Effects of Online Distribution for Marketing of Budget Accommodation Segment in Kolkata, India

Effects of Online Distribution for Marketing of Budget Accommodation Segment in Kolkata, India

¹Dr. Soumendra Nath Biswas & ²Mr. Sudipta Kumar Pal

¹Associate Professor, Assam University (A Central University), Silchar, Assam, India,

²Research Scholar, Utkal University of Culture, Bhubaneswar, Odisha, India

DOI: https://dx.doi.org/10.47772/IJRISS.2023.7896

Received: 10 September 2023; Accepted: 13 September 2023; Published: 18 September 2023

ABSTRACT

The budget accommodation segment has witnessed a significant shift with the rise of online distribution channels. While these platforms offer vast opportunities, they also bring forth a set of substantial challenges. This paper discusses the primary challenges faced by budget accommodation providers in the online distribution sphere and proposes solutions to address them. The key challenges include market saturation and competition, revenue management complexity, and the critical role of online reputation and reviews. The intense competition among numerous online travel agencies and accommodation platforms has made it challenging for budget accommodations to differentiate themselves and maintain profitability. Revenue management complexities arise from dynamic pricing and rate parity issues, which can lead to revenue leakage. Additionally, online reviews and reputation management are critical, as negative feedback can severely impact bookings and revenue. To address these challenges, budget accommodation providers can focus on differentiation through personalized experiences and value-added services. They can also utilize revenue management tools and data analytics to optimize pricing strategies and ensure rate parity. Active engagement with guests and prompt response to reviews, along with maintaining consistent service quality, can help manage online reputation effectively. In summary, while online distribution presents challenges for budget accommodations, innovative strategies and technology adoption can empower providers to thrive in a competitive landscape, ensuring sustainable growth and guest satisfaction.

Keywords: Hospitality, Budget accommodation segment, Online marketing, Online distribution

INTRODUCTION

The budget accommodation segment encapsulates a collection of providers, offering economical lodging, catering, and related services to budget-sensitive travellers. This classification encompasses all budget hotels, which constitute a substantial portion of the overall lodging industry. Within this segment, the core offerings are accommodation products, specifically hotel rooms. The diversity of these rooms varies significantly depending on the establishment’s type and the fluctuations in market demand.

The budget accommodation segment represents a substantial share of the overall lodging industry, yet little is known about their marketing practices. Irrespective of their size, these establishments must engage in some form of marketing to survive and thrive in a fiercely competitive landscape. Crafting and executing effective marketing strategies is pivotal in maintaining desired occupancy rates and achieving revenue targets for any lodging establishment. However, the challenges confronting the budget accommodation segment are twofold: firstly, managers often lack expertise in hospitality marketing, and secondly, budget constraints result in limited or non-existent marketing initiatives.

These constraints can potentially lead to a loss of competitiveness.

The proliferation and rapid evolution of Information and Communication Technology (ICT) have introduced unprecedented opportunities and challenges across the entire hospitality industry. This technological revolution has reshaped how hospitality organizations market their offerings, including budget accommodation providers. Notably, a significant portion of hotel and airline bookings have transitioned to online platforms. While the initial setup costs for online booking systems can be substantial, the long-term benefits outweigh these expenditures. Even smaller establishments within the budget accommodation segment can now afford this technology. Simultaneously, it offers convenience to potential guests, granting them the flexibility to select and reserve services like hotel rooms or airline tickets at their convenience, from the comfort of their homes. This transformation underscores the increasing prominence of online distribution channels for hospitality products, including budget accommodations.

REVIEW OF LITERATURE

The budget accommodation segment and the hospitality industry as a whole have witnessed a significant transformation in recent decades, largely driven by advances in technology and changing consumer behaviours. Among the most influential changes is the advent and spread of online distribution channels for accommodation products, even for budget hotels. This literature review is aimed at exploring the key trends, challenges, and opportunities associated with the online distribution of budget hotels.

Shanker (2008) addresses the vital role of Information and Communication Technology (ICT) in the tourism industry. The author explores the deep impact of ICT on various aspects of tourism, from enhancing visitor experiences to streamlining operational processes and marketing destinations effectively. The author also highlights the challenges and opportunities presented by ICT. This likely encompasses issues such as managing the rapid pace of technological change, ensuring data security and privacy, and harnessing the power of digital platforms for destination promotion and customer engagement. Dredge et al. (2019) investigate the influence of digitalization on the tourism sector, providing valuable insights into the constantly evolving domain of digital technology within the tourism industry. The utilization of digital platforms for marketing and distribution, the significance of big data and analytics in knowing traveller behaviour, and the challenges arising from cyber security and data privacy issues are the main focus areas of their research.

 Schuckert, Liu, and Law (2015) investigate into the dynamic world of online reviews within the hospitality and tourism sector. Their research contributes valuable insights into the rapidly evolving landscape of online reviews. The study highlights the growing significance of online reviews as a critical source of information for travellers and tourists. It is a valuable resource for academics, industry professionals, and marketers aiming to understand the evolving role of online reviews in shaping the tourism and hospitality landscape. It may explore recent trends in the generation, distribution, and consumption of these reviews, highlighting their impact on consumer decision-making processes.

Moreover, the study may touch upon the challenges and opportunities that online reviews present for businesses in the hospitality and tourism industry.

Theodosiou and Katsikea (2012) investigate the factors influencing the adoption of electronic business (e-business) practices within the hotel industry. This study offers valuable insights into the adoption and performance of e-business strategies in the context of hotels. The paper explores the drivers and inhibitors that influence the decision of hotels to embrace e-business practices and the intricate relationship between e-business adoption and performance within the hotel sector. Sparks and Browning (2011) highlight the influential role of online reviews in shaping consumer behaviour within the hotel booking process. This research contributes crucial insights into how online reviews affect travellers’ intentions to book accommodations and their perceptions of trust in the context of the hospitality industry. The study explores the persuasive power of online reviews in influencing potential guests’ decisions. Law et al. (2015) examines several aspects related to disintermediation, focusing on the viewpoints of suppliers of tourism products and services, particularly hotels, and traditional intermediaries like travel agencies. This examination takes into account the ongoing shift in the distribution landscape towards disintermediation, driven by the proliferation of Internet and mobile technologies that empower consumers to directly search for and purchase products and services from suppliers.

Buhalis and Kaldis (2008) offer a valuable investigation into the adoption of e-enabled Internet distribution strategies within the context of small and medium-sized hotels. Their research presents a comprehensive examination of the specific case of hotels in Athens, shedding light on the challenges and opportunities faced by these hotels in utilizing Internet technologies for distribution, and helps industry stakeholders to understand the evolving role of the Internet in reshaping distribution strategies for small and medium-sized hotels. Middleton and Clarke (2012) provide an extensive overview of the key concepts, principles, and strategies essential for successful marketing in the dynamic hospitality industry, covering a wide range of topics, from understanding the tourism market and consumer behaviour to destination marketing, sustainability, and digital marketing trends.

Suyunchaliyeva et al. (2020) contribute significantly to the exploration of the digital landscape’s impact on the tourism industry. The study focuses on the dynamic interplay between information technology and emerging trends within the tourism sector, providing an illuminating perspective on the transformative effects of digitalization on the industry. In a continually evolving tourism landscape, the research conducted by the authors serves as a valuable source of insights, elucidating the evolving dynamics of the digital economy in this context. Kumar, Syed, and Singh (2022) provide a timely and insightful examination of the digital marketing challenges faced by hotels in the context of the COVID-19 pandemic and beyond. The study also focuses on proposing solutions and opportunities for hotels to navigate these challenges successfully. The research contributes significantly to the discourse on digital sustainability in hotels, particularly in the context of the COVID-19 pandemic, and presents practical solutions to the digital marketing challenges that have emerged during these trying times.

Navío-Marco et al. (2018) revisit Buhalis & Law’s revolutionary study about e-Tourism, published in Tourism Management, and reflect on the evolution of e-Tourism and its significant impact on the tourism industry. The authors revisit and extend the seminal work by Buhalis and Law, providing insights into the developments that have occurred over three decades. This review offers an in-depth examination of the progress made in information technology and its integration into tourism management practices. Lee et al. (2020) presents a comprehensive examination of the burgeoning concept of smart tourism cities. This research delves into the dynamic evolution and transformative potential of urban destinations leveraging technology and sustainability principles.

Research Gaps

Based on the given literature review, several research gaps and potential areas for further investigation have been identified:

The Impact of Rapid Technological Change: Shanker (2008) touches on the challenges posed by the rapid pace of technological change in the tourism industry. However, there is room for more in-depth research into how tourism businesses can effectively adapt to and harness emerging technologies, ensuring they remain competitive and relevant.

Data Security and Privacy in Tourism: Shanker briefly mentions data security and privacy concerns in the context of ICT. Similar research can be conducted to explore the specific challenges and best practices related to protection of sensitive customer data in the tourism sector, especially amidst increasing cyber security threats.

Digital Platforms for Sustainable Tourism: While sustainability is mentioned in several studies, there is a need for research that examines how digital platforms can be leveraged to promote sustainable tourism practices, such as reducing the environmental impact of travel and supporting local communities.

Evolving Role of Travel Agencies: Dredge et al. (2019) touch on the impact of digitalization on travel agencies. A more detailed investigation into how travel agencies are adapting, evolving, or redefining their roles in the digital age could provide valuable insights for both practitioners and policymakers.

Sustainability and E-Business in Hotels: Theodosiou and Katsikea (2012) examine e-business adoption in the hotel industry. Future research could investigate how e-business strategies can specifically contribute to sustainable practices in hotels, including resource efficiency and responsible tourism.

Performance Metrics of E-Business Adoption: Further exploration into the specific performance outcomes of e-business adoption in hotels, such as its impact on revenue, customer satisfaction, and operational efficiency, would provide a clearer picture of its benefits and challenges.

Practical Solutions for Digital Marketing Challenges: Kumar, Syed, and Singh (2022) propose solutions to digital marketing challenges during and post-COVID era. Additional research could expand on these solutions and provide practical implementation guidelines for hotels and other tourism-related businesses.

By addressing these research gaps, further studies can contribute to a more inclusive understanding of the evolving dynamics and challenges within the tourism and hospitality industry, with a special reference to the budget accommodation segment.

Statement of the Problem

Accommodation products may significantly differ based on service providers and market demand. They span a wide spectrum, ranging from opulent five-star luxury hotels to basic budget accommodations without frills, catering to both business executives and leisure-seeking families.

These accommodations can be found in various settings, including city centres, resort destinations, transient stopovers, tourist destinations and residential areas, among others.

The 21^st century has ushered in significant changes in the business environment for budget hotels. These changes include an expanded range of product choices, intensified price competition, limited opportunities for development of new products, and the propagation of internet and mobile marketing. Much of these transformations are attributed to rapid technological advancements, especially in internet and web technologies.

In this context, ICT offers cost-effective solutions to address many of the marketing challenges faced by budget hotels. These solutions encompass precise inventory management, forecasting, budgeting, pricing, and most importantly, distribution. The distribution of accommodation products and services through online mediums, such as hotel and travel aggregators’ websites and mobile apps, is referred to as online distribution.

The primary advantage of online distribution for the budget accommodation segment is the ability to achieve global exposure for local businesses at a reasonably low long-term cost. Therefore, it is crucial to evaluate the effectiveness of online distribution as a marketing tool for budget hotels in terms of booking, occupancy rates, and revenue generation.

This research study aims to assess the readiness of online distribution and measure its impact as a marketing tool in the budget accommodation segment of the larger hospitality industry. It seeks also to theorize the overall role of online distribution in helping budget accommodation providers in Kolkata to address the marketing challenges of the 21^st century.

Research Objectives

1. To pinpoint the primary marketing obstacles encountered by the budget lodging industry in Kolkata in recent times and evaluate their impacts.
2. To categorize various online distribution platforms for budget accommodations based on their perceived efficiency.
3. To gauge the contribution of online distribution in reducing marketing hurdles in relation to room occupancy and revenue generation, thereby assessing its effectiveness.
4. To recommend a hospitality marketing mix that incorporates online distribution as a potent marketing strategy suitable for Kolkata’s budget lodging segment.

Research Design

In this research, the choice of the sampling method was driven by academic considerations and the aim of drawing meaningful conclusions from the study. The researcher opted for convenience sampling for several reasons. This method was chosen because it is cost-effective, time-efficient, and the sample units were readily accessible, easily quantifiable, and willing to provide responses. Adequate precautions were taken to minimize any potential bias that could affect the survey’s integrity.

The primary objective of this study is to assess the effects of online distribution as a marketing instrument within the budget accommodation segment in Kolkata. To achieve this goal, the research employed a cross-sectional written survey that included structured scale items. These scale items were measured using the standard five-point, bipolar adjective Likert scales. The decision to use the Likert scale aligns with established methodologies in prior behavioural and services marketing research (Zeithaml et al., 1990). Additionally, the questionnaire incorporated measures aimed at gathering demographic data about the respondents.

Data Analysis and Interpretation

Data analysis and interpretation are pivotal aspects of understanding the challenges and solutions associated with online distribution in the budget accommodation segment. In order to meet the objectives of the study, primary data has been collected against a structured questionnaire and the collected data has been analysed for appropriate interpretations. Factor analysis and other statistical method have been used for the purpose. The relevant table and chart corresponding to that factor analysis is given below:

Table 1. Factors influencing customer selection hotel – hotel facilities

Chart 1. Factors influencing customer selection- hotel facilities

Factor analysis is a statistical method that plays a crucial role in this study. Its importance lies in its ability to simplify complex data by identifying underlying factors or dimensions that explain patterns of correlation among observed variables. By reducing data dimensions, factor analysis helps and analysts gain deeper insights, uncover hidden relationships, and make more informed decisions. It aids in feature selection, model simplification, and the development of more efficient measurement instruments. From the above given table and chart, it has been found that, there are multiple factors that are influencing the customers’ choice of a budget accommodation during their booking of rooms in those hotels. Some of these factors are strongly correlated with the choice decision and some factors are loosely correlated while some factors are not influential. The details of these factors are given below:

Cleanliness, Hygiene, swimming pool, fitness centre, spa and massage rooms, wi-fi internet access, business centre with international newspaper, magazines etc., and travel desk are the factors that strongly influence the choice decision of the customers of budget accommodation segment. Bar/pub/discotheque, Restaurant/coffee shop, Hotel shuttle car, Sports facility/pool table, Card or online payment, Car/vintage car/limousine rental, Car parking, Valet parking are the factors that moderately influence the choice decision of the customers of budget accommodation segment. Finally, the dry cleaning/laundry service, lift/elevator, conference/meeting room/banquet facilities, luggage storage and porter service, baby sitter, shopping arcade, kids’ zone, concierge reception, welcome procedure are those factor that have very little or no influence on the choice decision of the customers of budget accommodation segment.

The above-mentioned factor analysis clearly identifies the correlation of varies factors with the decision of customers to pick a particular budget accommodation in order to book rooms for staying. It is also evident from the same that the choice of the customers in the budget accommodation segment depends on a wide range of factors with a varying degree of their influence.

DISCUSSION AND FINDINGS

The budget accommodation segment encompasses small and medium-sized lodging properties that focus on providing basic lodging with minimal services and selected on-site amenities and services. These properties prioritize delivering clean, comfortable, safe, and affordable rooms that meet the fundamental needs of their guests. Typically, they target a range of demographics of travellers, such as budget-conscious individuals who seek no-frills accommodations. Budget hotels are especially attractive to travellers looking for a cost-effective stay without unnecessary expenses for lavish services. In contrast to traditional lodging options, budget hotels represent a relatively recent development in the hospitality industry. Previously, this market was dominated by bed and breakfast inns and guest houses, often family-run businesses passed down through generations. Budget hotels differ from these older establishments in that they are professionally managed and offer limited or no-frills services to budget travellers while maintaining quality and hygiene standards. They are able to provide affordable accommodations by economizing on luxury amenities and staffing. Many budget hotels are affiliated with well-known hotel chains, allowing them to offer branded products and services to their guests. This affiliation with established brands provides a level of consistency and reliability for budget-conscious travellers seeking a straightforward and budget-friendly lodging experience.

Findings

1. Distribution channels for accommodation products play a pivotal role in the journey of goods and services from producers to end-users or consumers. The basic purpose of distribution channels is to ensure the efficient transfer and delivery of goods or services to consumers when and where they are needed, effectively adding value in terms of time and place.
2. Distribution channels typically involve multiple stages, including the producer, wholesaler, retailer, and ultimately, the consumer. However, contemporary businesses, including those in the hospitality industry, have expanded beyond single-channel distribution. Instead, they utilize various distribution channels, such as travel-tourism intermediaries and brand websites, necessitating the implementation of effective multi-channel portfolio management strategies.
3. The hospitality sector faces unique challenges due to the intangible nature of its product. Therefore, identifying and selecting the most effective channels is a crucial aspect of marketing strategy, ensuring competitiveness and the ability to reach the desired target market.
4. Direct distribution channels offer the advantage of establishing direct contact with customers and rapid responses to market changes. However, guests often prefer to make reservations through intermediaries rather than directly contacting hotels. Hotels still grapple with the challenge of diverting customers to use direct distribution channels instead of intermediaries.
5. Some primary online distribution channels, that are widely used in the hospitality sector today, are: hotel brand websites, online travel aggregator intermediaries, and the Global Distribution Systems (GDSs).

In summary, investing in these online distribution networks has become crucial for tourism-hospitality marketers looking to retain guests, enhance their hotel’s positioning, and gain a competitive edge in sometimes saturated markets with ample hotel supply. For budget hotels that find it challenging to manage various distribution channels, they can opt to maintain relationships with online travel distribution intermediaries or travel distributors for online distribution of their accommodation products. The internet web technologies have fundamentally transformed accommodation distribution, and new technologies continue to make it progressively convenient and swift for potential guests to access all kinds of information, not only locally but on a global scale.

RECOMMENDATIONS

1. Embrace Technology: Continually invest in technology to streamline operations, enhance the guest experience, and stay competitive. Consider adopting chatbots, mobile apps, and property management systems to improve efficiency and guest satisfaction.
2. Diversify Distribution Channels: While online travel agencies (OTAs) are crucial, explore other distribution channels, including direct bookings through your website and partnerships with local businesses to attract a broader audience.
3. Guest Engagement: Focus on providing exceptional guest experiences to build loyalty and positive online reviews. Encourage guest feedback and respond promptly to both positive and negative comments.
4. Collaborate with Local Businesses: Partner with local restaurants, attractions, and service providers to create value-added packages for guests. This can differentiate your property and enhance the guest experience.
5. Continuous Training: Invest in staff training to maintain service quality and ensure consistency. Well-trained staff can contribute significantly to guest satisfaction and positive reviews.
6. Online Reputation Management: Develop a proactive online reputation management strategy to monitor and respond to guest reviews on various platforms. Encourage satisfied guests to leave positive reviews.
7. Direct Booking Incentives: Offer incentives for guests who book directly through the brand website, in form of direct discounts or exclusive packages. This can help reduce reliance on OTAs.

CONCLUSION

The online distribution of budget hotels has become an integral part of the hospitality industry’s evolution. It offers these accommodations the opportunity to compete on a global scale, increase booking and occupancy rates, and adapt to changing consumer preferences. However, budget hotels must navigate challenges such as commission fees, reputation management, and fierce competition while leveraging technological advancements and sustainability initiatives. Future research should continue to explore innovative strategies and best practices for budget hotels in the ever-evolving online distribution landscape. The challenges and solutions associated with online distribution in the budget accommodation segment are critical considerations for hotel operators and stakeholders. The rapid evolution of technology and consumer preferences has transformed the way travellers’ access and book accommodations. While this presents challenges, it also offers immense opportunities for those who can adapt effectively. The challenges faced by budget accommodations include intense competition, complex revenue management, and the ever-present issue of managing online reputation. These challenges can hinder profitability and growth. However, through innovative solutions, budget accommodations can thrive in this digital age. Differentiation and the provision of personalized experiences can help budget accommodations stand out in a crowded marketplace. The adoption of revenue management tools and data analytics can optimize pricing strategies and maximize revenue. Additionally, active engagement with guests and responsive online reputation management can enhance the brand’s image.

In summary, the budget accommodation segment faces challenges in online distribution, but by embracing technology, focusing on guest satisfaction, diversifying distribution channels, and staying agile in a dynamic market, budget accommodations can thrive and remain competitive in the evolving digital landscape.

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