Hotel Industry E-Marketing

Hotel Industry E-Marketing

E-marketing is the new trend of marketing extensively acquiring by hotel industry. The traditional marketing strategy of hotel industry now not performing very well. In place e-marketing is taking the drivers seat.

The purpose of the research

The travel industry survives as one of the better performing sectors in e-commerce. With no fulfillment and no need for online payments, the hotel industry is well positioned to capture the full potential of ecommerce while avoiding many of its risks. “Currently, in Hong Kong, China, Taiwan and South Korea, approximately 5% to 10% of all lodgings are booked through the Internet, with 2004 estimates approaching 20%. This would follow the U.S. trend where hotels are reporting that up to 30% of all lodging is booked through online channels. Despite the burst of the Internet bubble, the promise of the Internet for hoteliers is still real: Online distribution can reduce costs, attract affluent customers and lessen dependency on more traditional and expensive distribution channels.”(Ref: – www.igk.co.kr, available on 23/03/2008)

Background

“As of September 2003, 604 million people worldwide had internet access”.

(Ref: -www.cyberatlas.com, available on 23/03/2008)

The Internet is assumed to be an important channel for marketing and distribution of products and services. This is, among other things, due to the cost-effectiveness of the Internet and the convenience for customers. With the Internet marketers can reach out to a broad customer base, locate target customers, identify their needs and communicate with them at a relatively low cost. The Internet provides an opportunity for market testing and optimization. Increasing digitalization will make it progressively easier to experimentally alter particular aspects of a business and quickly observe how customers respond (Wyner 2000).

Since the Web allows access to a plethora of information on different products, the hotel organization must encourage the potential consumer to use the Web site as both an information tool as well as a purchase option. This combination of information search and purchase process is an advantage over traditional retailing as online consumers have stated that personalized targeting is a reason they shop online. When consumers are more involved in the buying process it significantly improves brand recognition and recall.

Research Aim & Objectives/ Research Questions:-

The main aim and objectives of this research was to find out the use, importance and impact of the E-marketing and traditional marketing in hotel industry, explore and analyze which one is the best suited of marketing used by the hotels and its contribution to marketing performance. And finally emarketing and traditional marketing has been compared to reach the desired goal.

Research Hypotheses:

In the light of the achieving the above aims and objectives, the following hypotheses had been constructed: –

Hypothesis (1): The level of use of e marketing and traditional marketing by hotel industry is significantly related to the hotel firm’s marketing performance.

Hypothesis (2): E-marketing vs. Traditional marketing for the performance of the hotel

Structure of the research

The research is consisted of 5 chapters. In the first chapter is introduction of the topic, its background and the aims and objectives was described. Chapter 2 deals with the review of literatures in which all the variables are defined. Third chapter deals with the primary research done by the author and dealt with the findings and analysis of the hotels taken in the sample and the interviews had been put in to diagrams to have better understanding of the topic. Chapter four is dealing with the conclusion derived by the author on overall experience while developing the research; recommendations and limitations has been discussed in the last part of the research.

Literature Review

The researcher had identified a wide range of the literature review (in its wider broad sense which includes: Journals, Academic Books, theses and dissertations, short articles, e-databases, conference papers, etc).

Background

Marketing existed in society for millennia, ever since when people use to exchange from a product with other one, commonly known as “barter system”. Since after industrial revolution, market had taken a big turn and changes the meaning of marketing and gives a new definition to it. It’s been well said that marketing is not all about transaction; it’s also about developing relationship and ties with your guest or customer. And our international hospitality business is all about guest relation along with transaction and as we are involved in a transaction, thus we are engaged in a practice of commerce. “Commerce dealt with purchase and sale of good”. Before introduction of internet in the market, exchange of goods and services from producer to consumer was done through paper work and personnel contact

“Electronic commerce, commonly known as e-commerce or eCommerce, consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks. The amount of trade conducted electronically has grown extraordinarily since the spread of the Internet. A wide variety of commerce is conducted in this way, spurring and drawing on innovations in electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web at least at some point in the transaction’s lifecycle, although it can encompass a wider range of technologies such as e-mail as well.”(Ref: www.wikipedia.org, 23/03/08)

“A small percentage of electronic commerce is conducted entirely electronically for virtual items such as access to premium content on a website, but most electronic commerce involves the transportation of physical items in some way. Online retailers are sometimes known as e-tailers and online retail is sometimes known as e-tail. Almost all big retailers have electronic commerce presence on the World Wide Web. .”(Ref: www.wikipedia.org, 23/03/08)

Research Aim & Objectives/ Research Questions:-

The purpose of this research was to find out the use, importance and impact of the E-marketing and traditional marketing in hotel industry, explore and analyze which one is the best suited of marketing used by the hotels and its contribution to marketing performance. And finally emarketing and traditional marketing has been compared to reach the desired goal.

The research had adapted an interdisciplinary approach that makes use of hotel business enterprises marketing, E-marketing, IT, and information systems literature. This is in line with the point of view of Gatticker et al. (2000) who states that researchers should investigate the opportunities offered by the Internet using an interdisciplinary approach. At the same time, because E-marketing is a field that makes use of IT and IS, depending on that the research was considered the appropriateness of the various theories that underpin research into impact of e-marketing in hotel business. At same time the traditional approach of marketing has been compared to find out which one is the best suited for the hotel industry marketing performance.

Consequently, the objectives of this research are as follows:-

• To clarify a conceptual model to understand and interpret the use of the traditional marketing and E-marketing in hotel industry.
• To focus this impact of e-markting and traditional marketing has been compared in a view to hotels performance and how they use this.
• To explore and analyze the importance and form of e marketing used by the hotel industry and its contribution to marketing performance of the hotel.
• To assess the existing awareness of the hotels in Delhi to the expected benefits of the using of e marketing.
• To identify the results of using e marketing.
• To evaluate the current practices of e marketing by the hotels of Delhi taken in the sample.
• To examine the impact of traditional marketing and E-marketing practices on marketing efficiency

To achieve these objectives there was two hypotheses have been constructed to be tested during the research process.

Research Hypotheses:

In the light of the achieving the above aims and objectives, the following hypotheses had been constructed: –

Hypothesis (1): The level of use of e marketing and traditional marketing by hotel industry is significantly related to the hotel firm’s marketing performance.

Hypothesis (2): E-marketing vs. Traditional marketing for the performance of the hotel

Definitions

“Electronic marketing (E-marketing) can be viewed as a new modern business practice associated with buying and selling goods, services, information and ideas via the Internet and other electronic means. A review of relevant literature revealed that definitions of electronic marketing vary according to each author’s point of view, background and specialization.”(Ref: www.edamba.eu/userfiles/Hatem%20El%20Gohary.doc, viewed on 24/03/08).

Some of the definitions are as follows: –

Smith and Chaffey (2005) defines it as:

“Achieving marketing objectives through applying digital technologies”.

Strauss and Frost (2001) define it as:

“The use of electronic data and applications for planning and executing the conception, distribution and pricing of ideas, goods and services to create exchanges that satisfy individual and organizational objectives”.

The researcher had followed on Strauss and Frost definition in conducting the current research because: it takes into consideration all the element of E-marketing, all types of products, it illustrate the main objective of E-marking which is creating the exchanges that satisfy individual and hotel organizational needs. Moreover it is the official definition for E-marketing adopted by the E-Marketing Association.

(Ref: www.edamba.eu/userfiles/Hatem%20El%20Gohary.doc, viewed on 24/03/08).

From the researcher point of view, importance and impact of E-marketing in hotel industry has changed the shape and nature of hospitality industry all over the world. Because the rapid proliferation of the Internet, the World Wide Web (WWW) and electronic communication has created a fast growing new electronic channels for hotel marketing. This rapid expanding use of the Internet and other electronic communication for hotel business purposes attracts hotel companies to invest in online presence (Liang and Hung, 1998).

Marketing performance

Nowadays the fact that a hotel firm survival depends on its capacity to ultimate service experience, create value, and value is defined by customers (Day, 1990), marketing makes a fundamental contribution to long-term hotel business success.

E-marketing process used to evaluate marketing performance and effectiveness in hotel industry. On the other hand, when looking to the marketing performance and success measure there are many measures. Recently, in an attempt to organize performance measures Kokkinaki and Ambler (1999) have summarized it and established six categories for marketing performance and success measures which are: Financial measures / Competitive market measures / Consumer behaviour measures / Consumer intermediate measures / Direct costumer measures / Innovativeness measures.

(Ref:http://web.biz.uwa.edu.au/staff/jmurphy/O’Connor_Murphy_ijhm2004. pdfavailable on 12/03/2008)

E-Marketing Performance Measures

Standardized measures for E-marketing performance are both needed and necessary. The discussion of most of the researchers has centred on the following measures (beside the traditional marketing performance measures):

• Traffic
• Visit duration
• Conversion rate (visit to purchase)
• Catalogue size
• Sales value
• Number of transactions
• Number of users (as measured by the number of registered user accounts).

E-marketing performance measures. Namely:

• Financial measures
• Competitive market measures
• Consumer behavior measures
• Consumer intermediate measures
• E-marketing measures, such as
• Conversion rate
• Traffic
• Visit duration
• Number of transactions
• Number of users

(Ref: www.edamba.eu/userfiles/Hatem%20El%20Gohary.doc; available on 12/03/2008)

“The World Wide Web (WWW), which is the main e-marketing element, launched and started at 1993.”

(Ref: http://www.brad.ac.uk/hub/studentnews/emarketing.doc; viewed on 30/03/08)

“Despite of the fast growth in e-marketing research in the last decade, it appears that only from the late 1980s researches on e-marketing and internet marketing begun to appear in the literature. Starting with the work of: Malone, Yates and Benjamin (1987 & 1989), crossing by the work of: White (1997), Samiee (1998), Wientzen (2000), Porter (2001), Siddiqui et al. (2003), Daniel et al. (2003), Smith and Rupp (2003), Smith (2004 a, b) and ending with the work of: Sheth and Sharma (2005), Sandeep and Singh (2005), De Kervenoael et al (2006), Flavián and Guinalíu (2006), Taylor and England (2006).”

(Ref: http://www.brad.ac.uk/hub/studentnews/emarketing.doc; viewed on 30/03/08)

The research studies investigated and covered a wide rang of e-marketing areas, such as: internet-marketing / e-mail marketing / intranet marketing / SMS marketing / extranet marketing. On the other hand, it is noticed that the literature in Internet marketing covers five main areas, which are:

• Internet marketing (IM)
• Environment,
• IM functions,
• IM applications and
• IM research.

(Ref: http://www.brad.ac.uk/hub/studentnews/emarketing.doc; viewed on 30/03/08)

E- Marketing components

• Customers (Buyers): impulsive, patient, analytical
• Sellers
• Products
• Infrastructure
• Front end – The portion of an e-seller’s business processes through which customers interact, including the seller’s portal, electronic catalogues, a shopping cart, a search engine, and a payment gateway
• Back end – The activities that support online order-taking. It includes fulfillment, inventory management, purchasing from suppliers, payment processing, packaging, and delivery
• Intermediaries – A third party that operates between sellers and buyers
• Other business partners
• Support services

(Ref:http://www.ionglobal.com/documents/rating_luxury_hotel_emarketing_practices_in_asia.pdf,available on 12/03/2008)

Online Pricing

Enz (2003) also addresses the issue of the networks identified by Dale (2003) above, which she claims are driving down hotel profitability. Noting that hoteliers use these networks without a clear understanding of their effect, she claims that they encourage competition based solely on price and urges a rethink of such hidden discounting.

Citing forthcoming research from the “Centre for Hospitality Researchat Cornell”, she shows how price has become largely transparent and that consumers now book rooms at one price, shop around for better prices and then cancel and rebook. Rather than yield higher total sales, discounting simply displaces customers from one distribution channel to another. Any increase in volume fails to offset the revenue lost from the discounting. Claiming that this is true for all industry segments, regardless of occupancy rates, Enz maintains that hoteliers need to be more selective about the rates they provide to third party sites to insure that they are actually generating incremental revenues.

(Ref:-www.emarketingassociation.com available on 14/02/20080

Pointing out that consumers frequently search multiple channels for the cheapest price, and expect cheaper prices online, O’Connor (2003) investigates if the behaviour of chain hotel brands conforms to these expectations. Using historical data, he surveys rates across five B2C channels to establish whether pricing is consistent across channels; whether one channel is consistently cheaper; and whether the apparent pricing strategy is logical from both consumer and hotel perspectives. His findings show that hotel companies typically use multiple distribution channels, and offer multiple rates across each channel. No channel consistently offers the cheapest price, but the analysis reveals differences based on market segment. Consumers are more likely to find cheapest prices on direct channels (chain website and call centre) at the lower end of the market, and conversely through intermediaries at the upper end. In other words, luxury hotels appear to be offering their cheapest prices though channels with the highest cost of distribution. O’Connor concludes that hotel companies in general do a poor job managing their distribution, and urges them to develop well though-out pricing policies that would encourage consumers to book through brand websites. Anecdotal evidence would seem to suggest that operators have followed this advice, as evidenced by the recent widespread use of “Best Rate Guarantees” on many hotel websites.

(Ref:-www.emarketingassociation.com available on 14/02/20080

Litvin and Crotts (2003) focus on the potential use of online negotiation models in hospitality. While yield management varies prices relative to demand, the rate to individual customers is fixed; hotels set the price and potential guests accept their offer or stay elsewhere. In contrast, negotiation is normal with group sales (meetings, conventions, tour groups, and corporate travel accounts), and Litvin and Crotts explore the applicability of contemporary e-commerce negotiation models to group sales. They argue that the “Consumer to Computer” model, (buyers nominate a price, commit to the transaction and have their offer matched to potential suppliers) is inefficient. Only the highest bid is accepted, other potential customers are left unsatisfied and incremental revenue is lost as non-winning bids are foregone. “Online Requests for Proposal” (buyers detail their requirements, which are then forwarded to potential suppliers) help overcome these limitations, but generally only facilitate matching and have no influence over subsequent negotiations. Litvin and Crotts advocate an “Automated Business-to-Business Negotiation” model, whereby the facilitating company maintains a dynamic database of active purchase and sale intentions, which it cross-compares to seek potential transactions. Once detected, the negotiation process begins and the system attempts to bring buyers and sellers together by adding stated trade-offs as needed. As this takes place automatically, negotiation can occur simultaneously with multiple partners, increasing the likelihood of finding an appropriate deal. The authors argue that this approach is superior as it balances power differentials through matchmaking, and facilitates the entire process. Compiling a critical mass of potential buyer and seller transactions has limited the commercial success, so far, of this application.

(Ref:-www.learnmarketing.net available on 14/02/20080

Hospitality Consumers and E-marketing

Online Consumer Decision Making

Several articles investigate how technology influences hospitality consumer decision-making. Seeking information is one of the first stages in the decision making process. Gursoy and Umbreit (2004) use 3,264 responses from a European Commission survey to investigate cultural differences in how travellers from 15 EU countries search for information, online and offline. They found five distinct market segments and suggest specific marketing communication campaigns for each segment. For example, travellers from Belgium and Italy use external information sources more often than other segments, while travellers from Denmark and Finland use the Internet most frequently. Marketers need therefore to align their marketing efforts with a culture’s information search behaviour.

(Ref:- Reid R. D. & Bojanic D. C.(2006); hospitality marketing management; 4^th edition; New Jersey; Wiley).

Jeong et al (2003) explore the role of online information and behavioural intention, highlighting the importance of information satisfaction. They claim that this is a powerful determinant of behavioural intentions; lodging operators must ensure that websites satisfy visitors’ information needs in order to expect online transactions. Specific website elements to note include accurate and reliable information, and easy navigation. Susskind et al. (2003) investigate how apprehensiveness towards Internet use relates to information seeking, purchase intention and purchase behaviour.

(Ref:-Mooij M. D.(2005); global marketing and advertising, understanding cultural paradoxes; 2^nd edition; USA; Sageavailable on 14/03/2008)

Drawing on three separate surveys to develop and refine two measures, General Internet Apprehensiveness (GIA) and Transactional Internet Apprehensiveness (TIA), their results support strong relationships between apprehensiveness and both online information seeking and purchase.

(Ref:http://web.biz.uwa.edu.au/staff/jmurphy/O’Connor_Murphy_ijhm2004.pdf,available on 23/03/2008)

Card et al (2003) also investigate the purchase decision. Surveying members of the Travel and Tourism Research Association, they found that six out of seven shopped online, with airline tickets the most common purchase, followed by accommodation, travel information, rental cars, event tickets, bus or rail tickets and package tours. They found differences between shoppers and non-shoppers based on personal characteristics, with the former tending to be opinion leaders, more innovative, involved in information seeking and used to TV shopping. Their results, however, showed no differences between shoppers and non-shoppers based on perceptions of online store characteristics. Fam et al (2004) also consider online store characteristics, in particular the role of consumer trust. Their study of New Zealand online accommodation providers and consumers suggests a chasm between actual practice and consumer wants. The latter demand significantly more trust features – guarantees, refunds, company information, privacy statement and email confirmations – than websites currently provide.

(Ref:http://web.biz.uwa.edu.au/staff/jmurphy/O’Connor_Murphy_ijhm2004.pdf,available on 23/03/2008)

Website Layout and Design in process of E-marketing

To account for such differences between consumer wants and website offerings, hotels need to reflect upon their website design. However, research on effective hospitality websites is an ongoing quest. Several studies specifically examined website layout and design. The first two introduce the notion of the experience economy and suggest how Web technologies can reinforce the customer experience (Dubé, Le Bel, & Sears, 2003; Stamboulis & Skayannis, 2003). Websites, for example, should reinforce a hotel or resort’s position by going beyond visual pleasures on the site and adding sensual, emotional and intellectual pleasures for online consumers (Dubé et al., 2003). Other authors explore the practical and theoretical issues of howto accomplish this, investigating what features and functions hospitality operators should incorporate into their websites. For example, Jeong et al. draw upon past literature to develop six measures of website quality, namely information accuracy, clarity, completeness, ease of use, navigational quality, and color combinations. Responses from 1,743 US respondents suggest that website quality is an important antecedent of information satisfaction, which in turn is a powerful determinant of behavioral intention. Of the quality measures proposed, ease of use shows the strongest relationships with both information satisfaction and behavioral intentions.

(Ref:http://web.biz.uwa.edu.au/staff/jmurphy/O’Connor_Murphy_ijhm2004.pdf,available on 23/03/2008)

“Chung and Law (2003) develop a performance indicator for hotel websites based on five dimensions of information richness – facilities, customer contact, reservations, surrounding area and website management. Gauging the importance of dimensions from a survey of hotel supervisors, they analyse Hong Kong Hotel Association member websites. Consistent with past research, the level of information technology application relates directly to the hotel category. Murphy et al. (2003) posit that hotels paying attention to email also pay attention to their websites. Measuring email responses and assessing the website features of Swiss hotels, they argue that hotels with professional email responses also lead in the use of websites. Based on their findings, they suggest that hoteliers focus on inexpensive features that show a significant relationship to quality email responses, such as brochure requests, online services, hyperlinks, and branded URLs. Alternatively, their results suggest that hotels avoid questionable techniques such as animation, as it may reflect a bandwagon effect rather than add value. As in other studies, they found that hotel size and category relate directly to quality e-mail responses and the presence of appropriate website features.”

(Ref: web.biz.uwa.edu.au/staff/jmurphy/O’Connor_Murphy_ijhm2004.pdf; viewed on 12/03/08)

Customer Relationship Management and E-marketing

“Piccoli and colleagues (2003) review the risks and benefits of customer relationship management (CRM). This philosophy of intimate customer familiarity can lower marketing expenditures and increase sales through closer relationships and increased satisfaction. For this to occur, the entire hotel chain must cooperate in the collection, management and dissemination of customer information – an expensive and complicated process. They highlight a potential data-ownership dilemma caused by the structure of the US lodging industry in which owners, management companies, and brands cooperate in the operation of properties. It is inherently difficult for these three entities to share customer data. In addition to cooperating, they frequently compete with each other, which could limit successful CRM implementation. Piccoli et al argue that if these difficulties could be overcome, CRM would work best at the brand level, a claim supported by two case studies of brands with strong CRM programs – Wyndam International (Picolli et al., 2003) and Harrah’s Hotels and Casinos (Magnini, Honeycutt, & Hodge, 2003). The latter also exemplifies how successful CRM relies upon data mining. This procedure applies artificial intelligence and sophisticated statistical techniques to customer data to perform five tasks: classification, clustering, deviation detection, associations and forecasting, and can be a valuable tool for hotels seeking to better understand and predict guest behaviour (Magnini et al., 2003).”

(Ref: web.biz.uwa.edu.au/staff/jmurphy/O’Connor_Murphy_ijhm2004.pdf; viewed on 12/03/08)

Two articles investigate the implementation of a CRM system. Based on qualitative and quantitative research with Italian hotel operators, Minghetti (2003) proposes a CRM system and complementary matrix for evaluating guest information, which serve as a convenient blueprint for implementing or evaluating the CRM process. Louvieris and Driver (2004) suggest how the developing XML web standard could enable the CRM process. Consumers increasingly use a variety of devices (for example cell phones, Interactive television and kiosks) to access the web, and need different types of interactions, information and procedures depending on the relationship stage. They show how the current one-size-fits-all approach is unlikely to be successful. However providing the required personalisation to service each situation is difficult using current technology. They propose how the unique characteristics of XML, which uses content specific rather than stylistic tags, could help hotel companies implement the needed device specific and loyalty level personalisation.

(Ref: web.biz.uwa.edu.au/staff/jmurphy/O’Connor_Murphy_ijhm2004.pdf; viewed on 12/03/08)

Finally, three studies investigate a subset of customer relationship management, online customer service. These use similar methodologies to test Swiss hotels (Frey, Schegg, & Murphy, 2003), Tunisian hotels (Gherissi-Labben, Schegg, & Murphy, 2003), and luxury chain hotels (Schegg, Murphy, et al., 2003). Swiss hotels showed the highest e-mail response rates at 71% with Tunisian hotels at a 45% response rate performing worst. Most respondents, however, gave sloppy and inadequate replies, which suggest a lack of focus on online customer service. The authors argue that email communication is business communication and use diffusion of innovations (Rogers, 1995) as a theoretical base to investigate differences in response rates and response quality. There were no significant differences in response rates but larger, higher rated and affiliated hotels tended to provide better quality responses.

(Ref: web.biz.uwa.edu.au/staff/jmurphy/O’Connor_Murphy_ijhm2004.pdf; viewed on 12/03/08)

Some economic and human factors that affect hotel choice

1. Follow the money – Travel decisions are not just about hotels: airline costs, car rental costs and entertainment expenses also drive how companies make choices for approved hotels, in what cities.

2. Familiarity breeds return – The role of chain/brand hotel loyalty programs is a significant benefit to travelers. Companies of all sizes can exert influence over these programs – in some cases aggregating stay points for pooled corporate benefit, in other cases permitting travelers to retain points but only in approved locations/chains/brands.

3. Internal and External Roles – Hotel selection is influenced by relationships that are cultivated over time. Full time corporate traveler managers guide purchasing decisions. Others within an organization may also greatly influence hotel choices. Corporations may use mega agencies to provide soup-to-nuts purchasing management. Mega agencies may be limited to making recommendations only. Mega agencies may be used for their buying power in selected markets and not others. Here again the total travel buy can influence both corporation and agency behaviors.

4. Power is Local – Sometimes overlooked and taken for granted is the principle of local selling: look in your own backyard. This backyard can extend many hundreds of miles in less densely populated area, or it can literally be next door in major centers of commerce. Inbound demand to hotels can be driven by external business factors pushing business to an area. Demand is also driven by factors that pull the business into an area. Local companies who supply good and services to larger corporations up the food chain can create a gravitational force on their customers. Examples of these include product demonstration facilities, heavy equipment sales, science