During the last years, research has focused more on the tactics surrounding Internet development such as the development of web site content and design, and only recently on the competitive dynamics of the Internet and on building successful e-commerce strategies. This article aims to provide a conceptual framework for developing competitive e-commerce strategies in the hospitality industry. To this end, the new competitive environment (the virtual marketspace) fostered by technological developments and in which hotels have to compete is examined; specifically, three features of the virtual marketspace, namely, reach, richness and digital representation are analysed. Competitive e-commerce strategies in the hospitality industry aim at addressing and managing the challenges fostered by these three features. Successful examples from the hospitality industry are also provided.
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During the last few years, we have been overwhelmed by new ideas, concepts, facts, opinions and even buzzwords surrounding the spectacular development of e-commerce business. It can actually be said that knowledge development in this arena has replicated the image of its own evolution: speediness and a perpetually fierce race. Carried over by the flood of innovations, research has focused more on the tactics surrounding Internet development such as the development of Web content, design interface and/or the digitisation of business operations on the Internet (e.g., Cunliffe, 2000; Gilbert, Powell-Perry, & Widijodo, 1999; Huizingh, 1999; Liu & Arnett, 2000; Procaccino & Miller, 1999; Weeks & Crouch, 1999) and only recently on the competitive dynamics of the Internet and on developing successful e-commerce strategies for the Web (e.g., Sigala, 2001; Riggins, 1999). Moreover, confused about developments on the Internet, many hotels are developing e-commerce strategies that are short-lived or not profitable. Thus, there is a need to investigate and identify the strategic issues that can be considered as the pillars for the development of competitive e-commerce strategies, which in turn can form the basis for developing web site content and design.
The purpose of this paper is to provide a framework for developing competitive e-commerce strategies in the hospitality industry. To this end, the Internet features and the new competitive environment that they generate and in which hotels operate are analysed. When immigrating from marketplaces into marketspaces, three features become important, namely, reach, richness, and digital representation. The management of these three concepts underpins the development of a conceptual framework for building competitive e-commerce strategies which: (a) pulls together and unifies all the previously identified but scattered best practices on the Internet; (b) provides the objectives and reasons for developing innovative Internet services and offerings; and (c) identifies the managerial implications for implementing such practices.
Internet Features and Their Applications
Sigala (2001) identified three distinct capabilities that make the Internet a very powerful tool--interactivity, connectivity and convergence. The Internet allows real-time, online true interactivity, which is crucial since much business activity consists of interactions. Interactivity enhances the richness of customer relationships and creates new paradigms of product design and customer service (e.g., the customer can customise the product/service and the supplier can learn from the customer). Moreover, the Internet is an open, global network that everyone can easily get connected with. The increased connectivity enables new communication and coordination mechanisms both across organisations and customers as well as within groups of customers themselves, while, according to the "network externalities" phenomenon, as the number of connections increases the value of the network grows exponentially (Gosh, 1998). Finally, digital technologies (embracing computers, networks, and media) themselves are converging and making the Internet ubiquitous and mobile.
Thus, the Internet as media is not only considered as a rich information provision mechanism but also as a medium for communication, an environment for conducting transactions, and possibly a channel for actually delivering/distributing the product/service to the customer (Angehrn, 1997; Hoffman & Novak, 1996). The Internet is a niche instrument and a medium of highly customised contacts with existing and potential customers (Sigala, 2001; Sivadas, Gewral, & Kellaris, 1998). The Internet is a marketing communication channel (Berthon, Pitt, & Watson, 1996) and it has also been suggested as a tool for direct marketing (Mehta & Sivadas, 1995). The interactive nature of the Internet allows marketers to reach and interact with individual customers in one-to-one basis as well as to customise their offerings to personal preferences (Deighton, 1998; Gilbert, et al., 1999; Kierzkowski, McQuade, Waitman & Zeisser, 1996). The Internet is used for marketing research (Burke, 1996) as well as a new forum for word of mouth communication allowing people to seek advice and discuss purchase suggestions, for example, virtual communities. (Gosh, 1998; Hagel & Armstrong, 1997).
The Virtual Marketspace
Hotels have been criticised for treating the Internet as merely another sales channel (e.g., Sigala, 2001), but such an approach is fundamentally no different from traditional sales channels and it requires no change in the way business is conducted. However, competition on the Internet does not take place in the physical marketplace but in the marketspace (Rayport & Svioka, 1994), whereby profound changes occur on buyers' and sellers' transactions. The content of the transaction is based on the product/ service's information rather than on its physical appearance or attributes, while the context of the transaction is transferred from the physical world to a computer-mediated environment. Thus, the unique characteristics of the new virtual marketspace created by the Internet need to be first identified and then built business models accordingly.
Few models are found in the literature analysing the characteristics as well as the new rules and dynamics of the new economy. In his model, the wheel of Internet business, Dussart (2000) identified and clearly analysed eight concomitant and interrelated "re-volutions" driven by the Internet, (i.e., changes in the economy, product offerings, markets, distribution channels and power, relationships, management and control). However, although Dussart (2000) clearly and systematically analysed the new economic climate fostered by the Internet, he failed to identify the dynamics and competitive forces driving such changes.
Angehrn (1997) also proposed the ICDT model analysing how businesses should extend their information, communication, distribution, and transaction virtual spaces in order to exploit the new opportunities, and address the competitive pressures generated from the Internet. Dutta, Kwan and Segev (1998) expanded the ICDT model to include the highly required changes and enhancements in the dimension of customer relationships. Nevertheless, these frameworks although very useful to guide strategy-building processes aiming at products/services redesign and/or innovation, they fail to identify the dynamics of the new marketspace that require and foster such transformations. On the contrary, it is argued that successful strategies should be proactive and continuously adopt to forecasted changes (Berthon et al., 1996; Schwartz, 1997) Hence, the identification and management of the forces driving and requiring fundamental changes is highly required.
Evans and Wurster (1997, 1999) identified two features as the main sources of the changes in the new marketspace namely reach and richness and which are linked to Internet's capabilities. New technologies can convey a rich message to a wide base of customers challenging the traditional trade-off between richness of information and reach of message. The possibility of high levels in both dimensions creates a new environment, whereby the old rules of business no longer hold. Zott, Amit and Donlevy (2000) added a third characteristic of the virtual marketspace, the digital representation, which actually denotes the absence of a physical contact in a virtual market.
Reach is about access and connection--how many customers the business can access and how many products it can offer. Unlike in a traditional market where "bricks and mortar" are usually required, in the virtual marketspace anyone that can connect to the network can sell a product to the globally dispersed and connected consumers--the "Internet-ionalisation" effect (Dussart, 2000, p. 388). As a result, a vast number of new players, the "cyberintermediaries", has entered the marketspace by enormously increasing hyper-competition (Werthner & Klein, 1999).
Richness is defined as the depth and detail of the information that the business gives the customer or collects about the customer. Richness occurs in a virtual market, because information flows in both directions are greater, deeper and faster than they are in a traditional market. In a virtual market, technology empowers all parties with knowledge and so provides the potential to reduce any asymmetry of information between buyers and sellers. As buyers have more product/service information, price, vendor and transactions' transparency increase. Moreover, sellers can also collect more information about consumer's buying behaviour and characteristics in order to improve direct marketing activities and customise their e-marketing mix configuration (Sigala, 2001).
Nonetheless, online transactions are impersonal and this has its own drawbacks. Digital representation denotes this absence of physical contact (i.e., the inability to touch and feel the product, to visit a physical storefront and to have human interaction) (Zott et al., 2000). This feature of virtual markets is considered as the major inhibitor to purchasing, since customers must overcome the mistrust of not having human contact, the perceived lack of transaction and payment reliability. In the context of hospitality, whereby the product is totally intangible digital representation creates even more constraints.
Overall, it is argued that competitive e-commerce strategies are those that successfully address and manage challenges generated from these three features of the hyper-competitive virtual market-space. In fact, it is the successful coordination of these three dimensions rather than the separate management of each of them that can create sustainable competitive advantage. These are analysed as follows.
Managing Reach
Before the advent of e-commerce, for most hospitality executives the essential frame of reference has been a geocentric one where real estate and geography have been the big drivers in a physical world (e.g., buildings, dots on maps, markets served, and chains). Hotels chains have, and still brilliantly compete on "location, location, location", because the manner in which hospitality companies bring their product to market remains a cornerstone of any competitive strategy. However, technological developments have separated the physical function (rooms' inventory) from its information distribution function. Angehrn (1997) argued that technology provides tremendous opportunities for extending possibilities in information provision and expanding distribution channels. Castleberry, Hempell and Kaufman (1999) also advocated that as technologies continue to evolve, competition for the customer purchase will increasingly take place in the virtual arena as players battle for "electronic shelf space" and number of "eyeballs" (i.e., number of web site visitors).
In the same vein, Evans and Wurster (1999) argued that reach is the most visible difference between electronic and physical businesses, and it has been the primary competitive differentiation for e-business so far. They also went on to advocate that reach is about the battle for eyeballs, but also about space for a huge amount of information provision of both products and suppliers. Thus, overall management of reach should be built upon the management of these two interrelated dimensions (i.e., the number of eyeballs and information provision).
Access and Number of Eyeballs
The easiest way to increase access and number of eyeballs is to promote and link a web site with others. Indeed, with the explosion of infomediaries on the Internet, several hotels joined them in order to expand their distribution channels and enable customers to find them easier. However, because of high levels of reach and electronic exposure, hoteliers argue that they are loosing control on their room and rate inventory (International Restaurant and Hotel Association; IHRA, 1999). Moreover, high exposure and reach also resulted in increased transparency between prices, products and suppliers, which coupled with the fact that customers can also bid for rooms, all led to the "commoditisation" of the hotel products--competition on price only--(Connolly & Sigala, 2001). As hotel brands erode, hotels find it increasingly difficult to differentiate their product, build customer loyalty and drive traffic and sales to their web site.
However, theory and practice have indicated valuable strategies to manage reach. When competing for eyeballs, multiple electronic distribution strategies become unavoidable. As a result, the development of comprehensive distribution channel management strategies aiming at the most efficient and effective ways of controlling and distributing room and price inventories across players in the digital distribution chain are vitally important. To achieve that, hotels should aim at maintaining a single image of rooms and rates inventory that can be seamlessly distributed and updated at all available distribution channels (Connolly, 1999). The latter enables hotels to take control of their inventory, instantly respond to any demand changes, promote and sell their last available room and yield by distribution channel (Sigala et al., 2001). Although legacy systems have been a major inhibitor to the development of a single image room and rate inventory, such barriers should be solved and overcome.
However, distribution channel management for hospitality companies requires more than simply understanding the value chain and electronic distribution of rooms and price inventory. Hospitality businesses also need to develop business measurements that effectively represent e-commerce and determine the health and profitability of each available channel (Castleberry et al, 2000). Sigala et al. (2001) introduced the concept of e-yield, meaning yield maximisation by distribution channels by driving and controlling sales across electronic channels. To achieve that, technological developments such as networks, data warehousing and mining should be adopted, while the generation, auditing and analysis of information derived from each channel should become a standard procedure in each organisation's sales strategy.
Information Provision
Reach was also argued to be about the provision of product information, which in turn also increases number of eyeballs. This is because enhanced provision of product information provides customers with shopping convenience and enables transactions' transparency. For example, hotel web sites lose sales and eyeballs from one-stop-shop web sites (i.e., those providing more than one travel product) and from infomediaries providing comparative shopping. According to the IHRA (1999), 60% of online sales are going through the traditional players (the Global Distribution Systems) that provide a consolidated database of a wide range of products, while new types of infomediaries (the "meta-navigators") that provide technologies comparing multiple electronic retailers are growing in popularity and customer traffic.
Hoteliers are questioning their existing strategies (i.e., their promotion in multiple distribution channels). According to hotel-online.com (2000), a hotelier argued:
Now that is all about eyeballs on pages, the value of unsold rooms has changed and we are asking ourselves why we should sell our rooms for others to gain eyeballs.
Consequently, five leading hospitality companies recently announced the development of a "virtual market-place" through a new business-to-business web-based exchange (www.hotel-online.com). This is the first initiative of the hospitality industry to develop its own electronic mall and meant the beginning of co-opetition, (i.e., cooperation between competitors in order to survive).
A different strategy is found in the airline industry and there is no argument why hotels could not do the same. Lufthansa sells tickets for other airlines through its web site and British Airways recently announced to do the same (Simmons, 2000). The rationale is simple. If a customer cannot or does not want to book a flight from a certain airline, it is better for the airline to keep the customer in its branded web site rather than let the customer to go and buy a ticket in a competitor's web site. Moreover, by keeping customers on their web site, airlines can also gather a vast amount of customer information in order to manage richness. Evans and Wurster (1999) did not attribute this strategy to the greater transparency of online transactions but rather to the blow-up of the trade-off between reach and richness. Indeed, economics and management strategies in the marketspace become more complex but also more powerful when the dimensions of reach, and richness are combined and blurred.
An alternative strategy would be to offer services beyond product information. For example, hotels could offer a navigation service that solves consumer problems in finding information or provide intelligent agents to help in consumer decision making. Hotels can also follow a configuration or aggregation strategy that is to bundle different services/products to some kind of integrated offerings (Werthner & Klein, 1999). Aggregation of competing products/services is very common in the marketspace and as Evans and Wurster (1999, p. 91) argued "acting to preserve their own business from commoditisation, sellers happily commoditise one another's".
Managing Richness
When competing on reach, hotels have to struggle to keep abreast of electronic infomediaries. However, hotels have the natural advantages when it comes to richness, because as they host customers in their properties, there are multiple customer touch points from which to gather and update customer information (e.g., distribution channels, food and beverage systems, and front office) as well as to disseminate their product information.
Rich Product Information
Although hotels can develop web sites and empower them with search engines that facilitate browsing through the rich, online product information, in order to push cross-and up-selling amongst their properties and products, stand-alone hotel information on a web site suffers from lack of reach. This is in terms of limited online onward distribution to other web sites and product diversification. Evans and Wurster (1999) suggested two ways for empowering strategies through rich product information: (a) continuous product evolution; and (b) product/brand promotion and positioning as an experience rather than as a belief.
In the hotel context product evolution can be translated into dynamic pricing, meaning continuous price changes depending on market trends (e.g., Easyjet's pricing model). However, Dutta and Segev (1999) argued that technology advances have fostered innovative practices for dynamic and personalised customisation of the whole marketing mix (i.e., price, place, product, and promotion). For example, customers participate in product specification and design, in price negotiation and bidding, while they are delivered information at anytime, anyplace or anywhere through mobile Internet enabled devices.
According to the second suggestions brands communicated as experience are far better suited to e-commerce than brands as belief. Brands as belief convey facts or beliefs about product attributes; for example, Sony promotes its products as superior technology, high quality at a warranted price premium. However, messages such as that cannot compete with distributors, since the latter can easily demonstrate that some Sony products do not meet specifications and because of their endorsement the brand can become redundant. On the contrary, brands as experience are not defined by companies' mission statements or specifications. Instead, they are a fantasy, a state of consumers' minds created through several channels of communication. In this case, the brand, product and the experience are really one and the same and it is so difficult for online distributors to commoditise, erode and divert sales to other brands.
Thus, the concept of hotel branding should be revisited. It is very likely that hotels conveying a brand promising certain offering specifications would suffer from customer credibility, while it would be easier for cyberintermediares to commoditise and sell their room inventories across other similar hotel brands. To prevent commoditisation, hotels need to take a more direct and active approach to brand development and to lessen their dependence on cyberintermediaries. Direct promotion and communications with customers can enhance customer experience and loyalty with the hotel brand. Moreover, rich, customer-centred information, positioning the hotel brand as a customer-personalised experience, should be the hotels' counter to the superior reach, product diversification and objectivity as perceived by customers of cyberintermediaries. Indeed, best practices promoting hotel brands as an experience were strategies based on customer relationship management, product customisation and the development of virtual communities that directly affect customers' perceptions (Connolly, 1999).
Rich Customer Information
The Internet offers an unparalleled opportunity for gathering customer information, which in turn can be used for cheap and infinitely discriminating customisation of offers, products, prices and promotion. Data mining and data warehouses can gather and analyse varied customer information; for example, Internet browsing behaviour, purchasing history and demographics, which in turn can be used for several product personalisation practices, such as to speed-up booking process, to cross-sell other products, to increase the level of service, to customise banner advertising, to send personalised e-mails, and to reward customers' loyalty (Sigala, 2001).
Product and service personalisation is argued to be a vital e-commerce strategy because it creates web site "stickiness" and loyalty--the ability of web sites to draw and retain customers (Zott et al, 2000)--which in turn are crucial since the competition for eyeballs extensively grows as the number of customers, suppliers and intermediaries on the Internet increases (Shapiro & Varian, 1999; Stan & Mayer, 1999). Moon, Hempell and Hempell (2000) also argued that as connectivity and reach to the customer is no longer a technology hurdle, what actually builds a value added strategy is to "own" a customer--to build customer loyalty and stickiness on the Internet. Internet business is not just a battle for catching attention and eyeballs. It is a battle for trust, hearts and minds (Dussart, 2000) that depends on the successful management of richness aiming at building customer relationships. Indeed, Zott et al.'s (2000) study revealed that the way with which web sites manage information for building relationships substantially determines whether or not customers return to the web site, how long they stay online and more importantly how likely is that they will buy only.
On the other hand, good management and exploitation of richness aiming at building trust and customer loyalty significantly contributes to the management of the third feature (i.e., digital representation). In fact, online strategies become more powerful when they can simultaneously address and manage more than one of the marketspace's features.
Managing Digital Representation
The inability to touch and feel the product as well as to have a human contact in virtual markets is claimed to be a major inhibitor of online success, but the burden of alleviating these fears lies with the sellers. Strategies for managing reach and richness aiming at building trust, loyalty and "stickiness" through customer relationship management strategies as well as the use of virtual product presentations (e.g., web-cameras, 3D pictures, and video) greatly contribute to the management of digital representation. However, the following practices have also been proved to be necessary and very successful.
Online suppliers frequently attempt to overcome the lack of human contact by making the transaction as simple and error free as possible. Thus, there should be no more than three clicks to a booking, while web sites offering encryption and other secure payment methods were also proved to be more successful (Zott et al., 2000).
Few suppliers also attempt to simulate the social aspect of shopping by exploiting or creating virtual communities, chat rooms and bulletin boards of online customers or by exploiting the Internet's multimedia capabilities to entertain the buyers. Moreover, as Butler and Peppard (1998) claimed the notion of a customer community can convey enormous credibility on the information source, since ideas and proposals are vetted by and with trusted colleagues in the community. Indeed, virtual communities of customers have all the power of the traditional reference groups found in the physical marketplace, but with even greater quantity and quality of comparative shopping information as well as ways of sharing and disseminating it.
Virtual communities benefit both consumers and suppliers (Hagel & Armstrong, 1997). Consumers are able to share their experiences, and find and access competing suppliers and ideas. Suppliers can find and target specific highly segmented audiences, obtain market and customer information for product and price customisation practices, and exploit communities for effective word of mouth promotion. More-over, virtual communities are governed by network externalities rules (i.e., member-based content attracts more members, who in turn contribute more content while more members' interaction attracts more members and builds more members' loyalty) and so, virtual communities can be used for amplifying the reach and richness of hotels' web sites.
However, as Zott et al. (2000) argued, communities are not limited to the development of speciality web sites. Any firm that that is able to identify common interests amongst users, and then provide a medium where they can interact, share information and build interest around the product, can build a community. For example, in their web site, Westin Hotel & Resorts allow customers to get information and become members of the Westin Kids Club or to participate in the Traveller's Forum "where travellers converse with one another, ask questions and share experience" Tellini (1995).
Conclusion
The main purpose of the paper was to develop a framework for building competitive e-commerce strategies in the hospitality sector. To that end, the competitive benchmarks and features that are driving competition in the virtual marketspace have been analysed. Arguments for successful strategies were anchored in the unique characteristics of virtual markets, namely, reach, richness and digital representation. Thus, as competitive e-commerce strategies should be designed to address and manage competition along these three dimensions, hotels should aim at: (a) achieving great reach and exposure but overcome commoditisation and loss of room and rate inventory; and (b) exploiting richness in order to build and maintain customer relationships, increase eyeballs and create web site stickiness; and (c) simulating the shopping experience through virtual communities, web-cameras, and 3D pictures in order to overcome digital representation.
However, the three dimensions should not be considered as independent; instead, a framework of coordinated and aligned practices should be developed,whereby activities in each dimension should enforce and leverage activities in others. Moreover, it is evident that successful implementation of e-commerce strategies requires fundamental changes in the way hotels compete as well as evaluate performance. Indeed, the increasing importance of the value of hotel intellectual assets such as customer information and relationships has made a lot of hotels to immigrate from metrics based on physical assets to metrics based on intellectual assets (e.g., from revenue per available room to revenue per available customer) as well as to complement their existing metrics with metrics such as the lifetime value of customers and one-to-one yield maximisation (Sigala et al, 2001). However, further research is required for investigating what and how hotels should manage change for competing in the world of e-business.
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Correspondence Address for correspondence: Marianna Sigala, Lecturer in Hotel and Hospitality Management, The Scottish Hotel School, University of Strathclyde, 94 Cathedral Street, Glasgow, G4 OIG, Scotland, UK. Email: M.Sigala@strath.ac.uk Marianna Sigala The University of Strathclyde, United Kingdom
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