See discussions, stats, and author profiles for this publication at: [Link]

net/publication/276131348

The Nature of Hotel Chains: An Integrative Framework

Article  in  International Journal of Hospitality & Tourism Administration · April 2015

DOI: 10.1080/15256480.2015.1023639

CITATIONS READS

17 3,570

2 authors:

Maya G. Ivanova Stanislav H Ivanov

Varna University of Management Varna University of Management
50 PUBLICATIONS   180 CITATIONS    190 PUBLICATIONS   2,261 CITATIONS   

SEE PROFILE SEE PROFILE

Some of the authors of this publication are also working on these related projects:

DESTINATION MARKETING AND MANAGEMENT View project

Air transport and tourism relationship - case study of the Bulgarian Black Sea coast View project

All content following this page was uploaded by Stanislav H Ivanov on 02 July 2015.

The user has requested enhancement of the downloaded file.

 The nature of hotel chains: An integrative framework
Maya Ivanova and Stanislav Ivanov

Maya Ivanova, PhD

Assistant Professor, International University College, Bulgaria
E-mail: [Link]@[Link]

Stanislav Ivanov, PhD.

Professor and Vice Rector, International University College, Bulgaria; tel.: +359 58 655612,
e-mail: [Link]@[Link]

Corresponding author: Stanislav Ivanov

Abstract

Despite the huge research in field of hotel chains, a general conceptual model of a hotel chain

does not exist yet. Therefore, the paper aims at filling this gap by analyzing the nature of hotel

chains from three different perspectives (resource-based view, value chain and stakeholder

network perspectives) which are the sources of their competitive advantage. For all

perspectives we develop partial models of a hotel chain which are then combined into one

integrated model that can be used in the strategic analysis of hotel chains. Managerial

implications and limitations of the integrated and the three partial models are discussed.

Key words: hotel chain, resource-based view, stakeholder network theory, value chain,

integrated model of a hotel chain

Short title: The nature of hotel chains

Forthcoming as: Ivanova, M., Ivanov, S. (2015). The nature of hotel chains: An integrative
framework. International Journal of Hospitality and Tourism Administration, 16(2)

1
Introduction

Hotel chains, defined as a horizontal alliance of hotels under a common brand (Ivanov &

Zhechev, 2011) appear as major actors in the global hospitality industry. In 2013 they

encompass 67% of the total hotel room supply in the North America, but only 28% in Asia-

Pacific, 26% in Europe, 23% in Middle East and Africa, and 20% in Latin America

(Komodromou, 2013). However, due to processes like mergers and acquisitions, hotel chains

change radically the competition in global aspect (Cunill, 2006). Although there were

attempts to explain the success of hotel chains as organizations (Burges et al., 1995), their

multifaceted nature has not received enough attention. Research on hotel chains so far has

focused on internationalization of hotel chains (Bender et al., 2008; Cunill, 2006; Littlejohn et

al., 2007), modal choice (Alon et al., 2012; Contractor & Kundu, 1998; Dev et al., 2007; Quer

et al., 2007; Rodriguez, 2002), types of affiliation (Butler & Braun, 2011; Cunill & Forteza,

2010; Deroos, 2010; Roper, 1995), partner selection (Altinay & Okumuz, 2010), chain

performance (Barros & Mascarenhas, 2005; O’Neill & Carlbaeck, 2010), human resource

management within the chain (Davidson et al., 2006; Gannon et al., 2012), competitive

advantages for affiliated hotels in comparison to independent ones (O’Neill & Carlbaeck,

2010; O’Neill & Xiao, 2006), role of control in the expansion strategies of hotel chains

(Ghorbal-Blal, 2008) to name just a few directions. However, despite the huge research on

hotel chains in specialized literature, surprisingly a general conceptual model of a hotel chain

does not exist yet. The academic literature recognizes the fact that hotel chains are multiunit

enterprises which affiliate under a common brand hotels by various contracts and often

operate beyond country borders, but the nature of hotel chains as enterprises has not been

systematically researched. In this regard, current paper aims at filling this gap and develops an

integrative framework (Pearce, 2012) for the study of the nature of hotel chains which

culminates into the formulation of an integrated conceptual model of a hotel chain.

2
Hotel chains are an interesting object to research, due to their distinctive combination of

unique features – they are multiunit (and often multinational) enterprises in a service industry,

in particular the hotel industry. Several specific implications stem from these features that

influence the way we will look at the hotel chains in search of an integrated model for them:

1) Hotel chains are economic entities that utilize different resources in order to produce a

hotel product for the consumers.

2) Hotel chains unite more than one unit, which raises the question about the way hotels get

affiliated to the chain (by ownership, managerial contract, franchise, marketing consortium or

leasing) and the relationships that arise between the central chain management, hotel owners,

hotel managers and among hotels from the same chain;

3) Hotel chains often operate in more than one country, i.e. they face different macro- and

microenvironmental factors within each national market;

4) Hotel chains are service industry enterprises – their product is essentially a service, which

presumes predominantly intangible product elements that are not easy to transfer, and causes

challenges in maintaining coherent service quality at each affiliated hotel;

5) While service industries in general are considered to have low capital requirements

(Erramili & Rao, 1993), a hotel is a large financial investment, which determines the

dominance of non-equity entry modes by hotel chains (or ‘types of affiliation’ from the view

point of the individual hotels) – i.e. managerial contract, franchise, marketing consortium,

leasing.

=====================

Insert Figure 1 around here

=====================

3
In the theory of the firm (Becerra, 2009) each company, including the hotel chain, can be seen

from different perspectives – what it possesses and uses (i.e. its resources), what it does (i.e.

its activities) and whom it works with (i.e. its stakeholders). In current paper we adopt these

three perspectives in order to develop an integrated model of a hotel chain (see Figure 1 for a

detailed depiction of the steps in developing the integrated model of a hotel chain applied in

the current paper). The first perspective is derived from the resource-based theory, holding

that companies can be perceived as bundles of resources, which gain sustainable competitive

advantage from the quantity, quality and the effective and efficient use of resources (Barney,

1991; Barney, Wright & Ketchen, 2001). The second perspective stems from Porter (1985)’s

value chain theory and stipulates that the company is a bundle of activities (primary and

support activities) that create value for the customer. The third perspective steps on the

premise that companies are bundles of relationships and they gain competitive advantage on

the basis of their networks of relationships with different stakeholders (Freeman, 2004, 2010).

Obviously, each perspective is justified but depicts a unilateral view on the nature of the firm,

including the nature of hotel chains. The three perspectives cannot be perceived as alternative

to each other, but as complementary, because they view one and the same concept (the nature

of the firm) from different angles. In this light, they can be applied simultaneously in the

analysis of the hotel chain in order to provide a more holistic view of its nature. In a similar

vein, Kim & Oh (2004) adopt the resource-based and stakeholder network theories, which are

two of the three pillars of current paper, and combine them with Porter’s Five Competitive

Forces model in order to develop an integrated approach to hotel’s competitiveness. In current

paper, we go beyond Kim & Oh (2004)’s approach as we concentrate on hotel chains

specifically and apply the resource-based and the stakeholder network theories to investigate

their nature. We analyze the hotel chain from each of the above mentioned perspectives

4
(resource-based, value chain and stakeholder perspectives). We first critically evaluate the

three perspectives in the context of hotel chains, develop partial hotel chain models based on

each of them, and then combine the three partial models into one integrated holistic model

(see Figure 1). This integrated model will help researchers and practitioners to better

understand and analyze the nature of hotel chains, the relationships that exist between their

various stakeholders and assess the sources of competitive advantages for a particular chain,

regardless of the type of affiliation of the individual hotels to the chain (equity or non-equity

types). Therefore, the integrated model can be used as an instrument in strategic analysis of

hotel chains by academics and chain managers. Managerial implications and directions for

future research are also addressed in the paper.

Resource-based perspective of a hotel chain

Resource-based theory of the firm

The resource-based view (RBV) perspective describes the firm as a bundle of resources which

form the ground of its competitive advantage (Barney, 1991, Barney & Arikan, 2001;

Harrison & Enz, 2005). It has emerged as a part of the theory of the firm, explaining the

reason for the different performance of similar firms (Madhok, 2002), and the process of firm

growth (Becerra, 2009: 57-59). Later, the RBV has become a constant part of the Strategic

management field for providing a reliable basis for formulating and implementing a corporate

strategy (Harrison & Enz, 2005; Becerra, 2009; Barney et al., 2001). The main idea of the

RBV is that the company achieves superior performance and profits through the effective and

efficient use of its internal resources, alongside with creating and applying unique capabilities

and learning (Dev et al., 2002; Foss, 1996). In this process the company continuously expands

in order to deploy the maximum of its resources. Different firms may grow at different rates

(Becerra, 2009) due to the heterogeneity of resources and capabilities each firm possesses. In

5
field of international business and hospitality RBV is quoted mainly with regard to the

international expansion and modal choice (Choi & Parsa, 2012; Contractor & Kundu, 1998;

Dev et al., 2002; Peng, 2001) and co-production/co-creation of hotel services (Chathoth et al.,

2013).

In the core of RBV perspective lie the firm’s resources. Resources could be source of

competitive advantage only if they are valuable, rare, inimitable and non-substitutable

(Barney & Arikan, 2001). Many classifications have been adapted for resources, but most

scholars agree they are tangible and intangible (Barney et al., 2001), whereas the intangible

resources incorporate not only intangible assets, but also different capabilities and

competences. While the academic literature distinguishes the terms “resources”, “assets”,

“capital”, “competencies”, “capabilities”, “dynamic capabilities” and “knowledge”, Barney &

Arikan (2001) show that many of these terms convey similar meaning and could be used

interchangeably.

For easier reference we chose to classify resources into 4 groups, following Barney & Arikan

(2001): tangible (physical and financial resources, or “capital” in the original Barney &

Arikan (2001) terminology), and intangible (human and organizational resources). However,

under “intangible resources” we classify assets like trade mark, reputation, service

technology, reservation system, etc. which are typical for the subject of our research – hotel

chains (as part of the service industry), and we put human resources in a separate group.

While physical and financial resources are easy to copy, human and intangible resources are

the ones that form a source of sustainable competitive advantage (Villalonga, 2004; Wright et

al., 1994) and contribute to the differentiation of the hotel (hotel chain). Furthermore, we

identify organizational knowledge, learning and capabilities as a separate group of firm

6
attributes because of three reasons: a) they represent the ability of the firm to learn, innovate

and create knowledge (Harrison & Enz, 2005: 93), which is a much more efficient way to

exploit and attain new competitive advantages; b) organizational capabilities play an

integrative role for the rest of the resources (Aung, 2000), and c) organizational capabilities

influence the choice of non-equity entry mode by the hotel chain (Erramilli, Agarwal & Dev,

2002). Furthermore, Hu et al. (2009) identify knowledge sharing and knowledge management

as a crucial process in implementing innovations in hospitality industry. Knowledge

management including creation, retention, sharing and utilization of knowledge within the

company (Harrison & Enz, 2005) is the basis of the knowledge-based view of the firm, which

Grant (1996) considers to be an outgrowth of the RBV.

Resource-based model of a hotel chain

The RBV model of a hotel chain (Figure 2) logically begins with all resources (physical,

financial, human, intangible), possessed by the hotel chain’s central management and the

individual affiliated hotel. Resources are transformed by the individual hotel during the

production process (operations) into a product that delivers value to the customer. The

specific marketing mix of the hotel is influenced directly or indirectly by the hotel chain’s

central management requirements and its knowledge, learning and capabilities.

=====================

Insert Figure 2 around here

=====================

It is important to point out that in the model the resources have dualistic nature – from one

side, they belong to the individual hotel or the chain’s central management itself, but from the

7
other, they could be used by the other party as well. The central online reservation system, for

example, belongs legally to the chain, but is used by the individual hotel too; the building as

an asset belongs to the hotel (or the owner of the hotel) but it is the physical environment

where the chain’s product is being produced. This dualism becomes even more important

considering the fact, as Cunill & Forteza (2010) and Contractor & Kundu (1998) show, that in

hotel industry affiliation on a contractual basis only (i.e. franchising, management contracts,

lease and marketing consortia) is very typical and surpasses equity-based type of affiliation

(full ownership, joint venture). In non-equity types of affiliation hotels within the chain keep

their judicial independence, yet in the same time utilize some of chain’s resources – brand,

image, technology. Resources of the individual hotel and the chain’s central management are

similar, but different in scale. Main differences come from the intangible resources and the

organizational capabilities – chain’s central management has much stronger brand reputation

and image, international experience and knowledge, while the individual hotel works mostly

on the local market and has deeper view of it.

All types of resources are entangled in the production process and transformed into final

product for clients. In this metamorphose the organizational capabilities and learning play a

crucial role providing unique features to the product and the rest of the marketing mix

elements (Madhok, 2002). While the resources are the static elements in the RBV model, the

organizational capabilities, knowledge and learning implement a dynamic role (Hallin &

Marnburg, 2008; Madhok, 1997), which enables the transformation of resources into products

that create value for the customers.

The essential role of the RBV model of a hotel chain is to threefold: a) demonstrate the types

of resources possessed by the chain and the individual property, b) how these resources are

8
transformed into products to create customer value, and c) the resource synergy experienced

by both parties in the relationship (the central chain management and the individual hotel).

The type of affiliation determines the nature of relations between both sides, and is also a

prerequisite for the flow of information, knowledge and resources between them which

enhances their own potential for creating and sustaining a competitive advantage. The closer

the relationship, the more effective is the exchange of information, knowledge, resources

between the individual hotel and the central chain management.

Both the individual hotel and the hotel chain experience resource advantages from the

affiliation – the hotel, for example, gains advantage from chain’s market knowledge, service

experience, brand recognition, service quality standards and operating manuals, while the

chain also benefits from its affiliated hotel (Peng, 2001) – increased financial resources

(through franchise / management / lease fees), knowledge about local markets (demand,

competition, suppliers, legal system). Therefore, both sides win from this resource synergy.

The RBV model of a hotel chain discussed above leads to a better understanding of a hotel

chain as a bundle of resources. It emphasizes the importance of intangible resources,

organizational learning, knowledge and capabilities for both the hotel chains and the

individual hotels and outlines the resource advantages that stem from hotel’s affiliation to the

chain and vice versa. However, as a disadvantage we could mention that the RBV perspective

of the hotel chain does not encompass all the process activities that take place within the

organization and lead to the effective and efficient use of resources, and the stakeholders that

shape organization’s decisions – disadvantages that are overcome by the other 2 partial

models to follow.

9
Value chain perspective of a hotel chain

Developed by Porter (1985) the value chain perspective holds that competitive advantages of

companies stem not from their resources but from the primary (directly connected with the

production function of the firm) and the support (forming the basic firm infrastructure)

activities companies implement. Porter (1991: 108) furthermore argues that “resources are not

valuable in and of themselves, but because they allow firms to perform activities that create

advantages in particular markets. Resources are only meaningful in the context of performing

certain activities to achieve certain competitive advantages”. With the help of the value chain

model the company can gain an overview of its activities’ contribution to the value created by

the company (van Assen et al., 2009). Value chain has also become a useful tool for

comparing different performances of firms in the search of competitive advantage, alongside

with RBV. Both theories build their premises on totally different sources – internal tangible

and intangible resources of the RBV, and primary and support activities of the firm’s value

chain. Recently, it has been recognized (Ray et al., 2004), that in fact these two approaches

are interconnected and complementary to one another. A set of resources cannot be a

guarantee for a competitive advantage and better performance of a firm – a dynamic element

is necessary, in order to “move” and make use of available resources. In the value chain

perspective the role of this dynamic element is performed by the different company activities,

while in the RBV – by the organizational knowledge, learning and capabilities. It is necessary

to note, that Porter’s primary and support activities are different from the organizational

learning, knowledge and capabilities in the RBV – the latter stem from the tacit knowledge of

the firm, while the former are “actions that firms engage in to accomplish some business

purpose or objective” (Ray et al., 2004: 24).

=====================

10
Insert Figure 3 around here

=====================

In Figure 3 we develop the total value chain model of a hotel chain. It is a combination

between the value chains of the central chain management (the upper part of the model) and

the individual affiliated hotel (the mirror image in the bottom part of the model). The value

chains of the central chain management and the individual affiliated hotel are integrated

predominantly through the primary activities – they can share inbound logistics, distribution,

marketing and sales, after sale service, though at different degree in each case. However, the

actual servicing process (operations) takes place in the individual property (depicted by the

thick line in Figure 3) by following the service standards determined by the central chain

management. In this way clients consume the product of a particular hotel, but perceive the

combined value, created both by the hotel and the chain’s central management. It should be

noted that when the hotel is owned by the chain, the boundaries between the hotel and the

central chain management blur and sharing activities becomes more intense.

Sharing marketing activities is very typical for hotel chains (Ivanova, 2011a) and that’s why

some even call them “branded hotel groups” (O’Neill & Carlbaeck, 2010). Strategic

marketing and branding is usually performed by central chain management, while any

individual hotel has the right and the obligation for organizing its own local marketing

campaign, but in accordance with the general guidelines established by the central chain

management. Same is valid for the rest of the primary activities – there are standards and

requirements, imposed by the central chain management, but individual hotels can adapt them

to local markets.

11
Secondary activities are usually offered as additional optional services by hotel chains’ central

management to chain members. Each hotel arranges its own firm infrastructure, human

resource management and procurement system, but secondary activities are often provided by

the central chain management to individual affiliated hotel against additional fees (Ivanov &

Zhechev, 2011). Chain’s technological systems (reservation system, accounting system, etc.),

special human resources politics (training, education, motivation systems) and administrative

services are the most common secondary activities provided by the central chain management

to individual hotels.

The main advantage of the value chain model of a hotel chain discussed above is that it clearly

shows that chain’s competitive advantage stems from: a) the primary and support activities of

the central chain management, b) the primary and support activities of the individual affiliated

hotels, and c) sharing activities between central chain management and individual affiliated

hotels. In this regard, the market success of the chain depends strongly on the activities

performed not only by its central management, but from the affiliated hotels too. As a

disadvantage of the model one could mention the non-representation of resources in it.

However, as mentioned before, the value chain model of a hotel chain is a partial model,

complementary to the RBV model, and it is a necessary ingredient to the integrated model to

be introduced later in the paper.

Stakeholder network perspective of a hotel chain

The third pillar of our integrated model of a hotel chain is the stakeholder network perspective

(Coff, 1999; Freeman, 2004, 2010; Ivanova, 2011b). It holds that the competitive advantages

of a company stem from its network of relationships with various stakeholders, i.e. “any

group or individual that can affect or is affected by the achievement of a corporation’s

12
purpose” (Freeman, 2004: 229). The main idea is that in its everyday activities the firm affects

directly or indirectly interests of certain groups, which, on their side, provide the firm with

different resources that affect the long-term survival of the firm (Johnson & Vanetti, 2005;

Hill & Jones, 1992). That is to say, that the company might not have valuable, rare, inimitable

and non-substitutable resources (RBV perspective) and does not perform effectively and

efficiently its primary and support activities (value chain perspective) but with a network of

reliable partners the company will be able to gain a competitive advantage, although it might

not be sustainable in the long-run.

Stakeholders have different and often contradictory goals (Ford, 2011), which increases the

importance for the firm to know and manage them effectively. Generally, they could be

divided into external and internal. According to Harrison and Enz (2005) internal stakeholders

include employees, owners and managers, while external are customers, competitors,

suppliers, activist groups, unions, financial intermediaries, the media, government agencies

and local communities. The stakeholder model of a hotel chain, presented in Figure 4,

describes the relationships between the hotel chain as a firm and its main stakeholders. The

model goes beyond the Harrison and Enz (2005) classification and consists of three levels of

stakeholders, representing: a) the chain stakeholders – the central chain management and the

individual affiliated hotels; b) the internal stakeholders of the central chain management and

the individual affiliated hotels, i.e. the owners, managers and employees; and c) the external

stakeholders – the customers, suppliers, competitors, local communities, intermediaries,

financial institutions, media, labor unions, hotel management companies, and other external

stakeholders. The model also includes the factors of the macroenvironment within which the

chain operates – political, economic, socio-cultural, environmental, technological and

13
legislative factors. The main level of the model is the level of chain stakeholders as they are

the building blocks of the hotel chain itself.

=====================

Insert Figure 4 around here

=====================

Chain stakeholders

The central chain management along with all the affiliated hotels creates the main circle of

stakeholders, named chain stakeholders (Figure 4). This is the primary level of chain’s

stakeholder network, which is very specific for the hotel chain and determined by the type of

affiliation of hotels to the chain. Due to the dominant contractual base of affiliation of hotels

to chains, most affiliated hotels remain independent organizations. Their relations with the

central chain management are influenced not only by the regulations of the respective

contracts, but also by the cultural differences between the country of origin of the chain and

the home country of the individual hotel (Vaishnav & Altinay, 2009). The affiliated hotels are

geographically dispersed, especially in an international hotel chain, which causes them work

in totally different environments. Nevertheless, the individual hotels share the same brand so

that each of them should take into consideration the marketing activities of the other hotels in

the chain because they influence the market visibility and image of the brand as a whole.

That’s why the relations among affiliated hotels are included in the stakeholder network

model on Figure 3. The entry mode or type of affiliation (depending from the view point) is

differentiated by the level of control or ownership, or both (Brown et al., 2003), and affects

the relationships between the central chain management and the individual hotel. The latter

becomes even more complicated when chains apply plural forms of entry mode (Brookes &

14
Roper, 2012) – e.g. combining 2or more non-equity modes (like franchising and management

contract) or combining equity mode (joint venture) with non-equity modes.

In light of the agency theory (Eisenhardt, 1989) in non-equity forms of entry mode, the

relationships between the chain stakeholders are of “principal-agent” type and they depend on

the specific type of affiliation of the hotel to the chain. In franchising and marketing consortia

the individual hotels act as agents of the central chain management who is their principal,

while in management contracts and leaseholds the situation is reversed – the principal is the

hotel owner(s), while the role of the agent is played by the central chain management. The

“principal-agent” relationship between the chain stakeholders causes several problems which

may be considered as sources of potential conflicts between them (Eisenhardt, 1989; Turner &

Guilding, 2010). Firstly, both sides have different and sometimes contradictory interests – for

example, the central chain management may be interested in the high quality of the product,

which, however, requires additional costs by the hotels and decreases their bottom line.

Secondly, due to the asymmetry of information flow the principal has less information about

the operational issues taking place in the hotel than the agent itself. This leads to a moral

hazard faced by the principal who is never sure that the agent is acting properly, which

requires additional costs for contractual and operational control incurred by the principal

(Panvisavas & Taylor, 2008).

Internal stakeholders

The internal stakeholders include the owners, manager and the employees in the central chain

management and the individual affiliated hotels (see Figure 4), and the relations between them

are also of “principal-agent” type – managers serve as agents of the owners, who are their

principals, and employees act as agents of the managers, who are their principals. Relations

15
between owners and employees depend on the size of the company. In small family-run

properties the relationship between owners and employees are quite close and often based on

kinship, while in large corporations they appear to be only marginal because the managers act

as intermediaries between them. The interests of the three parties might be divergent, but the

relationships between them are based on the assumption of mutual agreement and consensus

in reaching the goals of the company (Hill & Jones, 1992). However, the internal stakeholders

have different bargaining power (Coff, 1999: 125) which may distort the consensus among

them closer to the goals of one of the parties.

=====================

Insert Figure 5 around here

=====================

It should be noted that between the internal stakeholders of different chain stakeholders also

exist connections (some exemplary situations are presented on Figure 5). Situation A on

Figure 5 illustrates the case when the hotels are owned by the hotel chain. Therefore, the

owners of the central chain management and the individual properties will be the same. In

situation B the properties belong to the same owners who are different from the owners of the

chain. In this way, the relationships between individual hotels will be based not only on brand

image but on ownership as well. Situation C is typical with management contracts when the

chain brands the properties (the chain appoints managers to the individual properties), while

situation D illustrates the case when the individual hotels are managed by the same

management company but are branded under the flag of a hotel chain. Of course, in practice

many other situations of relationships between the internal stakeholders of the chains and the

16
individual hotels are possible and those presented on Figure 5 should be perceived as

examples only.

Relationships also exist between the internal stakeholders of the individual properties that do

not belong to the same owner and they are sometimes even formalized – InterContinental

Hotel Group, for example, has established the IHG Owners Association comprised of owners

of IHG properties throughout the world (IHG Owners Association, 2012). It is important to

emphasize that in practice one and the same person can perform the role of an owner and

manager in one hotel (e.g. in family-run hotels), or be the owner of several properties.

External stakeholders

The third level of the stakeholder network model consists of all those “friends to grow, foes to

know” (Ford, 2011) that form the chain’s microenvironment – customers, competitors,

suppliers, intermediaries, local community, financial institutions, media, labor unions, hotel

management companies, and other external stakeholders. Managing relations with each of the

external stakeholders is part of chains’ strategic management and subject to cultural

differences (Jurgens et al., 2010). On this level the well-known Porter (1980)’s Five

Competitive Forces model is useful to analyze the relationships of the chain with some of its

external stakeholders such as customers, competitors and suppliers (see also Freeman, 2004:

237). Each of the external stakeholders impacts directly or indirectly the competitiveness of

the chain. Obviously customers’ needs, wants, preferences, incomes influence chain’s

decisions about its marketing mix; chain’s product quality is dependent on suppliers’ product

quality; changes in competitors’ marketing mixes impact chain’s competitive position, while

intermediaries (GDSs, OTAs, tour operators, etc.) make their own decisions which hotels to

sell, at what price, to which customers and whom to include in their own online hotel

17
reservation systems (Ivanov, 2008); media shape the tastes and opinions of customers and,

therefore, are a stakeholder to be considered. Hotel management companies are a specific

external stakeholders group. They manage hotels for their owners under a management

contract but do not brand the managed hotels under their own flag (if they do they would be

considered as hotel chains). Instead, the managed properties could be branded under the flag

of a hotel chain or not branded at all. If they are branded under the flag of a chain, then the

management company becomes a partner in the relationship between the chain and the

individual hotel as an external stakeholder. It is not an internal stakeholder, because the

involvement of the management company does not influence the very nature of the hotel

chain – the hotel remains affiliated to the chain and branded with its flag.

An advantage of the stakeholder network perspective is that it recognizes the fact that the

competitive advantage of the chain is not determined only by internal resources or activities,

but by external forces as well. The model emphasizes the connections between the company

and its stakeholders, but it is static and does not include input and output elements (like the

RBV model) or process elements (like the value chain model). Nevertheless, it provides a

useful overview of the hotel chain as a bundle of relationships.

Integrated model of a hotel chain

Each of the three perspectives of a hotel chain discussed above (resource-based view, value

chain and stakeholder network theory) models the firm from one point of view only – the firm

is discussed only as a bundle of resources, activities or relationships with stakeholders.

However, these perspectives and their respective models of a hotel chain are not alternative,

but complementary and they lay the foundations of our integrated model of hotel chain

presented in Figure 6.

18
=====================

Insert Figure 6 around here

=====================

The hotel chain consists of the chain stakeholders (the central chain management and the

individual hotels), each with its own internal stakeholders (owners, managers and employees).

Properties get affiliated to the chain through different types of affiliation (franchising,

management contract, marketing consortium, full or partial ownership, leasing) which from

the point of view of the chain are considered entry modes. Hotels acquire physical, financial,

human and intangible resources from their suppliers, transform them during the servicing

process into a product with the help of the organizational capabilities, knowledge and

learning, which is then offered to customers via different intermediaries. Both the hotels and

the central chain management experience resource advantages of the affiliation and their

respective value chains fit together through the implementation of the primary activities, and

especially through the operations (the actual customer servicing process) that take place in the

individual hotels. Each hotel’s marketing mix is influenced by the chain’s central management

decisions by a different degree depending on the type of affiliation. Additionally, individual

hotels are related with the rest of the properties in the chain through ownership and brand

image links. Finally, the hotel chain as a whole is connected with its external stakeholders

(suppliers, competitors, intermediaries, clients, local community, financial institutions, media,

labor unions, hotel management companies, and other external stakeholders) and operates in a

specific macroenvironment.

19
The integrated model in Figure 6 shows that the hotel chain is much more than just a “bundle

of resources” (resource-based view perspective), a “bundle of activities” (value chain

perspective) or a “bundle of relationships” (stakeholder network perspective). In fact, the

hotel chain is all these “bundles” together. Moreover, relationships between the hotel chain

and all its various internal, chain and external stakeholders (excluding competitors and local

communities) are contractual based, which gives the right to consider it as a “nexus of

contracts” or “bundle of contracts” as well (Jensen & Meckling, 1976, Coff, 1999). The

integrated model shows that competitive advantages of the hotel chain are derived from its

resources, activities and good relations with stakeholders simultaneously. If any of these three

sources of competitive advantage is not properly managed, the chain could remain

competitive in the short-run, but in the long-run its competitiveness might not be sustainable.

Conclusion

Current paper presented three partial models of a hotel chain, combined into one integrated

model, that interpret this heterogeneous institution from three different positions (as a bundle

of resources, activities and relationships) in search of a better understanding of its nature as a

firm, its economic base for existence and the sources of its competitive advantage. Resource-

based view model presents the internal foundations for creating and sustaining a competitive

advantage by acquiring, using, managing and sharing resources, organizational capabilities,

knowledge and learning. Porter’s value chain perspective emphasizes the proper activities in

search of superior performance. By interacting with its various stakeholders, the hotel chain

establishes certain relationships with them, which if properly managed, can also become a

ground for obtaining competitive advantage. In order to gain a holistic impression of a hotel

chain, all three perspectives were combined in one integrated model illustrated in Figure 6.

The proposed models are applicable for any type of affiliation of a hotel to a hotel chain –

20
equity (full ownership, joint venture) or non-equity based (franchising, management contract,

marketing consortium, lease).

Managerial implications of the integrated and the partial models

Our integrated model could be used as an analytical tool to investigate the specific sources of

competitive advantage of a particular hotel chain and identify the potential threats to chain’s

competitiveness. For example, through it central chain management could analyze chain’s

deficiencies in terms of resources, activities and relations with stakeholders and put efforts to

overcome them. From other side, the individual hotels could gain a better picture of their

place in the chain and their contribution to its overall performance. Therefore, the integrated

model of a hotel chain could be used by hotel chains in their strategic analysis process. It is

also equally suitable for international as well as domestic hotel chains.

Limitations of the integrated and the partial models

One main limitation of the integrated and the partial models is the generalized view of hotel

chains. Each model is a theoretical simplification of the much richer real life. Therefore, any

theoretical generalization is by default limited and limiting. Due to the enormous variety of

connections and relationships among the chain’s central management and the individual

hotels, as well as the specific regulations of each particular contract, it is hard to embrace all

possible relationships. For example, some hotel chains follow more conservative policy and

force the affiliated hotels to comply strictly to their requirements, while others have more

liberal rules and this influences the relations and the transfer of knowledge between the chain

stakeholders. However, the integrated and the partial models are flexible and open, not rigid

and closed, so that in the practical analysis of a particular chain some model elements might

be removed and others added depending on the requirements of the situation – for example,

21
one could apply a different classification of the resources or the external stakeholders other

than the classifications used in our models.

Further research

Hotel chain models presented in current paper try to fill the gap in the research of these

organizations and reassess their functionalities in the light of resources, activities and

relationships. Further research could concentrate on how resources, activities and

relationships influence the daily operations in the affiliated hotels. Additionally, future

research could shed light how different types of hotels, types of affiliation or level of analysis

influence the importance of the three pillars (resources, activities, relationships) in creating

competitive advantage for the hotel and the hotel chain. Furthermore, research could focus on

the measurement of the additional value that a newly affiliated hotel brings to the hotel chain

as a whole – currently research in the field of hotel chains covers the opposite situation only,

i.e. how the independent hotel benefits from its affiliation to the chain. Finally, more attention

could be paid on how the type of affiliation (or entry mode) influences chain’s relationships

with its various stakeholders with special attention to the internal stakeholders (owners,

managers, employees).

References

Alon, I., Liqiang, N. & Wang, Y. (2012). Examining the determinants of hotel chain

expansion through international franchising. International Journal of Hospitality

Management, 31(2), 379-386.

Altinay, L. & Okumuz, F. (2010) Franchise partner selection decision making. The Service

Industries Journal, 30(6), 929-946.

22
van Assen, M., van den Berg, G. & Pietersma, P. (2009). Key management models. The 60+

models every manager needs to know. Harlow: Prentice Hall-Financial times.

Aung, M. (2000). The Accor Multinational Hotel Chain in an Emerging Market: Through the

Lens of the Core Competency Concept. The Service Industries Journal, 20(3), 43-60.

Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of

Management, 17(1), 99-120.

Barney, J. & Arikan, A. (2001). The resource-based view: origins and implications. In Hitt,

M. A., Freeman, R. E., & Harrison, J. S. (Eds.) The Blackwell Handbook of Strategic

Management. Blackwell Publishing, 124-188.

Barney, J., Wright, M. & Ketchen, D. Jr (2001). The resource-based view of the firm: Ten

years after 1991. Journal of Management, 27(6), 625-641.

Barros, C. & Mascarenhas, M. (2005). Technical and allocative efficiency in a chain of small

hotels. International Journal of Hospitality Management, 24(3), 415-436.

Becerra, M. (2009). Theory of the firm for strategic management. Cambridge University

Press, New York.

Bender, B., Partlow, C & Roth, M. (2008). An examination of strategic drivers impacting U.S.

multinational lodging corporations. International Journal of Hospitality & Tourism

Administration, 9(3), 219-243.

Brookes, M. & Roper, A. (2012). Realising plural-form benefits in international hotel chains.

Tourism Management, 33(3), 580-591.

Brown, J. R., Dev, C. S. and Zhou, Z. (2003). Broadening the foreign market entry decision:

separating ownership and control. Journal of International Business Studies, 34(5),

473-488.

23
Burges, C., Hampton, A., Price, L. & Roper, A. (1995). International hotel groups: what

makes them successful? International Journal of Contemporary Hospitality

Management, 7(2/3), 74-80.

Butler, J., & Braun, R. E. (2011). The HMA handbook. Hotel management agreements for

owners, developers, investors and lenders. Los Angeles, CA: JMBM Global

Hospitality Group.

Chathoth, P., Altinay, L., Harrington, R. L., Okumus, F. & Chan, E. S.W. (2013). Co-

production versus co-creation: A process based continuum in the hotel service context.

International Journal of Hospitality Management, 32, 11-20.

Chen, J. J. & Dimou, I. (2005). Expansion strategy of international hotel firms. Journal of

Business Research, 58(12), 1730-1740.

Choi, G., & Parsa, H. G. (2012). Role of intangible assets in foreign-market entry-mode

decisions: A longitudinal study of American lodging firms. International Journal of

Hospitality & Tourism Administration, 13(4), 281-312.

Coff, R. W. (1999). When competitive advantage doesn’t lead to performance: the resource-

based view and stakeholder bargaining power. Organizational Science, 10(2), 119-

133.

Contractor, F. J. & Kundu, S. K. (1998). Modal choice in a world of alliances: analyzing

organizational forms in the international hotel sector. Journal of International

Business Studies, 29(2), 325-357.

Cunill, O. M. (2006). Growth strategies of hotel chains: Best business practices by leading

companies. New York: The Haworth Press.

Cunill, O. M., & Forteza, C. M. (2010). The franchise contract in hotel chains: a study of

hotel chain growth and market concentrations. Tourism Economics, 16(3), 493–515.

24
Davidson, M., Guilding, C & Timo, N. (2006). Employment, flexibility and labour market

practices of domestic and MNC chain luxury hotels in Australia: Where has

accountability gone? International Journal of Hospitality Management, 25(2), 193-

210.

Deroos, J. A. (2010) Hotel Management contracts – past and present. Cornell Hospitality

Quarterly, 51(1), 68-80.

Dev, C., Erramilli, K. & Agarwal, S. (2002). Brands across borders. Cornell Hotel and

Restaurant Administration Quarterly, 43(6), 91-104.

Dev, C., Brown, J. & Zhou, K. Z. (2007). Global brand expansion. How to select a market

entry strategy. Cornell Hospitality Quarterly, 48(1), 13-28.

Eisenhardt, K. (1989). Agency theory: An assessment and review. The Academy of

Management Review, 14(1), 57-74.

Erramilli, M. K., Agarwal, S. & Dev, S. C. (2002). Choice between non-equity entry modes:

an organizational capability perspective. Journal of International Business Studies,

33(2), 223-253.

Erramilli, M. K. & Rao, C. P. (1993). Service firms’ international entry-mode choice: a

modified transaction-cost analysis approach. Journal of Marketing, 57(3), 19-38.

Ford, R. (2011). Friends to grow and foes to know: lessons in successful stakeholder

management from Orlando. An interview with William C. Peeper, President (retired),

Orlando County Convention and Visitors Bureau. International Journal of

Contemporary Hospitality Management, 23(5), 696-712.

Freeman, R. E. (2004). The stakeholder approach revisited. Zeitschrift für Wirtschafts- und

Unternehmensethik, 5(3), 220-241.

Freeman, R. E. (2010). Strategic management: a stakeholder approach. Cambridge:

Cambridge University Press.

25
Foss, N. (1996). Capabilities and the theory of the firm. Revue d'économie industrielle, 77(3),

7-28.

Gannon, J. M., Doherty, L. & Roper, A. (2012). The role of strategic groups in understanding

strategic human resource management. Personnel Review, 41(4), 513-546.

Ghorbal-Blal, I. (2008). An exploration of the role of the construct of control in expansion

strategy of hotel chains: A multiple case study. Doctoral dissertation. Virginia

Polytechnic Institute and State University.

Grant, R. (1996). Toward a knowledge-based theory of the firm. Strategic Management

Journal, 17(Winter Special Issue), 109-122.

Hallin, C. A. & Marnburg, E. (2008). Knowledge management in hospitality industry: a

review of empirical research. Tourism Management, 29(2), 366-381.

Harrington, R. & Ottenbacher, M. (2011). Strategic management: An analysis of its

representation and focus in recent hospitality research. International Journal of

Contemporary Hospitality Management, 23(4), 439–462.

Harrison, J. & Enz, C. (2005). Hospitality strategic management. New Jersey: John Wiley &

Sons, Inc.

Hill, C. W. & Jones, T. (1992). Stakeholder-agency theory. Journal of Management Studies,

29(2), 131-154.

Hu, M.-L. M., Horng, J.-S. & Sun, Y.-H. C. (2009) Hospitality team: Knowledge sharing and

service innovation performance. Tourism Management, 30(1), 41-50.

IHG Owners Association (2012). Official website. Retrieved on 10th June 2012 from

[Link]

Ivanov, S. (2008). Conceptual marketing framework for online hotel reservation system

design. Tourism Today 8, pp. 7-32

Ivanov, S. & Zhechev, V. (2011) Hotel Marketing. Varna: Zangador (in Bulgarian).

26
Ivanova, M.G. (2011a). Marketing challenges faces by newly affiliated hotels. Proceedings of

Second International Scientific Conference for PhD Candidates on "Economics,

Management and Tourism", Duni, 2011. Retrieved 15th May from

<[Link]

Ivanova, M. G. (2011b). Stakeholder model of hotel chains: a conceptual framework. In

Hanbabaeva, H. N., Hristova, T. B. & Kurbanova, A. M. (eds.) Proceedings of the

“Strategic development of tourism and recreation” international conference.

Mahachkala, Russia, September 2011, pp. 45-49.

Jensen, M. C. & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency

costs and ownership structure. Journal of Financial Economics, 3(4) 305–360.

Johnson, C. & Vanetti, M. (2005). Locational strategies of international hotel chains. Annals

of Tourism Research, 32(4), 1077–1099.

Jurgens, M., Berthon, P., Papania, L. & Shabbir, H. A. (2010). Stakeholder theory and

practice in Europe and North America: The key to success lies in marketing approach.

Industrial Marketing Management, 39(5), 769-775.

Kim, B. Y. & Oh, H. (2004). How do hotel firms obtain a competitive advantage?

International Journal of Contemporary Hospitality Management, 16(1), 65-71.

Komodromou, M. (2013). Hotel chains: rapidly growing and diversifying. Tourism Review

Online Magazine, January 2013. Retrieved 26th April from <[Link]

[Link]/travel-tourism-magazine-worlds-hotel-chains-growing-rapidly-

article1994>

Littlejohn, D., Roper, A. & Altinay, L. (2007). Territories still to find – the business of hotel

internationalisation. International Journal of Service Industry Management, 18(2),

167-183.

27
Madhok, A. (1997). Cost, value and foreign market entry: the transaction and the firm.

Strategic Management Journal, 18(1), 39-61.

Madhok, A. (2002). Reassessing the fundamentals and beyond: Ronald Coase, the transaction

cost and resource-based theories of the firm and the institutional structure of

production. Strategic Management Journal, 23(6), 535-550.

Olsen, M. D. & Roper, A. (1998). Research in strategic management in the hospitality

industry. International Journal of Hospitality Management, 17(2), 111-124.

O’Neill, J. & Carlbäck, M. (2010). Do brands matter? A comparison of branded and

independent hotels’ performance during a full economic cycle. International Journal

of Hospitality Management, 30(3), 515-521.

O’Neill, J. & Xiao, Q. (2006). The role of brand affiliation in hotel market value. Cornell

Hospitality Quarterly, 47(3), 210-223.

Panvisavas, V. & Taylor, J. S. (2008). Restraining opportunism in hotel management

contracts. Tourism and Hospitality Research, 8(4), 324-336.

Pearce, D. (2012). Frameworks for tourism research. Wallingford: CABI.

Peng, M. (2001). The resource-based view and international business. Journal of

Management, 27(6), 803-829.

Porter, M. E. (1980) Competitive strategy: Techniques for analysing industries and

competitors. New York: The Free Press. Reprinted in 1998 with a new introduction.

Porter, M. (1985). Competitive advantage. Creating and sustaining superior performance.

New York: The Free Press. Reprinted in 1998 with a new introduction.

Porter, M. (1991). Towards a dynamic theory of strategy. Strategic Management Journal,

12(S2), 95–117

28
Quer, D., Claver, E. & Andreu, R. (2007). Foreign market entry mode in the hotel industry:

the impact of country- and firm-specific factors. International Business Review, 16(3),

362-376.

Ray, G., Barney, J. & Muhanna, W. (2004). Capabilities, business processes and competitive

advantage: choosing the dependent variable in empirical tests of the resource-based

view. Strategic Management Journal, 25(1), 23-37.

Rodriguez, A. R. (2002). Determining factors in entry choice for international expansion. The

case of the Spanish hotel industry. Tourism Management, 23(6), 597-607.

Roper, A. (1995). The emergence of hotel consortia as transorganizational forms.

International Journal of Contemporary Hospitality Management, 7(1), 4-9.

Turner, M. J. & Guilding, C. (2010). Hotel management contracts and deficiencies in owner-

operator capital expenditure goal congruency. Journal of Hospitality and Tourism

Research, 34(4), 478-511.

Vaishnav, T. & Altinay, L. (2009). The franchise partner selection process and implications

for India. Worldwide Hospitality and Tourism Themes, 1(1), 52-65.

Villalonga, B. (2004). Intangible resources, Tobin’s q, and sustainability of performance

differences. Journal of Economic Behavior & Organization, 54(2), 205–230.

Wright, P. M., McMahan, G. C. & McWilliams, A. (1994). Human resources and sustained

competitive advantage: a resource-based perspective. The International Journal of

Human Resource Management, 5(2), 301-326.

29
 Integrated hotel chain Integrated model of a hotel
model chain

Partial model of Resource-based view Value chain perspective Stakeholder perspective

a hotel chain perspective of a hotel chain of a hotel chain of a hotel chain

Main statement
The firm as a bundle The firm as a bundle The firm as a bundle
of resources of activities of relationships

Theoretical framework Resource-based theory Value chain theory Stakeholder network theory

Figure 1. Steps in developing the integrated model of a hotel chain

30
 Physical resources Central chain
management Chain influence on
Financial resources hotel’s marketing mix
Suppliers
Human resources Organizational capabilities,
knowledge and learning
Intangible resources
Marketing mix:
 Product
Resource advantages of Resource advantages of  Price Value for the
affiliation for the hotel affiliation for the chain  Place customers
 Promotion
Physical resources Individual
hotel
Financial resources Operations
Suppliers
Human resources Organizational capabilities,
knowledge and learning
Intangible resources

Figure 2. Resource-based perspective of a hotel chain

31
 Firm infrastructure
Support Human resource management
activities
Value chain of central Technological development
chain management
Procurement
Inbound Marketing After sale
logistics Distribution
and sales service
Primary
Total value chain Operations /
activities Inbound Servicing process
of the hotel chain Marketing After sale
logistics Distribution
and sales service
Value chain of Procurement
individual hotel in
the hotel chain Support Technological development
activities Human resource management
Firm infrastructure

Figure 3. Value chain perspective of a hotel chain

32
 Economic Political

Customers
Macroenvironment

External stakeholders
Hotel Media
management Chain stakeholders
companies Central chain
management Internal stakeholders
Employees
Entry mode

Owners Managers Other chain Suppliers

Competitors members
Socio-cultural Legal
Employees
Entry mode Type of
affiliation
Individual Owners Managers
Other hotel Financial
external Employees institutions
stakeholders Ownership
and brand
Owners Managers image links

Local community Labor Intermediaries

unions
Environmental Technological

Figure 4. Stakeholder network perspective of a hotel chain

33
 C) Affiliated hotels managed by the hotel chain
A) Affiliated hotels owned by the hotel chain and branded with its flag

Central chain Central chain

management management
Owners Managers Owners Managers

Owners Managers Owners Managers Owners Managers Owners Managers

Individual Individual Individual Individual
hotel A hotel B hotel A hotel B

D) Affiliated hotels managed by the same management

B) Affiliated hotels owned by same owner, but
company but branded with the flag of the hotel chain
not by the hotel chain
Central chain Central chain
management management

Owners Owners Managers

Managers

Owners Owners Owners Managers Owners Managers

Managers Managers
Individual Individual Individual Individual
hotel A hotel B hotel A hotel B

Figure 5. Selected examples of internal stakeholders relations

Note: Employees not presented as internal stakeholders for the sake of simplicity of the visualization. 34
Dashed lines represent connections between the internal stakeholders of different chain stakeholders
 Economic Political

External stakeholders

Labor unions │ Hotel management companies │ Financial institutions │ Media │ Other external stakeholders
Suppliers Competitors Local community Intermediaries Clients

Chain Hotel chain

stakeholders

Central chain
management

Resource
Entry Type of
advantages
Socio- mode of affiliation affiliation
cultural Legal

Resources Individual Marketing mix

 Physical hotel  Product
 Financial  Price
 Human  Place
 Intangible  Promotion
Ownership
and brand
image links

Other chain
members

………… Macroenvironment
35
Environmental Technological
Figure 6. Integrated model of a hotel chain
 Note to Figure 6. Explanation of symbols used:

Value chain of suppliers, intermediaries or clients

Value chain of central chain management

Value chain of affiliated hotels

Internal stakeholders (owners, managers, employees)

Organizational knowledge, learning and capabilities

36

View publication stats