Operational System Analysis A Holiday Inn Case Study
Table of ContentsExecutive Summary21. Introduction32. Operations
and Positioning32.1. Holiday Inn and its Market32.2. Service
Strategy Triad42.3. Market Positioning and Service Concept52.4.
Product/Service Mix62.5. 4Vs63. Customer Satisfaction and
Measurement73.1. Performance Objectives73.2. Measuring Customer
Satisfaction94. Appreciation of Operations Performance84.1.
Operations Strategy Reconciliation74.2. Service Delivery
System94.3. Potential Problems95. Positive Changes and
Justifications106. Conclusion and Recommendations11Reflection14List
of References13
Table of FiguresFigure 1 Service Strategy Triad12Figure 2 Total
Service Concept: Elements and Examples12Figure 3 External Effects
of the Five Performance Objectives13Figure 4 Operations Strategy
Reconciliation13Figure 5 The four stages of operations
contributions13Figure 6 Balanced Scorecard Principles14
Executive SummaryPositioned as an upper-scale hotel chain,
Holiday Inn precisely targets its customers business and leisure
travellers and develops unique product/service mix to meet market
requirements. This report identified key areas for considering when
planning the operational strategy. Operational analysis, including
customer satisfaction and measurement, operations performance,
service delivery system and justified positive changes were carried
out around Holiday Inn. In terms of performance objectives, five
core objectives, cost, dependability, speed, quality and
flexibility were discussed and examples from Holiday Inn were used
to support the discussion. In order to better appreciate the
operations performance, the Operations Strategy Reconciliation
model was proposed. Reconcile operations capabilities and market
requirements are always the essence in operational analysis and
planning. It was suggested that Holiday Inn employ balanced
scorecard to correct customer complaints about over-standardised
services and help the brand gain operations advantage over
competitors.
1. IntroductionAs a global hotel group, the IHG boasts 672,000
rooms in over 4,500 hotels in nearly 100 countries and territories
around the world. Its brands include InterContinental, Crowne
Plaza, Hotel Indigo, Holiday Inn, Holiday Inn Express, Staybridge
Suites, EVEN Hotels and HUALUXE Hotels. The mission of IHG is to
create the Great Hotels Guests Love (IHG, 2013d). This report aims
to identify key areas for consideration when planning the
operational strategy. This will be achieved by investigating the
InterContinental Hotels Group (IHG). The Holiday Inn brand within
IHG will be used as an example. To be specific, this report will
cover the following areas: the operation and positioning of IHG and
Holiday Inn; an investigation into the customer experience and the
use of systems and procedures to measure customer satisfaction; an
assessment of the operations performance. After the analysis of
Holiday Inns operations, the report will propose justified
plausible solutions for positive change.2. Operations and
PositioningOperational strategy is defined as the packages of
decisions that shape the long-term operations capability with
required operations resources (Slack et al, 2010). The entire
report will be structured around operational strategy for Holiday
Inn. 2.1. Holiday Inn and its MarketHoliday Inn is an international
hotel brand in the IHG Group. Unlike its brother Holiday Inn
Express which is a more economic chain, Holiday Inn is an up-scale
and mid-priced hotel brand. With 228,626 rooms in 1239 hotels (IHG,
2012b), Holiday Inn is one of the worlds most recognised hotel
brands. Outside the USA where there are 146,661 rooms in 820
hotels, Europe is the second largest market with 46,610 rooms in
288 hotels with another 20 coming on their way (IHG, 2012). Holiday
Inns expansion in Asia, especially in China is exceptional. For
example, with more than 64 properties, Holiday Inn is one of the
most recognised hotel brands in China (IHG, 2012b). The opening of
Pudong Nanpu Holiday Inn in Shanghai in 2009 marked the 100th hotel
in Asia Pacific (IHG, 2012b).Holiday Inn targets at both business
and leisure travellers who seek convenience, reliability,
relaxation and casual atmosphere. Its properties are located all
over the world and are always conveniently located (IHG,
2012b).2.2. Service Strategy TriadThe Service Strategy Triad
(Figure 1) addresses the interrelationship between target market
and service concept and service delivery system. By understanding
the Service Strategy Triad, an organisation can deploy its
operations effectively so that it can provide the right offerings
at the right time to the target customers (Roth and Menor, 2003, p.
148). Specifically, service concept (coined by Sasser et al., 1978,
p. 14) is a package of tangible and intangible offerings made by
the business to its customers and service delivery system concerns
about how the service concept is delivered to target customers
(Roth and Menor, 2003). The centre part service encounters are the
moments of truth (Chase et al., 1998, p. 142 cited by Roth and
Menor 2003) as only at this time the customers can experience and
evaluate the delivered services which will influence their overall
satisfaction, intentions to repurchase and loyalty (Roth and Menor,
2003, p. 148).This model highlights the need for an integrated
approach to service design. It also demonstrates the importance to
decide the service concept and design the service delivery system
in a way that they can be aligned to the target market. As stressed
by Prajogo and McDermott (2008), the congruence between the
organisations goals and the outside world the external fit (p. 507)
which is an important constituent of an organisations strategic
fit. Therefore it is meaningful to look at Holiday Inns service
concept and its alignment to the target market.2.3. Market
Positioning and Service ConceptThe parent company of Holiday Inn,
the IHG has the strength of segmenting its market precisely
following market analysis. It segments the market into high-end,
mid-range, economical and very economical sectors. In this way
almost the entire target market can be served. An accurate
positioning is vital in choosing appropriate strategies and
therefore builds brand characteristics (Slack et al., 2010) and
achieves competitive advantage. According to Slack et al (2010),
there are four approaches to position the hotel, namely positioning
based on properties and interests, positioning based on quality and
price, positioning based on consumer demands and positioning based
on product quality and class. Based on the positioning approaches,
Holiday Inn lies between economical and mid-range in IHGs mapping
of its house of brands (McDonald and Wilson, 2011). Roth and Menor
developed a list of elements (Figure 2) that consists of a service
concept. As examples of applying this framework to Holiday Inn
case, the supporting facility is convenient online-booking,
facilitating good is sleek reception, facilitating information is
comprehensive hotel information on the website and brochure,
explicit services can be standardised lobby soundtrack and scent as
well as easily accessible properties, and implicit services are the
friendly and relaxed atmosphere. From how IHG position the brand,
the essence of Holiday Inns service concept can be summarised in
five words: dependability, friendliness, accessibility,
attractiveness, and value. As mentioned before, customers in this
specific target market are different from those in high-end sector.
They are looking for a hotel that can provide dependable, delicate,
and easily accessible service at an average or slightly
above-the-average price. It seems that what Holiday Inn can offer
matches what its customers want. 2.4. Product/Service MixHoliday
Inn is keen to develop differentiated product/service offerings to
its customers. Its differentiated offerings can be either
location-based or time-based or global. For example, during Summer
time in UK 2013, Holiday Inn brings the option that kids under
18-year-old can stay for free if they share the rooms with their
parents. Kids aged under 13-year-old can even eat for free if they
order from childrens menu (Holiday Inn, 2013). Holiday Inn also
offers location-specific product/service. For example, in Holiday
Inn Resort on Phi Phi Island, guests can enjoy Bungalows and modern
studio and Jacuzzi and location cuisines at the restaurant. Thai
Dance performances and sunset trips are available local features.
Guests can even hold Thai & Western Weddings on site (Holiday
Inn Resort Phi Phi Island, 2013). Globally, Holiday Inn Hotels
participate in IHGs Priority Club Rewards programme so that its
guests can earn rewarding points for being the guests and use
earned points for free nights at any hotels within the IHG family
of brands (Holiday Inn, 2013). There are a number of other little
features that differentiate Holiday Inn. For example, Holiday Inn
Europe provides its guests with Park Stay and Go package which
includes one night accommodation and up to fifteen nights parking
at selected hotels (Holiday Inn, 2013b). It also provides travel
planner and guide in case that its guests want to explore the
destination.2.5. 4VsOperations management is mainly concerned with
how to better use resources to produce goods and services
(McDonald, 2008). It was concluded by McDonald (2008) that although
firms operations are similar in the transformational process from
resources to products and services, they are different in 4
dimensions defined as volume, variety, variation in demand and
visibility. Therefore, it is viable to examine Holiday Inns
operations from these 4 dimensions, namely 4Vs.In terms of volume,
as Holiday Inn is an up-scale and mid-priced hotel brand, the
number of properties is much higher than other higher-end brands in
IHG. For example, there are 1239 Holiday Inn Hotels around the
world, while there are only 53 InterContinental Hotels. The market
positioning of Holiday Inn determines the fact that this brand
requires a lot more properties to better serve the need for
convenience by its target markets.In terms of variety, Holiday Inn
itself is highly standardised, especially after its first
rebranding (Anonymous, 2008). It re-designed the logo and
introduced standardised lobby decoration, music and scent in the
re-branding. But apart from the standardisation, Holiday Inn is
keen to match its services to what guests want. The aforementioned
example of Holiday Inn at London Brentford Lock is an example of
its flexibility. The variation dimension is about the influences of
demand patterns and seasonality on sales volume (McDonald, 2008).
To Holiday Inn, some of its properties locate in tourist
destinations and will definitely be affected by seasonality. But as
its major target market is business and leisure travellers, its
variation is not as higher as its sister brand - Holiday Inn
Resort. The visibility dimension decides how much of the
organisations operations can be seen by its customers. For a hotel
brand like Holiday Inn, the visibility is mainly reflected in
observable aspects such as decoration of lobby and tidiness of
rooms. But the overall visibility may not be as high as other
luxury hotel brands in IHG. 3. Customer Satisfaction and
Measurement3.1. Performance ObjectivesThe five performance
objectives framework (Figure 3) was proposed by Slack et al (2001).
It was stressed that by achieving these objectives, organisations
can achieve high total productivity internally and customer
satisfaction externally. Although this framework was not built
intentionally for hospitality industry, it still fits the industry
perfectly. The five core performances are cost, speed, quality,
flexibility and dependability.Speed refers to the short time length
between request for service and being actually served. In
hospitality industry specifically, short lead and delivery time is
an important aspect of high service quality. For Holiday Inn, speed
has always been one of the focuses in its service delivery. For
example, in 2004, Holiday Inn started to strengthen its room
service standard by introducing an online certification system that
must be passed by its employees. And one of the key components in
the process was quoting the time of delivery (Davis, 2006).Quality
is continuously meeting customers expectation. It is the heart and
soul for the entire service delivery. Quality does not necessarily
need to be superior; it can also be innovative and personalised, as
long as it can meet customer expectations (Sila and Ebrahimpour,
2002). For Holiday Inn and the entire IHG, high quality is
considered to be the most important trait. Higher-end IHG brands
pursue superior quality while Holiday Inn focuses more on keeping
consistent high-level quality, for both services and hardware. One
example of its attention to quality is the hotel mangers replies to
guest comments on TripAdvisor. A guest complained about the slow
catering service he received on 25th April, the hotel manager
followed-up promptly on 30th April and express her apologies and
attitude to take remedial actions (see TripAdvisor, Holiday Inn
Bristol Filton page). Flexibility refers to the organisations
ability to change its strategies so as to meet changing customer
demands. One most recent example of Holiday Inns willingness to
stay flexible comes from Holiday Inn at London Brentford Lock. IHG
discovered from its travel insights report that the target market
of Holiday Inn, especially those business travellers, increasingly
prefer to work in casual and creative environment and hold quick
and informal meetings in hotel lobby (IHG, 2012c). IHG then gives
Holiday Inn the resource to trial a new lobby concept, and this
leads to the open lobby in this London Holiday Inn. In order to
align with customer expectation, this Holiday Inn provides iMac
computers in its lobby with free Wi-Fi and power outlets. In order
to meet their need for flexibility, dining and bar drinks are
provided all-day, along with the to-go Caf that provides Starbucks
coffee.Dependability is the ability to keep its promises made to
customers on products and services. Organisations like Holiday Inn
should always stay dependable in terms of quality and accessibility
while improving service speed. According to its own statement,
Holiday Inn can meet the demand for dependable accommodation
service by business and leisure travellers. Cost is always the
major operational objective to allow a company to remain both
competitive & profitable (Lecture note, 2013). For an
upper-scale hotel brand like Holiday Inn, cost advantage is not as
prominent as economic brand like Holiday Inn Express. However, by
shortening service delivery time and standardise service
procedures, it can still achieve high productivity internally, and
operate on high margin while keeping the prices lower than high-end
hotel brands. 3.2. Measuring Customer SatisfactionGiven the five
performance objectives, organisations need to measure customer
satisfaction to assess the level of fulfilment of these objectives.
There are a number of measurements that can be used to understand
customer satisfaction such as reliability of promises made, ability
to cope with increased demand, customisation of information,
ability to recover service failures and accuracy of information
(Lecture note, 2013). Zone of tolerance is another important
concept when measuring customer satisfaction (Zainol et al, 2010).
The zone of tolerance is generally recognised to fall between the
desire service level and the adequate service level (p.325).
Therefore, it is important for Holiday Inn to keep its guests
within the zone of tolerance. If service failure occurs, it should
carry out remedial actions to minimize the negative impact on
customer satisfaction.Mendelsohn (1998) asserted that measuring
customer satisfaction is not the end of service encounters and only
by managing customer satisfaction, a service organization can
improve its overall service. He further concluded that managing
customer satisfaction requires commitment to process improvement,
not to the measurement itself (p. 42). Therefore, the benefit of
understanding customer satisfaction is changing product/service mix
to meet customer needs. Holiday Inn seems to understand the
importance of managing customer satisfaction. Therefore, it tries
to understand and solve guests problem wherever there is one. It
employed a Guest Reviews system on its own booking page, so that
existing guests can comment on their stays with the hotel from
Staff and Service, Room and Comfort, Value, Variety of Breakfast
Choices, and Able to Relax on a 5-point scale. The information can
provide reference for the decision making of prospect guests. There
are also other hotel booking sites that provide such features (e.g.
Booking, TripAdvisor), but Holiday Inns self-ran Review section
still provides guests with the feeling of being respected and
valued. Also, in areas such as service failure recovery, the
aforementioned dialogue on TripAdvisor proved Holiday Inns
willingness to correct service failures as soon as possible. 4.
Appreciation of Operations Performance4.1. Operations Strategy
Reconciliation (Figure 4)After years of development, IHG has gained
high operations capabilities in terms of tangible (properties) and
intangible (service experiences, guest loyalty, etc.) resources.
Therefore, it is an educated guess that IHG can provide all-round
operations resources to Holiday Inns development to meet market
requirements. Major components that describe market requirements
are customer needs, market positioning, and competitor actions.
These 3 components further set the performance objectives as
discussed before. Customer needs and market positioning for Holiday
Inn have been discussed before. Therefore, only Competitor Activity
is remained to be discussed. Holiday Inn needs to keep a close eye
on competitor activities as they may alter market requirements. For
example, while other competitive hotel groups upgrade their loyalty
programmes (e.g. Starwood spg.), IHG is also upgrading its own
programme. The new IHG Reward Club is scheduled to be launched in
July and this re-branding move brings free Internet to all the club
members in 2014 and other benefits such as never-expire reward
points and extended check-out (IHG, 2013e). 4.2. Service Delivery
SystemService is the core for organisations in hospitality
industry. Service delivery system concerns about how the service
concept is delivered to target customers (Roth and Menor, 2003) and
it has impact on responding time and waiting time, which can
further impact customer satisfaction (Pullman and Gross,
2004).Service delivery designs in hotels of a similar positioning
are mostly identical. But differences exist in the actual execution
of the design. These characteristics are used for the assessment of
Holiday Inns service delivery system. As Holiday Inn is a
world-renowned hotel chain under the world-renowned IHG, the
training for employees must be sufficient and thus the level of
employee skills and degree of employee discretion must be high. In
order to achieve precise service delivery, employees of Holiday Inn
needed to pass the online certification from as early as 2004
(Davis, 2006). This certification system brings highly standardised
and efficient service offerings and is supposed to bring definite
higher customer satisfaction.However, telling from reviews from
online hotel booking sites like TripAdvisor, there are customer
complaints about the actual service they received. And these
complaints fall on degree of routineness and automation. Some
customers feel that they are being treated indifferently and this
goes against Holiday Inns service concept of friendliness and
attractive. For professional service providers, the degree of
routineness and automation should be minimized. In terms of
location, Holiday Inn has done an excellent job thanks to the
resource support from IHG as customers can find Holiday Inn hotels
throughout the world. It is reasonable to assume that despite the
complaints from a few customers, Holiday Inn has designed a good
service delivery system and it serves the target market well.4.3.
Potential ProblemsThe highly organised service delivery system may
make some guests feel being treated indifferently. More personal
connections are suggested in addition to standardisation and
efficiency. Also, the delivery system seems to be focused only on
customers. Although customers are important to Holiday Inn,
employees are still the most valuable asset the brand has.
Therefore, more attention should be paid to employees, for example,
a better performance measure system.
5. Positive Changes and JustificationsAs Holiday Inn currently
enjoys rapid global expansion and generally good reputation, it is
recommended to adopt a continuous improvement approach. Figure 5
shows the four stages of operations contributions. It is estimated
that Holiday Inn is currently positioned between Stage 3 and Stage
4. In order to reach the Stage 4, Holiday Inn need to improve its
systematic quality management and performance measurement systems.
McPhail et al (2008, p. 624) reiterated the important of
appropriate performance measures as the fundamental link between
strategies and actions. Among a wide range of performance
measurement systems, balanced scorecard (BSC, Figure 6) stands out
for its focus on HRs, intangible assets, and challenges associated
with regard to maintaining consistent product standards, while not
neglecting financial performance (McPhail et al, 2008, p.624).
Instead of focusing on one aspect, Balanced Scorecard can provide
Holiday Inn with a more holistic view of its organisational
strategy. Among the 4 aspects of Balanced Scorecard (Figure 6),
Customer and learning and growth is especially important as Holiday
Inn is a service company. To be specific, from the HRM perspective,
only if employees of Holiday Inn learn and develop themselves all
the time can they better serve the customer. From the company
perspective, Holiday Inn needs to stay agile and open to changes in
order to retain the competitive advantages. Therefore, for example,
now that some guests complain about the indifferent service they
received. In order to achieve the vision of To Create Great Hotels
Guests Love, the learning and growth department should react by
setting goals to introduce more personal feelings into the service
process. Customer department should then monitor the negative
reviews about services and provide feedback to Learning and Growth,
so that it can adjust its objectives about personal feelings
accordingly. 6. ConclusionIn conclusion, this report has addressed
4 aspects relating to operations management. Holiday Inn hotel
brand from InterContinental Hotel Group was used as a case.
Firstly, Holiday Inns upper-scale positioning and its target market
were identified. Based on market positioning, product/service mix
and 4 Vs of Holiday Inn were discussed. As a hotel, customer
satisfaction is important to Holiday Inns overall performance. Five
performance objectives were introduced and examples from Holiday
Inn were used to support the discussion. Holiday Inns service
delivery system was discussed later with potential problems from
the design of system. Lastly, balanced score was proposed as a tool
for Holiday Inns further improvement for its holistic view and
balanced aspects. ReflectionBy proper operational analysis and
reconcile operations capabilities and market requirements, Holiday
Inn achieved great success. The entire process works as the
following: market positioning, identifying target market, develop
product and service offerings, design service delivery system,
setting performance objectives, achieving objectives. The
fundamental and most important step in operational analysis is
identifying the market positioning and target market. Only these
are correct, products and services that meet market demand can be
developed and appropriate delivery system can be designed. The
practice of operational analysis is supposed to be driving
operational improvements in other hospitality environment as the
industry shares some distinctive characteristics, such as
intangible nature of services, and time dependent capacity. For
example, a restaurant can carry out an operational analysis to
identify what capabilities it has and what the market expect. If
there is reconciliation between these two, the restaurant should
focus more on the delivery of services, otherwise, it will need to
identify the gap and improve itself to meet market requirements. As
it has already carried out an operational analysis, the improvement
process will be well guided, so as to achieve efficiency in
operational improvements.
AppendicesFigure 1 Service Strategy Triad
Source: Roth and Menor (2003)
Figure 2 Total Service Concept: Elements and Examples
Source: Roth and Menor (2003)Figure 3 External Effects of the
Five Performance Objectives
Figure 4 Operations Strategy Reconciliation
Source: Slack et al. (2010)
Figure 5 The four stages of operations contributions
Source: Hayes, R. H., Wheelwright, S. C., Clark, K. B.
(1988)Figure 6 Balanced Scorecard Principles
Source:
http://www.meshekah.com/wp-content/uploads/2012/10/BSC-concept-BalancedScorecardReview.com_1.jpg?dur=4738List
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