The Role of the Brand in Modern Hotel Industry
The hotel industry for decades was relatively complacent. The demand for hotel rooms generally exceeded the supply. During the 1980s the hotel industry experienced a building boom, and soon there was a decline in room occupancy (Michman & Greco 190). Management was confronted with the problem that hotels cannot be easily remodeled to satisfy customers’ changing needs and that a product differentiation strategy was needed to make an individual hotel distinctive from the others.
To meet these challenges hotels carefully have been trying to match the service offering with the desired target market. The strategy of lifestyle market segmentation was employed by the major players of international hospitality market (Taylor, Smith ; Lyon 106). For instance, when Holiday Corporation learned that its midpriced Holiday Inn hotels were confronted with competition from budget hotels and luxury chains, Holiday Inn responded by expanding into the high- and low-priced ends of the market.
Embassy Suites, a chain of multiple-room suites, targeted mainly upscale business travelers and Hampton Inn hotels, a limited-service chain, targeted value-conscious business or pleasure travelers. Holiday Corporation also developed Homewood Suites, a chain of hotels designed for guests usually staying five or more nights. The Radisson Hotel has hosted many family reunions and has decided to actively pursue that market segment by advertising a reunion package for weekends.
Residence Inn, a division of Marriott, specializes in providing accommodation on the long-term stays up to six months or longer (Michman ; Greco 189). The purpose of this study is to explore what role the brand played in this process, how much it contributed to the success of the hotels in their competitive struggle for market share. Towards this end we will examine the sources of competitive advantage for the international hospitality industry firms, consider the examples of successes of the hotels in international hospitality market as well as analyze their causes, and make the conclusions.
The Brand as a Critical Source of Competitive Advantage for Hotels Many hotels has similar facilities and offer comparable services. Service tangibility can be increased by emphasizing service-provider reliability; hence the hotels face the necessity to make efforts to offer similar services to market segments with different demand patterns (Taylor, Smith ; Lyon 105). Although the hotels endeavor to standardize services, there is the danger that while these services may have more consistent quality and convenience, the personal touch may be lacking.
Essentially, hotel management must determine what they can do either differently or better than the competition. Four key ingredients in the hotel industry are considered by the experts in the field to be important for either success or failure of the hotel: innovation, target market segmentation and image, physical environmental resources, and human resources (Contractor ; Kundu 331). For the purposes of our study we will consider deeply one of these ingredients such as image, especially its component branding.
A brand is commonly defined as “a name, symbol, design, or mark that enhances the value of a product beyond its functional value” (qtd. in Cobb-Walgren, Ruble ; Donthu 25). Why are businesses and consumers alike willing to pay so much for brand names? Stated simply, brand names add value. The added value that a brand name gives to a product is now commonly referred to as ‘brand equity’.
Brand equity usually falls into two groups: “those involving consumer perceptions (e. g. , awareness, brand associations, perceived quality) and those involving consumer behavior (e. g. , brand loyalty, willingness to pay a high price)” (Cobb-Walgren, Ruble ; Donthu 27). Among the perceptual measures, one technique uses consumer preference ratings for a branded product versus an unbranded equivalent. Another approach treats brand equity as brand name importance, since the name of a brand is often its core indicator (Crimmins 12). Brand knowledge is decomposed into brand awareness – recall and recognition, and brand image – a combination of the favorability, strength, and uniqueness of brand associations (Cobb-Walgren, Ruble ; Donthu 27).
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