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Xianlong Jiang€¦ · China). These four hotels are all located in the city centre and we can...
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Xianlong Jiang
Examining if service standards is the factor that provides hotels with the greatest competitive advantage
1. Introduction Globalisation has led to an increasing number of business travellers in modern society. The demand
of business hotels consequently has rapidly risen. However, there is no widely accepted definition of
“business hotels” at present (Lee and Back, 2010). “Business hotels” are usually named mid-range
hotels because they provide moderate standards of facilities and services for business customers,
such as food, room service and Wi-Fi (Moskowitz and Krieger, 2003; Chu and Choi, 2000). The
property may also house a speciality restaurant, coffee shop and lounge catering to visitors as well as
hotel guests (Chu and Choi, 2000). In an international context, business hotels are normally located
in the city centre or central business district (CBD). Interestingly, due to its value for money, more
leisure travellers are choosing to stay in business hotels nowadays. Given the popularity of business
hotels among travellers, I am examining if hotel service standards is the factor that provides a
business hotel with the greatest competitive advantage. This hypothesis is based on the fact that
business hotels are part of the service industry. Therefore, the main purpose of the report is to
evaluate the significance of hotel service standards in relation to customer satisfaction levels by
analysing cases in Hangzhou, China and London, England. The conclusions drawn in this report will
enable key decisions makers of business hotels to modify their strategies to enhance their
competitiveness in the industry.
2. Literature review Due to the increasing demand of business hotels worldwide, many investigations have been
conducted to determine factors affecting the sustainable development of business hotels (Gundersen,
1996; Akbaba, 2006; Berezan, 2013). My report will assess if the factors listed in those previous
investigations actually affect the competitiveness of a business hotel and how important each factor
is. I will focus on hotel services in particular.
The literature on business hotels has highlighted several components of services that may affect the
hotel’s competitiveness. For example, previous surveys demonstrate that business hotels should
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focus on housekeeping and reception services, in order to increase the customers’ satisfaction levels
(Gundersen, 1996; Akbaba,2006; Berezan, 2013). In other words, the comfort level of rooms and
services provided by the reception may be the two most important factors in improving the
customer’s satisfaction of business hotels or make them more competitive. These days, the needs of
the customers are becoming more and more personalized. When they are consuming a good or
service, they are not only consuming that good or service itself, but they also consume something
else in addition.
Meanwhile, there are studies on how the use of colour in hotels can affect the relaxation of hotel
guests (Elsosan, Pandelaki, and Murtini, 2013). As the colour scheme chosen by the hotel is a subset
of hotel decoration, in my research, I will find out how decoration affects the customers and how
important decoration is in business hotels.
In addition, attempts have been carried out to investigate the relationship between branding and hotel
performance (Chu, 2000; Dos Santos, Méxas and Meiriño, 2017; Gundersen, 1996). The results
suggest that hotels with corporate brands will gain more profits than others (Dos Santos, Méxas and
Meiriño, 2017). Moreover, along with RBT (Grounded in resource-based theory), the correlation
between brand and profits will become stronger when the value of corporate brand is greater to
customers (e.g. in the lower-quality segment), and when the corporate brand is harder to imitate (e.g.
more well-known brand) (Silva, Gerwe and Becerra, 2017), and also when it is utilized by specific
organizational governance mechanisms. To evaluate, branding will also be part of my research. I will
compare the global-chain business hotel (Holiday Inn) with the local-chain business hotel (Z hotels
and Ji hotels) to see whether branding will influence the customers’ choices or not, and how crucial
is branding.
Porters Value chain
In his influential book on ‘Competitive Advantage’ released in 1985, Michael Porters proposed a
general-purpose value chain that companies can use to examine all of their activities, and see how
they're connected. The way in which value chain activities are performed determines costs and
affects profits. This tool can be applied to help business hotels understand the sources of value and
where hotel services fit into the picture.
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3. Research methods
In the report, I will combine secondary data reviews and interviews to answer my research question:
‘is the hotel service the most significant factor affecting a business hotel’s competitiveness?’
3.1 Research strategies and procedures
To begin, I am going to choose factors affecting customer satisfaction and hotel occupancy rate as
the method to measure competitiveness (Table 1). For data reviews, I am going to make use of
reviews from 2 different websites which are the Ctrip and booking.com for the past six months from
1 January 2017 to 30 June 2017. These two booking websites are used by many travellers in China
and UK respectively, and six months will be a reasonable and reliable time-frame to perform an
evaluation. I have collected data on five major sections which are location, services, facilities, price
and internal environment. Under each section, I will break them down into further sections so that
the data is more specific. For example, under the services section, I have listed three further sections
which are staff, food and extra services. By doing this I can obtain a more detailed and
comprehensive review of the data. These data will help me to make sense of the criteria customers
value most when it comes to satisfaction levels.
3.2 Multiple case studies
I will conduct four case studies, two in Hangzhou and two in London. In London, I will choose Z
Table 1 The list of factors of data reviews
Services Includes: Staff/ food/ extra services
Location Includes: Leisure/ Business
Facilities & Decoration Includes: Room/ Bed/ Internal facilities/ electric appliance. And also Internal facilities.
Price Includes: value for money
Internal environments Including: Cleaning/quietness
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Hotel Soho (a small business hotel chain only operated in Britain) and Holiday Inn Mayfair (a giant
international business hotel chain). In Hangzhou, my choices will be Holiday Inn Huanglong (giant
international business hotel chain) and Atour Huanglong (small business hotel chain only operated in
China). These four hotels are all located in the city centre and we can compare these hotels in many
different ways. Firstly, we can compare them locally to see the differences between small-chain
business hotels and big international branded business hotel chain. Secondly, we can compare the
differences between business hotels in China and the UK.
For interviews, I will be interviewing the staff representative or the hotel general director of each
hotel using the email contacts I have obtained. (Firstly, I checked the hotels’ websites to obtain the
customer services email, and communicated with them through email to arrange this meeting). The
staff representatives or general directors of the hotels have a more comprehensive view of the hotel,
unlike department managers who have a narrow view of the hotel, for instance, only the department
they are in charge of.
I will develop the interview questions based on previous customers’ reviews and literature reviews,
and separate the interview questions into three main parts which are 1) the competitive advantages of
a hotel, 2) the hotel policy, and 3) the hotel’s future development opportunities. By asking these
questions, I can prove whether the works of literature work in reality; secondly, I can understand
what these professionals think about the ways to make the hotel more competitive, and compare
these findings with the data review to see whether it works or not. Four main themes are services,
location, colour and decoration, and brand in the report.
3.3 Ethical issues
In order to protect the interviewees’ personal information, all the interviewees’ details will be
anonymous, and all data collected from these interviewees will be stored in an encrypted memory
stick which means only I can gain access to it. Besides, all interviewees have agreed to partcipate in
the research voluntarily.
3.4 Limitations
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However, there are some limitations in my research. First of all, due to privacy issues, it will be very
hard to get the primary data of customers’ satisfaction levels (questionnaire customers). I will only
have online reviews to rely on. In order to get around the problem, I will be asking those corporate
representatives what they think about the customer reviews, so I can get a better understanding of the
customer reviews. The other limitation in my research is that the cases in the UK and China have
slight differences. To explain further, Holiday Inn Hangzhou is located in the new CBD, and Atour
hotel is located in the old CBD; but the two cases in London are both located in the old city center,
not the new CBD. This is because there is no Holiday Inn located in London’s CBD.
4. Business hotels in China
4.1 Introduction
This chapter will include semi-structured interviews of corporate representatives of business hotels
and data reviews drawn from the Ctrip from 1/1/2017-30/6/2017 for Holiday Inn Qianjiang and
Atour Huanglong. From these data, we can get an idea of which elements will make the business
hotels more competitive.
4.2 Holiday Inn Qianjiang
Holiday Inn Qianjiang was established in 2010 and is located in Hangzhou CBD. There are 210
rooms (74 smoke-free rooms) and 96 suites in the Hotel. At the same time, all rooms are equipped
with a 32-inch flat-screen HDTV, free broadband access and comfortable bath facilities and other
personalized services. Besides, the hotel has six conference rooms, which can accommodate up to 70
people. In addition, the hotel has an indoor fitness centre, indoor constant temperature swimming
room, sauna room and cafeteria (The website of InterContinental Hotels Group).
4.2.1 Reviews
In the six-month period, 101 people in total commented on the hotel through the Ctrip app. In
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general, most people complained about the furniture and internal environment which were too old
and needed redecoration. Besides, the other main problem is that the hotel only provides western
food. The food options were insufficient in the hotel. On the other hand, the main advantages of the
hotels are good services, and brand-name. Foreign business travellers preferred the hotel and
provided better comments. According to the figures, in the theme of services, the reviews of the staff
are very interesting. 25% of customers commented the staff was “excellent”, but also 7% of people
said the staff was “extremely bad”, and there are no “bad” comments about the staff. Besides, it is
very interesting that the comments of “excellent” were mostly about business location (29%), as well
as the leisure location (21%) which received the third highest number of “excellent” comments.
However, several people complained about the leisure and business locations which were 7% and
5% respectively. Among all the data, there are three factors which did not receive any “bad”
comments (either “bad” or “extremely bad”). They are extra services, bed and quietness. In addition,
the one thing in common is that within services itself, there were not many “excellent” comments,
but there were many “good” comments. Across all data, food received the most “bad” comments and
the fourth highest “extremely bad” comments, so overall people complained a lot about food in the
Holiday Inn Qianjiang. Moreover, internal facilities received the highest “extremely bad” comments
(14%), showing that internal facilities received numerous complaints from people. Surprisingly, 19%
of people felt internal facilities were “excellent”.
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4.2.2 Interview
According to the interview of corporate representatives of Holiday Inn Qianjiang, 70% of the hotel’s
customers were business travellers (under company’s contract), 15% were conference team members
and 15% were tourists. Therefore, they are busier during weekdays rather than the weekend.
He suggests that the most important factor for business hotels is the location as the location defines
the customer group, and the second most important factor should be the price and services, with
decoration being the third most important factor. He also highlights that they obtain more contracts
depending on their location. Meanwhile, if hotels are in the same region, better services and price
will make them more competitive. As for decoration, the corporate representative does agree that
colours will influence the customers’ mood or attract more customers, but colourful decorations are
not practical. Although these colours are very beautiful, they are also easily dirtied or damaged, and
will cost a lot to clean. Therefore, when decorating the hotel, the management is most concerned
about whether these colours or furniture are easy to clean or not, and also if the decoration is
sustainable. For instance, some hotels appear as though they are 20 years old just after ten years, but
some hotels’ decoration still remain very new after ten years. Whether the decoration is sustainable
or not is important, because in reality, hotels need to make profits.
About branding, the corporate representative agreed that brand-name will make business hotels more
competitive in the market as this will attract more non-local customers and company’s contracts. For
example, Holiday Inn receives more foreign customers as they are a global brand. When these � 7
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foreigners come to China they do not know about local Chinese business hotels. If they only know
about the Holiday Inn, they will choose Holiday Inn during the period of G20 summit. Besides, as
Holiday Inn is a global chain hotel and belongs to IHG group, they can get more contracts from
major companies. Therefore, Holiday Inn can attract more customers than local or national chain
hotels.
4.3 Atour Huanglong
Hangzhou Huanglong Atour hotel was established in 2014, located in the central zone of Huanglong
CBD business circle. The hotel has 112 rooms with complete facilities. Besides, the hotel has an
exclusive courtyard, library and Chinese restaurant and western restaurant. At the same time, the
hotel covers a hundred megabytes of high-speed wireless, and the rooms are equipped with five-star
standard bedclothes and bath products.
4.3.1 Reviews
In the half year period, 110 people in total commented about the hotel through the Ctrip app. In
general, customers highlight the theme or the style of the hotel which made them feel like home.
Although it is a small hotel, the hotel is well equipped, clean, quiet and services are very good.
Besides, the library inside the hotel has boosted its rating. According to the figures, there are lots of
“excellent” reviews across all parts of the hotel especially staff, business location, room, internal
facilities and cleanness which received 26%, 25%, 21%, 27%, 18% “excellent” reviews respectively.
Besides, the percentage of “good” are all above 20% across all sections of the hotel, which is a
reasonably high figure. In addition, the negative reviews of “bad” and “extremely bad” were at most
3% for each section and through all sections of the hotel. Moreover, for food, business location and
furniture, there were no any negative comments (either “bad” or “extremely bad”). The element that
customers complained the most about was the room, with 3% of customers commenting “extremely
bad” and the same number commenting “bad”.
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4.3.2 Interview
According to the interview with corporate representatives of the Atour Hotel Huanglong, 50% of the
hotel’s customers were business travellers (under company’s contract), 20% were business customers
who book through third-party agents or online, and 30% were tourists. Therefore, they were busier
during weekdays rather than the weekend.
He suggested that the most important factor for business hotels should be the services as the services
will attract more return customers and it is the most important factors that can improve customer
satisfaction, and the second most important factor should be the location; then lastly, decoration. The
corporate representative said that industries like hotels and restaurants are basically part of the
service industry, and services should be the most important elements to attract more customers.
However, he also mentioned that after the CBD was relocated to Hangzhou Qianjiang new city, the
Atour received lower occupancy rate than it was used be. Concerning decoration, although it is very
important, it is not as crucial as other factors. For example, old hotels in the Europe still receive lots � 9
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of customers. In addition, he agreed colours will influence customers’ mood or attract more
customers, but he didn’t comment a lot about decorating. He mainly suggested that decoration
should be relevant to the theme of the hotel. For instance, the style of Atour hotels is humanity, so all
Atour hotels were decorated with a light brown colour. The corporate representative felt that this
colour will make people feel peaceful.
About branding, the corporate representative agreed that brands will make business hotels more
competitive in the market as this will attract more customers who are not familiar with the local area
and company’s contracts. For example, during the period of the G20 summit, Atour received few
contracts only with travellers who were familiar with the place. Recently, as they gradually become a
household name in China and also a national hotel chain, they have received more non-local
customers. As more and more people know them, more big companies will sign contracts with them,
as these big companies know it is a good brand and can match their standards. As a result, they do
get more customers than they are used to.
4.4 Comparisons and Summary
By comparing the Holiday Inn Qianjiang and Atour Huanlong, I obtained variable information.
Firstly, according to online reviews, it is very easy to see that Atour received much better reviews
than Holiday Inn. However, one thing should be pointed out: according to the interviews, there was
an increase in the number of guests at Holiday Inn Qianjiang during the period of the G20 summit. In
the report, it is difficult to define whether the “hotel service” is the most important factor in enabling
business hotels to be more competitive in Hangzhou China. However, I think that “location” might
be the most important factor due to two main reasons. One, is that the number of customers who
were living in Holiday Inn is higher than Atour Huanglong. Although critics argue might argue that it
might be related to the hotel brand, location remains a key factor as the hotel manager said they used
location to obtain more contracts. Secondly, although Atour received better reviews on service than
Holiday Inn, after the CBD in Hangzhou was relocated to Hangzhou Qianjiang new city, the Atour
experienced a drop in occupancy rates.
5. Business hotels in England
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5.1 Introduction
This chapter will include semi-structured interviews of corporate representatives of business hotels
and data reviews drawn from Booking.com from 1/1/2017-30/6/2017 for Holiday Inn Mayfair and Z
Hotel Soho. From these data, we can get the idea of which elements will make business hotels more
competitive in England.
5.2 Holiday Inn Mayfair
5.2.1 Reviews
Between 01/01/2017 and 30/06/2017, there were 119 people in total who commented on Holiday Inn
Mayfair. The most significant result is that the location section for both “business” and “leisure”
received the most “excellent” comments. Besides, it is also worth mentioning that within the
“services” section, the staff section received the second highest “excellent” comments among all
sections. In addition to this, all these three sub-sections did not have even one “extremely bad” or
“bad” comment. This shows the reviews for the sub-sections under “services” were very positive.
Across all sections, the ‘facilities’ section received the worst reviews in every module, especially
“electric appliance”, “internal faculties” and “furniture”. These sub-sections received the lowest
percentage of “excellent” comments but the highest percentage of “extremely bad” comments. It can
be observed that customers complained about these categories the most. At the same time, there were
some controversial modules which are “room”, “food” and “bed”. Especially for the bed, the amount
of “excellent” and “extremely bad” comments are about the same. It is also very interesting that the
“cleanness” module doesn’t have any negative comments, but its “excellent” and “good” comments
are relatively few.
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5.2.2 Interview
According to the interview with corporate representatives of the Holiday Inn Mayfair, the hotel’s
customers are 48% business travellers (under company’s contract), 42% tourists, and other types of
customers take up to 10%. Therefore, they will be busy all week.
He suggested that the most important factor for business hotels is the location as the location defines
the customer group. For instance, as their location is good for both business and leisure, they get all
types of customers and have high occupancy rates throughout the week, unlike other business hotels
which are only busy during weekdays. The second most important factor is the price and service. If
hotels are located in the same region, better services and price will make them more competitive; and
decoration, although important, is not as crucial as other factors. For instance, Holiday Inn Mayfair
has old decoration which customers complain often about, but they still have very high occupancy
rates and reasonably high ratings.
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About branding, the corporate representative agreed that brands will make business hotels more
competitive in the market as this will attract more customers who are not familiar with the area and
companies’ contracts. However, for them, it does not help a lot to some extent. To explain further,
there are many famous business hotel chains in the market, such as Novotel and Hilton, so the
competition will be very strong. Besides, there are also some traditional British business hotels in the
area, so many British people will choose to stay in those hotels. Therefore, there is much competition
in the market, both locally and internationally.
For decoration of colours, the corporate representative does agree that colours will influence the
customers’ moods or attract more customers, but he thinks these special decorations are not practical
for mid-range hotels, which may not be able to afford these decorations. Besides, given the
peculiarities of London, firstly, it is very hard to renovate the decoration as it will cost a lot; and
secondly, it may not fit the style of the building or the area.
5.3 Z Hotel Soho
5.3.1 Reviews
In the half year period, there were 132 comments in total about the Z Hotel Soho and generally,
reviews were positive. To begin with, the section which customers praise the most is the location for
either leisure or business, and from the data, leisure location has an even better performance than the
business one. This section on “location” did not receive any negative reviews. The “services” section
had comparatively highly positive comments in general, with “services”, “food” and “extra services”
modules receiving a reasonably high amount of “excellent” comments which just fell behind the
“location” section, and only a few negative comments. It is worth mentioning that customers
complain the most about the room. 39% of customers gave the room an “extremely bad” comment
which is the highest across all sections. Besides, the percentage of “extremely bad” comments for the
room was much higher than that for “electric appliance”, the sub-section with the second highest
(10%) of “extremely bad” comments. It is also interesting that the comments about electric appliance
were very controversial. The number of negative comments was roughly equal to the number of
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positive comments. The “cleanness” sub-section is also very interesting in that although it did not
receive many “excellent” comments, it has no negative comments. Overall, except the “room” and
“electric appliance”, Z Hotel Soho received reasonably positive reviews.
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5.3.2 Interview
According to the interview of corporate representatives of the Z Hotel Soho, the hotel’s customers
are 18% business travellers (with company’s contract), 26% are business customers who book
through the third-party agents or online and 56% are tourists. Therefore, they are busy all week.
The corporate representative suggested that the most important factor for business hotels should be
“the location” as the location defines the customer group. Since their location is convenient for
business and leisure travellers, they get all types of customers and have high occupancy rates all
week, unlike other business hotels which are only busy during weekdays. The second most important
factor would be the “services and price” because if the hotels are in the same region, better services � 14
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and price will make them more competitive. The services and special services have to boost their
customer’s satisfaction rates. The corporate representative believed that although decoration was
important, it is not as crucial as the other factors. As long as the decoration is of a comparable
standard to other business hotels in that region, it will be fine.
About branding, the corporate representative agreed that brands will make business hotels more
competitive in the market, as this will attract more customers who are not familiar with the area and
attract more companies’ contracts. For example, because Z Hotel is not a global hotel chain like
Holiday Inn, they do not have many contracted business customers as many big companies will not
sign a contract with them. Besides, many foreign customers may not choose Z Hotel Soho because
the hotel is unknown to them. However, while Z Hotel Soho is not a household brand, they still
receive high occupancy rates. Therefore, the corporate representative suggested that if the location is
good enough and with positive online reviews, many travellers will still choose the hotel, given that
the location is a big consideration when choosing which hotel to stay in.
For decoration of colours, the corporate representative agreed that colours will influence the
customers’ mood or attract more customers, but he thinks these special decorations are not practical
enough. He believes that the colour of the decoration is not the most important factor. Ensuring the
furniture and decoration are functional, and making sure the arrangement of rooms is functional are
more crucial than the colour scheme used. In other words, how to use the space more efficiently will
be very important, because in central London space is very limited. A smart design or arrangement
will make the hotel more profitable and let customers feel more comfortable.
5.4 Comparisons and Summary
By comparing Holiday Inn Mayfair and Z Hotel Soho, location is the most important factor for
business hotels. Both hotels have a great location for either leisure or business customers, so they
receive very high occupancy rates all week. In addition to this, from the data, they all have
reasonably good services but not the perfect or the best ones. However, they still have very high
occupancy rates and customer satisfaction levels, which proves that services may not be the key
factor for business hotels, but location.
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6. Conclusions
By comparing the findings on business hotels in Hangzhou and London, location is the most
important factor for boosting a business hotel’s competitiveness in both Hangzhou, China and
London, UK. This could be because a business hotel in a good location will provide much
convenience to business travellers especially if the hotel is near where the business meetings are
held. Although service is an important factor, it is not as important as location when it comes to
increasing competitiveness and maintaining high occupancy rates. For instance, Atour Hotel in
Hangzhou received better reviews for service standards as compared to Holiday Inn Hangzhou.
However, when the CBD was relocated to Qianjiang new city, the occupancy rates of Atour Hotel
fell. Hence, location is a significant element when business hotels are seeking to secure potential
contracts with companies.
According to the findings obtained from interviews and secondary data reviews, hotel service
appears to be the second most important factor when boosting the hotel’s competitiveness, after
location.
While decoration and the colour scheme used by the hotel can enhance customer satisfaction levels
and their moods, the decoration should be practical and cost efficient.
Furthermore, brand is a key factor for foreigners when choosing a hotel to stay in. The Holiday Inn
belongs to IHG group which is a global hotel chain. Due to a lack of awareness of domestic hotel
chains, foreign travellers are less likely to choose domestic hotel chains such as Atour or Z Hotel
over brand name hotels such as Holiday Inn. Political environments may be crucial in facilitating the
development of business hotels and playing a mediated part in the relationship between hotel brand
and scaling out.
In conclusion, the report has found that the role of hotel services is less important than that of the
location towards the success of a business hotel in the modern society, although it is also vital for the
business hotel managers to improve their services in order to appeal to travellers. Therefore, in the
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future, entrepreneurs in the business hotel industry should pay more attention to the selection of their
hotel location and use it to attract more companies and individual customers. Meanwhile, hotel
branding is a great strategy in enabling business hotels to scale out, especially in this modern society
where there are better transportation networks and an increasing number of both business and leisure
travellers.
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