How have the Luxury and Hotel Management expand their Brand in the Indonesian Hospitality Market

Introduction

Background Information

Tourism contributes approximately 9.3% into Indonesian economy with more than 10 million visitors visiting the country in 2019. In additional to increasing tourist, the country has seen a rise of travellers for business-oriented activities over the past 10 years (OCED, 2020). Factors leading to this shift and changing travelling and tourism destination can be traced to governments’ policies and framework built on incentivising the larger tourism and travelling industry to attract more foreign and domestic tourists. The hospitality and hotelier industry have been among the major beneficiaries of the changes with demand for services that include accommodation, catering, conferencing services, chauffeuring, meetings and events hosting and entertainment and recreation (Lashley, and Morrison, 2013; Pitt-Rivers, 2012). For that, the industry is principally grounded on services offered and significantly dependent on the consumers’ personal needs and perception of the service. Currently, there are 124 hotels with 81 of the rated as 4-star and 43 receiving five-star rating in the country.

Globally, the hospitality and hotelier industry continue to experience drastic changes largely due to consumer changing preferences and heightening demands for better services and entry by other business entities and alternatives in both service offered and destinations (Zsarnoczky, 2018). Technological adoption in the industry such as robots, analytics, digitalisation of the industry (room booking, making reservation and appointments, requesting room services, and Chatbots), and social media have revolutionised the entire sector (Ristova, and Dimitrov, 2019). Hilton Hotel & Resorts have integrated ‘Connie’, an Artificial Intelligence (AI) driven customer service robot developed in collaborated with IBM to enhance consumers services (Vidal, 2019). The concierge robot interacts with consumers providing information about nearby restaurants, tourist attractions, and general hotel information. The trend of using technology to offered information and directions services geared on improving customer services and satisfaction has taken root and being largely integrated but several hotel chain mostly in Japan, Singapore, and Malaysia (Ivanov, and Webster, 2019; Yang, and Chew, 2020).

With integration of social media into their business operation, businesses can reach out to consumers’ directly with personalised marketing of products and services while received feedback highlighting the responses of the consumers with positive or negative to particular products (Leung et al., 2013). On the other hand, it give consumers a platform where the can leverage their reviewing and commenting as well as accessing the reviews of the others on the products (Minazzi, and Lagrosen, 2013). The digital trends have had a significant influence to the industry affecting the direction and engagement among the potential consumers and business entities. The ability to review the experience and satisfaction rate of the other consumers with services offered comparing with those being offered by others entities, give the consumer power to make informed decision picking option with high satisfaction rate at a cheaper pricing. For this, the initial advantage held by businesses especially the ‘high end’ and in luxury segment of luxury services and products at exorbitant prices, now in the age of social media, has not only match the competitors but justify their luxury status compared with lower and mid-range hotels.

Ideally, shifting trend in the hospitality and hotel industry has been pushed largely with rapid evolution of consumers’ demands and preferences coupled with increasing competition. As pointed by Azhar (2020), these have forced traditional business entities to remodel their business approach that in addition to restructuring consumer engagement, building on increasing satisfaction and experiences levels, and shaping services and products to fit the preferences and demands consumer needs at personalised levels. Additionally, pandemic such as novel COVID 19 and severe acute respiratory syndrome (SARS) that led to shut down and significant restriction of movement and travel at a global stage has had detrimental impact on the performance and operations of the businesses in the entire hospitality industry. In addition to restricted international travels, consumers have been forced to prioritise on their expenditure choosing on to spending on necessary and basic needs due to lost and uncertainty on income generating activities. With these, hospitality and particularly business in luxury segment are the hardest hit to the point some facing shutting operations, businesses, or declaring bankruptcy.

Research problem

Branding development and expansion has growth into an important aspect of organisational business growth and performance strategy for many business entities. In hospitality and hotelier industries, branding has shown a huge potential due to increasing market share particularly in the luxury segment as well as addressing changes in the industry such as the rising Airbnb, influence of social media, online booking, and online consumer review and recommendation structures. Research is showing a significant weakening in the brand name in the hospitality and luxury hotel industry due factors linked to consumers’ reliance of internet for reviews, recommendation, dynamic market, emerging concept of luxury and comfort, and rapid changing consumer demands and preferences (Dev, 2012; Mahasuweerachai, and Qu, 2015). Arguably, the branding in the hotel and hospitality industry have largely been riding on certain functional advantages, business name, perceived luxury status, and attached perception to it while offering near similar services and products with competitors in the same market segment rather than been grounded on business advantage of differentiation and segmentation products and services.

In Indonesia, branding in hospitality industry has a huge potential due robustness and growing travelling culture both by domestic tourism and international. Travelling and tourism sector in Indonesia has grown gradually over the past decade, while also showing huge potential for business performance measured in increased income and expansion in operations. However, expansion of the luxury brands in the sector that largely depends on offering services and competitive advantage lies of offering better target services to consumers can be slow and marred by numerous challenges such as changing consumer needs, perception of luxury, rise of alternatives forms of luxury, change in travelling destination, and even pandemic such as novel COVID-19. For Indonesia, successful branding and brand expansion in Indonesian hospitality particularly in luxury segment is subject to various parameters range from consumers’ attitude, behaviour, travelling and tourism destination, market competition, and importantly brand management. However, with the changing travelling and tourists’ destination to Indonesia characterised with increasing tourists and travellers both domestic and international, the question therefore, remains how business entities in hotel and hospitality industry can leverage this growth into luxury segment and brand.

Research Aim:

Despite Indonesia becoming tourism and travellers destination of choice and rise in both domestic and international travelling and touring within the country, hospitality industry particularly the hotelier sector. Therefore, this research aims at investigating ways in luxury and hotel management can expand their brand to take advantage of the growth market in the Indonesian hospitality market.

Research Objectives

This research will be driven by the following research objectives

To critically review concepts and literature on branding, brand development, and brand expansion and growth in hotel and hospitality industry

To examine the luxury hotel brands in the Indonesian hospitality industry

To investigate contemporary challenges faced by brand expansion in luxury hotels and hospitality industry focusing on Indonesian Luxury hotel market

To appraise primary and secondary findings then make founded recommendations on luxury hotels brand expansion in Indonesia

Significance of the Study

This research intends to explore brand expansion of luxury hotels focusing primarily on the luxury hotels in the Indonesian hospitality market. Building on the influence of both international and domestic travelling and tourisms on the survival, performance, and growth of businesses entities in the segment, the study will investigate the concept of branding of the hotels in the industry, brand development, and expansion as a business model while focusing on the changing preferences, demands, and attitudes of the consumers. Moreover, given the volatility of the hospitality industry, lifestyle of both domestic and foreign tourist play a major role in shaping the performance of businesses that include hotels in the industry. Performance of business in hospitality industry is largely subject to both internal variables such as organisational management, structure, and culture, as well as external elements that include consumers’ lifestyle, attitudes, and behaviour on the services offered. Additionally, external variables such government policies, international governmental relations, travelling and accommodations structures, and, as seen with novel corona virus (COVID 19), pandemics play a major role on performance of business entities in the industry. Based on this and expanding travelling and tourism Indonesian market, this research will focus on the hotels brands, exploring challenges by hotels particularly those in luxury segment in attempt to grow and expand in the Indonesian hospitality industry.

Literature review

As described by Bastos and Levy (2012), branding concept is based on creating and upholding elements that would differential a product based on distinct image, quality, messaging, association, target clients, and content of a product or a company compared to other competitors in the market. According to Skaalsvik and Olsen (2014), branding in hospitality industry encompasses a business entity, product, or destination having features and reputations distinctly identifiable from competitors. Scholars have argued that in hotel and hospitality industry branding is based on the service quality reputation, reliability, and consumer experiences (Hultman et al., 2021; Mody, and Gomez, 2018). Globally, leading brands in the industry include Four Seasons, Hilton, Marriot, and Sarova with products and services offered synonymous. Branding in industry such as hospitality that rely deeply on the consumers; individual preference and perception on services, is grounded on the trust that existing customer base through existing experiences would reinforce loyalty to its brand (Yang, 2012).

Principally, as illustrated by Mody and Gomez (2018), these hotels leverage taking business advantage of perceived image, perception associated with image and name, social status and privileges associated, quality services offered, and accompanying brand value and awareness, and consumer brand loyalty to differentiate themselves among expanding cohort of business entities offer similar products and services. These branding and brand attributes gives a business entity advantage and can set prices at premium. However, rising challenge facing the luxury hotels is justifying the prices in relation to the services offered particularly in the period when there is a significant difference between expectation and quality of services and value of money (Punel, Hassan, and Ermagun, 2019). According to Hsu & Lin (2015) and Ariffin & Maghzi (2012), consumers are increasingly demanding for value of money questioning why they should lounge and seeking hosting and accommodation with a particular entity within a premium services while they can service near similar quality and quantity at a cheaper price at different business.

The rating system correlating to service quality and value of money as perceived by consumers as taken a centre stage in predicting expectation, leisure, and meeting expectation in larger hospitality industry (Lu et al., 2015). The findings by Mohsin and Lockyer (2010) indicated importance-performance for such services as room services, in-house services, consumer relations, and customer care as core to determining relationship between actual experiences measured against expectations on the services. In the luxury segment of hotels in hospitality industry, quality of services has grown into a crucial parameter in determining business growth, performance, survival, gaining competitive edge, sustainability in increasingly competitive environment as well as and giving consumers confidence on the services offered against the competitors’ (Israeli et al., 2011).

Findings by Verma, Stock, and McCarthy (2012), indicate that consumers are shifting away from the traditional trusting the information from the business entities through main stream media (television, radio, and newspapers) in getting and rating the quality of services offered rather largely basing their views on the reviews and experiences of other customers while comparing with competitors. According to Kandampully, Zhang, and Bilgihan, (2015) more and more consumers are shown willingness to switch from traditional luxury hotels to those that meet their accommodations and preferences. Additionally, according to Oskam and Boswijk, (2016), the rise of Airbnb demonstrates the changing concept of luxury. The concept premised on hosting a traveller and tourist then offering breakfast and accommodation in one home exert the feeling of being at home while offering convenience away from home (Sainaghi and Baggio, 2020). As argued by Mody and Gomez (2018), the growth of the segment has pushed and changed the concept of luxury in all dimension from being staying in hotels room to living in comfort of one’s room being housed by someone in their home.

A study conducted by Binder and Varga (2014) highlighted sociocultural and organisational structures as core factors driving sustainability and success of luxury hotels in Bali, Indonesia. The findings highlight complexity in organisational culture in the country but important the role played by community values in modelling managerial decisions and consumer engagement. Tjhin et al. (2016) highlighted that e-loyalty in Indonesian hospitality industry is hugely supported by consumer satisfaction, engagement, and relation. However, studies further demonstrate that consumers’ attitude, measure of expectations, and experiences are fundamental elements in building long-term consumers retention form a small aspects of larger consumer preference that incorporate hospitability, emotional attachment, pricing of services, and personalisation of products. In retrospective, literature offer a large scope of factors contributing and limiting luxury brand development and expansion but little research has touched the luxury segment of Indonesian hospitality market.

Methodology

Research Ideological Framework

Ideological framework as used in research outlines the belief informing the perspective taken by a researcher concerning research problems and questions to be answered (Saunders, Lewis, and Thornhill, 2003). It covers the basis to which a researcher view and knowledge development in understanding core aspect and variables under the investigation (Edson et al., 2016). Studies suggested grouping the vast number of the available ideological framework into three main paradigm. First, positivist posits that social world can be viewed and understood objectively. Zyphur and Pierides (2017) argued in line with developing knowledge based on verifiable and quantifiable means. Also referred to as social constructivism, interpretivism paradigm is built around concept social phenomena capturing opinions, norms, traditions, cultural setup, beliefs, and viewpoint (Goldkuhl, 2012; Packard, 2017). Therefore, the findings are subjectively drawn based on both participants’ opinion and understanding of various research parameters issues (Alharahsheh, and Pius, 2020).

In context of this research, satisfaction and experiences of the consumers form the basis of tourism and modelling luxury hotels. This research will be based on idea that people have different perspective of quality services, satisfaction levels, concept of luxury, and different preference largely driven by myriads of variables such as attitude, culture, social norms, lifestyle, beliefs, traditions, economic, and not limited to educational levels. These variables will be premise during investigation on luxury brand expansion and management in Indonesia Hospitality industry. Hence, this research will follow constructivism paradigm.

Research methods and strategy

In inductive reasoning, the assumption is driven conducting an investigation to solve a problems based on formulated research questions and aims (Heit, and Rotello, 2010). On the other hand, deductive reasoning is based on conducting a study to test validity of a theory and concepts held by a given phenomenon. Within this research, the core driven will be understanding consumers’ behaviour and attitude to model experiences towards luxury hospitality services. As such, it will first map out interrelation and correlation of different research variables then delve through direct engagement with participants to have a deeper understanding. Hence, it will adopt both qualitative and quantitative views under mixed research approach.

Data collection

In attempt to address the research problem and answer in a satisfactory manner, this research will employ primary data sources. As pointed by Cleary et al. (2014), unlike secondary source that encompasses data from existing source such as articles, organisational information, and publications, primary data are sourced directly from the source. Among other approaches, questionnaires and interview are common techniques in collecting primary data. Within this research primary source will be used that incorporate having a two phased data collection process. Sampling of participants for this phase will be randomised but capped to individuals with prior and in-depth knowledge and experience on the branding, brand development, and brand expansion. In the phases 1, the questionnaire will be posted onto online platforms then potential participants invited to fill the questions. The findings from this phase will be used to inform the second phase, which will be interview. The second phase will aim to have a deeper understanding of branding, brand expansion, and luxury hotels in hospitality industry. Sampling will be focused with participants drawn from a group with extensive experience and deep understanding of working of luxury hotels particularly in Indonesia.

Ethical consideration

This research will ensure that all participants consent by signing informed consent letter before engaging in data collection process. In addition to ensuring people undertaking in research are above the age of 18, the research will make sure anonymity and confidentiality is maintained while ensuring data will be handle principally within the scope of this study and attainment of academic course work. Furthermore, in line with academic integrity, all data and information used will be referenced and cited accordingly.

Timeframe Gantt Chart

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