk).

In 2004 mainland visitors continued to be the majority of Hong Kong tourism with a number of 12245862 tourists, increasing by 44.6%. “Free exercise” program was the driving force to promote further expansion of mainland market. Moreover, from July 1, 2004, the “free exercise” extended to 32 cities in South China and East China, 100 million 58 million residents from these cities could apply for travel to Hong Kong with the name of “free exercise”. In 2004, there were 426 million “free exercise” visitors, accounting for 34.8% of the total number of tourists; which rose more than twice than 134 million tourists in 2003 (http://www.discoverhongkong.com).

With the support from the government as well as the increasing trend of visitors travelling to Hong Kong, it is predicted that there will be a bright future for Hong Kong tourism which will directly promote the development of them park industry in Hong Kong.

6. Suggestions to Hong Kong Ocean Park

Generally speaking, Hong Kong Ocean Park, with Disneyland’s arrival, should transform hybrid strategy to differentiation strategy. More specifically, it involves two main parts: marketing strategy as short term goals and infrastructure construction as long term objective. However, it should always stick to its mission and vision of “delivering the highest standards of safety, animal care, products and guest service, be a world leader in providing excellent guest experiences in a theme park environment connecting people with nature.” – put a source here!

Marketing strategy
Product:

– Keep on introducing a variety of interactive activities with animals. For example: the Ocean theatre that staged dolphin and sea lion shows every day.

– Keep focus on seasonal and special events like Chinese New Year and Halloween. For instance, during summer holiday, some water-related activities such as water-war of foam parties should be organized which target teenagers.

– Develop a niche products, e.g. Sea World-styled wedding ceremony.

– Provide more sophisticated products to its customers than Disney. For example, build boutique hotel and spa-style hotels for tourists with higher income, expectations and needs. Such, move to a new market segment, even luxury tourism.

Price:

– Concentrate on giving value for the money the customers have paid. It is quite essential to attract mainland visitors who are more sensitive on price. Provide guests with more amusement facilities at a lower price than Disneyland to attract more visits.

– As to the local residents, it is suggested to offer them the annual pass as it creates loyalty and a real sense of value by encouraging annual pass holders to visit the park repeatedly. Some special offer to different groups in the society is also recommended, for example, a discount for students during holidays.

– As a step of moving from hybrid to differentiation strategy after Disney’s arrival, at first, Ocean Park should keep its prices, but later, with differentiation of its products range, the prices could be increased.

Promotion:

– Make full use of word of mouth marketing and the advantage of being the localized theme park. Proceed the promotion through the unique feeling of “growing together with Hong Kong” (Yan Le, 2007).

– Advertising campaign in Hong Kong can be carried out through the interactive quiz of the knowledge about animals to inspire their interest in nature and wildlife.

– As there is a significantly increasing number of mainland visitors to Hong Kong, it is strongly suggested that Hong Kong Ocean Park should establish agencies in major cities in China to showcase its unique attractions and attract more mainland visitors.

– Expand the marketing campaign to international markets to attract foreign tourists.

– In case of Disney’s arrival, Ocean Park can start more aggressive marketing politic for attracting tourists from all over the wor

Hotel industry and tourisms are fast growing world wide. There are number of studies on the problems and prospects of tourism industry in India and in Kerala. However research on hotel industry has grown only in the recent years . No systematic, detailed and comprehensive study on the hotel industry in Kerala has been made so far . Very poor data base on the availability of Hotel Accommodation ,even at the important tourist centres is a serious problem

Only descriptive literature exist at broad level An attempt is made in this chapter to Review some of the relevant existing literatures.

Anand’ in his study examines the reason for

the poor tourist traffic in India. He says that hotels and other supplementary

accommodations are the core of tourism industry and suggests that, the required

number should be made available for the proper development of tourism. Negi2

deals with all kinds of demands and problems faced by hotel industry. He predicts

that hotel industry has a big scope for expansion in future. The Indian Institute

of Public Opinion in a study considered accommodation sector as one of the

central elements because foreign tourist expenditure accounts with food and

beverages for 55 per cent and dominates foreign exchange earnings’. Seth Pran

Nath’ is of the opinion that there should be close connection between growth

of accommodation facilities and developments in the modes of transport.

Selvam5 in his study also deals with the adequacy and future needs of

accommodation Leela Shellyo has made an attempt to present a broad profile of

the hospitality industry. She has brought a fresh insight into the hotel industry and

has made a critical appraisal of the contemporary scene in the hospitality industry.

Pragathi Mohanty7 in her study has analysed the growth pattern of the hotel

industry in Orissa and has examined the growth trend with respect to different

regions and different types of hotels.

2.1 Trends in the Hotel Industry

In a study8 conducted by the Ministry of Tourism, the Government of India,

it is pointed out that star hotels of four star and above are generally considered to

be of international standards and cater to foreign tourists as well as the most

affluent of domestic tourists. According to Robert Collier9 a new hotel customer

is going to be looking for good value three star accommodation. So focus should

be on the development of three star hotels. He asserts that in order to survive in

today’s global village, hotels will have to be heavily branded or linked to a brand’A°

or positioned in a niche market. He foresees that there will continue to be room

for major chains” to grow with a variety of brands – as well as individual and small

regional chain in niche markets.

2.2 Dependence of Tourism on Hotel Industry.

Lack of accommodation was a serious problem for tourism development

even in the past The Sargent Committee12 set up in 1945, was the first to point

out the lack of suitable accommodation for international visitors and suggested

that a chain of first class hotels should be built in India. In 1956, the Estimate

Committee’3 on tourism said that the paucity of accommodation in India

continued The appraisal of hotel accommodation situation made by the Tourism

Department resulted in the recommendation of setting up of 5000 rooms or 8500

beds within the next three years’. In 1958, the Hotel Standard and Rates Structure

Committee’s recommended the rapid expansion of the hotel industry on a rational

and scientific basis.

In 1962, Hemphili, commented on the Indian hotel accommodation situation

that one has to book accommodation a year in advance to be sure of getting what

he wants. He also pointed out that about 7000 visitors cancelled trips to India

simply due to the non-availability of hotel accommodation’6. The Ad-hoc

Committee” on Tourism 1962, focussed its attention on the failure of the hotel

industry to keep pace with the increasing tourist demand. It pointed out that

during the period 1955-’62 the number of hotel-beds had increased by 11 percent

only against 300 percent increase in the number of visitors to India. The leading

hotelier J.R.D. Tata in 1965 had admitted that acute shortage of accommodation

had curtailed the flow of tourists to India”. Ina survey conducted by M.M.Anand

in 1966, twenty-two per cent of the foreign tourists answered accommodation

shortage as the most important deterrent to travel in India19. The Hotel Review

and Survey Committee 20 1968, set up to survey the requirements of additional bed

capacity at important tourist centres, once again highlighted the accommodation

shortage in India.

The National Council of Applied Economic Research21 (NCAER) had

opined that hotels are undoubtedly the most essential destination facility that a

country must provide, if it plans to build up tourism2?. The Estimate Committee of

Lok Sabha’s report22 for the year 1975-’76 felt that the various measures taken

and efforts made for tourism promotion will not produce the desired results if the

hotel accommodation in the country lags behind. J.R.D. Tata21 was of the opinion

that unless a major sustained programme of construction of new hotel facilities is

undertaken during the next five years, upto a million foreign visitors a year will be

diverted to other countries involving a loss of foreign exchange earnings to the

tune of Rs.500 crore.

Lattin24 stated that the hospitality industry is the only field where supply

must precede demand . The growth of the hotel industry is a pre-requisite for the

growth of tourist traffic . Naik S.D. and Davies

N. V21.

in an article expressed that

the growth of hotel accommodation has not kept pace with the growing demand

for it .

J.R.D. Tata felt that shortage of accommodation makes travel unsafe and

discourages the tourists to visit a particular area26. According to him it is essential

to have up-

to-date hotels for the advancement of a country in general or a city in

particular to provide facilities and comforts to visitors from all parts of the world.

Anand pointed out that lack of adequate hotels of acceptable international

standards is a critical factor in limiting traffic throughout the pacific, especially

India27 .

Haksar suggested that accommodation must be available in sufficient

quantity in the required type and quality to match the demand28 of travellers who

arrive at the destination . Accommodation probably precedes any other type of

development.

Naik S.D. and Davis N.V. observed that the future growth of tourism will

largely depend on the growth of suitable hotel accommodation in the country,

coupled with transport and other infrastructure29. The Sector Working Paper or

Tourism’0 of the World Bank has recorded that usually 60 to 75 percent of the

total expenditure of tourists accounts for food and accommodation and a

remarkable expansion of tourism is possible by increased supplies of moderately

priced accommodation in many countries. Negi asserted that “No Hotels no

Tourism”

The Economic Times` reported that acute shortage of accommodation and

travel difficulties can affect the image that a country presents to the world. The

Southern Economist33 opined that the main problem the foreigners face on landing

in India is the dearth of good hotel accommodation in the place of tourist interest.

The bulk is concentrated in metropolitan cities.

According to Lattin34, out of the various components of tourism industry,

accommodation component, more specially hotels, constitutes the major share,

ranging from 45 to 60 percent . Mukul Guha35 pointed out that hotels bag over 47

percent of the total sales by tourism and hold control over another 15 percent of

the incidentals complementary to the entire trade . For this he suggested that hotels

should be in a position to absorb the varied kinds of visitors ‘ influx. He added that

hotels are responsible to back up the spirit of a transit passenger for the next visit

or to dampen the same36 . He concluded that the growth of tourism industry in a

country depends on many respects on the hotel management of that country37.

Medlik38 is of the opinion that hotels are essential to the economies and

societies as are adequate transport , communication and retail distribution systems

for various goods and services . He said that hotels are important attractions for

visitors39 . The direct and indirect contribution of the hotel industry through the

subsequent diffusion of visitor expenditure to other recipients in the community is

brought out by him40 . He added that hotels may be one of the few sources of

foreign exchange earnings through the medium of tourism’”. Moreover hotels are

important outlets for the products of other industries42 according to him. He also

revealed that many hotels became social centres of their communities43.

In the opinion of Howard L.Hughes44 the amenities of accommodation and

catering must exist if tourism is to happen at all. The hotel and catering industry

will be responsible for whatever benefits and costs the phenomenon of tourism

itself brings and the amount of accommodation will in part, set the capacity of a

tourist destination4S . He also states that an expansion of tourism may require an

increase in the accommodation stock46 . The tourists especially the international

tourists may be influenced in their choice of destination by the availability of

suitable hotels and restaurant S47

According to Medlik48 the proportion of foreign and domestic tourists to

total tourists to a country has relation to the number of hotels in that country. The

larger the proportion of foreign tourists the higher would be the predominance of

hotels and vice versa . According to Sharma K.K, accommodation is the matrix of

tourism49 . Vivek Sharma states that without an adequate development of hotel

resources, all the national scenery , all climatic virtues and all the sporting and

recreational facilities will hardly suffice to sustain a good volume of tourists trade.

Seventy-five per cent of the problems of tourists on land are connected with

unsatisfactory hotel accommodation and services.

Hotels form an integral and vital segment of the tourism infrastructure in

the country and hence the Government of India had initiated steps to double the

hotel room capacity”. Government policies towards industry in general and the

hotel and catering industry in particular, will be a reflection of how far the

industry is able to contribute towards the achievements of government economic

policies

Subramanian points out that for accelerating the growth of tourism

industry, it may be propounded that supply” should be available before demand

can be generated. The centres with demand potential need be converted into

centres with actual tourist traffic4. Maneet Kumar points out that a country’s

tourism traffic is assessed not only by the number of tourists visiting the country

but also by the duration of their stay55. Robert Collier1G asserts that the obvious

reasons for people to stay in hotels are for business, meetings and seminars on the

one hand and for leisure, recreation and holidays or vacation on the other.

According to him the two most important factors relating to successful hotel stay

are comfort and luxury and efficiency.

2.3 Studies in the Context of Kerala

Tourism was declared an industry57 in Kerala in 1986, with a view to

developing tourism in the state, thus enabling those engaged in tourism

promotional activities in the state, to become automatically eligible for concessions

and incentives as applicable to the industrial sector from time to time. The

existence of well known and acclaimed hotels will go a long way in promoting a

tourist destination and unfortunately Kerala state has only a very marginal

representation in any major hotel chains”.

Skipper. G is of the opinion that various groups and individuals are

carrying out excellent work within tourism industry in Kerala but some times it

would seem in a vacuum ; it is unco-ordinated and sometimes adhoc and

piecemeal59 He admits that there are some superb quality hotels across the state

and quality guest houses and attractions, but all too often, it appears that

expectations of overseas customers are not met to the fu1160. According to Najeeb

E.M only very few hotels61 and resorts are available in the state . This results in a

rush with limited inflow to the destinations and subsequent inability to carry more

people

At the world Tourism Meet 1994, major tour operators were reported to

have expressed reservations about tourism infrastructure of Kerala over the lack of

enough luxury hotels62 at Kovalam, Kochi and other tourist centres. Sudheer S. V63

observed that private hotels were rendering better services in providing facilities to

tourists There were complaints, according to him, about poor hygiene and service

rendered by the state hotels. He was of the opinion that more hotels and

restaurants which are clean, moderately expensive and assuring best service”, may

be provided in the close vicinity of the centres. The Asian Institute of

Development and Entrepreneurship, made it clear that in order to increase the

percentage arrivals of foreign and domestic tourists to Kerala it is necessary to

create the necessary additional infrastructural facilities and amenities. Assistance

to hotel industry65 was an important recommendation in the project.

2.4 Back Water Tourism in Kerala

According to a study report66 by Mathews Varghese, Kerala is unparalleled

in the world. He says that Kerala has the added advantage of the sun, sand and surf

the three universal tourist attractions. He suggests that high standard hotels should

come up near back water tourism centres. Jose Dominic is of the opinion that

Kerala’s tourism industry and tourism product are in a stage of infancy67. He

points out that the resource truly unique and peculiar to Kerala is undoubtedly the

back-waters” He brings out that the backwaters can be to Kerala what the Taj

Mahal is to India or the pyramids to Egypt69.. According to him, recently there

have been some welcome development in the creation of backwater based hotel

infrastructure7? centred around Kumarakam. He opines that there is an urgent need

to review existing regulations which are constraints” on the development of hotel

facilities in the backwater tourism centres. According to Skipper G, the

backwaters are Kerala’s Unique Selling Proposition72 (USP).

2.5 Foreign Exchange Earnings

Foreign exchange resource crunch was heavily felt in India in 1991. In

March 1991, the official foreign exchange reserve of the Reserve Bank of India

excluding gold and SDR was $ 2,236 million. Three months later in June 1991, it

came down to just $1,124 million. At this stage it was worth just about two

week’s import, against a critical minimum of three months recommended by the

I.M.F. So the Government of India immediately negotiated a structural adjustment

loan from the IMF. As a part of the agreement, rupee was depreciated by about 20

per cent against US dollar and other major international currencies, in June 1991

followed by the partial convertibility of the rupee 71

Peters observed14 that many countries have embraced tourism as a way to

increase foreign exchange earnings. He added that net foreign exchange earnings

is high in tourism as the leakages75 are the minimum. The import content76 of

tourism industry’s foreign exchange earnings is a mere 5 per cent. The present

estimates77 show that foreign exchange earnings from tourism can be increased to

about Rs. 5000 core per annum (at 1986-87 prices) by the year 2000 A.D in India.

According to Madhav Rao Scindia78, tourism had emerged as the largest foreign

exchange earner for the country. Tourism brings in stupendously large amount of

foreign exchange. Even individual hotels79 brought in hefty chunks of foreign

currency. Tourism can become India’s key foreign exchange earner within the next

five years”

Vasant Sanzgiri81 estimated that with a foreign exchange outflow of Rs. 6-7

crores the hotel and restaurant industry directly earns about 49.7 per cent of the

estimated foreign exchange earnings by the tourism industry. Tourism is the largest

single foreign exchange earner for the country and the earnings mostly account for

by the expenditure on food and accommodation in this country82. Chatterjee83

documented that foreign exchange earnings from tourism are so high that tourism

industry now tops the list amongst other export oriented industries including

engineering goods and jewellery. Hotels and restaurants share fifty percent of the

foreign exchange earnings from tourism84. Syamali Talukdar and Alka Dahar85

opine that tourism is a major foreign exchange earner and hence the industry has

very strong case that it should be treated on par with export oriented industries

and same benefit be extended to it. It is reported that 70-80 percent of the

turnover of hotels is foreign exchange86. On the basis of net foreign exchange

earnings, tourism earnings were actually higher than that from exports of

handicrafts. The net foreign exchange earnings87 from tourism have been as high as

93 per cent. Tourism and hotel industry is already the third largest earner of the

foreign exchange. Still the foreign exchange earnings in India from tourism and

hotel industry are very small compared to many other industries88.

2.6 Employment Generation

The capital-labour ratio of hotel industry vis-a-vis other industries have to

be related in depth for evaluating the employment generations in hotels. The

employment potential for skilled and semi skilled labour in the hotel sector is quite

large. Negi estimates that as regards the direct employment, the room to staff

ratio89 for hotel varies between 1:1.5 to 1: 3. It is estimated that 54 per cent of the

tourist expenditure goes towards the payment of wages and salaries90. On an

average one hotel room should expect to provide employment for 2.5 persons

while connected industries and services would offer employment to nine times the

number of persons who are employed directly by the hotels91. The cycle of

increased income and employment continues until it is exhausted, which

phenomenon is due to employment multiplier in hotel and tourism industries. An

extra-ordinary contribution of two million jobs93 in hotels and restaurant sector

was found in the economic census of 1980. The labour content of $1000 worth

value added or net-output in various industries (1971) suggested that hotels and

catering create more employment94 for any rise in output than many other

industries. It is estimated that on an average, a single hotel room generates

employment to eight people directly or indirectly95. Increase in the hotel room

requirements in the approved sector would generate substantial number of jobs as

one hotel room provides direct employment to 2-4 persons and indirect

employment to ten times that number96. The National Tourism Board reported97

that about 45,000 trained personnel will be required by the hotel industry by 1995.

2.7 Income Multiplier Effect of Tourism

The National Committee on Tourism in its report of May 1988 has stated

that the money spent by the tourist percolates through many levels and generates

additional income at each round of spending and this has a multiplier effect98.

There is high multiplier for hotel industry; 3.8 for every Re. 1/- on hotel

expenditure” It is usually observed that the income multiplier effect of tourism

may be taken as 3.2 and the employment multiplier as 2.82 for foreign tourism and

4.00 for domestic tourism’00. Tourism is an effective instrument of income

redistribution in an economy’o’ According to a report by Chechi & Company 102

the income multiplier of foreign tourist expenditure varies between 0.58 to 4.3.

The multiplier effect of tourism in India has been estimated at 3.2 by the Indian

and 104

Council of Applied Economic Research”‘

It is estimated, for several items of tourist expenditure as many as 13-14

subsequent chain transactions take place105. In 1982, the Tata Economic

Consultancy Services Report had shown that for every job created by tourism

sector, 2.57 jobs are created else-where 106 . According to Peter107 most island

economies have an income multiplier range between 0. 6 and 1 . 2 while developed

economies have range between 1 .7 and 2.0.

2.8 Hotel Finance

In order to overcome the infrastructural short-comings a substantial

injection of funds is required which may be obtained through local borrowings and

borrowings at concessional rates of interests from. financial and aid institution

abroad’”. Statler emphasises the role of “location109i in the success of any hotel.

Hotels frequently compete for sites in town centres and other stations where land

values are high10 The ratio of capital to turnover is high in hotels, since the bulk

of capital, sometimes over 90 per cent, is permanently sunk in fixed assets.

Variable assets form only a small part of the total and stocks are usually low and

there is little or no work-in-progress”‘. Total fixed assets are static irrespective of

the occupancy and total variable costs are more or less proportionate with

occupancy’ 12

A survey of Horwarth and Horwarth International published in 1971

indicates that the average annual room occupancy of first class hotels”; ranges

between 72.6 per cent and 80 per cent in Asia and Far East, parts of Europe

including U.K , Australia and Mexico and to 60 per cent in U.S.A. It was 71.4 per

cent in Swiss city hotels’ 4, according to the report of the Swiss Society for Hotel

Credit 1970. It is found that the rate of return on investment1? in the four star

and five star category hotels is better than in other categories.

Intosh16 observed that expensive hotel accommodations are demanded by

those who want the best and who are willing and able to pay accordingly.

Expensive hotels have the highest occupancy. We have to concentrate on our

guests and try to create a special niche for the hotel’ 17. If tourists are brought in

chartered flights in large scale, the position in regard to hotel accommodation

would be chaotic. Unless a massive programme of hotel construction is taken up

immediately, India will have to miss out all the jumbos and the passengers they

carry1?. John Lea19 states that big hotel companies through their international

operations in origin and destination countries intervene between the would-be-

tourist and a chosen destination.

2.9 Public Sector vs. Private Sector in Hotel Industry

Skipper G120 opines that I.T.D.C and Government hotels are not up to the

standard and it is time for the various governments to get out of running hotels.

According to him there are some things which the public sector does the best and

only they can do and some things which the private sector does the best and only

they can do; put them together121 to have the best of both the world. The Adhoc

Committee on Tourism 1963 made it clear that the public sector will have to play a

major role if adequate accommodation of the right type for the kind of growth of

tourism is to be provided 122. Tourism industry is not a one man show. Private

entrepreneurs12?, big and small, have to come forward to provide services of such

quality that these services themselves should become an attraction. According to

Mahajan, tourism is a people’s industry and it is not possible for the government

alone to develop it, the government would provide necessary basic infrastructure

and give all possible incentives to the private sector to see that this industry is

properly exploited 124. The Estimates Committee of the Lok Sabha in its report on

tourism125, October, 1966 had opined that the hotel industry was predominantly

suitable for the private sector and that the public sector should not encroach upon

this sphere The government should invite the private sector to take up the task of

investing massive amount for creating additional accommodation in all ranges of

hotels’`”

The recommendations121 made in the final draft of the approach paper of

seventh five-year plan 1985-’90 stated that private sector investment will have to

be encouraged in developing tourism and public sector investments should be

focussed on the development of support infrastructure. The objectives of tourism

can be achieved successfully only with the joint effort of both public and private

sectors with government acting as a catalyst 128. Ganapathy is of the opinion that

tourism depends on a great deal on the private sector129 for which adequate

incentives and concessions are necessary . The role of the private sector in tourism

promotion will have to be increased significantly during the eighth five year plan

period, according to the National Development Corporation10. The nation invited

the private sector in a big way in the tourism sector in the seventh plan period

because of the resource constraint at the government level 131. The hotel industry in

India was finding it difficult to attract investors because they found investment in

other industries much safer and more attractive 1312 .

According to Chechi & Co., in most countries an investor can easily get two

to three times more return on his money when put elsewhere than in a hotel 113. It

was pointed out at a conference on tourism in London that it was better to build

shops, offices and other business premises and to make a profit rather than build

hotels and sell them at a ions’ 4.

Delegates from the Third World Countries attending a U.N conference on

industrial development were urged to encourage private foreign investment and

remove government constraints in order to ensure economic recovery 131 . The

government liberalisation had attracted private initiative and investment from

existing hotel companies, the Indian Corporate Industry, Non-resident Indians and

the foreign sector

it is seen that for the accelerated growth of tourism, adequate hotel

accommodation of the required type is a prerequisite. The economic significance of

hotels strongly recommends the setting up of additional hotels of different types,

especially the “class hotels” for which the private sector should involve in a big

way

This dissertation provides an analysis on how revenue management developed through out the years in different industries with more focus on hotels. It discusses the different revenue management strategies including pricing, capacity control, overbooking and forecasting. Related issues such as economic concerns, customer perception, competition, and common techniques and approaches used for solving revenue management problems are also discussed. Finally, I give my suggestion on some important areas that warrant further research.

Introduction

Tradditionally the main purpose of revenue management has been to maximise revenue.

It is the business practice with aim to see the right inventory to the right customer at the right price at the right time in order to maximise total revenue. (B.C Smith, J.F Leimkuhler and R.M.Darrow Vol 22). The concept of right” in this definition means achieving the maximum revenue for the sellers, and gaining maximum value for the buyers(S.E Kimes Vol 40). The basic of revenue management is to offer discounted rates to stimulate demand for inventory that would otherwise go unsold, while limiting the availability of the discounts to customers who are willing to pay a higher price. Hotel companies reported revenue increases of 2 to 5% as a result of using revenue management (Ibid)

The Brief History of Revenue Management

According to Carroll and Grimes 1995; Hanks, Noland, and Cross 1992; Smith, Leimkuhler, and Darrow1992) Revenue management, also known as yield management, has been widely adopted in the airline, hotel, and rental car industries, but has only recently gained attention in other industries (Kimes 2000; Kimes et al. 1998). Companies using revenue management have reported revenue increases of 2% to 5% (Hanks, Noland, and Cross 1992; Smith, Leimkuhler, and Darrow 1992).

In 1980s The airline industry launched revenue management practices. During that time yield management techniques became a common practice among airlines. On January 17, 1985 American Airlines launched its Ultimate Super Saver fares in an effort to compete with the low cost carrier People Express. ( www.ehotelier.com )

The need to fill at least minimum number of seats without selling every seat at discounted was the main reason that triggered the born by revenue management. ( www.ehotelier.com)

As new Airline companies started to enter the market in the 1980s, Airline companies were eager to sell enough seats to cover fixed operating expenses. Then once fixed expenses were covered, and there were now fewer remaining seats to sell, the remaining seats could be sold at high prices in order to maximise on revenue and profits.

According to (Boyd,1998), the application of correct revenue techniques by US Airlines and Delta Airlines resulted of an increase in revenue of US$500 and $300 million respectively, on the other hand Cross (1997) reports that revenue management helps Marriott Hotel to gainUS$100 million additional annual revenue Elliott (2003) presents how revenue management can contribute substantially to cost savings and revenue maximisation while helping maintain quality.

Research on revenue management has extended to several industries, with three major streams of investigation: descriptive (whether revenue management will work for a particular industry), pricing control, and inventory control. Industries that can use revenue management can be classified further by their relative ability to exercise pricing- and demand-control levers. An important aspect of implementing revenue management is to ascertain the extent to which customers will view pricing controls as being fair. While customers may initially view nearly any manipulation as potentially unfair, research on perceived fairness has found that customers generally will accept price manipulations as long as they believe they are gaining a benefit at the same time the business is receiving a benefit from pricing changes. Duration control involves some combination of manipulating customer arrivals and managing actual duration of use, depending on the industry in question.

Revenue management uses the basic principles of supply and demand economics, in a tactical way, to generate incremental revenues. There are three essential conditions for revenue management to be applicable:

There is a fixed amount of resources available for sale.

The resources to sell are very perishable.

Customers are willing to pay a different price for using the same resources.

The hotel industry fits these criteria extremely well. Obviously, hotels have a fixed inventory of rooms to sell; these rooms are also extremely perishable. Hotel rooms perish every day, any room that is unsold tonight is gone forever. There is also no question that different segments of business are willing to pay different rates under various circumstances.

Revenue management is of especially high relevance in cases where fixed costs are high as compared to variable costs. The less variable costs there are, the more added revenue will contribute to overall profit. This makes revenue management perfect for the hotel industry.

Effective market segmentation is the key to successful revenue management for hotels. Market segmentation begins with seasonal demand. For years, hoteliers recognized that almost all hotels experience periods of high and lower demand. This is even more obvious in hotels, located in resort and attraction areas.

Hotels quickly recognized that consumers would also pay more for rooms with a superior view, such as ocean or mountain views and other unique features of their location; larger or unusual rooms; and rooms with unique features.

Hotel revenue management hit its stride when hoteliers examined airline RM and realized that the factors of supply and demand, beyond natural seasonal demand, present opportunities to generate higher revenue. As room demand increases and room supply decreases, hotel rate opportunities also increase.

The airlines have taught us that supply & demand opportunities appear all year long because of conventions, group bookings, room production through web site marketing, special events and local attractions; all create revenue management opportunities.( Ehotelier )

This dissertation address the way revenue management is applied in hotels in UK and discusses the latest issues that faced revenue managers during the economic down turn last year

This dissertation Study has been undertaken through detailed analysis on how revenue management is applied in hotels and then discuss the issues facing Revenue managers today through the analysis of responses to a survey that was sent to revenue managers working at hotels in UK.

The research also include several working papers, conference proceedings and case studies that I believe are valuable in this study. Overall, 20 articles have been examined.

Several review papers have provided an overview of research on revenue management. A list of these papers is in Table 1. In This dissertation will focus on the progress of revenue management in recent years, especially after 1999.

Literature review
How Revenue Management is Applied

Gallego and Phillips (2004) introduce the concept of flexible products for revenue management. They define a flexible product as a ‘menu’ of two or more alternative, typically substitute, products offered by a constrained supplier using a sales or booking process. In this context, products include not only physical products but also service offerings. Researchers have applied revenue management models in a wide variety of industries where suppliers offer flexible products. Airlines, hotels and rental car industries represent three major traditional applications of revenue management. These industries share some similar characteristics. All of their products are perishable, the demand for their products vary significantly over time, and they have large fixed costs while variable costs are small in the short run. Because of revenue management’s success in these industries, researchers and practitioners have begun trying to adopt it in a wide range of miscellaneous industries such as restaurants, casinos, cargo, Internet services and apartment renting. These industries share some similar characteristics with the traditional industries. Some of these practices have acquired great success. In fact, all service providers can take advantage of revenue management theory. Just as ( Berman 2005) says, revenue management is an effective mechanism to allocate a service provider’s relatively fixed capacity and to provide discounts on a much broader scale. The table below provides examples of revenue management application in different industries. We are not going to discuss the application of revenue management in every industry. In the following section, we provide a brief overview and examples of revenue management research in three non-traditional industries

Revenue management practices in different industries (Berman (2005)

Industries

Example of practices

Hospitality Industries

Hotels

Provide special rate packages for periods of low occupancy;

use overbooking policy to compensate for cancellation, no-shows.

Restaurants

Move customers to off-peak periods by offering discount

coupons, or charging reservation fees and higher meal

prices on Friday and Saturday nights.

Attractions

Set different admission charge levels, provide joint-entry

tickets, group discounts, coupons, membership rates.

Cruise lines and ferry lines

Provide luxury class, economy class; change prices

frequently according to demand; sell more tickets than seats

to avoid cancellation and no show.

Casinos

Customize offers such as complimentary room, tickets,

gifts, discounts, etc., based on customers’ profitability.

Saunas

Determine price based upon factors such as room type, duration, and service type.

Resort

Provide different resort packages to attract different

customers.

Golf

Use different prices to reflect the value of different times of

the golf course.

Sports events and distribution

Determine ticket price for an event based on based on

factors such as customer tastes and area of seating;

determine the price of season tickets; determine the number

of tickets sold for each seat segment.

Conference

Provide different packages and rates to satisfy different

customers’ requirements.

Transportation related industries

Airlines

Provide business class, economy class; adjust prices

frequently according to demand; provide more tickets than

seats to avoid cancellation and no-show.

Rental cars

Adjust prices frequently according to demand; serve highvalued

fleet utilisation with priority; accept or reject

booking requests based on length-of-rent controls.

Railways

Divide customers into standard class and first class; provide

different prices based on the day of travel and the time of

the day.

Subscription services

IT Services and Internet Services

Allocate resources such as human resource, computing

capacity, storage and network capacity among segments of

customers and determine appropriate price for each

segment, high class customers will be served with priority.

Cellular network services

Control call admission based on customer priority, higher

class customers will be served with priority.

Major revenue management problems

Revenue management problems can be categorized into several different, but related, areas: pricing, auctions, capacity control (or inventory control), overbooking, and forecasting. In the following subsections, we will review each of these areas, but before we start, there are two points that need to be mentioned. First, although we categorize revenue management into several areas, this does not mean that these areas are completely isolated. In fact, these areas are highly correlated and need to be considered jointly when solving practical problems and some researchers are indeed trying to solve these problems jointly. For instance, Feng and Xiao (2006) present a comprehensive model to integrate pricing and capacity allocation. Second, auction is a specific type of pricing strategy. Here we separate auctions from pricing, because we want to emphasise the importance of auctions in the future application of revenue management. In addition, in this section, we also discuss other related issues regarding revenue management, including economic theory, the impact of competition and consolidation, customer perception and behaviour, the development and implementation of revenue management, performance evaluation of revenue management and techniques used for solving revenue management problems

Managing Seasonal versus Daily Demand

Revenue management principles apply to all levels of demand. Resort hotels with seasonal rates have been using a form of revenue management for years by posting higher or lower rates based upon seasonal demand; this is the essence of revenue or yield management. If these hotels thought they could get “in-season” rates all year long, they certainly would. They are adjusting for supply and demand. ( ehotelier)

Yield management provides the ability to build a base of business by posting a wide range of rates, low to high, to appeal to the broadest range of consumers. For hotels which are capable of handling group business, this is the theory behind quoting lower rates for groups; getting the business on-the-books. Once this base business is booked, either by groups or transient individuals, lower rates can then be closed for sale. This is daily demand.

It’s important to understand that yield management is the process of closing-out lower rates when there are fewer rooms to sell; leaving only higher rates as occupancy increases. Rates are not increased; lower rates are closed for sale. There is an important distinction between the two.

As demand increases, there are more methods of yielding higher revenue; the use of restrictions. Many hotels use restrictions very effectively. E.g. hotels with high weekend demand often restrict weekend reservations to a minimum of two nights by placing a minimum of two nights stay on Saturday, the more popular night. This limits stays to Friday/Saturday or Saturday/Sunday, the two weaker nights. The same can be applied to holiday periods.

The key to successful revenue or yield management is to review advance reservations and make rate close-out decisions as often as might be necessary; generally, three times per week. Hotels practicing revenue management gain an insight into the ebb and flow of business, knowledge of reservations booking pace, and a true understanding of factors which impact occupancy and average rate.

Capacity control

Koide and Ishii (2005) consider the hotel room allocation policies with early

discount, cancellations, and overbooking, but without no-shows. The presented model

can provide the optimal solution under certain conditions. They also derive an optimal

allocation for a simplified problem, which considers early discount but ignores

cancellations and overbooking. McGill and van Ryzin (1999) consider the allocation of capacity for rental businesses with two classes of customers. Their research suggests that the capacity reductions enabled by allocation schemes can help to lift profit margins significantly.

Zhang and Cooper (2005) address the simultaneous seat inventory control of a set of

parallel flights between a common origin and destination with dynamic customer choice

among the flights. They solve this stochastic optimization problem through simulation based

techniques. Most of the current capacity control practices are based on forecasting. However,

forecasting is difficult, costly and the results are sometimes unsatisfactory. Therefore,

researchers are trying to find alternative approaches. van Ryzin and McGill (2000)

present a simple adaptive approach to optimize seat protection levels in airline revenue

management. Instead of using the traditional method that combines a censored

forecasting method with a seat allocation heuristic (EMSR-b), this approach uses

historical observations of the relative frequencies of certain seat-filling events to guide

direct adjustments of the seat protection levels. Their preliminary numerical studies

suggest that this method can be used to augment traditional forecasting and optimisation

approaches.

Overbooking control

A number of researchers have developed dynamic optimization approaches to the airline overbooking problem and the related problem in the hotel/motel industry. The usual objective in these formulations is to determine a booking limit for each time period before flight departure that maximizes expected revenue, where allowance is made for the dynamics of cancellations and reservations in subsequent time periods and for penalties for oversold seats. KOSTEN (1960) develops a continuous time approach to this problem, but this approach requires solution of a set of simultaneous differential equations that make implementation impractical. Rothstein (1968), in his Ph.D. thesis, describes the first dynamic programming (DP) model for overbooking and reviews the results of test runs of the model at American Airlines. ALSTRUP et al. (1986) describe a DP treatment of overbooking for a two-class, nonstop flight and describe computational experience with the approach at Scandinavian Airlines. A DP analysis similar to Rothstein’s but developed for the hotel/motel

industry and extended to two fare classes is described in LADANY (1976, 1977) and LADANY and ARBEL (1991). A control-limit type structural solution to the (one class) hotel overbooking problem is described in LIBERMAN and YECHIALI (1977, 1978

Since McGill and van Ryzin (1999) had already presented a list of publications in

overbooking, we will only discuss the new publications. Zhang and Cooper (2005)

focus on the overbooking problem for hotels with multiple tour-operators and conclude

that an overbooking policy that treats the capacity of the hotel as a whole gives better cost

savings than an overbooking policy that allocates the capacity to each tour-operator

separately. Zhang and Cooper (2005) proposes two models (stationary-fares model and

nonstationary-fares model) to deal with a multi-period airline-overbooking problem for a

single-leg flight with a single service class and use the model to calculate the optimal

booking limits. Coughlan (1999) presents an airline revenue maximisation-overbooking

model at a fare class level for one service compartment-cabin where class level demand is

used to determine the number of bookings for each class. He concludes that this model

shows significant improvement over previous methods by testing the model with data of

Ireland’s national airline, Aer Lingus. Biyalogorsky et al. (1999) propose that a strategy

using overbooking with opportunistic cancellations can increase expected profits and

improve allocation efficiency, then derive a rule of how to allocate capacity to consumers

optimally. Under their strategy, the seller can oversell capacity when high-paying

consumers show up, even if capacity has already been fully booked, then the seller will

cancel the sale to some low-paying customers while providing them with appropriate

compensation. Toh and Dekay (2002) create an overbooking model for hotels to find the

optimal level of overbooking considering customer service level, unexpected stayovers, and cost of walking displaced guest.

Forecasting

Forecasting is a critical part of revenue management. The quality of revenue management

decisions, such as pricing, capacity control, or overbooking, depends on an accurate

forecast. Polt (1998) estimates that a 20% reduction of forecast error can translate into a

1% incremental increase in revenue generated from the revenue management system.

Revenue management forecasting includes demand forecasting, capacity forecasting, and

price forecasting, each of which has its specific requirements. All forecasting tasks need

to address issues such as what to forecast, the type of forecasting method, the aggregation

level, the data to use and the accuracy of forecast. Forecasting can have different

aggregation levels, from full aggregated forecasting to semi-aggregated forecasting and

to fully disaggregated forecasting. The data used in forecasting can be based on historical

arrivals or bookings. In addition, forecasting must be adjusted according to special

An overview of research on revenue management 111 events, for example, holidays. Zaki (2000) gives a summary of forecasting for airline revenue management.

Weatherland et al. (2001) discuss different ways to forecast demand for hotel revenue

management systems and assess the effectiveness of aggregated approach and

desegregated forecast. Furthermore, Weatherford and Kimes (2003) use data from Choice

Hotels and Marriott Hotels to conduct a comparative test on a variety of forecasting

methods for hotel revenue management systems to find the most accurate method. Their

research suggests that exponential smoothing, pickup method and moving average

models provide the most robust forecasts.

Despite the mounting forecasting methods, human judgment is still indispensable in

forecasting demand. Schwartz and Cohen (2004) make a study on 57 experienced

revenue managers to evaluate the bias of this kind of subjective judgment. They find that

the nature of the user interface can influence the way the revenue managers adjust the

computers’ forecasts, although the managers are given the same predictions. The

managers with a deliberate computer and no chart made the smallest volume of

adjustments to the computer’s forecast, while the managers with a slow computer and an interactive chart made the highest volume of adjustments.

How to develop revenue management

How to develop and implement revenue management systems is another key issue.

Kimes (1999) and Kimes et al. (1999) present a 5-step approach for implementing

restaurant revenue management and provide insights from the implementation.

Secomandi et al. (2002) present a case of how PROS Revenue Management Inc. worked

with three non-airline companies to determine the applicability of revenue management,

and to design, develop, and implement Revenue Management systems. Skugge (2002)

discusses issues that need to be considered when implementing a revenue management

system. He presents risks associated with development and implementation and ways to

reduce these risks, and then proposes a two-step process to maximise the likelihood of a

successful project completed on time and within budget. Okumus’s (2004) research

reveals the complexity and difficulty of developing and implementing a centralised

revenue management project. He argues that this is because revenue management

implementation is often viewed as a tactical activity, but this is not correct. He suggests

that researchers and practitioners should view the implementation from the perspectives

of strategic management, and they should change management fields.

Revenue managers play a crucial role in implementing revenue management. Skugge

(2004) finds that one of the reasons why some companies enjoy much greater success

with revenue management is they have more effective revenue managers and suggests

several methods to improve revenue management education and training programs. Zeni

(2003) presents a study performed at US Airways to measure the value of revenue

managers’ contributions to a revenue management system and concludes that analysts

can add up to 3 percent in incremental revenue. Parker (2003) presents that airlines need

to establish and provide support for a ‘community of practice’, which is a group of

revenue management related people who interact on an ongoing basis. This group takes

responsibilities of establishing protocols and standard procedures with respect to revenue

management. The implementation of revenue management requires management to make a series of business decisions. Yeoman and Ingold (2000) discuss the decision-making processes using examples from airlines and hotels. All business decisions have risks, as do revenue management decisions. Therefore, every company must evaluate the potential risks of revenue management. Lancaster (2003) focuses on the risk incurred in the revenue

management policies and analyses how risk management measurements and methods can

be applied to the revenue management practices.

In addition, companies want to make sure that their investment on revenue

management can achieve the expected return. Delain and O’Meara (2004) illustrate how

a company can build a business case to estimate the incremental revenues and costs

associated with developing or enhancing a revenue management programme

IT service and internet service

Revenue management also has application opportunities in subscription services, such as

on-demand information technology service and Internet service. Internet service is, in

fact, a special case of on-demand information technology service.

Nair and Bapna (2001) find that Internet Service Providers (ISP) have perishable

capacity for users to log on, a fixed number of units, and the possibility of segmenting

price-sensitive customers. These three characteristics are common with industries where

revenue management is traditionally applied. They also identify that revenue

management in Internet service is different than traditional applications. The Internet

service is continuous in state and time, the request and the service happen

simultaneously, and overbooking is impossible for ISP. Furthermore, they formulate the

revenue management problem for ISP as a continuous time Markov Decision Process to

maximize the discounted value while improving service levels for higher class customers.

Wynter et al. (2004) introduce a revenue management model for a specific information

technology service – on-demand computing service. Dube et al. (2005) make a further

analysis on the model of Wynter et al. (2004) both analytically and numerically, and

conclude that the application of revenue management can significantly increase revenue of on-demand computing service providers

Economic concerns

To better apply revenue management in the industry, practitioners must have a thorough

understanding of underlying economic theory, such as supply and demand, opportunity

cost, competition, consolidation, etc. Dana (1999) presents how revenue management

techniques, such as price dispersion, can shift demand even when the peak time is

unknown. Firms must compete with each other to get customers, so revenue management

decisions of one firm unavoidably affect the demand for other firms in the same industry.

The sudden reversal in the lodging industry’s fortunes from 2008 to 2009 made the focus on customer rate resistance, contract renegotiations, competition, and price wars as top priorities for revenue managers. This contrasts with a 2008 study by Cornell university , where human resources and technology issues were ahead of economic concerns. The recent bad economic situation made it for revenue managers to maintain price positioning, because the drop in demand has shifted considerable pricing power to the customer. Although many hotels can compete effectively on price (and others may have little choice), revenue managers may also draw on numerous non-price competitive techniques, including adding value. One pricing approach might be to create a set of targeted rate promotions that are protected by rate fences and designed to attract price-conscious guests. Another technique is to bundle services into packages that disguise room rates. Non-price techniques include competing on the basis of quality, creating strategic partnerships, taking advantage of your loyalty program, developing additional revenue sources, and developing additional market segments

Even as they agreed that customers have gained considerable negotiating power, a research by Cornell university see a larger role for RM as the economy recovers. In the meantime, revenue managers have a key responsibility to determine ways to offset the loss of business by creating special rates that are protected by rate fences to attract different market segments or to augment existing packages to retain current business

Looking ahead, revenue managers should be aware that customers will be strongly focused on price and less so on brand loyalty. The common thread in this view of hotels’ future is that RM is a valuable tool for hotel marketers and managers as they consider tactical price setting and strategic price positioning. The managers are well aware that revenue management cannot help in all cases. Also revenue managers should broaden the perspective on revenue management to include as many customer touch points as is appropriate. In a sense, this represents a combination of marketing principles with revenue management tactics. As demand returns, application of RM approaches will be able to help hotels find the way back to rate integrity. Based on that idea, now is the time to set price strategies and be ready with revenue management tactics when the recovery comes.

Customer perception

According to Cornell University research many managers have been reluctant to adopt revenue management practices because of possible customer dissatisfaction. They may well find support for their fears in the fairness literature, which has shown that customers will refuse to patronize companies perceived as unfair.

Customers from different cultures and nationalities often have different service expectations (Donthu and Yoo 1998). For example, Lee and Ulgado (1997) found that American fast-food customers considered low prices to be of paramount importance when evaluating satisfaction, whereas Korean consumers were more concerned about service dimensions such as reliability and empathy. Also, Asians often see eating out as more of a social or family activity than do Americans or Europeans (Hall 1966)