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Relationship Marketing Strategy for Hotel Group Web Sites
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Fourth International Conference
"Tourism
in Southeast Asia & Indo-China: Development, Marketing and Sustainability"
June 24-26, 2000 |
This paper provides a current study of the application of World Wide
Web marketing by the hotel industry. The paper reports the findings of
a two-year follow-up study upon the prevailing use of the Web by hotels.
Specifically, the aims are:
WEB FEATURES AS A SOLUTION TO HOTEL COMMUNICATION LIMITATIONS Hensdill (1998) describes the Web as "a perfect medium for selling travel". According to HOTEL's 1998 Worldwide Technology Survey, 81% of hoteliers worldwide were thought to be capable to accept reservations over the Web in 1999. There is now widespread acceptance of the use of the Web for electronic commerce. The Web's potential as a low-cost distribution channel is having a profound effect on both business and consumers. There are a number of reasons for this. The costs for establishing and hosting a Web site vary greatly depending upon the scope of the project, but can be relatively low. The Web offers the possibility of high-speed global information transfer, high levels of interaction and links to computerised reservation and database systems, irrespective of geography, time zone, or computer system. There are therefore benefits in extending the firm's marketing reach to the global marketplace; supplanting traditional distribution channels, and allowing potential consumers browsing time by use of Web technology. The above features of the Web are a possibility for all hoteliers and therefore the Web has the ability to provide equality of access and strategy for all. In addition for larger companies the Web offers a competitive alternative to more traditional computerised distribution channels, such as the Global Distribution Systems. The hotel industry is information-intensive and the Internet is, first and foremost, an information resource. Internet multimedia technology allows for the transmission of sophisticated digital images, video and sound. Hotel "electronic brochures" can now include moving, three-dimensional pictures of the property and facilities, which the potential customer could explore continuously. Virtual hotel tours can now be found on a number of hotels Web sites (e.g. Golden Tulip Hotels, Jarvis Hotels, Marriott International and Wingate Inns) and views from selected rooms could be simulated. Ticketmaster Online (www.ticketmaster.com) uses such innovation to provide a unique service that shows the view its customers can expect from their theatre seats, fostering one-to-one relationships with customers. From the marketing perspective a major benefit of the Web is the greater degree of interactivity than other communication media. The most valuable Web applications are those that allow companies to transcend communication barriers and establish dialogue directly with customers. For example, hotel Web sites can contain electronic forms for customer completion and hotels can reply directly via electronic mail (e-mail). This kind of connection will improve customer relations and 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 customised brochures, itineraries and 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 capability and willingness of customers to use the Web to book hotel rooms and to search for hotel information. SUITABILITY OF RELATIONSHIP MARKETING FOR THE HOTEL INDUSTRY A new form of marketing has emerged as relationship marketing, (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 centered approach whereby a firm seeks long-term business relations with prospective and existing customers". Similarly, Brodie (1997), and Coviello et al (1998) have described the major changes taking place in the continuing transition to relationship 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. 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 acquiring customers as indicated by Rosenberg and Czepiel (1984), Barnes and Cumby (1993), and Liswood (1989). Buttle (1996) notes that there are the direct costs of the successful conversion of 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). There is growing awareness of the lifetime value of customers. 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 revenue and contributions earned from a long-term relationship with a customer. Gilbert (1996) argues that the lifetime value of retaining customers enables the costs of conversion of the prospect to be set against the revenues earned over the long 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):
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 that the long-term
retention of customers requires the following five steps:
Gilbert's model can also be considered within the context of criteria for a successful Web strategy advocated by the Butler Group, which advises organisations to:
MULTIMEDIA AND RM Gilbert's table reveals that as customers are led through the phases of RM, there is an increasing need to convert 'surfing' into a business transaction and to encourage repeat Web site visits (to tempt and retain). Audience involvement is known to be an essential consideration for successful marketing. However, there is scant research available to indicate how the Web's multimedia characteristics can be used to induce effective marketing communication. The Web offers an alternative, single tool as an integrated communication medium. There is general awareness and understanding of the marketing value of the Web's interactive characteristics (Ghose and Dou, 1998), but the effects of multimedia attributes remain under researched. Furthermore, the problems associated with bandwidth and slow delivery are additional inhibitors to the wide-scale application of multimedia. However, some researchers advocate its use. Condon (1995) suggests that the use of multimedia on the Web home page is able to upgrade the product or service image and facilitate sales. It is likely that future compression technology and network infrastructure will provide a platform capable of rapid delivery of full media Web sites. It is also reasonable to suggest that multimedia could be used to foster a high involvement condition in hotel customers, encouraging transaction involvement and repeat Web site visits (to tempt and retain). It is therefore a matter of importance that the hotel industry considers the effect of Web style, particularly in the domain of sound, video and animation. The hotel industry is information-intensive and the sheer volume of information available will become an increasing burden to consumers. Pattie Maes addresses this problem and predicts that 'programs that can act independently will ease the burdens that computers put on people' (Maes, 1994). She further speculates that "if untrained consumers are to employ future computers and networks effectively, direct manipulation will have to give way to some form of delegation. Researchers and software companies have set high hopes on so called software agents, which "know" users interests and can act autonomously on their behalf. Instead of exercising complete control (and taking responsibility for every move the computer makes), people will be engaged in a co-operative process in which both human and computer agents initiate communication, monitor events and perform tasks to meet a user's goals.' METHODOLOGY OF THE STUDY A major survey of hotel Web sites was undertaken during May 1997 and repeated in November 1999. The sampling frame for the current study can be defined as any hotel group accessible via the Yahoo web site in November 1999. The sampling frame introduces the same bias as in the earlier study, i.e. hotel groups not listed on the Yahoo site are excluded. A total of 140 hotel Web sites were accessed from the Yahoo search engin - (http://www.yahoo.com). The data were recorded against the same checklist used in the original study. Additional Web mechanisms were recorded, as was all use of multimedia by the hotels. Hence every Web mechanism utilized by hotel Web sites in the sample, at the time of the survey, has been listed and analysed. DISCUSSION OF THE RESEARCH RESULTS The data was analysed using SPSS for Windows. Descriptive statistics were used to compute the relative frequency distributions of all variables. The Web research identified the current use of the following web mechanisms:
Information: The Web, as discussed, is potentially a strategic information centre for the hotel industry, capable of 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 information (facilities available, amenities, transportation services, attractions, travel directions, etc.), what's new, virtual hotel tour as an experience of 'walking through' the hotel property, special promotions and language localisation selection by browser. The most significant change since the first survey is the nature of the hotel Web sites. They are now providing detailed descriptions and images of most hotel facilities and can therefore be described as electronic brochures. The range and complexity of information now provided by the majority of hotels is evident from the chart above, which shows significant growth in almost all areas of information provision. The only reduction is in the provision of language localisation. The earlier study revealed slightly more than 35% of hotels providing four or more features utilising the checklist from the earlier model. Again, the growth is significant, with 71% of those surveyed now providing six or more such features. Thus, it is evident that the majority of the hotel chains are exploiting the potential of the Web as a strategic information centre. The authors believe that agent technology could provide a solution for the monitoring and maintenance of a hotel Web site. The ability of agents to operate in a flexible, proactive manner suggests that agent-based systems could be built to monitor changes in both customer behaviour and the outside environment, and equipped with this information, to update previously defined goals. The agent could then respond by taking the appropriate actions to meet these new goals. This could be the generation of a new, customised Web page for a specific customer group, whose interests have changed or for whom there is new information. Similar applications have already been built. The Zuno Digital Library (Zuno, 1997) uses agents in three roles, which represent the consumer, the producer (of information) and the facilitator (mapping between consumer and producer). The system retains models of consumers. It then operates in a proactive way by providing information they require and shielding them from information that is irrelevant. The output is not a Web page but the conceptual logic is the same. Reservation: The Web offers the hotel industry a distribution channel that enables customers world wide to book hotel rooms. Internet-enabled distribution strategy has been heralded as a way for small and medium sized companies to compete more equally with larger organisations (Watson and Zinkhan, 1997). The web hotel reservation capability currently includes the following features:
The number of hotel chains using the Web as a strategic extension to their customer databases has doubled from just over 2% to 5%. It seems, therefore, that the hotel industry remains cautious in this area. This may be attributed to the security issues inherent in allowing customers access to critical data. Loyalty Programs: Hotel chains are extending 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. The previous study (Gilbert et al., 1999) revealed that a high proportion (75%) of the hotel chains offered no loyalty programme features at all. There is significant change in this area, with 45% of hotel chains now offering loyalty features. The growth to 42% of those surveyed offering on-line enrolment is further evidence of the benefits of the interactive nature of the Web. Again, customer involvement is fostered. The number of hotel Web sites offering a restricted frequent guest area has risen to 30%, a clear indication that hotels are recognising the benefits of customer loyalty. Significantly, hotels seem to be more willing to give loyalty programme members access to customer databases, with 7% of those surveyed allowing such customers the opportunity to create and modify their own profiles, and 8% providing on-line account view. Interesting new research by Palmer et al (2000) has identified that while some medium to large-sized hotel groups are investing in collecting customer information, by means of loyalty schemes, they are not making sufficient use of the data. Newsletter: Hotel chains can 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. The growth to 50% in on-line newsletters is in line with the overall trend in on-line provision of services by hotel Web sites. The reduction in e-mail newsletters is significant and may be an indication of the increasing costs in providing such a service. 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 remains largely untapped by the hotel chains. The most commonly offered feature is the guest book, with 4% of hotel chains in the survey offering this feature. Feedback: Hotel chains can 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. This is the only area showing a reduction in provision. Fewer hotel chains than in May 1997 offer either feedback mechanism. This may be explained by the costs associated with responding to such feedback. Further research into this area of Web activity is needed. Customer Service: 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. In May 1997 only approximately half of the hotel chains
were offering customer service features. The current survey
The most significant change is in the number of hotel chains providing meeting scheduling and management facilities. This is now an important feature of many business hotel products, with 29% of hotel chains in the survey offering some form of this service. The range of facilities provided is impressive, with many hotels allowing business customers to book and customise their own meetings venues on-line. Public Relation: 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. In May 1997, 5.6% of the hotel chains were offering on-line request for photos/information. The current survey reveals that this figure is now 15%. Again, there is growth in the number of hotel chains providing e-mail updates on latest developments, from 0.7% to 3%. The potential of the Web as a public relations tool is gradually being exploited, with 18% of the hotel chains adopting the Web in this way. Value-added Service: 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. The previous study revealed that a large majority of the hotel chains (65%) were not providing any value-added service at all. This has now reduced to less than one third of hotel chains (32%). The most important growth is in the number of links to business travel partners, which is now 53% and links to other web sites, which is now 58% of those hotels chains in the current survey. Growth can also be seen in the provision of business and travel information, with 38% offering this feature. News and current affairs mechanisms remain minimal, with only 5% of hotels offering them. 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 now being recognised and exploited by many of the hotel chains, with 30% providing a company information centre including employment opportunities, and a further 11% offering on-line job application facilities. Channel Members: The Web offers the hotel chains an interactive communication tool to develop long-term relationships with the channel members. Again, significant growth can be seen in this area, with the proportion of hotels involved increasing from 0.7% in May 1997 to the current figure of 36%. Research: The Web could also facilitate continuous customer data collection and the tracking of customer expectations. Customised or incentivised surveys could be carried out cost-effectively. The finding shows that 11% of the hotel chains now utilise the Web to carry out research, compared with 4.2% in the previous study. Additional Features: The only additional feature found in the current study is the use of the Web to attract franchise interest. The survey revealed that 5% of the hotel chains are using the Web to promote business in this way. Multimedia Characteristics: There is significant use of animation, with 31% of hotel Web sites displaying animated features. The use of music is still under-developed, with only 3% of hotel chains using music as part of their Web site development. Total Number of Web Mechanisms: The graph below shows the distribution of the total number of Web mechanisms found from this study. It confirms the significant growth revealed in the detailed analysis of individual Web features, and reveals the hotel industry's commitment to this global network. ![]() CONCLUSION A number of surveys have reported a strong preference for the Web as a hotel information source and as a hotel-booking medium. As early as 1996 the Hotel Industry Marketing Group (HIMG) warned, "hotels must not ignore the Internet as a key source of business in the future", (Caterer & Hotelkeeper,1996). In the US, in the first quarter of 1998, nearly 50 million adults visited Web sites to research travel products and services (INTECO, 1999). In the UK, INTECO forecasts the value of leisure flights booked through interactive media to reach £400m by 2003. INTECO's research shows that private travel Web sites are the third most popular type of e-commerce site for UK consumers, visited by 25% of high-income households that have Web access. PhoCusWright (1999) report that revenue from the Web for tourism related industries was $25 billion in 1998. It is evident that the World Wide Web has now come of age with the information aspects being augmented with interactive, reservation and data transfer benefits. The hotel industry is committed to the Web as a major distribution channel and marketing tool. All of the hotel chains in the study are now involved in exploring its potential to develop long-term relationships with customers. The Web still has a way to go in terms of its development as a RM tool, which remains dependent upon customers demands, the hotel companies' willingness to let their Web sites assume a bigger marketing role, and the available technology. However, the results here indicate widespread confidence within the hotel industry of the future of the Web as a marketing mechanism. There is sufficient evidence to suggest that hotel companies are adopting RM as a strategy guiding the development of their Web sites, as proposed by Table 1. The question now remains of how long is it likely to be before researchers and developers consider 'loyalty agents' - facilitators that can act on behalf of both the buyer and seller, in a mutually rewarding relationship? Given such possibilities, the hotel industry must continue to exploit the full potential of the Web as a strategic mechanism to facilitate the practice of RM. The Web technology of the future is likely to further facilitate the development of RM, particularly for stages 4 and 5 of Table 1 in approaches to the long-term retention of customers. Hotels must continue to pursue RM and the Web as an imperative. REFERENCES Barnes, J.G. and Cumby, J.A., (1993). 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Professor Kaye Chon Chair Professor & Head Dept of Hotel and Tourism Management The Hong Kong Polytechnic University Hung Hom, Kowloon, Hong Kong Telephone: +852-2766-6382 Fax: +852-2362-6422 Email: hmkchon@polyu.edu.hk |