Category: Tourism

Introduction

The Grand Targhee Ski Resort is located on the western side of the Grand Tetons. Unlike other resorts, the Grand Targhee Resort is located on a small piece of land. This has forced the resort to come up with ways through which they can keep up with competition from other resorts. This has forced them to be innovative.

Main body

The Grand Targhee Resort has revamped a horse riding program, that used to offer guests horse riding lessons, after realizing that most guests did not like taking horse riding lessons. This has pushed the revenue from the horse riding program from $24,000 to around $84,000 today without incurring any extra expenses.

The Grand Targhee Resort has been forced to change some of its skiing programs. The resort realized that most skiing schools and clubs judged the success of their students according to the instructor’s parameters. The resort now offers skiing lessons that are fun. This winning formula has helped them maintain most of their guests. The company has also customized their skiing lessons to meet the needs of their guests because some of the guests who visit the resort are experienced skiers and cannot take the same lessons with beginners.

Conclusion

In order to maintain its market share, the resort has been forced to change its pay structures. Under their new pay structure, their instructors are paid more for returning customers. The company has also invested a lot of money and time to get the right instructors. The company offers discounts on their ski lessons to high school students. The Grand Targhee Ski Resort believes that customer satisfaction leads to repeat business and this has helped the resort maintain a competitive advantage over other resorts.

Introduction

George Gmelch takes an interesting view of tourism, not as done by most others. When tourism is discussed, the tendency is to focus on the physical attributes of the destination: clean beaches, glorious sunsets, breathtaking scenery- or on the tourists themselves. There is very little attention paid to the locals who are normally the same people acting as taxi drivers, chefs, hotel maids, beach boys, hotel managers, porters, and waiters/waitresses. This group is normally relegated to the background. Gmelch has taken it upon himself to interview and record the experiences of twenty-one of these workers and hence, shed light on how they react to their foreign visitors and how these visitors impact their lives.

The format used by Gmelch is to divide the interviews into five broad categories as the five major work areas in which the locals would encounter the tourists namely at the airport, the hotel, at the beach, and lastly by taking points from the government.

Racism and discrimination: the major theme that emerges in Gmelch’s book

A major theme that emerges subtly from Gmelch’s book, I believe, is that of racism and discrimination. This is because of the attitudes that most first-time visitors have towards the natives, seeing them as backward and uncivilized and more often than not, as being just the means to achieve their pleasures.

Examples to support the theme in the anthropology

The workers at the airport are the ones who get to see the incoming tourists at their worst because apart from the newcomers being frazzled with jetlag, the heat that they may be unaccustomed to, and being subjected to long cues, most still hold on to the misconceptions they have formed or heard about the country they are about to visit.

As explained by one interviewee who works at the currency exchange counter, some visitors expect an attitude of obeisance and servitude from the locals. It throws them off balance when they find it is not so and they may resort to making callous remarks about the inferiority of the black man, slavery, and colonialism (pg 51). Such negative attitudes indicate the low esteem in which some tourists hold the local blacks, a sign of racism.

It is easier when the tourists are leaving because they have experienced Barbados and loved it, and most only have pleasant memories to take home (pg. 51).

At the hotels where the tourists stay, some workers experience derision from the visiting tourists, having to put up with their crude behavior. Though most workers are not aware of it, their visitors do things that they would not do within their own homes, such as living damp towels and rubbish for the cleanup crew to come and pick up. Sheralyn, a hotel maid, says that the visitors can be very messy but they have to clean up without complaint (pg 67). It means that the tourists have very little respect for those who come in after them.

Initially, the workers tend to shy away from the tourists because they are so ‘different’; they talk differently and they even walk differently (pg 191). The workers are afraid that communicating with the tourists may be difficult hence at first they hesitate. But with time, they get used to this and build enough confidence to chat with them (pg. 191).

Though workers who interact with tourists generally find them agreeable, what puts them off is those visitors who are ignorant and/or snobbish. An interviewed beach vendor said that what puts him off are those tourists who say that before their visit, they had never had of Barbados, then go ahead to ask all sorts of questions that should have been common knowledge (pg. 191). It irritates him that such tourists expect a barbaric uncivilized place with ‘…people running around with a cloth about de waist’ (pg 191). For taxi driver Trevor Mapp, being asked if the island has running water and television is an occurrence that he has to occasionally put up with.

The class concept as illustrated in Gmelch’s book

The class concept does emerge very clearly in this anthropology. The locals and the tourists are two very different sets of people, starting right from how the latter treat the former down to the lifestyle of the visitors when they are in the country as compared to that of the locals. Because the tourists have the money, they also have the power thus the differential treatment. They eat the best foods, use the best transport and luxury hotels, and experience a lifestyle that a local may never get to enjoy. There is an apparent division of class with the tourists coming out on top. The tourists also get away with things that a Barbadian would never dream of doing such as walking around semi-nude in bikinis.

One thing that is apparent, from Gmelch’s interviews, is the envy that the local feel towards the seemingly affluent tourists who are openly willing to flaunt their money. What the locals do not grasp, as explained by one interviewee, is that these seemingly carefree individuals have saved for a whole year, if not a lifetime, to be able to afford a week’s pleasure away from their humdrum existence (pg. 33). Most locals assume that the life of luxury the tourists live while on holiday is the same one they have abroad.

This, as observed by Gmelch, may have a negative impact in the sense that as Barbadians strive to imitate the lavish lifestyles of their guests, using them as benchmarks of how one is supposed to live, they may strain their already overburdened financial ropes (pg. 33).

The sum of it is that unlike in other service sectors, the interaction between the tourist and the local worker normally goes above and beyond the impersonal, uninvolved level. As an interviewed bartender put it, in the hospitality industry one has to ‘…be friendly and speak properly.’ Giving the traits of a good bartender he says that one has to be ‘…a therapist, counselor, pimp, lover man, ambassador, and even a bush doctor’ (pg 72).

He is speaking for all the workers serving tourists in Barbados, whether they be clearance officials, money changers, taxi drivers, receptionists, hotel managers, beach boys, or tour guides.

Conclusion

In every society, tourism has its negative and positive impacts. The Caribbean island of Barbados is no exception. While the locals may benefit from the foreign currencies brought in by the tourists that are not all the gain from their foreign visitors. They learn more about the cultures of these people; they get a world perspective, albeit a narrower one. For some, dealing with international tourists gives them confidence, for others, it gives them an aspiration to live better lives. All in all, whether the tourists know it or not, they leave their marks on the lives of the Barbados locals who serve them with such sincere steadfast smiles.

Works Cited

Gmelch, George. Behind the smile: the Working Lives of Caribbean Tourism. Indiana: Indiana University Press, 2003. Print.

Describe the characteristics of Hotel Monaco. What is its target market? How does Hotel Monaco Chicago differentiate itself in that market?

The particular area in which Hotel Monaco tries to excel is impeccable customer service. There are three key characteristics that define the hotel and help the staff provide services of the highest quality: the tasks to be done, the treatment of the customers, and tangibles including the core, design, and comfort of the hotel. The staff supports the personal needs of the hotel’s customers and pays special attention to their comfort. Hotel Monaco is a 4-star hotel that provides personalized services for business travelers; therefore, business travelers are the hotel’s target market. Another important characteristic of the hotel is that it is located near shopping and entertainment areas. With this location, the administration of the hotel is able to please not only business but leisure travelers as well. Nonetheless, the most significant feature of Hotel Monaco is the service design as it is the most effective instrument used by the hotel to differentiate itself in the market.

How does Hotel Monaco’s small size support its strategy? Could a larger hotel do the same thing?

The small size of the hotel fully supports its strategy. One of the ways it supports the strategy is the use of a custom-developed application that informs the front desk about customer arrivals. The key feature of this application is that it also informs staff about returning guests and lists their preferences (if there are any). The hotel’s strategy is to captivate clients and exceed their expectations, a great representation of how the strategy of the hotel is in full compliance with its small size. Hotel Monaco does everything to satisfy customer needs and offers numerous extras to its visitors. Indeed, it is safe to say that a larger hotel would not be able to replicate the success of Hotel Monaco because the services at this hotel are incredibly personalized and aimed at returning customers. Larger hotels would not be able to provide the same level of personalized service due to the resources required to support this strategy.

What has Hotel Monaco Chicago done to meet business travelers’ needs? How does Hotel Monaco differentiate its treatment of weekend travelers from its treatment of business travelers?

To meet the needs of business travelers, Hotel Monaco Chicago goes beyond their expectations. The hotel staff members do little things to satisfy their customers and show that they appreciate the personality of each of their clients. The hotel provides excellent room service and maintains a high level of responsiveness. The key characteristic that differentiates weekend leisure travelers from business travelers is the price. In other words, the rates schedule varies depending on the type of customer and the purpose of their visit. Business travelers have access to discounts that are only available to companies, while leisure travelers are offered discounts that allow them and their families to stay at Hotel Monaco for a fair price.

Given any business’s desire to minimize non-value-adding activities, which of the activities of Hotel Monaco would you evaluate for possibly not adding value?

I consider the desire to provide irregular small services to be an activity that does not add value to the hotel. This would be a reasonable activity for a single hotel, but the chain of Kimpton hotels is growing. Trying to provide too many different services to different types of clients will result in a loss of resources. The competitive nature of the hotel business presupposes that the services that a hotel offers are somewhat standard. Hotel Monaco, on the other hand, relies on returning customers. It signifies their awareness of the importance of providing exquisite services to their regular customers but does not apply to the new customers of the hotel.

Abstract

In the 21st century, China has popped up as a big tourism country worldwide. China’s tourism business has been around in various countries and regions, forming a large industrial scale. The tourism industry, like a sunrise industry, with its own unique properties, has a great potential in stimulating consumption, accepting employment, promoting industrial restructuring and economic development.

This paper analyzes the general theory of tourism enterprises through the historical inevitability of conglomeration of tourism enterprises, the development status of tourism in China and other developed countries and internal and external barriers of China’s tourism enterprises. The aim of this paper was to reveal the Chinese tourism enterprises development strategy, to promote China’s tourism business a faster and healthier development, in order to deal with international competition and challenges. Primary data was collected using questionnaires and analyzed using statistical techniques.

The study found out that the major obstacles to conglomerate development are: lack of management experience, lack of experience in capital operation, financing channels, and funds, lack of manpower, unclear property right and weak brand awareness.

Introduction

Overview

This chapter covers the background to the study, problem statement, research objectives, research hypotheses and the significance of the study.

Background to the study

According to the statistics of World Tourism Organization (UNWTO) and World Travel and Tourism Council (WTTC), in the next 10 years, as the world’s largest industry, the global tourism industry will grow by more than 4.4 per cent annually, the number of international tourists and international tourism revenue is postulated to expand by between 4.3 per cent and 6.7 per cent annually; this is far much higher than the 3 per cent of world’s wealth increasing rate (World Travel and Tourism Council 2011). By 2020, tourist arrivals worldwide are expected to reach 1.6 billion passengers; the tourism industry revenue will increase to 16 trillion dollars, which is equivalent to 10 per cent of the global GDP. At least 300 million jobs will be provided, accounting for 9.2 per cent of the total global employment, further strengthening its position as the world’s largest industry (Shiwen 2008, p.23). According to the World Tourism Organization, the global financial crisis in the US and Europe crippled tourism market in mature economies, tourism in emerging economies is still developing. The tourism industry has become the first industry to rebound in the international financial crisis. It contributes to reducing the negative impact of the crisis and plays an active role in the global economic recovery (World Travel and Tourism Council 2011).

Since the occurrence of the global economic crisis, China’s tourism industry continued to maintain the momentum of rapid development. Its international tourism ranked first in Asia in addition to a strong tourism growth domestically (Shiwen 2008, p.25; Sorensen 2004, p.19). There are at least 20,000 travel agencies, 14,000-star hotels, 18,500 tourist attractions and 1.350 million practitioners. In 2010, China’s domestic tourism revenue was 1.26 trillion Yuan (equivalent to £ 117.3 billion), increasing by 23.5 per cent; tourism foreign exchange revenues was $45.8 billion, increasing by 15.5 per cent; China’s total tourism income was 1.57 trillion Yuan (equivalent to £146.15 billion), increasing by 21.7 per cent, equivalent to 3.94 per cent of China’s GDP. The tourism industry, as a new economic growth point, has been further strengthened (China National Tourism Administration 2010).

However, the data above only shows that China is a big tourist destination, not a destination with powerful competitiveness. China has a long way to go on the efficiency of resource allocation and competitiveness of tourism enterprises as compared with the other developed countries (Southall 1998, p.262). In terms of the overall economic benefits since the 1990s, there were two distinct characteristics: at the macro level, entailing that the industrial system and the size of the market are growing rapidly; at the micro-level, entailing that the total number of enterprises and incomes are increasing, the total profits and profit margins of tourism are declining even to negative profit margins and zero profit, thus, the tourism market as whole marks a poor performance (Leslie 2009, p.34; Tang 2005, p.332). China’s tourism market performance is summarized in Table 1.1 below.

Table 1.1 Performance of China’s tourism market. Source: (He & Xu 2007, p.53).

According to the structure conduct performance model of industrial organization, market structure determines market behaviour, and market behaviour has further affected the market performance (Bain 1968, p.122; Unger & Chan1994, p.37). Therefore, the poor performance of the Chinese tourism market can be attributed to the market structure. Table 1.2 shows the characteristics of China’s tourism market structure.

Table 1.2 China’s tourism market structure. Source: (He and Xu, 2007, p.54).

The table above depicts that China’s tourism enterprises have not become a real mainstay of the market, with small scale and low competitiveness. In the tourism industry, against the backdrop of market expanding, while the overall effectiveness growing, the acceleration is sluggish, resources allocation is inefficient, and the market performance is poor (He & Xu 2007, p.54; Wang 2003, p.334).

Statement of the problem

The relatively good performance of the tourism market in developed countries is because of the existence of some large travel companies, such as JTB in Japan, TUI in Germany, Thomas Cook in the UK, and American Express in the US (Wang 1995, p.62; Wang 2003, p.55). According to the annual reports before the outbreak of the economic crisis, in 2007 the operating income of JTB was $11.6 billion; it owned 338 offices, 2,500 branch offices and 66 international branches; In 2007, TUI’s Revenue was €21.865 billion, owning 797 branches, 3,500 travel agencies, 285 hotels and more than 100 aircraft; Thomas Cook in 2007, had an operating income of 64.06 GBP, owning 3600 agents worldwide, 85 aircraft and 73,000 beds in different hotels; In 2007, American Express had tourism-related revenues of $24.6 billion and 1,700 offices in 130 countries worldwide; currently the American express card owns 51.7 million users including 33 million US users (Leslie 2009, p.36; Wu 2003, p.42).

China is a major tourist destination with development potential; China is a big tourist destination, not a destination with powerful competitiveness (Wu 2002, p.1081). China has a long way to go on the efficiency of resource allocation and competitiveness of tourism enterprises as compared with the other developed countries. Potential converting into real productivity needs to establish a number of powerful national or multinational levelled enterprises with international competitiveness (He & Xu 2007, p.57; Wu & Yeh 2007, p.122). Increasing Chinese tourism market performance should be attributed to improving tourism market structure, forming large scale tourism enterprises, improving the correlation of assets in the tourism industry, optimizing the industrial structure, regulating the tourism market behaviour and ordering market competition (Wu & Ma 2005, p.268; Yin & Wang 2000, p.157). The development of enterprise conglomeration is the only way for China’s tourism.

Objectives of the study

The general objective of this study was to explore the development and management of conglomerated Chinese tourism enterprises. In line with the general objective, the study further examined the following specific objectives:

1. To verify the effect of internal management on the development of tourism enterprise conglomeration;
2. To investigate the effect of strategic management on the development of tourism enterprise conglomeration;
3. To find out the influence of property rights on the development of tourism enterprise conglomeration;
4. To determine the effect of capital structure on the development of tourism enterprise conglomeration;
5. To determine the influence of government behaviour on the development of tourism enterprise conglomeration;
6. To find out the solutions to the obstacles of the conglomeration of Chinese tourism enterprise.

Research Hypotheses

In order to meet the above objectives, the following hypotheses were tested:

1. Ho₁: Internal management does not affect the development of tourism enterprise conglomeration;
2. Ho₂: Strategic management does not affect the development of tourism enterprise conglomeration;
3. Ho₃: Property rights do not affect the development of tourism enterprise conglomeration;
4. Ho₄: Capital structure does not affect the development of tourism enterprise conglomeration;
5. Ho₅: Government behaviour does not affect the development of tourism enterprise conglomeration;
6. Ho₆: There are no solutions to the obstacles of the conglomeration of Chinese tourism enterprise.

Justification of the Study

The findings of this study are of great value to policymakers and regulatory authorities. It provides the policymakers with a wide exposure with regard to the development and management of the conglomeration of Chinese tourism enterprise; thus, enabling them to adopt the relevant strategies in line with the situation. The findings of this study also add to the body of knowledge of related studies about the conglomeration of Chinese tourism.

Scope of the Study

The scope of this study was in line with the general objective, which was to explore the development and management of the conglomerated Chinese tourism enterprises. Using primary data and applying statistical techniques, the study explained the variables to meet the research objectives.

Literature Review

Introduction

This chapter reviews the theories both empirical and theoretical that are closely linked to the development and management of Chinese tourism enterprise conglomerating. This literature review is based on the research proposal submitted in May 2011.

Tourism groups

The classification of tourism groups

From different contexts, tourism enterprise groups can have several categorizations. According to the formation patterns, they can be divided into four types, market growth types, industry-oriented types, capital intervention types and government-driven ones (Gee 1988, p.35; Yeung & Lo 1998, p.141). By business growth directions, that is, according to diversified development directions, tourism enterprise can be divided into three categories: (a) Horizontal specialization, meaning the tourism enterprise group will devote all its efforts to producing a single product and expanding in a single market; (b) Vertical integration, meaning the group will make expansion at the different stages of production; (c) Diversification, meaning that the group will make expansion at different areas with different final products (McGuffie 1996, p.36; Ansoff 1965, p.218; Yuann & Inch 2008, p.220). According to different affiliation models and structural relations, tourism enterprise can be divided into five forms, for instance: groups owned by a company, groups with holdings controlled by companies, groups leased by companies, management contracts and franchise alienation. In practice, these five forms are not separated from one another but are usually used in a mixed way (Harrison & Enz 2005, p.118; Yusuf & Nabeshima 2008, p. 35).

According to the formation of hotel groups, tourism enterprise can be divided into three types: (a) Chain, refers to a form of operation in which two or more subsidiaries operate under the same parent company which controls them through the complete ownership and lease of their buildings or land (Rousselle & Adler 2000, p.112); (b) Franchise, refers to a sustained relationship in which certain franchise rights are granted to the grantees, and the grantees get support in terms of organization, operation and management and in turn they return with some rewards (Barrows 2008, p.205; Yusuf & Wu 1997, p.202); (c) Management Contracts, also known as trustee management, means that the owners entrust their businesses to a management company (Diaz 1999, p.120).

According to the different driving forces and bonding relationships, the growth of the conglomeration of Chinese tourism enterprises can be divided into the following 4 models: (a) The tourism enterprises are driven by the government to voluntarily or involuntarily build an enterprise group with cooperation as the main objective, such as China Lianyi Group, China Hualong Group and China Friendship Group; (b) The groups are founded by a regional government with assets as the tie between different enterprises; (c) The hotel groups are built by the big companies or groups without the tourism industry, such as Gloria Hotels & Resorts and HNA Group; (d) The regional tourism groups are founded through the allocation of state-owned assets (Gu & Qin 2001, p.1; Cheng & Mark 1994, p.650). With regard to the geographical locations, tourism enterprise can be divided into domestic and international tourism groups (Luo 1997, p.1; Bairoch 1991, p.280).

Competitive advantages of the tourism group

Tourism enterprises engaging in a single business are willing to join a group because the tourism group has unique advantages in management and market expansion ever since its birth (Gee 1994, p.201). Tourism groups have various advantages with regard to management; the groups adopt the unified organizational structure, systems and management standards (Leslie 2009, p.102). The hotel groups in developed countries can adjust their organizational structures in line with the group size as well as their businesses; thus, giving a better contribution to the scale effect of the group (Myers 1996, p.47; Beall 2000, p. 430). These hotel groups generally have more advanced and well-developed management systems, which can establish uniform management methods and procedures for hotels under their control. And these hotel groups also can provide support for the hotels they are in charge of in various aspects including management. Largest hotel groups also provide train programs for the hotel staff.

The group has the ability to provide a variety of technical services and assistance to the affiliated hotels (Pizam 2005, p.113). In addition, the tourist groups have a financial strength; joining the group can help build up the credit of an enterprise in the eyes of the financial institutions, thus, making it easier to get a loan from them (Bloom & Williamson 1998, p.432; Ebrey 1996, p.175). Meanwhile, the group can also provide its affiliated enterprises with information about the financial institutions and recommend lending institutions to them (Andrew & Damitio 1993, p.207). The group has a strong internal financial regulation and control and can regulate the fund surplus and deficiency of its affiliated hotels in a timely manner (Horner & Swarbrooke 2004, p.302). Through the approaches such as scale operation and unified procurement, the group can effectively reduce the operating costs (Leslie 2009, p.102).

The tourist groups also have marketing advantages that are beneficial to them; the unified group sales and online bookings can build a solid customer base for hotels and tourism enterprises (Leslie 2009, p.122). The groups are usually large in scale and success in business and enjoy a high reputation, which is extremely beneficial to their promotion efforts (Wang 1999, p.13). A well known international hotel group with a high standard of service is sure to be attractive to the customers (Dubé & Renaghan 2000, p.68; Prahalad & Hamel 1990, p.12). A group can pool funds to engage in a large scale and worldwide advertising promotion, such as the Hilton Group’s worldwide promotional campaigns that honours promotion programs, senior citizens targeted tourism promotion programs, and weekend holiday promotion programs (Huckestein & Duboff 1999, p.32).

The tourist groups have advantages with regard to government policies; in China, a tourism group can enjoy many state preferential policies. As the related stipulations of State Council and National Tourism Administration (SCNTA) express in explicit terms that: in order to support the development of China’s domestic hotel management companies, in principle, the domestic hotel groups will be treated as equals as their foreign counterparts in China (Horner & Swarbrooke, 2004, p.204). The tourism groups also have advantages in terms of accessing information; the member enterprises of the group collect a large amount of information during the process of production, management and distribution. Through the exchange and sharing of the information, a greater value of the information is realized (Downie 1997, p.14). The tourism groups in developed countries attach much importance to the analysis of economic data and over the years they have gained much experience in processing information and improving the efficiency of decision making (Litteljohn 1985, p.162).

Connected assumptions of tourism groups

The conglomeration of tourism enterprises can be related to all aspects of enterprises behaviour. Therefore, the research needs to refer to the existing theories, especially on the organizational structure of the enterprise, strategic management theory (including the theory of competitive strategy and entrepreneurship theory), the modern theory of the firm (including property rights theory, contract theory and transaction cost theory), the theory of corporate culture, organizational learning theory, human capital theory and the theory of knowledge management support. These theories are not for tourist enterprise group to study itself, but it is necessary for the research of the conglomeration of tourism enterprises (Girardet 2004, p.168).

The assumption of the assortment of businesses

With the development of enterprise groups in developed countries, many lessons have been learned over the years. The mainstream thinking of both the business community and academic circles in the diversification of the growth of the enterprise groups is that a diversified development centring on core business is the guarantee for the success of a group. The representative theory is stated in the book of “Corporate-level Strategy” co-written by the British scholars representative Michael Goold, Andrew Campbell and Marcus Alexander in 1994. Their theory is based on the theories of their predecessors and the facts of the diversified development of large enterprise groups. They hold that: “if the company level strategies are expected to achieve the value-added purpose, the parent organization must build a high synergy and coordination with its operating divisions. A successful parent company is only devoted to a relatively narrow business scope but can always create value in these areas” (Goold, Campbell & Alexander 1994, p.137).

The assumption of organizational design of businesses

In the course of economic development, many different organizational structures emerged, such as the traditional line structure, functional structure, unitary structure and line and staff structure as well as modern multidivisional structure, matrix structure, multidimensional structure and holding structure. Of all these different structures, there are two most basic and common ones. One of them is the highly centralized unitary structure and the other one is a multidivisional structure (also known branching structure), which is widely used in modern enterprises. As Chandler (1962, p.134) said, many different variants of the organizational structures were developed and in recent years, now and then some variants were combined with each other to develop a new structure. Despite all of this, there are still only two basic organizational structures in the management of large enterprises: the centralized structure with function-based departments and the decentralized structure with multiple branches. The features of these two organizational structures are as follows:

Unitary design

The management design takes the British classical economists Adam Smith’s assumption of the division of labour as the core principles of organizational structure; thus, creating a business design in which the supreme leader has the absolute dominance. U-form organizational structure is shown in Figure 2.1:

This kind of company has various basic features based on the different functions; the company is divided into different management departments including production, marketing, technological development and financial accounting; each department is supervised by the company’s most senior leaders (and the important posts of the senior managers are usually held by private owners or major shareholders). Unitary Structure is an organizational structure which realizes a high degree of centralization (Litteljohn 1985, p.162; Sorensen 2004, p.22).

Multidivisional design

Multidivisional design is a combination of centralized and decentralized forms of organizational innovation. Often different divisions are set up according to different products, regions or countries and unitary structure is adopted in every division. The headquarters of the enterprise grants a great operational autonomy to its divisions, thus enabling them to do business in line with the market situation just like an independent company. Under every division, there are various management departments, such as production, marketing, development, and financial accounting. Every division is independent in accounting and responsible for its own profits and losses (Tang 2005, p.132; Unger & Chan 1994, p.50).

Such an organizational structure makes the company headquarters free of heavy daily businesses. It allows the headquarters to focus more on formulating and implementing strategies and plays the most important role of coordination and supervision. Thus, it can contribute to solving of problems within a large enterprise, such as product diversification, product design, information transfer and the coordination of decision making between different divisions (Wu 2002, p.1077; Yuann & Inch 2998, p.108). A strategic planning department is set up under the headquarters, and sometimes other functional departments such as finance department, accounting department and human resources department will also be established, which will provide guidance, services and consultations. It can keep the senior management personnel free of the trivial matters in daily businesses and allows them to maintain extensive contacts with their affiliated enterprises. At the same time, it also lowers the transaction costs within the enterprise. That is why the multidivisional structure is so widely adopted by so many enterprises. M-form organizational design is shown in Figure 2.2.

M-form structure has always been considered as a very suitable organizational structure at this stage for large enterprise groups. In the 60s, the US management expert Alfred Chandler (1962, p.218) published the book “Strategy and Structure”. In the book, he concluded that the surge of the production line of an enterprise leads to its changes in organizational structure, namely, the change from a functional and unitary structure to a loose multidivisional structure. In the 60s and 70s, his theory exerted a profound influence on the trend of decentralized operation of the large organizations (Chandler 1962, p.218).

During the 80s, with the further development of enterprise groups, new theory in terms of the organizational structure of enterprise groups emerged. The most representative theory was proposed by Christopher Barllett and Sumantra Ghoshal (1989) in their book “Managing across Borders”. In the book, they argued that a company can choose among the different organizational structures in light of the actual needs and they did not have to choose between the two extremes of the previous organizational structures, that is, centralization or decentralization. And they also developed a new organizational structure – Entrepreneur Structure.

It had three core functions: (a) promoting entrepreneurship, (b) paying attention to the outside world, and (c) seeking business opportunities. Functional integration enables the company to make full use of dispersed resources and capabilities and then build a successful business. Updated functions allow companies to constantly examine their current beliefs and practices. Thus, it will inject new impetus into the enterprise and sustain its development. But at the same time, they also admitted that multidivisional structure has completely replaced the functional structure which poses many limitations and the multidivisional structure may be the only or the most important reform in management which can help an enterprise in its expansion and diversification (Bartlett & Ghoshal 1989, p.211; Yusuf & Wu 1997, p.76).

Competitive advantage

The conglomeration of tourism enterprises nowadays is a development direction. In the modern strategic management theory, the theory of competitive strategy proposed by Michael Porter (1983, p.171) and the capacity of enterprises theory (enterprise resource theory) rise in the 90s stand out and provide an important starting point for this research. The conglomeration of tourism enterprises enhances competitiveness and creates a competitive advantage. The reason is that in the process of conglomeration, the old capacity reinforces and new capacity accumulates which helps the companies to develop and implement effective market competition strategies (Cheng & Mark 1994, p.653).

Competitive strategy theory of Michael Porter

Michael Porter’s (1983, p.49) theory of competitive strategy demonstrates that competitive advantage comes from the market force company-owned, which allows the enterprise to influence the industrial structure in order to gain competitive advantage within the industry. From Porter (1983, p.49), enterprises can choose “cost reduction”, “differentiation” and “target gathering”; three basic strategies to obtain its market advantage. On how to implement the strategy, Porter (1983, p.49) proposed a value chain concept. According to the definition, a company’s business can be described as a value chain; the total revenue from products or services activities minus total expenditure is the value-added from the chain. As long as the total income brought by products and services exceeds total expenditure, the company earns. Thus, by value chain analysis, companies can improve the value chain activities so as to improve its profitability (Porter 1983, p.50). From this point of view, the aim of conglomeration is to make the industrial environment under control through forming a corporative group. When the major companies from the developed world entered China, the only reaction for the local companies was to enlarge the company scale and enhance its influence in the industry (Bloom & Williamson 1998, p.423; Wu 2002, p.1090; Unger & Chan, 1994, p.37).

Capacity of enterprises assumptions

The capacity of enterprises theory believes that an enterprise is a collection of capacity or resources. And the keys to keep the competitive advantage are the capacity to accumulate, keep and apply a market expanding power. From this perspective, rather than the external environment, the internal one is a necessity to acquire and keep the competitive advantages (Sorensen 2004, p.23; Tauber 1981, p.38). And the capacity and resource are the sources of power. Differences in capacity lead to differences in performance. Since the capacity determines the performance and the competitive advantage, the capacity not only decides the sphere of business, especially the breadth and depth of its business diversification but also influences or even determines the performance of conglomeration. As for the conglomeration of tourism enterprises, core enterprises’ ability to acquire and integrate determines the performance of conglomeration (Prahalad & Hamel 1990, p.24). Some corporate groups kneaded by government administration do not play well because of a lack of the ability to acquire and integrate.

Therefore, in the process of the conglomeration of tourism enterprises, the ability of integration must be injected. The injection mode ranges from choosing the company with the ability as a core company or hiring the senior management personnel who can train staff to acquire this ability quickly as a group leader. Therefore, the competitive advantage can be established and the competitiveness of the enterprise can be increased (Prahalad & Hamel 1990, p.24; Ruan 2000, p.57).

Modern assumptions of enterprises

The modern theory of enterprise is mainly made up of property rights theory, transaction cost theory, and principal-agent theory as the main content. The modern theory of enterprise considers the enterprise as “a joint of a series of contracts”, which means that enterprise is a way of transactions between property (including substance resources and human resources) owners. The size of enterprises depends on the comparison between the internal cost of management and coordination and external cost of transaction in the market. The reason for tourism enterprises to conglomerate is because of the fact that the cost of internal property flow is much lower in the group than the external market transaction costs (Coase 1937, p.128; Ross 1973, p.138).

From the point of view of the modern theory of enterprise management, we can have a more complete understanding of the property relations: firstly, in the process of conglomeration, the property’s main body (including the main body of substance resources and human resources) will terminate or modify the original treaty or conclude a new treaty through equal gambling (Ross 1973, p.136). Corporate groups are not only involved adjusting the relationship among investors – the shareholders of the corporate group – but also among all parts of stakeholders (including shareholders, employees, suppliers, distributors, consumers and local residents, etc) (Clarkson 1995, p.103).

We cannot simply understand the conglomeration as the allocation of assets among tourism enterprises or the establishment of a cooperative relationship. Secondly, taking an enterprise as a joint of contracts has a preposition, which implies that the parties in the contract are supposed to be independent and share the equal property main bodies. A one-sided emphasis on one party’s interests is inconsistent with the principle of fairness embedded in the free market economy (Coase 1937, p.132). Therefore, in the process of conglomeration, we cannot rule out the equal participation of stakeholders, despite the fact that their interests are dissimilar. Otherwise, when they realize that their own interests are damaged by the process of conglomeration, they will take an uncooperative attitude, which is detrimental to the group’s development (Rousselle & Adler 2000, p.112; O’Neill & Mattila 2006, p.148).

Finally, due to the incompleteness of the contract, the operation of the enterprise relies heavily on the implications that exist in a variety of aspects, and it is far more complex to adjust these implications than the written contract since they are actually an adjustment of enterprise culture. The enterprise culture, as an implicit contract, can be seen as a complement of the written contract, performing a transaction cost-saving function (Liu & Dong 2001, p.132; He & Xu 2007, p.55). Therefore, in the process of conglomeration, the management of enterprise culture must be strengthened, and gradually a complete and optimized enterprise culture can come into existence (Ross 1973, p.137).

Brand and the brand extension assumptions

The assumption of corporate brand

The famous marketing guru Philip Kotler (1997, p.201) has a well-known definition of a brand; a brand is a name, term, sign, symbol or design, or a combination of them, and its aim is to mark a particular seller or group of sellers’ products or services in order to make it distinctive from the competitors’ products. A brand is a symbol or attitude of choices embedded in the minds of consumers; meanwhile, it is a feeling (Kotler 1997, p.201; Harrigan 1987, p.67). Tourism Group’s brand has the general content of the brand, which contains the names, symbols, designs, and combinations of them for tourism products or services to be distinguished, through the tourists’ experience; hence, bringing extra profits for the company. But the tourism product is different from the tangible ones, after the conglomeration, the brand design, promotion, extension and adjustment of all aspects should bear their own characteristics (Kotler Bowen & Makens 2006, p.135). Existing research shows that, for tangible products, the brand is the most important, while for intangible services the brand is the first (Kotler 1997, p.200).

The assumption of brand extension

The most important step of brand management in the process of tourism enterprises is how to do the brand extension on the basis of the original brand. Brand extension refers to a strategy of transplanting a famous or successful brand to different products, using the influence of the brand’s existing market power to launch new products to form a series of the product (Tauber 1981, p.38; Dussauge & Garrette 1995, p.515). The most important thing is that the extended products need to fit the core value of the brand. The brand’s core value, in essence, refers to the impression of the brand and symbolic meaning left in the minds of consumers, rather than the specific use of the product. When conducting a brand extension, the existing brand positioning needs to be analyzed. In addition, the brand’s core values should support the brand extension. It is also essential to pay attention to the extent to which the extension should be supported (Kapferer 2000, p.213). In other words, the content of core value determines the extension potential – the model released by Jean-Noël Kapferer (2000, p.214) is as followed.

The model shows that if a core brand value relates to the product-specific functions, formulas, technology, etc., then the extension potential of the brand is very limited. Conversely, if a brand’s core value ​​has nothing to do with the product attributes and product technology, then it provides benefits to the consumers and adds values ​​of the brand. When the brand extension potential is large, the brand is said to be highly extensible. To enhance the brand extension power, the concept of the brand needs to switch from the product formula to proprietary technology, interests and values. It also shows that to make a brand covering more types of products, the brand must have a deeper meaning. If a brand has no other identifying elements apart from the material properties (product or formula), then it cannot support a wide range of extension (Kapferer 2000, p.33).

We can use this figure to analyze the extension capabilities of a certain number of well-known brands. The possibility of brand extension depends largely on whether the original brand’s core values are ​​transferred to the extended products truly and completely. Particular formula and techniques are usually closely associated with certain products, it is difficult to extend it to a new product; on the contrary, brand philosophy and brand benefits for consumers are relatively easy to transfer to the new products, which will greatly enhance the ability of brand extension. In other words, the content of the brand’s core values ​​determine the feasibility and scale of the brand extension capacity and it is the key factor whether the brand can be extended and to what extent it extends to (Prahalad & Hamel 1990, p.24; Ruan 2000, p.57).

Travel agency and brand extension work in such a way that after a successful launch of a brand or a product, the products are developed under this brand and the product lines are extended form a series of relevant brand products. Some of the successful tourism enterprises through long term development and marketing capabilities grew rapidly. Internally, it also formed a mature marketing team with marketing experience and sales network. In this case, the brand extension strategy can not only provide consumers with more choices and improve the brand’s market competitiveness but also reduce the marketing costs for each product under the brand (Leslie 2009, p.102). However, the enterprises should deal with the relationship between the extension of products and the original brand. The core brand extension should not compromise the quality of the original brand and its customers’ experiences.

Therefore, the travel agency could apply sub-brand or multi-brand strategy, drawing attention to the link of original products, such as the similar service system, same interest points, same culture and value or a similar target market, etc., then take advantage of the product links and integrate the entire product line naturally, without any far fetched senses. For example, under the “new world view” brand launched by Shenzhen CITS, “finding the source” by Shangri-La, “thousands of elderly to Hong Kong and Macao go hand in hand” and “Shenzhen couple, Yangshuo appointment” are all-star products. Although they have different target markets, all of them reflect the humane and personalized content (Leslie 2009, p.102).

Assumption of Business Process Reengineering

Business Process Re-engineering (BPR) is an innovative approach to business organization born in the early 90s, in the USA. It was firstly advocated for by Professor Dr Michael Hammer, a former computer professor of Massachusetts Institute of Technology; the theory was further promoted by him. The term “re-engineering” was created by Dr Hammer. Re-engineering means the use of modern information technology to re-design business process fundamentally in attempts to improve their performance (Hammer & Champy 1993, p.90).

A process is a series of logically ordered sets of activities for a goal or a task. Business activities can be integrated into two different ways. One is according to the similarity of activities, such as combining similar activities into functional groups, like establishing a sales department; the other way is by engaging related activities together to form a process-oriented group, such as collecting personnel of design, technique, production, testing together to form a product development group. In a functional group, members assume the same job, thus the enterprise could gain the labour efficiency of division and economies of scale, but completing a workflow needs cooperation across multiple functional departments.

For example, in a manufacturing enterprise, the implementation of customer orders need to go through sales, production, finance and several other departments, so that the entire business process has to be separated by several units. Each functional department is engaged in one part of a complete process, while another part takes responsibilities of its own. As a result, the work of one part may be effective, but the operation of the entire process is inefficient. Each process is irresponsible for the overall concept, so the employees do not care about the development of the enterprise, and the lack of innovation, passion and enthusiasm, eventually leading to a lack of organizational ability to respond to the change of environment. While in the process groups, the group members are engaged in different but linked activities (Leslie 2009, p.102). Each member may be an expert in a certain field; their participation can make the work quickly resolved. The communication and coordination among them are rapid and efficient, thus they can complete the work efficiently and have a quick response to the outside world (Hammer & Champy 1993, p.91).

In the process-based organization, its operation is no longer on the basis of functional units, but on the process working groups, composed of employees who are working together and implementing the whole process operation. In general, this process group is usually seen in three basic forms: the first one is a group consisting of people of different skills together, they work together to accomplish a complex task. The second is the virtual working group, which is based on special needs or a specific task. Third, is the project worker, which is similar to the first one, but has only one member (Hammer & Champy 1993, p.91).

For service-oriented industry, the process of re-engineering is important. After the conglomeration of tourism enterprises, the environment will be changed dramatically, and this change is often a qualitative one, which means that after conglomeration, tourism enterprises need to redesign their business processes. For example, when travel agents conglomerate across regions, the business among regions can be achieved through the network, thus many processes can be simplified.

Management of tourism enterprise conglomeration

Developed countries started early in tourism groups. Their tourism groups outweigh China’s tourism by far in terms of size, capacity and effectiveness of the expansion means, which can be seen from the following data: Tourism groups in developed countries are very large in scale and have a high concentration. In 1995, the tourism-related business of American Express accounted for 66% of its total revenue. And the business scope of its travel agency is 100 times of that of CYTS, which ranks the first among the listed Chinese travel agencies. CYTS’s annual revenue in 1999 was 8.4 billion Yuan. World-renowned hotels are highly concentrated. Of the top 10 hotel groups, there are nine based in the United States. Such a high degree of concentration means a strong competitive edge (O’Neill & Mattila 2006, p.152).

Annexing small tourism groups by means of merger contributes to its rapid expansion. In today’s world, it becomes a trend for the enterprises in different countries to conduct mergers and acquisitions in order to strengthen their competitiveness, and the tourism industry is no exception (Gee 1994, p.117). In the middle and later periods of the 90s, American Express accelerated the pace of expansion and purchased all the shares of Havas Voyages which had the largest sales network in France. For the hotel industry in the United States, 1997 was a year of mergers and acquisitions, during which the number of mergers and acquisitions doubled as compared with that of the previous years. Such frequent mergers and acquisitions would inevitably re-divide the world hotel market (Gee 1994, p.118).

The organizational structures of international tourism groups began to be virtualized. The world economy is in a transitional period, changing from the industrial economy to the knowledge economy. The enterprises all over the world are experiencing three major knowledge-based changes; for instance, increased collaboration, decentralized management and decentralization and intelligent infrastructure building (Gee 1994, p.118). Under such circumstances, the tourism groups’ operation is moving towards virtualization, and even capital intensive hotel industry is no exception. In 1997, many hotel groups in the developed countries established strategic alliances with their competitors (Dussauge & Garrette 1995, p.521; Jarillo 1988, p.33; Harrigan 1987, p.67; Gomes-Casseres 1996, p.127).

The management status of tourism group in China

International tourism groups have entered the mature stage of development. Chinese tourism groups should learn from their management experience; in terms of management thoughts, products should reflect the market demand, sales should have a clear market positioning, and the businesses should rely on a thought-out marketing plan. In terms of the management system, property rights should be separated from management rights; a budget control should be adopted in finance; the theory of “only one master” is implemented in administration; a “line” principle is pursued in management to avoid overlapping management; in daily operations, a system of rules and regulations should be established and working procedures and assignment of responsibilities should be explicitly stipulated in documents (Eyster 1997, p.21; Eyster 1993, p.16).

More emphasis should be made on human resources; for instance, the large tour groups in the United States pay more and more attention to the attitudes of their employees. It has become one of the popular human resource management approaches for them to carry out a survey on the attitudes of their employees (Nebel 1991, p.118; Bond & Galinsky 1998, p.122). With the transnational expansion of the groups of the developed countries, more importance has been attached to the human resource management in cross-cultural operations (Roper & Brookes 1997, p.147; Amstrong & Connie 1997, p.181). In terms of the ability to run large companies, guided by the advanced management theories, enterprises in the developed countries far outweighed the Chinese ones in both capacity and level of management (Prahalad & Hamel 1990, p.21; Savage 1996, p.122; Pizam & Connie 1997, p.127).

The impact on the international market

Through a scientific method of operation, tourism groups monopolize the tourist market. Meanwhile, through online booking, tourists’ flow will be effectively controlled. Take American Express, for example, it has annexed many small tourism groups through mergers, therefore its businesses develop very fast; and its slogan is “With American Express, life is easier wherever you go”. Another example is the US Rosen Group. Its affiliated outlets are scattered all around the world. They act in cooperation with each other across a great distance, forming a large network. The emergence of international hotel chains greatly changes the tourism market. (Eyster 1993, p.16)

The impact on Chinese tourism market

Before China’s entry to the WTO, large international tourism groups did not have much impact on the businesses of the Chinese travel agencies. Therefore, the Chinese government did not pose many limitations on foreign-funded travel agencies operating in China. As China joined the WTO, its tourism market was opened to the outside world and a lot of foreign investment has officially entered the Chinese tourism market. To date, there have been 5 joint venture travel agencies in China. But China’s hotel market opened to the outside world earlier, a great number of international hotel groups have made their way into the Chinese market, which has a strong impact on Chinese hotel markers. The relevant situation is as follows: large international groups are very optimistic about China’s tourism market. With the edge in-network and group, they constantly plan to seize the Chinese market. Bass, Hyatt and Marriott and other ten well known international hotel groups have set up altogether 574 hotels in China. Marriott Hotels has already established 57 hotels in China now and plans to increase that number to 100 in the next five to six years (Feng 2001, p.86).

The outlets of international hotel groups in China concentrate on big cities and tourist cities. Hyatt Hotels Corporation entered China in 1986 and now runs hotels in Tianjin, Shanghai, and Xi’an. Shangri-La in China opened 36 hotels (Nash 1996, p.34). They are located in Beijing, Xi’an, Beihai, Shenyang, Changchun, Qingdao, Dalian, Shanghai, Harbin, Wuhan, Xiamen, and Shenzhen and another 10 will open a business in Lhasa, Yangzhou, Qinhuangdao and other tourist cities between 2012 and 2013. International hotel groups have expanded from the upmarket to the middle range market in China. Operators of the foreign-funded hotels find that exploring the middle range market can not only bring a faster return on investment but also can help them remain competitive in the Chinese market (Li 1998, p.12). Days Inn Hotel whose businesses mainly cover the middle and low rated hotels built 10 new hotels in China in 1998 and also plans to build 22 more in a bid to become the largest international hotel group in the Chinese market.

With China’s accession to WTO and the complete opening up of tourism to the world, the large international groups will have a bigger impact on the Chinese tourism industry. The General Agreement on Trade in Services (GATS) is an important part of the WTO institutional framework. It explicitly stipulates the basic obligations that the member states have to fulfil as well as the general principles that they have to follow. Implementation of these provisions will enable the Chinese market to be global and will bring great challenges to China’s tourism industry (Li & Lin 2000, p.13).

The development status of tourism groups in China

China’s tourism groups have made some achievements but they also face many problems and conflicts (Liu 1999, p.41).

Macro-institutional environment

The institutional environment for the Chinese tourism groups is changing from a planned economy to a market economy and it is in a transitional period, which poses great challenges to the development of the tourism groups in China. These challenges are mainly reflected in:

• The non-liquidity of property rights limits the growth of the tourism group; under the current ownership, property rights are in some way fixed in a certain government department (Liu1999, p.41).
• The underdeveloped capital market; at present, China’s stock market and bond market are far from perfect. There are various restrictions in bank loans and venture capital development is still in its infancy stage. All of this has greatly hampered the large scale development of the large groups.
• The government-appointed bureaucracy hindered the establishment of the modern enterprise system.
• Non-commercial purposes limit the groups’ development.
• Serious local protectionism
• The failure of the government macro-control on hotels
• The de facto absence of the owners of state-owned assets. At present, although it is clear that state-owned assets administration bureau at all levels can represent the state to exercise the power of managing the state-owned assets, they do not assume responsibility for profits and losses of the assets, and neither do they have the rights to recover the profits from the state assets management. And this has lead to the great loss of the state-owned assets in various ways (Liu 1999, p.42).

The development defects of tourism enterprises

Affected by various factors, the development of Chinese tourism enterprises are not healthy, and they cannot compete with the enterprises of the developed countries. As players in line with market competition, enterprises are pursuing the unity of economic and social value. However, under the inertia of China’s planned economy, China’s economic development of tourism enterprises is not satisfactory, leading to a lack of competitiveness in the whole industry in China. Meanwhile, the international consortium with international funds entrained into China resulting in a fiercer competition (Yang & Zhang 1999, p.24). In front of the major international tourism company’s attack, the living space of those single tourism enterprises is getting smaller and smaller with the danger of being annexed (Wang 2000, p.22).

Most of China’s tourism groups have not grown to the mature market players, thus, they cannot use the internal mechanism of the enterprise to achieve economies of scale. First of all, the ultimate beneficiaries of state-owned and collective tourism enterprises are not the enterprises themselves, thus the state-owned tourism enterprises are not true market players. Secondly, those groups are formed by administrative order, where the power of human, financial, and material has no change, thus, there are no clear organizational structures in the enterprise (Yang & Zhang 1999, p.25).

Compared to tourism groups in other developed countries, China’s tourism group management is still immature. First, many tourism groups are integrated by contract, so the collaboration is not firm. Because it is not based on property rights, it lacks control over the core business, member companies act according to their comparative advantage, and the group has no centralized leadership as they are structured loosely, thus its overall advantage cannot be played well (Angwin 2007, p.37). Secondly, there is no suited business strategy and no talents with strategic thought. Thirdly, they are short of mature group management and operational capacity of human capital. Fourthly, there is a lack of strong marketing power and network. Finally, there is a lack of well-known brands (Ruan 2000, p.53).

Obstacles to the conglomeration of Chinese tourism enterprises

Property rights

The barrier of property rights refers to various barriers existing during the property transaction between different owners in the process of tourism enterprises conglomeration (Keenan & White, 1982, p.37). Property barriers exist mainly in the reflection of the murky position of owners, inappropriate system, which result to other problems such as poor distribution channels between tourism enterprises and private enterprises (Ruan 2000, p.57).

The first concern is the transformation and reconstruction of tourism enterprises. In a broader perspective, it is an inevitable trend for state-owned assets to retreat from the highly competitive tourism industry; however, proceeding from a realistic operating environment is a serious issue troubling the Chinese state-owned tourism enterprises and management activities such as rent-seeking behaviour of various stakeholders restricted its market-oriented process to a considerable extent; insufficient theoretical support for institutional transformation and organizational change also impeded property rights trading system formation amid China’s tourism development (Keenan & White 1982, p.37).

Secondly, a great deal of severely fragmented state-owned assets in the field of tourism cannot form cross-regional, cross-industry or cross-ownership tourism enterprises groups. With the acceleration of the process of hierarchical management of state assets, this kind of situation could get worse; for example, a number of local governments and some super-sized state-owned enterprises ignore the nature of tourism and its inner connection, making Beijing Tourism Group solely the possession of Shanghai, Jinjiang International Group of Tianjin, Shanxi Tourism Groups of Shanxi, GDH Guangdong Hotel Management Holdings Limited of Guangzhou, etc. If property barriers like these cannot be solved effectively, it will be impossible for the Chinese tourism industry to realize its cross-regional conglomeration through opening option (Hammer & Champy 1993, p.91).

Capital structure

If one industry cannot form an effective fusion mechanism of industrial capital and financial capital, then this industry is hopeless. The current problem is that on one hand, China needs capital consolidation in the tourism industry and on the other hand, the current tourism industry’s background operations, and profit model seem to be too murky for the capital market to invest in. The poor performance of some of the already listed tourism enterprises discouraged the capital market involvement to a certain extent. It is believed that there is a high degree of information asymmetry between the current capital markets and tourism product market (Ruan 2000, p.57).

The tourism sector in Shenzhen and Shanghai stock market consisted of a total number of 28 tourism based companies (including the B shares), among which there are hotels and restaurants as follows: Huatian Hotel, Century Plaza Hotel, Dongfang Hotel, Huandao Industry, International Building, China World Trade Center, Dalian Bohai, Jinde development, Beijing Capital Tourism, New Jinjiang, Shares of New Asia, Tibet Pearl, Baohua Industry, Lawton, Holy Land and The Chinese Pan Tibet tour. According to the statistics of the business operation of listed hotels in 2001, lack of growth momentum is a major concern.

Most business indicators fail to reach the overall level of the vast majority of listed companies. From the growth indicators, the average revenue growth of 2001 was only 5.9%, and 13.6% in 2000, far below the growth rate of nearly 20% contributed by the listed tourism enterprises. It is noteworthy that the overall profitability of hotel companies suffered from a significant decline; earnings per share are registered as less than 1 cent for hotels in 2001, the average return on net assets was only 0.35%, and the average net profit was only 195 million Yuan. If tourism enterprises with these performances do not attempt to intensify their capitalization and strengthen competitiveness through assets re-organization, then these tourism enterprise groups will no longer be attractive to other companies (Prahalad & Hamel 1990, p.24; Ruan 2000, p.57).

Strategic management and internal management

Those barriers mentioned above are mainly from the macro level, so is that to say China’s tourism enterprise groups can successfully register progress when environmental factors are available? Not necessarily. In a sense, the problems arising from the internal world of the tourism industry and enterprise may pose far more serious threats to the development of the industry. The first barrier is about human resource. Three problems are raised: Enhancement of Chinese local and professional managers’ abilities and social recognition; follow-up training and retaining personnel; and combination of specialized teams. Now from the aggregate point of view, employees exceeded more than 100 million people merely in star-rated hotels. Over the last 20 years, a considerable number of professionals and managerial talents emerged; here the so-called human resource barrier is in terms of the services quality instead of structure. In this regard, we must establish the concept of corporate human resources.

In the first Chinese professional hotel managers seminar, the former chairman of Lausanne Hotel School, Ms Jiddah cited an example to illustrate the role that hotel management expertise plays in other industrial and commercial business; alumni of hers in Shanghai had left the hotel industry and then served at a German building materials company, but still as the head of Shanghai Alumni Association (Prahalad & Hamel 1990, p.24; Ruan 2000, p.57). He believed that 97% of the knowledge he could use came from Lausanne, such as the service chain system, operating system, human resource management. While clearly recognizing self-worth, we also need to learn from other industries and put the expertise to use in the field of hotel management (Hammer & Champy 1993, p.91).

The second hitch is the technical barrier, including hard information technology and soft management system. With the expansion of the scale and layout of the company, large enterprises still cannot manage the necessary information technology and management system. Now some of the hotel groups have no real sense of their strategic research and development centre, leading to the fact that there is no effective technical support for the group’s investment strategy, market strategy, product innovation and human resources sustainability, etc. (Hammer & Champy 1993, p.91).

The management mode with management philosophy, management system and operating mechanism as the core serves as the basic guarantee for the effective operation of tourism enterprise groups. For those mature management companies, their success is not a result of the people, but of the system. The vice president of the development department of InterContinental Hotels Group China, Mr Huang Deli, once introduced that the group’s customer satisfaction surveys are made ​​by an independent agency, so whether you are domestic or foreign management personnel, it’s very necessary to make every employee work hard on every single service so as to make the tourists, the owners and the groups satisfied. For Chinese tourism enterprise groups, especially those who are more dependent on the output of the management mode, making great efforts to study business management system and enforcement mechanisms will be very necessary. The fundamental reason is that we rely on people instead of the mechanism to ensure good performances, in other words, our management mode is unduplicated (Hammer & Champy 1993, p.91).

The third barrier concerns the localization of cross border tourism enterprise groups. The strategy for the localization of cross border tourism enterprise groups could push the development of Chinese tourism enterprise groups and also an inevitable choice considering its main purposes. For cross border tourism enterprise groups, localization provides a win-win platform; business costs are lowered while reward costs for management are raised. So what is localization? In reality, it is the localization of human resource. In fact, this is just the surface of things, only by proceeding from the ideas of the Chinese culture and conducting innovation with the relevant investment strategy can we realize the localization of cross border tourism enterprise groups. In this regard, the Intercontinental Group currently listed in the London Stock Exchange has done an impressive job. But not every cross border tourism enterprise group entering China is endeavouring to carry out the localization strategy. If there are still obstacles on the ideas and actions for cross border tourism enterprise groups, then Chinese tourism enterprise groups will lose the most precious opportunity to learn and cooperate with them, thus slowing down the pace of development (Ruan 2000, p.59).

Tourism Group’s market development

China Tourism Group’s development only has a history of twenty years. Some groups have made success, but overall, the growth of China’s tourism group is not optimistic. The success lies in the fact that after 20 years of growth, some companies have been the world leader standing in the top 300 in the list. In 2009, China’s Shanghai Jinjiang Group managed 707 hotels and business offices, 107,000 hotel rooms, ranking 13^th on the global hotel list. Home Inn managed 616 hotels and 71671 hotel rooms, ranking 19^th on the list, Shangri-la ranked 35^th (Dussauge & Garrette 1995, p.512). While the deficiencies lie in, those travel groups stay at a lower level and contribute little to the integration of the domestic hotel industry (Zhang 1999, p.24). Compared with the total number of 14,000 star hotels, only 30% of the hotels providing foreign services achieved group management (Gao 2001, p.26).

New trends in the development of the tourism group

Recently, the development of China Tourism Group is accelerating, the conglomeration of tourism industry appeared in a variety of forms. The forms included:

• A Loose strategic alliance
• Tourism enterprises are founded in different provinces focusing on the local tourist attractions. Anhui, Jiangsu, Guangdong took the lead to establish the local tourism enterprises. The basic model is that through asset allocation, the former subordinate enterprises under the local Tourism Bureau are transformed into travel groups directly. Those travel groups are playing locally, with operations of hotels, travel agencies, restaurants, taxies, tourism attractions and department stores (Zou 2000, p.124). For example, Beijing Tourism Group Co., Ltd. was established in 1998 and was renamed in September 2000 as Beijing Capital Tourism Group Co. Ltd. (referred to as BTG). It is a large conglomerate approved by Beijing Municipal People’s Government, owning the authorization of establishment and the management of state-owned assets.
• Recently, large players in different fields swarmed into the tourism market. After that, they all drew up plans on conglomeration, which attracted attention from all aspects. Huiming Gu (2000, p.202) thought that the current enterprises are focusing on capital operation; in the process of shifting from a planned economy to a market economy, companies can conglomerate through government’s help and market power (Gu 2000, p.202).

The developing strategy of the Chinese travel group

The macro-development strategy of the Chinese tourism group

On the motivation of the conglomeration of tourism enterprises, there are three different voices in the academic world:

Government-led strategy

The reasons to advocate for government-led strategy are based on three points: First, China’s tourism development experience over the past 30 years; second, the lessons learnt from the developed countries; and third, the nature of tourism industry makes it to revolve in many related sectors (Prahalad & Hamel 1990, p.24; Ruan 2000, p.57).

Government support for advanced project

Some scholars have argued that the government should actively encourage the consortia to enter the hotel industry or form groups, but the method should be based on acquisition, equity transferring and improving the existing hotels. In particular, the government should promote the cooperation between consortia and hotels and famous hotel management companies in order to let big financial groups hold shares and pass the management rights to the management company; thus, setting up the giants in hotel industry (Zou 1999, p.122).

The market-oriented strategy

Experts in the industry thought that capital is the key to the success of Chinese tourism conglomeration. That means that capital management should be a mode of operation to form tourism groups. In order to develop tourism groups according to the market-oriented standards, the expansion ought to follow the market laws. First, conglomerate groups should implement an internal management strategy to improve management and enhance the effectiveness of the internal allocation of resources. By expanding markets, companies can develop new products, adjust the organizational structure, improve management, increase productivity and control costs to integrate the internal resources under the capital structure (Wang 2006, p.202).

Business strategy of Chinese Travel Group

Conglomerating a group itself is not hard. What is difficult is what comes after the establishment of a group; can it develop orderly and durably? (Wang 2006, p.212).

China’s tourism market development strategy

• The strategy in the country: Major travel agencies should expand under the same brand and integrate the internal business. The market focus should be mid-end domestic tourism and business tourism market (Dai 1999, p.124). Low end starred hotel are the best choices for agencies to conglomerate and network (Zhang, Qin & Li 2000, p.43).
• The strategy worldwide: In the process of merging with the international tourism market, the main competitors are changing from the small and medium enterprises to large enterprises and enterprise groups, and the competition among countries bears a nature of global strategy (Guo 2000, p.201). The development of the international strategy will not only help to make extensive use of foreign resources but also improve the international competitiveness of China’s tourism enterprises (Li 2000, p.14).
• The market development space of Chinese tourism group: under the context of industrial restructuring in the country, a comprehensive restructuring of the asset structure has happened in some industries; thus, a number of new tourism enterprises with modern management system have come into being. These companies with loose alliances and the ones with systematic management are the ideal companies for cooperation with the Chinese tourism groups.

For example, a foreign trade group might own couples of luxury hotels, such as the World Trade Center under economic and trade department, Shangri-La under Minmetals Corporation, Fujian’s foreign trade hotel, Changchun International Trade, Shenyang Business Center. In the recent 10 years, those major trade companies conducted strategic adjustments to point at industrial fields. The New Asia Group in Shanghai is an original business enterprise without a link to industry. New Asia Group consists of hotel management companies, travel agencies, taxi companies, fast food chains, restaurants and other assets under its management. Shanghai’s New Asia Group is an integrated tourism group with great influence (Prahalad & Hamel 1990, p.24; Ruan 2000, p.57).

China’s tourism development strategy within the Group

Without cohesion, the effectiveness of conglomeration is not much strong; there will be no business combination, no powerful group benefits, no upwards power, and no sustainable development vitality (Wang 2006, p.210). Since the development of China’s tourism group determines the group’s internal cohesion, there are many studies that have been studied on this topic. The specific strategies can be divided as follows:

1. The importance of clear property rights is the consensus within the business and academic fields: The facts and figures of the recent years show that the diversification of property rights, joint-stock reform and the list of the shares on stock can not only increase the funding for the tourism enterprises but can also dump the non-performing assets, select a high-quality asset for listing and raise more money (Zou 1999, p.120). As the groups have not solved the core issues like the form of restructuring their corporate assets and property rights allocation, they failed to form an organic combination and failed to form a strong large scale and intensive management, resulting in the high cost of doing business, bloated organization and low efficiency; thus, the result of conglomeration is not obvious and the awareness is not high (Zhang & Zhang 2000, p.163). The Chinese Travel Group should stand on the basis of the clarification of property rights, improvement of the level of capital operation, and transfer of the capital to cost-effective enterprises and fields so as to achieve capital efficiency (Prahalad & Hamel 1990, p.24; Ruan 2000, p.57).
2. Improved management: First, companies ought to concentrate on the development of human resources; after the establishment of a travel group, more expert consultants, strategic management staff and professional managers are needed. Tourism human resources development is an important guarantee for the orderly and sustainable development of the group. Professional management is a necessary means to accumulate the core competitiveness for the travel group (Liu & Dong 2001, p.132).

Secondly, travel groups need to establish related organizational structures; organizational innovation of tourism enterprises has two means, one is to collaborate with organizations in the fields and the second is to corporate with large companies and co-invest in tourism enterprises (Dai 1999, p.127). Virtual chain entails a management model of using the strongest power and limited resources to maximize its effectiveness, based on computer network technology and it will be an indispensable operating mechanism in the future (Dong 1999, p.125). With the development of tourism, it is a realistic and feasible way to develop Chinese tourism by establishing a strategic alliance (He & Xu 2007, p.52).

3. The innovation of mode of operation: In the process of development, tourism groups need to create an operation mode according to their environment and conditions. Actually, the operation mode is diversified (Wei 2000, p.130). The conglomeration needs to build five resource system, human resource, capital resource, material resource, time and space resource and information resource (Wei 2000, p.133). From the perspective of market operation of tourism enterprises, the competition of level 1 is price competition, which is on the lowest level and most common one. Level 2 is quality competition, and level 3 or the highest level is culture competition. (Wei 2000, p.133).

Research Methodology

Introduction

A methodology is a process of instructing the ways to do the research. It is, therefore, convenient for conducting the research and for analyzing the research questions (Bryman & Bell 2011, p.158). The process of methodology insists that much care should be given to the kinds and nature of procedures to be adhered to in accomplishing a given set of procedures or an objective. This section contains the research design, study population and the sampling techniques that will be used to collect data for the study. It also details the data analysis methods, ethical considerations, validity and reliability of data and the limitation of the study.

Research philosophy

For this part, choosing a philosophy of research design is the choice between the positivist and the social constructionist (Easterby, Thorp & Lowe 2008, p. 67). The positivist view shows that social worlds exist externally, and its properties are supposed to be measured objectively, rather than being inferred subjectively through feelings, intuition, or reflection. The basic beliefs for the positivist view are that the observer is independent, and science is free of value. The researchers should always concentrate on facts, look for causality and basic laws, reduce phenomenon to simplest elements, and form hypotheses and test them (Bryman & Bell 2011, p.160).

Preferred methods for positivism consist of making concepts operational and taking large samples. The view of the social constructionists is that reality is a one-sided phenomenon and can be constructed socially in order to gain a new significance to the people. The researchers should concentrate on meaning, look for an understanding of what really happened and develop ideas with regard to the data. Preferred methods for the social constructionists include using different approaches to establish different views of the phenomenon and small samples evaluated in-depth or over time (Saunders, Lewis & Thornhill 2009, p. 87). For the case of analyzing the relationship between employee commitment and job attitude on service quality, the philosophy of the social constructionists was used for carrying out the research. Because it tends to produce qualitative data, and the data are subjective since the gathering process would also be subjective due to the involvement of the researcher.

Sample selection

Population refers to the total elements that are under investigation from which the researcher draws a conclusion (Saunders, Lewis & Thornhill 2009, p. 90). A sample is a subset of the population, i.e. it is a representation of the total population (Saunders, Lewis & Thornhill 2009, p. 90). This study mainly used a non-probability design of sampling. In this design, not every participant in the study has an equal chance of being chosen. Non-probability sampling design does not utilize much cost and time, hence it is widely preferred. When smaller samples are used, a non-probability research design is susceptible to errors, thus, normally a larger sample size is selected (Bryman & Bell 2011, p.160). In addition, it was preferred for the number of observations to be more than the number of variables as a regression analysis was to be conducted.

Research design

In line with the main objective of this study which is to explore the development and management of Chinese tourism enterprises conglomerating, this study employed a cross-sectional research design. Under this design, 110 respondents were targeted. They were issued with questionnaires to assist with data collection. The respondents were assured of the confidentiality of their participation.

Statistical method

Descriptive statistics and inferential statistics were both applied in the study in order to test the hypotheses.

Descriptive statics

Descriptive statistics is mostly applicable for analyzing numerical data. It uses distribution frequencies, distribution of variables and measures of central tendencies (Saunders, Lewis & Thornhill 2009, p. 93). The characteristics of the sample chosen will be used to compute frequencies and percentages with regard to the questionnaires.

Inferential statics

Inferential statistics gives the researcher the chance to convert the data into a statistical format so that important patterns or trends are captured and analyzed accordingly (Easterby, Thorp & Lowe 2008, p. 72). Regression analysis is utilized in inferential statistics. Regression analysis is employed to check on the relationship between a dependent variable and an independent variable. It allows the researcher to predict and forecast the expected changes to a dependent variable when one independent variable changes (Easterby, Thorp & Lowe 2008, p. 72).

Data Collection and Instrumentation

Questionnaires were used to collect the data. The questionnaires were issued to 110 respondents who were mainly employees in the Chinese tourism industry. The participants’ responses were treated with much confidentiality.

Data Analysis Methods

Data from the survey were entered into the Excel spreadsheet program for future analysis. Data were analyzed using SPSS and statistical tools.

Limitation of data collection methods

There have been a lot of concerns on additional budgetary expenses for collection of the data, regardless of whether the gathered data is really genuine or not and whether there may be an explicit conclusion when interpreting and analyzing the data. In addition, some employees were reluctant to offer some information they deemed confidential and unsafe in the hands of their competitors. This posed a great challenge to the research as the researcher had to take a longer time to find employees who were willing to give out adequate information.

Validity and reliability

The validity of the data represents the data integrity and it connotes that the data is accurate and much consistent. Validity has been explained as a descriptive evaluation of the association between actions and interpretations and empirical evidence deduced from the data. More precaution was taken especially when a comparison was made between employee commitment and job attitude. Employee motivation may differ from business to business and may not be identical in an industry. Reliability of the data is the outcome of a series of actions which commences with the proper explanation of the issues to be resolved. This may push on to a clear recognition of the yardsticks concerned. It contains the target samples to be chosen, the proper sampling strategy and the sampling methods to be employed.

Findings, Data Analysis and Interpretation

Introduction

This section covers the analysis of the data, presentation and interpretation. The results were analyzed using SPSS and statistical methods like Pearson correlation matrix.

Summary of descriptive statistics

Descriptive statistics using the measures of central tendencies were computed from the results gathered from the questionnaires. The questionnaires focused on employee commitment and job attitude.

Results for obstacles to the conglomeration

Respondents who were majorly employees were issued with questionnaires in order to express their views with regard to the study. The summary of results regarding obstacles to conglomeration is in the table below. The results show that from the sample of 65 respondents, the mean for lack of management experience or chaotic internal management system is 113.20 with a standard deviation of 14.30.

From this computation, it can be deduced that many enterprises still have a lower motivation toward conglomeration; this is indicated by the lower value of the standard deviation. A low attitude to conglomeration indicates that the level of commitment is also low.

In addition, the calculated arithmetic means for lack of experience in capital operation, financing channels, and funds; lack of manpower, especially the professionals; unclear property right/ hard to change property right; and weak brand awareness, are less than the calculated arithmetic mean for unclear diversification strategy. With regard to the fact that an average level of obstacles to conglomeration is represented by a mean of 36, it is evident that many enterprises have a lower attitude to conglomeration because they have no experience in capital operation (Mean=38.24, SD=3.13), they lack professionals (Mean=32.12, SD=6.30), they have no clear property rights (Mean=27.20, SD=5.30), they have a weak brand awareness (Mean=24.35, SD=4.22) and also have unclear diversification strategies (Mean=23.10, SD=4.80).

Summary of inferential statistics

The results of inferential statistics were used to establish the relationship that exists between Chinese tourism enterprise conglomeration and the various obstacles; in addition, inferential statistics were used to ascertain the connection between the variables. Pearson correlation matrix was used.

The results show that there are major correlations between enterprise conglomeration and: unclear diversification strategies (r = 0.598, p < 0.01), weak brand awareness (r = 0.585, p < 0.01), lack of experience in capital operation (r = 0.386, p < 0.01), and unclear property rights (r = 0.268, p < 0.05). There was no significant relationship between enterprise conglomeration and lack of professionals (r = 0.131, p > 0.05).

NOTE: * = p<0.05; ** = p<0.01.

Obstacle facing by the tourism enterprise conglomeration

Out of the 110 questionnaires issued, the feedback was received from 65 respondents, an effective rate of 59%. From the point of view chosen from the frequency of 16 sub-projects listed in the questionnaire; “Lack of management experience or chaotic internal management system” was selected by 20.00% of participants; 16.92% chose “Lack of experience in capital operation, financing channels, and funds”, “Lack of manpower, especially the professionals” ranked the third as 15.38% chose it. “Unclear property right, hard to change property right” ranked fourth as 13.84% of the respondents chose it. “Weak brand awareness” ranked fifth. Other frequently chosen items were “Irrational ownership structure”, “Unclear diversification strategy, the main business is not obvious”, “Inadequate government support, unreasonable policies and regulations and discriminatory policies”.

According to the classified five barriers to these 16 sub-items (as shown in Table 4.2) barriers to the internal management accounted for 47.69%; strategic management accounted for 16.93%; capital disorders accounted for 16.92%; property barriers accounted for 13.84%; government behaviour disorders accounted for 4.62%. The statistic shows that the biggest barriers to Chinese tourism enterprises development are obstacles to the internal management, strategic management barriers, capital barriers, obstacles and government ownership behavioural disorders. From the returned questionnaires, supplementary columns were mostly blank, the reasons may be probably from three aspects; one is that the questionnaire had covered all the items basically; the second was that the participants did not have a complete comprehension of enterprise conglomerate barriers; the third reason was that some participants were too lazy to fill out the columns. Those completed additional columns were “lack of marketing”, “weak overall operations”, “lack of innovation in management system” and so on. These factors are also the frequently encountered problems in China, but many of them have been overlapped by the factors listed in the questionnaire, thus those factors are not the study objects.

Individual item investigation

From the survey, the sub-options of “Lack of management experience or chaotic internal management system” and “lack of human resources, especially talent” under the internal management were selected with a high frequency. They were 20% and 15.38% respectively (as shown in Figure 4.3), which illustrates that the obstacles of internal management of tourism enterprises in China has been great and has been fully recognized within the business community; meanwhile, it verified the point of view of the study. Judging from the questionnaire, the importance of internal management has been emphasized by the managers of tourism enterprises. Many respondents chose the internal management obstacle under the barriers, which is another example that illustrates that tourism enterprises are currently in the process of increasing emphasis on human resources management, internal management system and establishing the use of scientific organization structure.

From the statistical data of strategic management obstacles, many managers thought that it hindered the development of tourism enterprise conglomeration; secondly, only to the “internal management” of the major barriers, 16.93% of the respondents chose the sub-options under “strategic management”, where “weak brand awareness” accounted for 10.77%. Right business environment analysis, development, selection and implementation of the business strategy guarantee the success of the enterprise conglomeration. Enhanced brand awareness, built brands and brand management of tourism enterprises in China are the weak points currently. The questionnaire results, to some extent, have proved that academia and the industry reached a consensus that strategic management deficiencies have become an obstacle to the development of Chinese tourism enterprises conglomeration (See Table 4.4).

According to the statistics, the capital barriers ratio is 16.92% (as shown in Table 4.5), compared with only 0.01% difference with strategic management barriers; thus, the capital obstacle has attracted managers’ recognition and attention. Currently, a lack of experience in capital operation, financing channels, and funds trouble the Chinese tourism enterprises. Enterprise development needs funds. The source of funding is mainly bank loans guaranteed by the local government. The result is that business decisions and personnel arrangements are hamstrung by the government, meanwhile, a single source of funding means increased business risk. Tourism enterprises must have capital support. The formation of tourism conglomeration is based on the premise of linking capital. In the future, those really strong ones are necessarily capital-backed companies.

Moreover, other factors, such as “Unclear property right/hard to change property right”, and “Inadequate government support/unreasonable policies and regulations and discriminatory policies” were also frequently chosen. All those factors were all the main barriers to the Chinese tourism enterprise conglomeration.

Summary

Through the above analysis, the following two conclusions can be drawn: (a) the major barriers to the Chinese tourism enterprise conglomeration are the internal management obstacles, strategic management barriers and capital barriers; (b) the internal management obstacles are the primary obstacle hindering the development of enterprise conglomeration. Therefore, policymakers and regulators should have these obstacles in mind so that they make concrete decisions, taking these obstacles into consideration.

Conclusions and Recommendations

Introduction

This chapter presents a summary of the findings and discussion of the results in accordance with the objectives of this study. Finally, the chapter contains the recommendations as per the findings.

Conclusion

The development of Chinese tourism groups has to go through a very long way of capital accumulation, and the formation of brands. It is worth noting that the era of “keen on establishing while ignoring development”, especially, the healthy and sustainable development is important (Yuann & Inch 2998, p.108). The management determines the development, only positive management can assure its core competitiveness, gaining a competitive advantage. Therefore, it is necessary to deepen the reform, remove obstacles, choose a suited group development strategy to facilitate the effective implementation of the management; thus, Chinese international competitiveness can be increased rapidly (Wu 2002, p.1077). Chinese enterprises have to face up the challenges of the World Trade Organization (WTO) and become a major player in the world market.

Solutions on internal management

Human Resource

Tourism conglomerates as intelligence intensive enterprises, the key to success lies in the quality of professional service. Employee behaviour itself is a part of tourism products. Only the right service concept and superb service skills provide high-quality service products. Sheraton emphasizes on the cultivating talents, using a variety of training activities to develop human resources to improve product quality. For example, at the Sheraton Asia Pacific Division, Sheraton carries out a ten-day annual “Military Academy” activities, training the managers of this area to enhance their professional knowledge, management levels and management skills. Sheraton picks up talents to colleges or participates in job training (Yuann & Inch 2998, p.108). Generally, Sheraton does not hire the senior manager from outside but promotes from within the system to maintain certain quality standards. Moreover, it has its own training centre. Orderly development of the human resource is an important guarantee of sustainable development for tourism conglomerates.

The tourism conglomerate needs more expert consultants, strategic managers, and professional manager with strategic vision and awareness of the international business. There are uncertainties in the process of enterprise internationalization and conglomeration. The international market has a great risk, a wide range of competition and complex business atmosphere, requiring the establishment of international awareness and improvement of international marketing and transnational management capacity. When communicating with foreign companies, leaders are expected to be familiar with business and professional competence. Besides a general management capacity, managers of multinational companies are required to be proficient in business, experienced, with the ability to speak foreign languages, use a computer to understand the western financial management and international regulations. This kind of talent is hard to find; companies should speed up their training program and create a batch of talents with international business awareness, thus they can safeguard the interest of the country and enterprises, and can get along with foreign companies well (Wu 2002, p.1077).

Implementation of the multidivisional structure

As China’s tourism enterprises have long been affected by the administrative intervention, they have not focused on organizational design and rationalization of corporate governance mechanisms, after the tourism group is set up, the first task is to reconstruct the group’s organizational structure. Tourism Groups have features of multi-industry, multi-product and multi-enterprises, but recently the scale is limited. In this case, the implementation of the multidivisional structure is the best choice (Prahalad & Hamel 1990, p.12).

At present, companies of Europe, America, and Japan often employ product segments, regional segments or multidivisional structures. In fact, management theory tells us that a linear organizational structure only suits for a single enterprise. For a large diversified group, it is particularly important to apply multidivisional structure and divide the group by product, branch or region as in the case of China’s multi-industry, multi-product or multi-ownership tourism enterprises. The adoption of the multidivisional structure is indeed a scientific choice because it is a parent company’s management system that solves the unclear property rights issues existing commonly between the parent company and subsidiaries; thus, there is first-layer management or regional management, making management level balanced (Dubé & Renaghan 2000, p.68).

The subsidiaries or business units take the responsibility of profit management, playing as a first-level profit centre. Within a certain industry or region, sub-sectors can be managed according to its category (such as the hotel industry multidivisional structure), and establish core business (also known as the flagship). Those sub-sectors and core business are responsible for the coordination and development of business. The holding company is above all the subsidiaries. In fact, in the process of a single business enterprise to a conglomerate, it will lead to the change and rationalization of corporate organizational structure. After conglomeration, the scale is always too large, as a result, the barriers such as information barriers and incentives barriers can lead to the decline of economic efficiency; therefore, a balance should be maintained in enterprise management between administrative levels.

The multi-level, multi-industry structure is a natural requirement for the tourism industry and different levels corresponding to different functions such as decision-making centres, profit centres and cost centres. Conglomerate – the core business – operation tends to be the strategic business unit management; subsidiaries tend to be the industry’s focal point, or combined into industry groups, or create a core business. This will help to improve the core competitiveness of the conglomerate. For example, the first step for Beijing Tourism Group is to set up second-level enterprises according to specialization, which is equivalent to group headquarters setting up divisions by product. BTG hotel group, Shenzhou International Travel Group, and BTG Auto Group (China Faw Group Corporation) are among the seven second-level enterprises. Below the second level enterprises is the primary business (Prahalad & Hamel 1990, p.12).

Management Mode

Strategic management is an important element of intangible assets such as knowledge assets and capital assets. A stable, unified and unique management style is easy to be reproduced. There are few groups which have formed their management style with features in China. While, the world’s famous travel agencies all have featured management styles, such as Hilton Worldwide with the slogan of being “fast and convenient”, emphasizes its efficiency. Holiday Inn focuses on the mid-and low-end markets, thus “warm, comfortable, cheap and easy” are the slogans that sell them. All the branches worldwide are implementing these ideas consistently. Meanwhile, customers also have a feasible expectation on the service quality, which facilitates the sale of services. Some old brands in China, such as BTG Jianguo Hotel Management Company Limited, White Swan Hotel, Gloria Hotels and Resorts are all managed by the world’s famous hotels, then acclaimed management experiences, gaining a reputation in China. Those old brands should continue to make full use of the advantage, thereby, expanding its numbers of managed hotels; achieving economies of scale and management synergies and maximizing the management synergies with other companies (Yuann & Inch 2998, p.108).

The innovation of culture of enterprises

Tourism conglomerates must establish a learning organization. It is a recommended way to implement dynamic learning at different levels in different ways according to their stage of development and the competitive environment. The most effective way of learning is team learning, using systems thinking approach to achieve knowledge sharing, turning tacit knowledge to explicit knowledge so that one person’s experience could turn into the skills and techniques of a group. Converting knowledge to competitiveness need to establish an open and innovative culture. The culture of enterprise in the next decade is likely to be a key factor in deciding the rise and fall of a company. The impact and influence scope of the culture of enterprise is closely connected to the core competitiveness of enterprises. Thus, the new values and vision are important to build a new enterprise culture and important for culture innovation and knowledge management. Being a learning organization and creative organization is a basis to improve core competitiveness.

Solutions on strategic management

Brand operation

The importance of brand for a tourism conglomerate

The service provided by tourism enterprises is intangible, which cannot be distinct from others through technology, packing and other specifications. It can only rely on customers’ experiences. Establishing a brand helps; tourists distinguish between different products through the different brands in different product awareness, thus, companies can create different brands to provide unique services for tourists. Moreover, the brand is a tool to reduce risks for tourists. As the tourism service is a service with production and consumption happening at the same time, the consumers cannot judge the quality before purchasing, therefore, the reputation is the only judge to show the quality. Those famous brands, picked up by customers’ experiences with money as votes are credibility and promises to the customers. On the perspective of the customers, buying a famous brand means being comfortable and guaranteed; the risks of regret will be reduced greatly (Prahalad & Hamel 1990, p.12).

In addition, since the service of tourism conglomerate is diversified, different products have different characteristics. To establish a brand can help to propagandize its characteristics and facilitate its promotion. When the conglomerate is expanding, the brand advantage can be used to occupy the market and gain a prior position. In the 80s, the hotel enterprises from developed counties occupied the Chinese market with its brand advantage; thus, they have already earned a big fortune. Therefore, tourism enterprises have to spare no effort to establish a new famous brand and improve brand management capacity.

The brand strategy

The brand is important to the development of tourism conglomerate; when implementing the brand strategy, companies should have the right idea. The companies should:

• Establish the brand based on quality; brand and quality are closely linked. The competitiveness of a brand is based on the high quality of its products. The world-famous brands have the same features, which is a sustainable pursuit to quality. After a brand is established, the quality is always falling and the direct consequence is the loss of consumers’ confidence. Its competitiveness will be reduced too. Thus, for a brand, quality is fundamental. The tourism conglomerates have to step out of the error of “focus on reputation/ignore the content”, regarding the quality as the lifeline of a brand. In order to enhance the quality of a brand, the tourism conglomerate can apply an international standard, or emphasize on innovation, or continue to develop tourism product and also determine the quality from the consumer’s perspective. The ability to pay varies from one tourist to another, thus, they have a related satisfactory range; when the quality reaches their range, it is easy for them to make a choice (Prahalad & Hamel 1990, p.12).
• Establish a brand with characteristics; with the end of the shortage era and competition increasingly fierce in the tourism market, the quality of tourism products is improving, and the vast majority of products could meet customers’ requirements. Therefore, the market segment is defined according to visitors’ preferences, hence, positioning the products relying on it. Companies should produce the products with features and build the brand image which makes the image clear and easy to propagandize, enhancing its competitiveness.
• The key to establish a brand; to establish a brand, companies should firstly accord to the strategic plans in order to give it a good associated name or the name related to characteristics of the company or product name; Secondly, it is necessary to give a full range of tourism promotion in order to strengthen the brand-specific impression; Finally, the high quality of tourism products should be consistent to improve the reputation and visitor satisfaction, deepening the feelings of visitors to the brand; thus, increasing the brand loyalty.

Choose a brand combination

Tourism groups engage in various tourism products to determine the portfolio of brands; two aspects are paid attention to: first, the combination of brand name and secondly, the establishment of the brand system.

• The combination of brand names; there are two means of brand combination: the name of the company, certain brand names and company’s name. Using the company’s name is a traditional strategy since these companies often establish an image in a certain market. For example, Shangri-La focuses on the high-end market (Yuann & Inch 2998, p.108). The image of the brand and of the product has to fit its positioning, so there is no possibility of vague brand image. However, for other tourism enterprises, their product lines are full ranged; thus, one product could have different positions when they are sold in different markets. The certain brand is an independent brand, which has no relation with the company; this brand emphasizes on its characteristics, with a unique brand image. The name of the company plus certain brand names is a helpful strategy, which could reflect the company’s credibility and the characteristics of the product. This is a commonly used method of brand combination Wu 2002, p.1077). Establishing the brand has become an important business strategy for the world’s tourist conglomerates. The formation of the trans-regional group and the formation of chain brands are the true reflection of the brand advantage. The world-famous brands are always the conglomerates with branches around the world. The most commonly used means of conglomeration is franchising and management contract, as franchising can occupy market share fast. Some conglomerates of well-known brands introduced brand loyalty strategy through relationship marketing and personalized services to a stable market share. The establishment of brand and brand awareness from customers actually is the establishment of brand advantages and competitive advantages. Brand loyalty is the aim of nearly all the conglomerates.
• The establishment of the brand system of tourism conglomerate; brand system means the structure among different brands within a conglomerate, which is important for a diversified tourism group. One way of setting up the brand strategy is by establishing a brand, for example, the BTG International Travel & Tours established by BTG; the other way is to establish the brand by market. BTG, again, established a luxury brand named Jianguo Hotel, while Jianguo Inn is an economic brand.

Related Diversification

Conglomerate management of tourism enterprises should be closely going around the main business. The unrealistic, blind multibusiness in the early stages is not desirable. The purpose of diversification is to prevent risks and gain high profits. Diversification entails related diversification and unrelated diversification. Related diversification refers to the company’s expanding to the areas connected to the existing business. Unrelated diversification means the company’s expanding to the area not connected to the existing business activities. From the foreign experience, the risk of unrelated diversification is bigger than the related one. According to the capital capacity development and maturity of Chinese conglomerates, it is difficult to conduct diversified business (Prahalad & Hamel 1990, p.12).

Operation on network

Operation on the network is one of the expanding strategies for a company. According to the features of tourism, tourism groups have to build a network to connect the branches in different regions and exert its function as a conglomerate, increasing the competitiveness on the target market. Looking at the experience of those big tourism groups, all of them regard the network operation as a target and indispensable part. For example, Marriott International Inc. ranked 3^rd in the world and owns 3,420 hotel in more than 52 countries and regions. The idea of network operation is clearly shown on its acquisition of the Renaissance Hotel. It readjusted its geographic network, achieving optimal distribution of resources, which facilitates the entry of international market and enhances the competitiveness.

Chinese travel groups have just started on building geographic networks. Shanghai Jinjiang Inn started to apply expanding strategy, managing several other hotels in other regions, but the majority of hotels are located in Shanghai. Outside Shanghai, the management is based on contract or commissioned by clients, without capital penetration; therefore, there has been no effective network coming into being. According to the experience of developed countries and the features of Chinese tourism conglomerate, the establishment of the geographic network has to focus on the following two points: first, conglomerates and branches should build a close link, including the capital, technology, management, brand and other links; it is easy to manage different regions by applying its function and economics of scale. Second, conglomerates and branches should better build a regional market with capital and culture advantages, having the ability to occupy and expand the market. The establishment of a geographic network needs 3 steps. First, set up a regional strategy; try to expand to a certain scale in a region. Second, realize the cross-regional expansion, searching for the market and market segment. Third, through multinational operations, participate in international competition.

Reasonable scale control

The conglomerate should keep a certain scale. If the scale is too small, it cannot achieve the economies of scale. If it is so big that it surpasses the company’s management capacity, the organization costs and friction costs would increase, resulting in dinosaur’s disease then paralyzing the running of enterprises. It is worth noting that group expansion should be controlled at a reasonable scale. Group expansion is in two ways: administrative scale orientation and economies of scale orientation (Yuann & Inch 2998, p.108). Group expansion does not rely on the notion of ‘the bigger the better’, thus, the strategy should be determined according to the specific circumstances and the internal conditions.

The blind expansion will lead to diseconomies of scale. When determining the scale of the group, it is necessary to take these factors into consideration: the group’s own capacity, development outlook, management capacity, market competition and other factors in the market. Tourism companies’ participation in the conglomerate must be based on voluntary exit, and it is important to reduce administrative intervention effectively. Management department should apply macro guidance, supporting and healthy development. Through the expansion of reproduction, companies can generate new products, rather than blindly expand the scale of their fixed assets. Scale structure should be as reasonable as possible, the number of enterprises at all levels should maintain certain proportions, but in general should be pyramidal Wu 2002, p.1077).

When applying large scale strategy, the following strategies should be adhered to (a) expand the scale of enterprises, especially the number of enterprises of the core layer. For example, technology investments, equipment upgrading, development of new products, or applying acquisition to expand the scale, which is conducive to organizational restructuring. The resources should be allocated rationally and resources utilization should be improved; (b) increase the number of product lines. China’s tourism conglomerates can increase the number of product lines by holding the shares to achieve the purpose of scale expansion. For example, China International Travel Service (CITS) use equity links, while the China Travel Service (CTS) employ capital involving for scale expansion.

The domestic development strategy

Competition in the market after China’s WTO accession will be fiercer. Chinese tourism groups can not directly compete with foreign counterparts in capacity and scale. Chinese companies should avoid head-to-head competition, but open up new markets according to the Chinese tourism market and enterprise’s conditions. The travel agency is principally expanded under the same brand targeting to other travel agencies, and on this basis, integrating the internal business.

China’s hotel management companies should focus on the development of domestic mid-end markets and business travel markets. A low star hotel is an optimal choice for the conglomeration of tourism enterprises. Currently, foreign hotel groups in the Chinese market accounted for most of the market share of high-end hotels, but the business hotel and mid and low-end hotels are still needed to be explored. Shanghai Jinjiang Group, always engaged in luxury and high-end hotel, has taken the lead to change. The group launched a popular and good business performance in “Civilian Holiday Inn”, indicating a readjustment of business strategy towards economy hotels, which is the biggest market in China. It will further expand the market share of Jinjiang Group in China’s Hotel Industry, capturing an all-round market, increasing the capacity of risk resistance internally and externally to increase competitiveness (Prahalad & Hamel 1990, p.12).

International market development strategy

The competition among countries bears a nature of global strategy. The international strategy will not only help the use of foreign resources but also improve China’s tourism groups in the international market position and competitiveness. International development is to adapt to international competition, and it is an indispensable part of globalization in the future. Chinese tourism groups engaged in transnational business, through commission business, shares, wholly-owned sole proprietorship, or a combination of the above methods Wu 2002, p.1077). On the location choice in multinational operations, the United States companies’ model is the United States – developed countries – developing countries, which aims to maximize the profit. Japan’s choice of model is Japan – developing countries – developed countries. This is for motivation to occupy more overseas markets. China’s tourism enterprises should combine their own advantages to choose the location, and the target should be the developing countries closer to their own social and cultural atmosphere and some surrounding countries such as Saudi Arabia, Kuwait, Iran, Vietnam, Laos, India, Poland, Middle East counties, Southeast Asia, Eastern Europe, thereby expanding the influence in the international market.

Solutions on capital operation

Build a capital bond

The formation of tourism conglomerates needs to set a core business of high market reputation, good operating conditions, big economic scale and high level of management. Several companies associated voluntarily to form a conglomerate with enterprises complemented each other, possessing an integral function. However, the majority of China’s tourism conglomerates are built on business contacts. There are few conglomerates based on capital bond and running with standardized operations. The fact proves that conglomerates linked by capital with standardized operations have vitality. Since the existing of common economic interests, cooperation within the conglomerate can be established on a solid economic foundation. Only when capital plays as a link, can the real and standardized operating conglomerate be built. The conglomerate linked by business contact or collaboration lacks a common interest mechanism, in the event of any conflict, the co-operation may collapse.

Effective capital operation

Insufficient capital is a major problem in the tourism conglomerate expansion. Some good ways to solve the problem is to develop the capital market, broaden the financing channels and actively promote the tourism conglomerates to be listed. The fact proves that diversification of property rights, joint-stock reform and listing on the stock market could increase the source of funds, get rid of non-performing assets and choose the good performing assets to be listed; thus, the conglomerate could raise more money and achieve low-cost expansion.

Capital operation is an important expansion means for tourism conglomeration in a market economy. Only internal accumulation and re-investment cannot meet the requirements of rapid development. The capital operation can make an inventory of existing stock capital, so that the stock capital and external incremental assets flow, so as to achieve the re-combination between enterprises, and optimal adjustment of the structure (Yuann & Inch 2998, p.108). Therefore, the scale of enterprise and market share expands rapidly, and in this way, the economies of scale increases. After more than 20 years of development, China’s tourism enterprise has a big scale in the number, and excessive competition within the industry has been a problem.

Capital operation of tourism conglomerate can be through a variety of ways. The first one is through acquisition, which means establishing the enterprises with famous brands and then acquiring other companies, making them members of the group, thus, achieving the purposes of promoting the growth of other enterprises. Many tourism conglomerates in developed countries achieved rapid global expansion through a capital operation. The second way is to develop a joint-stock group. Using the stock structure to build the property rights, and improving the internal management is the trend for the development of tourism conglomerates. Therefore, the positive development of joint-stock groups within the group is an important way to rationalize the relationship and enhance economic strength.

Thirdly, conglomerates should give full play to the market’s power to lead the reconstruction Wu 2002, p.1077). The reconstruction should use standard market methods such as mergers or acquisitions following the rules and regulations, and should not be affected by administrative order. Under the market forces, the formation and expansion of the conglomerate should be built on voluntary principles and linked by the capital, based on the institutional innovation and mechanisms switch in order to achieve an optimal allocation of resources and economies of scale. Therefore, superior enterprises have autonomy and initiative when merging with inferior enterprises, and they focus more on market research and risk analysis. The association between strong enterprises and the restructuring of superior enterprises assets should be encouraged, thereby rapidly increasing the competitiveness and anti-risk ability of these groups.

Summary

The relatively good performance of the tourism market in developed countries is because of the existence of some large travel companies, such as JTB in Japan, TUI in Germany, Thomas Cook in the UK, and American Express in the US. China is a major tourist destination with development potential; China is a big tourist destination, not a destination with powerful competitiveness. China has a long way to go on the efficiency of resource allocation and competitiveness of tourism enterprises as compared with the other developed countries. Potential converting into real productivity needs to establish a number of powerful national or multinational levelled enterprises with international competitiveness. The general objective of this study was to explore the development and management of the conglomerated Chinese tourism enterprises Wu 2002, p.1077).

Because of various obstacles of development, China’s tourism conglomeration cannot compete with foreign counterparts on scale and competitiveness, and the development potential will be seriously affected after entering WTO. Therefore, in the process of the development of conglomeration, the economic laws need to be followed, taking enterprise as the main body, and capital as a link. The conglomerate should be formed by market power, rather than administrative means. The core business ought to be highlighted and the competitive advantage needs to be enhanced. For China’s tourism enterprises, the operation of capital on the macro level and on the period of group construction is necessary. It is expected that by 2012, China’s conglomerates will continue to experience an incremental rise and the readjustment process (Yuann & Inch 2998, p.108).

Recommendations

Based on the findings of this study, conglomeration sometimes expands blindly. Therefore it is necessary to determine the scale of the group in reality, in accordance with conglomerate’s resources capacity, development space, management capacity, market competition and other specific factors. Association between strong enterprises occurs very fast; but the culture of conflicting, management obstacle and a weak consolidation cripple the development. Old famous tourism brands should continue to play their own advantage, gradually expanding the number of member companies in order to expand the size of the group and achieve economies of scale and management synergies. In the process of conglomeration, it is better to select distinctive members to maximize the synergistic effect. The government should establish a scientific organizational structure to assist China’s tourism conglomeration. The development of tourism conglomeration must be based on their own development, and build a compatible property rights, governance structure, operational modalities and management mechanism with the market economy system.

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Categories of Customers of Carlton Hotel

The hotel receives five categories of clients: Tourists, families, the elderly, business travellers and delegates (carltoncity. sg).

• Tourists: These guests travel specifically for recreation, sightseeing, visiting, as well as non-official activities (Goodman 2006). The hotel management provides them with the information they may need to enjoy their stay at the hotel (Evans & Lindsay 2011). Tourists are always looking for things such as beverages, recreational facilities and other services that meet their demand.
• Families: Usually, they travel when they have no serious or work-related commitments, especially on weekends, because they want to break a little bit from their daily practice (Gössling 2011). The hotel serves their specific needs by offering services such as meals and a playground for babies.
• The elderly this group of people finds it hard to survive without being assisted, so they are always looking for accommodation with a pleasant and sociable environment (Hoyle 2006). Carlton City Hotel responds to their needs by being considerate and patient with them.
• Business travellers: They make the huge bulk of the guests of Carlton City Hotel (Michman & Greco 2000). The hotel has modern facilities such as the Graffiti Sky Bar, plate, Tuxedo Café and state of the art swimming pool that cater to the needs of this group of guests.
• Delegates: the hotel has facilities that cater to this group of clients (Dimmock, Breen & Walo 2003). They usually look for a place told their meetings. The hotel serves their specific needs by ensuring they are allocated enough space, offering them free Internet to facilitate their meetings.

Value addition

The hotel adds value to its offerings in differing ways. For example:

Guest rooms

The Carlton City Hotel has added value to guest rooms with free Internet and big-screen TVs (Carlton city.sg). In addition, dining rooms are spacious, fitted with air conditioners and have TVs (Jones 2010).

The Graffiti Sky Bar

The hotel has added value to the bar by ensuring that different drinks from different countries are offered. In addition, the bar is located on the 28^th floor just enable clients to have the sky of the entire town (Weygandt 2005). The hotel has also equipped it with sporting facilities such as a pool table, computer games and smoking zones where smokers can enjoy their cigars.

Staff

Since employees are the face of the hotel, the management has developed schemes that enable them to enhance their skills for better service (Ragins & Greco 2003). The hotel sponsors employees to pursue online self paces courses. This adds value to the services of the hotel as the management knows how to handle its visitors.

Front office

The front office is spacious, with many receptionists to serve clients. In addition, the hotel has benchmarked time limits in which certain things linked to clients are supposed to be carried out (Bardi 2007). For instance, the front office is supposed to apply the 10-5 rule when greeting guests, answer the phone call within three rings (Riley, Lloyd & Propst 2007). The staff is also supposed to complete a meal order within twelve minutes.

Gym and Swimming pool

The hotel has added value to the gym through the provision of trainers. They usually help the client with various needs ranging from training to inquiries on how to keep fit. The hotel has also employed divers to manage the swimming pool area. They also help those who want to train how to swim. A bar has also been located where the swimming pool is to provide drinks to those who want to enjoy their drinking at the swimming pool (Sommerville 2007). In turn, this has had a positive impact on both internal and external customers.

Using all staff as points of information

Hospitality uses its employees as the main sources of information (Kusluvan 2003). These employees are meant to give visitors reasonable facts that they can use to better their experience at the hotel. This creates a highly personalized value and also shows that the hotel is operating in line with the latest shifts in the industry.

Enhanced Package

Carlton City Hotel has long been a great innovator in attracting visitors, and their collection of freebies is as well attractive (Hill & Jones 2009). The hotel employees several approaches to promote its services and products, particularly to local residents. For instance, “fractions” for locals include two free nights, at least two free alcoholic drinks and free passes to attractions.

CorVu Cor strategy application

Among the essential factors which impact a hotel’s success are centralized accounting and careful financial planning (Vault 2005). Whilst all accounting procedures were initially supervised through its corporate offices, the implementation of its web-based accounting system through the CorVu Cor strategy increased effectiveness by one hundred per cent (Moutinho 2000).

Reduced costs

During special occasions like valentines, the hotel usually make offers such as a romantic dinner for couples with sparkling strawberries and wine, a Kama Sutra kit and silk rose petals on the bed, all worth US$25 (Brotherton 2006).

Provision of clean and safe rooms

The hotel enhances the value of its offerings by making sure that rooms are clean and safe. Each room is fitted with CCTV to ensure that safety is not compromised. In addition, only one person is responsible for keeping the keys to the rooms (Wisner, Tan, & Leong 2009).

Cost Down

Value and Costs maintained

Energy

The energy-efficient systems have been installed to save on the amount of energy used by the hotel. Some of the gadgets installed include digital thermostats as well as cooling systems in all guest rooms (Sommerville 2007). This helps the hotel to save a lot of money which would have been used to pay electricity bills.

Water

Carlton City Hotel has installed a water softener that minimizes water for laundry. This technology saves the hotel more than 400,000 litres of water daily (Steingold 2009). The heat energy produced from various systems is also used to heat other systems such as swimming pools and bathing water.

Waste

The hotel introduced a waste management program that promotes the recycling of materials and a savings of more than US$5000 per year (Steingold 2009). The practice of waste management has been successful because the rate of occupancy has increased.

Green building practices

Each guest room is fitted with air conditioners that modified. That is, they do not use power to help minimize the overall use of power (Steingold 2009). Most of the materials used, especially for interior design, are natural, and this significantly reduces the costs associated with repairing the building.

Purchasing

The hotel has been partnering with local farmers to be supplied with organic products that are safe in terms of environment and health.

Staff engagement

The company has a program through which employees are sponsored to study (Sommerville 2007). This saves a lot on the cost that would otherwise be used to employ or hire other people. In addition, the hotel encourages clients to use local services such as local guides to save on costs.

Customer education

Tourists and guests can easily cost the hotel a lot if they are not given sufficient information on certain things. Some of the costs may result from court cases following client petitions for perceived poor services (Rutherford & O’Fallon 2007). The hotel provides information in guest rooms and on their website regarding how they operate and where client go for assistance.

Supply chain

The supply chain management of Carlton City Hotel is referred to as a one-stop source that brings together value-based and end-to-end supply management services. The chain connects them with the best services and products of suppliers that exceed or meet their specifications and standards at reduced costs.

Yield management

Yield managers at the hotel usually capitalize on the returns per available room and by renting rooms to the right clientele, at the right time, at the right price. To avoid rooms from going unoccupied, an aspect that increases the operating cost of the hotel.

Interactive Reservation Systems

Carlton City Hotel guests have access to the online interactive reservation systems.

Ideally, the number of reservations organized over the internet has continued to swell. Over 20 per cent of all reservations are usually made via the internet.

Plan, Do Check, Act

PDCA at Carlton City Hotel is evident mainly in services being implemented. For instance:

Money-back guarantee

The result the hotel wants to achieve is satisfaction from customers. The responsibility is solely dedicated to the management of the company (Carlton city. sg). Checking, in this case, involves the identification of nonconformity in order to take corrective actions. The area identified for improvement is timely reimbursement if the paid money.

Cancellation policy

The main aim of this policy is for clients to adhere to the laid down procedures when cancelling their reservations. The responsibility is allocated to the front office as they usually deal with reservation matters (Steingold 2009). Results, in this case, are the number of people who successfully go through the process of cancellation. Improvement by the hotel is to allocate time when the cancellation can be made.

Labor Cost Issues

Labour costs in Carlton City Hotel account for about 44.5 per cent of entire operating costs (Liu & Chen 2006). The hotel wants to achieve is to reduce the cost of labour. The way forward for the hotel is to provide training to relevant staff to avoid hiring others. In terms of the check, the hotel ensures that costs are significantly reduced. In terms of action, the hotel ensures that training and knowledge transfer is adequate.

Multicultural Issues

With the advancement in globalization, multicultural issues are confronting and troubling the industry managers (Sommerville 2007). What needs to be achieved is to have a diverse staff that serves the needs of a diverse clientele. To implement this, training must be given to the employees on how to manage a diverse clientele. Results are measured by the positive feedback received from clients.

Increased Competition

Players in the hospitality industry face tough competition from other players. In this case, the Carlton hotel wants to find ways of enhancing its competitiveness (Steingold 2009). The hotel responds to the issue by cutting down prices and offer greater value to guests. In terms of checking, the hotel ensures that products and services being produced are of the highest standards. To ensure this happens, the hotel allocates appropriate resources.

Cost Containment

Hospitalities are more and more challenged to find better ways that are helpful in minimizing costs without compromising the quality required to consistently meet the expectations of guests (Reisinger 2009). In this case, the hotel wants to find ways to run more efficiently and to scrutinize potentialities for cost savings that do not result in negative effects on the value of their offerings. This can be achieved through training of available staff.

Poor Employee service

The expected results comprise no complaints from clients. In terms of performance, there are logical and clear ways to achieve the stated aims (Steingold 2009). Some of these include close supervisory and signing of contracts. Improvements in the process shows indicate the success of the process. In this case, proper resources were offered to the concerned persons.

Guest room disorganization

The main focus here is for management to tighten up nuts in order to raise the standards of service. The path to achieving the corrective mechanism is very clear (Ragins & Greco 2003). That is, ensuring that enough time is allocated to ensure that rooms are not disorganized. In this case, the results were achieved. That is, guest rooms are no longer disorganized.

New management

The aim of having new management is to introduce new insights into the company. This can be achieved through the training of the existing staff members. In the case of changing the management, the hotel can change considerations applied successfully.

Conclusion

From the findings, continuous quality improvement is a standard that ensures quality in the services and products of a company. Evidently, Carlton City Hotel’s brands have engaged several aspects of quality management programs like employee training, supply chain management and CorVu Cor strategy. The aim of the hotel is to provide services or products that meet the expectations of all clients.

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Abstract

It is no longer tenable for businesses to focus on only providing customers with core services; they need to provide value-added services if their survival or competitiveness is important for their operations. Based on the need to remain competitive and relevant in today’s fast-paced business environment, this paper explores how value addition and customer satisfaction can be realized from elevator utilities. Based on a study of six five star hotels in Hong Kong, this paper proposes that added value can be realized from service innovation and technology. Additionally, this paper demonstrates that the use of innovative technology creates value addition, increases customer satisfaction and improves hotel value.

These views are developed after analyzing how elevator utilities can be used as a form of servicescape in Hong Kong hotels. Here, the general perception is that elevator utilities are part of the physical environment that defines the first interaction point between hotels and their customers. Therefore, through this understanding, this paper proposes that utilities installed within the elevator system can add value to a hotel’s service offing and subsequently increase customer satisfaction. This paper also draws a strong relationship between service innovation and organizational competitiveness because service innovation is perceived to increase customer satisfaction, and through word-of-mouth recommendations, customer satisfaction increases organizational competitiveness.

Introduction

“Satisfied customers are good customers” (James 1999, p. 5). This statement largely defines the perception of many businesses in the service sector have regarding customer satisfaction. Indeed, this conviction is widely held because good customers increase revenue and ultimately, businesses can thrive in such an environment. The relationship between customer satisfaction and business profitability has prompted many organizations to invest in customer satisfaction programs. Michel (2001) explains that businesses that operate in the service sector have one main goal – to satisfy their customers. The quality of services offered to the customers should be valued by the customers, such that, they can be enticed to come back (repeatedly). Having the ability to create good customer satisfaction is, therefore, an important component for any service business.

In striving to improve customer satisfaction, many businesses have invested in customer-centred programs and initiatives like improving customers-business communication, training call-centre workers, and even redesigning company products (James 1999). However, in today’s highly competitive business environment, merely meeting the customer’s basic requirements does not guarantee a business that it will be able to enjoy a loyal customer pool. Herstein (2010) explains that personalizing services and creating an aura of understanding that a business truly strives to uphold excellent customer service quality is a step towards creating a loyal customer pool.

That said, while the above initiatives may prove to be extremely successful in creating a loyal customer pool, they do not play an important role in attracting new customers. In fact, Woodruff (2003) points out that some customer-centred programs do not entice customers to pay a premium for the services offered. Concisely, incremental changes (which are meant to improve customer satisfaction) have a limited impact on customer purchasing behaviours because today’s customers are highly sophisticated and want something more than what has been traditionally offered. Hieronimus (2011) explains that “in times of product proliferation and more than 3,000 advertising messages a day, it is no longer enough to merely satisfy expectations” (p. 1).

Technology has been used by many organizations to satisfy and excite their customers. Precisely, technology has not only served the purposes of improving the quality of life and increasing the efficiency of operations; it has also served the purpose of enhancing customer experience (Bruggen et al. 2011). Notably, it is important to accredit technology by revolutionizing the provision of customer service through service innovation. Many researchers such as Chao (2008) and Bitner et al. (2008) have affirmed this fact by explaining that the empathy of service quality and service innovation has a profound impact in influencing customer perception (and ultimately, the customer experience in the hospitality or service sector). The following flow chart shows that product design and innovation (coupled with effective communication and services) increases a product’s differential attributes and ultimately, the value as perceived by the customer.

The focus on elevator utilities is one aspect of technology that plays a vital role in improving customer experience in the service sector. More importantly, many stakeholders in this sector find it more important (now) to create a wider array of customer products in elevator services to boost customer satisfaction. This push to improve the service offing has mainly come from organizations or corporations that rely on customer satisfaction to maintain their profitability. Indeed, like other sectors of the economy, manufacturing companies are mainly driven by market needs and therefore, they strive to improve their products to respond to market changes. Hotels are a primary group of companies in the service sector that consistently want to improve their customer service offing by taking advantage of the opportunities existing in the creation of additional value and customer satisfaction through elevator utilities.

Service innovation and value addition do not have a very open relationship (Tidd 2003). In fact, a few kinds of literature can specifically identify how the two concepts are directly related. Perhaps, the most complicating factor to this analysis is the changing business dynamics in service provision which have been spearheaded by technological innovation and the changing nature of consumer service demands. This paper aims to fill this gap by explaining how service innovation (elevator utilities) may lead to value addition for five-star hotels in Hong Kong as a way to address the changing needs of the marketplace, increased competition and changing consumer service demands. Based on the above explanations, the objectives of this paper are as follows:

• To demonstrate how added value can be delivered through service innovation and technology.
• To demonstrate that the use of innovation technology in hotel settings increases customer satisfaction as well as value of the hotel.
• To critically evaluate if the utilities installed within the elevator system can be used as a form of servicescape, with the view to add value to service settings and increase customer satisfaction.
• To demonstrate the relationship between service innovation and competitiveness in hotel settings.

Literature Review

Introduction

There are different concepts of service provision that will be consistently referred to in this paper. Some of these concepts are service innovation, service quality, value addition, servicescaping, and customer satisfaction. Because of the importance of these concepts in the understanding of this paper, it is crucial to explain the ramifications and contexts of these concepts. The concept of innovation is common for most organizations. Indeed, innovation refers to different and creative ways that can be introduced into an organization to solve customer problems (Tidd 2003). Innovative strategies may be known to customers but sometimes, the customers may be oblivious to their existence. The process of developing new and innovative strategies may be complex because of the need to introduce different elements for value addition to be realized. For example, Michael et al. (2008, p. 50) points out that it is important to realize a change in customer perception, thinking and capabilities to truly realize the goals of innovative strategies. Precisely, if customers are to truly realize a new experience in customer satisfaction, they need to consult different methodologies of having their personal needs taken care of.

Apart from service innovation, the concept of service quality is also consistently used this paper. Ryu & Jang (2008) explain that the difference between what the organization is offering and what is expected by the customers defines the entire concept of service quality. Chang (2008) acknowledges that “…a value is an enduring belief that a specific mode of conduct or end-state of existence is personally or socially preferable to an opposite or converse mode of conduct or end-state of existence” (p. 85). The concept of value has created increased interest in business because it not only defines the stability of businesses through customer purchases and spending behaviors, it also determines how loyal the customers can be through establishing the level of customer satisfaction that the customers experience from the entire process of value addition (Chang 2008). Conveniently, Hu et al (2009) posited that “…buyers’ perceptions of value represent a trade-off between the quality or benefits they perceive in products, relative to the sacrifice they perceive by paying the price” (p. 114).

When we analyze the concept of customer satisfaction, we can easily point out that sustainable competitiveness in today’s fast-paced business environment basically refers to an organization’s capability to provide high quality goods and services because it is only through the provision of quality goods and services that, customers can be truly satisfied (Chang 2008). Satisfied customers also form a loyal customer pool and they are equally able to provide effective word-of-mouth recommendations about an organization’s activities (to other people) (Bitner 1992).

Since it is already established that among the objectives of this paper is to evaluate if elevator utilities can be used as a form of servicescape, the concept (servicescape) is conveniently used to refer to the physical environment that customers and service providers interact (Ezeh and Harris 2007). This environment also denotes the physical premise where different tools of service are used to communicate the organization’s value preposition (Paninchukunnath 2009, p. 92). Research into the interaction between customer and service providers in the physical environment is ongoing but researchers such as Simpeh et al. (2011) propose that the physical environment is important in influencing customer perception because it not only influences customer perception, it distinguishes one company from the other, influences customer objectives and determines the quality or extent of the customer experience.

The importance of the physical environment is also emphasized because the physical environment always influences the customers’ interaction with the business throughout their entire visit. Indeed, it is through the physical environment that customer perceptions are built and destroyed (if at all they will) (Simpeh et al. 2011). Researchers who have bothered to dig deep into the impact of the physical environment on customer experience suggest that it has a negative and positive experience (Simpeh et al. 2011). These influences are mainly determined by the influence of the physical environment on customer behaviors like approach or avoidance. This influence is also extended to the impression created by the customers of the quality of services offered by the service provider. However, for the critical comprehension of how elevator utilities influence servicescape, it is vital to understand how value addition is created because there is a direct relation between the improvement of elevator utilities and value-addition.

Value-Addition

Chang (2008) explains that it is no longer tenable for businesses to focus on only providing customers with core services, they need to provide value-added services if their survival or competitiveness is important for their operations. Different researchers have had different views regarding what aspects of value addition that needs to be focused on. Hu et al (2009) however suggests that it is important to focus on unique aspects of value-addition such as perceived service quality, customer satisfaction and image building. Sye (2010) explains that the concept of value addition may take different forms, but in her opinion, it is important for businesses to put themselves in their customer’s shoes and determine what aspects of service provision will create value for their customers. Indeed, Sye (2010) explains that a customer may need “a problem to be solved, a new idea or simply a perspective on something” (p. 15).

However she also determines that the most important piece of information needed in value-addition is the availability of timely information for customers to make the right decisions regarding their interaction with specific businesses. Largely, the information referred by Sye (2010) borders on effective communication between businesses and customers. For example, if a sales person was intending to sell a product to a customer, the customer would appreciate being told the relevant information about the products as opposed to being given information that is not relevant to their needs. Here, the customer would appreciate the fact that the sales person did not waste their time and also, the fact that, they can make informed decisions about their purchasing choices. However, providing customers with the right information regarding available products and services is not the only way that businesses can create value for their customers.

Countryman and Jang (2006) have insinuated that the process of value addition is also complemented by the processes of service quality and service innovation. The quest to remain competitive and profitable has also fanned the quest to create more value addition in the long run.

Value addition has been embraced by different organizations. Not only are big hotels and organizations acknowledging its importance, even small to medium sized companies are acknowledging its usefulness in improving their competitiveness (Countryman and Jang 2006). For example, Kahle (2011) narrates the experience of a fast food restaurant in the United Kingdom (UK) which had a banner at its entrance stating – Five minutes or its Free. There were more than a dozen fast food restaurants operating within the vicinity of this particular restaurant but the restaurant decided to focus on its most unique strength – speed, to create value addition to its customers. In other words, this message could be interpreted to mean – “buy food from us because we guarantee fast delivery” (Kahle 2011). Not only is this message effective for the restaurant, a notable strength for the company (ability to provide goods quickly) was seamlessly used to create a benefit to the customers.

From the above example, it is easy to point out that value added prepositions can easily consolidate a company’s strength and turn them to viable benefits for the customers. Ideally, this preposition is also a platform that invites customers to be involved in the entire process of value creation. From the example above, customers can be simply involved in the entire process of value creation by confirming whether the restaurant will be able to deliver the food within five minutes (or not) (Kahle 2011). Eichentopf (2011) explains that the context of value addition basically communicates the message that customers should consider the organization because of their unique competencies. Most importantly, it is crucial to explain that the value addition process clearly defines what the organization intends to do and who it really is (amid all the competition) (Eichentopf 2011). Again, referring to the restaurant example, it is possible to assume that the restaurant had to make specific changes to its menu and staff to support its new value proposition. For example some of the meals which required more than five minutes to prepare had to be eliminated from the menu and slow cooks who could not prepare meals within the allocated time had to be given another job. From this example, we can therefore see that the process of value creation clearly makes an organization what it intends to be (Kahle 2011). However, an organization must also back up its image.

In an article written by Piercy (1995) it is explained that the process to transform organizations to be customer driven requires absolute detail. The first step in achieving this objective is explained to be the understanding of all organizational relationships that a business may have with their customers. Focus here is given to appraising these relationships and determining the value of each relationship. Relationships with the highest value should be strengthened (Piercy 1995). However, Corelli (2012) argues that businesses should not focus on improving the most notable (big) aspects of their businesses.

Instead, he proposes that the process of value creation should be centered on improving small things in the business. He gives the example that hotels nowadays have small bottled waters in hotel rooms for their guests to use at all times as a depiction of value additional products/services (Corelli 2012). Corelli (2012) observes that guests usually appreciate such small gestures of service quality and consequently, they add value to the service providers. Corelli (2012) gives another example of a banner in a hotel written “We want you to enjoy your stay. Please accept the following contents in the honor bar with our compliments: bottled water, orange juice, and soda” (p. 6). Corelli (2012) explains that the additional services offered in such messages or service offings are normally added to the room rate but customers fail to see this additional cost for what it is. Instead, they perceive hotels which offer such services to be ‘worth their salt’.

The provision of free Wi-Fi services has also been embraced by many hotels and other establishments in the service sector. Corelli (2012) observes that the provision of free Wi-Fi services is probably among the most common value-additional service that many establishments offer today. In fact, it is almost impossible to find any hotel charging for Wi-Fi services these days. Some hotels however still lag behind in this regard but the prediction is that in the coming few years, the provision of Wi-Fi services will be completely free (Corelli 2012). Because of the competitive business environment, some hotels have gone a notch higher to embrace other value additional services. For example, some hotels provide complimentary breakfast, bottled water, a muffin and an apple for early bird watchers because they want to stand out from their competition and offer value additional services that are not very common in the industry.

Piercy (1995) reaffirms the importance of strengthening a firm’s relationships with its customers as a critical component of value addition in the service sector. Here, he demystifies the commonly held ideology that businesses do business because he stresses the importance of people understanding that people actually do business and not the opposite, where businesses do business. However, Corelli (2012) affirms the fact that value addition is all engrained in business relationships. Furthermore, he adds that this fact is not only true for service-oriented businesses but all businesses in general. However, the most critical underpinning of all successful business relationships is the relationship between buyers and sellers (Piercy 1995). This observation is normally true for most business relationships between buyers and sellers because remote business relationships (between buyers and sellers) and more personal relationships (face-to-face) all emphasize the same thing.

Indeed, loyal customers are always loyal because they share a common trust with the business. Based on the importance of this fact, the importance of trust in business should be perceived to be as important as the concept of ‘price’. Corelli (2012) adds that value-added sales people normally put in more wok towards improving their relationships with their customers than organizations which do not bother about value addition at all. In fact, certain fields of business (like sales) are perceived to be more sensitive to value-addition processes because sales people are advised to be more attentive to their customers than their competitors (Piercy 1995). Ideally, sales people are advised to put more effort in gaining more knowledge, expertise and level of service than their competitors (because these elements are the ultimate deal breaker for successful sales people).

In closely related terms, Corelli (2012) advises many businesses to position themselves as “go-to” enterprises from existing and potential customers. The main argument here is that such businesses should be willing to help potential and existing customers even if there is nothing in it for them. Corelli (2012) perceives this effort to be a move towards increasing value-addition for their customers. Ultimately, he suggests that through the effort to add value, businesses can build long-term relationships and increase their probability to receive quality referrals from the customers they have dealt with (and any other future customer).

Based on global practices, the need to create value addition services (products) is no longer optional. As mentioned in earlier sections of this paper, the main factor of change that has led to this realization is the stiffening competition in the service industry. Through this realization, Corelli (2012) advises that,

“Develop an obsession to deliver the highest level of service with every customer, every day and when it comes to relationships, they will see you through the inevitable cycle of hard times. Now is the time to communicate your value-added offerings and not lower your price where you barely make a profit. Instead, “partner” with your customers and work with them so that the price is fair and affordable to both. The advantages are many and there is absolutely no downside. Most important is the opportunity to sustain a competitive advantage in the most competitive situation we have ever experienced” (p. 20).

Competitive Advantage theory

The competitive advantage theory has been used to explain the importance of staying on edge in today’s turbulent economic times. This theory proposes that organizations are better off if they pay close attention to the importance of sustaining their competitive advantage in all spheres of operation, including the national, corporate, local and individual levels (Goel 2009). Globalization has also been closely associated with this theory because many researchers associate competitive advantage with efficiency and efficiency has often been used synonymously with globalization (Goel 2009). Basically, the competitive advantage theory proposes the operation of businesses as if the world was borderless. However, the operation of businesses in a borderless environment is not practical because there are territorial borders and politicians who guard such territories with much zeal. Moreover, the policy environments in different territories are similarly diverse and this hurdle also poses a challenge to the practicalities of a global society (Goel 2009).

Ideally, it makes sense if a firm that has a competitive advantage over another organization is left to do a specific project as opposed to the less competitive organization but this does not mean that resources and capital can be equitably distributed across the world. However, the impression created by proponents of globalization is that the concept is a zero-sum game where everyone gets paid equally (Goel 2009). Nonetheless, if market forces were left to operate freely as if we lived in a perfect economy, equal resource distribution would be truly achieved. The hindrances to the perfect operation of market forces are explained by history dependency, causal ambiguity and social complexity in the diagram below. Otherwise, as explained in the diagram below, a firm’s resource heterogeneity and resource immobility should automatically amount to sustained competitive advantage.

Seeing the link between globalization, other tenets of the competitive advantage theory and value addition can be ambiguous but it is important to acknowledge the fact that the competitive advantage theory forms the framework for the execution of value-addition principles. In other words, through the principles of the competitive advantage theory (quest to always remain competitive), an environment of service innovation is effectively created because the world is not an ideal place (as explained under criticisms of globalization and why it is not perfect) (Goel 2009).

The underlying principle of the competitive advantage theory is based on the fact that opportunities exist for those companies which are willing to take the initiative of reinventing themselves and investing in service innovation for the betterment of their customers’ experiences (Shaw 2005, p. 206). This initiative is only a way to optimize an organization’s potential in service provision. Similarly, such an initiative seeks to help struggling organizations to move up the chain of quality service provision because they can overcome their capabilities-constraint and take up new and innovative opportunities to improve their service offing. Another underlying assumption of the competitive advantage theory is the fact that resources will always move to areas where there are opportunities (irrespective of socio-economic differences). Figuratively, this principle can be equated to the fact that “water will find its level if there’s no man-made obstruction” (Goel 2009, p. 7). Evidently, it is not always true that resources will always flow to areas where there are new opportunities for growth but undoubtedly, this philosophy is not entirely untrue either. Goel (2009) elaborates that

“What we observe is that, at a macro level, those forces will be at play – people will redeploy themselves to the best possible opportunities available and relocate if necessary. However, at an individual level, there may be adjustment pains due to lack of societal support, capability gaps and personal financial situations” (p. 5).

Even though the above assertion may largely hold true at the micro level, the same cannot be said for the macro-level. The competitive advantage theory assumes that artificial obstacles can delay the flow of resources to areas where new opportunities are realized but they cannot reverse the trend. Hence, the main conclusion arrived at here is that, investments in service innovation creates many opportunities for organizations and albeit artificial barriers can delay the flow of rewards, they cannot reverse the gains of service innovation (Goel 2009). That said, the competitive advantage theory proposes that businesses are better off embracing service innovation as opposed to preventing them or standing in their way.

Practically, if we were to apply the principles of the competitive advantage theory in the context of this study, we would arrive at the conclusion that hotels (or other service-oriented) companies which bother to embrace service innovation (through elevator utilities) will easily steal business from organizations that do not (Zoephel 2011). This is the core premise that competition seeks to uphold. Therefore, businesses that embrace service innovation are likely to have a stronger competitive advantage than businesses which do not.

Improving Elevator Utilities

Nonetheless, the creation of value addition (through elevator utilities) has not been explored by many researchers. Mainly, most literatures explain the importance of value addition in the hospitality sector without being specific about which areas to add value. Nonetheless, there are some specific areas which have been highlighted by researchers such as King (2012) as constituting areas for value addition. For example, King (2012) points out that improving the elevator speech is one notable area where value addition can be done. Many people have different interpretations of an elevator speech. However, elevator speeches are normally used to define the product and services that an organization offers. Occasionally, the elevator speech defines the value proposition for the organization (King 2012, p. 1).

The entire concept of an elevator speech is built on the premise that an organization will be able to communicate a summary of its products and services within a short timeframe, which is defined by the time it takes for a customer to get on an elevator ride and alight. Often, this time frame is between thirty seconds to two minutes. Ideally, Bate (2005) explains that an effective elevator speech should be able to excite the customer such that they should be looking forward to enjoying the services of the organization or come back again once they have had their stay in the hotel. King (2012) explains that because of the sheer importance and effectiveness of elevator speeches, many people often rehearse their speeches so that they are able to communicate their messages within the short time they have. There are different ways of conveying the elevator speech but the most common are video, audio, or written formats.

From a different perspective of value addition through elevator utilities, Tyni (2006) explains that adding value through elevator utilities should be understood from the time the elevator is purchased to its end-life. In detail, Tyni (2006) suggests the importance of purchasing efficient elevators from reliable companies. He also notes that the failure to purchase well-functioning machines poses a new problem that most marketers do not care to understand (Tyni 2006). Indeed, occasions where elevators have failed are properly documented. There are more than a few occasions where customers have been stuck in elevators because of mechanical failures or other instances of elevator failure. Apart from the common reason where elevators get stuck because of power failure, customers have had to endure painstaking experiences where elevators have jammed, failed to open or even failed to have proper ventilation. The reasons for discomfort are as many as the reasons why such elevators fail. Part of the reason identified for the poor service of certain elevators is attributed to poor manufacturing specifications (Tyni 2006). Precisely, some companies which manufacture these elevators do not give proper attention to the manufacturing process and thereafter produce faulty elevators, or elevators which cannot run their full lifespan.

Tyni (2006) points out that it may be difficult to identify the relationship between the purchase of faulty elevators and customer satisfaction but through the efficiency created by using well-functioning machines, we can easily point out that properly functioning machines are more likely to improve the usability of the machines. Customers can therefore be satisfied in this regard (Shaw 2004). However, the functionality of elevator systems has little to do with added value, but technical quality and freedom of deficiency.

Another critical issue about elevator usability is the size of the elevators. Tyni (2006) explains that most organizations often overlook the importance of having a properly-sized elevator, albeit it is useful in improving the user comfort. Failing to have a properly-sized elevator can have far-reaching implications on customer comfort because it creates a poor ambience for the customers. Customers can easily complain of poor ventilation, lack of comfort and other symptoms of congestion that may arise because of improperly-sized elevators. Regarding this concern, Tyni (2006) points out that hotels should be aware of the comfort of their elevators, and more importantly, they should know how the elevators serve their customer traffic. For example, a hotel that has many patrons needs large elevators to accommodate many people (or multiple elevators). The growth of customer numbers should also be factored when making the decision to install elevators in a hotel building because a hotel may experience a surge in customer numbers but their elevator systems may not accommodate this rise. Having properly-sized and properly-maintained elevators is therefore a value-addition opportunity that Tyni (2006) perceives to be very crucial for organizations that intend to increase customer satisfaction through elevator utilities.

Apart from purchasing and maintenance concerns, Tyni (2006) proposes that there are more positive ways that hotels can design their elevator systems to improve the customer experience. One common strategy that is used by most modern hotels today is to strategically design the elevator system ‘external’ to the building, such that, elevators ‘hang’ out of the buildings. The impression created here is that customers can feel attached to the building through a vertical elevator system which may seem dangerous or create a thrill as they move up or down the building. Often, such elevator systems are designed to overlook the city’s skyline, thereby creating a magnificent view for the customers to see.

For example, if we were to analyze this system in the context of this study, customers who use “attached “elevator systems can have a perfect view of Hong Kong’s sky line from dozens of floors atop a building’s floors. Obviously, it is important to mention that elevators which are designed in such a manner have transparent walls so that customers have an ‘almost’ unlimited view of the city from high above the building. This innovation is a modern design that is perceived to greatly add value to the customers’ experience as they use the building. Therefore, instead of just accessing the top floors of a building, customers can have a thrill by scaling up the walls of the hotels through their elevators and still get to see the magnificent view created as a result.

Other innovative suggestions for introducing value addition through elevator utilities have been centered on improving the comfort of elevator users. A notable invention that has been introduced (and has been in use for a considerable time) is the installation of cooling or heating systems in the elevators. Depending on the weather, an elevator can be set to a comfortable temperature so that the users feel comfortable. Notably, this service innovation provides a welcoming environment for the users and it improves their customer experience (Tyni 2006). Customers are highly likely to appreciate an organization’s effort to make their stay comfortable by regulating the environment in a way that suits the occasion. For example, in extremely hot surroundings, customers are likely to appreciate ‘cooled’ elevators so that they have a more pleasant experience. Alternatively, in extremely cold environments, customers are likely to appreciate ‘warm’ elevators. This is an added advantage of elevator systems that customers do not have to necessarily pay for directly. Concisely, customers are likely to feel better appreciated and equally likely to reciprocate the favor through better purchases and better word-of-mouth recommendations.

Another traditional innovation that has not only been used in hotels and elevator systems but also other service sectors is the installation of music systems. There are many studies which have been done to explain the relationship between music and shopping. More studies have been done to explain the relationship between music and enriched customer experience. Indeed, most research studies show that music has a strong impact on product preference and consumer spending. Moreover, several research studies also show that music has a potentially strong effect on enriching the customer experience (Copley 2008). Copley (2008) affirms that “researchers have found that loudness, tempo, and genre of music have significant effects on how long consumers spend in shops and restaurants, how much they purchase or consume, and whether they view brands or individual products favourably or unfavourably” (p. 3).

There are three tenets of consumer behavior that are established to be directly affected by music. One notable aspect of consumer behavior is time perception and the overall time spent on shopping. Copley (2008) shows that music volume share a negatively correlated relationship with the shopping time taken by customers when they visit a business establishment. However, studies which have been done to investigate the effect of loud music in shopping centers and supermarkets show that even though loud music may have a negative correlation with shopping time, customers tend to shop a lot (quantity) when loud music is being played (Copley 2008). The argument here is that sales per minute are greater when loud music is played as opposed to when low-volume music is played. Music has also been found to have a unique effect on different age groups of shoppers. For example, in a study done to establish the effect of music on department stores, it was established that when top 40 music was played, shoppers above the age of 25 years felt that they had spent more than the required time in the shop but if instrumental (or easy-flowing music) was played in the shop, shoppers below the age of 25 years felt that they had spent more time in the shop. From this study, it was established that the type of music played in the departmental stores had an effect on consumer behavior (Copley 2008).

Another aspect of music that is established to affect consumer behavior is the music tempo. From studies done in the 80s to establish the effect of music tempo on shoppers, it was established that slower music creates a slower traffic flow (Milliman, 1982). This realization has a profound effect on shopping behavior because it implies that when slow music is played in a shopping center, consumers are likely to spend more time in the restaurant. In a hotel set-up, this realization could imply that customers are likely to spend more time eating and drinking. However, this effect does not surprise anyone at all because it is only logical to say that slow-moving customers are more likely to see more items to shop and therefore, they are equally likely to spend more time in the shopping area. To complement the above findings, Copley (2008) explains that “Restaurants playing slow music had longer waits for tables and much higher customer bar bills as well. Interestingly, although restaurant patrons didn’t eat more in the slow music condition, they drank far more” (p. 5). A more interesting observation was that classical music had a far better response on impulse shoppers than any other type of music (Copley 2008).

Finally, another interesting observation made from the above studies is that music also has a strong impact on the customers’ product evaluation process. The observation made here is that people tend to have a more positive evaluation of products which have been advertised in conjunction with music. The opposite observation is true because it is observed that people tend to have a much negative perception of products that have not been advertised with any music at all (or products that have been advertised with bad music) (Copley 2008). More importantly, research shows that people tend to have a better perception of music which has been advertised with complementary music pieces. The observation here is that music tends to work well for both individual brands and group brands.

Copley (2008) explains that when considering the decision to introduce music as a value addition service, it is important to see that there is strong congruity between the music played and the product offered. The main ideology that has been used to support the installation of music systems on elevators (especially those serving commercial establishments) has been based on the above insights. Considering the additional value created from improving elevator utilities in hotels, it is implicitly important to acknowledge that the installation of music systems introduces a “spending” mood to the customers. In detail, because of the psychological effect of music on consumer spending, it is right to say that installing music systems on elevators prepares customers (psychologically) to spend more time in the hotel and possibly spend more money.

Interpretation

Through the above insights (showing how elevator utilities can be improved to create additional value for customers), we see that the process of value addition is closely related to profitability and competitiveness. However, there is a more direct link between the improvement of elevator utilities and service innovation. Indeed, we can categorize the value-addition proposals described above into three distinct components. These three distinct components also manifest the true characteristics and effects of value addition processes. The first component is technological leadership, the second component is efficient marketeering and the last component is cost leadership. Focusing on the concept of technological leadership we can easily see that value addition has a distinct product/process development potential which is enshrined within the framework of service innovation and the improvement of existing services through innovative techniques. For example, the introduction of elevator speeches is one innovative technique that manifests additional innovation that can be introduced to an existing service (elevator services). Therefore, through service innovation, hotels can introduce elevator speeches (or even music) to provide value addition services (Bettencourt 2010).

Focusing on the concept of efficient marketeering, we can see that value addition develops distinctive value addition competencies that surpass the production and distribution of products; instead, value addition provides innovative solutions and services to existing customers at no additional cost. When we critically analyze the concept of effective marketeering we see that value addition provides a more unconventional form of marketeering which is basically defined by word-of-mouth recommendations. This form of marketing is very efficient because it has a very high efficacy while it is almost inexpensive to execute.

Finally, focusing on the concept of cost leadership, we can see that the process of value-addition is a process that conveniently works towards making the service provider a leader among its peers. For example, outsourcing and the modification product categories provides economies of scale which facilitate better provision of services and increased innovation. These elements improve a company’s profile. Nonetheless, what is apparently clear from the above insights is the need for value addition on a more general context. Furthermore, there is only some scarce mentions of how elevator services can be improved but there is no direct link to value addition. Moreover, there is very little reference to how value addition can be created from elevator utilities. However, this gap in research is only one side to the entire analysis. The most important deficit of the existing literature is its failure to capture what value addition methodologies can be adopted in today’s fast paced world and what meaningful methodology can be used to conceptualize divergent consumer tastes and preferences.

Methodology

As mentioned in earlier sections of this paper, the methodology for this paper will mainly entail the collection of data from Hong Kong’s five star hotels. In detail, there will be a keen focus to establish how the hotels sampled in this study use their elevator utilities to create value addition, say through physical design, scent, mirrors, elevator speeches, keycard recognition and other tools of value addition. Regarding these tools, Bhardwaj et al (2008) argued that such aspects within the servicescape domain are “…associated with more positive cognition toward the physical environment, wider consumption spans, shorter time perceptions, less negative emotional and behavioral reactions to waiting, and more favorable purchase intentions, behavior and service assessment” (p. 38). This statement largely defines the rationale for conducting this study.

Research Design

This study will employ the quantitative research design. This research design will not only be useful in collecting new research information to sufficiently answer the research questions but it will also employ this research design to establish the relationship between the dependent and independent relationships established in the study (Hopkins 2000). In detail, the qualitative research design is expected to be descriptive in nature because of the fact that participants will be interviewed only once. Another reason for using the descriptive qualitative research design is the fact that this study will analyze elevators utilities on one hand and its ability to create additional value and customer satisfaction on the other hand. The firm’s competitiveness will also be understood to constitute part of the dependent variables. Based on this understanding, it is correct to point out that the independent variable will be elevator utilities while the dependent variable will be customer satisfaction, elevator utilities and firm competitiveness.

Since most researchers who employ the quantitative research design do not only rely on empirical data as their sole source of information, this paper will include post-positive assertions to come up with a more comprehensive body of knowledge. This knowledge will be used to understand some of the most important relationships in this study including the determination of the cause and effect paradigm, the reduction of precise variables, or phenomena of interest, hypothesis testing, employment of measurement and observation, and the assessment of theories. Through the above analysis, not only will the investigator be able to determine which variables to separate, it will also be easy to establish which variables relate in what way and to what associations. Similarly, it will also be easy to establish which instruments to use in this analysis so that we can be able to establish accurate scores of analysis.

Data Collection

It is important to point out that that the quantitative study will involve the collection of numeric data through online questionnaires. For ease of administration, the online questionnaires will be gathered by means of two standardized questionnaires which will be designed through accurate online protocols (Creswell 2003). The identification of the conceptual domain and a review of the existent literature (for the rationale of guaranteeing the content validity of the questionnaire schedule) will be crucial aspects of importance to be included in the development of the questionnaires. To justify this methodology for designing the questionnaires, it is important to point out that research affirms that questionnaires schedules are effective methodologies for gathering information online (because of their adaptability and easy application) (Bradburn et al 2004).

Two sets of standardized questionnaire schedules will be included in the process of developing the questionnaire. These schedules will contain items of divergent layouts, including: multiple choice questions, asking either for a single choice or all that apply; dichotomous responses such as “Yes” and “No”; self-evaluation items, evaluated on the 5-point Likert-type scale (strongly agree, agree, neutral, disagree, and strongly disagree), and; a few open-ended questions intended to elicit responses that cannot be possibly captured by closed-ended questions.

Sample Population

As mentioned in earlier sections of this study, the information obtained will be sourced from five star hotels in Hong Kong. Mainly, customers and management personnel will constitute the body of individuals to be consulted. To select the sample of customers, the convenience sampling technique will be used. Cumulatively, there will be 120 respondents sampled (from six five star hotels). The 120 customers will be evenly sourced to comprise of 20 customers from each hotel. The purposive sampling technique will also be used to select 12 managers from the sampled hotels. There is a difference between the convenience sampling technique and the purposive sampling technique because the convenience sampling technique will sample respondents by virtue of their availability while the purposive sampling technique will sample respondents by virtue of their understanding or knowledge regarding a particular issue (Cohen et al. 2007). All the respondents sampled must be adults (above 18 years) so that they are fully aware of the implications of the study. Regarding the respondents sampled from the managerial level, they must have worked for more than three years in their respective fields.

Ethical Considerations

It is important to address all ethical concerns that arise from the collection of research information and the dissemination and data analysis of all the research information obtained. The ethical concerns arising from this study cut across different aspects of the research methodology. Sequentially, this paper analyzes ethical issues associated with consent, deception, debriefing, withdrawal from investigations, confidentiality, withdrawal of participants, protection of participants, giving advice and data protection. These ethical issues are most relevant in the context of this study.

Consent

Before collecting data from any respondent in this study, it will be important to get the consent to do so. Based on the context for this study, consent will be sought from the management of all the five star hotels sampled. In detail, a letter of consent will be dispatched to all relevant officials (plus a copy of the questionnaire) to detail the respondents’ rights. Many issues will be analyzed from this letter including the right to informed consent, participation rights, privacy rights, confidentiality rights and the right to withdraw from the research at their discretion.

Deception

There is no intention to use any deceptive information in this study. To ensure the reliability of information obtained, the purpose for this study (academic) will be clearly communicated to all participants in the study and therefore, it is not expected that any deceptive information will be included in the study.

Debriefing

It will not be possible to undertake a debriefing exercise in this study because the information obtained from the participants does not pass the test of sensitivity.

Withdrawal from the Investigations

As mentioned in earlier sections of this paper, the right to withdraw from the research will be at the participant’s discretion. Any participant who withdraws from the study will not be required to give the reasons for doing so. However, to reduce the probability of participants withdrawing from the research, the importance of the study will be carefully explained to all the participants involved.

Confidentiality

It is very important to uphold the virtue of confidentiality in research undertakings. However, in the context of this study, privacy and confidentiality will be explained properly in the cover letter. It is expected that through the careful explanation of confidentiality, the participants will be able to make careful and informed decisions while the validity and reliability of the information obtained will be enhanced. Bradburn et al. (2004) demonstrates that when participants are often aware that their confidentiality rights will be well respected, they are likely to give accurate and truthful information. The assurance that the right to confidentiality will be respected will be drafted in a signed document. The document will stipulate that the information obtained will solely be used for academic purposes and not for any commercial or personal use.

Protection of Participants

Albeit the usefulness of the information obtained, the sensitivity of the information is not high enough to warrant the protection of participants.

Giving Advice

To remain objective to the purpose of the study, the participants will not be given any advice; instead, the participants will only be given the right instructions to enable them provide accurate information regarding the research.

Data protection

Data protection will be undertaken through the introduction of security passwords (in the course of data analysis). However, after the completion of the research process, this data will be destroyed.

Analysis

As explained in earlier sections of this paper, data was collected through online interviews as the primary source of information while secondary data was also collected as complementary material. The data obtained is presented in graphs and tables to show the distinction and underlying differences in the findings obtained. Comprehensively, the set of questionnaires presented to the managers differed from the set of questionnaires given to the customers. Notably, the set of questionnaires give to the customers did not contain issues regarding servicescape because it was assumed that most customers would not know what the term meant.

Explaining this term would also be time-consuming. The design of the customers’ questionnaire was also relatively simple and direct because the customers would be randomly sampled and there was a need to minimize the time taken to complete the questionnaires. However, the biggest reason for designing two types of questionnaires (for the customers and managers) is that the two respondents stand at two different extremes of the service sector pendulum. Indeed, managers work to please customers and customers often demand unique services from the managers. The managers are therefore the service providers while the customers are the service recipients. From this understanding, managers and customers are likely to have two diverging sets of views. It was important to capture this dynamic through the questionnaires.

The initial research was meant to administer 12 questionnaires for the managers and 120 questionnaires for the customers but upon completing the survey, 12 questionnaires were completed by the managers but only 100 questionnaires were completed by the customers. The reasons for non-completion are however unknown. All sets of questionnaires were self-administered interviews. The self-administered methodology was preferred because it offered several advantages to the credibility and convenience of the study. For example, self-administered questionnaires can be answered at the convenience of the respondents, do not need prior interview appointments, are unbiased, and very economical. The two sets of questionnaires (given to the managers and customers) were qualitative.

The first question posed to the managers was whether they believed service innovation creates added value and if ‘yes’ what ways did they believe could provide value addition services. The second question was aimed at investigating whether innovation technologies had a positive impact on customer satisfaction. This question was posed to the managers only because of its relative complexity. The third question posed to the managers was meant to investigate if service utilities in the elevator systems provided a form of servicescape and if so, did it add value to the hotel’s service offing or did it increase customer satisfaction. Finally, the last question was centered on investigating the effects of service innovation on the hotel’s competitiveness. This question was also posed to the customers indirectly. In detail, the managers were asked if the service innovation strategies employed in the hotels increased their competitive standing in the hotel industry while the customers were asked whether they would prefer to stay in a hotel that had better elevator utilities. These questions were designed to reflect the objectives of the study.

Both managers and customers answered the above questions articulately and when they were asked if service innovation creates value addition, all the respondents answered affirmatively. However, there was a slight difference in the direction of suggestions regarding what service innovation strategies could be adopted to improve value addition services between the views expressed by the managers and the customers sampled. It is assumed that the difference in views was mainly informed by the different skills and competencies between the two respondent groups. Moreover, their different positions in the service delivery process gave the two groups a different platform for comprehending the organization’s activities. The managers had a better oversight of the business activities because they mainly stood to offer the services while the customers gave their opinion from the perception of service recipients.

Nonetheless, eight managers suggested the seamless integration of technology to improve existing service innovation strategies. Their main argument centered on perceiving service innovation as a complementary process that would facilitate existing hotel procedures (traditional activities). The remaining four managers identified the improvement in the design and delivery of services to the customers as another viable strategy for value addition. Introducing more innovation in the service delivery system emerged as the most popular suggestion among the four managers who proposed the improvement in the design and production of services. These respondents also proposed the improvement of the service delivery system as opposed to product innovation. However, all the 12 managers sampled agreed that technological innovation should spearhead these improvements.

Notably, 90 customers sampled polled that they were satisfied with the elevator services offered in the hotel. Only ten respondents polled that they were not satisfied with the hotel’s elevator services. Seven of these dissatisfied customers were from one hotel. However, the responses gathered from 20 respondents differed with the suggestion by the hotel mangers that the best service innovation techniques would have to be based on technological inputs. These 20 respondents suggested that improved customer service and increased space would still achieve the desirable result of value addition. The main assumption here was that the customers were more concerned about their comfort while using the hotel elevators. Nonetheless, there was no identifiable explanation regarding which techniques about the hotel’s operations should be changed. Interestingly, there was another group of respondents (17 respondents) who proposed that expertise-based improvements could also achieve the same result of value addition. The main argument here was that expert services were more satisfactory to the customers. In light of this suggestion, Liebowitz (1997) explains that separating work/services between professionals and paraprofessionals is a noble way of improving an organization’s service offing.

When we analyze the disparity of responses between the managers and customers, we can re-emphasize Sye (2010) assertions (from the literature review) that it is important for managers to put themselves in their customer’s shoes if they are truly willing to improve their value-addition services. Therefore, according to Sye’s assertions, the customers’ recommendation that expert-based improvements provided enough grounds for value-addition is superior to the managers’ view that service innovation (or improved technological input) improves value addition.

When the respondents were asked whether they would prefer to stay in hotels that had better elevator utilities, the response was overwhelmingly positive. All the respondents ticked ‘yes’. The managers sampled also admitted that innovative technology had a positive impact on a hotel’s competitiveness but 10% of the customers sampled said that some innovative technologies were annoying to the customers. They explained that there were some innovative technologies that complicated simple processes, thereby making them ‘annoying’. Here, there was a strong emphasis on developing facilitative and simple-to-use technology as opposed to complicated and highly sophisticated technologies. The rest of the respondents however agreed that innovative technologies largely improved customer satisfaction.

The responses given by the customers and managers highlight previously mentioned insights regarding the competitive advantage theory. The competitive advantage theory stated that organizations which try to improve their products and services tend to attract the highest growth because customers tend to be more attracted to them. Indeed, when the customers were asked to state whether they would prefer to stay in hotels that had better service utilities, their response affirmed the insights of the competitive advantage theory. Therefore, the improvement of elevator utilities is an important competitive tool that can be used by the hotels to gain competitive advantage.

When the managers were asked whether service innovation through elevator utilities provided a form of servicescape, ten managers agreed that elevator utilities provided a form of servicescape. There was also a general consensus regarding the fact that elevator utilities increased customer satisfaction and added more value to the hotel’s service offing. It is perceived that most respondents agreed to the fact that elevator utilities provided a form of servicescape because it was the first physical environment that the service provider and the customers interacted. Indeed, even before the customers arrived at the reception, they already have a significant degree of interaction with the hotel through their elevator utilities.

Finally, when the managers and customers were asked if service innovation increased a hotel’s competitiveness, the respondents sampled answered positively. The reason given by the managers was based on the fact that service innovation had a profound impact on a hotel’s level of competitiveness. These results did not come as a surprise because the question was rather direct and it was almost logical that service innovation increased the level of competitiveness because it created additional value to a hotel’s service offing. Moreover, this response was complementary to earlier assertions where the respondents stated that innovation technology increased customer satisfaction. Indeed, satisfied customers increase a hotel’s level of competitiveness.

Comprehensively, from the responses gathered, there was a general consensus among the customers and managers that improved elevator utilities and service innovation improved a hotel’s value addition process (and ultimately, its competitiveness). Even though there was a small sample of managers who were more critical about the kind of innovative technology that were to be introduced in the organization, the customers agreed that hotels which had better elevator utilities were more appealing than those that did not. Regarding different types of service innovation strategies that could be adopted by hotels, the responses gathered seemed very dynamic because there were divergent views regarding what hotels could do to improve their service innovation strategies.

The introduction of the latest technologies seemed to be the popular view among most managers but it was interesting to hear responses bordering on the introduction of expert-service (to a company’s service strategy) as a viable service innovation proposal by the customers. Nonetheless, service innovation was identified to significantly increase customer satisfaction and organizational competitiveness. In addition, from the respondents sampled, most of the suggestions given were largely sourced from hotel customers and hotel managers. Based on the responses, in opinion, it would have been more interesting to get the view of lower-level employees regarding what they thought about service innovation, innovation technologies and their impact on customer satisfaction and organizational competitiveness. This is a future suggestion that needs to be included in the research design.

Conclusion

After weighing the findings of this study, we can see that value addition services are important ingredients to executing a successful competitive strategy. Indeed, from the responses sampled, we can affirm that customers appreciate progressive service innovation initiatives. Their appreciation can be easily seen through increased customer satisfaction. From these outcomes, we can also easily see the link between increased customer satisfaction and increased competitiveness. This relationship has been explained by many researchers sampled in this paper who point out that increased customer satisfaction increases sales through word-of-mouth recommendations. A satisfied customer is likely to relay the same contentment to other people who would also be interested to enjoy these services in the same facilities. There is no better marketing tool than word-of-mouth recommendations because it is honest and personal. Through the positive recommendations that satisfied customers are likely to relay to other people, we can easily draw the link with increased competitiveness because the impact of word-of-mouth recommendations is seen through increased competitiveness.

However, focusing on elevator utilities, this paper shows that the importance of developing progressive service innovation strategies cannot be underrated because elevators are practically the first point of contact between hotels and their customers. Since it is important to make a good impression to customers (especially first-time customers), hotels need to develop facilitative elevator utilities that are likely to increase customer satisfaction. Their competitiveness will subsequently increase through the sustainability of these progressive elevator utilities. The importance of technology in building sustainable elevator utilities has been highlighted as an important component of service innovation because it is through such technologies that customer needs can be met.

However, based on the responses of the customers, we can see that it is important for hotels to introduce simple technologies that improve the customers’ experience as opposed to those that complicate it. Therefore, there needs to be a lot of attention directed towards research and development because service innovation should be directed towards solving or addressing customer needs. There needs to be a thorough analysis regarding what customer needs exist and which ones are not properly addressed. This process needs to be the first step towards developing effective service innovation strategies and improving the overall effectiveness of elevator utilities.

If we analyze the findings of this research with previously held views by other researchers (in the literature review), we can see that creating value through elevator utilities is not a multi-faceted concept as previous researchers have explained. For example, from the literature review, we have seen that value creation is mainly driven by technological leadership, efficient marketeering and cost leadership. However, from the responses obtained, there is little reference of cost elements or the need for efficient marketing. Perhaps, this distinction is attributed to the fact that elevator utilities are part of a company’s service provision and therefore, the value creation model to be adopted for a product or a different type of service would not necessarily apply in elevator utilities. However, the main basis of similarity between this paper’s findings and other findings is the importance of technological innovation in value creation. This element was specifically emphasized by the managers.

Comprehensively, this paper demonstrates that in today’s globally competitive market, there needs to be a keen focus on two issues: The first issue is the need to adopt more technologically viable strategies in value addition. The second issue is focusing more on consumer variables to inform future value-addition strategies. Comprehensively, service innovation becomes the main change agent in the organization because it is the main bridge between the fast-changing marketplace and organizational inputs.

Validity and Suggestions for Future Research

Going forward, there needs to be a deeper analysis on the role of technology in improving customer satisfaction and organizational competitiveness. Furthermore, there needs to be a deeper analysis of the effectiveness of service innovation across different cultures. This recommendation is informed by the divergent opinions regarding the effectiveness of service innovation in improving customer satisfaction. Indeed, some respondents seemed to have a general positive perception regarding the introduction of innovation technology in value addition while others seemed to be more reserved about the kind of innovation technology to be adopted in hotel services. Since the customers sampled were sourced through convenient sampling, it was difficult to establish the profile of such customers. Therefore, it is important further analyze the effect of culture on the perception of technology because different genders and cultures are known to have different perceptions regarding innovation technology.

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Introduction

Any state of the USA has a lot to present to its citizens as well as tourists or random visitors. The State of Tennessee is one of such welcoming regions where the beautiful city of Gatlinburg is located. Being situated in the landscapes of the Great Smoky Mountains range of the Appalachians, it is a worthwhile destination. Taking a trip to Gatlinburg, one is sure to experience multiple attractions the city has to offer. Despite its popularity as a resting place, the town is also an excellent shopping location with many stores and malls. That is why a shopping trip to Gatlinburg is an enjoyable experience that combines customer opportunities and spectacular city views inspiring the city’s visitors.

Main body

A shopping journey in Gatlinburg should start with a visit to one of the seven big malls in the city. The Village located not far from the main street presents a variety of boutiques, shops, and places to eat. It is an outdoor mall constructed in a village-like manner that is a unique experience for the one who visits the city. Also, Baskins Square Mall and Mountain Mall have a lot of different types of stores ranging from clothes and cosmetics to magic shops (“Shopping,” 2019). A unique atmosphere in the Baskins Square Mall is created by the diversity of interior and exterior decorations of each shop that sets a festive mood even on a usual day. Thus, shopping in Gatlinburg’s malls is not an average experience.

Apart from the malls, there are many more sights to visit and places to shop in the city. One cannot miss an opportunity to take a look at the products specialty shops have to offer. The Maples’ Tree Shop sells Donna Sharp quilts, souvenirs, handcrafted signs, and many more goods that would make lovely presents for the dear ones or remain as a symbolic memory of the visit to Gatlinburg (“Shopping,” 2019). Moreover, hand-crafted products could also be found in such specialty shops as The Honey Pot or Wood Signs of Gatlinburg. One might enjoy buying bear accessories, cooking tools, homemade candy, or tobacco in special stores of the city (“Shopping,” 2019). A remarkable array of goods will satisfy even the most demanding visitor.

What makes Gatlinburg a unique place is its galleries and arts and crafts places. Here one can find not only art to enjoy while observing but also purchase a tour or even a class with an opportunity to buy a unique piece of art. The rich local culture inspires the craftsmen to create outstanding things which symbolize the uniqueness of the city and the region. Alewine Pottery, Blackwolf Knives, Misty Mountain Soap, Gatlinburg’s Craftsmen’s Fair, The Terry Waters Gallery, and many other interesting places are welcoming visitors to Gatlinburg (“Shopping,” 2019). Therefore, not only regular shopping routine is available in the city but also a wide range of exciting art and craft locations provide an opportunity to get acquainted with the local culture.

Conclusion

In conclusion, the city of Gatlinburg in Tennessee is a wonderful trip destination with a variety of places to shop. Its unique mountainous landscapes and a rich culture compose an impressive atmosphere. There are a lot of malls decorated and constructed in an unordinary manner that attract visitors from across the country. Specialty shops, art galleries, and craft shops are open to demonstrate the masterful skills of the artists and the impressive richness of the region’s culture.

Reference

Shopping. (2021). Web.

Turkey is a famous tourist destination that is popular among many tourists all over the globe. One particular feature of the country that attracts many tourists is the diversity of experience. While some might enjoy a quiet beach vacation, those who prefer an active lifestyle will also find many exciting opportunities in Turkey. The present paper will outline the international and domestic markets for pleasure and leisure in Turkey, including hospitality, shopping, dining, and sports.

Hospitality

The hospitality market in Turkey is particularly prominent due to the popularity of this country among tourists. The number of international tourists in Turkey was 12.2 million in 2017 and has been growing for the past year (EY Turkey, 2017).

The number of hotel rooms available in Turkey has also increased between 2014 and 2017 and is estimated to be about 15,000,000 in 2018 (EY Turkey, 2017). Turkey has a large number of international hotel chains operating in various cities, such as Hilton, Novotel, and Mariott. However, it also has a well-developed domestic hospitality market, with thousands of Turkish hotels and hotel chains in operation (EY Turkey, 2017). The size of both hospitality markets in Turkey has a positive effect on tourism because it enables customers to choose a hotel that suits their needs, budget, and personal preferences.

Shopping

The retail market in Turkey is also large and diverse, which plays an essential role in attracting tourists to the country. There are three critical forms of retail in Turkey: shopping malls, standalone shops, and markets.

Markets and independent shops usually sell domestically produced items, including furniture, accessories, clothing, and food (Arslan, 2018). Shopping malls, on the other hand, offer a mixture of domestic and international brands, thus catering to the needs and preferences of a variety of customers (Arslan, 2018). For tourists, shopping for locally produced goods in Turkey is more attractive due to low prices and significant variability. As a result, the domestic retail market remains more prominent than the international one, contributing to the growth of the retail sector in the country.

Dining

Dining experiences in Turkey are diverse and suit a variety of customer preferences. There is a broad range of local foods available in restaurants and markets. However, many restaurants serve European or Western cuisine. Most of these businesses are locally owned and operated, and few international chains are popular in Turkey. Most of these are fast-food restaurants, such as Burger King, McDonald’s, or Carl’s Junior. Therefore, although the dining market in Turkey is diverse, the vast part of this market is domestic, and international businesses in this sector are normally limited to fast-food chains.

Sports

Turkey offers a variety of sports and activities for active traveling. Water sports are particularly popular among tourists because they are offered throughout popular tourist destinations in the country. For instance, diving or water-skiing provides entertainment for tourists in Alanya, Kemer, and most other famous locations. Similar to other markets in the tourist sector, the sports market is mostly domestic. Although it is owned and operated by local people, it can rely on international suppliers for equipment. The U.S. Commercial Service (2014) reports that the leisure boat market in Turkey mostly uses boats supplied by Italy, the United States, and France, with some influence of the United Kingdom and Germany.

Conclusion

Overall, pleasure and leisure markets in Turkey are highly popular among tourists with different tastes and preferences. The four most prominent markets in these sectors are hospitality, retail, dining, and sports. Except for the hospitality market, they are mostly owned by local people, but some rely on international suppliers for equipment. Based on the analysis, it is evident that the tourism sector in Turkey also influences the growth of pleasure and leisure markets, since travelers often use products and services provided by these markets to enhance their experiences.

References

Arslan, Z. (2018). Leisure as distinction in the Turkish middle class: Nursing babies, collecting a trousseau, meeting at the malls, or surfing? In I. Modi & T. J. Kamphorst (Eds.), Mapping leisure: Studies from Australia, Asia and Africa (pp. 191-219). Singapore: Springer.

EY Turkey. (2017). Tourism market overview: Turkey & Istanbul. Web.

U.S. Commercial Service. (2014). Turkey. Web.

When it comes to traveling, many of us have our personal favorites and for some of the travelers is just a means of chasing their dreams. Our attitude toward exploring new things is the key to understanding the magic of traveling and seeing the world. It is evident that the majority of us have been somewhere outside our hometown or a place of permanent residence. When it comes to tourists, there are several types of them. There are travelers that want to visit only specific locations, and there are those who want to wander the world and see everything merely.

Considering the cultural, ethnic, and other innumerable differences inherent in all the countries around the globe, we shall understand that learning other nation’s traditions and preferences is our personal development. It raises self-consciousness and helps to see the world from a number of perspectives. There are two cities that did not make the list of the most popular destinations, but they regularly get high places in the top ten tourist destinations. These locations are London and Bangkok, and there are numerous places to see in both cities, so it is a once-in-a-lifetime experience, and one should visit both London and Bangkok if they want to see the best of Europe and Asia, but it is vital to remember that the climate in Bangkok is much better and there are way more tourist attractions that will be totally loved by the majority of visitors of all ages.

London is one of the most famous tourist destinations in the whole world due to its consistent presence in the global political and economic arena. It is important to mention that London is not so picturesque if we compare it to a number of other European capitals, but it is so stylish that it is absolutely impossible to pass on it. Many say that they typically dislike “London weather” and do not want to go there simply because they are not into relatively cold weather sprinkled with smog and heavy rains. Another important fact is that the weather in Great Britain, in general, is seriously impacted by the seas that wash its shores. Those tourists who want to travel to London have to be ready for unpredictable climate conditions and robust climate shifts (even during the day).

Nonetheless, London weather is more of a myth, and one should definitely visit this city if they want to feel the spirit of the Victorian era and almost literally go back in time. When speaking of London, one most definitely remembers Big Ben, Tower Bridge, or Buckingham Palace, but there is much more food for eyes and thought in London than one may imagine. A unique atmosphere envelops this city while the red buses and London cabs seem to come off the pictures from books and magazines. One should not believe, though, that London is too prim and ceremonious for casual travelers as it allows you to get on a giant Ferris wheel that is called “The London Eye” and observe a rather significant part of the city near the river Thames. The fans of Harry Potter will be able to visit the Warner Bros. facility and see how the movie was filmed.

The fact is, if someone is tired of the European architectural decisions, its conformist nature, and a fairly bewildered London-esque mood, there is nothing wrong with exploring the city, which is on almost the opposite side of the globe. Evidently, Bangkok is not as much recognized as London is, but this does not diminish its merits as one of the most popular tourist destinations in the world. In contrast to the previous city on the list, Bangkok meets us with vivid colors, an uplifting mood, and a variety of unforgettable entertaining activities.

When speaking of the capital of Thailand, one simply cannot go without mentioning the astonishing grace of the Grand Palace and numerous temples that can be located at every turn (literally). Bangkok excites and enthralls you, but its influence is not forceful because most of us will be glad to experience the spirit of adventure and treat ourselves with bright lights and shallow streets. Nowhere in the world, you will find the Floating Market that looks exactly like the one in Bangkok, and that is not an exaggeration. Even if that was not enough to persuade someone to visit Bangkok, one should remember that this city features heaven-like beaches that will not leave you unsympathetic or not willing to extend your stay in the capital of Thailand.

Overall, Bangkok is a must-visit location that should not be disregarded by travelers that are tired of European conservatism. If you are not sure whether you should visit Bangkok, you have to realize that this city is the only place where one can see an enormous statue of Buddha that is made of gold. There are also numerous art and history museums (Jim Thompson’s Museum is one of the most popular among them). One can even visit the Safari World and see exotic animals in their natural habitat. Not to mention that the weather in Bangkok is an absolute splendor – the sun shines for almost 24 hours, and a reasonable level of humidity will not have you dying from dehydration.

To sum it up, if we disregard our personal preferences or take the people that travel just for the sake of traveling, we will see that there are certain tourist destinations that are popular among each and every one. There are numerous cities around the world that are called tourist attractions, and they are principally called so because they attract people. For instance, one may not resist the magnificence of New York (Brooklyn or Manhattan in particular) at night, and you just cannot walk past Central Park or the Statue of Liberty simply because these are worldwide known trademarks and not only architectural and ecological monuments. The same relates to such places as Paris (the Tower of Eiffel), Beijing (the Great Wall of China), Rio de Janeiro (Christ the Redeemer), and many more. Irrespective of that, this essay should not be looked upon as a Bangkok sightseeing advertisement.

Instead, it should be perceived as a recommendation aimed at those individuals who love to travel and experience new things. Seeing the best of Europe and Asia by simply visiting two cities actually makes a lot of sense (that does not mean that you should not visit other places either) because exploring other cultures and getting acquainted with others is pure fun. Bangkok seems to be one of the best tourist destinations of all time, and I would absolutely love to travel there anytime. The weather in Bangkok is paradise-like, and the colors of the city are really bright and good-looking. My sincere advice to the reader is to travel as much as possible and learn more about other cultures and nations in order to broaden their horizons.

The ability to choose the right business model can be listed among the key prerequisites to success in all business fields. Its importance in business activities cannot be overstated since the model outlines the key principles of collaboration and drawing revenues. This paper discusses and compares the business models of three popular hotels in the United Arab Emirates as Grand Hyatt Dubai, Hilton Dubai Creek, and Ritz Carlton Dubai.

A business model belongs to the key components of development strategies used in business activities, and this notion is quite broad. Thus, using this term, researchers usually mean the representation of such aspects of the business as the methods of trading, organizational hierarchies, policies, or target markets (Bocken et al. 2014). Grand Hyatt Dubai is among the largest hotels in Dubai, it is owned by the Hyatt Hotels Corporation founded sixty years ago (Hyatt n.d.).

In its business operations, the corporation and all its hotels in different parts of the United Arab Emirates rely on the provision of high-quality services. Grand Hyatt Dubai belongs to the corporation’s luxurious full-service facilities, which is reflected in the number of revenues. According to the statements of its CEO, the corporation is planning to replace its “asset-recycling strategy” with “a fee-driven business model” (Ting 2017, para. 3). Along with other hotels owned by the corporation, Grand Hyatt Dubai is supposed to focus on technological development rather than real estate acquisition (Ting 2017).

Hilton Dubai Creek belongs to the most popular Hilton hotels in the United Arab Emirates. The hotel is owned by Hilton Hotels & Resorts (n.d.), a multinational network of full-service facilities and the key brand of the Hilton Corporation. Just like other hotels in the Hilton chain, the mentioned facility is a part of the global service differentiation model utilized by the corporation (Wang & Chung 2015).

The pillars of the hotel’s business strategy include customer retention and satisfaction since the company has introduced bonus systems and special offers for foreign guests (Hilton Hotels & Resorts n.d.). Belonging to the full-service segment, the hotel also invests in technological advancement to provide space for business events.

Ritz-Carlton Dubai is a famous high-class hotel in the United Arab Emirates. The facility belongs to the Ritz-Carlton (n.d.), a subsidiary of Marriott International headquartered in the United States. The mentioned hotel offers a wide range of accommodation services and a lot of event space for business and personal meetings (Ritz-Carlton n.d.). Similar to the previously mentioned hotels, the Ritz-Carlton Dubai is a part of a large chain.

However, the facts that make its business model special include a limited number of target customers and the lack of service differentiation activities (Bandyopadhyay 2014). Therefore, its model of operation is less flexible in terms of prices if compared to other chains presented in the United Arab Emirates.

In the end, taking into account the wider environment, it is possible to say that the three hotels share a range of similarities related to their business models. They include the focus on customer-centeredness, the provision of premium class accommodation services, and benefits for their long-standing customers. If the analysis is focused on Dubai, the three business models do not demonstrate significant differences due to quite similar pricing strategies.

However, there are obvious differences at the level of hotel chains that are manifested in the degrees of service diversification and the choice of target customers. In the context of the three hotel chains, the business model of Ritz-Carlton uses the most standardized approach to price determination. As a result, it causes a lack of accommodation options for clients from the middle class.

Reference List

Bandyopadhyay, D 2014, ‘Ritz-Carlton Hotel Company’, Medium. Web.

Bocken, NM, Short, SW, Rana, P & Evans, S 2014, ‘A literature and practice review to develop sustainable business model archetypes’, Journal of Cleaner Production, vol. 65, pp. 42-56.

Hilton Hotels & Resorts n.d., Hilton Dubai Creek. Web.

Hyatt n.d., About Hyatt. Web.

Ritz-Carlton n.d., The Ritz-Carlton Dubai,. Web.

Ting, D 2017, ‘Hyatt shifts strategy in plan to sell $1.5 billion in hotel real estate over next 3 years’, Skift. Web.

Wang, YC & Chung, Y 2015, ‘Hotel brand portfolio strategy, International Journal of Contemporary Hospitality Management, vol. 27, no. 4, pp. 561-584.