IBS Center for Management Research

Assessment of Consumer Preferences

This case was Men by V Srinlvaq and R Muthukumar, IBS Center for Management Researcf,. I was compiled from published
sources, and is intended to be used as a basis for class discussion rather than to illudrefe either effediw or ineffective handling
of a mtnagement sifuation.

Augusmm MarUlin L
lnstitut Teknologi Bandung
Indonesia
Licensedto print 05 copies, 13 August, 2013,
License valid upto 12 November, 2013.

O 201I,IBS Center for Management Research. All rights reserved.

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Assessment of Consumer Preferences

Kiran Agarwal (Kiran), founding head of Kiran Holiday Residency (KHR), a chain of hotels and
resorts based in Hyderabad, India, had been in the hotel business since 1990. With the company
growing over the years, Kiran planned to increase emphasis on customer service. He called for a
meeting of his senior management team. Eventually, KHR decided to a n y out a pilot marketing
research study to zero in on the consumer preferences to focus upon.

HOTEL INDUSTRY IN INDIA

In the post-globalization era, many countries were looking for global opportunities and foreign .
investments to give a boost to their economic growth. In this highly competitive era, the hospitality
business played a vital role in providing support to global economic operations. According to the
'Travel and Tourism Competitiveness Report (TTCR) 201 1' of the World Economic ~orum',India
was the 68' country in the list of the world's attractive2 destination^.^ With India becoming a
global destination for tourism as well as business, the hotel industry was booming.
The growth and success of the hotel industry mainly depended on the economic growth of the
country and the leisure time available to the people. After the economic reforms in the 1990s,
industrial growth in India received a boost; business opportunities and the overall economic levels
of the people increased. This led to a growth in Indian tourism.
The hotel industry is closely related to the travel and tourism industry. The growth of this sector
was propelled by an expansion in national and international tourism. The Government of India
(GoI) initiated several policy measures to provide a boost to travel and tourism and these had a
positive impact on the hotel industry. Campaigns like 'Incredible India' and 'Atithi devo
bhava'('Guest become God') helped in promoting tourism, which in turn helped the hotel industry
to expand. Investments in infixstructure increased business opportunities for the hotel industry. It
was not only the major Indian players but also the foreign players who entered the hotel industry
through joint ventures. Inter Continental, the Taj Group, the Oberoi Group of Hotels, the ITC
Welcome Group of Hotels, The Park Group of Hotels, Le Meridien Group of Hotels, and the
Welcome Heritage Group of Hotels were some of the major hotel groups in India.
According to the World Travel and Tourism council4, the hospitality industry in India was
growing at a rate of 8.8%. According to experts, as of 2010, there was a shortage of around
150,000 rooms in India, which had led to an increase in room rates. According to them, India

'

'

4
5

The World Economic Forum is an independent international organization committed to improving the
state of the world by engaging business, political, academic, and other leaders of society in shaping
global, regional, and industry agendas.
Every country is assessed based on selective features like natural resources, cultural resources, price
competitiveness, transport network, tourism inhtructure, etc. and the Travel and Tourism
Competitiveness Index (TTCI) or a Rank is assigned based on the net score.
Travel & Tourism CompetitivenessReport 2011,
http://www3.weforum.orgldo~FFTravelTouri~mC~mpetitivenes~SReportrt2Ol
1.pdf
It is an international organization of travel industry executives promoting travel and tourism worldwide.
"Hotel Industry in India," http:/~business.nmpsofindia~~m~india-indu~hotel-indu~-in-indiah~

Assessment of Consumer Preferences

would be a destination for hotel chains looking for growth. They said the growth rate would
increase further in the future considering the number of rooms that would be required by the hotel
industry.
With this kind of growth and opportunities expected, all the hotel chains had started to expand
their businesses. One such chain was KHR.

ABOUT THE COMPANY

Kiran, with a post-graduate degree in management from a reputed B-school, founded KHR in 1990
in Hyderabad. Before venturing into the business, he undertook a small pilot study to identify
business sectors with potential in India. He eventually zeroed in on the hotel business as one such
sector. According to experts, India being a populous country and with economic levels rising
rapidly, the hotel business would be an ever-flourishing business in the country. After a couple of
years of its establishment, the KHR group became popular in the region for its hotel and restaurant
services. KHR laid special emphasis on customer satisfaction. Along with quality food, the
restaurant ensured a pleasant and enjoyable ambience to provide a unique experience to the
customer. The cuisine offered a perfect blend of traditional and modem tastes at affordable prices,
which the group believed, was essential to ensure customer retention. KHR recruited highly
motivated youth to work in the organization. New recruits were given adequate training and
facilities to become part of a skilled workforce in the organization. Since its inception, KHR had
concentrated on coming up with certain schemes such as a complimentary breakfast for the
customers. The group was thus seen as a customer-centric business entity.
Due to the sharp business acumen of its management, long-term business strategies, and dedicated
manpower, the group had expanded its business operations to 20 hotels covering all potential
business centers in the region within a decade. These locations were identified based on different
backgrounds of consumers like income levels, disposable incomes, demographic features, etc.

THE PILOT
As part of the new 'customer focus' strategies, the management of the company planned to go in for

further expansion but in a planned way. The main objective of the company was to improve its share
in the market and retain the customers with their services. However, before starting the process of
expansion, the management wanted to assess customer preferences and the kctors influencing their
preferences. To discuss all the proposed initiatives, Kiran called for a meeting of the managers of all
the departments. The managers put forth their opiniondviews on the proposed new initiatives. K i m
was impressed with the suggestion of the Marketing Head, Anil Sharma (Sharma), that a Marketing
Research Analysis be conducted to come up with an appropriate solution.
Sharma was made responsible for the project. He carried out a small pilot study in Marketing
Research on customer preferences in the KHR group of hotels and the factors influencing their
preferences. The main purpose of the study was to assess significant factors which could influence
customer preferences. KHR set up a customer suggestions box to obtain customer feedback or
suggestions, based on which it could initiate changes in the existing system if required. These
feedback forms were helpful in developing a consumer preferences table (Refer to Exhibit I for
tabulated information). Another important initiative was the setting up of the consumer grievance
cell which provided solutions to the customers on problems that they frequently kced.
Based on the collected information and analysis, Sharma submitted certain recommendations to
the management. One of his recommendations was that KHR should focus mainly on three factors
which would have a major influence on consumer preferences, namely, quality of food, pricing of
the food, and service of the hotel. But Kiran had doubts whether this recommendation would be
accepted and was still not totally convinced that the research results were good enough to take a
decision based on them.

5.

Assessment of Consumer Preferences

Exhibit I

Consumer Preferences (Collected)

Note: All the ratings are given in the range 'I ' to ' I 2 'points scale of preference of the factorhananable.
The
score ' I 2 'points indicates highest level of preference. The score ' I 1 'point indicates next level of pre$erred
hotel and so on The score '1 'point indicates lowest level ofpreference.

i.

Assessment of Consumer Preferences

Suggested Readings and References:

1.

"Travel & Tourism Competitiveness Report 2011,"

http://www3. w e f o r u r n . o r g l d o c s / W E F F T r a v e l T o u r i s m C o m ~ O l1.pdf

2.

Aaker A. David, "Correlation Analysis and Regression Analysis", Marketing Research,

6&edition (ISBN 9971-5 1-262-9) John Wiley & Sons (ASIA) Pte Ltd.

3.

Malhotra K. Naresh., "Chapter 17: "Correlation and Regression", Marketing Research An

Applied Orientation, 5& edition (ISBN-978-8 1-203-3044-3), 2007.

4.

"Hotel Industry in India," http://business.mapsofindiacodindia-ind~~~otel-hd~in-india.htrn1