|David C. Gilbert, Jan A. Powell-Perry and S. Widijoso
School of Management Studies for the Service Sector, University of Surrey
This article offers a study of the current use of the internet, as a marketing tool, by the hotel industry. Such a study is timely given the growth rate of the Web is estimated at about 50% per month, with the number of sites doubling every 53 days. The Internet Domain Surveys, conducted by Network Wizards, have shown that business investment is moving unabated onto the Internet. Around the world, a projected 60% of large companies and 30% of midsize companies will also use the Internet for marketing and business purposes by the year 2000 (Crain's Chicago Business, 1994). This rush by companies to set up computer sites to conduct business has also filtered down to the hotel industry.
Hundreds of hotel companies have established themselves on the Web with their own web sites or via a link from a third party such as TravelWeb (URL: http://www.travelweb.com). Using the evidence from many of these sites this study reveals the current strengths and weaknesses of the use of the internet as a relationship marketing tool by hotel companies.
The Features of the Web as a Solution to Hotel Communication Limitations
Setting up a Web site is affordable as costs are relatively low.
Once established, the Web site allows a hotel to conduct a more targeted
business 24 hours a day, 365 days in the year, with a potential
There is, essentially, equal opportunity to access the market for all types and size of hotels. The technology also allows sophisticated digital images, video and sound. Hotel "electronic brochures" could include three-dimensional pictures of the property and facilities which the potential customer could explore continuously.
From a marketing perspective the major benefit is the much greater degree of interactivity than other communication media. Web sites can contain forms to fill out and hotels can use electronic mail (e-mails) to reply to customers. This mutually rewarding relationship can contribute towards the building of customer loyalty. The Web can give access to a greater store of information than other traditional communication media, and provide visitors with the means to select and retrieve only that which appeals to them. This means that customized brochures, itineraries, guides could be produced at the touch of a key. For the hotels, it provides a useful tool in their adoption of micro marketing in this "Age of the Individual" and relationship marketing. However, it must be remembered that the true determinant is the willingness of customers to use the Web to book hotel rooms and to search for hotel information.
Limitations of the Web in the Context of the Hotel Industry
One of the potential problems and limitations that the hotel industry must address is the consumers' inhibitions to change. It is imperative that the customer is comfortable with electronic shopping if individuals are going to book hotel rooms via the Internet. Consumers have been reluctant to supply credit card details over the Internet as they judge it to be risky and have a fear of breach of security (GVUs, 1996 Consumer Survey of WWW users). However, Richer has suggested that it is easier for hackers to obtain credit card details passed over a cordless or mobile telephone (Cossey, 1996). Both popular Web browsers, Netscape and Microsoft Explorer, have now incorporated secure payment encryption algorithms. Electronic cash (Ecash) has also been developed by Digicash for secure payments over the Internet without having to transmit credit card details.
One other problem is the requirement for informative and interesting pages can be conflicting. An eye-catching site tends to be full of graphic and multi-media capabilities. However, this results in slow download of the page. Kalife, in Computing (1996), states that , "The prospect of virtual hotel tours via the Internet ... excites hoteliers. However current bandwidth constraints mean the plans are far more virtual than real".
The commercial success of Internet technology depends not only upon connectivity but also the fundamental question of social acceptance. While the home PC market is growing at fast speed, the home Internet market is also set on an upward trend. According to research (Web Master, 1996) based upon more than a million people, around 2% of the population were already connected and 7% of the population is planning to go on-line shortly. This would mean that, in the very near future, approximately 10% of UK households (two million in total) will have an Internet connection.
Thus, it seems reasonable to conclude that society as a whole is becoming more familiar with technology, in particular with PC's and the Internet. Hence, this provides the hotel industry with the right opportunity to employ the Web as a marketing tool.
Suitability of Relationship marketing for the Hotel Industry
A new form of marketing has emerged as relationship marketing (RM), (Dwyer, Schurr and Oh, 1987, Christopher, Payne and Ballantyne, 1991, Sheth, 1994, Gronroos, 1994). Various other terms have been used either as substitutes for RM or to describe some close parallel - micro-marketing, loyalty marketing, one-to-one marketing, wrap-around marketing, customer partnering, symbiotic marketing and interactive marketing. Gummesson (1994) supports the view that RM represents a "new marketing paradigm" and the beginnings of a new theory. Evans and Laskin (1994, p440) suggest: "RM is a customer centred approach whereby a firm seeks long-term business relations with prospective and existing customers". Similarly, Gronroos (1990a), a leader in relationship marketing research, defines: "Marketing is to establish, maintain and enhance ... relationships with customers and other partners, at a profit, so that the objectives of the parties involved are met. This is achieved by a mutual exchange and fulfillment of promises". This definition attempts to incorporate both the transactional and relational qualities of marketing.
Some critics of RM suggest that it is really no more than a series of transactions over time. Strong rebuttal comes from Czepiel, who argues that a relationship possesses "mutual recognition of some special status between exchange partners (Czepiel, 1990, p13). Barnes (1995, p1394) adds to this by saying that "a succession of interactions does not necessarily lead to a relationship any more than repeat purchasing constitutes loyalty". True marketing relationships, like other human relationships, should be characterised by the deeper feelings of trust, concern and commitment.
Hotel Market Place and RM Considerations
In the current competitive market place hotel companies have found it necessary to win the loyalty of the reduced number of customers. As such they need to reorient their thinking away from merely attracting customers to retaining customers. This is due to the need to reduce the cost of acquiring customers. It is between five and ten times as expensive to win a new customer than it is to retain an existing one (Rosenberg and Czepiel, 1984; Barnes and Cumby, 1993; Liswood 1989). Buttle (1996) notes that there are the direct costs of the successful conversion of a prospect into a customer (selling costs, commission, product samples, credit-checking costs, administrative costs, database costs) as well as the costs of unsuccessful prospecting. Thus, keeping customers loyal is a sensible business strategy. Even with successful campaigns, companies still face the risk of customers defecting, i.e. stop coming back. Defection rates affect retention rates, which is a central issue in relationship marketing. Price Waterhouse calculated that a 2% increase in customer retention is equivalent to a 10% reduction in costs (Caterer & Hotelkeeper, 1994). As such an awareness of the lifetime value of customers is growing. A transaction-orientated view of the customer would consider the sales value and margin earned from a single sale, while a relationship-orientated view considers the revenues and contributions earned from a long-term relationship with a customer. Gilbert (1996) argues that the life-time value of retaining customers enables the costs of conversion of the prospect to be set against the revenues earned over the longer term. Sales and profits will also improve in direct proportion to the length of time a relationship lasts. In addition, existing customers tend to make more frequent visits, may broaden the base of their own purchases over time, and influence others through word-of-mouth advertising (Haywood, 1988).
A relationship marketing paradigm is most suitable when (Gilpin, 1996;
Lewis and Chambers, 1989, Reichheld, 1993, Juttner and Wehrli, 1994):
The suitability of RM for the hotel industry is also due to the ease with which RM can be practised within the industry. From accommodation bookings and the registration process, hotels already possess certain information on customers. It is also possible for hotels to find out other valuable information, such as frequency of stay and spending behaviour, through company records. This information can be brought together on a database system and manipulated to identify and target the more profitable customers. Hotels could then begin a relationship with customers.
RM Strategy for Hotel Group Web Sites
The objective of relationship marketing is customer retention.
Various hotel and tourism marketing academics (Gilbert, 1996; Haywood,
1988; Gilpin, 1996; Lewis and Chambers, 1989) have proposed alternative
strategies for achieving it. Gilbert (1996) proposed ( see
table I stages) that the long-term retention of customers requires
the following five steps:
The aims of this study were to carry out primary research in order to examine the use of the World Wide Web as a hotel marketing communication tool and to establish the management attitudes to the adoption of the World Wide Web as a relationship marketing tool.
The data was gathered using the following approach. The Yahoo web site, which gives a listing of hotel web sites, was regularly accessed. A critical examination of the web sites of the hotel groups listed was made using a check list chart. The sample was made up of the whole population of hotel web sites, made up of a sampling unit of establishments defined as any hotel groups on the Yahoo web site in May 1997.
It should be noted, however, that such a sample introduces a slight bias due to the fact that those hotel groups not listed on the Yahoo site will be excluded from the sample, but in general the list covered a wide cross-section of hotel group. Some of the hotel groups listed are not "hotel groups" in the pure sense, but are marketing intermediaries or representatives of independent hotel properties. A thorough attempt was made to identify these 'representatives' and leave them out of the sample. The final sample was 143 hotels.
In addition, qualitative, semi-structured interviews were utilised to establish to what extent the hotel chains adopt, or will adopt, the Web as a relationship marketing tool. This approach was preferable due to its suitability for an unexplored research topic, whose subject matter deals with confidential company information (e.g. marketing strategy). Also, respondents were reassured the results would have a degree of confidentiality.
A framework of questions was drawn up based upon the objectives of the research, (the marketing strategy which guides the development of the hotel web sites; the extent of success in achieving their aims and objectives; the extent that the hotel chains have adopted, or will adopt, relationship marketing as a strategy for their web sites; the future direction of the hotel web sites) was used to guide the discussion. The semi-structured interviewing approach allowed more control over the process and greater ease in recording (tape-recorded) the answers.
The sample selection was based upon senior (regional or head office) directors of marketing selected from all hotels from establishments defined as leading international hotel groups from hotel lists (HCIMA, 1996). In this particular study, the purposive sampling method was chosen. The regional or central head offices of hotel chains are scattered around the world. Therefore, it would be very difficult to obtain interviews from a random sample within a limited time period. Furthermore, senior directors of marketing often have a busy schedule and the interviews had to correspond with the respondents' availability and willingness to be interviewed.
Web Survey Results
The data was processed and tabulated from the pre-prepared survey chart input to SPSS. The frequency of all variables was then computed. The Web research identified the current use of the following web mechanisms: information, reservation, loyalty programme, newsletter, special gestures, feedback, customer service, public relations, value-added services, employee web site, channel member web site, and customised research.
The Web, as discussed, has the potential to be a strategic information
centre for the hotel industry offering the following features: electronic
brochure, corporate information (press releases, financial reports, company
history, company milestones, product and service information), on-line
directory (a listing of hotel properties available which is often categorised
by geographical location), property
The most commonly provided features are on-line directory (93.0% of the chains) and property information (89.4% of the chains). A significant proportion are also providing corporate information (37.3%), what's new (26.8%), special promotions (40.8%) and language localisation (18.3%). The provision of electronic brochure and virtual hotel tour are still limited to just 0.7% and 4.9% of the hotel chains respectively.
The Web offers the hotel industry a distribution channel that enables customers world wide to book hotel rooms. The web hotel reservation capability currently includes the following features: on-line search, on-line availability check, on-line reservation form, on-line reservation retrieval, on-line cancellation, real-time processing, create/modify profile, and e-mail reservation. The majority of hotel chains have taken advantage of the Web as a reservation medium. However, one third of the hotel chains are still not giving their customers the opportunity to book hotel rooms via the Web. This is surprising as a survey by HIMG has shown that business travellers have expressed a strong interest in booking hotel rooms via the Web (Caterer & Hotelkeeper, 1996).
The most commonly available reservation feature is an on-line reservation form. Although present technology does allow real-time processing of reservations, only 21.1% of the hotel chains offer such capability. This means that customers of the remaining 78.9% of hotel chains may have to wait two or more days for the replies to their reservation requests. If the attraction to using the Web is the promise of interactivity, customers may be disappointed. A significant proportion of the hotel chains has also offered more advanced features, such as on-line search (21.1%), on-line availability check (19.7%), on-line reservation retrieval (15.5%) and cancellation (16.2%). A small 2.1% has taken a step ahead of the rest by allowing customers to create and modify their profiles on-line. In this manner, the Web is acting as a strategic extension of hotel databases.
Hotel chains could also extend their loyalty programmes on-line by having special features for their potential and existing frequent guests; such as general information, on-line enrolment, restricted frequent guest area, on-line account review, create/modify customer profile, exclusive e-mail address, special Web offers, and request rewards on-line. A high proportion (75%) of the hotel chains offer no loyalty programme features at all. Although 25% have some kind of loyalty programme, only 19.7% of them provide general information on their programmes.
A small proportion has also offered advanced features for their frequent guests, such as on-line enrolment, special Web offers, on-line account view, create/modify customer profile and request rewards on-line. A restricted frequent guest area, which is accessible only by password, is provided by 1.4% of the chains, and an e-mail address for the exclusive use of frequent guests is also offered by 1.4%.
Hotel chains could keep their customers and employees up-to-date with the latest developments using electronic newsletters, which are of two types- Web newsletter and e-mail newsletter.
A huge majority (93%) of the hotel chains do not have both the Web newsletter and e-mail newsletter. A small proportion (2.8%) of the chains offers Web newsletter, and only 3.5% offers e-mail newsletters. Special Gestures. The Web offers hotel chains the ability to personalise the experiences of customers who visit the Web sites. Hotel chains could include features such as the set up of a personal Web page, address Web visitor by name, welcome message, and guest book. The potential of the Web to personalise customers' on-line experiences is still largely untapped by the hotel chains. The most commonly offered features are the welcome message and guest book. A small minority of chains have personalised customers' on-line experience by offering features such as set up personal Web page (2.1%) and address Web visitor by name (2.8%).
Hotel chains could employ the Web as an interactive marketing tool. Customers could give direct feedback via the Web. This could be done by filling up an on-line form or by e-mailing their comments, complaints or suggestions. Approximately three-quarter of the hotel chains provide one or both of the feedback mechanisms. 54.9% of the chains offer e-mail feedback, while only 23.9% of them offer on-line feedback form. There still exists quite a substantial proportion of hotel chains which are not taking advantage of this capability of the Web at all.
Hotel companies could utilise the Web to provide enhanced customer service. A Web site guide could assist customers in exploring the hotel web site. A hotel chain could post on its web site a series of frequently asked questions (FAQs), from which customers might be able to find answers to common queries. Printable property and meeting fact sheets could also be available for customers wishing to make hard copies of on-line information. Customers could be encouraged to book their meeting facilities by the provision of meeting planning worksheets. They could also make on-line requests for hotel brochures, general information and information on meeting facilities. Furthermore, hotels are also integrating the Web, and the Internet itself; into their products. For example, Inter-Continental Hotels and Resorts (URL: http://www.interconti.com) offer guests, at one of its international properties, the ability to purchase a card which allows them one hour of Web surfing via their television remote controls. Only approximately half of the hotel chains offer customer service features. The most commonly available features are on-line request for brochure/information and destination guides. The rest of the features are still mainly confined to a small minority of the hotel chains.
The interactive nature of the Web facilitates the building, maintenance and enhancement of relationships between the hotel chains and the influence markets or the general public. A hotel chain could e-mail updates on the company's latest developments to the press. 5.6% of the hotel chains offer on-line request for photos/information, while 0.7% of them offer e-mail updates on latest developments. The potential of the Web as a public relations tool is still largely ignored, with only a small proportion (7%) of the hotel chains adopting the Web in this way.
Here, a hotel chain could, potentially, provide a currency converter service, weather reports, information on business and travel, news and current affairs, links to travel partners, and links to other web sites (for e.g. local attractions). These features could serve to add value to the customers during their on-line interactions with the hotel chains. A large majority of the hotel chains (65%) do not provide any value-added service at all. The more commonly available features are links to travel partners, weather reports, information on business travel and currency converter.
Web Site for Employees
Hotel chains could employ the web as an internal marketing tool to build long-term relationships with its employees. A web site for the exclusive use of employees could be maintained and employment opportunities within the chain posted. An on-line job application form could facilitate employees in their application process. The Web site could also serve as an information centre, providing information such as mission statement, company policies, procedures, results, etc. It is evident that the potential of the Web as an internal marketing tool is still largely not exploited by the majority of the hotel chains, with only 10% offering their employees one of the above features.
The Web offers the hotel chains an interactive communication tool to develop long-term relationships with the channel members. However, only a small 0.7% of the hotel chains exploit this capability of the Web, in the form of a web site dedicated to channel members only. Potentially, hotel chains could post on their web sites information such as room availability and rates and last-minute offers.
Continuous customer data collection and the tracking of customer expectations could also be facilitated by the Web. Customised or incentivised surveys could be carried out cost-effectively. However, the finding shows that only 4.2% of the hotel chains utilise the Web to carry out research, by asking customers to fill up on-line surveys.
Those with Highest Number of Features - Top 10% of Hotel Web Sites
Table 2 indicates the top 10% of hotel
web sites, in terms of the number of Web features found from this study.
Out of these 14 hotel chains, it is interesting to note that nine of them
belong to the list of the world's top 20 hotel chains, in terms of number
of rooms. Hence, the larger hotel chains seem to be leading the way in
exploiting the potential of the Web.
Interviews: Results and Data Analysis
Five of the leading hotel chains were selected and their senior directors of marketing interviewed. This section complements the web survey findings. For the purpose of confidentially and anonymity, the five hotel chains are identified as A, B, C, D and E. Table 3 summarises the features of these hotel chains.
Findings of the Interviews
The five senior marketing managers were first questioned about their knowledge of the theoretical background behind RM. The findings were almost universal - all the managers stated that they have heard of; or read about, relationship marketing theory. They were able to relate RM to their marketing elements, such as databases, and targeted promotions focused on frequent customers. Manager B offered his definition of RM as "meeting the needs of the clients", a process that is done in a "perpetual cycle". The managers were unanimous in the opinion that RM has entered their Company philosophy and operating methods. Manager A commented that his company aims to be the leading hotel company in Asia by the year 2000. This is to be achieved through successful long-term hotel customer relationships.
The managers were then asked to answer several general questions on
the World Wide Web. When asked for the factors which have pushed their
hotel companies in the direction of the Web, they gave the following answers:
Manager D summed up all the answers with his comment that the Web is "an opportunity that you can't miss - to win new business."
When asked what the Managers seek to achieve through their web sites,
they quoted the following answers:
However, four of the managers were not sure of the extent of success of their web sites in terms of achieving the marketing and aims and objectives stated above. They commented that it is still currently not possible to find out reliably how many customer visits or 'hits' are received by their web sites. On the other hand, manager A claimed that his company has been able to monitor the number of 'hits', i.e. the number of visitors to the web site. His company's web site has been receiving an average of 3,000 hits per week since its start and the figure is increasing by the week.
All the hotel chains interviewed have computerised database systems to store guests' history records. The managers stated that the main sources of customer information are room registration cards, in-house guests, in-house dining programmes, in-house contests and health club registration cards. In their relationships with customers, the managers admitted that their priority is customer retention. Manager D believed that "if you can keep your customers, they themselves will generate new business by word of mouth". The managers also claimed to have strong relationships with the channel members. Managers D and E viewed the wholesale and retail tourist organisations as "an extension of (their) sales team". The channel members are seen as the key elements in bringing new business to the hotel chains.
The managers interviewed shared the opinion that the Web could serve as a marketing tool to establish, maintain and enhance long-term relationships with customers and third parties. They also believed that their web sites are a cost-effective, strategic link between their companies and the customers.
It was clear that hotel chains have attempted to take maximum advantage
of the capabilities of the
Discussion of the Results and Recommendations
The Web survey and the personal in-depth interviews have given interesting insights into the issues of hotel marketing on the World Wide Web and its potential as a RM tool. The hotel industry seems to be leading the way in terms of exploiting the capabilities of the Web. This is mainly because the inherent features of the Web provide a solution for the hotel industry in meeting current market challenges. Furthermore, there is a strong demand among business travellers for the Web as a hotel information source and booking medium.
For the hotel industry, the World Wide Web is not only an electronic
technology and an interactive communication medium:
The web as a RM tool allows customer self-customisation. Each individual customer may be at a different stage of the hotel/customer relationship, and hence he/she might have different information and/or service needs from other customers. It is therefore recommended that table 1 is examined as a means of the RM scheme being planned and implemented. The Web is also shown in the model as an extension of the hotel chain's database systems. All information provided by customers is stored and processed by the database systems. Personalised communication could then be cost-effectively produced and distributed via the hotel web site to both existing and potential hotel customers.
The World Wide Web, as an interactive communication medium, is still in its infancy stage. At present it is mostly the larger hotel chains which have begun to explore its potential to develop long-term relationships with customers. The smaller hotel chains are still not doing so, probably because they are lacking in financial and marketing resources, or only want to cater to a more localised or nationalised market. This will allow a competitive advantage to be developed by the larger hospitality organisations. Thus, the Web still has a long way to go in terms of its development as a RM tool, which is very much dependent upon customers' demands, hotel companies' willingness to let their web sites assume a bigger marketing role, and the available technology. However, there seems to be widespread confidence within the hotel industry of the future of the web as a marketing mechanism. Hotel companies should, as proposed by table 1, adopt RM as a strategy guiding the development of their web sites.
Both RM and the World Wide Web combined together present a powerful competitive advantage for hotel companies at a time when there is increasing competition over a reduced customer base. As such, no hotel company can afford to ignore the full potential of the Web as a strategic mechanism to facilitate the practice of RM. This means that the application of the Web as a RM tool is the next logical step forward for the whole of the hotel industry.
Barnes, J.G. and Cumby, J.A., 1993. The cost of quality
in service-oriented companies: making better customer service decisions
through improved cost information. ASB Conference.
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