Developing New Products in the Hospitality Industry: A Case of Egypt

Developing New Products inthe Hospitality Industry:

A Case of Egypt

Ahmed HassanienRiyad Eid

ABSTRACT. Drawing on associated literature and empirical research,this paper makes a contribution towards the engagement and expertise ofhotels in the new product development (NPD) process. The study pro-vides an investigation into the development and practices of new prod-ucts within the hospitality industry in Egypt. This is of considerableinterest to both practitioners and academics within the field of hospitalitymanagement. The findings reported are based on a survey of marketingmanagers in different hotel categories. Significant differences betweenhotels were found based on their categories. Moreover, the results revealthat the 5 star hotels demonstrate a higher orientation towards NPD thanthe 4 and 3 star groups with regard to their integration of NPD goals intothe overall marketing objectives of their firms. Management implicationsand areas for further research are discussed. doi:10.1300/J150v15n02_03[Article copies available for a fee from The Haworth Document Delivery Ser-vice: 1-800-HAWORTH. E-mail address: <[email protected]>Website: <http://www.HaworthPress.com> © 2006 by The Haworth Press, Inc.All rights reserved.]

KEYWORDS. New product development, innovation, marketing, hotels,hospitality, Egypt

Ahmed Hassanien, BSc(Hons), PGCert, PGDip, MA, PhD, is affiliated with the Schoolof Marketing, Tourism & Languages, Napier University Business School, Napier Uni-versity, Craiglockhart Campus, Edinburgh EH14 1DJ, UK (E-mail: [email protected]).

Riyad Eid, BSc(Hons), MSc, PGDip, PhD, MCIM, is affiliated with WolverhamptonBusiness School, Compton Park Campus, Compton Road West, Wolverhampton WV39DX, UK (E-mail: [email protected]).

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INTRODUCTION

New product development is continuing to be an area that is receiv-ing increased awareness, both in theory and practice (Shani et al., 2003).It is regarded as an essential activity for firms that desire to face compe-tition on the basis of quality and suitability of purpose (Ciappei andSimoni, 2005; Cooper, 1999; John and Snelson, 1990). Cooper (1999)argues that for any service organisation to succeed in today’s competitivebusiness environment to develop new products or fail as a company arethe only two options available. Along the same lines, Booz et al. (1982)argue that the success in launching new products is increasingly respon-sible for the growth and profitability of firms. Kotler and Armstrong(2004) also suggest that NPD is of utmost importance to enable a com-pany to meet customer wants and needs effectively. Finally, Shepherdand Ahmed (2000) argue that new products are fundamental to the devel-opment and sustainable success of the contemporary corporation.

Similarly, there is a strong relationship between product innovationand success in the hospitality industry. Laugen et al. (2005), Lewis andChambers (2000) and Morrison (2001) suggest a strong correlationbetween market performance and attention to product innovation. Bowieand Buttle (2004) argue that new products offer the opportunity to openup new markets and maintain significant market shares in those segments.As the life cycle matures, product innovations unrelated to price, such asdesign, customisation and quality are linked to competitive sales growth.

Previous research on new product development in the tourism and hos-pitality industry is limited. Bradford (1994) discussed innovation throughacquisition, within the restaurant industry, which involves the purchaseof small growing companies by large corporations as an alternative todeveloping new concepts internally. Jones (1996) developed a generic15-step process that companies use to manage new product develop-ment/innovation in the hospitality industry. The author had earlier, in1995, applied Scheuing and Johnson’s model for new service develop-ment to flight catering. His research found that airlines lack many of thesystematic procedures suggested by Scheuing and Johnson. Shoemaker(1996) monitored how customers develop a series of actions consideredas significant, compulsory or appropriate for a service transaction. Vari-ations from the script can be a source of dissatisfaction. Thus, whendeveloping new service delivery systems, companies must assist custom-ers in developing a new script. Miner (1996) created a customer-basedand detailed approach to developing new products in a restaurant. The

34 JOURNAL OF HOSPITALITY & LEISURE MARKETING

six-stage process includes product ideas, initial evaluation, customerreaction, sensory testing, field testing and product introduction.

OBJECTIVES OF THE PAPER

The present paper pursues the following objectives:

• To explore the importance and forces of NPD in hotels,• To investigate the perception and practice of hoteliers regarding

NPD, and• To explore to what extent hoteliers deal with NPD as a marketing tool.

Contribution to Current Knowledge

The current study contributes to a limited number of research studies onNPD in less-developed countries in general and in Egypt in particular.In addition, this study contributes to a current limited amount of empiri-cal research evidence to investigate the various approaches to NPD andthe evaluation techniques that should be used in the hospitality industry.Furthermore, the contributions of the study provide an agenda whichcan be used in guiding future research that will assist in extending theunderstanding of NPD and the role it plays in the sustainable success ofthe hospitality industry.

LITERATURE REVIEW

The changing market environment has forced marketing experts toreconsider the way in which they approach their tasks. Indeed, con-sumer tastes, wants and needs are changing from time to time and newcompetitive patterns are emerging. Therefore, it has become essentialfor an organisation to adapt, develop and innovate to achieve a competi-tive advantage and become successful (Kotler et al. 2002).

In simple terms, innovation refers to any good, service or idea that isperceived by someone as novel or new (Kotler et al. 2002). Capitalisingon the proposed six categories of product innovation suggested byHeany (1983), Lovelock has adopted them for use in the service con-text. Lovelock (1996) presents six categories of new products: majorinnovations, start-up business, new product for currently served mar-kets; product line extensions or additions, improvements to existingproducts, and style changes. Generally, the higher the level, the greater the

Ahmed Hassanien and Riyad Eid 35

risks and expenses entailed and the more difficult the management tasks(Lovelock, 1996).

Crawford (1994, p. 472) defines innovation as “the act of creating anew product or process. This includes invention as well as the workrequired to bring an idea or concept into final form. An innovation mayhave various degrees of newness, from very little to highly discontinuous,but that must include at least some degree of newness to the market notjust to the firm.” In this research, new product development and innova-tion are entwined, as it is difficult to separate one from the other (Laugenet al., 2005; Baldwin and Johnson, 1996; Saleh and Wang, 1993; Curryand Clayton, 1992; Laage-Hellman, 1987; Cooper, 1983).

On the other hand, product development definitions in the popularmarketing textbooks generally focus on the word new. A new product is“A good, service or idea that is perceived by some potential customersas new” (Kotler et al., 2004, p. 215). There are eight stages in new prod-uct development including the development of original products, prod-uct improvements, product modifications, and new brands developedthrough the firms own R&D efforts (Kotler et al., 2004). Keegan et al.(1995, p. 418) define a new product as being “a product being intro-duced to the market for the first time as a result of invention, innovationor improvement.” These authors offer a nine-step development processwhich includes idea generation, screening, business analysis, concepttesting, product and strategy development, marketing mix planning, testmarketing and product launch.

Cooper (1993) provides a more thorough approach in his definitionof a new product and what newness essentially means. He suggests thatnew can be new to the company or it can be new to the market or cus-tomer and presents six classes of new products. These are new to theworld products (products that create an entirely new market); new prod-uct lines (products that allow a company to enter an established marketfor the first time); additions to existing product lines (products that sup-plement a company’s established product lines); improvements to exist-ing products (products that provide increased performance or greaterperceived value and replaced existing products); repositioning products(existing products that are targeted to new markets or market segments);and reducing costs (products that provide similar performance at lowercost). All of these classes provide a variety of ways to examine whatnew products can mean to the company or to the market. However, Johne(1996) argues that cost reductions and repositioning are not distinct typesof product developments in their own right. In addition, truly innovativenew products and those in the “new to the world” have a higher failure


rate than those products, which are being continuously improved (Cooper,1993). All these new product classes are common in the hotel industry.

When exploring the process or activities which assist in the successfulintroduction of a new product, it is important to define new product devel-opment, which is a process consisting of specific activities and decisionpoints. However, it has been argued by service marketing academics thatthe development of a service product differs from the development of atangible product due to the characteristics of services comprising intan-gibility, inseparability, perishability, heterogeneity and lack of owner-ship. Literature provides a wide range of approach to understanding thenew product development process and factors contributing to the successof new products. Important contributors, which have been identified ascrucial to the success of new product development include customers,competitors and employees (Johne & Storey, 1998).

Although basic new product development models consist of six, seven,eight or nine steps (Lancaster and Massingham, 1999; Baker, 2000;Kotler et al., 2004; Keegan et al., 1995), there are a number of differentvariations of the new development process (Cooper, 1993; Crawford,1994). The most well-known model originates from Booz et al. (1968,1982) and consists of seven steps as shown in Figure 1. Despite differ-ent approaches to new product development (NPD) and new servicedevelopment (NSD) in the literature (Scheuing and Johnson, 1989), thisresearch followed Booz et al. (1982) simple model of the new develop-ment process (see Figure 1).


New product strategy Identify the strategic business requirements that the new productshould satisfy.

Idea generation Search for product ideas to meet strategic objectives.

Screening and evaluation A quick analysis of ideas made against criteria that reflect theobjectives of the organisation.

Business analysis A detailed analysis of the attractiveness of an idea in business terms.

Development Transition of the idea into an actual product for the market.

Testing

Commercialisation The when, where, to whom and how decisions of the Launch.

The commercial experiments necessary to verify earlier businessjudgements.

FIGURE 1. New Product Development Model

Adapted from Booz et al. (1982).

However, this research considers the model developed by Booz et al.(1982) to be appropriate for the following reasons. First, it provides aclearly simple and concise structured model of new product developmentbased on research over many years into US-based companies. Second,Lovelock (1996) argues that the basic steps in new service developmentare broadly similar to those in manufacturing, beginning with objectivesetting and then proceeding through idea generation, concept screening,concept development, generation/evaluation of the final service productand its associated marketing strategy, design of a system for continuousperformance evaluation, and product introduction. Third, it is one of themost recognised NPD models (Hart, 2000). Fourth, most of the NSDmodels are intuitively based rather than empirically based. Finally, thismodel is accepted by hospitality marketing scholars (e.g., Buttle, 1996;Kotler et al., 2003).

Another way to look at product development strategies in an organisa-tion is product/market growth options. Management should review ifthere are any further opportunities for its growth by considering its prod-uct and market dimensions. Regarding these dimensions, Ansoff (1988)has proposed the product/market matrix which is known as the Ansoffmatrix. This matrix represents a framework for reviewing how to improvethe performance of the existing offer or to develop new product and mar-ket opportunities through four options as indicated in Figure 2.


FIGURE 2. The Ansoff Matrix

Source: Ansoff, I. New Corporate Strategy. Copyright©1998 John Wiley & Sons, Inc. Reprinted with per-

mission of John Wiley & Sons, Inc.

In the hospitality industry, this matrix is accepted by marketing writerssuch as Kotler et al. (2003), Morrison (2001) and Bowie and Buttle(2004). Palmer (2001) states that most growth that occurs practically isa combination of both product development and market development.For example, for a leisure hotel looking to attract new business custom-ers, it may not be enough to simply promote existing facilities. In orderto meet business people’s needs, it might have to offer refurbished facil-ities to make them more acceptable to business customers and offer newservices. However, this matrix ignores the overlapping and inter-rela-tionship between some of its strategies. For example, a new productmay be developed both to keep existing markets and attract new ones.

RESEARCH METHODOLOGY

The methodology used in this study was a quantitative survey. A pilotstudy was carried out in order to clarify the wording of the questionnairesurvey. The pilot work was undertaken in January 2005, with a group offive hotels. Since personal interviews are highly appropriate for protest-ing (Churchill, 1995; Hunt et al., 1982; Reynolds and Diamantopoulos,1996), they were used in the pilot study to enhance the validity of thequestionnaire.

The questionnaire design was modified based on the feedback andcomments from the pilot study participants. The formal survey was con-ducted between March and May 2004. The questionnaire itself was printedon seven pages of A4 paper. A total of 50 multiple-choice questionswere asked, which were grouped into five parts: (1) NPD significance,(2) NPD frequency and barriers, (3) NPD as a marketing tool, (4) NPDprocess and requirements and (5) the perception of the hotel marketingmanagers regarding innovation and NPD.

In addition to the pilot study, a number of techniques were used toimprove the response rate. First, the questionnaire was designed in sucha way that makes it take only 20 minutes to be completed. Second, col-our department-headed cover letters were used to illustrate the universitysponsorship. The cover letters were individually addressed with respon-dents, job titles and full addresses. The researchers’ names, positions andsignatures were provided in the cover letter. Also, self-addressed, firstclass stamped return envelopes were included. Third, the respondents wereassured that their responses would be confidential and all data would bereported in aggregated form. Fourth, drop and collect, telephone and self-administered (or face to face) were the data collection methods. Each


data collection method has strengths and weaknesses and in usingthese complementary data collection methods, the researchers soughtto counterbalance the merits and demerits of each method. However,the response rate of the marketing managers in all hotel categories was85.9% (54% of this total response rate was collected via the self-admin-istered method, 23% via the drop and collect method and 13% via thetelephone method).

Measurement Development

In order to develop and validate the instrument, several steps were taken:

1. Development of the measure from the literature;2. Initial pre-test; and3. Pilot test of the measure.

In this regard, the questionnaire was reviewed first by six academicresearchers experienced in questionnaire design. They were asked to pro-vide feedback on the overall design, particularly the measurementscales. Their inputs were then considered in improving the design. Fol-lowing from that point, the questionnaire was piloted with two expertsknown to the researchers. The pilot took the form of an interview wherethe participant was first handed a copy of the questionnaire and asked tocomplete it and then discuss any comments or questions he had. Theobjective of this pilot was to assess time required to complete the ques-tionnaire, clarity of instructions, simplicity, consistency of questions, clearlanguage and comprehensiveness. As a result of this pilot, some amend-ments were made to improve the questionnaire.

Population and Sample

The population included all hotel marketing managers in 5 star, 4 starand 3 star hotels in Egypt. The researchers used the non-probability(judgemental) sampling method with the objective of sampling the pop-ulation of hotels in Egypt. Accordingly, the hotels of Greater Cairo werechosen as the sample for this research. Cairo was selected for the fol-lowing reasons.

• First, in comparing Cairo with the other areas, Cairo is consideredone of the most, if not the main, oldest and best-known tourist mar-ket in Egypt.


• Second, Cairo represents the top area in terms of hotel unit number(about 24% of the hotels and 96% of the floating hotels), with a fairrepresentation of each category, in Egypt.

• Finally, Cairo is a rich, inclusive market that possesses most, if notall, types of hotels (i.e., floating or ship-based hotels, downtownhotels, urban hotels, transit hotels, limited service hotels, luxuri-ous hotels, economy hotels, and so on).

A total of 91 hotels was selected as the samples of the survey. A totalof 63 valid returns were received by the closing date of the survey, rep-resenting a 69% response rate (see Table 1). This rate is much higherthan other similar surveys conducted in the NPD studies.

FINDINGS

Most of the respondents (75%) considered NPD as very importantand important (46.4% very important, 28.6% important) for their hotels.It is worth mentioning that none of the respondents answered “notimportant” at the other end of the scale. This finding suggests that inno-vation or NPD is not exclusive to hotels of a particular size. Moreover,most respondents agreed (62.3% strongly agreed and 34.4% agreed)that hoteliers should give further recognition to the importance of NPD,which means that the Egyptian hotels can gain better value and benefitsfrom it. Along the same line, all hoteliers stated that NPD has anessential marketing role.

Although the majority of hoteliers (88.3%) agree that there are clearlydefined stages that make up the NPD process in their hotels, they do notuse formal and detailed guidelines to carry out their innovation. Themajority (68%) of all hotels do not have formal guidelines in place toguide NPD process from idea to launch and instead they use informal ones.


TABLE 1. Survey Response Summary

Total number of questionnaires distributed 91

Number of completed and returned questionnaires 67

Unreachable companies 4

Declined participation 9

Response rate (%) 85.9

Respondents were asked to identify the main reasons for developingnew products for their hotels. Information relating to the importance ofNPD in hotels in Table 2 indicates that “to keep up with the competition”is the most important reason to develop new products, followed by “tosatisfy current customers.” These findings confirm what have beenmentioned above in relation to the importance and benefits of NPD. Onthe other hand, to upgrade the hotel to a higher category is the leastimportant reason to develop new products. This might be attributed tothe difficult hotel upgrading criteria used in Egypt as indicated by a 3star hotel marketing manager:

Although we offer the service and product quality of four star hotels,our hotel will never be upgraded to that category because of the sizeof our entrance and reception.

In order to reduce the complexity of the list of reasons, an exploratoryfactor analysis (with Varimax rotation) was performed to examine if theitems for a construct share a single underlying factor (i.e., are uni-dimensional). Items, which did not satisfy the following two criteriawere deleted: (1) dominant loadings greater than 0.5, and (2) cross-loadings less than 0.35 (Hair et al., 1998).

The nine items (variables) measuring the reasons for NPD in this re-search were subjected to principal component factor analysis. Eigen-values and scree plot were used to determine the number of factors to be


TABLE 2. Importance of NPD

1* (%) 2 (%) 3 (%) 4 (%) 5* (%) Mean

to keep up with the competition 0.0 1.6 11.1 52.4 34.9 4.20

to satisfy current customers 1.6 4.8 17.5 55.6 20.6 3.88

to decrease operational expenses 0.0 11.1 42.9 33.3 12.7 3.47

to attract new customers 3.2 15.9 25.4 46.0 9.5 3.42

to improve the operational efficiencyof the hotel

17.5 41.3 27.0 14.3 3.38

to maintain corporate image andstandards

1.6 22.2 39.7 33.3 3.2 3.03

to comply with the new trends andtechnology in the market

6.3 34.9 31.7 27.0 0.0 2.78

to cope with the governmentalrequirements

12.7 41.3 33.3 11.1 1.6 2.58

to upgrade the hotel to a higher category 14.3 57.2 22.2 3.2 3.2 178

1* = Strongly disagree; 5* = Strongly agree.

extracted. A three-factor structure was suggested using the criteria of aneigenvalue greater than 1 and the extracted factors account for 74.24%of the total variance. All factor loadings are generally high, and the lowestloading is equal to 0.58, while the Kaiser-Meyer-Olkin test of the factoranalysis is substantial (0.67). The resulting factor loadings are shown inTable 3 with all factor loadings less than 0.5 suppressed. All items wereloaded onto the expected factors as they were originally designed. Factorloading were all higher than 0.5 on its own factors and, therefore, eachitem loaded higher on its associated construct than on any other construct.This supported the discriminant validity of the measurement.

The interpretation of the three-factor solution was accomplished byrelating them to theoretical concepts of NPD. The first factor seems tofit very well with the Product Cost and Values since all the elementssuch as “to decrease operational expenses,” “to improve the operationalefficiency” and “to upgrade the hotel to a higher category” suggest avery strong incentive for decreasing product cost and improving itsquality. However, one of the individual variables in this factor, to


TABLE 3. Factor Analysis for Reasons for NPD

NPD Reasons Component

Factor 1 Factor 2 Factor 3

Product Costand Values

ProductQuality

Customer andCompetition

to decrease operational expenses .84

to improve the operational efficiency .75

to upgrade the hotel to a higher category �.62

to cope with the governmental requirements .72

to maintain corporate image and standards .69

to comply with the new trends andtechnology in the market

.60

to satisfy current customers .78

to keep up with the competition .67

to attract new customers .58

Initial Eigenvalues 2.4 1.6 1.2

% of Variance 29.25 23.17 29.25

Cumulative % 29.25 52.42 74.24

KMO test 0.67

Bartlett Test X 2: 185, Sig.: 0.001

upgrade the hotel to a higher category, has a negative factor loadingindicating a negative correlation in the factor. The second factor, Prod-uct Quality reveals the elements that are likely to improve quality of theproducts introduced by hotels. “To cope with the governmental require-ments,” “to maintain corporate image and standards” and “to complywith the new trends and technology in the market” are all important toachieve this end. However, this factor is consistent with the academicargument put forward by Ciappei and Simoni (2005), Cooper (1999), andJohn and Snelson (1990) which indicated that NPD is an essential activ-ity for firms that desire to face competition on the basis of quality andsuitability of purpose.

The third factor seems to fit very well with the Customer and Competi-tion since all the elements such as “to satisfy current customers,” “to keepup with the competition” and “to attract new customers” suggest a verystrong incentive for satisfying customers and improving the competitionability of the hotels. These variables belong to the most important stake-holders for commercial service organisations. Moreover, this factor isalong the same lines with what have been mentioned before by Kotler andArmstrong (2004), Laugen et al. (2005), Lewis and Chambers (2000) andBowie and Buttle (2004) regarding the importance of NPD.

The top sources of new product ideas for most hotels were competi-tion (88%), customer feedback (82%), suppliers (59%), staff (7%) andhead office (8%). Interestingly, none of the 3 or 4 star hotels mentionedtheir “staff” as a source of new ideas whilst about 15% of the 5 starhotels encourage staff to put forward innovative ideas. Similarly, 43%of the 3 or 4 star hotels mentioned their “head offices” as a source of newideas whilst about 75% of the 5 star hotels receive new ideas from theirhead offices. These findings lend support to the literature that foundcustomers have been recognised as a less significant source of ideas fornew services than competitors (e.g., Easingwood, 1986; Scheuing andJohnson, 1989; Kelly and Storey, 2000). In addition, the findings con-firm that customer participation is an essential component of the NPDprocess (e.g., Hart and Baker, 1994; Rothwell, 1994; Saren, 1994; Ennewand Binks, 1996; Martin and Horne, 1995).

Respondents were asked to rank in order of importance the main fac-tors which influence their hotels’ decision to introduce a new product orservice to their customers. As Table 4 suggests, most hotels adopt the“Such as Competitor” type of product innovation and only five hotels(three 5 star hotels; one 4 star hotel and one 3 star hotel) are trying todevelop products that will lead the market. Therefore, most Egyptianhotels have the reactive strategy of “Such as Competitor” product


development. The other five hotels that have a proactive new productdevelopment strategy are the market leaders of the three hotel categoriesin Cairo.

Respondents were asked to underline the significance of variousstages of the NPD process. The findings revealed that Egyptian hotelsdo not entirely follow the seven stages of the model proposed by Boozet al. (1982). The results show that hotel management appears to drawmore attention to the idea generation and screening stages of the devel-opment process of hotel services. The result is not surprising given thefact that the more ideas a firm can generate, the greater the likelihood ofchasing a victorious one (Alam, 2002). On the other hand, “test marketing”was found to be the least important stage of the NPD process. This find-ing supports earlier research results (e.g., Kotler et al., 2003; Alam, 2002;Alam and Perry, 2002; Barczak, 1995; Mohammed and Easingwood,1993). Moreover, these findings concur with Cooper and Kleinschmidt(1986) and Mahajan and Wind (1992) who found that most companiesdo not perform all of the activities during the NPD process. Accord-ingly, this disregard of some NPD activities in Egyptian hotels might beattributed to a couple of reasons: (1) the nature of NPD in most of thesehotels which is mainly product modifications and (2) the involvementof the head office in case of chain hotels.

Respondents were also asked to highlight the importance of differentproduct/market development strategies for their hotels. Table 5 indi-cates the importance placed on each strategy.

It shows that the majority of Egyptian hotel marketers consider “mar-ket penetration” and “market development” as the most importantgrowth strategies. However, these two strategies provide limited oppor-tunities for innovation as they depend on using existing products toincrease market share or sales. Strategies that offer larger opportunitiesfor product development are given low importance. This might beattributed to the lack of both finance and experience.


TABLE 4. Approach to New Product Development

Approach 5* Hotels (%) 4* Hotels (%) 3* Hotels (%)

No new products – 7.7 12

Such as competition 68.4 77.6 88

Develop new products 31.6 14.7 –

This finding supports previous work by Mahajan and Wind (1992).To explore whether the three hotel categories differ in terms of the allo-cated importance to each product/market development strategy, a one-wayANOVA test was conducted. The result of the one-way ANOVA testindicate that there is a significant difference (at 0.05 significance level)between the 5 star hotel category versus the 3 and 4 star categories asshown in Table 6.

From the preceding discussion, it can be argued that product develop-ment decisions are exercised more from a marketing dimension in thecase of 5 star operations than in the case of 3 and 4 star ones. This is evi-dent in the extent that the 5 star operations revised their products andservices, their integration of research into reaching decisions pertainingto what services should be introduced and, accordingly, their develop-ment and introduction of new services to suit their customers. This wasalso indicated in the product/market development strategy.

When asked “To what extent does the hotel revise its existing ser-vices/facilities to satisfy customer’s changing needs and attitudes?”, themajority of respondents claimed that such activities are carried out to a“great” or “very great” extent. However, when asked whether their hotelshad developed any new products or facilities in the past 10 years, veryfew were able to identify examples of such product development orinnovation. For instance, only 34% of the 3 star hotels have introduced anew service to their customers in the last 10 years.

It needs to be noted that, however, the majority of the 3 star hotelshave been in operation for more than 20 years. Examples of new ser-vices introduced at these operations include a discotheque, coffee shop,


TABLE 5. Importance of Each Product/Market Development Strategy

Strategy VeryImportant

(%)

Important(%)

Moderate(%)

Unimportant(%)

VeryUnimportant

(%)

Mean

Increasing sales ofpresent products inexisting markets

83.1 16.9 – – – 1.17

Developing new marketsfor existing products

45.8 54.2 – – – 1.54

Developing new productsfor existing markets

32.2 15.3 44.1 6.8 1.70 2.31

Developing new productsfor new markets

3.4 6.8 39.0 37.3 3.51 3.51

health club and laundry. Similarly, 48% of the 4 star hotels have intro-duced new services to their customers in the last 10 years. One 3 starhotel manager justified this lack of new products or services by saying:

We do not have enough finance to implement this new type of newproduct development.

Another 3 star owner/operator stated:

Our customers have not complained about our existing products.

This attitude reflects three things: (1) the hotel does not revise itsservices in accordance with customers’ needs; (2) the hotel does notcontemplate the revision of its services until they receive customercomplaints; and (3) there is a lack of appreciation of NPD.

On the other hand, 85.7% of the 5 star hotels have introduced at leastone new service to their customers in the last 10 years. Examples ofsuch services are airport shuttle bus, business centre, health club, newfood and beverage outlets, conference and convention facilities, internetcafé, on line reservation system, new extension shopping mall and facil-ities for disabled people.


TABLE 6. Results of ANOVA Test on Hotel Category and NPD MarketingObjectives

Mean SD MeanDifference

MeanDifference

MeanDifference

5 star 4 star 3 star 5 star 4 star 3 star 5 and 4 starhotels

5 and 3star hotels

4 and 3star hotels

Developingnew marketsfor existingproducts

1.29 1.77 1.64 .46 .44 .49 .48* .35* .13

Developingnew productsfor existingmarkets

1.43 2.77 2.80 .18 .17 .19 1.34* 1.37* .03

Developingnew productsfor newmarkets

2.81 3.92 3.88 .51 .76 .97 1.11 1.07 .04

*Mean difference is significant at the .05 level.

Moreover, the majority of hoteliers (68%) disagreed and stronglydisagreed with the statement “our physical evidence (architecture, designand décor) differentiates our hotel from its main competitors.” Surpris-ingly, 15% of the 5 star hotels agreed with this statement. This might beattributed to the fact that tangible products are very costly comparedwith intangible ones (Hassanien and Losekoot, 2002).

Respondents were asked to rank the main forces driving the NPDprogrammes in their hotels. Surprisingly, Egyptian Hotel Association’sinspection was found to be the main force to product development inmost hotels; competition came as the second force while technologyand head office were the third and the fourth forces, respectively. Toobtain more detailed information, the data were cross-tabulated withinthe three hotel categories. A cross-tabulation analysis indicates cate-gory differences in the main forces driving NPD in hotels (Table 7).However, this reflects again the fact that NPD in Egyptian hotels is mar-ket driven. To explore whether the three hotel categories differ in theirNPD forces, a one-way ANOVA test was carried out. There appears tobe no significant variation between hotels in relation to their NPDforces, with the exception of the two forces of “customers”; “EgyptianHotel Association’s inspection [EHA]” and “Head office.” Three andfour star hotels seem to recognise the influence of competition and EHAinspection more to develop products more than do the 5 star hotels. The5 star category seems to get greater latitude to innovate by their headoffices than the other two categories. The findings also confirm previouswork by Jones (1995), which indicated that new product development,or innovation activities in international affiliated firms are carried out byparent companies.

Regarding the different methods used to evaluate NPD performancein hotels, the results revealed that the most widespread NPD evaluation


TABLE 7. NPD Forces

Rank 5 Star 4 Star 3 Star

Force percentage Force percentage Force percentage

First Head office 71.4 EHA 53.8 EHA 55.6

Second Customer 61.9 Customer 46.1 Competition 42.3

Third Competition 38.1 Competition 38.5 Customer 38.5

Fourth Technology 28.6 Technology 30.8 Technology 26.9

Fifth *EHA 4.8

methods among hotels were as follows: (1) profitability analysis (76.1%;for example, occupancy rate and Return on Investment); (2) customeracceptance of the new products (68.2%; for example, complaints andguest comment cards), (3) increased market share (60.3%); and (4) meet-ing government’s standards (55.5%). These findings support those ofearlier studies by Booz et al. (1982), Mahajan and Wind (1992) andGriffin and Page (1993) which indicate that the most frequently used NPDsuccess measures are profitability and customer acceptance. Surpris-ingly, qualitative evaluation methods were barely used in most hotels.This result confirms that quantitative evaluation methods are more usedin the hotel industry than qualitative ones (O’Connor, 1999).

CONCLUSION

This paper provides an investigation of the NPD policies of the hoteloperations under study and the extent to which the implementation ofthese policies is aligned with their marketing practices. Drawing uponinferences from the study findings, the main conclusion is that themajority of 3 and 4 star Egyptian hotels do not adequately use NPD as amarketing tool. They do not reflect a marketing orientation in theirproduct decisions, policies or objectives. In essence, these hotels couldmake fundamental changes and developments in the way their productsare designed and developed. Furthermore, they have some distance totravel before they reach an organisational structure that fully integratesmarketing and product to deliver high levels of service quality andcustomer satisfaction.

As for 5 star hotel firms operating in Egypt, most of these interna-tional operations are utilising NPD as a marketing tool more than anyother hotel categories. However, while most of these operations are try-ing to integrate their product development programmes within theirmarketing plans, they do not give equal consideration to satisfying cus-tomers’ needs and the permeation of the NPD philosophy among theirdifferent levels of employees. Hence, there is still room for improve-ment in many areas in order for these organizations to achieve fullycomprehensive and integrated NPD plans.

The results also show that hotel firms in Egypt need to take a pro-active attitude towards NPD through considering the provision of satis-factory funds to allow for effective development and changes to theirproducts. Also, they need to meet the requirements of their customersthrough conducting ongoing market research and to look at the other


services and products offered by other hotel categories in other compet-ing nations such as Tunisia, Turkey, Greece and Spain. Finally, hote-liers should fully respond to the competitive hotel industry environmentand adopt a market-driven approach towards not just the intangibleproduct but also the tangible product.

The present study makes a contribution to the literature on marketingin general and offers useful outcomes and guidelines to scholars andeducators in the field of hospitality marketing in particular. It providesscope for academic theorists to operationalise the concept of NPD in thehospitality industry. The study has also potential for managerial appli-cation in the adoption and use of NPD for marketing purposes. It pro-vides useful elements and factors that can affect NPD efforts. From thisstudy, practitioners can derive a better understanding of the NPD pro-cess and its impact on the success of their organisations.

LIMITATIONS AND FURTHER RESEARCH

This paper has explored the NPD process in the hotel sector of the hos-pitality industry. However, this research is subject to a number of limita-tions. The research method presents limitations of generalisation to otherinternational hotel markets and therefore further research is required toexplore the NPD process within the context of different countries. It maybe fruitful to explore these themes within different types of hospitalitysectors. Further research might also address the limitations of this study,with its reliance upon quantitative data and employ qualitative methods toexplore the relationships between the different dimensions of the NPDprocess.

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Developing New Products in the Hospitality Industry: A Case of Egypt

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