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International Journal of Contemporary Hospitality Management

Customer relationship management for hotels in Hong Kong

Ada S. Lo, Lawrence D. Stalcup, Amy Lee,

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To cite this document: Ada S. Lo, Lawrence D. Stalcup, Amy Lee, (2010) "Customer relationship management for hotels in Hong Kong", International Journal of Contemporary Hospitality Management, Vol. 22 Issue: 2, pp.139-159, https:// doi.org/10.1108/09596111011018151

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Customer relationship management for hotels in Hong Kong

Ada S. Lo

School of Hotel and Tourism Management, The Hong Kong Polytechnic University, Kowloon, Hong Kong

Lawrence D. Stalcup

College of Health and Human Sciences, Georgia Southern University, Statesboro, Georgia, USA, and

Amy Lee

School of Hotel and Tourism Management, The Hong Kong Polytechnic University, Kowloon, Hong Kong

Abstract

Purpose – The purpose of this study is to investigate how hotels are implementing customer relationship management (CRM) practices at the property level. Design/methodology/approach – Semi-structured in-depth interviews were conducted with 45 hotel managers from 17 hotels. The interviews were recorded, transcribed, and analyzed using content analysis. Findings – All participating hotels have practices in place to manage customer relationships. The most commonly cited goal for CRM is guest retention. Evaluation and control are perceived as very important activities not only to create value for the customers, but also to track the performance of the guest contact departments and the customers’ evaluations of the hotel/restaurant experiences. Research limitations/implications – The sample is probably biased towards hotels that are most interested in CRM and are heavily weighted towards higher tariff properties. Practical implications – The study modified Buttle’s CRM value chain to analyze hotels’ CRM

• practices. Results of the study provide a source for industry practitioners to compare and benchmark

their practices and to obtain useful CRM ideas. Originality/value – CRM-related research in the hotel industry has looked at a variety of specific practices and its role in achieving overall objectives at the corporate strategic level. Yet, no research has been done to investigate CRM practices at the property level for hotels using the CRM value chain. Keywords Customer relations, Customer service management, Value chain, Hotels, Hong Kong, Marketing strategy Paper type Research paper

Introduction The concept of customer relationship management (CRM) was first developed in the mid-1990s in information technology (IT) industries (Boulding et al., 2005; Payne and Frow, 2005). Innovation in information processing, more sophisticated and demanding

The current issue and full text archive of this journal is available at www.emeraldinsight.com/0959-6119.htm

This research was funded by the School of Hotel and Tourism Management, The Hong Kong Polytechnic University and supported by the Hong Kong Hotels Association.

CRM for hotels in Hong Kong 139

Received 24 July 2008 Revised 14 November 2008 3 February 2009 6 April 2009 Accepted 10 April 2009

International Journal of Contemporary Hospitality Management

• Vol. 22 No. 2, 2010
• pp. 139-159

q Emerald Group Publishing Limited 0959-6119 DOI 10.1108/09596111011018151

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consumers, and an increasingly competitive environment contributed to the development (Bell et al., 2002; Chen and Popovich, 2003; Parvatiyar and Sheth, 2002). CRM was initially considered as a technology-only tool or simple database marketing (Chen and Popovich, 2003; Parvatiyar and Sheth, 2002). However, it has evolved into a management philosophy in which an organization concentrates its activities around the customer. Over time, it has emerged as a strategy to use IT to integrate the cross functions of employees to understand and retain long-term profitable relationships with customers. The goal is to create greater value for both customers and shareholders (Payne and Frow, 2005). Many studies have been conducted on CRM in various industries in the past 20 years. However, there is still significant disagreement on its definition and meaning (Buttle, 2004). In addition, there isnotacommonly agreed frameworkforthe implementationand evaluation of the effectiveness of CRM practices (Sigala, 2005). Payne and Frow (2005) proposed a cross-functional, process-based conceptual framework covering five generic processes including strategy development, value creation, multichannel integration, and information management and performance assessment. Based on the work of Payne and Frow (2005), Iriana and Buttle (2006) created a 13-item survey instrument to assess an

• rganization’s CRM orientation in terms of strategic, operation, and analytical
• perspectives. Buttle (2004) proposed a CRM value chain for the development and

implementation strategies. The value chain has two main parts that include five primary stages and the supporting conditions. Both are essential components for creating value for customers and profitability for the company (Buttle, 2004). Sigala (2005) suggested an integrated managerial approach to hotel CRM including the three areas of information communication technology (ICT), internal and external relationship management, and knowledge management. CRM-related research in the hotels has looked at various specific practices in isolation. They include loyalty programs, brand loyalty, customer satisfaction, knowledge management, information and communication technologies, and internal and external marketing (Bouncken, 2002; Choi and Chu, 2001; Engstrom et al., 2003; Kandampully and Suhartanto, 2000; Lee et al., 2005; Minghetti, 2003; Palmer et al., 2000; Piccoli et al., 2003; Sigala, 2005; Sigala et al., 2001; Tepeci, 1999). The purpose of the research presented here was to investigate how hotels in Hong Kong are managing customer relationships. The study adopts Buttle’s (2004) CRM value chain framework. This was chosen for the study because other studies have either focused on the strategic view or on the role of ICT in CRM

• practices. Although a more recent survey instrument has been developed by Iriana

and Buttle (2006), which focuses on the evaluation of companies’ customer relationship orientation in the strategic, operational, and analytical domains. Buttle’s (2004) CRM value chain provides a framework to understand how CRM practices are implemented at the operational level and how the different activities work together to create value. It focuses not only on the process, but also identifies the supporting conditions for successful CRM implementation at the property level. Furthermore, hotels of different size and price/quality level have CRM systems of varied levels of sophistication (Imrie and Fyall, 2000; Moriarty et al., 2008). This suggests that differences in CRM practices may exist among hotels of different price/quality levels in Hong Kong. The specific research objectives for this study are to:

.

identify the goals of CRM strategies;

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.

identify and analyze CRM strategies and systems used by hotels in Hong Kong; and

.

identify how CRM practices differ amongst price/quality segments. CRM value chain Buttle’s (2004) CRM value chain is an adaptation of Porter’s (1985) value chain. Buttle’s (2004) CRM value chain has two main parts which include five primary stages (customer portfolio analysis, customer intimacy, network development, value proposition development, and management of customer lifecycle) and the supporting conditions (leadership and culture, data and IT, people, and processes). Both are essential components for creating value for customers and profitability for the

• company. The four supporting conditions influence each of the five primary stages of

the value chain, and, without them the implementation of CRM strategy is unlikely to be successful (Buttle, 2004, p. 42). Several adaptations have been included in the CRM value chain model for this

• study. The goal of Buttle’s (2004) original model was “customer profitability”.

However, the researchers believe that generating value for the customers, i.e. the benefits which customers receive from the price paid and the various sacrifices customers make (Zeithaml, 1988), is also an important outcome of the primary and supporting CRM activities. “Creating and managing network” is the third stage of Buttle’s (2004) CRM value chain. This stage requires the company to develop and manage a business network comprising suppliers, partners, investors, and employees. However, this network relationship building process between the hotel and suppliers, partners, and investors is not purely for the purpose of creating value for the customers and the attainment of CRM objectives. This stage is not considered as appropriate for the CRM value chain applied in the hotel industry. On a similar note, Sigala (2005) also suggested the importance of the management of the relationships among internal customers (employees) as one of the important managerial processes in her CRM

• model. Therefore, the development and management of employee relationships and

network will be discussed in the context of “people” in the supporting conditions. It is clear that the five primary stages represent the first three processes of strategic management (analysis, resource development, implementation) but the evaluation and control process seem to be missing in Buttle’s (2004) value chain. The evaluation and control process ensures that the company is achieving what is set out to accomplish, compares performance with desired results, and provides the feedback necessary for management to evaluate results and take corrective action (Wheelen and Hunger, 2004). Furthermore, evaluation of performance is an important step in the quality improvement process especially for organizations practicing total quality management or possessing a strong belief in continuous improvement (Wilshaw and Dale, 1996; Yang, 2006). Therefore, the CRM value chain proposed for this analysis includes a final component of “Evaluation and control” in the primary stages. Figure 1 shows the CRM value chain adopted for this study. Methodology The study adopted an inductive approach as suggested by Creswell (2003) by following the five steps: (1) Gathering of information. (2) Asking open-ended questions of participants and recording field notes.

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(3) Analyzing data to form themes or categories. (4) Identifying broad patterns, generalizations, or theories from themes or categories. (5) Generalizing or theorizing to past experience and literature. Qualitative study based on semi-structured interviews with managers from hotels of different classes was appropriate because it helped to understand how and why an

• rganization’s members view a particular issue (Walsh, 2003). The interview questions

were developed based on a review of the existing CRM literature (e.g. Buttle, 2004; Iriana and Buttle, 2006; Sigala, 2005) which aimed to identify the CRM practices adopted by hotels in each of the primary stages and supporting conditions in the CRM value chain. The initial questions were reviewed by hospitality faculty members and hotel managers. Some adjustments were made and reviewed by other experts. The questions were pre-tested on subject experts and no further changes were made. Sample questions can be found in Table I. Hotels in Hong Kong are famous for their service excellence. One can find virtually all the famous brands, and several major international luxury brands are headquartered there. Several of these hotels are rated among the “top hotels of the world” (Conde Nast Traveller, 2007; Travel and Leisure, 2007). All member hotels of the Hong Kong Hotel Association (total of 93) were invited to participate in the study. Letters were sent to the general managers inviting them to nominate managers with CRM responsibilities from at least two departments. A total of 17 hotels (18 percent) agreed to participate. It is highly likely that these properties are more active and interested in CRM than the typical hotel in Hong Kong. Therefore, the sample is probably biased. However, the objective of this study is to identify the CRM practices in use, not to measure how widespread the use may be. For this reason, the sample was viewed as appropriate. The interviews were conducted face-to-face with individual managers at the hotels. However, more than one manager was present on four occasions. In total, 45 managers were interviewed. Of these, 13 came from the Rooms Division and the same number came from the Food and Beverage (F&B) Division (i.e. restaurants). Ten were from Marketing and Sales. Five were either general managers or assistant general managers responsible for general operations. Four were from other departments including IT, Human Resources, and Meeting and Events. The participants were provided with the interview questions in advance. Each interview lasted for approximately 50 minutes. In

Figure 1. CRM value chain for hotels

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Description of the dimensions Sample questions asked in interviews Key findings Primary stages Customer portfolio analysis To identify customers whom the company would like to serve by accessing the potential economic contribution of existing and potential customers Does your hotel have a system or practice in place to manage/maintain customer relationships? If yes, please describe what it is? All hotels collected information about their customers at various points of

• contact. None used the data to perform

cost and profitability analysis for the purpose of segmentation and identification of potential customers Customer intimacy To better understand customers by knowing their identity, profile, history, requirements, expectations, and preferences in order to facilitate more intelligent CRM decisions. Who is responsible for the implementation of the CRM practices? Is your CRM program a chain-wide program? What kind of customer information does your hotel collect? How is the information being used? All hotels proactively gathered information about customers’ preferences, special requests, and

• complaints. Higher tariff hotels were

more active in encouraging the employees to gather this information. Communication with customers (e-marketing) was an important component of enhancing customer intimacy Value proposition development To identify sources of value for customers and create a proposition and experience that meet their requirements, expectations, and preferences Hotels used different ways to differentiate themselves from their

• competitors. In addition to offering

superior quality services, higher tariff hotels provided more opportunities for employees to interact with customers (e.g. lobby greeters and managers present in the lobby). One hotel has a separate reservation hotline to handle restaurant reservations Most hotels have well-designed procedures to handle complaints Employees were empowered and have

• wnership to handle complaints

(continued) Table I. CRM value chain dimensions and sample questions for the interviews

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Description of the dimensions Sample questions asked in interviews Key findings Managing customer lifecycle To design process and organizational structure to facilitate the acquisition, retention, and development of new and existing customers Guest relations staff to act as internal sales managers focusing on building relationships, identifying guests’ needs, and servicing of in-house guests Frequent guest or VIP programs were used to recognize and reward repeat guests Most hotels appeared to concentrate primarily on returning guests Evaluation and control To evaluate the performance and the

• utcomes of the CRM practices and to

propose measures for continuous improvements Hotels tracked the performance of their guest contact departments and customers’ evaluations Some hotels used this information to monitor their performances and improve their services Some hotels were required to share this information with sister hotels Supporting conditions Leadership and culture Availability of strong leadership commitment and customer-centric

• rganizational culture

Please describe your company’s mission/ values Who (which departments) is/are responsible and involved in the CRM process? Most hotels have strong customer-

• riented cultures

Missions and values were communicated to all employees at orientation programs and on other training occasions Some have identified certain managers

• r departments to be responsible in

executing and managing the CRM process Hotels with senior executives with prior experiences in managing luxury hotels tended to bring in new CRM ideas (continued) Table I.

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Description of the dimensions Sample questions asked in interviews Key findings Information technology Availability of high quality customer data through the use of appropriate information technology Does your company adopt information technology to collect and manage customer data? The higher the category of the hotels, the more resources they committed to adopting technology as part of the CRM process All hotels have separate CRM systems/ databases for rooms and F&B customers People Availability of qualified and committed employees in all stages of the CRM value chain What is your employee turnover rate? What does your hotel do to ensure that qualified employees are hired and retained? All hotels emphasized that their CRM practices were sustainable only with capable and passionate employees All hotels invested considerable resources in recruiting, training, and retaining their employees Low employee turnover and low-service employees contributed to the success of CRM Process Availability of processes which contribute to the creation of value for customers What do you want to achieve through your hotel’s CRM practices? How does the company communicate its mission and/or value to the employees? Are you sharing your customer information within the hotel? Are the customers’ information being shared among sister properties? What are the factors which facilitate and hinder the implementation of CRM at your property? Most of the hotels adopted a proactive approach in serving the customers Most of the hotels did not appear to be effective in systematically amalgamating the information of guest requests and complaints into a single database for analysis purpose Most of the hotels were not sharing their complete customer database with sister properties Table I.

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all but six cases, there were two interviewers present and each took individual notes. With participants’ permission, the interviews were audio-taped and transcribed. Interviewees were ensured anonymity of responses by disguising their names and

• companies. The transcripts and notes were read through to obtain a general sense of

information and overall meaning. Two of the authors coded the transcripts independently by segmenting the sentences and phrases into categories, which were then labeled. Based on the results of the coding process, descriptions of the themes were generated. Then, the main themes generated by the two authors were compared to generate common themes. Characteristics of participating hotels The Hong Kong Tourism Board divides the hotels into three general categories using a formula that takes into account such factors as facilities and average daily rate (ADR). These categories are: High Tariff A (16 percent of total) High Tariff B (32 percent of total), and Medium Tariff (42 percent of total) (Hong Kong Tourism Board, 2007). The research presented here uses this breakdown with one modification. As the researchers began to analyze the data, it became obvious that there was a marked dichotomous difference within the High Tariff A category. In the research, these are named “Super A” and “High Tariff A”. This separation was supported by significant differences in the ADR and the number of employees per room. Ten of the hotels indicated that they were part of an international chain. Six identified themselves as part of a local chain. The last indicated that it was independent. F&B sales, which include restaurant and banquet, contribute to a large portion of the total revenue for hotels in Hong Kong. Most of the larger hotels operate multiple outlets and draw significant business from the local community. Several indicted that F&B sales were equivalent or even greater than room sales. Table II shows the characteristics of the participating hotels. Findings and discussion CRM goals Being able to build strong customer relationships is vital to the success of the

• rganization as it focuses on maximizing the revenue from each guest over the lifetime
• f the customer relationship (Wilson et al., 2002). Table III shows a tabulation of the

CRM goals and objectives of the responding hotels. With a single exception, all the hotels considered “encouraging repeat customers” as the goal for implementing CRM. The “Super A” and “High Tariff A” hotels suggested that making guests feel special, exceeding customers’ expectations, communicating and connecting with customers, and targeting the right customers were other goals they would like to attain. Two of the “High Tariff A” hotels explained that CRM practices could help create a home-like feeling for their customers. One hotel stated that they were able to identify areas for

• improvement. “High Tariff B” hotels suggested that making guests feel special,

enhancing customer satisfaction, and encouraging repeat customers were their main

• bjectives. Two of them also agreed that CRM practices would help them identify areas

for improvement. Enhancing customer satisfaction, exceeding their expectations and encouraging repeat customers were mentioned by both “Medium Tariff” hotels. CRM value chain analysis: primary stages Table I shows a summary of the descriptions of the CRM value chain dimensions, the corresponding questions asked to investigate the dimensions, and the highlights of the key findings of the analysis.

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Category

• No. of

hotels %

• No. of guest

rooms ADR (yr 2007) in HK$a Occupancy (yr 2007) %

• No. of F&B
• utlets
• No. of

employees

• No. of employees per

room High Tariff A (all) 9 53 542 2,221 84 6 585 1.08 Super A 5 29 435 3,024 78 7 658 1.51 High Tariff A 4 24 677 1,218 90 5 493 0.73 High Tariff B 6 35 540 938 89 4 340 0.63 Medium Tariff 2 12 352 630 89 4 163 0.46 Total 17 100 519 1,581 86 5 449 0.87 Note: a 1 Hong Kong Dollar ¼ 0:128 US Dollar Table II. Characteristics of participating hotels

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Category

• No. of

hotels Make guests feel special Make guests feel “coming home” Exceed guests’ expectat- ions Communicate with guests Enhance guests’ satisfaction Generate repeat business from customers Target right customers Increase market share Identify areas for improvement Super A 5 2 1 2 4 1 3 High Tariff A 4 1 2 1 2 4 1 1 High Tariff B 6 1 1 1 5 2 Medium Tariff 2 1 1 2 1 1 Total 17 4 2 3 5 2 15 3 1 3 Table III. Goals of CRM

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Customer portfolio analysis. The CRM value chain places great importance on assessing the potential economic contribution of each customer by estimating the revenue generated. Without customer data, the companies will not be able to segment the market and project the potential sales from each group. All the hotels participating in the study collected information about their customers at reservation, check-in, check-out, and during their stay. As Minghetti (2003) suggested, they collected three types of information, which included front-line data (guest profile information), spontaneous data (information provided by the guest) and behavioral data (guest transaction data or preference information input by staff into the computer system). The types of information collected were very standardized but the quantity and quality depended on the sophistication of the systems used. No major differences were found among the hotels of different categories. They gathered guests’ profile and transaction information via the property maintenance systems and restaurant management systems. The information is stored in guest

• databases. For room guests the information is used for segmentation and sales
• forecasting. None of the hotels stated that they analyzed the cost and profitability for

each of the segments and customers were segmented mainly based on their geographic market and purpose of business. The use of restaurant guests’ profile and transaction information was limited to sales forecasting. Buttle (2004) believed that customers generating different profitability levels should be served differently. Customers can be segmented based on their “profitability” as this allows the company to maximize the profits by offering differentiated products and services to different segments. Customer intimacy. Better understanding of customers will enable more intelligent CRM decisions (Buttle, 2004). The company must be proficient in acquiring, enhancing, storing, distributing, and using high-quality customer data. All hotels believed that it is important to understand the needs of customers. They all used the guest information, such as preferences, special requests, and incidents, to service the guests when they are in-house or making future reservations. Some hotels have invested in computer- based restaurant reservation systems which allow them to store customers’ information, special requests, and transaction details. Others use the traditional reservation book and note cards to record customers’ information. All hotels proactively gather information about their customers’ preferences by encouraging their guest-contact staff to observe and record guest preference

• information. Some of the “Super A” hotels provide small note pads for their staff to

record guest information. The information is sent to the guest relations or front office department to update the guest database. Only one hotel set a target for the number of guest preferences each employee was expected to collect. This concurred with the findings of Gamble et al. (2001) that staff incentives for advancing customer knowledge are uncommon. Customer data were made available to those involved in service, operations, sales, and marketing. Most of the hotels limit employee access to the guests’ information to ensure customer privacy. The majority offered the guests the opportunity to “opt” out

• f the system by asking the guest to indicate at check-in whether they would like the

hotel to use his/her information for marketing purposes. This is mainly because the Personal Data (Privacy) Ordinance of Hong Kong of December 1996 states that unless the individual gives consent personal data may only be used for the purposes for which they were collected or a directly related purpose. The parties collecting personal data should ensure appropriate security measures are used to protect the data and control

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the access of the data (Office of the Privacy Commissioner for Personal Data (PCPD), 2008). All the participating hotels viewed communication with customers as an important component of enhancing the intimacy with customers. An important goal for several properties is improving the efficacy of their target marketing to existing customers. Communications were targeting specific groups based on demographic characteristics, preferences, and transaction histories. They considered e-marketing the most cost-effective promotional tool. Several hotels stated that they limit the number of promotional emails sent to guests to avoid communication overload. A few participants suggested that this overload could lead to guests ignoring the communications, or worse, it could create negative feelings towards the hotel. A few hotels have found ways of using their systems to increase revenue from in-house guests. For example, in one hotel the guest relations department works closely with the restaurants to steer guests to hotel restaurants in need of additional business... However, manpower is an issue. Without sufficient staff to be able to interact with customers and play the role of “internal sales manager”, the system will not work. Value proposition development. This stage involves identifying sources of value for customers and creating an experience that meets and exceeds their expectations and

• requirements. Long term profitable relationships with key customers can be

maintained by satisfying individual guest needs, improving the guest experience, and avoiding or minimizing the effect of service failures (Choi and Chu, 2001; Engstrom et al., 2003; Minghetti, 2003; Tepeci, 1999). In addition to the traditional marketing mix, management of customer experience is especially important in a service industry like hotels in the value creation process. Customization of service and communications, service guarantees, and service recovery programs are value-added CRM practices. Hotels participating in the study used different ways to differentiate themselves from their competitors. The medium tariff hotels identified themselves as offering “value for money” to their guests. The High Tariff B hotels focused more on the quality

• f the products (e.g. guest rooms, restaurants, and location of the hotel). The High

Tariff A and “Super A” hotels differentiated by offering superior products and personalized services. They sought to provide more opportunities for managers and employees to interact with customers informally. A number of the “Super A” hotels deployed guest relations officers, lobby greeters, and duty managers to approach guests in the hotel lobby and to make courtesy phone calls. Some hotels scheduled their management staff to be manager-on-duty on a rotational basis and some were required to be in the lobby for a certain number of hours a day to greet and bid farewell to

• guests. One of the hotel executives comment that:

It is important for us to be there for the guests, whenever they need us. Having staff in the lobby is just like having someone to welcome guests back home. Also, they are there to talk to guests, find out how they are enjoying their stay, and provide relevant information and suggestions to guests when needed.

This was not only practiced by higher tariff hotels. One of the “Medium Tariff” hotels required the two sales managers to take turns greeting the guests in the lobby, thus allowing the sales managers to maintain closer relationships with the guests. This supports Beck and Knutson’s (2006) suggestion that the functions of sales managers in hotels are changing. However, it also puts pressure on the sales managers and requires them to have strong time management skills. One of the “Super A” hotels with a number of F&B outlets has a separate reservations department to answer telephone calls for reservations for the different

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restaurants within the hotel. The hotel has a computerized restaurant reservation system and a designated reservation number for all the restaurants, which operates from 10 a.m. to 10 p.m. daily. The manager believed that if the hostess in the restaurant is too busy greeting the guests and not answering the phone, the hotel is either losing potential revenue or not providing the appropriate service to the customers. This is another example of how hotels are adding value to the customer experience. Complaints provide an opportunity to gather information that can be disseminated and used throughout the organization for product modification, service enhancements, and preventative measures (McAlister and Erffmeyer, 2003). All the hotels agreed that service recovery is one of the most important CRM tasks. They all have well designed procedures for handling guest complaints. Most included systems for logging and disseminating details of the complaints and follow-up to ensure satisfactory

• resolutions. Most of the hotels require that feedback must be provided to guests

within 24 hours. Hotels also believed that staff being given the opportunity and autonomy to handle guest complaints is of utmost importance. All “Super A” hotels require any employee who received the complaint to “own” it until solved.

Whoever receives the complaint has ownership of it. You will own the problem and follow through until you have done everything you can [. . .]

said one of the executives of a “Super A” hotel. Another executive also expressed similar thoughts:

We also emphasize to our staff that we should try to solve the guest’s problems before they depart as there is a high possibility that they will become a very satisfied customer.

The majority of the hotels required their staff to involve the duty manager when the complaint involved potential compensation or hotel liability. Managing customer lifecycle. Customer acquisition, retention, and development are important processes in managing customer lifecycle. With good customer databases and data mining techniques, customer data can be used to prospect new customers and for cross-selling and promotion of new products and services. It is important to ensure new guests are identified, and existing guests are retained and encouraged to return. One of the “Super A” managers purposely took the guest relations department out of the Rooms Division and made it a separate unit answering to the General Manager. This allowed the guest relations team to focus exclusively on building relationships, identifying needs of the customers, and servicing them. The executive further explained:

My sales managers are my external sales and my guest relations team is my internal sales.

By sharing the sales responsibilities among other guest contact staff, the sales managers can focus on revenue-generating sales activities and tasks outside the hotel while the front-line staff focuses on servicing and selling to in-house guests (Beck and Knutson, 2006). Frequent guest programs are very commonly used marketing tools to attract and retain customers. All the hotels have some form of program to recognize and reward their frequent customers. They recognize their patronage by offering special welcome

• amenities. Major chains have corporate frequent guest or loyalty programs to

encourage patronage. These programs are often incentive programs in which guests can accumulate points and redeem rewards. There appears to be a difference between the frequent guest programs of “Super A” and other hotels. “Super A” frequent guest

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programs are usually not a point-based program. They recognize the loyal guests by

• ffering different amenities other non-monetary benefits. These amenities are often

tailored to the guest’s individual preference. The hotels believe that their well-heeled guests are looking for more than materialistic rewards. Therefore, building an emotional tie with the customers is likely to be more successful. The objectives of these loyalty programs must be to develop high levels of emotional loyalty rather than just repeat visits (Hallberg, 2004). These programs are effective in increasing customer loyalty to the hotel brand or chain, but at the same time are very costly to operate (McClearly and Weaver, 1991). Chain hotels are in a better position to share the costs among the different properties. Several of the hotels, particularly the “Super As”, appeared to concentrate primarily

• n returning guests. Repeat guests tend to get most of the attention and service from

the hotel staff, and many resources were spent to recognize and reward them. It can be speculated that first-time guests are not receiving the full “wow” experience while paying the premium rates. This may inhibit their becoming regular guests. Johnson and Selnes (2005) suggested that a healthy customer portfolio requires significant efforts to bring new members into its portfolio of loyal and most profitable customers. Evaluation and control. Potentially one of the important findings from this study is that evaluation and control are perceived as very important activity. This is not only for the purpose of creating value for the customers, but also for tracking the performance of the guest contact departments and the customers’ evaluations of the hotel/restaurant experiences. Virtually all of the hotels provide comments cards in the guest rooms and restaurants. Some of the hotel chains monitor guest satisfaction by having the properties randomly survey in-house guests using a standardized group-wide questionnaire. Some offer incentives such as F&B coupons to encourage guest participation. To increase the credibility of the results of the survey, four hotel chains commission a research company to conduct surveys of guests after they have checked out. Most of the higher tariff hotels tend to have a more sophisticated process and system to analyze the information for performance monitoring. They also use the information and results more extensively to improve their services and products. With more resources, “Super A” hotels can afford to have a designated manager responsible for collecting, tracking, and analyzing all the relevant information including complaint correspondence, emails, log books, comment cards, etc., for the improvement and enhancement of service quality. In some cases reports are generated by the corporate

• ffice, and hotels could access the reports of all properties. Managers commented that

every hotel within the group would feel the “pressure” to make improvements since every hotel is “watching”. Supporting conditions Leadership and culture. Leadership is needed to provide direction for the organization. To successfully implement CRM, the leader must be strongly committed to lead the change (Buttle, 2004). Leaders also should have ownership of any CRM programs or individual initiatives. The background of the senior executives also provides directions for the hotel on whether to adopt a more operational or analytical CRM approach. One

• f the medium tariff hotels shared that their general manager and their senior

executives had experience in managing luxury hotels. Therefore, they brought in a number of positive changes to the hotel by implementing CRM initiatives. Initiating

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change in a company with a number of long-service employees was not an easy job, but the management finally gained the support of the employees. The level of market-orientation varies across the properties. Narver and Slater (1990) define market-orientation as the organizational culture that most effectively and efficiently creates the necessary behaviors for the creation of superior value for customers and superior business performance. All the hotels have mechanisms to understand the customers’ preferences. Some of them are obsessed in obtaining customers’ information. However, some hotels, even those in a chain, do not share customers’ information with their sister hotels. The “Super A” and “High Tariff A” hotels deploy more resources to deliver services and products that meet the needs of individual customers. The other hotels adopt a more standardized approach. Hotels in the higher quality categories were seen to have a more customer-oriented culture in which their employees have a strong sense of “ownership” satisfying the needs of the

• customers. This is in line with Brown et al. (2002) who defined customer-orientation as

the employee’s predisposition to meet the customers’ needs and confirming that customer-orientation had positive impact on employees’ performance and satisfaction. Employees are empowered to make the guests happy but the managers are active in the process. Empowerment involves the transfer of power from higher levels of employees to front-line staff (Cunningham et al. 1996). It was observed that the higher the category, the more empowerment is given to the employees for handling guests’

• issues. Not only should the complaint be handled in a timely manner, but the content

and process of consumer complaint management are important in influencing customers’ perception of the service failure experience and satisfaction (Hocutt and Stone, 1998; Spreng et al., 1995) and their repurchase intention and negative word-of-mouth communication (McAlister and Erffmeyer, 2003). When employees are given the opportunity to enjoy autonomy in decision-making, it contributes to higher employee satisfaction (Hocutt and Stone, 1998). Extensive orientation sessions, customer service trainings, and management-employee meetings are common practices to equip employees with the necessary skills and knowledge for their jobs. In all of the best examples, the employees are given extensive orientation and training before being empowered. They have to “earn” the responsibility, but at the same time it is important to motivate and gain employees’ commitment through these internal marketing processes (Gro ¨nroos, 1994).

• People. A recurring theme among the participants was the importance of the people.

Even managers from the most technologically-oriented hotels emphasized that their CRM practices were sustainable only with capable and passionate employees with strong enthusiasm in their job. Many of the managers professed and demonstrated a love for the job. These managers wanted to make their guests happy and handling difficult guests represented a “game” not a burden. All the hotels have invested considerable resources in recruiting, training, and retaining employees. Virtually all the properties had full-time dedicated training staff and required extensive orientation programs for all employees. All the “Super A” hotels stated that low employee turnover and long-service employees contribute significantly to the success of their CRM programs. Information technology. IT includes front office applications that support service, sales, and marketing; depositories of customers’ data; and back office applications which integrate and analyze the data (Greenberg, 2001). Not surprisingly, as the average daily rate increases, so do the resources committed to CRM. The “Super A” hotels dedicate extensive technological resources to retain loyal customers. Even

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within categories there were differences in the level of IT utilized. At one extreme was a hotel that used paper and pen logbooks that are transcribed and distributed by a secretary each morning. At the other end a manager of a highly computerized “Super A” property joked that the company had never seen a system they did not like. Perhaps, coincidentally, the hotel also maintained a high occupancy and room rate with fewer employees-per-room than any other hotel in their classification. Appropriate use

• f technology certainly helps the hotels manage customer relationships more

effectively though virtually all the managers emphasized that it is a tool to help employees and not a substitute. All participating hotels except the two medium tariff hotels use or were in the process of adopting computerized restaurant management systems. However, the level

• f sophistication varies. Some only use them for managing reservations, but some also

have the capability of storing customers’ profile and transaction data. Some hotels maintain a separate restaurant customers’ database solely for the purpose of e-marketing and mailing of promotional materials. Within the hotel, most seem to operate separate CRM systems for the rooms division and food and beverage. A few managers indicated that they would prefer a single system which consolidates all customers’ records. This would require investment in a computer system that can integrate multiple databases. Several managers indicated that their owners are reluctant to make such investments in non-physical assets.

• Processes. The process is the way which things are done within an organization.

The processes need to be designed and implemented to facilitate the creation of value to the customers and the achievement of CRM objectives. These processes can be classified as front-of-the house, where interactions with customers take place, and back-of-the house, where the different departments support the delivery of services to the customers. Most of the hotels have adopted a proactive approach in serving the customers by

• btaining guests’ information and preferences in advance and using them to service the
• customers. The higher priced properties appear to be quite efficient at using the

prodigious quantities of data collected towards correcting individual problems, personalizing the guest experience, and identifying target markets. Most of the managers interviewed were satisfied with the type and quality of customer information collected through the different channels. Three of the “Super A” hotels and one from each of the rest of the categories, designate a staff or a particular department to maintain the guest database to ensure that it is complete, valid, and up-to-date. However, most of the hotels do not appear to be effective in systematically amalgamating the requests and complaints into a single database that can be analyzed longitudinally to look for opportunities for identifying and correcting defects. Only three, all “Super A” properties, described such a proactive system. Several of the participants perceived customer information as proprietary even within the same company. All but one “Super A” hotel interviewed were sharing their frequent guests program members’ information with their sister properties. The guest history information is uploaded to a central database and dispatched to the different properties every night. Three out of the four participating “High Tariff A” hotels did not do so because they either did not have a central reservation system or their property management system was not capable of storing and sharing complicated guest information. Another stated that each hotel within the group operates independently and there was no need to share guests’ information. One manager was honest enough to admit that this was because they might be competing for a piece of

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business with a sister property. Sharing of customer information among sister hotels under the same group is uncommon for “High Tariff B” and “Medium Tariff” hotels. The finding is consistent with Gamble et al. (2001) and Piccoli et al. (2003) that the practice of sharing customer information is problematic because of contractual agreements, lack of trust, and technological restrictions. Although Gamble et al. (2001) and Piccoli et al. (2003) suggested that legislation barriers is one of the possible reasons for not sharing customer data, it appeared that this is not one of the reasons considered by the hotels not sharing their databases with sister properties even though they were required to comply to the Personal Data (Privacy) Ordinance of Hong Kong. Implications and conclusion CRM-related research in the hotel industry has looked at various specific practices and the role of CRM in achieving overall objectives at corporate or strategic level. Yet, no research has been done at a micro-level by looking at the CRM practices adopted by individual hotel properties by adopting the CRM value chain. Modifications were made to the original CRM value chain framework of Buttle (2004). Evaluation and control were included as a final stage of the model because, in practice, this is a very important step for companies that are striving to improve service quality and delivery of value to

• customers. In theory, it is also supported by research in strategic management and

total quality management. This study suggests some significant implications for managers in competitive

• environments. The most commonly cited goal for CRM was guest retention. All hotels

studied had similar CRM practices but those in the higher rate range had more complex systems and processes. The best way for a hotel to keep their guests is to meet the individual needs, both intrinsically and extrinsically. The most important step in this process is to systematically identify and process those needs. The best hotels studied did this routinely almost without fail. The good CRM systems are designed to collect, process, and use customer data to ensure that opportunities are discovered and problems are handled promptly. There is a noticeable difference in the practices between the luxury properties and the “super” luxury hotels with the latter adding separate staff and computer systems aimed at tracking guest preferences and using the information to enhance guest experience and monitor performance. The lower to medium range hotels tend to consider CRM as a tool for marketing. Based on the CRM practices identified in the CRM value chain, the primary activities can be classified mainly into two types:

• perational and analytical. All the hotels are engaged in operational CRM which

includes understanding customers’ needs and expectations, creating value through the delivery of services, products, and experiences, and managing customers’ lifecycle. Virtually all of the hotels collect and analyze comment cards and surveys. However,

• nly three hotels regularly analyze guests’ complaints, comments, and requests from

various sources for the purpose of problem identification and continuous improvement. Hotels that do not review guest service failures in a holistic and longitudinal process are doomed to repeat those failures. None of the hotels are intensively “mining” their customers’ transaction data to identify the cost and profitability of each customer

• segment. Although they capture a considerable amount of customer data (front-line,

spontaneous, behavioral, and customer satisfaction and complaints, etc.) from different sources, these data are seldom used to create useful knowledge about the customers (Dev and Olsen, 2000). This is very similar to the findings of Moriarty et al.’s (2008) study of small hotels in which hotels identified as having higher levels of marketing

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activity have more formal and organized systems of collecting, recording, and using customers’ information (e.g. comments, negative word-of-mouth, preferences, etc.). Information collected was purely used to service the customers. The hotels did not analyze the data collected nor use the data for other purposes beyond electronic direct marketing. In terms of managing customer lifecycle, the hotels are doing particularly well in retaining customers. Most of them have some form of frequent guest programs. The type of reward differed by category where the “Super A” hotel programs are more “recognition-based” and the others are more “point-accumulation” oriented. Successful loyalty programs should be focusing on building an emotional tie with the customers rather than on repeat business. One of the important findings from this study is that, evaluation and control are perceived as very important activities for the purpose of creating value for the customers, tracking the performance of the guest contact departments, and for monitoring the customers’ evaluations of their hotel/restaurant

• experiences. Effectiveness of the CRM practices can also be tracked by having a

system to monitor the costs and benefits of acquiring, retaining, and developing different customer segments. Having the “tools” for CRM does not guarantee successful implementation and achievement of goals. Success of the CRM process depends on whether the hotel has strong leadership in driving the whole process; a customer-oriented culture; managers and employees who passionately maintain constant guest attention to enhance guests’ emotional attachment to the hotel. Computer systems to collect and process customers’ information; and a process for supporting the delivery of value to customers are also critical. In every organization resources are limited. This means that they must be expended where they can do the most good. Usually this means rewarding the current regular

• guests. However, it is critical that the hotel staff constantly work to identify and woo

the next generation of regulars. The research presented here is exploratory and has two principal limitations. First, the sample is probably biased towards hotels that are most interested in CRM. Also, the sample is heavily weighted towards higher tariff properties. This makes it a useful sample for developing the systems, but it means that the results cannot be generalized. Second, the research was conducted exclusively in Hong Kong which is a great hotel city but probably atypical. It is widely recognized that knowledge about customers (potential or existing) is an asset and will add value to a company. In order to stay competitive, companies need to acquire new knowledge about their market, explore and make use of their existing knowledge about their customers, and share this knowledge within the organization (Schlegelmilch and Penz, 2002; Tiwana, 2001). Therefore, future projects should investigate how hotels are adopting the knowledge management approach to enhance customer relationships. Furthermore, an instrument should be developed to survey hotels in Hong Kong and elsewhere by adopting the CRM value chain to test the relationship between the adoption of CRM practices and the customer retention rates and profitability.

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