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Customer Relationship Management (CRM) in the Hotel Industry Executive summary Hospitality business is a multi-million-dollar industry rapidly shaping global economy and the contemporary socio-economic developments. The hospitality services have always been demanded among tourists and travellers, restaurant clientele and hotel guests, though it seems at the dawn of the 21st century the overall perception of hospitality need dramatic reconsideration. According to statistical indicators, the industrys development has recently reached its acme and almost every world citizen bore relation to the hospitality services (Montes 2000). At the dawn of the new millennium, hospitality industry experts forecasted that the global economy of the new century will be prevailed by the development of state-of-the art technologies and hospitality industry. These predictions were based on the realistic assessment, since the tourism and travel services have shown a remarkable 500% growth over the last 25 years. Prior to the global economic recession, international hospitality business was considered by the industry experts as one of the most fast-growing industry that annually earned multi-trillion-dollar profits and dramatically shaped the development of the global economy over the last decade (Nagle 1999). Annual share in the global economy gained from the hospitality services (including hotel services, tourism and travelling, leisure and entertainment, catering and food services) comprised 3.5 trillion prior to the financial crisis. According to the industry forecasts, the industry was to become the largest in the world with regard to the scope of penetration and revenues by 2010. Summer Palace Hotels is a five-star hotel group that operates in more than 50 countries around the world. As their consultant, I aim to gain insights into how their current CRM practices are keeping pace with the industry.

Customer relationship management (CRM) remains as relevant today as it was during its inception in the 1970s. This is particularly true with the hotel industry, where the way hotels manage customer relationships often define their competitive edge (Piccoli et al. 2003). However, due to rapid changes within the industry, hotels need to respond to these changes continually in order to stay relevant to their customers. The hotel industry is experiencing the emergence of a new class of accommodation that attempts to position itself between a typical backpackers' accommodation and a fullservice hotel. Although they currently operate only five-star hotels, Summer Palace intends to diversify into this potentially lucrative segment, which they name Summer Inn. However, they are unsure whether a loyalty program is necessary for this business. Much like budget airlines, some of these new breed of hotels offer a loyalty program, while others do not, presumably as a cost-saving measure in order to keep the price low. Strategic insight into CRM Under the harsh circumstances of the global economic crisis when the demand and revenues gained from the hospitality services decline, it is important that every hospitality organization that would like to sustain its competitive advantage is aware of the potential dangers outlined in the Gaps model. The model was designated by the management theorists Parasuraman, Berry and Zeithaml in 1990 to enable corporate management to manage the existing and potential gaps with the utmost efficiency while providing services to the customers. This effective approach ensures that the company manages the gaps that occur in its business operation by winning and sustaining the clients. Furthermore, the approach enables to gain competitive advantage and advance the quality of the provided services (Zeithaml et al., 1990). Therefore, Montes (2000) argues that most of the hospitality industry operators have shifted their strategic focus towards the combination of highly-innovative approaches

High-quality hospitality services have always been on the high demand among hotel guests, restaurant clients, travellers and tourists who enabled such a considerable growth of the various segments of the industry. However, the assessment of positive correlation of supply and demand in the hospitality industry is not self-sufficient anymore, since hospitality managers had reconsidered the very concept of hospitality and shaped it to the challenges and innovative trends of the 21st century (Gronroos 2007, pp. 24-26). The contemporary idea of hospitality management consists not merely in the achievement of customer satisfaction and meeting their individual needs. In addition to this core purpose of the hospitality concept, the industry has become much dependent on the two core pillars of operation< namely: sound HR management, and vast implementation of the innovative cutting-edge information and communication technologies. Particularly these are the two core prerequisites of the any of todays hospitality company competitiveness and its competitive advantage on the highly-competitive global marketplace. Conversely, whenever these two determinants of success are not followed, the hospitality service company loses clients and eventually goes bankrupt (Gronroos 2007, pp. 121-125). Therefore, corporate managers stick to the following guidelines when evaluating and improving customer service: ensuring enough staff on the floor to help customers fill their needs; training staff how to help customers have a good experience. Customer relationship management (CRM) involves the processes applied by a company to manage the contacts with the customers. CRM is a software-based method applied to manage relations with customers in order to advance the long-term value to a company, as well as enhance corporate growth and profit. This customer-oriented technology reflects the corporate strategic approach to develop customer relationship-building and marketing processes to win the more customers on the competitive market and make them loyal to the brand. The effective application of CRM assumes that service managers are fully

aware of the customers needs. Such marketing-led approach eventually builds and sustains long-term business relationships with the customers. CRM is a complex process that overall involves feasible processes and systems including marketing, sales, contact management activities, customer support and customer interaction (Payne and Ballantyne 2002). CRM system is also an effective marketing tool that enables a company to identify customer purchasing trends and patterns and develop marketing campaigns on this basis. Hence, CRM provides the companies with relevant methods and technologies to optimally manage their relationships with customers on the basis of the advanced software applications designated to store and use relevant data on the customers with a maximum effect and efficiency (Peelen 2005). Within the CRM software framework, customer-oriented processes are supported by various corporate departments through the collection, storage and processing of the information about the customers. CRM therefore primarily aims to improve services rendered to the customers, as well as apply customer contact information for the purposes of targeted marketing. Overall, CRM is considered a holistic software-based approach applied to better handle customer relationships. CRM does not require major software investments, though proper software is needed to fully explore the benefits of the applied CRM strategy (Gronroos 1997). Summer Palace Hotels CRM success story Over the past two decades Summer Palace Hotels has won a competitive advantage on the hospitality market mainly due to the smart application of the effective CRM programs backed up by thorough marketing research of customer buying behaviours and changing marketing trends. Successfully implemented through the Advantage Card loyalty scheme, Summer Palace Hotels CRM strategy consists in: (1) strong focus on the individual customer needs and behaviours; (2) enablement of new initiatives and non-traditional hospitality options; and (3) maximum customer support with the consideration of the most recent

marketing trends as well as customer needs and preferences. To implement sound CRM strategy Summer Palace Hotels reorganized its whole business around the CRM (Piccoli et al 2003). Summer Palace Hotels applies the Micro Strategy Business Intelligence Platform, which enables the company to provide its customers with advanced reporting and analysis of loyalty data. Summer Palace Hotels applies Micro Strategy as a CRM tool to obtain relevant data on: (1) the purchasing capacity of its customers; (2) customer segmentation; (3) and direct marketing feasibility. The data is primarily collected from Summer Palace Hotels Advantage Card loyalty program. Micro Strategy platform enables Summer Palace Hotels to conduct a sophisticated analysis of its customer base and allows the customers with access to the companys marketing database. At that, Summer Palace Hotels effectively applies one-toone marketing approach to increase the lifetime value and profitability of its each individual customer (Piccoli et al 2003). The companys CRM philosophy is primarily focused on the offering of great value to the customers. At that, the company permanently monitors the newest market trends to maintain the competitive advantage. Herewith, Summer Palace Hotels is entirely oriented towards the customer satisfaction by valuing the latter with fantastic opportunities and promotions, Taking Summer Palace Hotels case study into account, it is apparent that the company does not perceive customer relationship management as a mere software product or technology. Conversely, in Summer Palace Hotels CRM reflects the corporate direction to build up a sustainable business concept and strategy on the grounds of customer-oriented approach. The CRM strategy is based on the application of lead management tools and information technologies that are utilized to collect relevant data about the clients within all stages of CRM life-cycle, involving attraction, maintenance, and loyalty). In practical terms,

CRM is applied as sound relationship builder with individual customers to build their loyalty to a companys brand. As a result of effective CRM application, the company enhances its competitive position on the market and increases revenues since building up loyal relationships with individual customers enable the company to win new customers and maintain the existing ones (Temporal and Trott 2001). Summer Palace Hotels applies CRM to primarily focus on an individual customer while facing fierce competition on a highly competitive hospitality market. The CRM strategy therefore allows Summer Palace Hotels to fully concentrate on the attraction and maintenance of its customers by means of feasible marketing approaches, involving initial communication, customer data collection and analysis, sales, and servicing. Summer Palace Hotels utilizes CRM as an effective business solution fully integrated into the corporate information environment functioning as a unified customer database. The applied software enables to automate the ongoing marketing business processes, including sales and customer servicing options. Consequently, Summer Palace Hotels wins the customers by offering the most effective opportunities while targeting the right customers at the right moment through the most optimal relationship channel. Summer Palace Hotels therefore applies its integrated CRM to ensure the full-fledged coordination of its departments, which are altogether connected to the CRM platform to enable the most effective personified relationships with the end customers. Furthermore, CRM is applied as an effective problem-solver whenever marketing, sales and service departments act independently from each other holding different views and inconsistent approaches towards the end customer (Piccoli et al 2003). The business management effect of CRM operation is evident since the strategy enables the company to unify and transfer the decision-making process to the lower level owing to automation. This enables the company to better react to the current demand, increase turnover and save on costs. Finally, CRM philosophy assumes the history of company-customer

interrelationship, which enables Summer Palace Hotels to better plan its business and enhance its sustainability. It is evident that further application of CRM by Summer Palace Hotels should be based on the newest software and technological solutions; at that the corporate management should consider that the costs allocated for winning every new customer are fivefold higher than the maintenance of the existing one (Temporal and Trott 2001). Overall, the contemporary perception of CRM strategy assumes that customers build up their relations with the companies on the principles of overall partnership and trust, rather than simply a product provided on the marketplace. The partnership communications therefore involve various channels ranging from viral marketing to Internet chats. Consequently, CRM enabled more differentiated demand on the part of customers, and more personified attitude on the part of companies. Thus the conventional pyramid of values has dramatically shifted from the pure consuming needs (consisting of specific product availability and affordability; compliance of the set price to customer expectations; sales and service convenience; and credibility of product reliability and quality), to the more personified values (consisting of mutual loyalty between customer and company; overall satisfaction in accordance with customer demands and expectations; permanence, assuming that the company considers customer concerns; and personification reflected in the companys individual approach to its every customer) (Peelen 2005). The full understanding and effective combination of these core CRM values makes the Summer Palace Hotels customer relationship strategy unique on the hospitality market enabling its customers with the highest quality standards; personified communication through the wide network of channels; wide selection of brand-made products; outstanding expert services at the affordable prices; and overall loyal approach to each individual customer - as the highest priority within Summer Palace Hotels business philosophy.

Reference list Gronroos C. 1997, From marketing mix to relationship marketing towards a paradigm shift in marketing, Management Decision Vol. 35 no 4 PP 322 339 Montes, T. 2000, The Diversity Challenge. Ashridge Journal, Summer, 18-21. Nagle, G. 1999, Tourism, Leisure and Recreation. Nelson Thornes. Payne C., and Ballantyne D. 2002, Relationship marketing, Oxford Butterworth Heinemann. Peelen E. 2005, Customer Relationship Management, FT Prentice Hall Piccoli, G, OConnor, P, Capaccioli, C & Alvarez, R. 2003, Customer Relationship ManagementA Driver for Change in the Structure of the U.S. Lodging Industry, Cornell Hotel and Restaurant Administration Quarterly, Vol. 44, No. 4, pp. 61-73. Temporal, P., Trott, M. 2001, Romancing the Customer: Maximizing Brand Value Through Powerful Relationship Management, Wiley; International edition Zeithaml, V., Parasuraman, A. & Berry, L. 1990, Delivering quality service: Balancing customer perceptions and expectations, New York, NY: The Free Press.