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Strategic responses of the Spanish hospitality sector to the

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International Journal of Hospitality Management 32 (2013) 141–148
Contents lists available at SciVerse ScienceDirect
International Journal of Hospitality Management
journal homepage: www.elsevier.com/locate/ijhosman
Strategic responses of the Spanish hospitality sector to the financial crisis
Maria del Mar Alonso-Almeida b , Kerstin Bremser a,∗
a Pforzheim University of Applied Sciences, Business School, International Business, Tiefenbronner Str. 65, 75175 Pforzheim, Germany
b Universidad Autónoma de Madrid, Faculty of Economics and Business Administration, 28049 Madrid, Spain
a r t i c l e i n f o
Keywords:
Strategic responses of the Spanish hospitality sector to the financial crisis   代寫
Tourism
Financial crisis
Performance
Hotel
Strategy
a b s t r a c t
The 2008 financial crisis weakened the hospitality sector severely, like other industries. This paper inves-
tigates the response of the Spanish hospitality sector to the crisis by analyzing a sample of almost 70% of
Madridhotels.Inparticular,thisresearchfocusesontheconnectionbetweentheimpactsofthecrisis,the
measures taken to alleviate the crisis and an individual hotel’s performance. The study shows that hotels
that focus on high quality, brand image and a loyal customer base are best equipped to handle the crisis.
Increased spending on marketing also eases the impact of the crisis. Cost-cutting measures characterize
the worst performers. Contrary to the results presented in the literature, the crisis had no immediately
visiblenegativeimpactuponanindividualhotel’sperformance.Therefore,hotelsshouldfocusonquality,
branding, a reliance on loyal customers and increasing marketing to counteract the crisis.
© 2013 Elsevier Ltd. All rights reserved.
1. Introduction
Until now, the scientific literature barely mentions the world-
wide recession following the financial crisis of 2008 with the
exception of studies by Kimes (2009) and Enz et al. (2011). The
empirical study here considers the strategic responses of the Span-
ish hospitality sector to the 2008/2009 financial crisis. It is based
on a survey of the entire population of Madrid hotels. Almost 70%
of the hotels questioned took part in the research. The results were
analyzedcombiningfactorialanalysis,hotelcharacteristicsandtwo
regression models.
Strategic responses of the Spanish hospitality sector to the financial crisis   代寫
The economic crisis began in 2007 with a liquidity crisis in the
banking system resulting from the sale of complexly structured
financial products. In the beginning, the subprime crisis did not
reach Spain because its banks had focused on retail banking and
abstained from purchasing structured mortgage products. How-
ever,duringthecrisis,theSpanisheconomysuffered,duetoitsside
effects, namely, the lack of liquidity in the global banking system,
the changing perception of risk, and the adjustment of the hous-
ing markets and the subsequent global recession (Alvarez, 2008).
In particular, the altered perception of risk led to falling demand
in the housing market, which translated into layoffs in the con-
struction industry. Within Europe, Spain was one of the countries
that suffered most from the crisis, due to its severe housing bubble
(Alvarez, 2008; Taylor, 2009).
Corresponding author. Tel.: +49 177 564 75 41; fax: +49 7231 28 6100.
E-mail addresses: mar.alonso@uam.es (M.M. Alonso-Almeida),
kerstin.bremser@hs-pforzheim.de (K. Bremser).
Theresultingriseinunemploymentfurtheraggravatedthecrisis
(OECD, 2009). The crisis affected the tourism sector when unem-
ployed people reduced their spending. Madrid hotels rely heavily
on domestic tourism. In 2008, more than 50% of all hotel overnight
stays were Spanish residents, a percentage that has remained sta-
ble over the past several decades. (Instituto de Estadística de la
Comunidad de Madrid, 2010).
The current study expands the existing body of literature by
examining the service industries, especially hotels, instead of man-
ufacturing. The service sector is the most important sector of the
Spanish economy based on its contribution to the gross domestic
product (GDP). In 2008, services accounted for nearly 50% of the
GDP. In Spain, tourism companies form a significant part of the ser-
vices sector and accounted for approximately 13% in 2010. Within
Europe, Spain has the highest number of hotels and restaurants.
International and domestic tourism contribute significantly to the
national income (Instituto de Estudios Turísticos, 2011; Instituto
Nacional de Estadística, 2010b). However, due to the recession
following the 2008 financial crisis, international tourism to Spain
declined,andspendingbyinternationalaswellasdomestictourists
deteriorated (Instituto de Estudios Turísticos, 2010).
Strategic responses of the Spanish hospitality sector to the financial crisis   代寫
The study is unique in the aspect that it surveyed the entire
Madrid population of hotels and received a strong response. Given
Madrid’s dominant position in the Spanish economy, results can
be transferred to the whole of Spain. The research thereby sheds
a detailed insight into the strategies of Spanish hotels during
the 2008/2009 financial crisis. It encompasses different aspects
of strategy choices that so far have not been combined in litera-
ture. It addresses brand image, quality and customer loyalty. These
aspects are then contrasted to financial performance. In addition,
the authors test if proactive or reactive measures are better used in
0278-4319/$ – see front matter © 2013 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.ijhm.2012.05.004
142 M.M. Alonso-Almeida, K. Bremser / International Journal of Hospitality Management 32 (2013) 141–148
crisis situations. Thus, the research is able to give an almost com-
plete picture of the 2008/2009 financial crisis for Madrid hotels. By
analyzing data from individual business instead of aggregated data
fromindustrysectorsawealthofinformationisaccessed.Thecom-
bined results can assist managers in choosing successful measures
to cope with a crisis and aid in developing crisis plans containing
emergency measures.
Thepaperproceedsasfollows.Section2reviewstheexistinglit-
eraturetodiscernpossiblestrategiestorespondtoafinancialcrisis.
Section 3 describes the sampling frame and the method employed
in the course of the investigation. Section 4 presents and discusses
the results, and Section 5 states the conclusions, as well as the
limitations of the study.
2. Theory
The literature presents a mixed view regarding the impact of a
crisis on hotels. Kimes (2009) conducts a worldwide online survey
of hotel revenue managers. The respondents state that hotels in
nearly all segments in most parts of the world have experienced
drops in occupancy, average daily rate, and revenue per avail-
able room. Therefore, no distinction exists for the impact of the
crisis between different hotel types with different brands or quali-
ties. Okumus and Karamustafa (2005) support these findings. They
conclude that no different responses among hotels with differing
classifications existed during the Turkish financial crisis. Similari-
ties in the long- and short-term negative effects of the crisis were
evident and frequent.
A survey undertaken for the Leading Hotels of the World Group
by Barsky (2009) indicates that a recession affects luxury hotels
belonging to the Leading Hotels of the World brand less than hotels
focusing on business travelers. In addition, a prior investigation by
the same author comes to a similar conclusion. Barsky and Nash
(2008) state that, during the 2008 recession following the finan-
cial crisis, branded luxury hotels were more able to maintain their
prices than other hotels.
Kim and Kim (2005) draw a similar conclusion; however, their
research does not occur during a recession. By interviewing Korean
travelers,theyinvestigatetheimpactofbrandequityontheperfor-
mance of luxury hotels and chain restaurants and find that a strong
brandimagepositivelyimpactsfinancialperformance.Thefindings
in a study by Taylor and Enz (2002) support the Korean research. In
their survey of the responses of general managers to the attacks of
September 11, 2001, they note that high-quality, up-market hotels
arelesslikelytocutpricesinresponsetoacrisisbutinsteadincrease
andredirectmarketingeffortsandcutcostsbylayingoffemployees
or reducing their hours worked to stay profitable.
Strategic responses of the Spanish hospitality sector to the financial crisis   代寫
Additionally, several authors examine the impact of brand
image on hotel performance during favorable economic times.
They state that well-managed hotel brands achieve higher mar-
ket shares, command higher market values and better profitability,
are able to charge premium prices, have easier access to financing
and will most likely be able to achieve higher revenues per avail-
ableroomandoccupancy(Keeling,2001;KimandKim,2004,2005;
O’Neill and Mattila, 2010; O’Neill and Xiao, 2006; Prasad and Dev,
2000). All of these studies indicate that having a brand positively
influences performance.
H1. Hotels having a strong brand image show better financial
performance during a crisis than other hotels.
Quality may also improve financial performance through
improved processes (cost reduction) or higher customer satisfac-
tion (increased sales). However, most research is based on the
manufacturing industry and has been conducted during favorable
economic times. In their literature review, Wayhan and Balderson
(2007) cite 13 different studies researching financial performance
and quality. Ten indicate that total quality management (TQM)
increases financial performance, whereas the rest report the oppo-
site.
Morris (2006) fails to find a connection between quality and
financial performance, whereas Corbett et al. (2005), Lloréns
Montes and Verdú Jover (2004), Martinez-Lorente et al. (2000) and
Padma et al. (2006) find a connection, at least partly. Different indi-
cators can represent quality. On one hand are certifications by the
International Organization for Standardization (ISO) or Environ-
mental Management System (EMS) and the winning of a quality
(i.e.,Baldridge)award,andontheotherhandistheimplementation
ofTQMprograms.Financialperformancecanalsomanifestthrough
different forms. Some authors rely on measurable data, whereas
others rely on the judgment of management. Because literature
on the connection between quality and performance in the hotel
industry is scant (Alonso-Almeida et al., 2012), the findings from
manufacturing industries must be applied to service industries.
H2. Hotels having high quality show better financial performance
during a crisis than other hotels.
In addition, the literature covers the negative impacts of a cri-
sis on an individual hotel. Negative impacts consist of declining
sales, declining prices and cost containment, all of which lead to
a decline in profits, staff dismissals and, as a final consequence,
bankruptcy. Okumus et al. (2005) distinguish between the long-
and short-term negative impacts of the Turkish financial crisis. In
total, after the crisis, hotels experienced reduced occupancy rates
and higher costs, and had to utilize fewer employees and to post-
poneinvestmentplans.IntheirstudyontheTurkishhotelindustry,
Okumus and Karamustafa (2005) remark that negative effects of
the crisis mainly consist of decreased tourism demand, difficulties
incollectingonloans,thepostponementoffutureinvestments,dif-
ficulties in paying debts and increasing costs. These results neither
differ according to destination nor hotel type. Kimes (2009) points
outthedifficultiesinmaintainingpricepositioningduringthe2008
financial crisis. Hotels had to rely on such strategies as rate fencing
because pricing power had shifted to consumers. As a result of the
crisis, revenue managers report an overall decline in revenues.
Enz et al. (2011) indicate that, in comparison to the terrorist
attacks of September 11, 2001, the negative impact of the finan-
cial crisis on an individual hotel’s performance exists but is not as
immediate as the effect of September 11. However, it lasts longer.
GiventhattheUSgovernmentgroundedallplanesimmediatelyand
closed the entire US airspace for three days it is not surprising that
this specific terrorist attack impacted hotel’s performance faster
thanthefinancialcrisis.Still,bothformsofcrisishaveanimmediate
impact on a hotel’s performance. Furthermore, Henderson (1999)
reports a decline in profitability at selected sites by approximately
30%inSingapore’stouristattractionsaftertheAsianfinancialcrisis.
This reduction indicates the severe negative impact of the financial
crisis on individual companies. de Sausmarez (2004) states that,
due to declining international demand after the Asian financial cri-
sis,theMalaysiantourismindustrysawanincreaseinbankruptcies.
Pearce and Michael (1997) support her finding in their study of
strategies that make manufacturing industries recession resistant.
They indicate that, during a recession, bankruptcy rates increase
dramatically.
H3. The crisis had an immediate negative impact upon the per-
formance of individual companies.
To alleviate the negative impact of a crisis, some strategies
enablecompaniestoreboundfasterfromacriticalsituation.Alarge
andsteadilygrowingbodyofliteratureontherelationshipbetween
customerloyaltyandperformanceexiststhatdescribessomeofthe
factors that affect performance during a crisis. The research begins
with the works of Reichheld et al. (1990), Rust and Zahorik (1993)
M.M. Alonso-Almeida, K. Bremser / International Journal of Hospitality Management 32 (2013) 141–148 143
orSrivastaetal.(1998)andwiththeformulationofthesatisfaction-
profit chain by Anderson and Mittal (2000). The satisfaction-profit
chain argues that better attribute performance leads to customer
satisfaction, which, in turn, drives customer retention and finally
leads to increased profits of the company.
Severalauthorstestdifferentstagesofthismodelacrossvarious
industries using diverse proxies for performance (i.e., shareholder
value in Anderson et al., 2004; cash flow in Gruca and Rego,
2005; stock prices in Fornell et al., 2006; customer revenue at
the individual customer level in Helgesen, 2006; and Tobin’s q
and market-to-book ratio in Aksoy et al., 2008 and Williams and
Naumann,2011).Thefindingssuggestthatapositiverelationexists
between customer loyalty and retention and performance. This
relation is mainly due to four different factors: (1) loyal customers
buy more, (2) loyal customers spend a larger share of their income
at the supplier, (3) loyal customers tend to be less price-sensitive
thanothercustomersand(4)loyalcustomersspreadpositiveword-
of-mouth and thereby increase the customer base (Williams and
Naumann, 2011). However, the connection between customer loy-
alty and performance seems to be asymmetrical and nonlinear,
and the connection differs according to industry (Anderson and
Mittal, 2000). Reinartz and Kumar (2002) even argue that the link
between loyalty and performance is much weaker than what has
been assumed and that the only way loyal customers contribute to
a company’s performance is by spreading positive word-of-mouth.
Forthehotelindustry,Andersonetal.(2004)findtheassociation
between customer loyalty and shareholder value to be negative.
However, a study by Gruca and Rego (2005) indicates that cus-
tomer satisfaction and loyalty significantly reduces the variability
of future cash flows for the accommodation industry. In addition,
hotels with high levels of customer satisfaction and loyalty enjoy
lower price sensitivity. Therefore, for the purposes of this paper,
the ability to maintain stable hotel prices serves as an indicator for
performance in the hotel industry, which agrees with the findings
of Gruca and Rego (2005).
H4. A loyal customer base affects performance positively during
a crisis.
Previous studies consider the strategies that different compa-
nies use to cope with a crisis. Some authors note that the most
successful strategies to overcome a crisis make use of proac-
tive measures; for instance, increasing marketing spending and
sales. In his research on the success of adaptation strategies of
Finnish companies after the 1989–1993 recession, Laitinen (2000)
states that the most successful strategy is medium- and long-term
investments in new product development, along with marketing.
Research by Pearce and Michael (1997) supports these findings.
Firms focusing on marketing in their core business have bet-
ter chances of surviving a recession than companies focusing on
retrenchment. Ang et al. (2000) provide an explanation for the
effectiveness of certain marketing strategies. During a recession,
consumers adapt their spending patterns, switch brands, delay
purchasesandincreasecomparativeshoppingand,asaresult,com-
panies must increase the visibility of their products to remain
attractive. Therefore, companies should respond to a crisis by
increasing their marketing efforts.
Empirical studies of the tourism industry show the success
of these proactive strategies. The hotel managers interviewed by
Okumus et al. (2005) mention their additional investment in mar-
keting as a beneficial impact of the Turkish financial crisis, which
helps them to survive. de Sausmarez (2004) indicates the impor-
tance of marketing, “The experience of Malaysia has shown (...
that) international and domestic marketing of tourism (...) were
all major contributors to the recovery of the tourism sector” (de
Sausmarez, 2004, p. 228). Whereas Malaysia relies on increased
marketing to attract more foreign tourists, general managers of
AmericanhotelsafterSeptember11,2001(giventhespecificnature
of the crisis) focus on increasing marketing and sales to domestic
tourists (Taylor and Enz, 2002). Revenue managers in interna-
tional hotels also support this view. They mention the necessity
of increased marketing-related activities as a strategy to cope with
the 2008 financial crisis (Kimes, 2009).
Turning to new markets or market segments also helps to
increase sales. Lee et al. (2009) note that, during the Asian financial
crisis, Korean firms that relied on exports instead of the domestic
market were more successful. As Pearce and Michael (2006) state,
customers become more cautious during recession times as they
spend less and become more sensitive to pricing. Some customers
might even abstain from purchasing altogether because they have
experienced a deterioration of their personal finances. Therefore,
the authors recommend a program to avoid the negative conse-
quences of recessions: companies should position their firms in
multiple markets and regions. In an earlier study, these authors
suggest that, during the peak of a recession, cautious expansion
should be pursued (Pearce and Michael, 1997).
Applying these findings to the tourism sector, empirical studies
show that many companies turn to a strategy of new customer
acquisition. Henderson (1999) reports a shift in the marketing of
Singapore’sattractionstonewsegmentsofthedomesticmarket.In
anotherstudy,deSausmarez(2004)detectsincreasedmarketingof
Malaysia’sattractionstonewdomesticcustomers(i.e.,government
employees), and Okumus et al. (2005) note an increased interest in
foreign tourists.
H5. Proactive measures (i.e., increased marketing) taken to cope
with the crisis influence performance positively.
Apartfrommarketing-basedstrategies,researchersalsodiscuss
strategies based upon retrenchment. Pearce and Michael (1997)
state that an overly strong focus on retrenchment could lead to
poorer performance during a recession. In their 2006 article, those
authors find that retrenchment through cost-cutting and asset
reductioncouldenablefirmstoreboundfromarecession.Nonethe-
less, an overly strong focus on cost-cutting measures through the
reduction of R&D expenses, reducing customer service, and laying
off employees, among other measures, may cause permanent dam-
age to competitive advantage and market share growth. Anderson
(2006)agreesandstatesthat,inacrisissituation,costsmustbecut.
Nevertheless, tourism establishments should execute cost-
cutting strategies by maintaining existing staff levels and instead
relying on gains in work-time flexibility or efficiency increases to
avoiddamaginglong-termperformance.Henderson(1999)reports
a similar finding from her research on the reaction of Singapore’s
tourist attractions. Most attractions began to implement cost cut-
ting measures but sought to keep staff levels constant. Kamoche
(2003) disagrees with this measure. The Hong Kong hotel industry
responded to the Asian financial crisis by cutting costs, dismissing
staff, imposing wage cuts and implementing hiring freezes. Con-
sequently, these actions lead to job insecurity, declining morale
and low organizational commitment, which thereby damages the
long-term image of the hotels. Laitinen (2000) also looks at the
medium and long-term effects of different strategies. According
to his findings, adaptation strategies based on negotiating finance
contracts, restructuring debt and the realization of fixed assets are
mostcloselyrelatedtofailure.Althoughhotelswelcometheoppor-
tunity to cut costs because of the crisis (Okumus and Karamustafa,
2005) and often use cost-cutting as Taylor and Enz (2002) cite
(most general managers after September 11, 2001 relied either on
revenue-enhancing or cost-containing strategies), managers must
be cautious regarding the extent to which they actually implement
these strategies.
144 M.M. Alonso-Almeida, K. Bremser / International Journal of Hospitality Management 32 (2013) 141–148
H6. Companies that focus on cost-cutting perform worse during
a crisis.
3. Methodology
3.1. Sample and data collection
Findings from the literature are used to create a survey to test
the five hypotheses. The survey was conducted in 2009 across the
entire population of Madrid hotels listed in the Tourspain guide
to obtain generalizable results. The total population included 198
hotelsfromthecapitalofMadrid,Spain.Inall,134hotels,or67.67%,
provided information, which represents a high response rate for
this type of study (Malhotra and Grover, 1998).
Madrid serves as sampling unit because tourism comprises a
significant part of its local industry. Apart from the typical “sun
and surf” destinations, such as the Canary and Balearic Islands,
Madrid shows the highest hotel occupancy rates within Spain, as
well as above-average tourism spending (2008 data). Unlike sun
and surf destinations, Madrid is attractive for different forms of
tourism, such as business travel, leisure (urban travel) and confer-
ence tourism (Instituto de Estadística de la Comunidad de Madrid,
2010). Among the Spanish regions, the capital of Madrid has the
highest GDP per capita, and tourism comprises a significant por-
tion of the local labor market. Taken together, financial services
and tourism contribute 13% to the local GDP, and both sectors were
severely hit by the crisis (Instituto Nacional de Estadística, 2010a).
Therefore, the impact on business and leisure travel should be vis-
ible in the Madrid sample.
3.2. Data analysis and results
This research is conducted as a descriptive analysis. The 134
hotels in the sample are, on average, 16.27 years old and contain
an average of 188 rooms each.
Two factorial analyses of the items identified in the previ-
ous literature and addressed as part of the present study (see
Tables 1 and 2) quantify the impact of the crisis and the measures
takentoaddressit.Aprincipalcomponentanalysisisusedtoextract
the data.
The first factorial analysis used a value of 0.730 obtained by a
KMO test and indicates that there was a good fit. The correlation
matrix is an identity matrix because Bartlett’s test of sphericity
obtained 599.699 for the statistic and a critical probability of 0.000.
Only factors with values of one or more were considered. The axes
wererotatedusingKaiser’svarimaxprocedure,inwhichonlyfacto-
rial loads of over 0.4 were used. The previously mentioned factors
explain 62.80% of the total variance. This analysis yields the four
factors in Table 1.
The first component, COST REDUCTION, indicates that hotel
management cuts salaries, budgets and services immediately to
cope with the crisis. The second, EFFICIENCY IMPROVEMENT,
denotes management’s commitment to anticipating threats dur-
ing economic downturns to perceive opportunities in advance and
to be prepared to take advantage of them as they arise. The third
component, COMPETITIVITY IMPROVEMENT, is closely related to
maintaining or widening the competitive advantage. Lastly, the
fourthcomponent,INCOMEREDUCTION,referstoadeclineinhotel
incomes, due to price reductions or reduced occupancy rates.
The second factorial analysis uses the same method. A value
of 0.763 obtained with the KMO test indicates a good fit. The val-
ues obtained with Bartlett’s test of sphericity were 904.227 for the
statisticandacriticalprobabilityof0.000,whichshowthatthecor-
relation matrix is an identity matrix. The factors explain 48% of the
total variance. This analysis yields the four components in Table 2.
The first component, REACTION, groups the measures taken
by the hotel, due to a decline in income. The second, ADDED
CUSTOMER VALUE, denotes the management’s commitment to
increasing quality and services as part of a strategy to anticipate
threatsandbepreparedtocounterthemwhentheyarise.Thethird
component, FLEXIBILITY, is closely related to the management of a
hotel’s operations. FLEXIBILITY includes measures to reduce fixed
costs and to gain flexibility. The fourth component, PROACTION,
includes activities that strengthen a firmˇ ?s competitive position.
With regard to hotel strategy, a factorial analysis analyzes the
strategy used by hotels during a crisis. Table 3 shows the findings.
This factorial analysis has a value of 0.560, which was obtained
with the KMO test. The values obtained with Bartlett’s test of
sphericity are 117.318 for the statistic and a critical probability of
0.000. The extracted factors were only considered if their values
were one or larger. The axes were rotated using Kaiser’s varimax
procedure in which only factorial loads of over 0.4 were used. The
two factors CUSTOMER LOYALTY and PRICE explain 67.20% of the
total variance.
The created variable PERFORMANCE measures the hotel’s per-
formance in times of crisis. This variable explains the variation in
pricesduringthecrisisperiod.Thevariablehassixclasses:(a)prices
increasedaboveinflation;(b)pricesincreasedthesameasinflation;
(c) prices remained unchanged; (d) prices fell between 1% and 10%;
(e) prices fell between 11% and 25%; and (f) prices fell by more than
25%.
Two logit models aid in analyzing the impacts on performance
and the measures taken during the crisis. The first model, called
BEST, studies the factors that influenced the best performers. The
model assumes that the best performers are able to maintain or
increase prices. The second model, called WORST, analyzes the fac-
tors that influence the worst performers. This model includes all
hotels whose prices decreased by more than 25%.
The specification of the two models – BEST and WORST – is
as follows:PERFORMANCE=IMPACTSi+MEASURESi+STRATEGYi+
CHARACTERISTICSi+CONTROLi
The sub-index i refers to each hotel. IMPACTS, MEASURES and
STRATEGY comprise the set of variables that explain what a hotel
hasdoneduringthecrisisperiod.Thefivedichotomousvariablesof
low prices, high quality, focusing on the market segment, balance
between prices and quality and brand image compose the variable
CHARACTERISTICS. These variables describe five service character-
istics, but a hotel should choose only one. The variable has a value
of1whenthecharacteristicisselected.AGEandSIZEarenumerical
variables that represent the age of the hotel and the number of the
rooms (logarithm). They are control variables that are represented
by CONTROL.
For the BEST model, the fit is adequate, and the (−2) Log likeli-
hood has a value of 88.585, which is low, as recommended by some
authors. The statistical Nagelkerke R Square has a value of 0.478.
Table 4 shows the representative variables.
Thismodelexplainsthedecisionsmadebythehotelsduringthe
crisis period. The hotels that countered the crisis most effectively
arethosethatdevelopedhighqualityservicesorhadabrandimage.
Thosehotelstookproactivemeasurestofacethecrisis,buttheydid
not invest in new services. Therefore, their customer added value
was negative. Their reaction to the crisis included a reduction of
internal costs but not a decrease in revenues. In this case, customer
loyalty was one of the most powerful explanatory variables.
In the case of the WORST model, the (−2) Log likelihood has
a value of 97.859, which is slightly worse than that of the other
model but still low enough to be significant. The statistical Nagelk-
erke R Square has a value of 0.151. Table 5 shows the explanatory
variables.
The hotels that performed worst during the crisis were those
that did not characterize themselves as low-priced. Instead, when
M.M. Alonso-Almeida, K. Bremser / International Journal of Hospitality Management 32 (2013) 141–148 145
Table 1
Factors affected by impact of the crisis. a
Mean Component
1
Cost reduction
2
Efficiency improvement
3
Competitivity improvement
4
Income reduction
? Cronbach .759 ? Cronbach .793 ? Cronbach .812 ? Cronbach .838
Income reduction 3.9 .137 .251 .230 .744
Room price reduction 4.0 .117 .138 .104 .830
Salary freeze 2.4 .662 .194 .058 .105
Employee dismissals/layoffs 2.8 .753 .195 .095 .094
Reduction of direct client services 2.5 .779 −.177 .027 .230
Elimination of back-office services 2.1 .795 −.172 −.017 .112
Increased subcontracting 2.2 .628 .134 .015 −.179
Introduction of new products or services 3.2 .239 .506 .271 .284
Flexibility gains 3.3 .001 .734 .064 .320
Increased answering speed 3.3 −.003 .717 −.013 .255
Introduction of new exclusive services 3.4 .072 .765 .271 −.184
Company is opening in new international markets 2.7 .149 .075 .884 .086
Company is opening in new market segments 3.1 −.014 .108 .889 .099
Company disposes of anti-crisis plans 3.1 −.028 .228 .476 .333
a
The official questionnaire was written in Spanish. The English version is for informational purposes only and remains untested.
Table 2
Factors resulting from measures taken to deal with the crisis.
Factor Mean Component
1
Reactive
2
Added customer value
3
Flexibility
4
Proactive
? Cronbach .831 ? Cronbach .791 ? Cronbach .846 ? Cronbach .875
We canceled expansion plans 2.0 .621 .025 .240 .195
We canceled investments 2.0 .682 .157 .201 .244
We reduced management levels 1.6 .684 .191 .040 .173
We decreased or eliminated our training
budget
2.2 .717 .093 .112 −.091
We decreased or eliminated our budget for
internal and external social spending
2.2 .754 .108 .155 −.036
We entered into strategic alliances with other
companies to offer joint services
2.3 .364 .473 .251 −.062
We improved processes to save operating costs 3.3 .131 .480 .314 .356
We asked clients more about what would
increase value
3.0 .073 .586 −.019 .417
We renegotiated prices or payment conditions
with suppliers
2.9 .270 .411 .291 .054
We created or improved our loyalty program 3.4 .187 .504 −.108 .381
We reduced our sales forecast for the year 2.8 .331 .544 .181 .003
We created awards for employee’s ideas to
reduce costs or increase sales
2.7 .268 .697 −.119 −.085
We introduced employee empowerment 3.2 .148 .619 −.037 .206
We introduced new IT systems 2.8 .159 .529 .024 .139
Products or services in high demand from
clients were not changed, but lesser
demanded ones were omitted to reduce
costs
2.8 .201 .146 .690 .066
Costly products or services were substituted by
cheaper ones
3.0 .133 .002 .629 −.062
Competitors’ practices and services were
imitated
2.1 .058 −.022 .469 .270
We renegotiated bank credits 1.7 .320 .006 .395 .245
We reduced personnel in all departments 3.0 .162 .011 .795 −.093
We strengthened the commercial area 3.4 .091 .157 .057 .781
We increased spending on advertising 2.6 .041 .067 −.078 .670
Table 3
Factors resulting from strategies to deal with the crisis.
Factors Mean 1
Customer loyalty
2
Prices
? Cronbach .733 ? Cronbach .715
Client loyalty 4.3 .771 −.076
Our exclusive services differed from the competition 3.4 .695 −.029
Our image of trust 3.2 .850 .073
Our prices 4.1 −.072 .881
Our offers 3.6 .041 .883
146 M.M. Alonso-Almeida, K. Bremser / International Journal of Hospitality Management 32 (2013) 141–148
Table 4
Results of the econometric model BEST.
B S.E. Wald Sig. EXP(B) 95% C.I. for EXP(B)
Lower Upper
Brand image 1.170 .711 2.713 .100 3.223 .801 12.972
High quality 1.053 .611 2.974 .085 2.868 .866 9.495
Cost reduction .736 .327 5.071 .024 2.087 1.100 3.960
Income reduction −.751 .280 7.175 .007 .472 .272 .818
Added value −1.712 .383 19.968 .000 .181 .085 .383
Proactive .610 .291 4.378 .036 1.840 1.039 3.258
Client loyalty 1.031 .366 7.923 .005 2.803 1.368 5.746
Constant −3.884 .946 16.842 .000 .021
the crisis occurred, they attempted to gain flexibility without
decreasingcostsintheshortterm.Becausetheyremovedbasicser-
vices or replaced them with other less expensive ones, they were
forced to decrease prices to attract customers.
4. Discussion
This research paper shows that certain hotel characteristics,
which studies, until now, focused on mostly during prosperous
periods, also improve financial performance in crisis periods. This
improved financial performance supports H1 and H2 (hotels char-
acterizedbystrongbrandimageshowbetterfinancialperformance
during the crisis than other hotels; hotels having high quality show
better financial performance during a crisis than other hotels).
In the sample of the best performers, brand image and quality
are highly significant. The existing literature explains that brand-
ing serves as a major differentiation point for the customer (Kim
and Kim, 2004). A brand name stands for consistent quality, high
customer satisfaction and, therefore, influences customer loyalty.
Brandownerscaneasilydemandpricepremiumsandincreasetheir
income. As the research shows, hotels in the BEST model are able
to maintain or increase prices. In times of crisis, it appears that
branded hotels can retain their client base by offering added value
for the customers and increasing their marketing efforts.
Contrary to the findings from the literature, the research does
not support H3 (the crisis had an immediate negative impact upon
the performance of individual companies). The BEST model shows
that some hotels reduced costs but did not suffer a decrease in
sales.Therefore,thenegativeimpactofsalesreductionthatismen-
tioned in the literature is not evident. This negative impact is only
apparent in the WORST model. Hotels in the WORST model are
not able to decrease costs but are forced to decrease their prices.
Pearce and Michael (1997) have an explanation for this behavior;
they state that recessions create opportunities that marketing-
orientated firms can grasp quickly and thereby improve their
chances of survival. The efforts of the hotel managers to create a
strong brand, offer high quality and build a loyal customer base
appear to increase occupancy. In addition, their focus on market-
ing by, for example, looking for new distribution channels and
increasing spending on advertising brings additional business to
theirestablishmentsuchthattheyareeitherabletomaintainprices
andoccupancyoravoidadecreaseinsalesthroughincreasedprices
with reduced occupancy.
Quality affects performance positively through improved pro-
cesses. In this situation, costs decrease and customer satisfaction
increases. As the research shows, this finding proves to be accurate
regardless of the economic cycle. Especially during crisis times, it
is assumed that clients who still travel thoroughly check the offers
they find and select the best option. Therefore, the implication is
that hotel managers should not take measures against a crisis that
affecteitherbrandimageorqualityvisibly.Hotelguestswillreward
them and continue to patronize their establishment.
Along with brand image and quality, the findings of the BEST
model show that a loyal customer base affects performance
positively,whichsupportsH4(aloyalcustomerbaseaffectsperfor-
mance positively during and after the crisis). Loyal customers are
willingtorecommendthehoteltoothercustomersandspendmore
during their stay. In crisis periods, loyal customers remain satisfied
with their hotel of choice and do not downgrade or switch to other
offers. In addition, they appear to focus less on price and more on
the other attributes of the hotel. In this situation, hotel managers
are able to maintain or increase their prices. These findings are in
line with those of a case study by Williams and Naumann (2011)
who examine customer loyalty in a company that earns most of
its money from service contracts during the 2001–2002 US reces-
sion. Hotel managers should attempt to acquire a large and loyal
customer base to consistently provide stable occupancy.
This research only partially supports H5 (proactive measures
(i.e., increased marketing) taken to cope with the crisis influence
performance positively. As the BEST model shows, these hotels
increase marketing efforts but decrease customer added value. The
findingregardingmarketingactivitiesisinlinewiththeexistinglit-
erature. As Pearce states: “Marketing activities in the core business
areclearlythemajordeterminantofprofitabilityinbothgoodtimes
and bad.” (Pearce and Michael, 1997, p. 310). Increased marketing
activities augment the visibility of the hotel and more customers
choose the hotel, which raises occupancy and, subsequently, per-
formance. Simultaneously, and contrary to the literature, these
hotels achieve a cost reduction by reducing customer added value
during crisis periods. A possible explanation for this strategy could
be that the offers of these hotels are already superior, and they do
not need to improve added value to retain customers. Due to their
brand image, consistent quality and high loyalty, they are able to
Table 5
Results of the econometric model WORST.
B S.E. Wald Sig. EXP(B) 95% C.I. for EXP(B)
Lower Upper
Low price −2.778 1.093 6.461 .011 .062 .007 .529
Cost reduction −.737 .345 4.561 .033 .478 .243 .941
Flexibility .548 .305 3.223 .073 1.730 .951 3.148
Constant .669 1.026 .425 .515 1.952
M.M. Alonso-Almeida, K. Bremser / International Journal of Hospitality Management 32 (2013) 141–148 147
increase performance without investing in new products or ser-
vices. This strategy is risky because quality or brand image could
deteriorateoverthelongterm.However,futureresearchisrequired
to examine this risk.
In addition, the results of this study indicate that the worst
performers focus on cost-cutting measures, which supports H6
(Companies that focus on cost-cutting perform worse during a cri-
sis).Thisfindingagreeswiththeexistingliterature.Inthelongterm,
cost-cutting measures damage a company’s competitive position
becauseoffersthatcustomersappreciatedisappear.Theworstper-
formers take measures to increase flexibility (they reduce service
offers, implement staff layoffs, and attempt to increase financial
flexibility by renegotiating credit lines). Such measures obviously
change the services offered. However, these efforts are not suc-
cessful in reducing costs. Instead, these hotels are forced to reduce
prices to attract customers. Therefore, their competitive position
deteriorates.
5. Conclusions
This study on the Spanish hotel sector provides valuable infor-
mation for hotel managers. In crisis periods, a strong brand,
high quality and a loyal customer base maintain good perfor-
mance. In addition, immediate measures to counter the crisis
should be proactive (i.e., increased spending on marketing). Cost-
cutting, which often is an immediate response to a crisis, should
be avoided to prevent erosion of the hotel’s future competitive
position.
Given the limited geographic area in which this study is per-
formed, the results might not be applicable to hotels in other
locations. An increase in the geographical coverage of the study
to the entire country or capitals of other countries could offer
further valuable insight. The survey study method only gives
a snapshot of a hotel’s situation during the crisis. Larger data
series are required to detect the long-term effects of a crisis.
In addition, an objective performance measurement through, for
example, market value, revenue per available room or other estab-
lished financial ratios could offer insight because management’s
perceptions are often biased. Unfortunately, such data are dif-
ficult to obtain for individual hotels because they often belong
to chains, which do not publish data by individual establish-
ments. This study focuses entirely on hotels and their reactions
during the financial crisis. Travel agencies or tour operators
that also belong to the tourism industry are not included in
the research. Surely, interesting findings would result from an
analysis of those sectors of the tourism industry during crisis peri-
ods as well as comparative studies considering the after-crisis
situation.
Thisstudycontributestotheliteraturebyprovidingafirm-level
analysis rather than an industry-level analysis. In addition, due to
thehighresponserate,thispaperoffersanalmostcompletepicture
of a specific geographical area. Finally, this research extends the
body of literature into the area of service industries during crisis
periods.
Acknowledgments
The authors thank Howard Sutton, Professor of General and
International Business, Pforzheim University of Applied Sci-
ences, Faculty of Business and Law, Tiefenbronner Str. 65, 75175
Pforzheim, Germany, and Fernando Casani, Professor Titular de
Universidad, Universidad Autónoma de Madrid, Faculty of Eco-
nomicsandBusinessAdministration,28049Madrid,Spain,fortheir
valuable comments and recommendations. They also thank two
anonymous reviewers for their helpful suggestions.
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