Chapter 10

Hotel Innovation and the Creation

of Competitive Advantage

Georgia Yfantidou, Eleni Spyridopoulou, Thekla Chatzigeorgiou

and Paraskevi Malliou

Abstract The objective of this research is to investigate the innovative factors and
their effect on maximizing the efficiency of the services provided by the hotel
accommodation. This paper is a literature review about hotel innovation. There is
an urgent need to provide a unique differentiation of hotel products and examine the
added value by providing innovative ideas to services to improve tourist experi-
ence. This paper is an introduction of new innovative ideas for further research and
development of issues related to hotel services. The competitive environment is
increasing and the solution for hotels is to be competitive and work under a
systematic strategic using innovative ideas and create personal products for each
customer for a unique stay. Being different and competitive is not only an idea but a
choice to succeed.

Keywords Hospitality
Innovation
Hotel
Added value
Competitiveness

JEL Classification L83 sports Gambling
Restaurants
Recreation


Tourism Z32 tourism and development

1 Introduction

Today, tourism holds a key role in the economic recovery of Greece. The strategic
plan for tourism is tailored to the tourists’ habits, the destination’s selection criteria,
the way that the tourists seek information and the channels through which they
purchase services and organize their trip. Tourism has become one of the most
important social and economic activity in Europe. Tourism brings further income

G. Yfantidou (&)
E. Spyridopoulou
P. Malliou

Department of Physical Education and Sport Science, Democritus University of Thrace,
Komotini, Greece
e-mail: gifantid@phyed.duth.gr
T. Chatzigeorgiou
School of Pedagogical and Technological Education (ASPETE), Komotini, Greece

© Springer Nature Switzerland AG 2019 135

V. Katsoni and M. Segarra-Oña (eds.), Smart Tourism as a Driver for Culture
and Sustainability, Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-030-03910-3_10
136 G. Yfantidou et al.

and employment, understanding of other cultures, conservation of natural and

cultural heritage, infrastructure development, which in turn have social and eco-
nomic benefits. Tourism depends more than any other human activity on the quality
of natural and cultural environment. As a special form of entertainment, tourism has
its own special characteristics. Moore, Cushman & Simmons (1995), stated that
certain types of tourism can be distinguished based on the characteristics of
entertainment.
According to the World Travel & Tourism Council (2015), tourism is the largest
industry in the world and is predicted to grow continuously into the 21st century.
Tourism industry is based on the hotel infrastructure of each country, which con-
tains independent hotels and hotel chains. Both can cover lots of the tourist needs
by offering integrated products in more advantageous prices. Pricing is inextricably
linked with the quality of tourism products and services. A tour operator who has
expert knowledge of the constantly changing market, is able to offer a greater
variety of tourist packages and superior quality services. Botterill & Crompton
(1996) noted that the customer is really satisfied when the result exceeds their
expectations. Thus, companies should constantly seek to cover the expectations of
their clients maximally if they want to be competitive.
This paper provides a unique means of hotel businesses nationally and inter-
nationally from the traditional hotel product to a consideration of adding value by
providing facilities and services that make the hotel the center of the holiday.
Differentiation is now a basic requirement. This paper suggests that hotels should
adopt innovative ideas and reinvent themselves in order to be competitive. Staying
closer to customer is an essential ingredient for the future market place. This paper
is under the project “Go Functional Improvement & Tourism—GO FIT”.

2 Defining Innovation

Innovations must be ‘new’, which relates to an idea that is perceived as ‘new’ to an

individual regardless of when it was first used or discovered, and must be suc-
cessfully implemented to derive an economic benefit. It is important to introduce
new service business models through continuous improvement of operating tech-
nology, return on investment in human resources or management of the customer
experience. One definition of innovation is given by the OECD’s Oslo Manual and
according to this, innovation is “the implementation of a new or significantly
improved product (good or service), or process, an innovative marketing method, or
a new organizational method in business practices, workplace organization or
external relations” (The Organization for Economic Cooperation and Development
2005). There are several definitions of innovation, many researchers define inno-
vation as a process, while others state that innovation can also be a function, an
activity or a result. Either way, innovation is equivalent to the creation or devel-
opment of something new (Nagy 2014). Gallouj & Weinstein (1997) stated that
“service innovation is characterized by service particularities such as intangibility,
10 Hotel Innovation and the Creation of Competitive Advantage 137

perishability or simultaneity, which also helps reduce the gap between the service
provider and the consumer, a gap that still exists in other industries because there is
no interaction between the two parties”. The invention is the conception of the idea
while innovation is the simultaneous translation in economic terms. The conception
of the idea is the principle of innovation.
Therefore, defining service innovation is not an easy task. Mudrak, van Wagenberg
& Wubben (2005), refer that “Service innovation is the process through which a firm
undertakes changes in its philosophy, culture, operations and procedures to add value
to the result of the service or product for the benefit of the customer”. Another
definition of the concept was suggested during the Cornell Hospitality Roundtable:
“Service innovation is the introduction of new or novel ideas which focus on services
that provide pioneer ways of delivering a benefit, new service concepts, or new service
business models through continuous operational improvement, technology, invest-
ment in employee performance, or management of the customer experience” (Verma,
Anderson, Dixon, Enz, Thompson &Victorino 2008).
A service innovation always includes replicable criteria that can be identified and
systematically reproduced in industry, these could be the service outcome or the
service process which benefits the service provider and the customers. These cri-
teria improve the developer’s competitive advantage by using some technological
or systematic method during the design stages of service criteria development.
Berry, Shankar, Parish, Cadwallader & Dotzel (2006), examined a pioneering
model that requires firms to innovate in two distinct service innovation fronts:
(1) innovation in how service is delivered and (2) innovation of new offerings that
satisfy the core benefits sought by service customers.
The innovation types according to many researches intend to analyze four
clusters of concern from the literature on hospitality innovation (Jones 1999;
Orfila-Sintes et al. 2005) namely: management, external communications, service
scope and back-office. Therefore, we may argue that competitiveness in tourism is
particularly dependent on innovation for achieving lower costs and higher quality
outputs (Ottenbacher & Gnoth 2005; Chadee & Mattsson 1996) such as improved
services and products, environmental issues, information and communication
technologies (ICT hereafter) interaction (Orfila-Sintesa & Mattsson 2007).
Coombs and Miles (2000) suggest three different categories of theoretical
approaches in service innovation. The Assimilation Approach assumes that inno-
vation in services is similar to innovation in manufacturing. In general, this
approach describes a rather passive role to service innovation which, according to
this view, is mainly driven by the technological development in manufacturing
industries Second, the Demarcation Approach clearly distinguishes service inno-
vation from innovation in manufacturing. This approach postulates that due to the
specific traits of services, service innovation must be treated differently from
manufacturing innovation. Finally, the Synthesis Approach follows the idea of an
increasing convergence of services and manufacturing. There are both, shared
features and differentiating characteristics of innovations in services and in
manufacturing.
138 G. Yfantidou et al.

According to Tseng, Lin, Lim & Teehankee (2015), the criteria used to evaluate
service innovation are multiple and the following factors are proposed: Information
technology, Technology structure, Business culture, Acquisition knowledge man-
agement processes, Conversion knowledge, Application of innovative knowledge,
Security on operations knowledge, Market share, Service innovation competitive-
ness, Specialized market units, Monitoring market forces, Success rate of R&D
products/services, Self-generated innovative products/services, Number of new
products/services applications, Degree of innovativeness of R&D products,
Intensity of collaboration with others, R&D knowledge sharing ability, Forecasting
and evaluation of technology innovation and Entrepreneurial innovation initiatives.
Finally, innovation and value are interesting issues for academics and practi-
tioners, and some studies emphasize the service-dominant logic, which can provide a
framework for understanding how value gets co-created by the firm, customers,
employees, and technology within a system, such that it gets differentiated from
competing firms’ offers (Vargo & Lusch 2004). The resource-based strategic
necessity hypothesis supports that information technology creates advantages by
leveraging or exploiting existing human and business resources and it could be a
competitive advantage to a hospitality firm (Clemons & Row 1991; Bilgihan,
Okumus, “Khal” Nusair, & Joon-Wuk Kwun 2011). Verma et al. (2008) agrees to
this concept and refers to the key elements of service innovation such asa) customer
focused—to exceed the customer’s expectations, (b) process focused—to improve
and adapt the products and services by using modern technologies or new methods
of organizing the innovation process, (c) continuous improvement oriented—to seek
out the trends in the industry in order to provide intuitive services to the customer.

3 Hotel Services and Innovation

The features and the characteristics of the experience economy become markedly
important based on value adding consumption of products (Andersson &
Andersson 2006). McCabe (2009) highlighted the fact that “hospitality services are
much more than simply about selling food and drink or providing people with a
roof over their head for a night” (essential or basic needs of life). They are rather
“delivered as a consumer experience” and becoming an ‘experiential consumer
good’ that are aimed at satisfying ‘consumer’s emotions’. Also, Lashley (2008)
expressed how hospitality is ‘rooted in social engagement’. Jalali (2013) expressed
that entertainment and art industries; hospitality industry and tourism can be closely
tied to each other and this relationship is growing.
There are three main characteristics in the hotel industry that are different from
other service activities. First, there is the regular category classification ‘‘stars’’ of
hotels which goes from 1 to 5 and determines the type, number and quality of
services provided. Second, it is usual to have firms specialized in managing hotels;
and there are hotels where owners manage them, owners that rent the hotels, or
professional executives running hotels through a management contract; or under a
10 Hotel Innovation and the Creation of Competitive Advantage 139

franchise contract. Third, the hotel chains which have a central office, depending on
the company, with different attributions and several degrees of vertical integration
(Orfila-Sintes, Crespi- Cladera & Martinez-Ros 2005).
“Tomorrow’s consumers are more sophisticated, educated and travel experi-
enced, older and more affluent, more physically and mentally active, more
self-aware in an increasingly stressful world, seek value learning and self-
improvement, look for more innovation in destinations and activities, seek holidays
that have a minimal impact on the physical and cultural environments, an
increasingly look for better value for money, and for ‘more’ than the traditional
hotel product” (Hackett & Melia 2012).
Innovation activity should be defined as two innovation degrees in which client
intensity is monitored by hotels and leads to the introduction of additional char-
acteristics to existing attributes (incremental innovation) or to the adoption of a new
attribute (radical innovation) in the services provided, although these changes in the
service may come from process innovation (Martĺnez-Ros & Orfila-Sintes 2009).
The market segment can be approached through the type of board sold, the
channels used in commercializing the service and the degree of customer loyalty.
Innovation propensity can be explored based on these features. The channels used
to commercialize the service can also be innovated through the new possibilities
offered by the information and communication technologies (e.g., booking via the
Internet) or else be improved by using recent technologies (Sangster 2001). The
hotels’ differentiation is the strategic behavior related to its closest competitors,
companies with similar services in the same area. Using technological innovations,
to differentiate services, can provide tourist accommodation services in addition or
higher quality than those of their competitors. This differentiation, according to
Chung & Kalnins (2001) is considered as a major competitive variable, achievable
through innovation. Nowadays apple presented ibeacon. The term iBeacon and
Beacon are often used interchangeably. iBeacon is the name for Apple’s technology
standard, which allows Mobile Apps (running on both iOS and Android devices) to
listen for signals from beacons in the physical world and react accordingly. In
essence, iBeacon technology allows Mobile Apps to understand their position
on a micro-local scale, and deliver hyper-contextual content to users based on
location. The underlying communication technology is Bluetooth Low Energy.
Raddisson BLU hotels started to use these devices to increase quality standards for
their customer. This technology begins from tourists’ arrival to information given
about a nearby activity. Many applications have been designed to help the hotels to
keep connected to their guests wherever they are before, during and after their stay
to satisfy their guests’ needs.
Service innovation capability is crucial for an international hotel to acquire a
competitive advantage, which enables the hotel to respond to or exceed customer
expectations for novel and unique services. Service innovation capability is deemed
contributive to hotels’ competitive advantages, however, research exploring the
ways of improving service innovation capability is scant. Customers of interna-
tional tourist hotels have high expectations for service quality and accommodation
experience. To maintain their competitive advantages, hotels have to strive to
140 G. Yfantidou et al.

satisfy customer demands for new and unique services (Hu et al. 2009). Service
innovation is a source of competitive advantage for hotels (Ottenbacher & Gnoth
2005) because new services can help attract new customers, increase customer
loyalty, create new market opportunities, and raise sales performance and prof-
itability (Huang 2014; Nicolau & Santa-Maria 2013; Tang, Wang, & Tang 2015).
Survival of tourist enterprises in today’s demanding, dynamic and competitive
market allows only monitoring of trends and this is primarily the improvement of
product and service quality at all levels of the business with the most efficient and
effective performance of business processes. It is necessary to work on improving
the excellence, innovation and quality products and services and on improving
knowledge, skills and abilities of employees. Only the companies that are focused
on quality, satisfaction of their customers and their employees can compete on the
demanding tourist market (Sladoljev, Sisara & Goles 2014). Investments in inno-
vation are considered a key element in explaining a firm’s competitive advantage,
either in costs or differentiation strategy, which in both cases might lead to better
performance indicators for the firm (Peteraf 1993; Tugores & García 2015).
Hotel success has been contributed to high key factors such as the quality of the
infrastructure and products of the hotel, the location of the property, the staff that
provide the services in the hotel and the high rate of customer care and satisfaction
that the establishment provides. These hotels are focusing on differentiating
themselves to such an extent that the hotel is the tourist attraction and is an integral
part of the stay. The ability to develop and launch successful new services in the
market place is not only critical for survival but also creates a competitive
advantage for the organization (Ottenbacher & Harrington 2010).
Furthermore, it has been recognized that the level of tourist satisfaction can be
attributed to the different properties of each destination, including the tangible
products, the prices, the intangible quality of service and friendliness of the local
people (Crompton & Love 1995). Heide, Gronhaug & Engset (1999), developed a
measurement scale of 22 questions for the business hotel industry which is about
the tourists’ satisfaction (hotel customers). They revealed that 70% of the total
variance of overall satisfaction was due to the physical size of the rooms and the
intangible dimension of the reception area. Mueller & Kaufmann (2001), refer that
in health tourism hotels (spa), due to international competition in this specific
market, the higher quality of services is vital to customers’ satisfaction due to their
high expectations. Also, Castro, Armario-Martin & Ruiz-Martin (2007), empha-
sized that the satisfaction is the variable that leads tourists to visit the same desti-
nation again and recommend it to others.
In the research of Randhawa, Kim & Cichy (2017), managers noted that revi-
talizing different areas of the hotel’s real estate and assets, such as the golf courses,
kitchens, and dining areas, have increased the participation. Two managers
described some of their efforts. They remodeled the pool cabana complex to provide
a higher level of food and bar service. They peaked on revenue and usage. With the
renovation, they created four outdoor dining verandas that can seat up to 200 people
at one time, which were full most evenings in the summer. Renovation helped the
hotel attract its current guests to use the facilities more frequently by providing
10 Hotel Innovation and the Creation of Competitive Advantage 141

guests with higher perceived value in the newer facilities. According to Suh, West
& Shin (2012), the core competencies that are more important to the success of
future managers in the hospitality industry have six dimensions: hospitality skills,
interpersonal skills, supervisory skills, food and beverage management skills,
leadership and communication skills. Another example is the possibility for the
visitor to choose to clean the towels which is an environmentally friendly solution
and at the same time reduces cleaning costs. This improvement of service (at least
for the “green” customer) can then be combined with other innovations in the
operation of the internal processes department such as: reducing workers from
tumble dryers and the simultaneous increase of employees to serve customers.
Finally, to complete the holistic example of innovation, this “green towel service”
with reduced costs should: to be communicated to the market through the external
communication type. This could be achieved using a user-friendly internet service.
In this way the hotel will gain a “green” image (and combine it with a green key
award) and all four types of innovation are integrated to improve the hotel’s
performance.

4 Conclusion

Innovation is one of the main determinants of competitiveness. The inter-sector

heterogeneity should be considered while applying innovation theory to service
sectors, since it is essential to study innovation in one specific sector at a time.
Innovation is the creation of new possibilities for additional added value, consid-
ering not only the typical product/process innovation of manufacturing but also
market, organizational, and resource input innovation. According to Prahalad &
Ramaswamy (2004), suggest that innovation might need to shift, toward the
co-creation experience of people. As competition intensifies and the pace of change
accelerates, firms need to exploit existing competences or exploring new oppor-
tunities (Jansen, Van den Bosch & Volberda 2006; Floyd & Lane 2000). The
service differentiation strategy involves greater presence of human resources.
Furthermore, establishments with a stronger market-oriented strategy implemented
over time would be able to introduce innovations that require more trials and
adjustments when they are functioning below maximum capacity (Sirilli &
Evangelista 1998), thereby generating more options for radical innovation
(Martinez-Ros & Orfila-Sintes 2009). Guests are hoping that hotels will not only
provide comfortable accommodation, but they will help to gain an unforgettable
travel experience. Thus, international hotels should be geared to create functional
and recreational values to meet customer expectations. In addition to providing
accommodation and catering services, entertainment services (e.g. leisure facilities,
spa, sightseeing, etc.) focuses on creating value for the customer. The provision of
sport and recreational services is currently: a lucrative energy for business, which
brings increased profits, repeated customers, enhanced experience for audiences of
all ages and higher value at the hotel product (Choy 2000).
142 G. Yfantidou et al.

The hotel industry was chosen for this study because tourism is an important and
extremely competitive sector, which is characterized by continuous transformation
(World Tourism Organization 2004).
Integrating innovation is now a real and necessary fact for the hotel industry
because mainly the life cycle of their product presents two major challenges (Kotler
et al. 2006). Firstly, because all products eventually decline, the hotel business has
to find new products to replace the older ones (the problem of developing new
products). Secondly, the company needs to understand how its products decline,
and then it should change strategy as products go through their life cycle stages.

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