HOTEL BRANDING STRATEGY: ITS RELATIONSHIP TO GUEST SATISFACTION AND ROOM REVENUE John W. O’Neill Anna S. Mattila The Pennsylvania State University U.S. hotel brands and international hotel brands headquartered in the United States have increasingly evolved away from being hotel operating companies to being brand management and franchise administration organizations. This trend has allowed for the accelerated growth and development of many major hotel brands, and the increasing growth of franchised hotels. There are numerous strategic implications related to this trend. This study seeks to analyze some of these strategic implications by evaluating longitudinal data regarding the performance of major hotel brands in the marketplace, both in terms of guest satisfaction and revenue indicators. Specifically, the authors test whether guest satisfaction at various U.S. and international brands influences both brand occupancy percentage and average daily room rate 3 years later. In addition, the authors investigate whether the percentage of franchised hotel properties influences both guest satisfaction and occupancy 3 years later. Also, they test whether overall brand size has a positive or detrimental effect on future hotel occupancy. Finally, whether the change in guest satisfaction for hotel brands effects the change in average daily rate during the same 3-year period is tested. KEYWORDS: strategy; brand; franchise; quality; guest satisfaction; lodging
Today’s lodging guests are seeking consistency and quality at the right price (Dube & Renaghan, 2000). Consequently, lodging operators have turned their attention to guest satisfaction and branding because brand name operates as a “shorthand” for quality by giving the guest important information about the product/service sight unseen (Briucks, Zeithaml & Naylor, 2000; Jacoby, Szybillo & Busato-Schach, 1977). Accordingly, hotel executives recognize brand quality as an important company asset and as a potential source of strategic advantage (Damonte, Rompf, Bahl, & Domke, 1997). To maximize brand equity, most hotel mega-companies have developed multiple brands to serve multiple markets (Jiang, Dev, & Rao, 2002). The value of a brand is based on the awareness of the brand, its quality perception, and overall customer satisfaction (Aaker, 1991). Satisfied customers tend to buy more, be less price conscious, and to generate positive word-of-mouth, thus contributing to bottom-line profit (Anderson & Mittal, 2000). Due to increased attention to a customer focus, brand managers use Journal of Hospitality & Tourism Research, Vol. xx, No. x, Month 2004, 1DOI: 10.1177/1096348004264081 © 2004 International Council on Hotel, Restaurant and Institutional Education
JOURNAL OF HOSPITALITY & TOURISM RESEARCH
satisfaction as a measure of operational success of their overall branding strategies (Shocker, Srivastava, & Ruekert, 1994). The primary purpose of this study is to empirically examine the links between guest satisfaction and revenue indicators (i.e., occupancy and average daily rate, or ADR) at a brand level. In addition, we explore the impact of franchising on guest satisfaction and occupancy rates. THEORETICAL BACKGROUND
From a corporate strategy viewpoint, well-managed brands tend to gain increasing market share. Yet, previous research linking service quality with market share in the hospitality industry shows mixed results (Ekinci, 2002). Specifically, there are two divergent views on the effect of brand growth on customers’ quality perceptions (Hellofs & Jacobson, 1999). First, the market signaling theory suggests that consumers interpret a high market share as a signal of high quality, thus resulting in increased future demand (Caminal & Vives, 1996). Consequently, it is not surprising that market share leaders, including those in the...