Customer equity in hotels : the role of hotel type, visit purpose and consumer characteristics

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UNIVERSITY OF AMSTERDAM

Customer Equity in Hotels

The Role of Hotel Type, Visit Purpose and Consumer Characteristics

Author: Annika Arielle Raaijmakers Student number: 10665870

Qualification: MSc. in Business Studies – Marketing Track Supervisor: Dhr. drs. ing. A.C.J. Meulemans

Second corrector: Dhr. prof. dr. J.H.J.P. Tettero

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Abstract

This study aims to investigate the role of the three drivers of customer equity – value equity, brand equity and relationship equity – in the hotel industry. More specifically, the focus will be on the influence of hotel type, visit purpose, and demographic variables on the relative importance of these drivers. 125 hotel visitors were asked to indicate their perceived level of importance of the drivers in their decision to return to a hotel. Statistical data analysis explored the differences between sub groups. The results show that, overall, value and relationship equity play a prominent role in building customer equity in the hotel industry. Nevertheless, hotel type, visit purpose, gender, age, education and family composition affect both the absolute and relative importance of value, brand and relationship equity. Implications for hotel managers are provided and possible issues for future research discussed.

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1. Introduction

Throughout the years, marketing’s function has shifted from single transaction focused to more relationship-driven (Achrol & Kotler, 2012) and consequently from product to customer focused. Companies increasingly recognize that customers are valuable, if not their most important, assets and therefore customer equity should be monitored and maximized in order to enhance long-term performance (Gupta & Lehmann, 2003; Vogel, Evanschitzky & Ramaseshan, 2008). Getting a grip on the concept of customer equity helps managers to assess their relative long-term position in the market they operate in (Rust, Lemon & Zeithaml, 2004). Especially in services industries, rather than solely focusing on brand equity, knowing and understanding the customers’ lifetime value of your company is crucial (Rust, Zeithaml & Lemon, 2001).

Even though the importance of customer equity is increasingly recognized, it is considered a complex tool which is why few organizations actually measure and manage it (Persson & Ryals, 2010). A clear and complete picture of the concept and its drivers per industry is missing. The three drivers of customer equity – value equity, brand equity and relationship equity – and their individual effect on customer equity or components of it is studied extensively. Most of these studies, however, do not take into account that the relative driver impact is unequal across different industries.

This study will investigate the relative importance of the customer equity drivers in one specific industry: the hotel industry. A distinction will be made between luxury, mid-priced and economy hotels (Kang, Stein, Heo & Lee, 2012). Besides, the influence of value, brand and relationship equity will be compared based on the consumer characteristics age, gender

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6 education and family composition, and purpose of visit (i.e. pleasure versus business stay). Hence, the following research question will be answered:

What is the relative importance of value, brand and relationship equity in the hotel industry (luxury, mid-priced and economy hotels) and are there any differences in the relative importance of drivers based on age, gender, education, family composition and purpose of visit?

This issue will be examined in two ways. First, a literature review will present what can be expected based on research already conducted in this field. Second, responses on a survey measuring the importance of the sub drivers of customer equity are collected and statistically analyzed.

The outcomes will provide useful insights to managers of different hotel types. First, it will help them to assess their long-term position in their specific market by gaining a deeper understanding of the drivers of customer equity. Furthermore, the results can help them to differentiate between customer segments and tailor their marketing efforts based on this segmentation.

In the following section, this paper will review the literature written so far on customer equity and its drivers. Subsequently, a research gap becomes clear, explaining the necessity to find an answer to the research question of this study. Secondly, the methodology used to study this issue will be thoroughly described. Third, the data collected will be analyzed and the results presented. In the last section, a conclusion will be drawn, the outcomes of this study will be discussed and limitations and future research areas will be highlighted.

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2. Literature Review

In this section, an overview of the current customer equity literature will be provided and, subsequently, an interesting research gap will be explored and elaborated on. Finally, the research question of this paper will be presented.

2.1 The customer equity concept

Customer equity is a broad concept that has become more commonly used since companies increasingly acknowledge the importance of their customers as assets (Gupta & Lehmann, 2003; Vogel, Evanschitzky & Ramaseshan, 2008). It can be used by managers as a proxy of the market value of their organization and in order to assess the market position relative to its competitors (Rust, Lemon & Zeithaml, 2004). However, measuring customer equity is challenging.

Customer equity represents the value of a company’s customer relationships. More specifically it is defined as the total of the discounted lifetime values of all its customers (Rust, Zeithaml, & Lemon, 2000, p. 4). As this definition implies, customer equity is long term focused since it does not only include a customer’s current, but also future profitability. It includes the level of retention, the profit margin per customer, acquisition costs (Gupta, Lehmann & Stuart, 2004; Stahl, Heitmann, Lehmann, & Neslin, 2012) and cross-selling (Gupta, Hanssens, Hardie, Kahn, Kumar, Lin, Ravishanker & Sriram, 2006).

In order for a company to call itself truly customer-focused, it should organize its activities, processes and communications around customer equity and the factors that drive this concept (Rust, Zeithaml, & Lemon, 2000, p. 6). According to Vogel, Evanschitzky and Ramaseshan (2008) the concept of customer equity captures customer value management (i.e. value

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8 equity), brand management (i.e. brand equity), and relationship or retention management (i.e. relationship equity). Value equity is the cognitive, objective and rational evaluation of an offering’s quality, price and convenience. Brand equity, in contrast, is rather emotional, subjective and irrational. It is “the differential effect of brand knowledge on consumer response to the marketing of a brand” (Keller, 1993, p. 8). Relationship equity concerns retention programs and relationship-building activities that augment the chance of repeat patronage and increased spending (Rust, Zeithaml, & Lemon, 2000, p. 8). In conclusion, value equity, brand equity and relationship equity are driving customer equity by enhancing the total worth of a company’s customers.

2.2 The effect of value equity

Several prior studies have empirically tested the value- loyalty relationship in different contexts. For example, perceived consumer value has been identified as a major determinant of customer loyalty in telecommunication services (Bolton & Drew, 1991). Nevertheless, Cronin, Brady and Hult (2000) noted that the outcomes of studies that investigate the link between quality, value and satisfaction on behavioral intentions vary with the focus and research objectives of the study. Unlike most other studies, they therefore simultaneously examined the effects of the three factors on loyalty intentions and likelihood to recommend. Their outcomes are consistent with prior research findings and indicate that service value has a fairly strong direct and weak indirect impact on behavioral intentions across all six industries incorporated in the study. Similarly, Sirdeshmukh, Singh and Sabol (2002) found that value plays an important role in establishing loyal customers in retail clothing and non-business airline travel. Wang, Lo, Chi & Yang (2004) confirmed these findings as their study revealed that functional value (a concept mostly concerning perceived quality) positively

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9 affects customer behavior-based CRM performance (i.e. word of mouth referral and repurchase) in a securities firm context. Several studies found that customer satisfaction (partially) mediates the relationship between perceived value and loyalty behavior (e.g. Wang et al., 2004; Yang & Peterson, 2004). In the specific context of the hotel industry, research revealed the importance of good value for money, convenience of location (Atkinson, 1988; Ananth, DeMicco, Moreo & Howey, 1992), and quality (Oh, 2000) in hotel selection. Studies also repeatedly found value-related factors to be important in affecting hotel visitors’ intention to return to the same hotel. Particularly, value for money (Dubé & Renaghan, 1999; Choi & Chu, 2001; Mason, Tideswell & Roberts, 2006) and service quality (Dubé & Renaghan, 1999; Choi & Chu, 2001; Gallarza & Saura, 2006; Mason, Tideswell & Roberts, 2006; Ladhari, 2009) are found to be antecedents of loyalty behavior. These studies show the “value-mindedness” of travelers: they generally seek quality service and convenience for good prices. Also the indirect effect of perceived value to satisfaction on loyalty seems to hold in a travel related context (Gallarza and Saura, 2006).

2.3 The effect of brand equity

Brand equity and its antecedents are a highly researched topic in the marketing management literature. The influence of brand equity on customer loyalty also received extensive attention. One study even found that brand equity consistently is the most important antecedent to both behavioral and attitudinal loyalty (Taylor, Celuch & Goodwin, 2004), compared to other potential loyalty drivers. Another study found that brand knowledge indirectly affects future purchases via a brand relationship path that includes brand satisfaction, brand trust and attachment to the brand (Esch, Langner, Schmitt & Geus, 2006). Moreover, Stahl et al. (2012) examined the relationships between brand equity and the key components of customer

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10 lifetime value (i.e. customer acquisition, customer retention and profit margin per customer). Their outcomes claim that brand knowledge, relevance and esteem –three out of four brand equity pillars- positively affect all three components of customer lifetime value. Differentiation, the fourth pillar, has a highly positive effect on margin, however, negatively influences retention and acquisition. Hotel industry specific, Kandampully and Hu (2007) questioned 1500 guest of various hotels belonging to three different hotel types in order to find out whether managers should enhance their hotel’s image to retain customers. Their study outcomes support the notion that corporate image has a strong impact on customer loyalty in this context as well.

2.4 The effect of relationship equity

Relationship equity includes loyalty programs, special recognition and treatment, affinity programs, community-building programs and knowledge-building programs (Rust, Zeithaml & Lemon, 2000/2001, pp. 125-138). Many studies have found that retention programs and relationship-building activities positively affect customer loyalty. Bolton, Kannan and Bramlett (2000), for example, found that the loyalty reward program of a worldwide financial services company improved customer evaluations, behavior and repeat purchase intentions. Lewis (2004) studied the loyalty program effectiveness -measured in terms of customer retention- of an online grocery and drugstore items merchant. He found that implementing the program, on average, increased annual purchasing per customer. A similar research was conducted by Liu (2007), in which the impact of a (convenience store franchise) loyalty program on customer usage levels and loyalty was investigated in a longitudinal study. Findings suggest that especially light buyers (i.e. consumers with low and moderate initial patronage levels) purchase more frequently over time after joining the loyalty program.

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11 Additionally, the loyalty program incentivized purchases in different product categories (i.e. cross-buying) for these buyers. Also in a hotel context, frequent-guest programs have proven to affect firm performance. Marriott, for instance, noticed a two and a half time increase in spending for guests joining the program (Seacord, 1996, cited in Tepeci, 1999). Hilton even reported that 19 percent of their HHonors program members have indicated not to stay at a Hilton hotel without such a frequent-guest program (Tepeci, 1999).

Besides loyalty programs, community-building programs are a way to closely bound customers to a company or brand. Oliver (1999) pinpointed that, in fostering loyalty, building a brand community might complement or work even better than a high level of individual fortitude (i.e. action inertia and fierce defense against competitive overtures). In this case, customers are interested in the group camaraderie offered within the (social) environment surrounding the product/service. Several studies affirmed that building a brand community has positive consequences for a firm in terms of loyalty (e.g. McAlexander, Schouten & Koenig, 2002; Algesheimer, Dholakia & Herrmann, 2005).

An overview of the current literature shows us a fair amount of evidence that value, brand and relationship equity all drive customer equity, also in the specific context of the hotel industry. However, few studies have actually incorporated all three drivers and their effect on customer equity, or components of it, simultaneously. Rust, Zeithaml and Lemon (2000, pp. 9-12), in contrast, argued and proved that the relative importance of customer equity drivers differs across industries. Ruyter, Wetzels and Bloemer (1998), for example, had already found that the influence of service quality -a component of value equity- on loyalty varies significantly per industry. Furthermore, Vogel, Evanschitzky and Ramaseshan (2008) studied the effect of value, brand, and relationship equity on consumers’ loyalty intentions and future sales in a

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12 retail setting. Their outcomes suggest that all customer equity drivers can significantly predict future sales, yet that value and brand equity have particularly strong impact on loyalty intentions in the studied context. The outcomes of this study again highlight that not every driver has an equal effect in a retail setting, supporting Rust, Zeithaml and Lemon (2000, pp. 9-12)’s view.

2.5 Research gap and contribution

As previously shown, literature so far examining the relationship between customer equity and its drivers mostly focuses on the relationship between one type of equity (or components of it, e.g. brand attachment), and retention or loyalty. We see that customer equity is not very commonly used as a holistic concept: retention, loyalty, cross-selling and profit margin –the components of customer equity- are used more often. The same holds for value, brand and relationship equity. As a result, the academic literature on customer equity and its drivers is scattered. Relationships are proven to exist between (components of) the three equity drivers and (components of) customer equity, however, this fails to provide us with an understanding of the complete picture. A positive relationship between loyalty programs and retention, for example, might blind managers from other, potentially more powerful, drivers of customer equity. It is therefore important to know the relative influence compared to other drivers. As a result, there is need to test all three customer equity drivers simultaneously in one study.

As already said, Rust, Zeithaml and Lemon (2001) suggest that this relative importance of drivers differs between industries. For example, brand equity might matter more in commodity than in non-commodity markets. Especially service industries are concerned with customer equity for service providers increasingly derive revenues from the creation and sustenance of long-term relationships with their customers (Gupta et al., 2006). Therefore,

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13 this study will focus on the hotel sector. In order to recognize the highly distinctive markets and offerings within the hotel industry, a distinction will be made between luxury, mid-priced and economy hotels (Kang, Stein, Heo & Lee, 2012). Hotel type relates to the level of service, facilities, operations and target market segments (Kim, Cho & Brymer, 2013). Especially the latter underlines that ignoring differences between hotel types could result in less useful outcomes and insights. The desires, expectations, and therefore the decision-making process potentially vary for the distinct segments.

But even when the relative importance of value, brand and relationship equity within one specific industry are known, differences might exist between consumers based on other characteristics. In marketing it is no secret that consumers have divergent wants and needs, and that these are even unstable in various situations. It is therefore plausible to assume that the relative importance of drivers of customer equity differ based on consumer characteristics and consumption context. Characteristics can, for example, be demographic or related to common needs, and the context can differ based on the purpose of consumption. Nevertheless, no such research has been found in the reviewed literature. Hence, this study will examine the differences between gender, age, education and family composition as well as the purpose of visit (i.e. business stay versus pleasure stay). The reason that these variables were chosen is because they are easy to measure and operate. Consumer characteristics like, for example, the ‘Big Five’ personality traits (Goldberg, 1990) might be less practically relevant as in most cases hotels do not possess this kind of information about their customer base. Purpose of visit is important in order to acknowledge that a single customer has different needs when staying in a hotel for a holiday or business trip.

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What is the relative importance of value, brand and relationship equity in the hotel industry (luxury, mid-priced and economy hotels) and are there any differences in the relative importance of drivers based on age, gender, education, family composition and purpose of visit?

The next chapter discusses the propositions and conceptual model that will be tested during this study. Then, the research design and methodology will be elaborated on. Finally, the proposed expectations will be tested and the outcomes discussed.

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3. Theoretical Framework

In order to answer the research question of this paper, the effect of hotel type, visit purpose, gender and age on the relative importance of the equity drivers need to be explored. In this section the expectations regarding these effects will be developed and explained.

3.1 Differences between types of hotel

The relative importance of value, brand and relationship equity as a driver for customer equity is likely to vary between hotel types (i.e. economy, mid-priced and luxury), as the wants and needs and decision-making process for each segment differ.

3.1.1 Value equity

The definition of customer value given earlier implies that a consumer whose loyalty is driven by value cares mostly about an offering’s quality, price and convenience. This can be considered a rather objective and rational driver of customer equity. Knutson (1988) questioned 1853 frequent travelers patronizing all three segments of the hotel industry regarding the factors they consider important in their hotel choice. Respondents in all segments reported ‘clean, comfortable and well-maintained rooms’ and ‘convenient location’ to be particularly important factors for both initial and return hotel selection. Economy travelers, however, were substantially more sensitive to room rates than mid-priced and luxury travelers. Kandampully and Suhartanto (2000) also found that satisfaction with basic needs (e.g. housekeeping) and price are determinants of loyalty in hotel chains, even though less strong than hotel image (which will be discussed in the next section). Kim, Jin-sun and Kim (2008) similarly found perceived value to be a determinant of revisit intent in mid-priced hotels. Additionally, outcomes of one study concluded service quality to be the largest determinant of loyalty in the luxury segment (Wilkins, Merrilees & Herington, 2009).

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16 In summary, value is considered important in all three hotel segments and might be similarly important in absolute terms. However, in the luxury segment value -especially quality of service- might constitute the mere basis that is expected from guests, whereas for the economy segment value seems the most crucial determinant. Relatively speaking, therefore, value is expected to drive customer equity most in economy hotels.

3.1.2 Brand equity

In general, brands help consumers in their decision making process by providing a set of expectations of what it has to offer, both in functional and symbolic benefits. This is particularly important for services as branding enables consumers to visualize the intangible (Simoes & Dibb, 2001). Ostrowsky, O’Brien, and Gordon (1993) proved the impact of image – especially reputation and quality of customer service- on retained preference (indicating customer loyalty) in the airline industry. Additionally, brands get even more relevant in purchase decisions when it is hard to differentiate between offerings. In the context of online retailing, Smith and Brynjolfsson (2001) found that the brand is a major determinant when choosing between homogeneous products. This is a consequence of the reduced perceived risks and search costs. Therefore, in case uncertainty is involved, consumers tend to go for the more familiar brands and those with a favorable image, believing that this provides an assurance of a company’s services. The perceived risk involved in switching between brands, as a result, creates behavioral loyalty. Phau and Prendergast (2000) already found that increased awareness results in a higher level of brand preference, which subsequently generates stronger purchase intentions. In the specific context of chain hotels, Kandampully and Suhartanto (2003) found a positive relationship between image and loyalty (measured by intention to recommend and repurchase). Both attributes (e.g. staff performance, interior

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17 design) and the holistic aspect (e.g. atmosphere, reputation) of brand image proved to be important. Also Kim, Jin-sun and Kim (2008) found that brand awareness and image increased guests' revisit intention in mid-priced hotels.

The mid-priced hotel category includes many hotel chains with multiple properties in different cities and countries. Based on the existing branding literature and following the risk and search cost reducing line of reasoning it is expected that hotel brand will play an important role in creating customer equity for mid-priced hotels.

In luxury hotels the brand is expected to play a major role as the associations attached to luxury brands are highly symbolic. This image, including for example exclusivity and prestige, can add tremendous value to the offering and consequently affect loyalty (Fredericks & Salter, 1995). Vigneron and Johnson (2004) investigated the concept of luxury brand by developing a scale to measure perceived luxury. Their study reveals that luxury is multidimensional and substantiated by a five-factor model: conspicuousness, uniqueness, quality, extended self and hedonism. This model implies that luxury brands are, with the exception of quality, highly symbolic and not so much functional. Similarly, Heine (2010) developed a scale for measuring a specific aspect of luxury brands: brand personality. His findings again highlight that luxury brands are more symbolic than those of non-luxury brands. Important reasons for consuming luxury products are to show success and social status, reward own self and to provide one with confidence (KPMG, 2006). Hedonic value, compared to utilitarian value, has a great impact on luxury brand satisfaction (Song, Hur & Kim, 2012).

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18 As expected from the discussion above, image has been found to affect customer satisfaction and preference (a dimension of customer loyalty) in luxury hotels (Mazanec, 1995). Similarly, Aiello et al. (2009) studied the effect of brand name and other marketing items on consumers’ product evaluation and purchase decision. The study provided interesting insight into how these effects differ for luxury goods compared to convenience and shopping goods. Together with design, the factor that impacts the evaluation and purchasing decision of luxury goods most is the brand, while for shopping and convenience goods the brand plays a medium or even inferior role, respectively. Further, Liu, Li, Mizerski and Soh (2012) found that, in case of luxury fashion brands, brand attitude has a significant effect on brand loyalty. Ultimately, the brand trust argument provided for the mid-priced hotel segment seems to play a role in luxury hotels as well. Song, Hur and Kim (2012) found that brand trust decreases brand risk and increases brand loyalty in a luxury context.

In conclusion, brands reduce the perceived risk in consumers’ choice between the “mass” of mid-priced hotels. Moreover, luxury brands have a symbolic function and provide consumers with image and non-product related benefits which makes the brand more relevant in evaluating and decision-making. Besides, luxury brand image has continually proven to positively affect customer loyalty. Economy hotels, in contrast, are usually not expected to create additional value with their brand. They hold no symbolic image nor is there much risk involved because of the low price and the hotels’ functional character. Therefore, brand equity is expected to be more important in luxury and mid-priced hotels as compared to economy hotels.

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19 3.1.3 Relationship equity

Relationship management concerns monetary, functional or emotional rewards for repeatedly buying the product or using the service of a company. Frequent-stay programs, for example, allow customers to accumulate frequency points and offer them discounts or extra benefits in return. Some sources have reported a high impact of reward program membership on hotel brand choice (e.g. key factor in deciding where to stay for 37% of guests in 2007, Barsky & Nash, 2008). Findings, however, are inconsistent. Mattila (2006), for example, found that value-added reward program benefits (e.g. guaranteed room availability) were able to predict behavioral loyalty. She, however, also concluded that point accumulated discounts failed to predict guest loyalty. Tanford, Raab and Kim (2011), in contrast, found that members of hotel reward programs have significant higher value commitment than non–reward members, which in turn affects loyalty behavior (e.g. Mattila, 2001; Sui & Baloglu, 2003). Also affective commitment was greater, but only for high tier members. Benapudi and Berry (1997) explain that rewards offered by loyalty programs can be seen as relationship specific investments which increase the customer’s dependency on the relationship partner. Although a more emotional bond might be needed to establish affective and long-lasting loyalty, relationship equity is expected to play a role in creating customer equity for mid-priced hotels. One study reveals that for customers with a low level of attitudinal loyalty, perceived switching costs are highly effective in driving share of wallet when combined with an attractive reward program (Wirtz, Mattila & Lwin, 2007).

Although frequent-user programs might result in revisits and cross-selling for the mid-priced hotel segment, they have proven to be little effective in fostering true loyalty in the luxury segment (Duboff & Sherer, 1997; Duffy, 1998). In luxury hotels relationship building is

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20 essential in terms of recognition and special treatment, rather than providing guests with discounts and presents. Giving a customer the feeling that he or she gets personal attention will increase the likelihood for that customer to stay loyal to the luxury hotel. Kim and Cha (2002) empirically tested the consequences of relationship quality (i.e. feelings and emotional states induced by customer–employee interactions) in luxury hotels. Their results point out that higher relationship quality resulted in higher share of purchases, better relationship continuity and worth of mouth. Bowen and Shoemaker (2003) examined several features of relationship management to find out which ones foster loyalty for luxury hotel guests. The factors that engender loyalty in luxury hotels show that benefits that are related to individual recognition of the customer and customization of services (e.g. the hotel uses information from your prior stays to customize services for you) are rated much higher than monetary-based rewards or gifts. Tideswell and Fredline (2004) performed a comparable study by investigating what exactly it is that customers want as additional value in return for their commitment to, and repeat patronage of, a five-star hotel property. They found similar results, although frequent guest programs were also considered moderately important.

The economy segment is not expected to care about building relationships, but is rather interested in seeking value for low prices. In conclusion, customer equity is relatively more driven by relationship equity in luxury and mid-priced hotels than in economy hotels.

3.2 Differences between hotel visitors

As consumers are highly heterogeneous, marketing academics and practitioners often group consumers into segments in order to better understand, and thus serve, these smaller, more homogeneous groups. This segmentation has been based on various characteristics. Commonly used segmenting characteristics are behavioral based, like personality (e.g. Big

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21 Five personality traits, Fiske, 1949), social class or lifestyle. Additionally, the wants and needs per customer varies based on the usage situation. For example, one’s restaurant choice, experience and evaluation probably depend on the company (e.g. friends or business associates) and occasion (e.g. casual date or formal meeting). Although all of these segmentation bases could provide interesting insights, the hospitality literature has mainly distinguished customers based on demographic characteristics, like gender, age, education and family composition.

Research has shown that factors that are considered important to travelers differ according to certain characteristics. Ananth et al. (1992) found significant differences between older (>59) and younger (<59) travelers in factors determining hotel choice. Value-related factors like, for instance, free breakfast and bathroom amenities were significantly more important to the younger segment. This age group considered ‘tie-in with airline frequent-traveler programs’ more important as well, indicating potential sensitivity towards relationship-building strategies. Another study found that female business travelers consider security, personal services and low price more important than men (McCleary, Weaver & Lan, 1994). Contrasting the results of this study, Shanka and Taylor (2004) did not find significant differences for gender. Their results, nevertheless, point out age differences: younger (<50) consumers considered physical facilities important, whereas the services provided component seemed particularly important the older (51+) age group (Shanka & Taylor, 2004).

Besides differences in perceived importance of aspects, drivers of loyalty behavior have been proven to vary based on gender and age as well. Iacobucci and Ostrom (1993) found that women are in general more sensitive to relational aspects of service encounters in case of long-term interaction. Mittal and Kamakura (2001) and Homburg and Giering (2001) found

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22 that at the same level of satisfaction, men were more likely to repurchase than women. Skogland and Siguaw (2004) confirmed these findings in a hotel context, as their study revealed that men were more likely to reduce risk by purchasing a known hotel. Ndubisi (2006), however, found different effects for trust in the banking industry: he showed that women are significantly more loyal compared to men at higher levels of trust in the bank. Mittal and Kamakura (2001) and Homburg and Giering (2001) also found a moderating effect of age on the satisfaction-repurchase behavior relationship, although the direction of the results were conflicting. Contrary to these findings, other studies did not find that age or gender influenced the relationship between satisfaction and repurchase (Mägi, 2003; Mattila, 2007) or share of wallet (Cooil, Keiningham, Aksoy & Hsu, 2007). Also education had no impact (Cooil, Keiningham, Aksoy & Hsu, 2007).

Another common way to group hotel visitors is according to their purpose of visit (i.e. business versus pleasure travelers). In this regard, Lewis (1985) and Knutson (1988) found that leisure travelers were more concerned about rates than were business travelers. The latter group is mostly concerned with location (McCleary, Weaver & Hutchinson, 1993). Other studies also found travel purpose to influence hotel type selection (Min, Min & Emam, 2002) and importance of hotel choice criteria (Yavas & Babakus, 2005). Earlier studies, in contrast, had not found any significant differences between business and leisure travelers regarding their perceived importance of hotel selection factors (Chu & Choi, 2000; Shanka & Taylor, 2004).

In summary, prior research has found divergent results regarding differences between demographic groups in a consumer context, which makes it difficult to express any expectations of the precise effect of demographic variables on the relative importance of

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23 equity drivers. However, consumers seem to differ in what is important to them and what drives them to show repurchase behavior. Besides, of all the reviewed literature, no studies have examined the differences in relative customer equity driver importance for distinctive demographic groups. Hence, in order to increase our understanding of which driving forces of customer equity impact which consumer segments, and in what context, it is relevant to explore the moderating effect of demographics and travel purpose. Demographic variables which effects will be explored are: gender, age, family composition and education. For the latter two, no literature has been found that gives us any specific expectations on the relative driver importance. They seem, however, interesting to investigate in a hotel context as family composition might say something about travelling companions (i.e. partner and/or kids), and education about decision-making (e.g. need for cognition, Cacioppo & Petty, 1982).

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24 3.3 Conceptual model

Hence, type of hotel, purpose of visit, age, gender, family composition and education are expected to have an impact on the relative importance of value, brand and relationship equity in building customer equity in the hotel industry. Altogether, this result in the following conceptual model:

Figure 1. Conceptual Model Value equity Brand equity Relationship equity Customer equity Type of hotel Consumer demographics - gender - age - family composition - education Purpose of visit

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4. Methodology

4.1 Data collection

The total sample consists of 125 cases. 77 of the responses were collected via an online survey. First, a self-selection approach was used. The link to the survey was placed on social media pages and people were invited to participate in the research. Second, a snowball sampling approach was used in order to collect data from travelers unknown to the researcher: respondents were requested to forward the survey link to any other person they know that sometimes stays in a hotel and would be willing to participate. Besides the online survey, data was collected at the WTC train station and Schiphol airport, where people were asked to fill out a paper-based questionnaire. This resulted in another 48 respondents. The combined internet-mediated and paper-based approach has the advantage that the sample includes more varied respondents. For example, older people, which are an important subgroup of the population, are represented in the sample as well.

4.2 Measurements

The questionnaire consisted of eight statements on which respondents were asked to indicate the degree to which they (dis)agreed with a certain item on a seven-point Likert scale. The eight statements reflect the sub drivers of the three equity drivers as found by Rust, Zeithaml and Lemon (2000/2001, pp. 89-141). Ethics, which they found to be part of brand equity in the airline industry, however, was not included as this driver seems less applicable to the hotel industry. Only one item per sub driver was included in the scale in order to increase the response rate. Furthermore, respondents were asked in which type of hotel they most usually stay, and for what purposes. They could choose between budget, mid-priced and luxury hotel, and business or pleasure stay as visit context. Lastly, their demographics (i.e. age, gender,

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26 education and family composition) were asked. For gender, male or female are the two options. Age is measured on a numerical scale. The family composition scale consists of single, married or life partner, with or without children. Education will be measured by the highest obtained degree. As clarification for the Dutch respondents, the Dutch equivalents of the degrees were indicated between brackets. The complete survey can be found in Appendix I.

4.3 Sample

The final sample consists of 74 male and 51 female, of which 89 are pleasure and 36 are business travelers. 22,4% usually stays in budget hotels, 57,6% in mid-priced hotels, and 20% in luxury hotels. Respondents’ age ranges from 19 to 75 years old. 50 respondents are single without children, 39 married with children, 17 have a life partner but no children, and the remaining 19 are either single with children (n = 6), married without children (n = 5) or have a life partner without children (n = 8). Only 11 respondents completed high school (n= 9) or less (n=2), 19 completed vocational education, 53 higher education, 34 obtained a Master’s degree, and the remaining 8 a Doctoral degree.

The next section describes the data analysis approach and provides the results of these analyses.

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5. Results

5.1 Data analysis

IBM SPSS statistics software was used to analyze the data. First, the data is checked on missing values and outliers: no outliers are detected and two incomplete cases are deleted list wise. Then, independent sample t-tests and one-way ANOVA compute whether the various segments scored significantly different on the items at the α = .05 level. A Shapiro-Wilk test checked whether the sample was drawn from a normally distributed population. The outputs provide strong evidence against normality (p = .000). Although often claimed differently (e.g. Jamieson, 2004), parametric statistical tests are highly robust to non-normality and skewness, for sample sizes greater than 5 (Norman, 2014). In other words, the chance of erroneous results does not significantly increase if the assumptions are violated. Hence, t-test and ANOVA are still appropriate to test equality of means. Further, Levene’s test was used to verify the assumption of equal variances across groups. Next, the factorability of the data (i.e. sampling adequacy for factor analysis) is measured by means of Kaiser-Mayer Olkin and Bartlett’s test of sphericity. The outcomes indicate suitability of the data as KMO > .6 (.748) and Bartlett’s is significant (p = .000). Subsequently, several factor analyses are run in order to determine the relative importance placed on the three customer equity drivers by hotel visitors. The technique used is a principal components extraction based on eigenvalue >1 criterion and Direct Oblimin rotation. The following sections describe the results of the performed analyses.

5.2 Type of hotel

To gain insights on the differences between types of hotels concerning the importance placed on the separate items, a one-way ANOVA analysis was run. The output (Appendix II, Table

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28 1) shows significant differences between hotel types on price and quality (p < .01), customized service and recognition (p < .05), and marginally significant on convenience (p < .10). The importance placed on quality and customized service increases from budget to luxury hotel (Mbud = 5.50, Mmid = 6.08,Mlux = 6.52; Mbud = 3.79, Mmid = 4.29,Mlux = 5.04). Convenience is perceived more important in luxury (Mlux = 6.16) and mid-priced (Mmid = 5.93) hotels, compared to budget hotels (Mbud = 5.50). Recognition is considered substantially more important in luxury hotels (Mlux = 5.20), than in budget and mid-priced hotels (Mbud = 4.21, Mmid = 4.21). Price, in contrast, plays a significant smaller role in luxury hotels, than in mid-priced and budget hotels (Mbud = 6.11, Mmid = 5.96,Mlux = 5.08).

A factor analysis was conducted in order to find the number of underlying components of the eight items and their construction and internal item weightings. Running a factor analysis on all cases extracts two principal components (see Table 1). The first component is closely associated with all three relationship equity items (Lcustom = .877, LFGP = .799, Lrecog = .787), and moderately associated with the brand equity items (Lfamil = .591, Limage = .497). So, the brand equity items are relatively less important in measuring this factor. The second component consists of price (Lprice = .739), quality (Lqual = .647) and convenience (Lconv = .639); the three items measuring value equity. Considering the total means of the driver items, value equity seems to be most relevant in the overall hotel industry. The same factor analysis was performed for the individual types of hotels in order to discover any differences between budget, mid-priced and luxury hotels.

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29 Total hotel industry

Components 1 2 Familiarity .591 Image .497 Price .739 Quality .649 Convenience .639 FGP .799 Customized .877 Recognition .787

Table 1. Components and factor loadings per type of hotel

Running a factor analysis that only includes cases for which hotel type is budget, extracts three principal components. Table 2 portraits the components and its factor loadings. The first component is highly related to frequent guest programs (LFGP = .918) and customized service (Lcustom = .902). The second component consists of price (Lprice = .852), quality (Lqual = .747) and convenience (Lconv = .746). Lastly, familiarity (Lfamil = .759), image (Limage = .721) and recognition (Lrecog = .657) load high on the third component. So, compared to the total hotel industry, budget hotels also need to separately manage brand equity (including recognition), besides value and relationship equity. Comparing the means scored on each item (Appendix II, Table 1) reveals that value equity is substantially more important in budget hotels than brand equity and relationship equity, respectively.

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Budget hotels Mid-priced hotels Luxury hotels

Components 1 2 3 1 2 1 2 Familiarity .759 .632 .790 Image .721 .502 .728 Price .852 .876 .432 Quality .747 .812 .846 Convenience .746 .827 FGP .918 .864 .649 Customized .902 .879 .655 Recognition .657 .803 .551

Table 2. Components and factor loadings per type of hotel

Running a factor analysis on mid-priced hotels yields very similar results to the total hotel industry. This is not surprising as mid-priced hotels are near 60% of the total sample. Two principal components are extracted (see Table 2); one consisting of the relationship equity items (Lcustom = .879, LFGP = .864, Lrecog = .803) and moderately related to brand equity (Lfamil = .632, Limage = .502), and the other consisting of price (Lprice = .876) and quality (Lqual = .812). Convenience, nevertheless, shows no significant loading on any of these components. Comparing the means scored on the separate equity drivers reveals that value equity is considered most important.

Running a factor analysis on al driver items, including only luxury hotel cases, extracts two principal components (Table 2). The loadings on these components, however, differ in an

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31 interesting way from the general and mid-priced ones. The first component is highly loaded by the two brand equity items, familiarity (Lfamil = .790) and image (Limage = .728). Also, the three relationship equity items belong to this component (Lcustom = .655, LFGP = .649, Lrecog = .551). Frequent guest programs and customized service are stronger loaded than recognition. Additionally, price loads relatively low on this component (Lprice = .432). The second component consists of quality (Lqual = .846) and convenience (Lconv = .827). Again, the latter component, reflecting value equity, is considered the most important. In the case of luxury hotels, however, price does not relate to value.

5.3 Purpose of travel

An independent samples t-test was run to examine the differences between business and pleasure travelers regarding their perceived importance of driver items. The results (Appendix II, Table 2) show significant differences between travel purposes on familiarity, convenience and frequent guest programs (p < .05). For each of these, business travelers indicated a higher importance mean compared to pleasure travelers (Mbusiness = 5.28 , Mpleasure = 4.64; Mbusiness = 6.22 , Mpleasure = 4.74; Mbusiness = 4.61 , Mpleasure = 3.94).

Again, a factor analysis was performed for the distinct travel purposes in order to discover any differences between business and pleasure travelers’ relative importance of equity drivers. Running a factor analysis that only includes cases for which travel purpose is business, extracts three principal components. Table 3 portraits the components and its factor loadings. The first component consists of all relationship and brand equity items (LFGP = .754, Lcustom = .748, Limage = .701, Lfamil = .635, Lrecog = .605). Convenience (Lconv = .844) and quality (Lqual = .576) load on the second component. Lastly, there is a third component, reflecting price only (Lprice = .776).

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32 Business Pleasure Components 1 2 3 1 2 Familiarity .635 .531 Image .701 .447 Price .776 .835 Quality .576 .683 Convenience .844 .600 FGP .754 .839 Customized .748 .904 Recognition .605 .800

Table 3. Components and factor loadings per travel purpose

Running a factor analysis that only includes cases for which travel purpose is pleasure, extracts two principal components (Table 3). The first component’s composition is similar to the first business component (i.e. all relationship and brand equity items load on it), however, recognition weights relatively heavier and the loadings of relationship equity (Lcustom = .904, LFGP = .839, Lrecog = .800) are significantly higher than those of brand equity (Lfamil = .531, Limage = .447). So, relationship equity, including recognition, is relatively more important to pleasure travelers, whereas brand equity plays a role for business travelers as well. The second component reflects value equity, in which price (Lprice = .835), is substantially more important than quality (Lqual = .683) and convenience (Lconv = .600). Hence, price plays an

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33 important role for both travel purposes, yet convenience is a more important concept in defining value equity for business than for pleasure travelers.

5.4 Gender

Again, an independent samples t-test is performed in order to test the differences in perceived importance of driver items for males and females. The outcomes (Appendix II, Table 3) indicate that quality is significantly more important for men than for women (p < .05) in their decision to return to a hotel (Mm = 6.19, Mf = 5.82). On other aspects, no absolute differences were found.

Table 4 on the next page shows few differences in the outcomes from the factor analyses per gender. Both for male and for female, the first component consists of the relationship equity (Lcustom = .885, LFGP = .879, Lrecog = .672; Lcustom = .905, Lrecog = .858, LFGP = .719) and brand equity items (Lfamil = .508, Limage = .304; Limage = .511, Lfamil = .434). From the weightings can be concluded that for both sexes, relationship equity is relatively important compared to brand equity. Nevertheless, recognition seems slightly more important to woman, whereas men weight frequent guest programs relatively heavier. The value equity items load high on the second component for female (Lprice = .867, Lqual = .727, Lconv = .655). Familiarity loads relatively weak on this component as well (Lfamil = .483). For men, the value equity items are divided over two separate components: the first consisting of quality and convenience (Lqual = .819, Lconv = .811), the second of price (Lprice = .727). Additionally, the brand equity items load moderately negative on this component (Limage = -.559, Lfamil = -.415). These outcomes suggest that price is relatively important to both male and female, yet that quality and convenience seem relatively more important to men.

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34 Male Female Components 1 2 3 1 2 Familiarity .508 -.415 .434 .483 Image .304 -.559 .511 Price .727 .867 Quality .819 .727 Convenience .811 .655 FGP .879 .719 Customized .885 .905 Recognition .672 .858

Table 4. Components and factor loadings per gender 5.5 Age

Age got measured on a numerical scale. Before testing the effect of age on the relative importance of drivers, the respondents are grouped into age intervals. Several intervals were tested to identify which are most homogeneous in group and most heterogeneous between groups. Ideally, each group has an approximately equal size. The resulting intervals are younger than 25 (n= 37), 26 to 35 (n= 28), 36 to 50 (n= 32) and older than 51 (n= 28).

A one-way ANOVA is conducted in order to investigate driver importance differences between age groups. The results (Appendix II, Table 4) suggest that the perceived importance of familiarity and convenience is unequal for the four age groups (p < .05). Familiarity is least important for hotel visitors aged younger than 35 years (M26-35 = 4.46, M<25 = 4.54), more

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35 important to the 36-50 aged (M36-50 = 4.91), and most important to the >51 aged (M>51 = 5.46). The convenience aspect is found to be significantly less important to the youngest age group (M>51 = 6.11, M36-50 = 5.97, M26-35 = 6.11, M<25 = 5.46).

Factor analyses per sub group extracts three components for all ages. As can be seen in Table 5, the relationship equity items load high on one component for all groups (from >51 to 25-36: LFGP = .749, Lcustom = .789, Lrecog = .881; LFGP = .924, Lcustom = .793, Lrecog = .590; LFGP = .903, Lcustom = .901, Lrecog = .822) except for the <25 aged. For these youngest travelers recognition loads high (Lrecog = .821) on a different component, further consisting of moderate loadings of the brand equity items (Lfamil = .551, Limage = .660). As can be seen from the relationship equity weightings, recognition loads relatively heavier for the 26-35 age group compared to the two oldest groups. Hence, recognition plays a relatively important role for travelers younger than 35 years compared to travelers older than 35 years. The brand equity items load relatively low for the two youngest and the oldest group (Lfamil = .551, Limage = .660; Limage = .579, Lfamil = .403; Limage = .499, Lfamil = -.590/.469). These items play a significantly more important role for travelers aged 36 to 50 (Limage = -.717, Lfamil = -.904). Again, the total value equity plays a relatively important role for all ages, however, the importance of the individual items differs. Convenience is relatively unimportant to hotel visitors under 25 years (Lconv = .547). Price is a separate component with a high loading in both the 26-35 (Lprice = .886) and 36-50 group (Lprice = .929), whereas this is the case for quality in the oldest group (Lqual = .921). Ultimately, quality seems of relative less importance to the 36-50 aged travelers (Lqual = .604).

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36 <25 26-35 36-50 >51 Components 1 2 3 1 2 3 1 2 3 1 2 3 Familiarity .551 .579 -.904 -.590 .469 Image .660 .403 .516 -.717 .499 Price .926 .886 .929 -.701 Quality .889 .772 .604 .921 Convenience .547 .880 .801 .427 .817 FGP .891 .749 .924 .903 Customized .950 .789 .793 .901 Recognition .821 .881 .590 .822

Table 5. Components and factor loadings per age group 5.6 Family Composition

Family composition got measured on a scale with six options. Not all family compositions are sufficiently represented in the sample. Therefore, family compositions are classified into a ‘without children’ (n = 72) and ‘with children’ (n = 53) group.

A one-way ANOVA indicates marginally significant differences for familiarity and customized service between respondents with children and those without children (p < 0.1; Appendix II, Table 5). For both variables, travelers with children reported a higher perceived importance than travelers that do not have children (Mchildren = 5.11, Mno-child = 4.61; Mchildren = 4.62, Mno-child = 4.11).

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37 Running a factor analysis that only includes hotel visitors with children, extracts three principal components. Table 6 depicts the components and its factor loadings. The relationship equity items load high on the first component (Lcustom = .881, Lrecog = .839; LFGP = .790). Further, the familiarity and quality items load moderately, but relatively low on this component (Lfamil = .568, Lqual = .478). For the second component, price weights relatively high (Lprice = .664), and familiarity and image moderate (Lfamil = .409, Limage = .550). Also quality loads moderately on this component, yet the loading is negative (Lqual = -.529). The third component mainly consists of convenience (Lconv = .946). This output suggests that relationship equity plays an important role for families with children, together with the convenience and price aspects of value equity.

With children Without

children Components 1 2 3 1 2 Familiarity .568 .409 .520 .355 Image .550 .498 .524 Price .664 .822 Quality .478 -.529 .828 Convenience .946 .571 FGP .790 .780 Customized .881 .853 Recognition .839 .789

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38 Factor analysis for travelers without children extracts two components (see Table 6). Similar to the without children group, the first component consists of the relationship equity items (Lcustom = .851, Lrecog = .789, LFGP = .780). The brand equity items load moderately on this component (Lfamil = .520, Limage = .524). The second component reflects the value equity items (Lqual = .828, Lprice = .822, Lconv = .571). For both family compositions, relationship equity plays an important role. Also value equity plays a role, yet reviewing the individual item weightings reveals a striking difference is the importance of the sub drivers of this type of equity. Families with children are more convenience-focused, whereas families without children care more about quality. The role of brand equity seems comparable in both sub groups (i.e. subordinate role), and does not differ compared to the total hotel industry.

5.7 Education

Education was measured on a scale with six options. The lowerst three levels of education (i.e. less than high school, high school and vocational education) are recoded into ‘low educated’ and the highest three levels of education into ‘highly educated’. This resulted in sub group sizes of nlow = 30 and nhigh = 95.

Means comparison of both groups indicates that customized service and recognition are significantly more important (p < 0.05; Appendix II, Table 6) to low educated (Mcustom = 4.93 and Mrecog = 5.00) as compared to high educated (Mcustom= 4.14 and Mrecog = 4.22).

Once more, factor analyses are performed per sub group. Both analyses extract two components (see Table 7). Although the items loading on the two components are highly similar for low and high educated, the weightings differ in an interesting way. The first component of low educated hotel visitors consists of the brand equity items (Lfamil = .851, Limage = .737), relationship equity items (LFGP = .676, Lrecog = .642, Lcustom = .422), and

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39 convenience (Lconv = .634). Except for convenience, this also hold for the high educated (Lcustom = .865, Lrecog = .733, LFGP = .711, Lfamil = .539, Limage = .508). From the magnitude of the loadings, however, we can conclude that brand equity plays a relatively more important role for low educated than high educated, while relationship equity is relatively more important for high educated. For these travalers with high education, the second component consists of the three value equity items (Lprice = .770, Lqual = .716, Lconv = .670). The second component of low educated is somewhat more complex to interpret. Quality and customized service load relatively highest, but negatively on this component (Lqual = -.777, Lcustom = -.729), and price loads moderately high (positive) on it. Hence, price moves opposite to quality and convenience. This might indicate some price/quality trade-off. It seems that the perceived importance of a good price justifies a lower level of quality and customized service.

Low educated High educated

Components 1 2 1 2 Familiarity .851 .539 Image .737 .508 Price .643 .770 Quality -.777 .716 Convenience .634 .670 FGP .676 -.460 .711 Customized .422 -.729 .865 Recognition .642 -.521 .733

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6. Conclusion

This study’s objective was to explain the relative importance of the three drivers of customer equity in the hotel industry, and how this is different for distinct hotel types, visit purposes, gender, age groups and family compositions.

The results indicate that all three customer equity drivers play a role in the hotel industry, which is consistent with previous studies that found the individual drivers to influence customer equity. These studies, however, did not examine the drivers simultaneously and, therefore, were not able to provide any insights on the relative importance placed on the three drivers. This research reveals that value equity and relationship equity, respectively, are considered most important by hotel visitors in general in their decision to return to a particular hotel. Nevertheless, the outcomes confirm the expectation that the relative importance of the drivers differs based on hotel type. Brand equity plays a relatively more important role in luxury and budget hotels than in mid-priced hotels. This partly confirms, and partly contradicts expectations based on the existing literature. As expected, a luxury hotel’s brand is perceived relatively important. This might be explained by the added symbolic value Fredericks & Salter, 1995), and supports prior research that found brand to positively influence loyalty (Mazanec, 1995; Aiello, Donvito, Godey, Pederzoli, Wiedmann, Hennigs, Siebels, Chan, Tsuchiya, Rabino, Ivanovna, Weitz, Oh & Singh, 2009; Liu, Li, Mizerski & Soh, 2012). Against expectations, brand plays a relatively important role in budget hotels. This might reflect some level of perceived risk involved in booking a budget hotel (e.g. low quality standards). Also, for this type of hotel, recognition is correlated with brand equity. This might imply that the recognition and special treatment item is actually measuring the emotional attachment aspect of a brand in case of budget hotels. For mid-priced hotels, brand

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41 equity is of less relative importance than anticipated based on prior research (Kandampully & Suhartanto, 2003; Kim, Jin-sun & Kim, 2008). This indicates that hotel visitors do not need hotel brands for choosing between the large range of options in the mid-priced hotel sector, nor do they experience a high level of risk. However, no absolute significant difference in either familiarity or image between hotel types can be concluded from the means comparison analysis. Further, relationship equity is relatively less important in luxury hotels. Although this was expected for monetary benefits (i.e. frequent guest programs, Duboff & Sherer, 1997; Duffy, 1998), customized service and recognition were anticipated to be of high importance (Kim & Cha, 2002; Bowen & Shoemaker, 2003; Tideswell & Fredline, 2004). Confirming this expectation, means comparison analysis shows significantly higher absolute importance placed on these two items, compared to budget and mid-priced hotels. The results on relationship equity further confirm the important role of this type of equity in mid-priced hotels (Wirtz, Mattila & Lwin, 2007; Tanford, Raab and Kim; 2011), yet reject the expectation that building relationships is unimportant in budget hotels. Furthermore, as hypothesized, price is unrelated to value in luxury hotels and plays a significant smaller role, both in relative and absolute terms, compared to mid-priced and budget hotels. Finally, although value equity is, relatively speaking, equally important for all hotel types, the absolute importance placed on quality and convenience increases from budget to luxury hotel. The results also confirm the expectation that travel purpose influences the importance placed on the three equity drivers. Brand equity plays a relatively more important role in a business context, and familiarity is significantly more important to this group of travelers in absolute terms as well. Relationship equity, recognition in particular, is relatively more important to pleasure travelers. The absolute importance of frequent guest programs, in contrast, is rated

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42 higher by business travelers. Furthermore, convenience is substantially more important to business travelers, both in absolute and relative terms. This confirms the findings of prior studies that found that business travelers consider location as highly important (e.g. McCleary, Weaver & Hutchinson, 1993). Ultimately, although the existing literature suggests that leisure travelers are more concerned about rates than business travelers (Lewis, 1985; Knutson, 1988), price is relatively important to both business and pleasure travelers.

Besides, breaking up the total hotel market into men and woman results in little nuances in relative importance of drivers. Recognition seems slightly more important to woman in considering relationship equity, whereas men weight frequent guest programs relatively heavier. This confirms the expected sensitivity of women to relational aspects of service encounters. Although price is, relatively seen, equally important to male and female, quality and convenience are relatively more important to men. Moreover, examining absolute mean differences based on gender also suggests that quality is significantly more important to male than female in their decision to return to a hotel.

Also age groups were compared. The eldest people (i.e. >51) care significantly more about familiarity than the 36-50 aged, which in turn are more concerned about this aspect than travelers of the age <25 and 26-35 years in their decision to return to a hotel. Convenience is significantly less important to the youngest age group compared to travelers older than 25. In relative terms, the recognition aspect weights heavy for relationship equity to hotel visitors younger than 35 years, compared to hotel visitors older than 35 years. Although, overall, brand equity plays a relatively unimportant role, the familiarity and brands items play a substantial role for the 36-50 age group. Furthermore, convenience plays a relatively small role to the youngest travelers (comparable to results in absolute terms), whereas for the oldest

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43 travelers price plays a slightly smaller role compared to all other age groups. Ultimately, quality seems to be substantially less important to the 36-50 aged travelers and, in contrast, particularly important to those aged 51 and older.

Family compositions were compared in terms of having children or not. No significant differences in means were found between travelers with children and those without children. Only familiarity and customized service were marginally significantly higher for travelers that do not have children. Comparing the relative importance of drivers suggested that the sub drivers of value equity differ in importance: convenience weights higher for families with children, whereas families without children are more concerned with quality.

Lastly, hotel visitors were compared based on their level of education. Means comparison indicated that customized service and recognition are significantly more important to low educated as compared to high educated. In relative terms, relationship equity plays a more important role for high educated, while brand equity is more important to low educated. Additionally, although value equity plays a role in both groups, the composition and role of subdrivers is distinct. Travelers with low education seem to make a trade-off between quality and customized service, and price. For high educated, quality, price and convenience are all important in assessing value equity.

In conclusion, the results confirm that examination of the relative importance of equity drivers, rather than solely the absolute importance, gives interesting insights.

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7. Discussion

7.1 Theoretical implications

This study contributed to the existing literature in several ways. First, prior research has shown the effect of value, brand and relationship equity. This study confirms that all three drivers to some extent affect customer equity in the hotel industry. The second and main contribution is the simultaneous examination of the three drivers in this particular industry. Previous studies only investigated the drivers or components of it separately, neglecting the fact that this might blind us from other, perhaps stronger, influences of other drivers. Simultaneous measurement allows for comparisons of effects, resulting in conclusions on the relative importance of customer equity drivers. Furthermore, (relative) importance was compared for different hotel types, travel situations and customer groups. This pinpointed that the overall results (i.e. total hotel industry) are not generalizable. Hence, more accurate conclusions could be drawn, resulting in more useful insights for hotel managers.

7.2 Practical implications

The outcomes of this study give insights to hotel managers concerning important areas to focus on in order to build customer equity. Budget hotels will have to balance all three types of equity, whereas mid-priced hotels need to focus on relationship and value equity to improve their relative market position. Luxury hotels, in contrast, should be more concerned about building a strong brand. The comparison based on travel purposes and customer characteristics helps hotel managers to tailor service offering for distinct segments and in this way optimize their customer equity. Business travelers, for example, are more interested in convenience compared to leisure travelers. Consequently, location (e.g. distance to business

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45 center) plays an important role and less convenient locations might have to be compensated by offering free shuttle services.

7.3 Limitations

This study has several shortcomings. First, all three equity drivers were measured using only two or three items. Brand equity, in particular, is a broad and hard to measure construct: scales with many items have been developed to measure this construct (e.g. Yoo and Donthu, 2001). Using all these items, however, would have severely affected the response rate. Therefore, this construct’s measurement scale has been simplified to its two main components: brand awareness and brand image. Familiarity and image, however, are concepts that might not be accurately measured using only one item. Additionally, image is not something consumers can really relate to. The question “Do you identify with the other visitors of this hotel?”, for instance, might have made more sense to them. Another shortcoming of this study is that respondents were asked to indicate the type of hotel they most usually visit. They might, however, not be totally aware of the criteria that define hotel types and distinguish them. This might have resulted in respondents filling out the survey for a different type of hotel than they have indicated. An alternative would have been to ask for the name of one particular hotel that they have stayed in, and subsequently classify this hotel according to established criteria. This, however, might have led to confusion about what was asked for in the equity driver questions. There is a risk that respondents would fill out the survey indicating performance of that particular hotel on the different aspects, rather than the desired level. Third, the outcomes indicate intentions rather than real behavior. Prior research has shown that the degree of consistency between intentions and behavior is influenced by several factors (Sheeran, 2002). Conclusions from this study, therefore, might not accurately

Customer equity in hotels : the role of hotel type, visit purpose and consumer characteristics