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THE COMPETITIVENESS OF HOTEL FACILITIES. THEORY AND PRACTICE

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DOI: 10.14505/jemt.v6.2(12).10.

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 Volume VI, Issue 2(12), Winter 2015

DOI: http://dx.doi.org/10.14505/jemt.v6.2(12).10

THE COMPETITIVENESS OF HOTEL FACILITIES.

THEORY AND PRACTICE
Marina Viktorovna KOBYAK
National Research Nuclear University, MEPhI7, Russia
mkobyak@yandex.ru
Ilina Elena LVOVNA
Plekhanov Russian University of Economics8, Russia
Suggested Citation:
Kobyak, V.M, Lvovna, I.E. (2015). The competitiveness of hotel facilities. Theory and practice, Journal of
Environmental Management and Tourism, (Volume VI, Winter), 2(12):374-381, DOI: 10.14505/jemt.v6.2(12).10.
Available from: http://www.asers.eu/journals/jemt/curent-issue.
Article‟s History:
Received August, 2015; Revised September, 2015; Accepted October, 2015.
2015. ASERS Publishing. All rights reserved.
Abstract:
The present stage of economic development in Russia is characterised by the intensive growth of its market, the
introduction and rapid expansion of new forms of competitive relations. Firstly, the competition for natural resources and
goods has been replaced by the competition for customers. Secondly, stable social and economic relations have not
been formed in hotel business yet. These two factors have determined the development of tourism. At the present time
hotel business is among leaders within the service sector which greatly influences the major branches of economy:
transportation, communication, construction, agriculture, the production of fast moving consumer goods etc. The supply
of hotel services is boosting while rates of growth for this sector reaches 20% per year.
This rticle is concerned with the uthors‟ methodology for ev lu ting the efficiency of hotel f cilities which
enables them to apply a specific evaluation approach in accordance with the following classification criteria: the
specialisation of lodging facilities, a hotel type, its rating or category, room capacity, location, average residence.
Furthermore, the authors have developed the matrix of the weight indices for profit centres within lodging facilities
regarding all essential features.
Keywords: Hotel facility, efficiency, service, lodging facilities, hotel room capacity, profit centers, weight indices.
JEL Classification: Z32.
1. Introduction
The analysis of economic development in Russia and foreign countries has shown that the
competitiveness in the sphere of hotel business is especially severe in large cities with an extended coverage
of lodging facilities. Although old hotels are being renovated and new ones are being put into operation, the
demand for hotel services of high quality becomes even higher.
Under these conditions, the management of such hotel facilities plays an important role in maintaining
its high efficiency, competitiveness and a good reputation on the market of hotel services. In the current
situation the hotel management should make strategic and tactical decisions which are science-based and
implementable. The market conditions in the sphere of hotel business are becoming more challenging. The
market boundaries are extending due to the growing involvement of foreign hotel companies which can
function in the setting of intense competition. Since Russia has become a member of the World Trade

7 Moscow Engineering Physics Institute, Kashirskoe highway, 31, Moscow, 115409, Russia, Tel. +7-985-928-24-33
8 Stremyanny per 36, Moscow, 117997, Russia

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Organization its hotel business faces serious problems while integrating in the global hotel industry. The thing
is many Russian hotels, even in Moscow and Saint Petersburg; do not conform to the international service
level. The further development of the national tourist industry and particularly hotel business is hindered by the
absence of up-to-date methodology.
These conditions determine the relevancy and significance of fundamental scientific researches
directed at elaborating the theory and methodology of efficient hotel management.
2. Method
During the research the authors have used the following cognitive methods: theoretical (analysis,
synthesis, aggregation) and empirical (observation, comparison); the method of economic-mathematical
modeling; system approach; mathematical statistics and expert assessment. Each of these methods and their
combinations has been applied in accordance with their functional capabilities; therefore the reached
conclusions and recommendations should be trusted.
3. Results
The obtained data have proved that hotel room capacity is currently paid the most careful attention,
however hotel business should take into consideration the specialisation of profit centres in order to maximise
the efficiency of any given service.
This recommendation can be explained by a simple fact that customers mainly choose the hotel that
has available rooms in the necessary period but they also look at other services. Thus, hotel room capacity is
an essential but not a sufficient reason to stay at this particular place. It is worth mentioning that hotels cannot
change the structure of their room capacity or adapt to the shift in demand fast enough. However, demand for
those services which produce an additional profit can be relatively regulated, with their range being expanded
or limited in conformity with customers‟ requirements and personal contacts with clients.
4. Discussion
The authors have thoroughly analysed the existing scientific literature (Andreev 2009, Balabanov 2006,
Bulatov 2008, Kaurova 2010, Kurakin 2005, Lebedev, Drozdov, & Kustarev, 2006; Rodionov 2005, Rychkov, &
Berezov, 2002) and formulated their own methodological principles to systematise managerial decisions and
make the management of hotel facilities more efficient.
 The principle of providing both standardized and personalized hotel services. On the one hand,
hotel facilities must meet the requirements of governmental, departmental and corporate standards
(including non-regulatory standards adopted by the Hotel and Lodging Association or some other
institutions). On the other hand, hotel facilities should provide personalised services for all their
customers.
 The feedback principle. Being based on the alteration of efficiency evaluation, a special system of
efficiency indices is used to improve managerial decisions and take into account customers‟
response to such changes.
 The principle of unity of material and human resources in providing hotel services. Thus, hotels
should make efforts to renovate their material facilities and enhance the quality of their services.
During the management process they should take into consideration indicators of their financial and
economic activities and indicators evaluating human resource management, the level of
organisation, social activities etc.
 The principle of the integrated accounting of efficient processes and results. Since hotel services
are being provided over a period of time, the efficiency management cannot rely on the evaluation
of the final results and should be quickly altered or improved while customers are still using these
services.
 The principle of the priority of intensive factors for efficiency improvement over extensive ones. This
tendency is caused by the changes taking place on the modern market of hotel services (for
instance, the rise of customers‟ requirements to the service quality, its personalisation etc.).
Therefore, it is better to improve the quality of the existing hotel services than expanding the whole
hotel business on the same terms.

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 The principle of futurism (the combination of perspective and retrospective). The efficiency
management embraces past experience and forecast of customers‟ demand for hotel services, new
trends in tourism industry, business life etc.
 The principle of differentiation. Methods of efficiency assessment should be differentiated in
conformity with hotel typological characteristics.
Taking into consideration the above-mentioned methodological principles of improving the management
efficiency, the authors of this article have formulated methods for evaluating efficiency indices of lodging
facilities.
The crucial feature of the suggested methodology is its ability to differentiate methods for improving the
management efficiency depending on the following classification criteria (Birnbaum 2000, Gronroos 2011,
Levitt 1998, Lockwood & Medlik 2001, Lovelock 1996, Wissher Ziss 1999, Goiden-Romero 2007, Wievijrka
1995):
 specialization of lodging facilities;
 type of a hotel facility (hotel, motel, apartment hotel, hotel garni, bed and breakfast, spa hotel, guest
house, rotel, flotel, flytel, tourist village, tourist camp etc.);
 rating or category (star system, World Travel Awards, crown system, without categories etc.);
 room capacity (small – fewer than 50 rooms; medium – 50-200; large – more than 200);
 location;
 customers‟ average residence.
These indicators can serve as key points for developing the matrix of hotel efficiency criteria. The
methodology consists of the following successive stages:
 Information gathering. This method is based on the analysis of customers‟ preferences which are
fulfilled when clients look for a suitable hotel. This information can be acquired with the help of opinion
polls and the further analysis of reviews posted by customers on hotel the websites.
 The selection of basic criteria for choosing a hotel realised with expert methods. First of all, two major
criteria should be picked out since they are of great importance for particular groups of guests. For
example, it can be the specialisation of lodging facilities or their location.
 The formation of the matrix of hotel efficiency criteria. Each criterion has one of 5 possible meanings
which correlate with points ranging from 1 to 5: “absolutely unimportant”, “rather unimportant”, “don‟t
know”, “rather important”, “important”. (Fukuyama 1999, James 2003, Singelmann 1978) The authors
can exemplify the usage of these criteria in the following matrix developed by the authors and
comprising basic combinations of criteria for selecting a hotel by the target customers in accordance
with their preferences (Table 1).
Table 1.The combination of criteria for selecting a hotel by the target customers
THE HOTEL LOCATION
Customers’ Near an Natural areas (parks,
City Places of Tourist Shopping
travelpreferences airport, railway lakes, the sea,
centre entertainment attractions malls
station mountains etc.)
Romantic vacation 3 2 5 4 3 5
Spa resort 3 1 2 2 2 5
Family vacation 3 2 4 5 3 4
Sight-seeing tour 5 4 2 5 2 2
Luxury 4 2 5 4 4 4
Design 4 3 5 5 4 4
Shopping 5 3 5 3 5 3
Fine cuisine 4 3 5 4 4 3
Health resort 2 1 5 4 4 5
Transit 3 5 2 2 2 2
Note: Data are presented by the authors.
As is evident from the table, passing passengers look for hotels nearby an airport or a railway station,
but people on a health resort are mostly interested in recreation areas (either natural or artificial) that can be

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reached on foot. While choosing the best lodging facility, customers decide on the purpose of their visit, range
the above-mentioned criteria in order of their importance and then select the most suitable hotel which has
received the highest assessment.
 The thorough analysis of possible lodging facilities. Thus, the authors can indicate some common
approaches to the selection of lodging facilities which are widely used by customers:
- if there are more than one purpose of visit (for example, a family vacation combined with a sight-seeing
tour and a walk around retail entertainment centres), most clients choose the hotel equally-spaced from
all destinations;
- if a residence period becomes longer, clients badly need addition hotel services (an iron, refrigerator and
other household devices should be available in the hotel room);
- if clients just pass this hotel on their way to the final destination, they select the hotel which is the nearest
to the transport hub or the hotel which provides transfer services;
- if clients travel on their own, they choose the hotel which is accessible by public transport in order to visit
major points of interest in this area;
- if clients plan to hold a business meeting or a conference in a hotel, this facility must have its own
meeting room and a special menu suitable for highly-placed people;
- if clients want to enjoy a romantic trip or celebrate their honeymoon, they choose a cosy and comfortable
hotel. As a rule, it has a special suite for newlyweds or offers discounts for spending a honeymoon in a
fancy interior and ordering additional services (cooked-to-order breakfast, flowers and gifts delivery, etc.);
- the youth chooses budget hotels which lie relatively close to key sights. They do not care about additional
services or the level of comfort, however free Wi-Fi is a significant indicator in selecting a proper lodging
facility;
- families need spacious rooms (2+2) or an opportunity to conjoin two rooms. They also request a special
menu and entertainment for their children.
- If a hotel provides services for other categories of clients, their specific preferences should be also
analysed.
 The assessment of hotel business profitability and the indication of correlating competitive
advantages. At this stage the authors also evaluate hotel profitability that is regarded as a part of
its efficiency in the framework of their dissertation. As a rule, profitability in hotel business is
assessed through centres for financial responsibility (Kaurova 2010). This methodology, though,
takes into accounts only one of the above-mentioned criteria – a hotel location. There is a need of
a different approach which will rely on a wider range of criteria, particularly on customers‟
preferences.
Methods of hotel profitability evaluation have a practical application and are basically used in a financial
analysis. Therefore, the elements of hotel profitability which are essential for the efficiency assessment should
be thoroughly considered in order to pinpoint and fulfill competitive advantages.
The following stages of hotel profitability evaluation can be distinguished:
 preliminary assessment of hotel competitiveness as based on the analysis of hotel business in a
region;
 indication of purposes for developing business strategies;
 verification of hotel development strategies;
 determination of aggregated and singular hotel efficiency indices;
 calculation of the budget on condition that the stated purposes have been accomplished.
This evaluation helps to form an anticipated budget plan where evaluating criteria correspond with all
hotel structural subdivisions. The first thing which should be considered for making rapid assessment of
profitability is the type of a hotel mentioned in different classification systems. Taking this, a hotel will be
properly positioned among its rivalries when all its services are ranged in profit and cost centres and, more
importantly, weight indices are pointed out to show the significance of a certain service for hotels with different
specialisations.
Generally, hotel profit centres comprise:
 room capacity;

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 food services;
 health and beauty services (beauty parlours, massage rooms, fitness studios, gyms, swimming pools,
spa salons and saunas);
 tenements (shopping malls, meeting rooms etc.);
 services for businesspeople;
 informationandcommunication services;
 dry-cleaning and laundry services;
 and other services.
Hotel cost centres are not directly involved in the provision of services for hotel guests, they support the
activity of productive subdivisions. Cost centres include (Zaitseva, 2007):
 hotel administrative authorities;
 sales and marketing subdivision;
 technical subdivision;
 HR subdivision;
 Financial subdivision;
 security.
Table 2. The weight indices of hotel profit centres (in fractions of one)

Customers’ THE PROFIT CENTRES

Room Food Health and Shops Transport ICT Meeting
travelpreferences
capacity services beauty services services services rooms
Romantic vacation 0.5 0.3 0.1 0.03 0.02 0.05 0
Spa 0.45 0.2 0.3 0.01 0.01 0.03 0
Family vacation 0.4 0.2 0.1 0.05 0.1 0.15 0
Sight-seeing tour 0.5 0.3 0.02 0.01 0.1 0.07 0
Luxury 0.5 0.3 0.09 0.06 0.01 0.04 0
Business 0.3 0.1 0.05 0.05 0.1 0.2 0.2
Design 0.5 0.2 0.1 0.1 0.05 0.05 0
Shopping 0.3 0.2 0.1 0.2 0.1 0.1 0
Fine cuisine 0.3 0.5 0.1 0.05 0.01 0.04 0
Health resort 0.35 0.25 0.1 0.05 0.05 0.1 0.1
Transit 0.55 0.1 0 0.02 0.3 0.03 0
Average indicators 0.42 0.24 0.1 0.05 0.08 0.08 0.03
Note: Data are presented by the authors.

While choosing a place to stay, customers range certain characteristics of a possible hotel, decide on
the most significant features and evaluate their level. In this regard, making a hotel more competitive on the
market of lodging facilities is impossible without analysing characteristics which are of great importance for
clients and bring the largest profit. Hotels of different specialisations have various ratings of their profit centres
(х). Gross income of a hotel (Rev (N)) can be calculated by the following formula:
Rev (N) = х1 Rev (N)1 + х2 Rev (N)2 + … + хnRev (N)n
where: Rev (N)n – the income of any given profit centre;
хn – a weight index of profit centres for this type of hotels.

Using some classification criteria to evaluate efficiency, the authors have developed their own matrix of
the matrix of the weight indices for profit centres within lodging facilities regarding, for example, a hotel
specialisation (Table 2). Such matrixes can be used for all the essential criteria mentioned above (a hotel
location, hotel type, rating, room capacity, average residence).
Gross income of a hotel is taken as 100%, in this case n=7, but these data can change depending on
the number of profit centres for any given hotel. Each profit centre can bring the average income of 12.5%,
however in nearly all hotels profits from renting rooms are much higher than those of dry-cleaning and laundry
services.

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Nevertheless, there are different weight indices of profit centres for specific hotels which are received
with the help of expert methods, such as a questionnaire survey of customers and a hotel staff. The analysis
has shown that hotel profit centres can be ranged according to their weight indices in the following way
(average percentages are given in the brackets):
 room capacity (42%);
 food services (24%);
 health and beauty services (10%);
 transportation services (8%);
 information and communication services (8%);
 shops (5%);
 meeting rooms (3%).
However, the authors have emphasised that these data can change for hotels of different
specialisations. Moreover, customers‟ preferences greatly differ regarding the type of a hotel. For instance,
business tourists have the following preferences:
 room capacity (30%);
 information and communication services (20%);
 meeting rooms (20%);
 food services (10%);
 transportation services (10%);
 health and beauty services (5%);
 shops (5%).
These guests are more interested in advanced communication services and proper meeting rooms than
places for shopping. Clients of spa hotels are guided by such criteria as room capacity (45%), health and
beauty services (30%) and food services (20%), with other services being less important. These tendencies
can be distinguished for other lodging facilities and profit centres.
Another major index of hotel efficiency is a personalised interaction with clients. In order to personalise
its interaction, hotel staff should take into account the following criteria:
 competence (hotel workers, regardless of their position, have skills and knowledge to provide the best
services);
 responsiveness (an adequate response to unusual requests of their customers);
 reliability (hotel stable operation);
 accessibility (it is easy to interact with hotel personnel);
 understanding (the recognition of specific need of their clients);
 trust (hotel reputation);
 communication (regular and timely announcements for their clients);
 palpability (pleasing hotel exterior and interior, tidy and neat appearance of its staff);
 helpfulness (carefulness, politeness, amiability).
As mentioned above, modern hotels have to work in an extremely competitive environment since many
international hotel chains are currently establishing on the Russian market. Thus, they compete with foreign
companies along with national counterparts. The rapid development of communicative means and electronic
devices provides information storage and processing and results in creating a new information environment for
hotel operation. This fact determines the shift in the rules of successful interaction with clients.
The authors are convinced that an informative approach should be stressed out among other ways of
personalised interactions with clients since it is connected with information accumulation, processing and using
for making managerial decisions. The application of these methods should result in creating a unified system
that is to improve hotel management efficiency.
According to the chosen strategy, the management of an economic object should be regarded as the
sum of its managerial object and subject. For instance, a managerial object can be a functioning hotel, while a
managerial subject is represented by its client. A managerial object and subject interact with one another using
means of direct communication and feedback. Thus, hotels exchange informative messages with their

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customers to assure a personalized approach. Leading hotels make good use of modern automation systems
and information technologies.
Conclusion
The Russian hotel business is still characterised by a poor interaction with clients before their arrival
and after their departure. For example, hotels may send email messages to their guests two days before their
arrival to thank them for their choice, to remind them about check-out time and fines, to inform them about
additional services and the events planned by the hotel for this period. Thus, hotels will be able to minimise the
number of cancellations and increase the profit from additional services. As soon as a guest checked out, the
hotel marketing subdivision should start a campaign for their return. The following day this subdivision can
thank a customer for choosing their hotel and send them a 5% bonus certificate which can be used during their
next residence or given to a third party as the coupon is transferable.
At the present moment hotels try to personalize their interaction with customers since this criterion
becomes even a more important competitive advantage than standardized services that are implemented in
almost every lodging facility. If a hotel gets regular and loyal customers, it can reduce advertising costs and
therefore increase its profit.
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[18] Rychkov, V.I., Berezov, S.A. (2002). In the automation of the management of financial-economic activity
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