Opportunities for independent hotels competing with chain hotels

Opportunities to Succeed as an Independent Hotel in Competition With Chain Hotels

Hotel Augustin, Bergen Norway

Overview of Hotel Augustin

The Augustin Hotel located in Bergen Norway is the oldest family-run hotel in Bergen. The Augustin "...combine[s] old world charm with modern sophistication." (Hotelgenie.com) Hotel Augustin was built in 1909 in what is referred to as "Jugend style." The present family running the hotel came into ownership during 1919 and is presently under operation by the fourth generation. (Scantours, 2007) During the 17th century, the Altona Tavern was a local haunt for Bergen artists and concertmasters and has since then been "creatively incorporated into the hotel." (Ibid; paraphrased) the Altona was host to the concertmaster Ole Rodder as well as other luminaries of the 1700's and Musikselskabet Harmonien, Bergen's orchestra was known to rehearse there as well as did the theatre company Det Dramatiske Selskab. (Scantours, 2007. The hotel's new wing has all the modern facilities and comfort with an interior designed by a young Bergen architect, namely, Aud Hunskar who has won several prices to include the Norwegian Design diploma in 1993. (Scantours, 2007) the Augustin boasts original art masterpieces throughout the establishment. The hotel is located centrally to the shopping and harbor area, which includes the Fish Market; World Heritage listed Bryggen and the Mount Floyen furnicular. The dock where one can catch 'Gateway to the Fjord' boat rides is located approximately 300 meters from the Augustin Hotel. (Scantours, 2007) the following labeled Figure 1 shows the hotel's entrance and registration desk at the Augustin Hotel

Augustin Hotel Entrance and Registration Desk

Source: Scantours (2007)

The following labeled Figure 2 shows the location of the Hotel Augustin on the harbor in Bergen, Norway.

Location of Hotel Augustin on Harbor

Source: Scantours (2007)

II. Restaurants of Hotel Augustin

Restaurants in the hotel include the ground floor restaurant Kjobmandsstuen (the Merchant's Rooms) which is designed in "intimate and rustic style" (Scantours) and the two restaurants located in central Bergen's largest shopping centre the Galleriet which are the Augustus Conditori & Lunchsalon and the Spiskammerset (the Larder). (Scantours, 2007)

Dining Accommodations of Hotel Augustin

Source: Scantours (2007)

III. Accommodations (Room Types and Styles)

Single rooms are available at Hotel Augustin and are of the same type as are offered in double room accommodations. Double room accommodations in Hotel Augustin are of two types: (1) Double rooms in cozy, old-fashioned style; and (2) Double rooms in contemporary design. Double rooms with cozy, old -- fashioned style include rooms with a view of the harbor. These rooms are recommended for those "who appreciate cozy rooms, in an old-fashioned style with personality and atmosphere." (Scantours, 2007) the rooms are furnished with furniture procured from antique auctions. Artwork includes the work of many Norwegian artists. Furnishings are inclusive of a desk, mini-bar, text-TV with cable, a trouser press, wc/shower, and a hair-dryer. The double rooms in contemporary design were renovated in 1995 and are recommended for those "who want a straightforward room with modern, pleasant design." (Scantours, 2007) Furnishings include a desk, mini-bar, text-TV with cable, trouser-press, WC/shower, hair-dryer, extra phone in the bathroom.

Hotel Augustin Room View

Source: Scantours (2007)

IV. Health & Safety Provisions of Hotel Augustin

The Hotel Augustin believes that health and safety are vital in both the employees working environment and the guest's accommodation environment. Offerings of the hotel include rooms to accommodate those who are allergy-sufferers and those who require wheelchairs for mobility. Over 50% of the rooms are non-smoking rooms. Fire alarms have been installed that connect 'directly' to the main fire station in Bergen located only three minutes from Hotel Augustin. (Scantours, 2007; paraphrased)

THE OPPORTUNITIES to SUCCEED as an INDEPENDENT HOTEL in COMPETITION WITH CHAIN HOTELS

CASE STUDY: HOTEL AUGUSTIN, BERGEN NORWAY

CHAPTER TWO

LITERATURE REVIEW

I. Overview of Destination: Bergen Norway

Source: National Railroad Museum

Bergen, Norway has many attractions to boast that draw tourists to this area. Bergen is the second largest city in Norway and is the Gateway to the Fjords. Bergen is centrally located by the North Sea and was founded in 1070. Bergen is called: "...a melting pot of arts and culture, activities at sea, oil and gas, and academic endeavors." Bergen is an international town that has the charm and atmosphere of a small town. The city's population is approximately 235,000 and is referred to as appearing "like a spectacular amphitheatre clambering up the mountainsides, overlooking the sea, embracing you." (www.bergen.kommune.no) Bergen is also stated to be: "...one of Norway's most vigorous cultural cities." Founded in 1070 by King Olav Kyrre, Bergen has become a commercial and shipping town significant to the European industry. Bergen was at one time the: "...largest of all town in the Nordic countries." (www.bergen.kommune.no) the Wharf in Bergen was rebuilt after the fire in 1702. The harbor front in Bergen, called Bryggen, "was a scene of thriving activity for 'the Hansas' until the 18th century. Bergen is a university city with a major business and commerce college along with other various colleges in the city. Bergen is an international town that has the charm and atmosphere of a small town. The city's population is approximately 235,000 and is referred to as appearing "like a spectacular amphitheatre clambering up the mountainsides, overlooking the sea, embracing you." (www.bergen.kommune.no) Bergen is also stated to be: "...one of Norway's most vigorous cultural cities." Founded in 1070 by King Olav Kyrre, Bergen has become a commercial and shipping town significant to the European industry. Bergen was at one time the: "...largest of all town in the Nordic countries." (www.bergen.kommune.no) the Wharf in Bergen was rebuilt after the fire in 1702. The harbor front in Bergen, called Bryggen, "was a scene of thriving activity for 'the Hansas' until the 18th century. Bergen is a university city with a major business and commerce college along with other various colleges in the city. One of the attractions of Norway are the fjords with the longest and deepest being the Sognefjord. The countryside in Norway is stated to be of a breathtaking nature. Bergen is host to many music festivals and events throughout the year. One such event is the Bergen International Festival founded in 1953 and 'focused on presenting prominent international and Norwegian artists in the fields of music, ballet, opera, theater, dance and the performing arts." (Nordiske Festspillene l Bergen Impulser, 2007) the festival takes place each year: "over 12 days at the end of May and presents 120-140 events. The music of Edvard Grieg (1843-1907) is presented at his home Troldhaugen during this festival. (Ibid) Conference events are noticeably present in Bergen as noted at the homepage of the city online at http://www.visitbergen.com.

II. Independent Case Studies Review

The work entitled: "Independent Hotels: The New Brand Alternative" states that in the past ten years hotel development "...has demonstrated an acceleration of brand proliferation." (Swig, 2000) Whether the proliferation of brand has been driven by financial investors or consumers "is available for argument, but all research would indicate that franchise or chain branded hotels command an overwhelming market share vs. independent hotels." (Swig, 2000) in spite of these trends Swig (2000) holds that independent hotels "may be more of a viable brand alternative than ever..." Independent hotels have gained significant ground in the areas of distribution through global distribution systems and especially through internet exposure." (Swig, 2000) While the independent hotels are not causing a large threat in the view of the chain hotels, there certainly has been an impact in major markets and specifically in specialized resort locations. Statistics reveal that independent hotels have "lost ground in market coverage to the brand sector." (Swig, 2000) in the U.S. "the percentage of independent hotel rooms vs. total supply slipped from 38.9% in 1990 to 30.3% in 1999 due to significant growth in the economy and mid-scale chain sectors." (Swig, 2000) as of Swig's (2000) report there were 1.2 million independent hotel guest rooms available on a daily basis versus 1.25 million average daily rooms in 1990." (Swig, 2000) Swig states that the measure of potential possess of an individual Independent hotel is its ability to "be distinctive in their market." (Swig, 2000) Swig reports that diverse markets such as "Miami, New York, Chicago, Denver, Seattle, New Orleans and San Francisco has reflected a business model with a formula linking the hotel product to the destination, its neighborhood, building architecture, and the personality of the intended customers." (2000) Swig reports that Chip Conley of Joie de Vivre Hotels (a group of fifteen independent boutique hotels in and around San Francisco states: "We sell sleep, but we create dreams through making an emotional connection to our customers." Boutique customers according to Conley are "sophisticated, artistic, literary, and conscious." (2000) Swig further reports the statement of Steve Pinetti of Kimpton Hotels who expresses a strongly belief that: '...there is a migration or revolt from brands. We sell sleep, but we create dreams through making an emotional connection to our customers." Boutique customers according to Conley are "sophisticated, artistic, literary, and conscious." (2000) There are other factors associated with change that enhance the ability for the independent hotels to compete as there is a segment of customers with the desire to discover for themselves what best satisfies their taste. The independent hotels offer guests "the option of maintaining their differentiation while affiliating with 'soft' brands, which reflect a defined product and offer similar service support as franchisers or chains." (Swig, 2000) Swig additionally reports that Rob Cornell of Preferred Hotels believes that "global distribution brands have evolved today to provide the independent hotel owner; manager access to the latest in reservation distribution and marketing technology, partner relationships, quality stands, volume purchasing and sales infrastructure. " (2000) Technology is said to be the "new vehicle" that enables equal access..." (Swig, 2000) Finally, Swig states that "membership or affiliate organizations have matured and gained credibility with consumers. At the same time these groups have broadened their foundation of services and technology to strengthen independent hotels even further. Brand status has been achieved through the ability to satisfy both independent hotel operators and achieve strong reputations with consumers. The final step in this paradigm will be the positive recognition of independent hotel development from the investment community."{2000)

Carol Verret states that there are "cost-effective ways of positioning your independent hotel and resort" however, coordination is required. Verret states the following as a bare framework of such a plan:(1) Rate and Offering Positing - Decide on a rate structure in relation to the hotel's position in the market with the hotel's competitive set; (2) Revenue Management Strategy - Decide on the revenue management strategy; (3) Property Management System - this is termed a good investment although it is necessary to keep updated as new updates are released for the system; (4) GDS Presence and Reservations Capability - Stated to be a wise investment is hiring a company for provision of 800 number reservation services and GDS placement that will be picked up by the E-commerce channels. Desk staffing for sales is not a good idea since they may not be good sales people and furthermore the business peak season for reservations will also be the busiest time at the hotel; (5) Group Sales - it is stated that "a well-planned group sales effort can support your property in the off-season and maximize revenue in peak season." (Verret, 2005) in a separate article entitled: "The Challenge of Marketing Independent Boutique Hotels" Verret (2002) states: "We all have wonderful memories of a charming hotel in which we stayed that was free of the cookie-cutter image, had an intimacy that made us feel special and nooks and crannies that invited us to linger and relax. Hoteliers often harbor a retirement fantasy that when the mainstream career comes to a close, they will walk into the sunset and operate an inn or a bed and breakfast and will have gone to hotel heaven. Well, let me tell you that hotel heaven can turn into hell very quickly." (2002) How so one might ask? According to Verret due to the size of the boutique property, they often do not have the "clout in the market to recruit and retain good line employees. Seasonality can have the happy retired hotelier making beds, doing laundry and unstopping toilets in the off-season" due to being forced to lay off seasonal staff. Further budgeting and forecasting can create quite a problem if accurate records have not been kept. According to Verret: "Marketing an independent boutique hotel requires a certain finesse and accountability due to the restrictions of size and budgets." (Verret, 2002) Factors required for development of a "lean and targeted marketing plan" (Verret, 2002) are inclusive of the following: (1) Begin by developing a client profile for each market segment by season; (2) Use electronic distribution channels and manage the heck out them; (3) Develop a Public Relations Plan within your marketing plan; (4) Develop your own Customer Relationship Management program; (5) Develop cost effective mailing pieces targeted to past guests and potential guests that your profile for the period of time or promotion that you have developed; (6) This may sound trite but make sales calls based on your target customer profiles. (Verret, 2002)

In a set of case studies reported online, the E-Site Marketing Website the case study involving "The Hay-Adams" hotel is reported. The Hays-Adams is a 145-room independent luxury hotel located in Washington D.C. directly across from the White House. In 2002, the hotel was extensively restored. In order to increase awareness among consumers of the Hays-Adams Hotel E-Site Marketing was designed and developed and finally launched through an e-mail marketing campaign announcing the reopening of the Hays-Adams. Features of the email campaign are stated to have been as follows:

HTML e-card design, using an animated GIF to add movement to the piece without causing any of the difficulties that can result from sending out campaigns that use Flash technology

Three calls to action on the e-card, with links to the following pages of the site: The Homepage for the Hay-Adams, the Special Offers page and the Reservations page

Dissemination of the e-card to approximately 1,000 e-mail addresses contained in three separate databases

Online real-time reporting to determine the success of the e-mail campaign in achieving its objectives." (E-Site Marketing Case Studies: The Hays-Adams)

Results of the case study include findings that the campaign was "extremely successful in increasing awareness of the reopening of the hotel and the promotional rates. Campaign results include the following:

Overall click rate for the campaign - 30.5%;

One database received a click-through rate of 56%;

Clicks were received on the calls to action from people who were not on the recipient list for the campaign, indicating that the email was forwarded to others, who in turn responded to it (6.6% of total clicks were the result of referral marketing)" (Ibid)

According to Starkov (2002) if a hotel does not "currently generate at least 8% to 10% of its' bookings from the Web" then there should be a concern asking why since over 7% of all revenues in hospitality will be Internet-generated." Starkov additionally states that: "Online distribution is here to stay. Over 192 million North Americas are active Internet users and 37 million of them have already purchased travel online. The Internet offers vast, interactive, rich media and most importantly, growing distribution market." (Starkov, 2002) in a case study conducted related to 'Half Moon' a 400-acre independent beach-front resort located in Montego Bay, Jamaica. Half Moon "was in need of a total Internet marketing strategy" (E-Site Marketing, 2007) that would make the provision of an online presence and increase the resorts occupancy and revenue. E-Site Marketing created and implemented an E-business plan for Half Moon that was complete including the following components:

Search Engine Marketing Program

Linkage Research & Acquisition Services

Monthly Website Traffic Reporting & Analysis

Mini-site design and development for property target markets - golf, meetings and weddings

Website Maintenance

E-mail marketing and e-newsletter campaign design, development and distribution

Internet marketing consulting

Online advertising

Interactive sales proposal

Online booking engine (E-Site Marketing, 2007)

Results of the case study state that Half Moon "...has a strong online presence and brand awareness as a result of Internet marketing initiatives." (E-Site Marketing, 2007) Additionally 300,000 visitors visited Half Moon's website in 2002 and as well Half Moon is "...ranked highly in search engines for competitive keywords inclusive of 'Jamaica vacations' and 'luxury Jamaica resorts'." (E-Site Marketing, 2007)

III. Destination Web Strategy in Hospitality - Leveraging the Destination

The work of Jason Price and Max Starkov entitled: "Building a Destination Web Strategy in Hospitality - Leverage the Popularity of the Destination for the Benefit of Your Hotel(s)" states that: "A Destination Web Strategy means leveraging the popularity of your destination to your own advantage by making your hotel or cluster of hotels the 'hero' of the destination, and in the same time turning your hotel website into a valuable destination resource for your online customers and increasing its value and relevance for the search engines." (2003) Imperative within this strategy is the "context of local resources." (Price & Starkov, 2003) it is held that hotel planning is "destination sensitive." (Price & Starkov, 2003) Keywords based on the name of the city destination plus the hotel are common and 85% of those who use the Internet rely on search engines such as Google, Yahoo, MSN, AltaVista..." (Price & Starkov, 2003) These authors state that: "...by having a robust Destination Web Strategy, the search engines will be able to find additional value in your website, catalog and index the website more effectively, associate it more specifically with various local attractions, lifestyle attributes and aspects of the destination, and drive more business to the property." (Price & Starkov, 2003) it is revealed in this report that a "Destination Web Strategy" may be in various forms however, the most common forms of a Destination Web Strategy are those as follows:

Destination Section or Page: An optimized destination section or page within the hotel website of a single hotel property or a corporate website that represents a cluster of hotels in a given destination;

Destination 1-Pager: A stand-alone fully optimized one-page website representing a cluster of hotels within a destination;

Destination Website (single property): A stand-alone website encompassing destination attributes matched with attributes of the hotel. (e.g. eco travelers, gamblers, spa enthusiasts); and Destination Web Portal: A stand-alone multi-page fully optimized website representing a cluster of hotels with local area content, pages targeting different audiences (e.g. business travelers, leisure travelers, etc.). " (Price & Starkov, 2003)

Related as well is that some hotels are through the guidance of "Internet-savvy consultancies, have already begun employing Destination Web Strategies to counter the disastrous effects of merchant model discounts and better market their product and local destination attributes." (Price & Starkov, 2003)

Destination Web Strategy involves two primary goals:

1) provide valuable and relevant destination information so that the online travelers and the search engine spiders alike find value on the website beyond the mere hotel product content; and 2) Turn the hotel into the gravitational center of the destination." (Price & Starkov, 2003)

Price and Sarkov state that the steps required in the developing the 'Destination Web Strategy" are those as follows:

Identifying the most popular area attractions;

Identifying the relevant lifestyle categories, attitudes and values of your existing and potential customer base;

Identifying local events that can be exploited to attract guests at the property;

Identifying how local attractions and lifestyle attributes relate to the property;

Identifying patterns of consumer online purchasing habits for the hotel/resort and the particular destination;

Evaluating the most popular target keywords for the destination;

Ranking the keywords according to their popularity and relevance;

Developing credible and relevant copy based on detailed destination research;

Weaving the target keywords throughout the copy;

Developing the "invisible copy": page titles, description tags and meta tags;

Overhauling your website to add the identified destination, lifestyle and property attributes and position your hotel product as the central point of the destination; and Performing a Destination-Focused Search Engine Strategy (Price & Starkov, 2003)

According to Price and Starkov (2003) the Destination Web Strategy:

Allows the hotel brand, hotel management company, branded or independent hotel and resort to leverage the popularity of the destination for the benefit of its property or cluster of properties within a destination;

Allows hoteliers with cluster of properties within the destination to cross-sell their properties and leverage differences in location and price to appeal to a range of travel planning budgets, tastes, and perceived values;

Reduces the overall marketing cost (creation, development, maintenance, and search engine submissions) as the strategy bundles together more than one property, or a single property with the attributes of the destination; and Allows customers to locate a property or group of properties unique to a particular attribute of the destination or a lifestyle category." (Price & Starkov, 2003)

The following figure illustrates the Destination - Hotel Lifestyle Matrix as related by Price and Starkov (2003)

Destination - Hotel Lifestyle Attributes Matrix Hospitality e-business Strategies

Source: Price & Starkov (2003)

Certainly the guidelines provided in the foregoing matrix are informative for development of the independent 'destination web strategy' knowledge base for marketing strategy.

IV. Enterprise Content Management and Digital Media

IBM reports in the work entitled: "Planet Digital: Bringing Enhanced Media Services to Hotel Guests" (2006) that the media & entertainment and travel & transportation industries have met consumer need through Enterprise Content Management and Digital Media. The report outlines the facts in a chart as follows:

Figure #

Outline of Enterprise Content Management and Digital Media

Business need:

Planet Digital needed to enable its innovative business model for media service delivery, which allows the company to focus on its core competency while relying on collaborative partnerships for solution components and service capabilities.

Solution:

Planet Digital teamed with IBM and others to create a packaged media solution that serves hotel guests. The solution stores the television feeds of 12 channels for 24 hours and makes them available for viewing on demand. It also provides a portal to offerings from Planet Digital's channel partners including video and audio on demand, interactive information services and Internet access.

Benefits:

Time-shift" TV viewing offers hotel guests an exclusive service and is a key competitive differentiator for Planet Digital • Partnership-based business model enhances Planet Digital's flexibility and responsiveness • Reduced administration costs through full integration with hotel back-office systems for automated billing and enhanced service

Source: IBM (2007)

This allows for "catering to sophisticated travelers" as well as a "set of offerings on the leading edge" according to the IBM case study report. In terms of business benefits, the following are stated as IBM's provision:

1) Focus on core competency allows Planet Digital to devote more of its resources to creating innovative new services; and 2) Planet Digital's small size gives it a high degree of business flexibility and responsiveness to its customers. (IBM, 2007)

Integration is stated to be 'key' "since the individual service offering come from diverse providers - and have diverse 'faces', Planet Digital's challenge was to combine them into a single, integrated service." In a partnership with an ISV to create a portal and GUI that provides a seamless front-end to the various offerings." (IBM, 2007) All deployment is housed fully integrated with the hotel's back-office systems, which serves to lower administration costs for the hotel. Key components of the services are:

Network Consulting: Consulting/Assessment, Strategy/Concept Design, Virtual Private Networking;

Network Integration/Deployment: Cabling and Connectivity Design/Implementation, LAN Design/Implementation,

Mobile and Wireless Network Services: Cisco Gold, Security and Privacy Network Products Rollout." (IBM, 2007)

The report states that collaboration is accomplished through its "core competency - the creation, marketing and delivery of innovative service solutions." (IBM, 2007) What this all boils down to for the guest are enhanced media services that "make a hotel stand out from the crowd." (IBM, 2007) These enhanced services include pay-per-view movies and access to restricted television channels as well as a richer variety of media and information services, which are expected by many if not all guests in today,'s highly technologically enabled business as well as individuals and the ever-maturing tech society.

THE OPPORTUNITIES to SUCCEED as an INDEPENDENT HOTEL in COMPETITION WITH CHAIN HOTELS

CASE STUDY: HOTEL AUGUSTIN, BERGEN NORWAY

CHAPTER THREE

METHODOLOGY

The methodology employed in this study is of a qualitative nature and is accomplished through a review of recent literature relating to the independent hotel industry and the business factors that define and shape the industry in both the present and the future of the independent hotel industry. Literature reviewed has been of an academic and peer-reviewed nature and includes review of both qualitative and quantitative case study data collection, analysis and findings information. Review of literature in a case study is of an interpretive nature and is conducted with the intent of acquiring knowledge as to best practice or optimal strategic management of some or all areas of an organization and in this case, the business entity of an independent hotel located in Bergen, Norway. In order for this case study to become informed, it was necessary that research be conducted into Bergen Norway, the destination itself in terms of historical and local cultural significance. Furthermore, the historical background of Hotel Augustin became the focus of research as it was important to understand the history of this location itself. Finally, the outlying countryside, or in this case the harbor and sea attractions as well as the cultural events are significant factors in determining the marketing strategy for a destination so rich in history and culturally vibrant as is Bergen Norway and specifically Hotel Augustin. Finally, this literature review turned to the latest models identified by research as effective and known to boost business for the independent hotel are reviewed. After conducting an extensive literature as herein described the researcher has compiled the information and stated findings that are based upon the evidence presented in the case studies reviewed in the literature review of this present study.

THE OPPORTUNITIES to SUCCEED as an INDEPENDENT HOTEL in COMPETITION WITH CHAIN HOTELS

CASE STUDY: HOTEL AUGUSTIN, BERGEN NORWAY

CHAPTER FOUR

FINDINGS

Findings of this study include the fact that independent hotels have growth rapidly over the past decade. (Swig, 2000) in fact, the independent hotels may be more of an option for those traveling than ever since the independent hotels have gained ground of a significant nature through global distribution systems and due to the Internet. (Swig, 2000) the measure of an independent hotel's potential for success is the hotels' capacity to develop a distinct name for itself in the market. (Swig, 2000) Today's independent hotel guests are "sophisticated, artistic, literary, and conscious." (Swig, 2000) the Internet has opened new doors for independent hotels in terms of their ability to purchase in volume and the sales infrastructure of the independent hotel. Technology is enabling independent establishments as nothing before has been able to do. There are cost-effective methods of positioning the independent hotel however, it does require coordination.