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    International Journal of Contemporary Hospitality ManagementIdentifying the attributes of blue ocean strategies in hospitality

    Jen-te YangArticle in format ion:

    To cite this document:Jen-te Yang, (2012),"Identifying the attributes of blue ocean strategies in hospitality", International Journalof Contemporary Hospitality Management, Vol. 24 Iss 5 pp. 701 - 720Permanent link to this document:http://dx.doi.org/10.1108/09596111211237255

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    (2012),"Thinking outside the hotel box: Blue ocean strategies for hotels in Taiwan", Strategic Direction, Vol.28 Iss 10 pp. 9-11 http://dx.doi.org/10.1108/02580541211268384

    W. Chan Kim, Rene Mauborgne, (2005),"Value innovation: a leap into the blue ocean", Journal ofBusiness Strategy, Vol. 26 Iss 4 pp. 22-28 http://dx.doi.org/10.1108/02756660510608521

    Norman T. Sheehan, Ganesh Vaidyanathan, (2009),"Using a value creation compassto discover Blue Oceans", Strategy & Leadership, Vol. 37 Iss 2 pp. 13-20 http://dx.doi.org/10.1108/10878570910941172

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    Identifying the attributes of blueocean strategies in hospitality

    Jen-te YangDepartment of Hotel Management, National Kaohsiung University of

    Hospitality and Tourism, Kaohsiung City, Taiwan ROC

    Abstract

    Purpose The purpose of this study is to identify the characteristics of a blue ocean strategy (BOS)in selected hotels in Taiwan.

    Design/methodology/approach Semi-structured interviews and the grounded theory approachwere applied in this study. A total of 32 senior and top managers working in the corporate executiveoffice and the divisions of rooms and marketing were selected from international tourist chain hotels

    and resorts for semi-structured interviews.Findings The results show that the features of BOS are identifying guest value perceptions,innovating distinctive added-value offerings, developing new market segments, branding andre-branding, creating a unique hotel ambience, adjusting distribution channels, and establishingstrategic alliances.

    Practical implications The study suggests that in the sampled hotels, hoteliers should integrate ademand-based pricing strategy with a supply-based product-development strategy. Organizationaleffectiveness could be further advanced in those hotels by the introduction of revenue managementbased on the determination of variations in guest demand, making it possible to offer different pricingstrategies to diverse market segments.

    Originality/value The results show that the sampled hotels should be able to create uniqueproducts and services for customers that strengthen their competitive positions in the marketplace ofinternational tourist hotels in Taiwan. This study advances academic knowledge in the field of

    organizational effectiveness, particularly with respect to managing customer demand and capacity inthe hotel industry.

    KeywordsBlue ocean strategy, Capacity management, Customer relationship management,Demand management, Hospitality management, Taiwan, Customer orientation, Competitive strategy

    Paper typeResearch paper

    IntroductionMehmetoglu and Altinay (2006) claimed that the hospitality environment hasgradually become more turbulent because of a shift in the complex of variations incustomer demand and purchasing behavior. Moreover, recently, both the globalnatural environment and economic conditions have changed considerably. This has

    also led to increased complication in the areas of room capacity management. Inparticular, Kuos (2009) study postulated that the provision of quality service andproducts to tourists is a challenging task for hoteliers. Consequently, the formulation ofa strategy to expedite a hotels establishment of a sustainable successful advantage inan uncontested marketplace has become crucial.

    The current issue and full text archive of this journal is available at

    www.emeraldinsight.com/0959-6119.htm

    This research was fully supported by the National Science Council, Taiwan ROC under grantnumber NSC96-2416-H-328-001-MY3.

    Attributes ofblue ocean

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    Received 16 January 2011Revised 19 April 2011

    15 August 2011Accepted 17 September

    2011

    International Journal of

    Contemporary Hospitality

    Management

    Vol. 24 No. 5, 2012

    pp. 701-720

    q Emerald Group Publishing Limited

    0959-6119

    DOI 10.1108/09596111211237255

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    The hotel industry offers intangible products and services to its customers. For thisreason, the most crucial strategies in the industry involve how to offer betterpeople-oriented services and how to encourage repeat business. The blue oceanstrategy (BOS), which has been studied in the field of strategic marketing, may offer

    important advantages with regard to company survival in the context of the turbulentbusiness environment of the hotel industry, particularly in Taiwan. The BOS shifts thefocus from competition among companies within the same marketplace toreconstructing market boundaries and creating new customer demand; that is, itattempts to develop an uncontested marketplace. Kim and Mauborgne (2005) haveconducted research on BOSs during the last 20 years and have reported on a number ofstudies showing that creating and implementing such strategies can moveorganizations to the next level of an uncontested marketplace, which, in turn, canadvance organizational effectiveness.

    In this study, we aimed to reframe our perspectives on BOSs by applyinghospitality management and marketing theories to this domain. The main purpose ofthis study was to identify the characteristics of a BOS that are relevant to the hotelindustry in Taiwan. This study extends the literature on strategic hospitalitymanagement in three distinctive ways. First, this study demonstrates that conceptsfrom customer relationship management (CRM) and network theory can be integratedinto the implementation of a BOS. Second, this study indicates that revenuemanagement is appropriately incorporated into a BOS; the differentiation betweenlodging offerings and the low opportunity-cost advantages of hotels will thus besustained. Third, in the twenty-first century, the turbulent hospitality environmentrequires greater understanding of the value-related perceptions of guests to facilitatethe successful development of effective market segments, unique brand expansion, andstrategic alliances with returning guests. Thus, network theory and CRM cancontribute to successful development in the hotel industry.

    Fundamental conceptsThis section provides a review of the concept of a BOS and of factors critical tosuccessful implementation of this strategy based on CRM and network theory.

    BOSsIn their book, Blue Ocean Strategy, Kim and Mauborgne (2005) use blue ocean as ametaphor related to the aims and strategies of companies. Underpinning this strategyis the goal of creating new customer values and new offerings in an uncontestedmarketplace. Features of the so-called red ocean strategy include competing in anexisting market space, beating the competition, exploiting existing demand, makingvalue-cost trade-offs, and aligning a firms activities with its strategic choice of

    differentiation or reduced cost. Features of a BOS include creating an uncontestedmarket space, rendering the competition irrelevant, creating and capturing newdemand, abrogating the value-cost trade-off, and aligning a firms activities with itsstrategic choice of differentiation or reduced cost (Kim and Mauborgne, 2005).

    Value and innovation are traits associated with the sustainable competitiveadvantages of a company. Kim and Mauborgne proposed that a BOS include value andinnovation. A strategy canvas, a diagnostic and action-focused tool, clearly shows theextant and potential features of products in an industry as well as the extant and

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    potential competitors offering such features. This tool also presents a four-actionframework (eliminate, reduce, create, and raise). The first two components involveattempts by a company to enhance a low-cost advantage within an industry, whereasthe latter two components enable the company to enrich its differentiation advantage.

    Indeed, value creation should be unique and hard to imitate.In this study, we applied the eliminate-reduce-create-raise grid to identify the

    characteristics of a BOS that are most important for the future of the international hotelindustry in Taiwan. Understanding company-wide and industry-wide circumstances interms of the four-element grid enables hoteliers to create customer value and innovativeproduct and service offerings for customers; ideally, this will result in an uncontestedmarketplace. To achieve the continuous creation of value and innovation, subsequentimplementation of a BOS would build on the theories of CRM and networks.

    CRMOzgener and Iraz (2006) claimed that CRM involves a strategic focus on people,

    processes, and technology. Some literature has specifically focused on people; forexample, Wu and Li (2011) described CRM as a process of collecting customerinformation through interactions between internal and external customers. Alongthese lines, many reports (e.g. Geddie et al., 2005; Lo et al., 2010) have shown thateffective CRM practices may be beneficial to organizational performance in terms ofcustomer patronage and satisfaction.

    CRM can be incorporated into the implementation of BOSs. A plausible rationale forthis approach is that CRM reinforces customer satisfaction and loyalty (e.g. Osmanet al., 2009; Geddieet al., 2005). Sigala (2005) recommended that such implementation ofCRM strategies and tactics would enable hoteliers to collect the customer informationneeded to create new customer values and further develop offerings for them. Thus, theavailability of distinct innovations should result in an increased number of customized

    offerings for existing customers as well as the establishment of new market segments.

    Network theoryLo et al. (2010) claimed that establishing a network was necessary to further thedevelopment of CRM. Such a network enables a company to collect and processcustomer information obtained from all concerned stakeholders, including employees,customers, suppliers, and partners. This process can help to ensure the quality of thecustomer information collected from different channels. Additionally, Sigalas (2005)studies of Greek hotels revealed that CRM should focus on both internal and externalcustomer relationships along with applications of knowledge management, specificallyin relation to knowledge sharing and information and communication technologies.This process was thought to result in the creation of customized services and the

    enhancement of customer experiences.Saxena (2005) claimed that network theory was connected with CRM. Indeed, the

    social relationship between employees and customers is structured as a complexnetwork. To achieve the three characteristics of network theory, embeddedness,density, and centrality (Bhat and Milne, 2008), an organization should nurturecollaboration and trust among individuals. Social interactions involve theinterconnection of individuals, employees and customers, in the service of sharingtheir experiences through any social means. Such interactions result in the collection of

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    high-quality customer information and the subsequent creation of new offerings forthem. In this way, new customer values and/or market segments may be achieved.

    MethodologyParticipantsThe sample group was selected from 15 international tourist hotel chains and includedchief executive officers, directors (or managers) of the room division, and directors (ormanagers) of the marketing division. Participants were drawn from the followingglobally and locally managed (or franchised) international tourist hotels in Taiwan:Ambassador, Four Seasons and Regent, Grand Hyatt, Howard, Landis, Nikko,Shangri-La, Sheraton, Small Luxury Hotels, and Westin. A total of 32 participants wereinvited and interviewed. Hotel chains were selected for inclusion in this study becauseof their accessibility and the scope of their daily operations (Yang, 2007, 2010). Profilesof the participants are provided in Table I. Of the 32 participants, 18 were females and14 males. Their ages ranged from 30 to 48 years.

    No. Types of hotel Current positions Seniority

    1 Resort hotel Executive Assistant Manager 222 Resort hotel Director of Rooms 173 Commercial hotel General Manager 94 Commercial hotel Executive Assistant Manager 105 Commercial hotel Director of Sales 96 Commercial hotel Front Office Manager 13.57 Resort hotel Director of Marketing 128 Commercial hotel Front Office Manager 89 Commercial hotel Front Office Manager 10

    10 Commercial hotel Assistant Director of Sales 10

    11 Commercial hotel Director of Sales 1312 Commercial hotel Director of Sales 1313 Commercial hotel Director of Marketing 1514 Resort hotel Director of Rooms 1215 Resort hotel Night Manager 816 Commercial hotel VIP Lounge Manager 6.517 Resort hotel Director of Rooms 10.518 Commercial hotel Director of Rooms 1519 Commercial hotel Assistant Front Office Manager 820 Commercial hotel Front Office Manager 1121 Commercial hotel VIP Lounge Manager 1022 Commercial hotel Assistant General Manager 19.523 Resort hotel Front Office Manager 16

    24 Commercial hotel Senior Sales Manager 1625 Commercial hotel Director of Revenue 1026 Commercial hotel Director of Sales 18.527 Resort hotel Sales Account Mgr 528 Commercial hotel Duty Manager 15.529 Commercial hotel Director of Marketing 530 Commercial hotel Sales Account Mgr 631 Commercial hotel Senior Sales Manager 1032 Commercial hotel Resident Manager 12

    Table I.Profile of the participants

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    Interview questionsOpen-ended questions were developed to guide semi-structured interviews. The termblue ocean was clarified before each interview, and the interview guide was deliveredto invited participants approximately ten days before interviews, allowing respondents

    to think about the questions in advance. Additionally, interviewees were encouraged todevelop and extend their thinking and to explore the determinants of BOSs. Fourinterview questions, drawn verbatim from Kim and Mauborgne (2005), were asked:

    (1) Which factors that the [hotel] industry takes for granted should beeliminated?;

    (2) Which factors should be reduced well below the industrys standard?;

    (3) Which factors should be raised well above the industrys standard?; and

    (4) Which factors that the industry has never offered should be created?.

    Interviewees were prompted to elaborate when responses were vague or lacking indetail.

    Data collectionThis study proceeded in four steps. First, we designed an interview guide. Second, wedistributed the guide to the participants before their interviews. Third, we collecteddata related to the blue ocean concept from participants employed in internationaltourist hotel chains. Finally, we analyzed the qualitative data.

    We conducted semi-structured interviews to solicit and document hoteliers insightsinto BOSs. Each interview lasted approximately 60-90 minutes. This interviewapproach, enabling the collection of rich and in-depth data through probing questions,was used to provide the foundation for a new theory. The study terminology wasexplained prior to each interview, and questions were rephrased as necessary.

    Interviews were conducted in either the business center of a respondents hotel or in arestaurant in (or outside of) the hotel. Each interview was tape-recorded uponagreement of the respondents and transcribed literally. Interview texts weresubsequently coded using the QSR NVivo 7 software.

    Data analysisThe purpose of this exploratory study was to achieve a detailed understanding of themeaning of BOSs and of the context in which they are implemented in the hotelindustry. Thus, the coding and analysis of the data were based on the grounded theoryapproach of Glaser and Strauss (1973). Grounded theory analysis allows researchers toidentify those features and variables within complex organizational contexts that aremeaningful in terms of particular issues. As a result, researchers can easily and

    comprehensively interpret qualitative data and then further develop the logic andeffectiveness of the results. This study also utilized a specific analytic strategydeveloped by Mehmetoglu and Altinay (2006).

    Transcripts of the original interviews in Chinese were translated into English by theresearcher. All interview texts were coded using the QSR NVivo 7 software. Thissoftware enables items of interest appearing in the text to be coded, and it is used totrack emerging and developing ideas. Nodes can be moved when merger or separationis appropriate to ensure that each node is composed of related characteristics.

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    The data transcripts were read and re-read till the meanings of the entire transcriptwere understood thoroughly (Mehmetoglu and Altinay, 2006). Then, the procedureused to analyze and interpret the data followed the protocol proposed by Strauss andCorbin (1998): conceptual ordering (a so-called coding stage) involving the creation of

    elaborate nodes, organizing the qualitative data (verbatim interview transcripts)according to relatedness, writing memos and developing the patterns on the basis ofthe nodes, and producing the report. Tree-structured catalogues of branches of thenode tree were formulated in what Mehmetoglu and Altinay (2006) call multiple levelsof analysis (p. 21).

    During analysis and interpretation, the data were considered from all angles, and allplausible underlying meanings were considered. This inside out technique enablesresearchers to elaborate meanings from different perspectives. Analyses of the treediagram were based on comparisons across all data sources within the relevant nodes.Furthermore, the coding paradigm was grounded on the relations among nodes theso-called emerging categories (Mehmetoglu and Altinay, 2006).

    ResultsThis section presents quotations to support the qualitative results, and the findingssection presents the outcomes emerging from a coding hierarchy developed accordingto the analytical and inductive approach adopted in the data analysis. The diagram ofthe coding hierarchy presented in Figure 1 is illustrated with parent and childrennodes. Qualitative data were collected and analyzed on the basis of the application ofKim and Mauborgnes (2005) blue ocean concept.

    EliminateParticipants were asked to identify the factors that are taken for granted by theinternational five-star hotel industry should be eliminated.

    Removal of travel barriers for prospective visitors to Taiwan. Thirteen intervieweessuggested that the Taiwanese government expand tourism policies. In particular, theynoted that the mainland tourism market could be developed by an approach thatminimized travel limitations and/or barriers for those who would like to visit Taiwan.They referenced the transportation convenience of the three direct links across theTaiwan Straits as an example of this approach. One of the interviewees emphasizedthat changing from one-way to two-way communication after a new government isformed would allow enactment of a multi-faceted policy for direct charter flightsbetween Taiwan and China, which would result in an increased number of visitorsfrom Mainland China. Additionally, joint enterprises involving Taiwan and Chinawould offer mutual opportunities to expand capital investments.

    Remove constraints on foreign capital investment. From the perspective of market

    saturation, an open policy between Mainland China and Taiwan might attractforeigners for capital investment and boost the MICE industry. This would eventuallybenefit the lodging industry by prompting an increase in occupancy rates. From theperspective of supply and demand, execution of this policy would not only contributeto overall tourism and hospitality earnings, but would also boost employment in thetourism and hospitality industry. Furthermore, this would encourage investment in thedevelopment of new markets for related businesses. The latter implication wassupported by the following comments:

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    Figure 1.Coding hierarchy

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    As the occupancy and average room rates increase, our hotel chain is able to further developits establishment through such projects as hotel renovations, building new properties,creating various categories of the brand, and so on. If room demands continuously grow,there might be a situation in which potential investors establish new properties to meet the

    demands (Interviewee 26).

    Due to the situation related to room occupancy, in which room supply exceeds customerdemand in Kaohsiung, the hotel business is highly competitive [ . . .] This market is quitedifferent from the demand-supply situation in Taipei. Sometimes, during times wheninternational events are held in Taipei, rooms are not always available; this results in adramatic increase in average room rates (Interviewee 10).

    ReduceThis section deals with the identification of factors that should be reduced well belowthe industrys present standard. This node consists of three components: bargainingpower, in-room equipment, and guestroom products and services.

    Bargaining power. Room supply exceeds customer demand in some regions inTaiwan, leading to a situation in which travel agencies have more bargaining powerthan do hotels. Seven interviewees emphasized that the average daily room rate willincrease only if the market saturation in that specific region is maximized. This meansthat room rates could be controlled by customers in that market. On the other hand,Interviewee 8 noted that the demand for rooms, specifically in Kaohsiung, wouldincrease if the policy allowing mainland tourists to visit Taiwan was implemented; inthis situation, average room rates would increase. This would result in anadvancement of organizational effectiveness in terms of financial considerations.

    In-room equipment and amenities. In response to questions about modifying theamenities and room-associated products, 13 interviewees noted that guests have

    gradually changed their requirements for in-room equipment and amenities over thepast three years. For example, in some newly developed properties, hi-tech equipmentand/or software systems, such as the e-concierge and e-butler, have been installed inguestrooms. Such systems are multi-functional and integrated. Indeed, the e-conciergesystem in the resort hotel where Interviewee 15 worked contains hundreds of videos,musical pieces, games, and assorted entertainment programs instead of a DVD player.However, Interviewee 1 differed from Interviewee 15 in this regard in that s/he believedthat any type of equipment provided to guests could be viewed as a fringe benefitattached to a room even if guests did not require it. Implementation of the greencleaning policy promoted by one international chain hotel involved the removal oftoilette items from the bathrooms of guestrooms. These items were produced forrepeated use, packed as a travel kit, and sold as a mini-bar item.

    Stabilize use of guestroom products and services. With respect to changing thebehavior of guests related to their use of room-associated products and services, eightinterviewees mentioned that hotels had reduced the charges for in-room equipment andservices, such as mini-bar items, telephone service, and laundry services to stimulateuse over the past few years. At Interviewee 1s hotel, information about these reducedcharges was transmitted to the person making the room reservation and printed on atent card placed in each room. This card includes a comparison between the telephonecharges in that hotel and those in other hotels in town, underscoring that making

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    phone calls in this hotel was the best deal in Taipei. Overall, the execution of all of thesemodifications resulted in higher use of the hotels offerings.

    Create

    The third question asked about factors that should be newly created in the industry.This subsection was designed to provide evidence of how the provision of roomproducts and related services has been mis-focused or un-focused. It is important tomatch the requirements of guests with the offerings of hotels. This section addressesfour issues: international branding, new market segmentation for attracting mainlandtourists, market integration among regional hotels, and development of hotel packagesassociated with cultural tourism.

    International branding: establish a regional brand for the Asia-Pacific Rim. Thisnode refers to the efforts of hoteliers to promote their brand globally. Interviewee 7suggested that the government cooperate with hoteliers in the international promotionof tourism and accommodation products and services to increase the number ofinbound tourists. This participant also suggested that the government assistexecutives in developing and then internationally advancing a local brand for theAsia-Pacific Rim.

    Interviewee 4, an executive assistant manager in an international hotel chain,appreciated that service providers in Taiwan were more friendly and passionate thanworkers in other foreign countries. These two elements are the most crucialdeterminants of outcome in the hotel industry, resulting in the reinforcement of thequality of service and the enhancement of the fringe benefits available to hotel guests.Based on these considerations, several hotels in Taiwan should be able to establishtheir brands as regional brands in the Asia-Pacific Rim, and the government shouldcreate a series of marketing strategies to attract inbound tourists. This approach wouldenable hoteliers to develop and advance international branding.

    New market segmentation to attract mainland tourists. Since the new government inTaiwan took office in 2008, large-scale development in marketing to Mainland Chinahas progressed, thus expanding the tourism and hospitality industry to stimulate thecurrent depressed economic environment. Sixteen interviewees emphasized that manyhotels targeted this group of visitors as a large potential market. Twelve of theseinterviewees said that they would categorize guests from Mainland China in the sameway as those from other countries (such as Southeast Asia, America) and they wouldnot make special efforts or offer privileges to attract them. On the other hand, three ofthe interviewees took the opposite perspective. For instance, Interviewee 7 mentioned:

    To attract mainland tourists to Taiwan, hoteliers have to understand the differences inlifestyles and cultures between Taiwan and Mainland China, and to offer unique travelingproducts for the mainland market. We should also notice that the tourism infrastructure

    such as sufficient accommodation and tourist spots in Taiwan is still not completely ready.Although the two countries opening up their borders to tourism is a very important policy, Ibelieve that allowing mainland visitors into Taiwan is definitely not a panacea that will savethe domestic tourism market.

    Market integration among regional hotels. Given the supply and demand structure ofTaiwans tourism market, opening the market to visitors (especially from MainlandChina) should increase total market demand in Taiwan. This could result in an increasein the average daily room-rates. Applying pull marketing strategies and an integration

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    of the domestic regional market would not only enhance hotel occupancy rates, butwould also increase average daily room-rates, i.e. make rates comparable to those inother markets such as Hong Kong, Singapore, and London. Interviewee 29 pointed outthat hoteliers engaged in regional marketing must unite to keep room-rates consistent

    with those in international hotels in other foreign cities rather than engage in pricecompetition with one another.

    The development of hotel packages to accompany cultural tourism. Five intervieweesworking in resort hotels mentioned that the government should assist the hotel sectorto develop tourism packages that integrate local culture and custom with hotelproducts and to promote these integrated tourism packages around the world.Examples of these products might be gold sculpture art in Yilan, dried and driftwoodsculpture art in Hualien and Taitung, and activities that engage local communityculture, such as bamboo weaving.

    RaiseThis section considers the question of which features should be enhanced above theindustry standard in international hotels in Taiwan. According to the concept of thevalue curve (Kim and Mauborgne, 2005), this section can be divided into three nodes:brand development, market segmentation, and the provision of products and services.

    Brand development. Based on the child nodes of brand development, the content ofthe interview transcripts can be divided into two categories: branding expansion andbrand differentiation.

    First, regarding brand expansion, the collated qualitative data can be divided intothree sub-categories: innovation in the professional brand, readjustment andpositioning of the hotel brand, and the establishment of brand image recognition.

    Two interviewees were actively working to develop their own hotel brands, andtheir future blueprint is to expand and develop international (or regional) brands. At

    this point in time, however, hotels are focused on the domestic market, anddevelopment occurs incrementally, directed at inbound tourists such as those fromHong Kong and Mainland China. For instance:

    Taiwanese tourists are the major guests. Except for Taiwanese tourists, currently [. . .]visitors from Hong Kong are the top guests in the amount of room occupancy. [. . .] This isbecause Hong Kong doesnt have [. . .] pastoral scenery like that in Yilan [. . .] it does not havehot springs either. So [. . .] after we went to Hong Kong to do the advertisement andpromotion, we found that our accommodation packages have been very highly praised byvisitors from Hong Kong in the last two years (Interviewee 27).

    Eight respondents mentioned that after branding, brand restructuring could boost thetourism business from Mainland China groups. Because of travel agency policies, onehotel interviewee indicated that the travel agencies that deal with mainland tourists

    would prefer to cooperate with domestic hotel chains. This is because the agenciesconsider hotels more in the light of pricing advantage or bargaining power to suppressred ocean strategies.

    By integrating brands, the operators of hotel chains can achieve cost advantages bylowering their costs. This is no longer the time for hotel enterprises to work alone.They must work through alliances to enhance the future of their businesses. Inaddition to the logistics of procurement and human resources planning, resourceintegration also includes the integrated packaging of products among all units within

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    the group, such as urban business hotels with farm resorts, or hot springs with farmresorts and beach resorts. Products and services are designed according to customerspreferences, and diverse product packaging is offered to customers in the same marketto induce them to return. This packaging of products can create another blue ocean

    scenario for the group. For example, Interviewee 13, a corporate director of a marketingdivision, said:

    One night at the [Hotel B] in Taipei, he can go out to eat and walk to bookstores. The secondnight, he can go to the hot springs in Yangmingshan. This is a new product for the HongKong market. [. . .] This new product is the package that other hotels are not able to offerbecause, as we are a hotel chain. [. . .] This year, I have one more new product farm tourism which is very popular in Hong Kong. Visitors from Hong Kong have no experience of whata farm vacation feels like. We can use [one of our chain resort hotels] to package it.

    Second, regarding brand differentiation, many hotels regularly change roomdecorations and welcome gifts to offer guests different experiences. Tworespondents said that their hotels always carefully select welcome gifts to offer their

    guests with fresh, diverse products and services every time they stay. Oneinternational commercial hotel changed the special Taiwanese specialties it serves,such as famous sun cakes from Taichung. Another hot-spring resort hotel providedcatering services for supper (such as snacks or seafood porridges) to differentiate itselffrom other hotels, which offered instant noodles. Meanwhile, this hotel provided adifferent accommodation experience by offering two meal services, in the belief thateating outside might be likely to affect perceptions of the quality of the entire travelingexperience. As Interviewee 2, a director of a room department, said:

    I insisted [. . .] that the price should include meals. [. . .] Of course, in some ways customers feelsome unreasonable. However, we must do it this way [ . . .] because if we insist that thepackage will not include meals, then most guests might go out to eat. In that case, we feel thattheir current trips may not be very well arranged because outside dining experiences might

    be unpleasant, and that would destroy their whole perception of the quality ofaccommodation and scenic spots in Wulai. [. . .] In fact, we could also provide the samethings as the other hotels, such as instant noodles. [. . .] But today, we serve top guests. Here,our catering services offer seafood porridges to our guests. [. . .] We provide French cuisine,and other hotels provide only local-style meals.

    Market segmentation. With regard to market segmentation, some resort hotels addspecial features to the room amenities and equipment to satisfy customers needs. AsInterviewee 5 mentioned:

    . . . when we first opened, we did not include a meeting package with accommodations.However, we later received a large number of inquiries about meeting packages withaccommodations. As a result, we had to increase this part of the facilities.

    Because Interviewee 5s hotel is a small-scale property, small meeting groups are itsmajor market target. It is not able to serve large groups. Therefore, unlike the otherhotels, it handles small groups and individual tourists, accommodating group sizes upto 16 people. The hotels market operations are completely different from those of largehotels and business hotels.

    Expand marketing territories . In total, 80 percent of the interviewees hotels wantedto expand their marketing territories to increase room occupancy rates. One example ofthis was a high-priced luxury resort, whose original main marketing targets were

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    guests from Southeast Asia. Within the past three years, to maintain their marketposition and to enhance the occupancy rate, they have expanded to include consumergroups from Hong Kong and Mainland China. Three interviewees working incommercial hotels and four in resort hotels in Central and Southern parts of Taiwan

    stated that since the Japanese senior visitors market has expanded, they have designeddiversified tourism products with travel agencies to accommodate these visitorslong-stay needs. Through an all-in-one package from travel agencies, the customersof that group can reduce the burden of making their own travel arrangements.

    Restructure distribution channels. Four interviewees said that in the past threeyears, distribution channels have changed. Hotels used to employ a wholesale travelagency as a marketing channel; however, these travel agencies always negotiate a lowprice from the hoteliers to gain a high level of operating profits. Thus, these hotelsshifted their strategies, and they now contact foreign outbound travel agencies directly,rather than domestic inbound travel agencies in Taiwan. A marketing managerrespondent mentioned that during the hotels off-season period, they could not sit andwait for travel agents to allocate guests to the hotel because to do so could exposeregional and international hotels to the predicament of serious price and marketingcompetition. For example, as Interviewee 29 mentioned:

    Price competition will have a negative effect on the market. Then it is not a blue oceanstrategy, it is a red ocean strategy. [. . .] In reality, Hong Kong and Southeast Asian travelagencies are probably monopolized by an agency in Taiwan, such as [Agency X] [. . .] Today,if [Agency X] does not promote our [Hotel C], [Hotel C] would never have space to survive inthe market of international tourist hotels in Taipei. As a result, four years ago, we startedcooperating directly with travel agencies in Hong Kong, and the result of this coordinationwas very good. [. . .] This enabled our hotel to create a market without competition. Thismight be an example of applying the blue ocean strategy [i.e., to create an uncontestedmarket].

    The provision of products and services. All the respondents agreed that room productsand services can only be increased; they cannot be decreased. The qualitative datashow that hoteliers have attempted to differentiate their provision of products andservices from those of other hotels and to create effective market segmentation. Theseofferings can be categorized into innovative in-room amenities, cross-industry strategicalliances, and customized travel package for tourists from Mainland China.

    The results of the study demonstrate that hotel executives could develop the firsttwo forms of products and services by observation of guests behavior in a hotel anduse of guest comment cards. The details of these new offerings could be conveyed byadvertising materials, e-marketing, and sales calls to hotel end-guests and to those whoare in charge of making a room reservation for corporate customers, thereby providinginformation to both existing and potential customers. Hoteliers continually create more

    diversified products and services to meet customer needs and preferences.Innovation in in-room amenities. To add value to hotel offerings, two resort and

    three commercial hotels upgraded in-room amenities from local brands to internationalbrands, such as bathroom accessories/toiletries from local brands to BVLGARI andHermes, to increase top customers frequency of using name brands and thus increasethe hotels popularity in the top tier of society. The study indicates that deluxeamenities include enhanced work-desk lighting, complimentary access to thehigh-speed Internet, flat screen LCD television, etc.

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    Understand guest preferences. To create freshness for returning guests, some hotelsno longer provide simply the traditional welcoming fruit and birthday cards and cakes.Hoteliers are working hard to discover and understand their guest preferences: forexample, some hotels change the flavor of tea bags seasonally, whereas others provide

    fresh fruit juices in an in-room fridge. In addition to providing a welcoming tea, onehotel offers seasonal refreshments so that returning customers can have differentexperiences. Two other resorts also provide mini-bars as a complimentary service, eachcontaining four bottles of soft drinks or beer, in addition to offering mineral water.

    Differentiate offerings. To differentiate offerings from other hotels, Interviewee 19showed her attention to the needs of in-house guests:

    One night, I saw an in-house guest go out to buy some food and snacks. After thiscircumstance occurred, I suggested the provision of a snack for in-house guests. The topmanagement supported this proposal, and decided to provide a homemade hot porridge in aroom-service style around midnight; thus, this is an added value to the service.

    Upgrade in-room electronic equipment. All interviewees mentioned that website service

    has gradually shifted from broadband cable to wireless internet. In the past few years,the price for access to the internet has been falling. Currently, six researched hotelsoffer this as a complimentary service. Four city hotels have already established awireless network in public areas in hotels to enhance services and to meet guest needs.

    This study indicated that in the past two years, in-room electronics equipment hasbeen gradually updated and upgraded. This includes in-room portable phones, freemobile phone rental, LCD screen TVs, multi-functional office equipment including fax,photocopy, print and scan functions, brew coffee machines, and integrated businessdesk design. In addition to the above in-room amenities, with respect to hotel facilities,Interviewee 14 said:

    We offered one night with two meals: dinner and breakfast. Early this year, we added a

    welcome tea party at the lakeside pool for those who check in at 3 oclock. In addition to this,we organized a space to establish a small-scale library for guests. The reason for ourproviding this facility was because I often saw our guests bringing books for their stays.Also, we cooperate with [Bookstore Y] and ask them to provide the best-selling 150 books inthe library.

    Cross-industry strategic alliances. This study indicated that to create an uncontestedmarket, a cross-industry strategic alliance could be developed through cooperationamong local governments, travel agencies, leisure facilities such as national parks, themedical industry, and so on. Two hotels in Taipei have programmed medical travelpackages for the mainland China and Japanese markets. This special tourism packageis affiliated with hospitals, and it includes accommodations, a leisure tour, and medicaltreatment.

    Many hotels offer accommodation packages affiliated with the local agents ofleisure attractions (such as cable cars, river cruises, and golf clubs). Two hotels havecreated alliances with booksellers to promote art and cultural tours. Three hotels offera cultural tourism package in cooperation with local cultural bodies, such as the woodcarving tour in Sanyi, Miaoli, and the ceramics street in Shanshia, Taipei County.

    Developing customized travel packages. Three hotels marketers said that after thegovernment had opened the gate for mainland China tourists to visit Taiwan, theybegan to target this potential market and to design customized accommodation

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    products for this targeted group. The features of this product include creating welcomeposters, training staff to use the Mandarin terms used in China, producingadvertisements in simplified Chinese characters, and adapting public places to thebehavior of Chinese tourists. One researched hotel in southern Taiwan provides a

    private dining environment for mainland China tourists, enabling the hotel to meet thecustomers different lifestyle requirements. As Interviewee 27 mentioned:

    Hotel welcome posters may be made up to ten times bigger. The bigger posters for thesetourists mean they are more welcome. This indicates that the aim of the service is to satisfycustomers needs. [. . .] Due to the differences in lifestyle, in some public areas, they smoke andtalk more loudly in the restaurant. How the service providers politely communicate with thesetourists has become important in minimizing any insults to their pride. [ . . .] How to preventother customers suffering from this situation may now prove a challenging task formanagers.

    Interviewee 31 highlighted that the interior and exterior design of the hotel wasdecorated in the traditional palace style architecture, so that they could target guests

    from mainland China in particular, by offering them a site inspection of the hotel thatincludes a historical-cultural visit. A hotel tour guide recounts Chinese history as a wayof introducing Chinese artifacts and the showcase of exquisite antiques to the in-houseguests. During their stay, the guests are served a hand-made dessert, such as a redbean muffin, the favorite food of politicians wives.

    Discussion and implicationsThis section applies Mehmetoglu and Altinays (2006) qualitative analysis technique,in particular to the stage of enfolding the literature. Based on the results and anintegrative approach, some key concepts are examined, such as BOS, marketsegmentation and branding, effective revenue management, and network theory. Aconcept may be derived from various sub-components of the research parent nodes

    eliminate, reduce, create, and raise but these components are intertwined.

    Applying BOSThe results of this study indicate that in the concept of the BOS, the hotels studiedemphasized those aspects that create distinctive added-value offerings through CRMand that created a value-cost trade-off.

    Creating added-value offerings through CRMThe creation of new customer values (demand) and new offerings (supply) in anuncontested marketplace underpins the BOS. The hospitality environment ischaracterized by the variability of its nature. In particular, customers needs arevaried, and their preferences change from time to time. There is often a degree of

    irregularity in the overall patterns of change. Moreover, Yang et al. (2009) claim thatcustomers perception of value strongly affects their purchasing behavior (p. 498).Consequently, understanding customer needs and preferences is crucial, and it requiresthat the front-line service providers grasp customers perceptions promptly to motivatetheir buying behaviors and satisfy their needs. Product development thus becomesimportant. This study indicated that the hotels studied used CRM strategies and tactics(Geddie et al., 2005; Sigala, 2005) to proceed to their BOS by creating added-valueofferings for their customers.

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    To consider and meet diverse customer requirements, many studied hoteliers haveadjusted the use of rooms and have introduced new in-room amenities. Additionally,the evidence shows that each hotel developed its own distinct features in packages(combinations of tourist attractions and activities, accommodations, food and beverage

    products, and services). Additionally, some hoteliers have developed customizedtourist packages for different market segments. In particular, after the Taiwanesegovernment opened the gate for mainland China tourists to visit Taiwan, many of theresearched hotels created some ancillary offerings, such as welcome posters andprivate dining environments.

    Creating a value-cost trade-offAnother foundational concept of a BOS involves the creation of a value-cost trade-off.This study found that two practices used this concept: adjusting distribution channels,and establishing strategic alliances. Traditionally, hotels coordinate with wholesalerswhen dealing with inbound markets. This study found that one local hotel chain

    directly negotiated tourist packages with retail travel shops overseas to benefit fromcost advantages and marketing effects. This approach not only creates a value-costtrade-off, but also provides new offerings for potential inbound tourists because theseretail shops are the most accessible to end-users (tourists); this approach alsoconsolidates tourists traveling requirements. In addition to these benefits,collaboration with retail shops in the distribution channel allows the hotel to alignits entire system of activities with its strategic choice of differentiation or low cost.This is an example of implementing a BOS.

    The application of this direct distribution channel can also be congruent with thenature of demand, the variety of hotel offerings, and promotional campaigns. Thispractice might reconstruct marketing boundaries by, for example, developing strategicalliances and creating buyer chains. It might achieve results beyond existing customerdemand and might also provide opportunities to explore non-customer needs (Kim andMauborgne, 2005).

    With respect to the concept of a strategic alliance, the findings of this study showedthat some hotels have used strategic alliances (e.g. a cross-industry collaborations withnational parks, medical services, and recreational entities and the formation ofpartnerships in the Asian Pacific region) to implement a BOS with aspects of productdifferentiation and low cost trade-offs. Many literature reviews (e.g. Chathoth andOlsen, 2003; Reidet al., 2008) have noted that joint programs and activities undertakenby multiple hotels, such as the integration of logistics and marketing, can facilitatesustainable advantages for each partner hotel.

    Market re-segmentation and re-brandingThe literature review suggests that room demand in the hotel industry appears tofluctuate and that demand patterns are sometimes unpredictable (Pullman andRodgers, 2010). Variations in demand can be classified into daily, weekly, and seasonalpatterns. Therefore, capacity management becomes significant in the domain ofhospitality strategic operational management (OReilly, 1986; Getz, 1987). Pullman andRodgers (2010) describe capacity management as the provision of sufficient roominventory to satisfy guest demands. Hoteliers have to be aware of these complicated

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    variations in demand and must determine what type(s) of market segments need to betargeted from time to time to maximize the utilization of fixed hotel capacity.

    This study showed that modifying the original market segmentation to incorporatenew demand-group categories has become an operational tendency. The findings of

    this study show that many hoteliers have attempted to understand time-variabledemands, segmentable markets, and customer buying behavior, and subsequently toidentify potential sources of demand and to develop the most valuable target marketsin each time slot, i.e. adjusting the demand from diverse market segments.Accordingly, such strategies should result in the optimal utilization of fixed capacity.

    ONeill and Mattila (2010) suggested that brand affiliation and recognitioncontribute to successful hotel operations by way of consistent service quality and thuscreate sustainable success. This study has shown that many hoteliers have applied ahotel brand strategy as a marketing strategy (Dev et al., 2009) to create their blue oceanvision. Developing their brands should result in the creation of customer loyalty.

    Additionally, the results of this study also reinforce the notion proposed by ONeill

    and Mattila (2010) that hotel expansion could take place through the development ofmultiple brands within a hotel group. Such branding enables hoteliers to targetdifferent market segments for each brand name. This study has demonstrated anexample of brand expansion strategy in Formosa International Hotels Corporation inTaiwan. As hoteliers carefully develop each brand identity for each type of hotel, hotelsthat offer tiers designed for diverse groups of hotel guests will increase customer brandloyalty and also extend the corporations market share as a whole (ONeill and Mattila,2004). Ultimately, building brand affiliation would increase the hotels revenue (ONeill,2006) and create what Kim and Mauborgne (2005) call values.

    The findings of this study did not show any strategic operational concerns aboutbuilding brand loyalty. This contradicts the proposition of Hu et al. (2010). Thisdiscrepancy may have arisen because the hoteliers studied perceived the possibility

    that guests have available an extensive selection of hotel brands or that guest loyaltyto a specific brand involves only a weak affiliation. Consequently, how hoteliersstruggle to overcome this challenge is important in the BOS. This study also indicatesthat the development of reward programs and/or new product and service offerings onthe basis of guest value perception may prove a feasible practice. In addition, someCRM practices could be recommended to the studied hotels.

    Revenue managementToday, revenue management, which focuses on demand pricing strategy, is a strategictool for maximizing hotel revenue (Heo and Lee, 2009). Effective revenue managementenables hoteliers to optimize the allocation of perishable room inventory and to offer

    diverse prices to different market segments, thereby maximizing total hotel revenuepotential (Chiang et al., 2007). Prior to implementing revenue management, one of themost essential strategic concerns is capacity management.

    This qualitative study found that a majority of the hotels researched emphasized asupply-based product development strategy. Consequently, these hoteliers should paymore attention to demand-based pricing strategy, along with the integration ofdifferent segments in time-variable demand. In the context of the BOS, to enrich thedifferentiation advantage and achieve low opportunity cost advantage, the studied

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    hotel executives should optimize the control of room inventory withnicheprices acrossdiverse market segments.

    Network theory

    The results provided information about the issues of networking and social interaction.Surprisingly, the study findings included no evidence of a network. The followingsubsection presents speculations about why the management interviewees did notrefer to elements of these theories. For example, one plausible explanation suggeststhat all the selected interviewees naturally involved themselves in this kind of socialinteraction while at work but did not explicitly mention it during the interviews.Moreover, one interview transcript reflected the practices of an executive manager whowould observe customers behavior when they stayed at the hotel. Although socialinteractions between service employees and customers would result in creating valuesfor the customers, this sort of episodic observation may not do justice to the overallconcept of networks, which implies that hoteliers should completely understandcustomers perceptions and expectations of offerings by establishing long-lastingrelationships though the formation of embedded networks (Kanadampully, 2006). Thisunderstanding would allow the hoteliers to create value and innovative differentiatedofferings to their customers.

    Overall, this qualitative study suggests that the strategies used, such as CRM, tocreate added-valued offerings, marketing segmentation, brand management, andrevenue management can satisfy the needs and wants of targeted consumers in themarket segment(s) of each hotel and thus match their expectations. Applications ofdistribution channels and strategic alliances may enable the hotels studied to sustaintheir advantageous market positions. This study indicates that these strategies weredifferent from those of other competitors. If they were all similar, the ocean would bered rather than blue. Additionally, the managerial implications of this study suggest

    that such BOSs should be amended continuously before competitors can duplicate theamendments. The strategies could be amended according to changes in the nationalenvironment and in the hospitality sector. A hotel that does not amend its positionaccordingly, may find itself operating in a red ocean market. The concept of a BOS wasimplemented by the hotels studied to a certain degrees; thus, it seems thatorganizational effectiveness could be further strengthened.

    ConclusionsIn this study, we sought to identify the characteristics of a BOS in selected hotels inTaiwan. The results of this study showed that the more brand expansion is enacted,the more able hotels are to create new customer value. Furthermore, creating (oradding) value to hotel offerings would beneficially reinforce revenue management and

    strengthen market positions in the hotel marketplace. In addition to the creation ofvalue, this study also highlights that although the strong local economy in Taiwanimproved gradually in 2010, hoteliers studied continue to provide new offerings in anuncontested marketplace. This leads to the evolution of a great number ofmodifications to room-associated amenities and to the development of hotel productsand tourist packages for inbound and domestic tourist and guests. Such considerationof customer perceived value in developing new product offerings should, in turn, resultin greater satisfaction and loyalty on the part of the customers. This study also

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    concluded that the prices, products, and relevant marketing strategies that wereimplemented by the hotels studied emphasized key concepts of a blue ocean, value andinnovation. These strategies are adapted continuously as the national and hospitalityenvironments in Taiwan are changing. If a hotel does not revise its policies

    accordingly, it may find itself in a red ocean market.With regard to theory building, this qualitative study bridges the gap between

    theory and practice by focusing on the implementation BOSs via application of CRMand network theories. The practical implications for hospitality settings should befurther developed, and the translation of the data in the matrix into actual practicesshould be discussed. The study also indicated that the value characteristics of theBOSs of the selected hotels are creating added-valued offerings for existing customersand aligning all hotel products, services, and activities with the strategic choice ofdifferentiation. The innovation component in this hospitality setting would includerestructuring market segmentations, rebranding, and reformulating pricing strategiesto capture new demand.

    Limitations and further researchThis report has several limitations that may suggest topics for future investigation.This study used a qualitative approach involving the application of a grounded theory.A major concern is the issue of generalization. Thus, a further study may extend thepresent results by exploring the extent to which CRM and network strategiescontribute to the implementation of BOSs. Furthermore, a longitudinal study may beuseful for examining this connection. Future studies should also consider the effects ofsocial interaction and networking on the implementation of BOSs. Additionally, astudy to determine whether knowledge-sharing, CRM, and network theories enableemployees to understand their customers more efficiently will contribute to theknowledge base. The results of this study are limited by the number of selected

    interviewed participants, which was determined in the context of considerations ofdata saturation. Future research should explore the feasibility of implementing a BOSbased on the elimination-reduction-creation-raise matrix across an entire hotel chain oraccommodation sector in Taiwan or any other country.

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    About the authorJen-te Yang is an Associate Professor of Hotel Management at National Kaohsiung University ofHospitality and Tourism, Taiwan, ROC. He completed his doctoral studies in Management atEdith Cowan University, Western Australia, in 2005. Before Jen-te moved to an academic careerin 2002, he had had extensive working experience in divisions of food and beverage, rooms andmarketing and sales in four international five-star hotels in Australia and Taiwan. Currently, hisresearch foci are blue ocean strategy, career planning and development, individual behavior,group behavior, managerial psychology, organizational change, and organizational socialization.Jen-te Yang can be contacted at: [email protected]

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