Affiliation to Hotel Chains: Requirements towards Hotels in Bulgaria

Transcription

1 Affiliation to Hotel Chains: Requirements towards Hotels in Bulgaria Maya Ivanova CEO, Zangador Ltd., Bulgaria International University College, Dobrich, Bulgaria Stanislav Ivanov International University College, Dobrich, Bulgaria Forthcoming in: Journal of Hospitality Marketing and Management 1

2 Affiliation to Hotel Chains: Requirements towards Hotels in Bulgaria The hotel chain s expansion involves several strategic decisions whether to expand, choice of a destination, choice of an entry mode, and selection of a hotel partner. This research note focuses on the hotel partner selection and more specifically on the requirements the hotel chains have towards hotels in Bulgaria that aim to be affiliated, as well as hotels perceptions of chains requirements towards them. Findings reveal that chains put higher emphasis on the task-related rather than the partner-related criteria. The hotels systematically overrate the importance of the specific requirements chains have towards them. Managerial implications, research limitations and directions for future research are also discussed. Key words: hotel chains; partner selection; task-related criteria; partnerrelated criteria; entry mode; Bulgaria; Introduction The expansion of hotel chains involves several strategic decisions whether to expand/internationalise, which destinations to enter, which specific entry mode to use and, finally, which particular hotels to affiliate. While the determinants of the internationalisation process, destination choice, entry modes and strategies have received considerable interest (Alon et al., 2012; Chen & Dimou, 2005; Contractor & Kundu, 1998; Cunill, 2006; Guillet et al., 2010; Johnson & Vanetti, 2005, Ivanova & Ivanov, 2014; Rodtook & Altinay, 2013; Yu et al., 2014), the partner hotel selection appears to be neglected by scholars. Research on the partner selection process focuses mainly on strategic alliances (Geringer, 1991; Holmberg & Cummings, 2009) with only marginal interest in the field of hotel chains (Altinay, 2006; Holverson & Revaz, 2006). 2

3 Partner selection between hotel chains and individual hotels is defined as a bilateral process in which the hotel chain and the potential member hotel evaluate the other partner and decide whether to enter in a long-term relationship with it. Hotel chains are known to prefer mainly the non-equity (management contract, franchise, lease, etc.) rather than the equity forms of expansion (full or partial ownership) (Martorell et al., 2013), and that s why this research note focuses on the non-equity modes of affiliation of hotels to hotel chains. In the establishment of a partnership, finding a reliable partner is of great concern to both the hotel chain and the independent hotel that aims at affiliating to a chain. In order to facilitate the process of partner selection, hotel chains usually develop a set of guidelines (requirements) for evaluation of the potential partner hotels (Altinay, 2006). If the independent hotel is aware of the chain s requirements towards potential partner hotels, it could try to match them and enhance its chances to be affiliated. On the other hand, the independent hotels might be considered as clients to the chain, to whom the chain sells its brand, knowledge, expertise, service standards in exchange for a chain membership fee paid by the hotel in the form of royalty, franchise, or management fee. In this regard, the hotel chains should also take into consideration the requirements of independent hotels towards them. Therefore, both parties could win if they know each other s requirements towards them. This research note focuses specifically on the chains requirements towards hotels in Bulgaria that possess the potential to be affiliated to hotel chains through non-equity modes. In particular, it aims at: (1) measuring the importance hotel chains put on their requirements towards the potential partner hotels, (2) revealing the (potential) partner hotels perceptions of the chains requirements towards them, and (3) identifying the gaps 3

4 between the chains requirements and the hotels perceptions of them. The requirements of hotels towards chains go beyond the scope of current paper and should be subject to future research. Methodology Data collection took place in June-November The authors distributed questionnaires by to 6 respondent groups: a) domestic hotel chains, b) foreign chains present in Bulgaria, c) foreign chains not present in Bulgaria, d) local hotels that were currently part of a foreign chain, e) hotels that were once part of a foreign hotel chain, and f) independent hotels that had never been part of a chain. The domestic chains and the foreign chains present in Bulgaria were contacted because they were very familiar with the situation in the country, while the foreign chains not present in Bulgaria were considered as potential entrants to the country and possible partners of the hotels. The local hotels that were currently or previously part of a chain were surveyed because their managers were familiar with the chains requirements towards them. The independent hotels were contacted because they were potential partners to the hotel chains and the perceptions of their owners and managers regarding the chains requirements towards hotels would influence their decision whether to join a hotel chain or not. The questionnaires to the chains were sent by to the managers responsible for expansion (development director, development manager, vice president on development, head of development, expansion manager, or managers of regional headquarters). The questionnaires to the hotels were ed to the persons responsible for marketing and management of the property (general manager, marketing manager, front office manager, or owner (if possible)). At least 2 reminders to 4

5 participate in the survey were sent to each respondent group. The hotels affiliated to domestic chains were not asked because they were owned by the chains and, therefore, their decision to join a chain was not market- but ownership-based. Summary of the sample is presented in Table 1. INSERT TABLE 1 AROUND HERE The specific chain requirements towards hotels were derived from two source areas: the literature on partner selection (Bierly & Gallagher, 2007; Geringer, 1991; Holmberg & Cummings, 2009) and the application forms of some of the leading hotel chains. In the research literature, Geringer (1991) s typology of task- and partner-related selection criteria received wide acceptance and it served as a basis for this note as well. Task-related criteria include the operational skills and resources needed for running the business while partnerrelated criteria consist of the subjective characteristics of the partners which make them reliable. In the context of hotel chains, Altinay (2006) identified as task-related criteria the physical condition of the hotel and the appropriate design according to a chain s service operations manual, while as partner-related criteria reliability, commitment, culture and experience. As a practical source of partner selection criteria we used the publicly available application forms of 5 of the top 10 international hotel chains which they used in the process of evaluating potential partner hotels. From a theoretical perspective, these application forms included mostly task-related criteria: location of the property, 5

6 characteristics and condition of the building, facilities, qualifications of the employees and the managers, etc. Partner-related questions in the application forms were general information about the applicant, ownership of the property and the land, financial stability, and recommendations from third parties. The final set of task- and partner-related selection criteria used in this research is presented in Table 2, which also illustrates the findings. The hotel chains requirements towards hotels and the hotels perceptions of the requirements were measured on a 5-point scale (1-extremely unimportant, 5-extremely important). The Kolmogorov-Smirnov test for normality of the distribution of responses showed that they were normally distributed only for the answers of hotels and not for the chains. Therefore, the differences between responses of chains and hotels were identified via the non-parametric Mann-Whitney U test. INSERT TABLE 2 AROUND HERE Findings The results indicate, that the chains put the greatest emphasis on task-related criteria like the location (m=4.32) and accessibility (m=4.11) of the hotel, the characteristics and condition of the property (m=4.21) and the possibility to adapt it to chain s requirements (m=4.16). Some task-related criteria like competent employees (m=3.58), qualified 6

7 managers (m=3.47) and hotel managers local market knowledge (m=3.68) and the partnerrelated criteria hotel s image in the local community (m=3.53) and financial results (m=3.47) were deemed as less important. This is probably a result of the fact that the chains have their own service standards which are imposed on the affiliated hotels, they send managers to run the hotels (in management contracts) and provide training to the hotel employees and managers, which makes the physical attributes of the building more important to the chains. It should be noted that foreign chains consider the possibility to adapt the building according to their standards as more important (it is their highest ranked requirement: m=4.70) than Bulgarian chains do (it is one of their lowest ranked requirement: m=3.56), probably because foreign chains have stricter standards about the buildings and premises in their hotels. The hotels perceptions about chains requirements towards them are quite uniform. Most of the requirements have been valued between 4.17 and Only two (local market knowledge and hotel s financial results and performance) have an average response below 4 on the 5-point scale. Comparing the chains requirements towards hotels and the hotels perceptions about chains requirements we find that hotels systematically rank the requirements as more important than chains actually do. Results reveal significant differences between chains requirements and hotels perceptions of them in four areas: competent employees (p=0.010), qualified managers (p=0.001), location (p=0.023) and hotel s image in the local community (p=0.052). In three of these areas, the hotels seem to overrate the importance chains put on the particular requirements. On a disaggregate level, the opinions of the chain members are closer to the responses of chains and fewer significant differences are found between them. On the other hand, the opinions of 7

8 independent hotels are more divergent from the chains responses (see Table 2). In particular, statistically significant differences between the responses of the chain members and the independent hotels were found in: possibility to adapt the property to chain s standards (p=0.011) and competent employees (p=0.051) in both cases the responses of the chain members were much closer to the chains answers which is understandable considering the fact that chain members have already experienced the chains requirements towards them and thus have better view of them compared to the independent hotels. Conclusion This paper s contribution to the analysis of the partner selection criteria in the context of the hotel chains expansion can be evaluated from two perspectives. From a managerial perspective the findings show that the hotels that want to join chains should focus on the task-related criteria concerning the hotel s building itself its location, accessibility, characteristics and condition of the property, possibility to adapt the property to chain s requirement. The other task-related (qualification of managers and employees, market knowledge) and the partner-related criteria (hotel s image, financial results and performance) are not of high importance to the hotel chains. Therefore, if the hoteliers want to successfully affiliate their properties to chains, they should start planning the process well in advance, even during the project phase of the hotel construction, in order to be able to easily fulfil the chains requirements towards them. From a research perspective, the paper reveals a serious gap between the chains requirements towards hotels and the hotels perceptions of chains requirements towards them. For example, Bulgarian hoteliers think 8

9 that chains look at the competent employees, qualified managers and hotel s image, while in reality they put greater emphasis on the hotel s building. This means that hoteliers in the country have incomplete knowledge and misconceptions of what the hotel chains would require from them in order to affiliate their properties. Additionally, findings indicate that hoteliers perceptions depend on whether their properties are affiliated to a chain or not. Due to their experience, the managers of flagged hotels have a more clear view of the chains requirements towards them and their perceptions towards the chains requirements are closer to the opinion of the chains, compared to the perceptions of the managers of the independent hotels. The research is not without its limitations. It took place in Bulgaria, where the penetration of hotel chains is very low as of 1 st December 2012 only 108 hotels (or 2.86% of all accommodation establishments at that time) belonged to hotel chains (domestic or foreign). Furthermore, only 10 of the foreign hotel chains (with or without presence in Bulgaria) agreed to participate in the research (out of 230 contacted chains). Further research could concentrate on the perceptions of hotels in other countries and cultural contexts which might turn out to be different from the perceptions of hoteliers in Bulgaria. Research could also shed light on the opposite requirements in the chain-hotel partnership the hotels requirements towards chains and the chains perceptions of these requirements. Finally, future research might focus on the specific criteria the hotels and hotel chains have towards each other in the partial ownership type of affiliation (i.e. joint venture), which remained beyond the scope of this paper. 9

10 References: Alon, I., Liqiang, N., & Wang, Y. (2012). Examining the determinants of hotel chain expansion through international franchising. International Journal of Hospitality Management, 31(2), Altinay, L. (2006). Selecting partners in an international franchise organisation. International Journal of Hospitality Management, 25(1), Bierly, P. E., & Gallagher, S. (2007). Explaining alliance partner selection: fit, trust and strategic expediency. Long Range Planning, 40(2), Chen, J. J., & Dimou, I. (2005). Expansion strategy of international hotel firms. Journal of Business Research, 58(12), Contractor, F. J., & Kundu, S. K. (1998). Modal choice in a world of alliances: Analyzing organizational forms in the international hotel sector. Journal of International Business Studies, 29(2), Cunill, O. M. (2006). Growth strategies of hotel chains: Best business practices by leading companies. New York: The Haworth Press. Geringer, J.M., (1991). Strategic determinations of partner selection criteria in international joint venture. Journal of International Business Studies, 22(1), Guillet, B. D., Zhang, H. Q., & Gao, B. W. (2010). Interpreting the mind of multinational hotel investors: Future trends and implications in China. International Journal of Hospitality Management, 30(2), Holmberg, S., & Cummings, J. (2009). Building successful strategic alliances. Strategic process and analytical tool for selecting partner industries and firms. Long Range Planning, 42(2),

11 Holverson, S., & Revaz, F. (2006). Perceptions of European independent hoteliers: hard and soft branding choices. International Journal of Contemporary Hospitality Management, 18(5), Johnson, C., & Vanetti, M. (2005). Locational strategies of international hotel chains. Annals of Tourism Research, 32(4), Ivanova, M., & Ivanov, S. (2014). Hotel chains entry mode in Bulgaria. Anatolia: An International Journal of Tourism and Hospitality Research, 25(1), Martorell, O., Mulet, C., & Otero, L. (2013). Choice of market entry mode by Balearic hotel chains in the Caribbean and Gulf of Mexico. International Journal of Hospitality Management, 32, Rodtook, P., & Altinay, L. (2013). Reasons for internationalization of domestic chains in Thailand. Journal of Hospitality Marketing & Management, 22(1), Yu, Y., Byun, W.-H., & Lee, T. J. (2014). Critical issues of globalisation in the international hotel industry. Current Issues in Tourism, 17(2),

12 Table 1. Sample Characteristics Contacted Responded Response rate Hotel chains Bulgarian chains 12* % Hotels in Bulgaria Foreign chains % present in Bulgaria 22* % not present in Bulgaria % Total chains % Current foreign chain members 47* % Current independent hotels % former foreign chain members % never been part of a chain % Total hotels % Note: * indicates researchers have contacted all hotels/chains falling in the population 12

13 Total (chains) Bulgarian Foreign Total (hotels) Members Independent Chains vs. Hotels Chains vs. Members Chains vs. Independent hotels Members vs. Independent hotels Table 2. Research Results Requirement Mean [standard deviation] Mann-Whitney U-test Hotel chains Hotels (Significance) Task-related criteria Location 4.32 [1.52] Accessibility 4.11 Characteristics and condition of the property (building, premises, areas) Possibility to adapt the property (building, premises, areas) to chain s standards [1.21] 4.21 [1.28] 4.16 [1.04] Competent employees 3.58 [1.27] Qualified managers 3.47 [1.27] Local market knowledge 3.68 Partner-related criteria [1.30] Hotel s image in the local community 3.53 [1.50] Hotel s financial results and performance 3.47 [1.50] 4.44 [1.57] 4.33 [0.94] 4.11 [0.99] 3.56 [1.07] 3.78 [1.13] 3.78 [1.13] 4.11 [0.74] 3.56 [1.50] 3.44 [1.26] 4.20 [1.47] 3.90 [1.37] 4.30 [1.49] 4.70 [0.64] 3.40 [1.36] 3.20 [1.33] 3.30 [1.55] 3.50 [1.50] 3.50 [1.69] 4.21 [0.91] 4.17 [1.05] 4.38 [0.90] 4.30 [0.95] 4.25 [0.89] 4.27 [1.02] 3.84 [1.26] 4.21 [0.99] 3.79 [1.15] 4.28 [0.69] 4.17 [0.65] 4.58 [0.55] 4.64 [0.48] 4.08 [0.76] 4.33 [0.67] 3.86 [1.03] 4.19 [0.74] 3.89 [0.99] Number of respondents [0.97] 4.17 [1.15] 4.32 [0.98] 4.19 [1.03] 4.30 [0.92] 4.25 [1.11] 3.83 [1.32] 4.22 [1.06] 3.75 [1.20] 982.5** (0.023) (0.921) (0.975) (0.611) 921.0*** (0.010) 801.5*** (0.001) (0.576) * (0.052) (0.542) 246.0* (0.059) (0.467) (0.553) 259.5* (0.094) (0.171) 198.0*** (0.007) (0.773) (0.176) (0.481) 736.5** (0.024) (0.886) (0.798) (0.957) 651.0*** (0.004) 603.5*** (0.001) (0.536) 765.0** Note: mean responses (m) on a 5-point scale (1-extremely unimportant, 5-extremely important). *Significant at 10%-level; ** significant at 5%-level; *** significant at 1%-level (0.044) (0.600) (0.932) (0.189) (0.188) ** (0.011) * (0.051) (0.616) (0.595) (0.334) (0.719) 13