Managing Distribution Channels in 4 to 5 Star Hotels in Austria

TABLE OF CONTENTS

EHL HONOUR CODE

EXECUTIVE SUMMARY

ACKNOWLEDGEMENT

1. INTRODUCTION

2. DISTRIBUTION CHANNELS
2.1 Technology in the Hospitality Industry
2.2 Managing Distribution Channels
2.2.1 Letter
2.2.2 Telephone
2.2.3 Facsimile (Fax)
2.2.4 Global Distribution Systems (GDS)
2.2.5 Central Reservation System (CRS)
2.2.6 E-Mail
2.2.7 The Internet Distribution
2.3 Importance of Distribution Channel Efficiency
2.4 Challenges of the Reservations Department
2.4.1 Data Management
2.4.2 Yield-/ Revenue Management
2.4.3 Customer Relationship Management (CRM)
2.5 Hospitality as a Service Industry
2.6 Service Failures & Consequences
2.7 Service Failures in the Hospitality Industry

3. THE ROOM RESERVATION PROCESS
3.1 Reservations Department as First Service Encounter
3.2 Re-engineering of the Reservations Department
3.3 The Classical Reservation Process in Detail
3.3.1 Receiving Inquiries
3.3.2 Determining Room Availability
3.3.3 Accepting or Denying Requests for Reservation
3.3.4 Documenting Reservation Details
3.3.5 Confirming Reservations
3.3.6 Maintaining Reservation Records
3.4 Service Failures in the Room Reservation Process

4. FORMULATION OF THE HYPOTHESIS

5. METHODOLOGY
5.1 Target Population
5.1.1 The Austrian Hospitality Industry
5.1.2 Sample Size & Procedure
5.2 Questionnaire Construction
5.3 Data Collection Method
5.4 Questionnaire Analysis
5.5 Limitations

6. PRESENTATION OF RESULTS
6.1 Response Rate
6.2 Sample Characteristics & Descriptive Analysis
6.3 Hypothesis Testing
6.2.1 Hypothesis 1 (H1)
6.2.2 Hypothesis 2 (H2)
6.2.3 Hypothesis 3 (H3) 58

7. DISCUSSION OF RESULTS

8. CONCLUSION & FUTURE RESEARCH

9. BIBLIOGRAPHY

10. APPENDIX
10.1 Reservation Procedure Sample
10.2 Sample Selection of Austrian Hotels by Federal State and 3-5 Star Category
10.3 Questionnaire
10.4 Opening Letter (German)
10.5 Tables of Results

EHL HONOUR CODE

“ As a student at the Ecole h ô teli è re de Lausanne, I uphold and defend academic integrity, academic rigour and academic liberty as core values of higher learning. I attest, on my own word of honour, that work submitted in my name is my own work, and that any ideas or materials used in my support of this work which are not originally my own are cited and referenced accordingly ” .

(Ecole hôtelière de Lausanne, Rules & Regulations 5.5.1)

EXECUTIVE SUMMARY

This dissertation summarises relevant literature on traditional and online distribution channels and gives an insight in the management of hotel’s room reservation processing as well as potential consequences of intrinsic service failures. Since it was assumed that differences in distribution channel treatment do exist in hotels, investigation was focused on telephone and e-mail reservation channels as the ones with the strongest utilization rates. Therefore, hypothesises were formulated to undertake research on both channels in comparison to room reservation transformation rates, frequency of focal points of service failures and the potential influence of category, size and location as specific hotel characteristics.

In order to carry out the investigation, an online questionnaire was established in co-operation with university and industry room reservation professionals. The actual study focused on the Austrian three to five star hotel segments since these categories were expected to provide all relevant investigated communication channels. The aim was to find comparable results to Swiss figures. Therefore, a sample of 800 hotels was contacted. 89 hotels or 11.4 per cent replied in total (exclusive 17 undeliverable hotel contacts).

The statistical analysis pointed out that the telephone channel tends to be still slightly more efficient than the e-mail. A correlation with hotel characteristics showed that location did influence channel’s efficiency rates among the investigated hotels. These results indicated that hotels in big cities had higher room transformation rates on average than properties in resort destinations or any other location. Category as well as number of guest rooms did not provide significant dependence on this transformation ratio. In contrast to the efficiency, all hotel characteristics illustrated significant influence on frequency of focal points of service failures. The frequency of focal points of service errors, however, differed in relevance among telephone and e-mail reservation channels. Even if the findings pointed out that focal points of service failures seemed to be mainly emphasized by ‘ indefinite guest confirmations ’ and ‘ refusals due to unavailable room preferences ’ on both channels, channel specific errors such as Spam illustrated very common problems in the usage of e-mail reservations.

Finally, this paper compared the findings with results of earlier studies and gave hoteliers a recommendation on short-, medium- and long-term channel management.

ACKNOWLEDGEMENT

A gratitude has to be addressed to all people who contributed to this work. In particular, Dr. Roland Schegg, professor at Ecole hôtelière de Lausanne (EHL) and research associate at the Lausanne Institute for Hospitality Research (LIHR), has to be mentioned since his support represents a main pillar of the entire paper. In addition, a compliment has to be addressed to professor Christina Tavares, who gave the essential input regarding room reservation management. Moreover, I would like to thank my parents, Eveline Kullmann-Stadlinger and Dieter Kullmann, who supported me psychologically to go always one step further to enhance the value of this paper. Finally, the hoteliers who participated in the online survey need to be mentioned with gratitude.

1. INTRODUCTION

Many studies (Leuenberger, Schegg and Murphy, 2002; Claessen and Schegg, 2003; Gherissi, Schegg, and Murphy, 2003; Frey, Schegg and Murphy, 2002; Meador, 2002) investigated potential quality issues of e-mail and/ or telephone reservation requests in hotels. These findings pointed out that certain hotel characteristics demonstrated significant influence on the quality management of telephone and e-mail inquiry processing. It is the task of reservation agents in the hospitality industry to execute this booking process entirely from the first service encounter with the customer until the last reservation processing. Only if this pre-consumption stage is fulfilled successfully, the guest’s actual hotel stay can take place in prospect. With the use of best practices, the fully guest experience can be achieved and business generated for the hotel (Walker, 1995; Barrington and Olsen, 1987). Therefore, service errors in the reservation process need to be diminished as much as possible in order to allow long-term competitiveness for hotels (Shoemaker and Lewis, 1999). This dissertation paper moves one step further than earlier studies by illustrating reasons, which cause these significant differences of hotel characteristics. Therefore, the entire reservation process will be investigated and a thorough analysis on failures, respectively problems, as well as efficiency rates will be carried out for this research.

2. DISTRIBUTION CHANNELS

2.1 Technology in the Hospitality Industry

Research has shown that far more hotels, than one might believe, did in 1995 still not use any form of information technology at all, as shown by for instance south Wales’ independent hotels. These have only been adopted to information technology by half of the entire hotel sector according to a 583 independent hotel investigation (Main, 1995). Hotel type, size, location, category and profiles of managers (gender, age, education) as well as the external environment determine whether hotels use information technology systems or not (Main, 1995; Camison, 2000; Premkumar and Roberts, 1998).

The hospitality industry is known as a slow adopting industry on IT systems (Dubé et al., 2000) with relatively late implementation and overall poor practices among hoteliers (Frey et al., 2002). Meidan and Chiu (1995) believe that one main reason to this is based on the perceived threat of losing business by dehumanisation among hoteliers. According to the author, hoteliers feared to adopt to technology since they believed that technology will substitute employees, which will disaffect their customers and cannot neither provide nor maintain the same level of quality during the service delivery process (Meidan and Chiu, 1995; Geller, 1984). Nowadays, the picture has changed slightly. Olsen (1996) argues that information technology will be the essential tool to succeed in the highly competitive hospitality industry. IT implementation allowed various systems (distribution systems, property management systems, electronic point of sale and reservations) to communicate with each other and, thus, to exchange information rapidly (Sigala et al., 2001). Thus, best practices in IT usage will result in a higher level of controlling, better coordination among departments and in the optimisation of the cost structure within the establishment.

Connolly, Olsen and Moore (1997) emphasize the importance on information technology due to “ hypercompetition, where shorter transaction times, non-traditional competitors, volatility, surprise, and new alliances are the norm ” . The authors add that, in addition, shortages in workforce as well as the trend of increasing operating costs can be eliminated, or at least reduced, by the use of IT.

The application of IT systems allows companies to facilitate existing manual processes, to enhance employee’s responsibilities and, thus, to add value throughout the entire service-profit (value) chain (Heskett et al., 1994). This means that hoteliers who include information technology e.g. property management systems, yield management systems, preventive maintenance systems, expert systems, etc. within their establishment, can possibly improve the satisfaction and performance level of their employees and, in the end, increase the hotel’s profit in terms of return-on-investment. As Katz (2000) expressed: “ IT has been a significant challenge for tourism organizations because it requires efficiency in internal and external communications. The initial cost of IT will be quite high in a financial sense, and the tremendous cost savings in the long-term will depend upon the efficiency of the IT during its crucial implementation stages ” . However, hotel companies that will not implement information technology, at all, or continuously develop their IT systems on slow speed, will not stay competitive in the long-term (Brynjolfsson and Hitt, 1996).

2.2 Managing Distribution Channels

Middleton (1994) defined the term ‘distribution channel’, or access system (touchpoint), as the following: “ A distribution channel is any organized and serviced system, paid for out of marketing budgets and created or utilized to provide convenient points of sale and/ or access to consumers, away from the location of production and consumption ” . Distribution channels have been mainly influenced by the flux of innovations within the hospitality industry over the years (Connolly, Olsen and Moore, 1997).

Anton (2000) analysed the entire channel distribution system and constructed three main lessons based on the past, which should be paid particular attention to:

(1) “ Customers greatly value free and easy access to the company and critical information
(2) When new channels become available, companies are quick to offer them, but not so quick to staff them properly to handle the ‘ flood ’ of customer contracts. Witness the blocked calls when 800 numbers were first offered, and the lack of response to e-mails in more recent times
(3) The addition, new channels do not replace existing channels of access to information. Customers prefer multiple touchpoints available at any time and for free. ”

Also Rao (1999) discovered that the success of distribution channels is based on three elementary issues: speed, convenience and reliability. Schegg and Steiner (2003) found that according to location (mountain-, lake regions, cities, etc.), category and size of hotels, differences exist in supply and booking rates of distribution channels. Hereby, traditional channels are the most utilized touchpoints as can be observed from the ‘Swiss Average Booking Volume 2002’ ( Figure 1 ; Schegg and Steiner, 2003). In particular, one to three star hotels as well as smaller hotels received more reservations via direct distribution channels than four and five star hotels as well as larger hotels. However, according to Starkov (2003), the picture is in progress to change dramatically in the U.S. and will be more focused on online technologies soon.

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Figure 1 - Swiss Average Booking Volume 2002

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Figure 2 - Distribution Connectivity - IT

(Schegg & Steiner, 2003) Integration Today (Dennis, 1998)

Middleton and Clarke (2001) distinguished the distribution of services to the distribution of goods by mainly two primary characteristics. The first one, the perishability of room nights, which does not allow the hotel to stock the final product. And the second one, the intermediary’s purchasing behaviour, which means that neither the product is bought in bulk nor the financial risk is been shared with the producer of the product. In particular, the aspect of perishability without any possibilities of product storing is the raison d’être why the distribution process becomes so extremely important according to the author. However, Middleton and Clarke (2001) also emphasize barriers to implement all types of distribution channels in a business outlet since “ the only limit to creating additional channels is the marginal point at which the unit costs of providing and managing each multiple access point exceeds the marginal unit profits of bookings using this access ”. The author adds that fixed as well as variable costs are involved in the reservations process for each channel. On the one hand, fixed distribution costs include the initial investment as well as maintenance and training costs of employees and the attached salary expenditures around the specific channel. On the other hand, variable costs comprise for instance travel agent commissions, phone charges, toners, paper, postage, web fees, and the like. Thus, Mallen (1996) stated that the decision to chose particular distribution channels should depend on four major components, which are the basis of competitive superiority: “ maximize sales, minimize costs, maximize channel good will and maximize channel control ” .

Over the years, various denotations with similar meanings evolved. These include controlled versus intermediary distribution channels (Dix and Baird, 1998), pull versus push distribution channels (Lewis and Chambers, 2000), traditional versus online distribution channels (HeBS, 2002) and direct versus indirect distribution channels (Gee et al., 1999).

Concerning the hospitality industry, Meidan and Chiu (1995) stated that the exchange of requests during the distribution from and to the room reservation department is mainly executed via “ telephone, telex, fax, letter, use computer or visit the hotel reservation centre ” . However, one has to know that, in particular, the ‘ use computer ’ option plays an essential role in today’s world of reservations since GDS, CRS, Internet direct bookings, online travel agencies and e-mail bookings are all included and, in sum, account for high reservation’s inquiries volume.

According to Sigala (2001), the technological impact on distribution is evident since even the analysis for market segments are not anymore evaluated in the traditional way by segments rather than by distribution channels and their market segmentation as well as the purchasing behaviour of its customer groups. In addition, the author states that multi-channel utilization causes, partially, adverse impacts such as the confusion among potential guests when discovering different rates among the different channels for the same room and duration conditions. Generally, traditional channels such as mail, telephone, faxes and CRS are characterized by higher fixed costs and greater reservations volume, whereas GDS (travel agents and tour operators) and the various online channels are much cheaper in usage, however, lack behind in total amount of bookings ( Figure 1 ; Schegg and Steiner, 2003) (Starkov, 2002). The HeBS Report (2002) goes even further by identifying traditional channels as ‘inefficient and expensive’ compared to online alternatives.

The following distribution channels play the prior roles within the hospitality industry and will be discussed according to their particular characteristics. The channels are analysed in chronological order from traditional to online access points:

2.2.1 L ETTER

The boom of online service caused and, still, causes diminishing numbers for letter usage as means of distribution over the last years. The ‘Annual Report of the Suisse Post’ (2002) gives evidence for this statement. While in 2001 ‘A-Post’ letters accounted for 869 million letters in Switzerland, the figure declined progressively by 28 million in 2002. Therefore, it can be assumed that this trend impacted the room reservation process in the hospitality industry as any other industry. Letters, whether handwritten or computer typed, do already belong to traditional, old-fashioned ways of communication in the hospitality and are, nowadays, less often used than ever before due to their slow transportation speed, high price and complex delivery process.

Ho, Jacobs and Cox (2003) carried out a study on letters as communication channel between hotels and customers in the year 1988. In a recent second study, the authors investigated the same variables again in order to evaluate the development of practices on letter communication since the first study. Results have shown that return memo forms became less often used than in past between hotels and customers. The findings also indicated that more than 46 per cent of hotels preferred to include a telephone number (in 1988, it was around 9 per cent) rather than a return memo form for further communication. Additionally, the authors discovered that neither significant usage improvement on response rates nor quality enhancements have been made between 1988 and the current findings. In 1988, more than 27 per cent of hotels did not respond to room reservation inquiries at all, whereas, the recent research still indicated a non-response rate of 21 per cent. According to Ho et al. (2003) the 27 per cent of the non-responses among hotels represented already missed revenues of around $31,000 for each hotel in 1988. Moreover, the authors highlighted that among the hotels who responded to the inquiry, improvements were made with regards to the response time. When 1988, the rate of response was 82 per cent four weeks after the initial guest inquiry, the current study included around 99 per cent of the answers.

Dix and Baird (1998) stated that resort hotels receive far more reservation requests via letter than any other hotel type since the speed is not considered as the main matter of importance during the communication process. Therefore, the lead time is longer between the involved parties. Generally, a letter can be considered as one of the more individually customized channels and is often used for service failure complaint letters by customers and service failure recoveries strategies by hotel companies.

2.2.2 T ELEPHONE

According to ‘Call Center Profi’ (1999), the main communication focus of many industries, such as the despatch industry, is set on telephone communication (80 per cent of sales) rather than online services or others. Support for the hospitality industry is given by the Four Seasons Hotel Berlin, which declared the telephone as the foremost channel for reservations with over 40 per cent of incoming bookings directly followed by fax inquiries (Stahl, 2003). In the area of business, the telephone is still number one in the ranking of communication tools, however, it is the e-mail, which has the strongest growth rates of all (Müller-Hagedorn and Büchel, 2001). According to ‘First Consulting Group’ (2002), a significant change from telephone usage to online communication is already in progress. An ordinary structured reservations department can be categorized as a call centre since it represents an organisation form with the prior task to communicate with customers directly in the most service- orientated manner with the support of information- and telecommunication technology (Wiencke and Koke, 1999). Despite, it is important to state that call centres do not exclusively utilize the telephone as single tool of communication.

Technological progress, e.g. face-to-face phones, IVR (interactive recordings) and voice recognition technology (VRT), might play a growing role for telephone communication channels in future. According to the ‘Hospitality TechAdvisor’ (2001), the VRT system recognizes different accents as well as allows usages of whole sentences, which will be answered automatically and appropriately at once. Anton (2000) mentions that many advanced technologies are, nowadays, used in call centres. These include ‘value-based caller routing’ (which allows to select a predetermined most valuable customer (MVC) before speaking to an ordinary client), ‘computer-simulated training’ (CBT/ SBT) (uses actual call examples for new employee training), ‘computer telephony integration’ (takes customer profile from the corporate database, which recognizes the caller and provides important information on him or her) and ‘middleware’ ( “ enables information held in different formats to be integrated and presented to the call centre agent in a consistent format ” ). However, the question remains open if the hospitality industry, as a slow IT adopter, will jump on the bandwagon of these potential successful technologies (Frey et al., 2002). Up to now, Lennon and Harris (2002) have found that the travel industry, as a highly customer-orientated sector, sticks longer to its communication habits than more innovative industries such as manufacturing or technology.

Dix and Baird (1998) illustrated that telephone bookings are considered as the most common form of reservations, in 1997, for hotels and will maintain their status. Hartley and Witt (1992) found in their study that many hotels use the telephone inefficiently to transfer inquiries into actual reservations. The authors found that 35 per cent of calls, among 84 hotels, “ were not directed beyond the person answering the phone ” and that around 80 per cent have not asked customers on specific needs. Thus, inefficient practice of telephone communication might have resulted in lower hotel revenues as a prior reason (Abbey, 1998). Also, VeVerka (1995) discovered that 90 per cent of hotels, in a 100 test call sample, missed the chance to transfer room reservation inquiries in confirmed reservations. One of his additional findings was that almost no hotel “ did try to sell the value of the property before quoting rates ” . The author also discovered that 58 per cent of hotels did not attempt to convert the inquiry in a final sale. However, in comparison to the e-mail distribution, Meador (2002) observed that companies generate less service failures and provide more quality when dealing with customer by the telephone (55 per cent) than e-mail (48 per cent).

The main advantage to ‘indirect human participating’ communication channels is the social component and the direct interaction between both parties on the telephone. The telephone channel allows the reservations agent to react immediately and well adjusted to the clients’ particular desires. Tone of voice and eloquence of speech play a vital role at the telephone and, can, influence positively or negatively according to their practices (Garavan, 1997). These aspects can result in less service errors in the reservation process, whereas, inaccurate treatment of clients on the telephone will definitely increase the defection rate of customers. It is this dependence on humans, which also illustrates the telephone’s major disadvantage. The cost issue of salaries and training courses on communication are very high compared to other distribution channels.

2.2.3 F ACSIMILE (F AX )

Fax machines translate pictures via scanning in so-called audio voices, which are sent via telephone lines to its recipients. As can be observed from the distribution channel’s popularity on Swiss hotels ( Figure 1 ; Schegg and Steiner, 2003), the fax is part of the traditional channels with strong usage rates.

Rao (1999), who defined five main phases during fax deliveries, illustrated, from an 1999’s point of view, the advantages of fax usage compared to other distribution channels such as e- mails. Firstly, unskilled employees can execute fax deliveries easily without any further training. Secondly, only access to a telephone line is needed for the communication. Furthermore, in contrary to PC utilizations, no complex and expensive soft- or hardware systems are required for faxes. Finally, no inconvenient online disconnections will appear nor disliked junk e-mails arrive. Even if many analysts envisaged the demise of the facsimile more than once, Rao believed, in 1999, in a further growth, “… , the fax machine continues to dominate inter-office messaging and is showing signs of expansion ” . Rao (1999) refers to the fax technology as reliable and mature, which is still not the case for other distribution channels. In addition, the author gives examples of many beneficial features of fax machines such as plain paper usages, voice mailboxes, copy options, scanning tracks. Also, Dix and Baird (1998) refer to the fax as the useful combination of both “ performance letters and speed of telephone calls ” . The authors, additionally, put emphasis on the positive aspect of 24 hour deliveries without being dependent on office opening hours nor on different time zones as with telephone calls.

A different point of view is shown by Starkov (2003) who argues that traditional fax deliveries are very expensive in comparison to online services and require continuous maintenance in equipment i.e. toners. Starkov sees no future for fax machines in near prospect, especially due to e-mail based fax services.

2.2.4G LOBAL D ISTRIBUTION S YSTEMS (GDS)

Global distribution systems came up in the 1990s to play a major part of the hospitality distribution process up to now. Originally, the system was created for the airline industry, however, it went independent later on and became the main tool for travel agents and tour operators to interact with room reservations (Connolly, Olsen and Moore, 1997).

According to Middleton and Clarke (2001), “ worldwide hotel bookings have grown remarkably from 10 million reservations in 1991 to some 45 million in 1999. At the turn of the new century, GDSs handled nearly 90 per cent of all Business-to-Consumer (B2C) electronic reservation transactions in travel (incl. Web site bookings) ” . The authors state that the primary objective on GDS was to provide immediate access to hotel room inventories at low- cost and highest efficiency rates. According to many researches, the GDS market share will be highly challenged by the rise of online channels due to characteristics such as low-cost, immediate and individual access, high speed and immense potential (HeBS Report, 2002).

One of prior advantages, compared to other distribution channels such e-mails or faxes, is the seamless connectivity, which provides direct access to hotel databases and allowed GDS users to observe the actual availability within the hotel’s PMS and to book up to the very last room at any time for any registered hotel (Catrett, 2003). However, a major disadvantage of the GDS is its accessibility, which is exclusively controlled by intermediaries such as travel agents or tour operators. Thus, neither the hotel has direct control over the channel nor the end consumer straight access to any booking possibilities. This GDS weakness developed into a threat since other online services integrate the GDS’s advantages and provide solutions to its weaknesses (Catrett, 2003).

2.2.5 C ENTRAL R ESERVATION S YSTEM (CRS)

According to Kasavana and Brooks (1998), central reservation systems are distinguished into two categories, affiliate and non-affiliate networks. In this context, ‘affiliate’ refers to the contractual membership of the property to the chain. In addition, the authors argue that nowadays almost every hospitality chain operates with its own CRS. The main advantage of the CRS is the generation of customers at one property for other properties of the same chain. A hotel, which has a contract with either a CRS or GDS company allows commonly free-sale allotments, which are confirmed via type B or type A interfaces (Catrett, 2003). Type A reservations are confirmed via telephone modem within 7 seconds automatically, whereas type B interfaces are human interfaces, where reservation requests are confirmed via fax, however, this process can be very quick or take up to 2 hours. Most often the CRS is connected to, at least, one GDS and, thus, function in cooperation ( Figure 2 ; Dennis, 1998).

2.2.6 E-M AIL

According to Ramsay (2001), the e-mail is an important business activity whether at home or at work. The e-mail as a tool to deliver information within the Internet experienced huge growth rates in the past and will continue to do so in the future according to analysts (International Data Corporation, 2001). These predictions show that within the next five years the e-mail traffic will expand by 138 per cent of its 2001 popularity. Until 2005, analysts forecasted around 1.2 billion e-mail accounts and a daily traffic of 36 billion e-mails worldwide. E-mail becomes particularly interesting for companies either internally or externally due to its ease in usage and the low cost involved (Alternate Line Service, 2001). In studies from Cucchi (2002) and ‘marketagent.com’ (2002) among Internet users, results show that the e-mail causes a decrease in usage of other channels and, thus, substitution. So did 84 per cent of ‘surfers’ agree to use letters less often, 57.3 per cent the fax and, finally, 43.2 per cent the telephone.

However, companies also suffer of intrinsic problems in the usage of e-mails. Though, two- thirds of German and Austrian companies have already been attacked by viruses and mass advertisement Spam e-mails (junk). Costs of spamming on European companies have been estimated to have caused damages of around €10 billion annually (European Commission, 2001). Schwartz (2003) reports that around 13 billion junk e-mails are sent every day. The author’s findings show that these unwanted e-mails also cause costs to U.S. companies of $10 billion annually by diminishing the employees’ productivity. According to Heckerman, “ Spam could soon represent 90% of all e-mails ” since it has already reached a 40 per cent peak in 2002 (Schwartz, 2003). The author states that this adverse effect brings the threat along that people might not use e-mails as means of communication in future anymore.

Pechlaner and Rienzner (2001) describe the foremost advantages of the distribution channel e- mail: the possibility to contact several addressees in the meantime with the same message, speed and low costs are in the foreground. Also Sinha (1999) stresses the particular uniqueness of e- mails by its positive characteristics such as any time messaging, various recipients with the same message, inserted attachments, forwarding options and direct answer possibilities. Parker (1999) states that e-mails have main advantages such as the access to the broad audience, however, the author explains three major problems associated with e-mails. Firstly, Parker argues that e-mails are, nowadays, overused due to their low-cost and simplistic characteristic and, therefore, sent for unnecessary purposes. Secondly, e-mails are often misinterpreted and answered to quickly without focusing on the content. And thirdly, companies suffer from e-mails as means of evidence since they are used as sources against the companies in many legal cases, which was not the case via telephone communication. Since junk e-mails became known as mediators of viruses, many companies use e-mail filter options and firewalls, nowadays, in order to protect themselves.

According to Nadaban (2002), the evaluation of e-mails should be appraised with regards to the SERVQUAL model (reliability, responsiveness, assurance, empathy and tangibles) on variables such as responsiveness, response time, salutation forms, contact information and others to allow objective quality conclusions. In a similar study, Leuenberger, Schegg and Murphy (2002) noticed that “ even luxury hotels have difficulties providing prompt and accurate e-mail responses to their customers ” and that around 30 per cent of hotels did not give any response to reservation requests at all. Gherissi, Schegg and Murphy (2003) stressed that these e-mail non- response rates lie, in some cases, even over 50 per cent and cause highly negative impacts on customer satisfaction. Moreover, Anton (1995) states that even when buyers gave clear ‘yes’ to the purchase via e-mail, 32 per cent of the companies did not respond anymore backwards to the customer, which illustrates nothing else than lost revenues and adverse future business.

2.2.7 T HE I NTERNET D ISTRIBUTION

According to the HeBS report (2002) and Anton (2000), the Internet distribution channel will play a greater role than ever before in the hospitality distribution and might in the long-run eliminate as well as substitute the traditional distribution channels ( Figure 3 ; Anton, 2000). The report illustrates predictions on the development of online versus GDS’s market share. Hereby, it is forecasted that the GDS will continuously decline in market share (from 21 per cent in 2000 to 15 per cent in 2005) whereas the online channels will constantly increase in demand (from 4 per cent in 2000 to 20 per cent in 2005).

According to Connolly et al. Anton (1997), the online world is becoming a main part of our daily lives. This results in major changes within the distribution process since the buyer becomes the all-alone actor and employee of the service.

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Figure 3 - The evolution of key customer access channels

This means that the potential buyer will execute the reservation process independently without any employee supporting or intermediary interacting. As a result, Katz (2000) highlights the necessity to educate customers properly since empowerment will not be efficient if the knowledge lacks behind how to use the new responsibility.

Katz (2000) mentions privacy and security issues such as the fraudulent use of credit cards, which are major concerns for users when purchasing online. Lennon and Harris (2002) discovered that 58.5 per cent of websites across different industries do not provide a security statement, and therefore do not take basic necessities of their customers into account. Other points of concern remain speed of connectivity, connection failures, cookies, viruses (bugs) such as ‘ Love San ’ and spamming matters. These aspects can result in diminishing confidence and trust in online reservation systems and if not improved affect user rates in a negative way.

Also the suppliers’ side has been strongly influenced by the Internet. According to Wagner (2000), most global players moved into the online world by providing their own web-pages and online booking facilities. With such offers hoteliers try to stay in contact with their guests and vice versa as direct as possible. This effect of eliminating intermediaries is known as ‘disintermediation’ or ‘decoupling’. The Internet is popular for travel users due to its flexibility, speed and low-cost (Pechlaner and Rienzner, 2001). The potential customer benefits from unique characteristics such as virtual tours in hotels or online chats with reservation agents at local call rates.

Another important online trend for the hospitality industry is the increasing boom of online travel agencies. Katz (2000) emphasizes the changes in the distribution system caused by companies such as Expedia, Travelocity, Priceline and the like. These companies and related auction style-pricing models illustrate major threats to traditional travel agencies but also to hotel branding systems. This is due to hotel booking possibilities at lowest rates, which might not match to the reputation of high-class establishments. Katz (2000) argues that these online TA’s target markets have been ignored for too long by traditional TA competitors and, now, threat their own business.

2.3 Importance of Distribution Channel Efficiency

According to Connolly (1999) the decision whether to implement specific distribution channels or not plays a vital role for hotels. The author mentions that the comprehension of “ the more channels the higher the visibility, which, in turn, generates more demand ” is totally misleading. The decision, which channels to implement or not depends on the company, the competitive environment, supply and demand, market segments, purpose of travel and hotel category. However, there are important variables that require special attention when making such a decision. These include the channel’s visibility, the potential marketing usage and services offered at both access points for customers and employees. According to Connolly (1999) distribution channels can even complement each other, but the transformation ratio is essential when deciding which channel provides the highest return-of- investment.

Schegg and Steiner (2003) investigated these channel efficiency rates or look-to-book ratios in the Swiss hospitality industry. A sample of 213 hotels gave evidence on the comparison between ‘inquired reservations’ per channel to ‘actual reservations’ of same channel. First of all, the study showed significant differences among hotel categories with regards to total numbers of reservation inquiries. The figure of telephone reservation inquiries was three times higher for four and five star hotels compared to the one and two star category. Fax and e-mail reservation inquiries accounted for almost equal values, respectively, in the one, two and three star hotel segment. Hereby, four and five star hotels received more total reservation inquiries than the other segments: fax (+ 250 per cent) and e-mail (+ 60 per cent). Secondly, the study showed, apart from hotel category differences, variations in reservation inquiry values with regards to the size and location of properties. The results prove that larger city hotels receive at least as double as many telephone reservations than all other locations. Also fax and e-mail room reservations inquiries are at peak at the cities. Generally spoken, hotels with more available rooms received more reservation inquiries. Finally, Schegg and Steiner’s study gives evidence on efficiency rates of telephone and e-mail. The results show that around 50 per cent of e-mail inquiries are transformed in actual room bookings compared to 60 per cent for the telephone. According to Stahl (2003) the fax generates around 30 - 50 per cent non-bookings, which give the fax a similar efficiency rate compared to e-mail and telephone.

2.4 Challenges of the Reservations Department

The classical room reservation process illustrates one of the most imperative tasks within any hotel (Meidan and Chiu, 1995). This is due to its function as being, usually, one of the first customer service encounters and its task to sell room nights, which is the chief business for any hotel, motel, inn or other lodging establishments by definition (Kasavana and Brooks, 1998). So do, for example, 72 per cent of total revenues in the U.S. lodging industry result from room sales (Smith Travel Research, 1999). The reservation department represents, actually, the centre of complex business processes with close coordination to the front office department and the sales and marketing function. Therefore, the importance of accessibility on customer details has impacted the department with task to gather as many information on guests and their preferences as possible in order to use relationship marketing techniques (Bain, 1998). The idea is to target, acquire and maintain customers better than competitors by the usage of more profound knowledge. This knowledge is then used as the basis to sell rooms at maximum rates with the use of yield management and to treat customers in a personalised way.

2.4.1 D ATA M ANAGEMENT

Gathering information on customers allows companies to prioritise and profile their customers, especially, with the usage of information technology. Nowadays, database management allows a company to customize their product to individuals as well as to enhance their customer service (Anton, 2000).

In the case of hospitality, the data management process gives hotels the possibility to analyse customer information on segments, no-show reservation histories, cancellations, unexpected early departures, walk ins and the like. This illustrates an important prerequisite for yield management and customer relationship management (CRM). For yield management, “ an ideal application should systematically record historical patterns of demand and be able to process and analyse this data to establish trends over time by market segment ” (Jauncey et al., 1995). According to Connolly and Moore (1995) each information on customers represents an opportunity for improvement of knowledge on particular guests and for the usage of consecutive service encounters. The authors consider data management as an imperative learning tool. “ The more it is used, the more it learns by collecting additional, pertinent information about each guest. Information will then be readily available to each service provider in the organization ” (Connolly and Moore, 1995).

2.4.2 Y IELD -/ R EVENUE M ANAGEMENT

Yield management has impacted the hospitality industry more incisively than ever before (Payne, 1997) and influenced the reservations process strongly (Gonzales et al., 1994). Nowadays, reservations management turned out to be less placed into the foreground as a topic since yield management became the inevitable tool for optimising room sales. Even so, the two terms are not substitutes of each other. On the one hand, reservations management focuses on the process (‘ how to do something ’), whereas, on the other hand, yield management, or revenue management, is strongly associated with the concentration on the output (‘ what to achieve ’) (Sigala et al., 2001). Yield management’s prior objective is to find the best fit between supply, room capacity of hotels, and demand among various market segments, which have different price sensitivities.

Orkin (1988), Kimes (1989) and Donaghy et al. (1994) emphasized the importance of the establishment of policies for the application of yield management. The authors suggested that these policies should illustrate guidelines for reservation clerks relating to “ pricing/ discounting, overbooking, reservation pick-ups, incentives, cancellations, advance payments, deposits and the setting of maximum and minimum lengths of stay ” (Jauncey et al., 1995).

Yield management has increased further interest in managerial concerns since it is said to cause particular problems (Kimes, 1989). These include adverse moral perceptions among employees due to flexible pricing for the same room, the necessity to change the customer’s understanding of paying different rates for the same room as well as the importance of training for employees. Since yield management became a vital matter of the hospitality business, it has mainly impacted the reservation department in total by its revenue-driven focus (Sigala et al., 2001).

2.4.3 C USTOMER R ELATIONSHIP M ANAGEMENT (CRM)

Apart from yield management, customer relationship management has received much attention. According to Berry (2002), “ relationship marketing is attracting, maintaining and - in multi- service organizations - enhancing customer relationships ” . This ideology highlights the importance of retaining customers, at least, as equally important as acquiring new customers, which is not the case for all companies. However, according to the author, it is the major objective to create a long-term loyal relationship between the service operator and its client, which will result in lower defection rates and lower costs as well as more satisfied customers and higher profits.

Among the various customer relationship management strategies is the use of database management in order to customize the services according to the guest’s history profiles, known as ‘customizing the relationship’. This potential segmentation will distinguish the most valuable customers (MVCs) from the ordinary client (Bain, 1998). The importance lies in Pareto’s rule since the idea behind is that 20 per cent of the company’s best customers (MVCs) account for 80 per cent of the generated revenues and, therefore, require a better treatment.

In particular, the key issue of internal marketing is relevant for relationship marketing since it considers the employee as a customer within the company who requires development and will pay back the return-of-investment over time. Therefore, according to Heskett, Jones, Loveman, Sasser, and Schlesinger (1994), an increase in satisfaction of employees will result in higher profits in the end. The authors defined the idea in this manner: “ IT can effectively be applied to enhance service delivery of both peripheral and core services, contribute to customer satisfaction and loyalty, and ultimately lead the firm in gaining competitive advantage through increased profitability and/or market share ” . The importance of relationship management becomes evident when considering that the reservation agent represents the link between the hotel and the customer. Thus, only if the employee executes its duties at a high performance level, a better relationship with the potential client can be achieved. Therefore, reservation agents need to be aware of the necessity to treat customers according to best practices in order to guarantee a long-term relationship for the hotel.

2.5 Hospitality as a Service Industry

Since the reservation department belongs more often to the sales and marketing division than in past (Gonzales and associates, 1994), the important focus became ‘selling’. Therefore, reservations agents need to comprehend the exceptionality of services in order to achieve this goal. Shostack (1977) stressed the unique characteristic of services in comparison to physical products as the following: “ A service is rendered. A service is experienced. A service cannot be stored on the shelf, touched, tasted or tried on size ” . Also Grönroos (2000) described services’ uniqueness to products by their “ intangilibility, perishability, heterogeneity as well as simultaneity and inseparability of production and consumption ” . In addition, the author concentrates on a key topic, which is product-different: the issue of customer participation in the production and consumption stage of the business and “ therefore, its own influence on the flow and outcome of the process ” .

Walker (1995), Barrington and Olsen (1987) classified three steps of customer’s service participation: pre-consumption, consumption and post consumption. All three steps illustrate together the sequence of the total service experience for customers. The pre-consumption stage has to be highlighted in this paper since it represents the rooms reservation process in the case of the hospitality industry. Therefore, the reservation agent has the task to treat the customer at this service encounter successfully in order to allow subsequent steps in the chronology such as the actual hotel stay during the consumption stage. Similarly, Lovelock (1991) and Mills (1986) distinguished services in two main areas: ‘core services’ such as the hotel stay and ‘supplementary, support or peripheral’ services such as the reservations process. The two authors argued that it is possible for service operators to change the peripheral service slightly without negatively impacting the core service and, thus, the guest’s satisfaction attitude.

According to Cumby and Barnes’s (1996), the interactions between customers and employees have a large impact on the satisfaction level of customers and all subsequent stages of the service process (Carlzon, 1987). Chandon (1996) said that “ customers ’ satisfaction with the encounter may affect their perception of the overall service quality ” . As the slogan says ‘never get a second chance for a first impression’, the positive degree of attitude and behaviour of employees are vital for companies to provide competitive service quality (Farrell et al., 2001). Positive outcomes can result in future business by repeat purchases and positive word-of- mouth. Hereby, Bowen and Shoemaker (1998) discovered that loyal customers recommend their preferred hotel to an average of twelve people and, thus, generate business directly to the hotel.

Grönroos (2000) argued that customers have a hard time to assess a service before it is consumed, which challenges the abilities of employees within the reservations department as they have to transform room inquiries in actual reservations. The service aspect will be more decisive in future than ever before according to Grönroos since “ the competitive environment in more and more situations can be characterized as a service competition ” . Also Henkoff (1994) argued that “ the one place where you can differentiate yourself is in the service you provide ” .

These service characteristics of the hospitality industry have to be internalised by reservation agents in order to provide potential customers with better information on the hotel offer. Only if reservation employees are knowledgeable, the objective to sell room nights to customers can be achieved more successfully and efficiently (Catrett, 2003).

2.6 Service Failures & Consequences

According to Spreng et al. (1995) a service failure is defined as a problem a customer is faced with relating to the service provider. In the case of reservations, this can be referred as any reason, which leads to an error in the reservation process and, thus, in subsequent stages, or influences the customer negatively during this service encounter. Colgate and Norris (2001) identified two potential simplified outcomes of reactions as either the customer’s staying or leaving the company. Moreover, the authors argue that the outcome can be evaluated on three dimensions: loyalty, voice (‘complaint’) and exit. Since companies do not want to lose their customers, service recovery techniques are often used to affect customers positively to remain with the company. This is conform to the concept of customer relationship management since existing customers are less costly regarding future expenses such as marketing investments, than acquiring new ones (Mittal and Lassar, 1998) and, thus, play a most important role for companies. Colgate and Norris (2001) found in their studies that the “ three major factors that affect a customer ’ s decision to remain or exit are the customer ’ s satisfaction with recovery efforts, their sense of loyalty to the provider, and their perception of the barriers to exit ” .

Also, Keaveney (1996) discovered critical-incident categories, which caused customer’s patronisation from a company to competitive operators. Her findings among hundreds of switched customers, due to service failures, illustrate that 44 per cent switch due to core- service failures (e.g. service not provided), 34 per cent due to service-encounter failures ( “ uncaring, impolite, unresponsive, or unknowledgeable ” ) and 30 per cent have been based on the changing price level of the service. According to Zeithaml and Bitner (2000) service recovery is essential to resolve service failures and to maintain customers. Therefore, the authors found that “ dissatisfied customers who complain and the situation is not resolved are only likely to repurchase in 10% of cases, whereas repurchase intention increases to 54% when complaint is resolved, and 82% when the complaint is resolved quickly ”.

2.7 Service Failures in the Hospitality Industry

Dubé and Ranaghan (1999) investigated service quality aspects of the luxury hotel industry. The authors discovered that the perception of customers varies strongly to what managers perceive as areas of required improvement or added value within the hotel. Thus, only if hoteliers understand their guests, service failures can be diminished and quality enhanced.

According to Shoemaker and Lewis (1999) the hospitality industry is emphasized by tight competition, a mature stage in the industry life-cycle and a lot of similar offers among various hotel operating companies. This highly competitive environment does not allow companies anymore to ignore service failures and to focus only on acquiring new customers, an approach known as ‘conquest marketing’. It is equally important to retain existing clients by ‘loyalty marketing’ as well, in order to stay profitable in future. Therefore, Shoemaker and Lewis developed the ‘Loyalty Triangle’ with the aim to show hotels how they can achieve their overall goal of gaining brand relationship loyalty among their customers. The three elements consist of the “ process, database management/ communication and value creation: added and recovery ” and have to be pursued with equally important concentration in order to develop long-term loyalty.

Figure 4 - Loyalty triangle (Shoemaker & Lewis, 1999)

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The process element includes the customer as well as the service provider and all their service encounter interactions. Generally spoken, this process stage refers to “ how the service works ” , which involves the guest from its first impression until the last contact point with the hotel. With regards to the process element, the authors refer to the GAP/ SERVQUAL model from Zeithaml (1996). Shoemaker and Lewis (1999) associate the first three gaps of this model with the process element, which show the main sources of service failure in this perspective:

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The second element is the value creation, which focuses, on the one hand, on added value to enhance the long-term relationship and, on the other hand, on value recovery, which has the purpose to rectify inaccurately treated clients. Shoemaker and Lewis (1999) state that the purpose is to “ increase customer perceptions of the rewards and costs associated with present and future service transactions ” . In particular, the value recovery is associated with service failures since the recovery shall eliminate or, at least, reduce future costs. “ Value recovery research has shown that the magnitude of monetary compensation offered and the effectiveness of the recovery impact future loyalty and satisfaction ” (Shoemaker and Lewis, 1999).

The authors illustrate that value recovery is practised by the use of psychological and emotional benefits in the hospitality industry. Customer care via 24h toll-free numbers or guest relations management initiatives are commonly used to resolve problems. Other benefits include “ perfect stay programs ” , which guarantee for instance upgrades during next stays or “ 100% satisfaction guarantees ” that represent a money pay-back option if the guest was treated inaccurately.

Finally, the database management and communication element allows to customize services for guest stays. Service failures are associated with the forth gap of Zeithaml’s model at this stage. This gap illustrates discrepancies between performance and the promise of the service quality. According to Shoemaker and Lewis (1999), the origin of evolved service failures arises from four main components: “ inadequate management of service promises; promising unrealistic expectations and rewards in advertising and personal selling; insufficient customer communication; and inadequate horizontal communication among departments ” .

Since the ultimate goal is to avoid customers from switching to other hotel service operators, major hotel groups empowered employees to resolve service failures independently by offering specific types of compensation (Dubé and Shoemaker, 1999). In an investigation on complaint management, Bowen and Shoemaker (1998) found that most complaints are undertaken by program members who care on their hotel operators, which actually symbolizes a relationship.

According to Shoemaker and Lewis (1999), service failures are in the current competitive market situation not affordable anymore and result in switching customers. These service failures will involve high costs to recover the relationship with discontented guests. Since hotels strive for brand relationship among their customers with the attempt to minimize negative impressions as much as possible, hotels need to improve potential sources of service failure to overcome unprofitable business outlooks as illustrated via proper usage of ‘Loyalty Triangle’ components.

In particular, the findings of Pechlaner et al. (2001) and Leuenberger, Schegg and Murphy (2001) have shown that critical lacks on quality issues still do exist in electronic reservation communications with customers. These results in relation to Shoemaker and Lewis’ (1999) study indicate that improvements have to be made in reservation department practices in order to guarantee better business for hotels in the long-term.

3. THE ROOM RESERVATION PROCESS

3.1 Reservations Department as First Service Encounter

The reservations department as the pre-consumption stage of the entire guest experience during the hotel stay is responsible for the generation of clientele and needs, therefore, a more profound insight. The room reservation process is, generally, the first customer encounter with a hotel. According to Shostack (1985) and Bitner (1990) a service encounter is defined “ as a period of time during which a consumer interacts with the service firm ” , often it is also called ‘moment of truth’. ‘Services marketing’ considers service encounters as the building blocks of buyer’s perceptions (Tudori, 2003) and distinguished the encounters in three main categories: remote, phone and face-to-face. Remote are all electronic communication technologies (ECTs) without any direct human interactivity such as e-mail, fax, telex, etc (Young, 1995).

Since improvements of service quality during service encounters are paramount, Chandon (1996) investigated customers’ satisfaction levels on the following issues: “ perceived competence of employee (rituality), employee ’ s ability to listen (interactivity), employee ’ s effectiveness, employee ’ s dedication (interactivity), agent ’ s satisfaction, client ’ s courtesy (rituality), security (rituality), office privacy (materialization) ” . The author found that, in particular, the perceived competence, listening and dedication, as interpersonal relations or social skills, play the most important role for customers. Also Farrell et al. (2001) emphasize the importance on front-line employees because they represent the ‘direct contact’ link between the customer and the company and are, therefore, responsible for the service impression and the further business development.

According to Simmerman (1992), the outcome of a negative first impression such as due to impoliteness of staff, can have very negative consequences for a company such as customers defections to competitors in around 70 per cent of cases. On the other side, an increase of only 5 per cent in retention rate can lead to an increase of between 35 per cent and 95 per cent of profits. However, this increase is not exclusively due to the encounter experience, but at least partially responsible for this profitability enhancement (Zeithaml and Bitner, 1996).

3.2 Re-engineering of the Reservations Department

According to Gonzales and associates (1994), the room reservation process has undergone fundamental changes within the last decades. From being integrated among front office operations in the traditional reservation process, it has become a main branch of the sales and marketing function in the new reservation process at larger outlets. Generally, the duties between reservations and sales differ in the target markets at larger properties. Whereas, the reservation department is, in general, mainly concentrated on FITs (Free Individual Travellers), the sales department negotiates rates on high volume and rate discounts with intermediaries and corporations on a broader basis at larger hotel properties and according to the hotel’s policies. Gonzales and associates (1994) assert that objectives changed from being occupancy driven to the optimisation of RevPAR (revenue per available room), which is the main principle of yield management. With this restructuring, conflictive objectives between reservations with occupancy-orientation and sales with revenue-orientation have been improved and aligned. This required to empower reservation agents and to reposition their function from pure “ order-takers, record-keepers and providers of reservation information ” (Gonzales and associates, 1994) within a strict policy-focused department in the old system, to sales-focused responsibles in the new system. However, there is still potential of improvement on the coordination according to Ho, Jacobs and Cox (2003). Hereby, the authors state that many hotels focus intensively on the marketing-promotion aspect of the property, but still suffer of intrinsic problems to transfer these room reservation inquiries in confirmed reservations.

Gonzales and associates (1994) argue that the restructuring process brought major changes to the reservations department in regards to state-of-the-art telecommunication and information technology usage. Therefore, according to the author’s argumentation, global distribution systems and central reservation systems become crucial with the main purpose to let intermediaries, such as travel agents and tour operators, participate self-reliantly in the room reservation process through the use of hotel’s own property management systems. This had the prior purpose of generating additional demand and to increase customer’s awareness on a broader basis. In addition, the authors continue to explain that this caused “ fast cycle times, high staff motivation, market visibility, high customer intimacy, and yield maximization ” as positive outcomes.

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Figure 5 - Traditional Reservations Design

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Figure 6 - New Reservations Design

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Figure 7 - Traditional Reservation Process

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Figure 8 - New Reservation Process

http://gonzales.com.sg/BPR.html

3.3 The Classical Reservation Process in Detail

The classical reservations process includes seven generic reservation activities (Baker, 1994):

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All reservation process steps are applicable in a computer based environment as well as in a manual system. Generally, computerized reservation systems such as property management systems, have the advantage of immediate updates caused by any modifications in the rooms inventory and an enhanced accuracy of room availability (Kasavana and Brooks, 1998). The computerised systems execute parts of the reservation’s process, such as the compiling of reservation reports, automatically according to the reservation agent’s commands.

However, according to Baker (1994) the efficiency of workforce and its ability of SAP: speed (s), accuracy (a) and politeness (p) plays further the key role in the entire reservation process. In particular, this becomes vital since the hospitality industry is emphasized by strong competition, high fixed costs, a fragmented industry structure as well as a mature stage in the industry life cycle (Bowen and Shoemaker, 1998). Therefore, Kasavana and Brooks (1998) identified efficient reservations procedures, or standards (see appendix 10.1) , as an important prerequisite in order to optimise SAP, to guarantee consistency, and to provide guests successfully with “ the room that best meets the needs the guest expressed during the reservations process ” . Baker (1994) believes that these procedures combined with social skills and salesmanship are the foremost areas of importance within the reservations department in order to function most efficiently.

In addition, literature has shown that six prior techniques to manage reservations exist in hotels: “ overbooking policy, forecasting room availability, yield management technique, automating the hotel ’ s reservation system, training those responsible for processing reservations and the approach to minimise the hotel ’ s loss from no-shows ” (Meidan and Chiu, 1995). Hereby, the authors found that the efficiency of these six fundamental reservation management techniques mainly depends on hotel specific characteristics such as type, policies on factors such as “ occupancy rates, overbooking policies, percentage of non- guaranteed no-shows, hotel size, types of guests preferred ” (Meidan and Chiu, 1995) and category of the establishment. However, the most significant point of attention was given to training aspects on booking speed among reservation agents and their knowledge on the hotel property. It is said that during the reservation process the importance whether to book or not is not anymore clarified by “location, location, location” of the outlet, rather than by “knowledge, knowledge, knowledge” on the property, which can be gained by potential customers through different distribution channels (IHRA, 1999).

The following steps of the classical room reservation process shall illustrate how reservations are conducted from the hotel’s point of view:

3.3.1 R ECEIVING I NQUIRIES

Inquiries are received via various distribution channels, respectively communication channels, (telephone, fax, letter, e-mail, hotel’s Internet homepage, etc.), documented and transferred to the responsible reservation agent and, thus, show the way how reservations are conducted from the potential guest to the hotel. The accessibility is vital for the success of a hotel company according to Kasavana and Brooks (1998). Since different distribution channels are used unequally efficient (Schegg and Steiner, 2003) such as e-mails with 45 to 75 per cent non-response rates (Gherissi, Schegg and Murphy, 2003), as mentioned earlier, the focus should be set on the improvement of each touchpoint to increase the performance. Moreover, this stage in the process also includes the reservations agent’s task to gather information on potential clients such as “ the guests name, address, and telephone number; company or travel agency (if applicable); date of arrival and date of departure; and the type and number of rooms requested ” (Baker, 1994). Additionally, information such as “ room rate, number of people in party, method of payment or guarantee, and any special request ” have to be gathered to process the reservation. In general, if the communication or distribution channel accessibility to the hotel does not work properly, no business transaction can take place.

3.3.2 D ETERMINING R OOM A VAILABILITY

In this second step, the reservations agent has the duty to compare the information of the ‘receiving inquiries stage’ such as the date and room category with earlier processed reservations. Thus, the availability is evaluated according to earlier and new room reservation inquiries. Kasavana and Brooks (1998) as well as Baker (1994) suggest that this task has to be closely orientated on the overbooking, respectively underbooking, policy of the hotel, if in place. This booking policy has to be based on past figures in order to avoid ‘walking guests’, which is associated with very high costs since the hotel has to guarantee a room at same quality standard in another property by contract. However, if the yield management policy is inaccurate, the risk of not selling the maximum number of rooms can arise, which results in less revenues. Baker (1994) suggests that an efficient system, whether computerised or manual, has to be used in order to determine the room availability precisely. Therefore, the author mentions “ forecast boards, reservations charts and computerized systems ” as solution, which fulfil this requirement. Despite, all of these issues illustrate potential points of service failure if not updated or used accurately.

3.3.3 A CCEPTING OR D ENYING R EQUESTS FOR R ESERVATION

If the reservation agent can provide the potential guest with a desired room according to the room availability, he or she has the task to decide whether to accept or deny the room inquiry at this stage. In most cases, the reservation agent will accept the requested room since it is the hotel’s main business. However, reasons of denying the inquiry do exist. According to Kasavana and Brooks (1998), the reservation agent will have to deny an inquiry according to the hotel’s policy if the guest is already known as a ‘problematic customer’, during earlier business, due to issues such as not settling the room account of previous stays, destroying room inventory or, generally spoken, causing lots of problems. Therefore, if a guest is already mentioned on the blacklist, a room might not be provided. Despite, the majority of denials are based on other reasons such as fully booked room categories on particular dates, when customers or the hotel need to refuse the business. Even, if the reservations agent denies a reservation, his or her behaviour should not differentiate to guests with accepted inquiries since the hotel might make future business with these denied clients. Therefore, social skills play a crucial role during this stage. In addition, the agent should always try to switch the customer’s demand to an alternative offer on another time period to keep the business with the hotel (Baker, 1994).

3.3.4 D OCUMENTING R ESERVATION D ETAILS

In this forth step, after the reservations agent has accepted the room reservation inquiry, (s)he has to enter all relevant information, gained during the ‘receiving inquiry’s’ step, into the computer system or the reservation form. The reservation clerk should also communicate the differences of guaranteeing and non-guaranteeing the room to the customers in order to avoid prospective misunderstandings. In the case of a guaranteed reservation, the reservation agent might require further payment information (e.g. “ credit card, prepayment or deposit ” (Baker, 1994)). Afterwards, the agent has to update the availability immediately as well as entering the information in a hotel diary if a manual system is used. Two issues are essential at this stage for the reservations agent. Firstly, the person who makes the reservation is often not the actual guest, and, thus, should not provide his or her own personal information rather than the ones of the actual room night user. Such false information would lead to problems for the actual customer during the check-in process. Secondly, in a computer based environment, the agent should utilize existing guest profiles from earlier stays, for accurate analysis purposes, rather than creating new profiles for already existing clients (Kasavana and Brooks, 1998).

3.3.5 C ONFIRMING R ESERVATIONS

The reservations agent has to confirm the reservation in a written acknowledgement, which represents evidence for the actual contract. Even, if these written acknowledgements become less often used in large hotels, smaller hotels do often still use such a confirmation method. The reasons for the diminishing popularity among many hotels is associated with the involved costs. The confirmation includes all relevant information on the reservation and the hotel stay (Baker, 1994). Often, the agent gives a reservation number to the customer in order to facilitate prospective interaction between both parties. If no written confirmation was exchanged between the hotel and the customer, misunderstandings could arise and no evidence of the actual contract exists. Such potential service failures could lead to problems for clients and create adverse consequences for the hotel with regards to future business (Kasavana and Brooks, 1998).

3.3.6 M AINTAINING R ESERVATION R ECORDS

This step involves two tasks. The first one is “ filing of the original booking ” and, the second one is “ modification of the bookings ” (Baker, 1994). ‘Filing of the original booking’ refers to structuring all reservations in order to retrieve the booking if required. In a manual system, the sequence of reservation forms is often established in a chronological order of arrival dates and/ or alphabetical structure in the second stage. Other methods of orders are also used such as guaranteed and non-guaranteed bookings. However, any wrong allocation of reservations can result in unavailable rooms during the check-in procedure of guests and, thus, cause problems for customers. ‘Modification of the bookings’ refers to changes on reservations due to new preferences of guests or, even, cancellations of the entire room reservation. If a room has to be cancelled, the responsible party, hotel or customer, and the time conditions of the cancellation has to be traced back in order to clarify potential charges or compensation between the parties (Dix and Baird, 1998). At any time of booking modifications, the reservations agent has to update the room availability immediately to allow precision for other reservation requests. This availability update is an important step, in particular, in a manual system to guarantee room status precision, whereas it is completed automatically in a computerised property management system (Baker, 1994).

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