Cornell CHR Reports

Emerging Marketing Channels in Hospitality: A Global Study of Internet-Enabled Flash Sales and Private Sales

Wed, 08 Feb 2012 10:20:12 EST

The potential uses of flash deals or daily deals have caught the attention of many restaurant and hotel firms, as well as third-party distributors, such as Expedia. A survey of nearly 200 international hospitality practitioners found that a remarkable 42 percent had tested a flash deal promotion, and some of those firms had offered numerous flash deals. At the same time, 46 percent of the responding hospitality firms had no intention of offering a flash deal, with some citing concerns about the potential damage of group discounts to brand integrity. Individual hotels that had offered flash deals tended to be on the large side, averaging more than 150 rooms. Discounts offered in the deals ranged widely, from 15 to over 75 percent off rack rates. Likewise, commissions paid to deal vendors saw a wide range, as the most typical commission was 15 to 20 percent, but some hotels paid as much as a 40-percent commission. Most of the deals reported in this survey had been offered through Groupon or LivingSocial, but Jetsetter unexpectedly appeared as the number-three flash-deal channel for these respondents. Deal structures also varied widely, although many deals were offered for mid-week. Although most offers involve a non-refundable purchase, deal vendors are increasingly offering their customers opportunities to obtain refunds in certain circumstances. Respondents’ general assessment of the deals’ success was moderate. They agreed that their deals brought in new customers, but repeat business was more tenuous. One favorable outcome was that the respondents saw little evidence of cannibalization of existing business, particularly when they packaged their deal carefully. On balance, hoteliers who were most pleased with the outcome of their deals were also the ones who managed the cost of the deal most assertively.

The Effect of Corporate Culture and Strategic Orientation on Financial Performance: An Analysis of South Korean Upscale and Luxury Hotels

Thu, 12 Jan 2012 13:14:42 EST

Researchers have been studying the importance of an appropriate and effective culture to business success for over thirty years. A successful culture combined with a congruent strategic orientation is now considered essential for a business to maintain its edge in a fiercely competitive environment. So far, however, little research has focused directly on how the hospitality industry can maximize performance through the combination of a corporate culture and a strategic action plan. In this study, we explore the relationship between strategic orientation, corporate culture, and financial performance for hotels, using data from 211 managers of 99 upscale and luxury (4- or 5-star) hotels in South Korea. The study shows that corporate culture directly affects financial performance, but for this group of hotels not all cultures performed equally. The transaction-oriented Market culture did not promote financial performance, as compared to the family-oriented Clan culture or the innovative “Adhocracy” culture. The tradition-bound Hierarchical culture actually cost hotels in terms of financial performance. Certain strategic orientations moderated and improved financial results for some of the cultures, but not all. The opportunity-seeking approach of a Leading strategic orientation drove financial results for the Clan and Adhocracy cultures, but did not help the Market or Hierarchy cultures. Other strategic orientations also drove financial results, including Future-analytic and Defensive.

Compendium 2012

Mon, 16 Jan 2012 12:20:56 EST

The 2012 Compendium provides a complete record of CHR’s 2011 publications, arranged by topic, as well as summary lists of CHR publications from 2010 and 2009. CHR publications include Cornell Hospitality Reports, Cornell Hospitality Tools, Cornell Hospitality Roundtable and Conference Proceedings, and the Cornell Hospitality Quarterly. In 2011, CHR published 22 Reports, 4 Tools, 7 Roundtable and Conference Proceedings, and 1 Industry Perspectives white paper.

CHR 2011 Annual Report

Mon, 16 Jan 2012 12:19:10 EST

This is the annual report for 2011 for the Cornell Center for Hospitality Research.

The report summarizes the CHR’s activities in 2011 all designed to fulfill the CHR’s mission of providing new and valuable research-based information to the hospitality industry. The report summarizes CHR’s publications, which include Cornell Hospitality Reports, Cornell Hospitality Tools, Cornell Hospitality Quarterly, Industry Perspectives, Roundtable and Conference Proceedings, and provides information on webcasts and roundtables. Also included is a review of the QUIS 12, the twelfth International Research Symposium on Service Excellence in Management, which drew some 300 researchers and practitioners to Cornell to examine quality in service.

The 2010 annual report also outlines plans for 2012, including webcasts and roundtables, as well as CHRS 2012, the second Cornell Hospitality Research Summit, scheduled for October 8-9, 2012.

The Role of Multi-Restaurant Reservation Sites in Restaurant Distribution Management

Wed, 11 Jan 2012 14:01:24 EST

A study of 474 U.S. consumers documents the increasing popularity of sites that allow reservations at numerous restaurants—although the telephone remains by far the most common way to make a restaurant reservation. Slightly over half of the respondents to this survey had made a restaurant reservation online. About 60 percent of those who made reservations online used a multi-restaurant site to do so, and the rest used the restaurant’s own website. Those who continued to make phone reservations said they preferred a personal touch. However, a substantial percentage of respondents who telephoned their reservation had located the restaurant using a multi-restaurant site or app. Restaurateurs need to note the demographics and habits of customers who typically make reservations online. There are no gender differences between customers who make reservations online and those who don’t, but the online group is noticeably younger. Multi-restaurant site users also visit restaurants more frequently than the other respondents. They were more likely to rely on online reviews, and they like having several restaurants to choose from. Although participating in a multi-restaurant reservation site represents an additional expense, restaurateurs should consider a distribution strategy that includes such sites, especially since they seem to be the preferred portal for younger guests who dine out more frequently than others.

Environmental Management Certification and Performance in the Hospitality Industry: A Comparative Analysis of ISO14001 Hotels in Spain

Thu, 15 Dec 2011 12:36:42 EST

As the number of hotels that are strongly interested in sustainability-related issues increases, the hotel industry is still seeking consensus on how sustainability can be measured and managed. One standard that provides both measurement and policies for sustainability management is ISO 14001, which is being adopted by an ever growing number of hotels, especially in Europe. Using a sample of over 2,000 independent hotels in Spain, this report analyzes the differences between those hotels that have implemented the ISO 14001 standard and those that haven’t. Also considered are the possible effects on the business results of such companies of moderating factors such as company size and the market segment in which the hotel operates. On balance the certified hotels recorded stronger sales and earnings before taxes and depreciation than those that were not certified. Certified hotels in Spain tended to be larger than uncertified properties, and certified hotels in city and beach locations enjoyed considerably stronger performance than those without the certification. The report challenges the often-heard contention that adopting sustainability programs will diminish hotels’ performance. Instead, these data show the reverse to be the case.

A Comparison of the Performance of Franchise and Independent Hotels: The First Two Years of Operation

Tue, 22 Nov 2011 12:43:28 EST

Although franchising has become a dominant mode of entry for hotel owners, a substantial number of entrepreneurs open their property as an independent and unaffiliated hotel. Given the finance community’s desire for a brand flag as a condition of many loans, this analysis used STR Global data to compare the performance of newly opened franchise properties to that of independents. A comparison of the financial results for the first two operating years of 104 franchised and independent hotels in the United Kingdom found that the performance picture for franchise properties was overall not superior to that of independent properties. For full-service hotels (those in higher chain scales), the data revealed an early advantage in RevPAR for franchise properties, but that difference faded as time went on. For limited-service hotels, the independents experienced stronger RevPAR from six months after opening through two years after opening.

Restaurant Daily Deals: Customers’ Responses to Social Couponing

Mon, 07 Nov 2011 16:02:45 EST

A survey of 931 U.S. consumers finds that those who have purchased daily deals from a casual dining, fast-casual, or quick-service restaurant are not noticeably different in behavior or attitudes from those who have not done so. One difference in attitudes provides insight into those who purchase social coupons: they like to be “market mavens,” who stay on the cusp of market trend and price information. Those who purchased daily deals were significantly more likely to be younger, be married, and have a higher income than non-purchasers. On balance, the study indicated that the benefits of offering a social coupon seem to outweigh the disadvantages. Many of the potential concerns about offering a social coupon, including poor tipping, overwhelming the staff, and customer disloyalty, are not substantiated. There was some evidence of cannibalization, as 44 percent of those using a social coupon reported being frequent customers, but the coupons also brought back infrequent customers and attracted a substantial percentage of new customers. Most critically, many of the new and infrequent customers said they would return to the restaurant and pay regular prices, as well as recommend the restaurant to friends. New customers in particular would not have tried the restaurant without the daily deal offer. All customer groups said they considered the restaurant to be a good value, even without the discount offer.

To Groupon or Not To Groupon: A Tour Operator’s Dilemma

Thu, 10 Nov 2011 14:11:14 EST

The case of a tour operator in New York’s Finger Lakes region highlights the remarkable potential benefits of participating in a social coupon promotion, as well as the possible pitfalls that require a carefully crafted arrangement. The benefits include participation in an attention-grabbing website (in this case, Groupon) and having many new customers exposed to the business. Possible disadvantages include cannibalizing existing customers, attracting deal seekers who will not become repeat customers, and failing to make up for the revenue forgone when discount purchasers occupy spaces that could have held full-price customers. For the tour operator, Experience!The Finger Lakes (E!FL), an additional challenge was to create a discount package that did not lose money. To alleviate potential issues, the tour operator used a creative approach that involved working with Groupon and participating wineries to add value to the core tour product. By creating a special package, E!FL was able to cover costs, add value for all parties, and offer a different product that was not directly comparable to its core menu of tours.

Network Exploitation Capability: Mapping the Electronic Maturity of Hospitality Enterprises

Wed, 12 Oct 2011 09:31:21 EST

Although many hospitality firms are making effective use of their information technology resources, the value and effect of those operations could be magnified by a strategic and integrated approach to IT, called Network Exploitation Capacity (NEC). The NEC model maps an organization’s advance toward full integration of network capacity that culminates with a self-renewing or learning strategy for the firm in three areas: demand generation, multi-channel distribution management, and revenue optimization. Unfortunately, most hospitality firms are at the first step of the NEC maturity scale, “Basic,” in which one or more staff members handle some aspects of IT (often with good result), but other aspects are neglected and, in any event, the efforts are not tied together in an effective strategy. Some firms are at Stage 2 of the model, “Systematic,” which expresses an approach to network exploitation that has been codified as part of the firm’s operating system, and the firm is functioning in all three phases of network exploitation. Even if single individuals are responsible for these functions, the firm holds the knowledge of how these areas operate, rather than have the knowledge reside solely in the individual. Advancing to Stage 3, the “Integrated” Stage, a few firms are systematically fostering synergy in the three areas of network exploitation and consciously coordinate operational behavior in a consistent fashion. While no firms have reached Stage 4, the “Analytical” Stage, this stage is characterized by a disciplined analytical mindset that aims at effective operations. Firms achieving Stage 5, “Optimizing,” would add the critical element of an institutionalized process of continuous learning, re-training, and overall optimization of the network exploitation capacity.

The Current State of Online Food Ordering in the U.S. Restaurant Industry

Mon, 12 Sep 2011 11:11:07 EST

A study of 372 U.S. restaurant operators (of all sizes) that accept takeout orders found that about one-quarter of those surveyed have adopted online ordering. Just over one-fourth of those surveyed use some form of online ordering. These restaurateurs have been pleased with the technology, and all of them indicated that online ordering has met or exceeded their expectations on ROI. Although convenience and control are both drivers of the move toward online ordering, this study found that consumers and operators differed on the ranking of those two factors. Operators thought that consumers like online ordering for its convenience, but an earlier study of consumers found that what they like is control over the ordering process. Contrary to some reports, the restaurants in this study did not find substantial increases in average check, but they did report considerable increase in order frequency. For this sample, the top benefit of online ordering was a savings in labor, since employees are not tied up on the phone or at the counter. Order accuracy was another benefit cited by these restaurant operators.

Unscrambling the Puzzling Matter of Online Consumer Ratings: An Exploratory Analysis

Wed, 24 Aug 2011 09:26:29 EST

This study explores the patterns of online reviews of vacation homes from a community-based travel advisory website with a goal of understanding the biases inherent in online word of mouth (WOM) related to tourism and hospitality services. An analysis of nearly 3,200 reviews from “Reviewsite.com,” (a pseudonym) which posts reviews of vacation rental properties across the USA, finds an overwhelming preponderance of favorable reviews. More to the point, relatively few “moderate” reviews are posted, and the second-highest category is extremely negative comments. Using semantic processing techniques on the aggregate review text, the study identifies the nuanced opinions and concerns of the travelers who write reviews. Negative reviews tend to be lengthy and argumentative, often detailing disappointment over expectations not met. Positive reviews, on the other hand, tend to be relatively brief and confirm the overall rating. Consumers who wrote “high” reviews placed greater importance on value for money, cleanliness, and comfort than did those who wrote negative reviews. Those who wrote “low” reviews placed their emphasis on the service provided by the property staff and management. Negative reviews were more likely to involve a higher price accommodation. This analysis indicates that the overall numerical ratings typically used in review systems may not be the ideal indicator of perceived service quality. The results suggest that review sites should develop better methods to aggregate, synthesize, and publish the review contents, particularly the numerical ratings. This and other review sites show the average of all the point-scale ratings, but such simple means do not take into account the biases that are inherent in the rating systems. Instead, the sites should provide more information and heuristics to help the consumers navigate through the clutter and get the information they desire.

Designing a Self-Healing Service System: An Integrative Model

Thu, 11 Aug 2011 12:21:26 EST

All service organizations seek to deliver the customer experience they planned. No organization is perfect, though, and so the best of them plan for inevitable failures. Since the experience exists in the minds of customers who individually determine its quality and value, service organizations must not only plan the service delivery system thoroughly, but create ways for it to heal when it breaks. Any delivery system that relies heavily on employees for its success will need to include the means for those employees to find and fix the problems that arise. The process presented here is a systematic approach to assessing customer satisfaction before, during, and after the service experience. Designing the system requires that you study your customers in intimate detail, build a service delivery system that will deliver the experience they expect from your organization, monitor that system closely, create accurate early warning measures for each of the many possible failure points, engage everyone in the organization in watching those measures, and follow up on everything that doesn’t meet your customers’ expectations. The techniques that constitute this process ensure that service organizations both systematically plan for customer satisfaction and ensure that there are ways to heal any part of the service delivery system that is broken. A “self-healing system” allows employees to override the delivery system and fix customer problems when they occur and ensures that the system designers improve it to prevent it from failing again in the same way.

Reversing the Green Backlash: Why Large Hospitality Companies Should Welcome Credibly Green Competitors

Thu, 04 Aug 2011 13:24:57 EST

This report presents three studies suggesting that when a large restaurant or hotel company announces the adoption of green practice consumers may react in contrary fashion and decrease their evaluation of that company. First, an in-depth interview project among students at the School of Hotel Administration suggests that individuals are deeply skeptical when large corporations and chains promote their sustainability initiatives, as compared to small independent operators. Seeking circumstances in which a large company could gain sustainability credibility, two follow-up experiments further examine the interaction of a restaurant chain’s green practice adoption and the presence or absence of a small, highly credible competitor. The results indicate that, in the absence of a credible competitor, consumers’ liking of a large hospitality company may actually decrease when the company announces the adoption of a green practice (e.g., organic or locally sourced ingredients). Ironically, then, in markets where there is no credibly green competitor, large corporations may be better off not promoting their sustainability initiatives. The opposite is true, however, when consumers are aware of credible independent firms involved in green practices. Under these circumstances, evaluations of a large company are improved. Initially we hypothesized that the large company would need to imitate the competitor’s program to reverse the green backlash effect. However, the results of a survey of a nationwide panel of consumers suggests that a reversal of the green backlash can occur even if the large company is engaged in a different green activity. The key mechanism was credibility or trustworthiness of the company with regard to the green practice.

This report was produced with the assistance of McDonald's USA, a senior partner of the Cornell Center for Hospitality Research

Developing a Sustainability Measurement Framework for Hotels: Toward an Industry-wide Reporting Structure

Wed, 03 Aug 2011 12:09:15 EST

What is the carbon footprint of my hotel stay? Surprisingly, each global lodging company currently provides the answer to this question in a different format, inhibiting aggregate corporate or event travel carbon footprinting and comparison. Third parties have attempted to help answer this question uniformly but their proposals have not gained traction, and no single method for calculation has been widely adopted.

The need for uniform carbon footprint calculation of a hotel stay is paramount, yet it is not the only sustainability performance metric. Other issues such as energy, water, and waste are also at the forefront of stakeholder requests and manifested through sustainability reporting and certifications.

The emergence of such questions, combined with the global trends of sustainable development and corporate responsibility, point toward a broader need for addressing non-financial performance data collectively and uniformly within the hotel industry. In response to requests from guests, investors, and other stakeholders regarding sustainability, most hotel companies have developed platforms to address these needs. Despite this promising development, the individual chains’ reports, assumptions, and measures are not always communicated uniformly—although it’s clear that stakeholders seek to use the data to make comparisons.

Taking a historical context for sustainability measurement within the industry and globally, this report presents a conceptual framework for developing sustainability performance indicators to address present stakeholder requests, as well as others that may arise. The framework developed and tested in this report is designed to provide an avenue for industry collaboration and discussion toward a uniform set of metrics that are highly practical in application. The framework is tested using actual 2010 data from 20 hotels operated by InterContinental Hotels Group, Marriott International, or Wyndham Worldwide, all of which assisted with data collection. The study applied the framework seeking to evaluate the boundaries, quantification methods, and metrics for performance indicators of carbon, energy, water, and waste derived from hotel stays, which currently are the most common requests from external stakeholders. In addition, the practicality of data collection was considered as currently practiced.

Based on the study’s methods and results as an example, standard metrics are certainly feasible, yet several issues required for collaborative industry agreement remain. Hotels will need to agree on boundary specifications such as addressing differences in laundry wash handling, the quantification of values such as which emission factors to use and how to allocate rooms versus function space footprints, and the metrics utilized such as per occupied room or per available room.

Further issues to enable comparability are discussed. No one catch-all industry benchmark will adequately represent the environmental footprint of hotel stays. Normalization based on amenities or outlets, climate zones, and chain scale segment can help various stakeholders understand the complexity of hotel footprinting, provided that industry collaboration coincides with the proprietary sustainability systems lodging companies are developing internally.