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Types of Innovation in the hospitality industry
From analysis to a conceptual model
Name: Joan. G.C. Barneveld
Student number: 11121513
Study: MSc. in Business Administration Track: Entrepreneurship & Innovation Institution: University of Amsterdam First supervisor: dr. W. van der Aa
Second supervisor: dr. I. Maris – de Bresser
Version: Final
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Statement of originality
This document is written by Joan Barneveld who declares to take full responsibility for the
contents of this document.
I declare that the text and the work presented in this document is original and that no
sources other than those mentioned in the text and its references have been used in
creating it.
The Faculty of Economics and Business is responsible solely for the supervision of
completion of the work, not for the contents.
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Preface
It is time! After five months of hard work I can finally proudly present my thesis “Innovation in the hospitality industry? An analysis of the different types of innovation in the hospitality industry”. This thesis is written as a completion of my master degree in Business Administration, with a specialization in Entrepreneurship & Innovation. The year has flown by and this can only be interpreted as a positive fact.
The interest in this topic stems from my youth. I grew up in the café of my parents and already from a young age I poured my own beers and started working in the family business. The last few years I began to notice that the traditional pub my parents exploit is disappearing, and that, according to my understanding, not much resources were been invested in innovative ideas in the hospitality industry. So my interest was aroused to research whether tradition still plays a major role in the hospitality industry or that innovation is surely a point of interest.
Several persons have contributed academically, practically and with support to this master thesis. I would therefore firstly like to thank my head supervisor dr. Wietze van der Aa for his time, valuable input and support when I was lost throughout the entire master period. Furthermore I would like to thank the entrepreneurs and managers of the studied cases for their time and valuable information.
Finally I would like to thank my family and friends for being helpful and supportive during my time studying Entrepreneurship & Innovation at the University of Amsterdam.
Only remains me to say, a pleasant reading.
Joan Barneveld
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Abstract
In this rapidly changing world, Innovation is becoming a major topic for all industries. However the majority of the hospitality firms does seem to underestimate the power of innovation. Even the amount of academic research about innovation and the hospitality industry is limited. The absence of a clear definition of hospitality innovation is can be a reason for this. Therefore the aim of this exploratory deductive research is to clarify which role innovation plays in the hospitality industry and especially which types of innovations the hospitality firms implement.
This goal was achieved by ameliorating the definition of a hospitality innovation into: Innovation in the hospitality industry can be described as new ways of doing regular things, or unique, ore better combinations of the already existing elements within the triangle of the consumer, employee, and external influences, with the ultimate goal to improve the overall experience Based on this revised definition and three service based innovation models, a conceptual model was conducted. This model consist of six dimensions: service concept, customer interaction, organization, business model, business partner, and presence. Subsequently the model was applied on 14 selected international and Dutch hotel and restaurant business cases to test whether the model is sufficient and to make a first attempt in clarifying what the most common types of innovation are in the hospitality industry. The data was gathered by using a triangulation approach. Primary data was collected through conducting semi-structured interviews, while secondary data was retrieved from (online) news articles, magazines, and company websites.
The research showed that a service type of innovation is the most important type of innovation for the hospitality industry. This is in line with previous research as well. As they stated that renewal in a firm’s service concept is the most important dimension for a hospitality firm to innovate in. Furthermore, it has been found that hospitality firms are too dependent on innovation efforts from business partners outside the hospitality industry. It is apparently not common for hospitality firms to develop and implement their own innovations.
The conducted conceptual model gives a first insight in types of innovation in the hospitality industry and can help other researchers and the hospitality industry itself to form a better understanding about innovation in this industry. It shows were the trends are and where innovation opportunities lie. Future research can build upon this conceptual model by specifying the dimensions even better and testing it on a larger and more diverse group of hospitality firms. This will improve the operability of the model and will improve the generalizability of the results.
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Table of content
PREFACE ABSTRACT 1 INTRODUCTION ... 1 2 LITERATURE REVIEW ... 22.1 THE DEFINITION OF INNOVATION ... 3
2.2 TYPES OF INNOVATION ... 4
2.3 INNOVATION AND THE HOSPITALITY INDUSTRY ... 6
2.4 CONCLUSION ... 9 3 RESEARCH DESIGN ... 10 3.1 DATA COLLECTION ... 10 3.2 ANALYSIS ... 14 4 CONCEPTUAL MODEL ... 14 5 RESEARCH RESULTS ... 17
5.1 INTERVIEW WITH EXPERTS ... 17
5.2 INTERNATIONAL HOSPITALITY BUSINESS CASES ... 20
5.3 HOSPITALITY BUSINESS CASES IN THE NETHERLANDS ... 28
5.4 HOSPITALITY INNOVATION AWARDS ... 42
5.5 SUMMARY OF RESULTS ... 44
6 DISCUSSION ... 46
6.1 MANAGERIAL IMPLICATIONS ... 49
6.2 LIMITATIONS AND FUTURE RESEARCH ... 49
7 CONCLUSION... 51
REFERENCE LIST ... 53
APPENDIX A – INTERVIEWS EXPERTS HOSPITALITY INDUSTRY ... 57
APPENDIX B – TEMPLATE INTERVIEWS HOTELS AND RESTAURANTS IN THE NETHERLANDS . 58 APPENDIX C – LIST OF CODES FOR ANALYSE ... 60
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APPENDIX E – SOURCES ZOKU ... 62
APPENDIX F - SOURCES DE HALLEN ... 67
APPENDIX G – SOURCES MAMA KELLY ... 68
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1
Introduction
„The species that survived were not the most intelligent – they were the most adaptable to change”. Charles Darwin
This statement of Charles Darwin is now more true than ever. The world is changing rapidly and the urgent need to adapt is becoming an important topic and field of interests in basically all industries. However this seems not to be the case in the hospitality industry. The number of journal articles is low about this topic and regarding to the Dutch hospitality exhibition, we see that the organization still needs to make the entrepreneurs aware of the fact that they need to innovate. While firms in the hospitality industry increasingly face more demanding and at the same time more whimsical clients (Den Hertog, Gallouj, & Segers, 2011). Hospitality firms often do not see that the power of innovations can provide unique experiences, which can create a stronger emotional bond with the customers, resulting in a greater likelihood of customer loyalty and premium prices (Sipe, 2016). Back in the days, customers came to a café or restaurant to catch up, so it did not really mattered how the place looked like and how the ambiance was. Nowadays people know what everyone is doing through the use of social media like Facebook and Instagram. Customers now go to a public place to get entertained and gaining new experiences.
Obviously there are firms who innovate, however most improvements in service activities are incremental. Hotels, restaurants etc. increase opening times, use key cards instead of keys, ore place a goldfish bowl in the hotel room. These improvements are useful and indeed necessary, but they are limited in the kind of returns they can produce (Berry, Shankar, & Parish, 2006; Enz, Verma, Walsh, Kimes, & Siguaw, 2010b; M. Ottenbacher, 2005). A reason for this can be that the hospitality industry is a service orientated industry, which is highly depending on his employees and hosting is one of their top priorities. Another matter can be that it is a rather ‘old’ and traditional industry. With the time certain norms have set the standard for the industry, and it can be hard to break those.
A reason for the lack of academic research about innovations in the hospitality industry can be the fuzzy nature of this industry. It makes it difficult to identify and classify the novelties and changes in the hospitality industry (Sipe & Testa, 2009). Therefore most of the researchers focus on the drivers behind the innovations and not on the type of innovations itself.
The aim of this research is to clarify which role innovation plays in the hospitality industry. How can innovation be described in the hospitality industry, what do entrepreneurs in the industry think
2 innovation is, and what are common innovation outcomes in this industry. Is it true that innovations in the hospitality industry, are merely incremental innovations and almost no radical innovations? From these questions the following research question arise:
When hospitality firms innovate, which type of innovations do they implement?
The question will be answered by conducting a conceptual model which presents six different innovation types specified for the hospitality industry. Subsequently this model is applied to different international and national hospitality business cases.
In this paper we present the findings of a inductive based research. The first section positions this research in the wider literature of innovation in hospitality services, by describing the term innovation and the already existing models for categorizing types of innovation. In the second section a conceptual model is introduced for categorizing types of innovation in the hospitality industry. A subsequent section briefly presents the research design. Then in the main body of the paper, the results of the research results are discussed. Finally, overall conclusions are presented and the implications for the hospitality industry and suggestions for further research are discussed.
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Literature review
Innovation has received widespread attention in the business world and a unrestricted search of academic publications using the word innovation produces tens of thousands of articles (Crossan & Apaydin, 2010; Johannessen, Olsen, & Lumpkin, 2001). So what counts as an innovation? The reason that there is still no answer on this question is presumably because previous research has not yielded a widely-held consensus regarding how to define innovation (Den Hertog et al., 2011). As a consequence of this the word innovation is overused, misused, and has lost its meaning (Keely, Pikkel, Quinn, & Walters, 2013).
The literature review starts with an overview about the research regarding to innovation in general. Elaborating on this, the step is made to innovation in the service industry and subsequently to the hospitality industry. The intermediate step of the service industry stems from the fact that the hospitality industry is a part of this service industry (Den Hertog et al., 2011). The different types of innovations is the next concept that will be discussed and subsequently the literature review will end with a analyse of the innovation research in the hospitality industry itself.
3 2.1 The definition of innovation
The first definition of innovation was introduced by Schumpeter in 1934, in his work on the theory of economic development. According to Schumpeter, innovation is reflected in novel outputs: a new good or a new quality of a good; a new method of production; a new market; a new source of supply; or a new organizational structure, which can be summarized as ‘doing things differently’ by making new combinations (Schumpeter, 1934). However, according to Hansén and Wakonen (1997) it is “practically impossible to do things identical, which makes any change an innovation by definition”. After this first definition, many followed: “Innovation is the creation of a viable new offering” (Keely et al., 2013), “innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations” (OECD, 2005), “the generation, development, and adaption of novel ideas on the part of the firm” (Damanpour, 1991), and “any idea, practice, or material artefact perceived to be new by the relevant unit of adoption” (Zaltman, Duncan, & Holbek, 1973). In general we can say that nearly every definition of innovation focuses on the concept of newness, and it can be a means and an end, a process and an outcome (Johannessen et al., 2001; Sipe, 2016).
What innovation means in the service industry is, according to different scholars and when using the traditional typology, difficult to explain. Therefore researchers have questioned wherever service innovations can be understood from the same theoretical framework as the manufacturing industry at all. However the research about innovation in the manufacturing industry can provide a basis for the development of a theory of innovation in the service sector (Sipe & Testa, 2009; Sipe, 2016). According to Berry, Shankar, and Parish (2006) innovation in the service industry differs from innovation in the manufacturing industry in three ways. First is the fact that the service delivery staff is the actual providers of the labor-intensive interactive services. They are a part of the experience of the customer and therefore a part of the innovation. Second is the fact that customers requiring “local” decentralized production; “Customers will drive only so far to eat at a restaurant, no matter how innovative it may be”. And last, but not least, is the fact that service innovation in general do not have a tangible product to carry a brand name on (Berry et al., 2006). A definition of innovation in the hospitality industry can elaborate on this distinguishing between the manufacturing- and service industry, because a unique characteristic of hospitality industry is that the hospitality experience is a co-creation of the guests, employees, and experiential
4 offerings, and in most occasions the service is simultaneously produced and consumed (Sipe, 2016). Elaborating on this we can formulate the following definition of innovation in the hospitality: innovation in the hospitality industry are new ways of doing regular things, or unique, or better combinations of the already existing elements within the triangle of the consumers, employees, and external influences (Jones, 1996).
2.2 Types of innovation
What kind of innovations a firm has implemented, can be categorized in different ways and several researches have made an attempt to clarify this. The first researcher is the founder of the innovation concept itself, Joseph Schumpeter. As mentioned before, he has categorized innovation in five ways: a new good or a new quality of a good; a new method of production; a new market; a new source of supply; or a new organizational structure (Schumpeter, 1934). A downside of this definition is the fact that it was written at a time when there was mainly a manufacturing industry. Due to this, this definition only focusses on product innovation, and for this reason it is challenging to apply this division on service innovations. Another frequently used method is to categorize innovation on the basis of their newness. Researchers argue that innovation vary along a continuum from incremental to radical (Johannessen et al., 2001). Radical innovations are mostly described as revolutionary, disruptive, discontinuous, or breakthrough. These types of innovations lead to fundamental changes and have a clear departure from existing practices in an organization. On the other hand, incremental innovations represent a variation in existing routines and practices (Crossan & Apaydin, 2010). By using this explanation we only focus on the impact an innovation has and we do not pay attention on in which field the innovation took place. Preissl (as cited in Hipp and Grupp, 2005) is questioning this categories as well. He doubts what the relevance of the differences between these categories is for the service sector. In an attempt to clarify and visualize the different types of innovation, Sawhney, Wolcott, and Arroniz (2006) developed the innovation radar. By interviewing managers responsible for innovation-related activities at several large companies across a range of industries and reviewing academic literature, they found out that many firms view innovation from a too narrow perspective. This blinds them to opportunities and leaves them vulnerable to competitors with broader perspectives. Sawhney, Wolcott, and Arroniz peer reviewed their initial set of 100-plus measures through several rounds. After this the measures were revised and pretested. The innovation radar presents and relates all the dimensions through which a company can innovate and consist of 12
5 dimensions: offerings, platform, solutions, customers, customer experience, value capture, processes, organization, supply chain, presence, networking, and brand (Sawhney, Wolcott, & Arroniz, 2007). An interesting characteristic of this model is that the researchers have tried to combine the different types of innovation with the degree of newness, by using a spider web. The empirical basis is strengthened by means of the use of real life business cases. On the other hand this is a foible as well, due to the fact that the pretesting was conducted by managers from exclusively the food- and energy industry. These are, indeed, two completely opposite industries, although there are not representative enough to generalize their findings for the whole industry and/or other industries.
A few years later Larry Keely tried to answer the following question: ‘How can you innovate effectively?’ By analysing nearly 2000 examples of the then best innovations in various industries, they developed a framework: ‘The ten types of innovation’. This framework consists of three color-coded categories: configuration, offering, and experience. Configuration focus on the innermost workings of a firm and its business system. Innovations can be made in the profit model, the network, the structure, and the process. Innovations in the offering category can be a new product performance or a new product system and are focused on a firm’s core product or service. Service, channel, brand, and customer engagement are possible innovations in the experience part. These type of innovations focus more on customer-facing elements of a firm and its business system (Keely et al., 2013). The framework is developed based on real life cases across various industries. Do to this we can conclude with almost complete certainty that the framework is applicable to all industries, including the hospitality industry. A flaw of this method is that the research used the top 2000 then best innovations. Due to this it is hard to say whether the framework is applicable for ‘less innovative’ firms as well.
Den Hertog, van der Aa, and de Jong (2010) have conceptualized a framework that is focused on managing service innovations as well. They did this by integrating six dimension where service innovations can take place, with six dynamic service innovation capabilities. By analysing a wide variety of articles about service innovation they developed the following dimensions for innovation in services: new service concept, new customer integration, new business partner, new revenue model, new delivery system: personnel organizations culture, and a new delivery system: technical (Hertog, Aa, & DeJong, 2010). A major advantage of this framework is that it is focused on service innovation. This can imply that it is better applicable on the hospitality industry as well. However the frameworks lacks empirical evidence, based on the fact that it is a theoretical based
6 paper.
The above mentioned models, the innovation radar, the ten types of innovation, and the six dimensions for service companies to innovate in, approached the ‘problem’ very pragmatic. The researcher merely looked at what the outcomes were of the innovation processes of a firm; what type or form of innovation the firm had implemented. They did not take into account which drivers helped or forced a firm to choose for a certain type of innovations.
Geoffrey Moore approached the categorizing of the different innovations at the level of the category life cycle. There are innovation types available for each phase in this cycle: emerging, growth, maturity, declining, and end of life. The innovation types for each life cycle phase are grouped according to four value disciplines that are described by Micheal Treacy and Fred Wiersma in The discipline of Market leaders to identify strategies. Subsequently Moore has linked types of innovations to this disciplines (Moore, 2005). The innovations that are seen as very powerful, expensive, and risky are grouped in the product leadership discipline. This innovation types are: disruptive -, application -, product -, and platform innovation. The second discipline is customer intimacy and this innovations are less risky and less powerful, but can yield cost savings and efficiency. Line-extension -, enhancement -, marketing -, and experiential innovations are better suited for this mature, more stable markets. Operational excellence is the third discipline and is comparable with customer intimacy. The innovation types in this discipline are: value-engineering -, integration -, process -, and value-migration innovation. Last, but not least, is the category renewal discipline. This discipline come into play when a business is declining and must be wound down or immediately exited. Organic innovations, acquisition innovations, and harvest and exit are a part of this discipline (Moore, 2005; Treacy & Wiersema, 1997). As mentioned before, the unique characteristic of this model is that it is based on the life cycle of a service or product and this is a totally different approach compared to the other models. Geoffrey Moore has tried to combine different views on how to categorize innovation types into one model. However by doing this, the framework becomes complex and unclear. That this opinion is shared is shown by the quality of the data used and the limited number of publications that have applied his methodology in their research.
2.3 Innovation and the hospitality industry
The nature of the output of the hospitality industry is fuzzy and complex. As stated before, this industry offers a multiple set of tangible and less tangible service activities that in combination
7 result in a certain service experience (Den Hertog et al., 2011; Orfila-Sintes & Mattsson, 2009; Sipe & Testa, 2009). Only a few studies have made an attempt to investigate the innovation behaviour in this experience based industry; the hospitality industry. It can be said that innovation is an under-represented subset of the experience context research in general. Achieving innovation in guest experiences has been discussed theoretically, but empirical studies are scarce (Hjalager, 2010). In general, studies on innovation in the hospitality can be divided into two streams: innovation and entrepreneurship studies within the hospitality and tourism or innovation in services studies The first-mentioned refers to an extant industry-specific literature covering various aspects, levels of analysis and points of departures for analysing innovation in the hospitality industry. The second stream, i.e. the innovation in services, can be divided into technologist, service-oriented and integration approaches (Den Hertog et al., 2011).
Overall, the main focus of these studies is on the drivers behind the innovations (Jones, 1996; M. C. Ottenbacher, 2007). The researchers aim to clarify if the size of the firm, the type of hospitality, or the type of management, etc. has a major influence on the innovativeness of a firm and the type of innovation they choose to use. Mostly, the data is collected by questionnaires, interviews, and case studies. Another approach of various studies is to select a few innovation types, based on the conducted literature review, and subsequently measuring which driver has the most influence on which type of innovation (Den Hertog et al., 2011; Hipp & Grupp, 2005; Orfila-Sintes & Mattsson, 2009; M. Ottenbacher, 2005; Paswan, D’Souza, & Zolfagharian, 2009).
However ,a few studies in the hospitality field have made a small attempt in classifying the innovation types in the hospitality industry. According to Harrington (2004) innovation in one sector of economic activity tends to be heterogeneous. Because of this, Orfila-Sintes and Mattssona (2009) argue that the best approach is to classify innovation in the hospitality industry by some relevant types. These types are derived from the four clusters of concern mentioned in Ottenbacher and Gnoth (2005), namely: management, external communications, service scope and back-office. The management innovation type refers to the quality of management processes, to the ICT applications for management, and to improvements of the organizational structure. As a result, the management innovation considers the importance of the environmental quality in the hotel’s competitiveness (Orfila-Sintes & Mattsson, 2009). Therefore it is crucial for service organizations to solve management problem through organizational innovation (Choi, Poon, & Davis, 2008). Innovation in external communications characterize the high information-intangible content of services products and processes in the hospitality industry. Opportunities for new
8 services, and doing current things in a different way are mostly generated through all the new opportunities of ICT (Orfila-Sintes & Mattsson, 2009). Service scope innovations leads to changes in the service output and this output is nearly the most important one in the hospitality industry, due to the strong competition in this industry. Service scope innovation is the tangible part of innovation and the core of customer value (Stamboulis & Skayannis, 2003). Finally innovations in the back-office are incorporations of new technological assets for the improvement in productivity and for achieving more efficient service delivery (Orfila-Sintes & Mattsson, 2009). According to Jones (1996) “many new products in the hospitality industry are not simply products; they have service implications, too”.
In 2011 Pim den Hertog and co-workers conducted a research for a public- private industry association in the Dutch hospitality industry. The purpose of their research was to make a deliberate attempt to measure technological and non-technological innovation, organizational aspects of the innovation process in the Dutch hospitality industry and their link to firm performance. Based on the reviewed literature, a framework of key innovation targets was composed. The innovation types were divided into primary business processes and supporting business process. The key innovation targets for the primary business processes are: the service formula or concept, the serviscape or location/building and how it is decorated, the assortment of products and services directly related to food, drinks and sleeping, the service interaction level offered or service experience offered to the guest, the actual primary service production in the area of food, drinks and sleeping, and the equipment or technology used in the primary production process. The key innovation targets for the supporting business processes are: procurement or supply management, marketing and sales management, human resources management, accounting, day-to-day operational management, and use of innovative equipment/technology in generic supporting activities (Den Hertog et al., 2011). By analysing the data from a survey among 613 Dutch hospitality firms they found that the innovation rate in this service industry is much higher and more varied than regularly reported. Though, the data showed that a majority of firms did not innovated on key aspects of the six primary business processes at all. Aspects on which some hospitality firms did innovate were assortment and technology. However this was still higher among the supported business processes and seems to indicate that the more marginal innovations seems to dominate. This may indicate that hospitality firms depend on innovations from firms from outside the industry itself and suggests that they prefer a wait-and-see attitude instead of adopting a more pro-active stance towards innovation. A reason for these facts can be
9 that 58% of the entrepreneurs in the industry experience barriers when innovating. Furthermore we could argue if these supporting business processes are innovations or rather adaptions to certain circumstances (Den Hertog et al., 2011). This also touches upon the fundamental discussion, as previous discussed, on what essentially should be labelled as innovation and innovation processes in services still and what as regular fine entrepreneurship (Drejer, 2004). Furthermore, Den Hertog and co-workers stated that the majority of the Dutch hospitality firms had co-operated in some way to realize an innovation. However, they tend to co-operate preferably with suppliers rather than with colleagues from the hospitality industry itself (Den Hertog et al., 2011).
2.4 Conclusion
The literature review made clear that there is still not a widely-held definition about innovation in general, and thus even less about innovation in the hospitality industry. We stated that an unique characteristic of the hospitality industry is that the created service experience is a co-creation of the guests, employees, and experiential offerings. Therefore we can describe innovation in the hospitality industry as new ways of doing regular things, or unique, or better combinations of the already existing element within the triangle of the consumers, employees, and external influences. In this definition we can still find the influences of the first manufacturing based description of innovation by Schumpeter: It is all about doing things differently by making new combinations.
The first attempts of categorizing types of innovation are based on innovations in the manufacturing industry as well. Of course this is not surprising, because the service industry has only really become important in the second half of the 90s. Nonetheless these divisions are not applicable to the service industry. Subsequently, some service based models were introduced to tackle this problem: the innovation radar, the then types of innovation, and the six dimensions for service companies to innovate. However they approached this problem very pragmatic, by only testing the outcomes of the innovation processes instead of taking into account the drivers behind these innovations outcomes as well.
The few researchers that did studied innovation in the hospitality industry did included these drivers in their studies. However, they were just more interested in these drivers, than the actual type of innovation outcome itself. Here we can see a research gap: on the one hand researchers have introduced models to categorize different types of innovation in the service industry, and on the other hand researchers have conducted studies about innovation in the hospitality industry which mainly focus on the drivers. Although it would be really interesting to
10 know as well what for types of innovations these drivers have brought as well. In order to achieve this, a combination of the following service industry based models can be made: the ten types of innovation, the innovation radar, and the six dimensions of service innovation. Many dimensions of these models are equivalent to each other and can therefore be combined.
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Research design
According to the literature review we can state that there has been little to no (academic) research conducted into innovation in the hospitality industry. Especially not in the domain of which types of innovations hospitality firms implemented. To close this research gap we need to answer the stated research question: when hospitality firms innovate, which type of innovations do they implement. The answer on this question was found by conducting an induction based exploratory study. This approach is used when new phenomena are studied and when there is not enough theoretical basis to start from. The goal is to develop general conclusions or theories by searching for patterns from collected data (Saunders & Lewis, 2012).
It would be eminently interesting to focus on the whole hospitality industry, as it can be valuable to analyse if there a major differences in types of innovation between the various fields of this industry. However, regarding the time restrictions, it will be not feasible to conduct this. Therefore, the focus will be on hotels and restaurants in the Netherlands. Restaurant is the largest hospitality group in the Netherlands (25.2%). The interesting combination of sleeping, eating, and drinking is the reason that hotels have been selected. In total this are 16.800 firms in The Netherlands (CBS, 2016).
3.1 Data collection
The first step of the research was conceptualizing a framework that can be used to analyse the selected business cases. This framework helps to place a certain innovation of a hospitality firm in one of the previous selected dimensions. The conducted framework is based on several different models that have made an attempt to conceptualise the different innovation types. These models all used a similar approach by analysing only the outcomes of the innovations and not the drives behind the innovation. As this study has the same purpose, the following models are used: The innovation radar from Sawhney, Wolcott, and Arroniz( (2007), the ten types of innovation from Keely, Pkkel, and Quinn (2013), and the six dimensional model of service innovation from Den Hertog, Van der Aa, and De Jong (2010). The latter forms the basis for our conceptual model, because this is the only model which is focussed on the service industry. The other two models
11 were developed to distinguish between innovation from all industries. However these two models are used as a supplement to the six dimensional service model, to form the new conceptual model for types of innovation in the hospitality industry.
The data collection was the second step in this research. This was done by conducting semi-structured interviews with experts in the hospitality field. The purpose of these interviews was to get a better understanding of what the current state of innovation is in the Dutch hospitality industry. The experts were chosen on the basis of their work experience and their affinity with the hospitality business. By choosing a semi-structured interview approach, the interviewer is allowed to omit some topics and ask additional questions as appropriate to dig deeper into particular subject. The order in which the researcher asked them can vary according the conversation as well and can help to get new insights on certain aspects (Saunders & Lewis, 2012). An overview of the questions for the expert interviews can be found in appendix A.
Subsequently, documentary research was used to analyse several already published business cases with the conducted conceptual model. By doing this we could test to what extent the proposed model is valid and applicable for the hospitality industry (Eisenhardt, 1989; Saunders & Lewis, 2012). The business cases were selected from the study conducted by the Cornell University School of Hotel Administration. This university is ranked as the 10th best university in the world by the Centre for World University Ranking and is fully focussed on academic research and education in the hospitality sector (Cornell University, 2016; “CWUR 2015 - World university Rankings,” 2015). The aim of their research was to understand and identify innovative practices across the hospitality industry. The researchers have identified the firms by interviewing industry leaders and on the basis of their innovative practices, with a focus on the lessons those innovations offer to the rest of the hospitality industry (Siguaw, Enz, Kimes, Verma, & Walsh, 2009). In the research the researchers describe 53 diverse hospitality (related) organizations that demonstrated enhanced organizational performances, which have used novel thinking to meet customer needs, regardless of whether those needs are newly identified or longstanding (Enz et al., 2010b). These 53 cases have been published in four separate articles. The first article describes cases that are underpinned by rapidly advancing technology and demonstrate how technology is altering the hospitality industry landscape and how critical this is to the success of the firm (Siguaw et al., 2009). In the second article the focus is on how firms use this technologies, rather than the technologies itself (Kimes, Enz, Siguaw, Verma, & Walsh, 2010). The third article
12 focus on firms who implemented sustainable innovations and on start-ups who use key elements of cost management while offering distinctive amenities and design elements (Enz, Verma, Walsh, Kimes, & Siguaw, 2010a). In the last article the focus is on new business concepts and innovations in human resource practices (Enz et al., 2010b). Within these 53 cases, ten cases can be categorized as either a hotel or a restaurant. The other forty business cases describe innovation practices of firms who deliver supporting services to the hospitality industry. This varies from applications that compares consumer’s comments from participating firms, websites that help customers to plan their entire trip, software for an online booking system, a luggage delivery service, a wine tasting service, and even technological innovations in a whole ski area (Enz et al., 2010a, 2010b; Kimes et al., 2010; Siguaw et al., 2009). In this stage of the research, the selected cases need to be both national as international. By using these specific ten international cases, we can show that the conducted model is not only applicable in The Netherlands, but worldwide. This approach ensures as well the construct and internal validity, because multiple sources of evidence are used, from different geographical areas (Eisenhardt, 1989).
Subsequently, a multiple case-study research is applied to test the conceptual model on firms in the Netherlands. Four cases were selected to be able to generalize the findings from these cases to a certain extent and to make sure that the findings are useful for inductive theory building. Especially in the early development of a field of research such as innovation types in the hospitality industry (Teagarden et al., 1995). The use of case studies is in line with the exploratory focus of this study. Yin (2003) suggests that case studies are epistemologically justifiable and essential where either theory does not yet exist or is unlikely to apply, or where theory exists but the environmental context is different. The four cases were selected based on the information collected in the interview with the experts. Two, CityHub and MaMa Kelly, were explicitly named by the experts. The other two, Zoku and De Hallen, stemmed from the blurring trend1 they mentioned as being an important trend for the hospitality industry. Furthermore the data for the cases was selected from multiple data sources, like interviews, newspaper articles, and internal documents. For the business cases De Hallen and MaMa Kelly we interviewed the owner(s) or a representative of them. Due to the fact that there was not enough reliable and useful data available from secondary sources. By adding the data from the interviews to the already collected data from newspaper articles, the companies websites, and magazines, we were able to check this data on
13 reliability and we were able to fill in the missing information. For the business cases Zoku and CityHub only secondary sources were used, due to the fact that so many different sources, in terms of quality of the news source, different perspectives, and publication date were available. This was sufficient enough to check the reliability of the founded information. This specific approach per business case helped to develop a better understanding of which type of innovation the firms have introduced in the past five years. It gave the opportunity to analyse the underlying ideas of the different choices they made when selecting and implementing certain innovations.
The two 30 to 45 minute long interviews with the owner(s) or representative took place in the firm concerned. The main advantage of these face-to-face technique is that the researcher can adapt the questions as necessary and is sure that the responses are properly understood (Sekaran & Bougie, 2009). Another advantage is that the interviewer have the opportunity to form a picture of the firm. During the interviews, a narrative interviewing technique was used to give the interview the possibility to talk freely in order to capture the whole story (Jovchelovitch & Bauer, 2000). This approach is in line with the exploratory purpose of this study (Sekaran & Bougie, 2013). During the interviews the innovators (interviewees) were asked to provide: (1) a description of the innovative practice; (2) details on execution, focusing on how the innovation was implemented; (3) the outcomes of the innovation; and (4) lessons they learned. An overview of the questions can be found in appendix B.
As a result of the semi-structured approach of the interviews with the hospitality experts one extra data set was added to this research. This extra data set contains information about the Hospitality Innovation Awards (HIA). The HIA is a yearly competition that is organized during the Horecava2, and focus on new innovation concepts, services, or products in the Dutch hospitality industry. In their 16 years of existence they have seen many innovations pass by. Every year a jury of hospitality experts decides who the nominees are for the four categories (food & beverage, concepts, interior & design, equipment & services, and mobile applications & social media), which innovation idea is the best in their category, and eventually who the overall winner is. Only the last five years the jury described their reasoning for the above three decision in official jury reports. This data provides an insight into the development of innovation in the hospitality industry and shows the current state of the role of innovation in this industry. It helps to answer the question whether hospitality firms wait for innovations efforts from their business partners, want to
14 collaborate with these partners to introduce new innovation, or are developing innovations on their own. The jury reports can be found in Appendix G.
This approach of using different data sources, methods, and theories to collect data can be described as a triangular data collection approach. It improves the intern validity of the study, because all these different sources, methods, and theories strength each other in terms of objectivity and reliability (Sekaran & Bougie, 2013).
3.2 Analysis
The interviews were recorded and transcribed. Subsequently, this data was, together with all the data from the secondary sources, analysed manually by using the coding software Nvivo. Coding can be described as a process that breaks-down, examines, compares, conceptualizes, and categorizes the implemented data. This process allows the researcher to get familiar with the data, and it makes the gathered data easier to understand and apply at a later phase. The actual codes can be described as fragments that hold a certain bias and are named after this bias. (Boejije & Hart, 2005). A deductive approach was used for naming this codes. This means that the process coding started with an already existing list of codes, which was based on the interview questions as mentioned before. An overview of the codes used can be found in appendix C.
4
Conceptual model
In the literature review several models that describe different types of innovation have been analysed: the innovation radar, the ten types of innovation, and the six dimensional model of service innovation. However none of these models is focussed on the different types of innovation in the hospitality industry. For the purpose of this research this gap need to be closed. This will be done by conducting a conceptual model that is aimed at clarifying the different types of innovation in the hospitality industry.
As a result of analysing the three abovementioned models we can conclude that there are many similarities between these models. In some cases they use the same definitions (for example: ‘brand’ in the innovation radar and the ten types of innovation) and in other cases they named it differently, however their description of the definitions is equivalent (for example: profit model in ten types of innovation, revenue model in the six dimensional model, and value capturing in the innovation radar).
15 conceptual model. This model presented here is a deliberate attempt to visualize which types of innovation are most common in the hospitality industry. The basis of this conceptual model is the six dimensional model of service innovation, for the reason that this is a model specified on service innovation. By using this basis we have to keep in mind that this model is not empirically tested (Hertog et al., 2010). To be able to apply this framework on the hospitality industry, the model is expanded and combined with the innovation types from the Innovation radar and the ten types of innovation model. The first dimension is service concept and describes the value that is created by the service provider. According to den Hertog and coworkers (2010) this can be named ‘service offering’ as well. Knowing this, we can merge the offering and platform dimensions of the innovation radar, and the service innovation form the ten types of innovation into this dimensions as well. This types of innovation represent the creation of new product and services. This can be done by creating totally new products or services, or by making new combinations (Sawhney et al., 2007). Innovations in a firm’s service concept are according to OrfilaSintes and Mattssona (2009) one of the most important dimensions for a hospitality firm to innovate in. To assess if an innovation fits in this category, we use the following guidelines: (1) the firm offers a notably superior offering that dominates
market share or earns a substantial share and (2) the service possess unique features and functionality that captivate customers, and is simpler and easier to use than those of competitors (Keely et al., 2013).
The second dimension is customer interaction and is about the interaction between the customer and the firm. Through this
16 interaction several innovations can be born, which the firm itself would have never thought of. The innovation types customers, customer experience, and solutions from the innovation radar and customer engagement from ten types of innovations can be integrated into this dimension. They describe it as innovations in discovering customer needs and redesigning customer interaction with the firm by developing new solutions. The following guidelines apply for this category: (1) the firm makes it easier for customers to deal with complex or difficult things and (2) the firm’s service confers a unique identity or status to customers (Keely et al., 2013)..
Organization is the third dimension and relates to organizational structure of a firm itself. There can be innovations in how things are organized or coordinated, by changing a process or a structure in the firm. Den Hertog (2011) sees this type of innovations as improvements in the actual primary service production; how beverages are prepared. The dimensions structure and process from the other two models describe the same type of innovations. According to Keely and co-workers (2013) these type of innovation form the core of the firm and can yield advantages for longer period of times. The following criteria apply to this category: (1) the firm has a unique feature in doing or delivering its services (Keely et al., 2013) and (2) the firm has a unique work environment and motivates its employees to grow.
The fourth dimension is business model and is about redefining how firms get paid for their services. It is not always necessary to come up with totally new services to gain more profit. By making new combinations of existing services, or adding or removing small characteristics of an existing service a firm can capture new value and thereby innovating their revenue model (Keeley, et al., 2013; Sawhney et al., 2006; den Hertog et al., 2010). The dimension profit model from Keeley and value capture from the innovation radar are a valuable additions to this. The following statements can be seen as guidelines for this category: (1) the firm makes money in ways that are different from competitors or industry norms and (2) the margins are significantly higher or lower than those of competitors (Keely et al., 2013)
Business partner is the fifth dimension and represent innovations with new business partners. This can be by co-producing new services, or by selecting new business partners in the firm's supply chain (den Hertog et al., 2010). Supply chain innovations from the innovation radar, channel innovations from the ten types of innovations, and new technical delivery systems from the six dimension model can be combined in this dimension. They all describe the thinking differently about sourcing and fulfilment (Sawhney et al., 2007) . Den Hertog and co-workers (2011) described this innovations as one of the six innovations in the primary business processes
17 of a hospitality firm. This can be equipment or technology used in the primary production process. To assess whether innovations fits in this category we can use the following criteria: (1) the firm uses different channels in complementary ways and (2) other firms help to sell or deliver the firm’s offerings, and this is done in a unusual way according to the industry standard (Keely et al., 2013). The sixth, and last dimension represent the innovations in presence and is about new places where a service can be experienced. Innovations in this dimension can be done by creating new touch points by using the firm's existing network, or by expanding his network. By doing this a brand can, for example, be introduced in a new market or become stronger in the existing market (Sawhney et al., 2007). The guidelines for this category are: (1) the firms has an unusual identity, particularly when compared with the competitors, (2) customers see themselves as a part of a distinct community or movement centred around the brand, and (3) the firms has expanded its services to an unusual divers area of business.
5
Research results
As explained in the research design, the research can be divided into four phases. The first phase consisted of developing a conceptual model to be able to allocate hospitality innovation to a certain dimension. This was done in the previous section. In the second phase of the research, several experts in the field of hospitality were interviewed. In order to get more information and a better insight of innovation in the field of hospitality. Testing the conducted conceptual model with ten international business cases is the third phase. In the fourth and last phase, four contemporary Dutch innovative hospitality cases are described and applied to the conceptual model.
5.1 Interview with experts
The second phase in the research consisted of conducting interviews with experts in the field of the hospitality industry. Two experts were interviewed to get a better understanding of what the current state of innovation is in the Dutch hospitality industry . Both experts are selected based on their current job position and/or their previous work experience. The first experts is the CEO of the Question Mark Group. This is an umbrella organization and consist of four consultancy organizations in hospitality and facility management. He is gathered his knowledge through the hotel school, working in the hotel industry, and working for large scaled hospitality operations. He is also the chairman of jury of Horecava Innovation Awards. The second expert is the managing director of the largest food exhibitions of the Netherlands at Amsterdam Rai and is in charge of
18 concepts, marketing, sales, and operations of the Horecava.
The interviews were divided into four main questions namely: how would you describe innovation in general and in the hospitality industry, what type of innovations are known for this industry, what are innovative hotels and restaurants in the Netherlands at the moment, and what is the impact of these innovations; incremental or disruptive. (See appendix A for the entire interviews.)
5.1.1 The concept innovation
According to the experts, innovation in general can be described as technical renewal: ‘Innovation very broadly is often a technology-driven development”. However, innovations in the hospitality industry are viewed from the entrepreneur and are more experience driven. These hospitality entrepreneurs are, for example, implementing innovations that improve the hygiene, the profit margins, and the quality of the service. Yet a difficult aspect about innovation in the hospitality industry is that the hospitality is an experience industry and that raises the question if something is a real innovation or a trend? Most of the concepts are copied from abroad, especially from New York and London. Smart Dutch entrepreneurs notice that it is big business and bring the product or concept to the Netherlands. This opportunity recognition can be driven by consumer demand as well.
5.1.2 The types of innovation
The types of innovation that are most common in the hospitality industry, according to the experts, elaborates further on this division of innovations on the technological side and the ‘experience side’. These technological types of innovation are mostly brought to the industry by partners like suppliers of kitchen appliances, suppliers of mobile payment and suppliers of POS3 systems. They have developed a new product or service and try to sell it to their clients: the hospitality entrepreneurs. This is also evident to the submissions for the hospitality innovation awards. Most submissions are related to innovations in the food and beverage sector, and especially in the fast food industry. Every year there are fast food entrepreneurs who made an attempt to renew the traditional croquet and/or bitterbal.
Very occasional it happens that the entrepreneur is faced with problems or thinks that processes can be run smoother and he or she confronts a external business partner with this
19 question. Subsequently they co-create something new together. Innovations that are merely based on improving the experience of the customer do come from the entrepreneurs themselves. However this is mainly true for hotel and restaurant concepts.
5.1.3 The impact of innovations
Nearly all innovations in the hospitality industry can be marked as incremental innovations. This are small improvements, like new tableware which can improve the experience of a restaurant visit. However if you look at what has changed the past five years, it can be the case that small improvements from five years ago, have a major impact now. That is also the reason that this incremental innovations can be seen as the most interesting and important for this industry. Hospitality entrepreneurs have to adapt to this small changes, otherwise they will be the next Nokia, Kodak, or Vroom & Dreesman. Major disruptive innovations are less common. According to the experts, one of the last major innovation is the Chef Watson from IBM. This is a computer program that helps chefs to discover and create original, totally unique recipes with the help of flavour compound algorithms from a big database. Another major innovation (or trend) is blurring: a combination of hospitality and retail. People want to eat everywhere anytime. The traditional split of buying groceries in the supermarket for diner and going to a restaurant to go out for dinner is not working anymore. When people go to the hairdresser they also want to drink a good cup of coffee, when people go the supermarket they would like to eat something as well, when people go shopping a refreshment is always welcome etc.
5.1.4 Innovative hospitality firms in the Netherlands
As stated before, most trends and innovations in the Netherlands come from abroad. In terms of innovativeness New York is ten years ahead and London five year ahead of the Netherland. However from all European countries, the Netherlands can be seen as the ‘trend setter’. Nearly all innovations start in the big cities like Amsterdam, Rotterdam, Den Haag etc. From there it goes to other part of het Netherlands. CityHub in Amsterdam and MaMa Kelly in Den Haag can be seen as new innovative concept in the Netherlands. The CityHub is a new hotel concept that is focused on the new generation of travellers that prefers the cheap prizes and social aspects of a hostel, but likes the luxury and privacy of a hotel as well. Everything in this hotel is controlled by technology: how you check-in, how you enter your room, how you order your drinks and so on. MaMa Kelly is a restaurant in Den Haag, the Netherlands. They just want to serve good food from
20 a small menu, in a nice atmosphere which is reflected in every detail. Here you can think about the right sort of music for that moment in time, a nice cup of coffee, the perfect cocktail and a friendly host.
5.2 International hospitality business cases
The next step in the research was to apply the conceptual model of types of innovation in the hospitality industry on international business cases to determine which types of innovations these cases have implemented. These business cases are selected from the study conducted by the Cornell University School of Hotel Administration. The researcher selected 53 hospitality innovations which present a diverse group of concepts and firms. All of which have used novel thinking to meet marketplace needs, regardless of whether those needs are newly identified or longstanding (Siguaw et al., 2009). For this research ten business cases are selected on the basis of representativeness of the industry and the selected focus group: hotels and restaurants. In most cases this are firms that are known for their innovation strategy and are regularly named as best practice examples.
The ten selected cases can be categorized as six hotels: Capella Hotels & Resorts, Chic & Basic, The Ritz-Carlton Hotel Company, Shangri-La Singapore, Seaport Hotel, and Tune Hotels and four restaurants: Aqua by Grandstand, Iggy’s, Jumbo Seafood Restaurant, Sakae Sushi (Enz et al., 2010a, 2010b; Kimes et al., 2010; Siguaw et al., 2009). Each case is briefly described in terms of information about the firm, which innovation(s) the firms have implemented and what the motivations was for these innovations. Data from the articles from the Cornell University and the firm’s websites was analysed for this purpose. Subsequently, the conducted conceptual model is used to analyse in which dimension of the conceptual model the implemented innovations can be placed.
5.2.1 Capella hotels & resorts
This firm established a chain of hotels and resorts around the world. They aim to provide higher levels of guest satisfaction, guest retention, and employee satisfaction than their competitors (“Capella Hotels & Resorts,” n.d.). In late 2006 the brand redeveloped their service standards to be able to meet their previous mention standards. Capella hotels & Resorts analysed what the customers saw as a negative point of staying in a hotel and choose to focus on the in check-out times, knowing that this is one of the biggest frustration for hotel guests and made an attempt to solve it by moving away from the industry standard (check out at 10 am and check in at 3 pm)
21 and introducing a new service concept: checking in and out whenever the guest want. Capella hotels & resorts introduced a 24-hour standard for the front office, reservations, laundry, and housekeeping. By doing this hotel guests are able to check in and check out whenever they want. They can use the room as long as they want, and there is a room available at the time of their arrival. To be able to accomplish this they had to innovate their organization structure as well. Normally the staff from the front office, reservations, laundry, and housekeeping worked during the day from 8 am till 5 pm. Capella hotels & resorts added two other shifts: an early shift starting at 6:30 am and a night shift starting at 5 pm (Siguaw et al., 2009). By introducing this new workflow Capella hotels & resorts innovated in customer interaction as well. The hotel guests have the opportunity to contact one of the staff members anytime they feel they need to. They really make helping their guests their main priority.
5.2.2 Chic & Basic
Chic & Basic owns and operates hostels that offer guests an innovative lodging experience centred on design novelty, practicality of amenities, and sensitivity to personal needs, while still offering low cost sleeping. Due to the perception that hostels were low quality and offered few services, the owners of Chic & Basic noticed that the traditional hostel was unattractive to many potential customers. By fusing design and functionality the firm has upgraded the traditional dormitory style hostel concept by paying a lot of attention to the design and amenities. By doing this the owners have tried to improve the poor image of hostels and showed the world that it is possible to offer a certain quality, design standard for an affordable price. Instead of offering the common dormitory style accommodations. These above mentioned characteristics of the hostel can be categorized as a new service concept innovations. Chic & Basic offers individual rooms with own bathroom and free WIFI. The hostel aspect comes back in the common kitchen and living area. By combining this the hostel experience is both ‘basic’ and ‘chic’. To maintain the operational costs, each hostel is equipped with two full time workers and one part-time position. These employees are carefully selected and have the opportunity to grow internally in the firm. All new positions are filled by own people first. In this way the firm can maintain the firm’s philosophy and their superior guest service. Another innovation can be seen in their business model. They implemented a new revenue stream by generating extra turnover through giving people the opportunity to buy decorative items and furniture from the hostels itself (Enz et al., 2010a).
22 5.2.3 Ritz-Carlton Hotel Company
The Ritz-Carlton Hotel company has a reputation of delivering great service to their guests. To maintain this high service they introduced the training program called “Radar On – Antenna Up” into the employees training and development plan. The employees of the hotel are viewed as the driving force behind the firm and by introducing this new program the hotel is sure that all of their employees are prepared to deliver the required service. ‘Radar On – Antenna Up’ teach the employees how to interact on the ‘non-visible signals’ of guest needs and wishes during their stay in the hotel. Eventually the ultimate goal is specifically to show employees how to deliver personalized service in such a way that guests become engaged with the Ritz-Carlton brand: “The goal is not to satisfy guests through just meeting their expectations, but rather it is to engage with them through an emotional connection”. By implementing this training program, the Ritz-Carlton implemented a customer interaction innovation. Their staff is better trained to have a better connection with the guests, to work more efficient, and the hotel motivates their staff to grow and improve themselves. “Radar On—Antenna Up” proved to be so effective at improving customer satisfaction for The Ritz-Carlton that they decided to make the course available to other organizations in different industries, such as automotive, aviation, finance, food services, health care, retail, and transportation (Enz et al., 2010a)..
5.2.4 Shangri-La Hotel
The Line restaurant of the Shangri-La Hotel was renowned for their its extensive lunch buffet, however the management of the Shangri-La Hotel saw that customers only wanted to eat a few things and did not want to pay the full price or stay for too long. On the other hand new competitors (bakeries and small lunch rooms) were entering the market with quick low priced lunches. To stay in the market the restaurant introduced a new business model: ‘Lunch by the minute’. Customers could enjoy everything what the buffet had to offer for half the usual price, on the condition that they finished their lunch in 30 minutes. The only exception with the ‘normal lunch’ was that they guests had a reduced choice in drinks. They could choose between coffee or thee. By introducing this new way of eating lunch at an expensive restaurant, more customers could come to their restaurant and the restaurant could serve more customers in the same amount of time. To increase the revenue of the new concept, the Shangri-La Hotel added several additional options, like a drink menu or a fresh juice, to the menu for a small additional price. (Kimes et al., 2010).
23 5.2.5 Seaport Hotel
The Seaport Hotel is a 428-room independently owned and operated luxury hotel located at Boston Harbour. The unique feature of this hotel is the development of Seaport Saves, an environmental program dedicated to increasing sustainability and conversation throughout the hotel. They introduced several innovative systems such as a fully automated water system that uses microorganisms to breakdown organic waste and convert it into water, a system that removes 98,5% of all airborne particles in the hotel room, a system that transforms used water from the hotel into a chemical-free disinfectant for all facets of housekeeping, and the hotel uses a laundry system that uses electricity to transform oxygen into ozone that provides a more efficient wash cycle that uses less water, less electricity, and fewer chemicals. All these changes are off course a major improvement for nature, however it reduced the hotel’s costs perdurable as well (Enz et al., 2010a). By implementing all these environment friendly concepts, they innovated their organization. They have a unique feature in doing and delivering ‘standard’ hotel services to their guests and they are able to capture more value because they improved the efficiency and effectiveness of their resources.
5.2.6 Tune hotels
Tune hotels is a hotel that offers “a five-star sleeping experience, at a one-star price” with limited service. They introduced this new concept to answer on the demand of travellers of low-cost airlines. They saw that the customers these travellers could not find a clean, safe, and affordable place to stay once they had arrived. By introducing this new hotel concept Tuna hotel made a new combination of two already existing business concepts: the hotel and the revenue model of a low-cost-airline. This can be seen as a service concept innovation. Furthermore, their business model is based on these efficient operation approaches of a low-cost-airline. Tuna hotels uses direct distribution through the internet, price positioning to stimulate demand and maintain high occupancies, optional amenities, high operating efficiencies, and a simple and consistent operating model that provides the customer a significant value proposition. Tune Hotels only offers the basics, an additional fee must be paid for extra services like towels, soap, and shampoo. By doing this they are constantly searching for new opportunities to increase their revenue, without raising the basic rates for their hotel rooms. This can be labelled as a business model innovation.
