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Marketing effectiveness of the hotel industry in Croatia
Hospitality Management 19 (2000) 227±240
Marketing eectiveness of the hotel industry in Croatia Sanja Cizmara,*, Sanda Weberb a
Horwath Consulting Zagreb, Mihanoviceva 40, 10000, Zagreb, Croatia b Institute for Tourism, Vrhovec 5, 10000 Zagreb, Croatia
Abstract Despite the scarcity of empirical investigation, marketing eectiveness is recognised as an important prerequisite of the overall market eectiveness of the hotel industry. The purpose of this empirical study was to examine the in¯uence of eective marketing practices on business performance in the Croatian hotel industry. Our ®ndings indicate that the marketing eectiveness is positively associated with the performance level, the scope of marketing activities, the way marketing information is used in strategic and operational management and also with the status of the marketing department within the hotel company. The managerial implications of the ®ndings are presented along with future research directions. # 2000 Elsevier Science Ltd. All rights reserved. Keywords: Marketing eectiveness; Business performance; Marketing activities; Marketing information; Marketing department; Hotel industry
1. Introduction The frames of today's market environment are, to a large extent, determined by globalisation trends in all the industries and nearly all the countries of the world (Finnie, 1994). During the past several decades, globalisation has penetrated into the tourism ¯ows. As a result of this, competition in tourism, including the hotel industry, has become ®ercer. This is why the marketing eectiveness in the sense of impacts of marketing practices on business performance of the hotel industry has become a focal point of research. The fact that marketing functions provide an answer to the question of how to attract guests under these conditions of ever growing competition gives rise to a thesis that marketing eectiveness, to a large *Corresponding author. E-mail addresses: [email protected] (S. Cizmar), [email protected] (S. Weber). 0278-4319/00/$ - see front matter # 2000 Elsevier Science Ltd. All rights reserved. PII: S 0 2 7 8 - 4 3 1 9 ( 0 0 ) 0 0 0 2 0 - 7
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extent, determines the overall market eectiveness of the hotel industry. The long-term survival of the hotel industry in a competitive environment depends on its ability to satisfy customers' demand eciently and eectively (Nicholls and Roslow, 1989). But in comparison with commercial service operations such as banking, insurance or retail distribution, the hotel sector was slow to implement marketing as a management discipline (Calantone and Mazanec, 1991; Appiah-Adu et al., 1999). Recent research results show that the level of the market eectiveness of the hotel industry in Croatia is far below the eectiveness levels of the hotel industries in the Mediterranean countries which are Croatia's main competitors in the tourism sector. It has already been proven, theoretically, that destination choice (primarily the country, and then resort } travel destination) represents one of the ®rst and most important decisions made by a tourist; this decision is subject to a number of factors (country image, accessibility, attractiveness, safety level, etc.) which highlight the fact that the market eectiveness of the hotel facilities is, to a large extent, determined by external factors. The Croatian hotel industry is in a speci®c position in which these external factors are extremely pronounced, primarily due to the consequences of the war which raged in the area at the beginning of the 1990s, and secondly, due to the process of privatisation of the hotel industry which is currently under way. Major overall and losses in the tourism industry, insolvency and a lack of cash, are the most striking characteristics of the Croatian economy. Throughout the 20-year pre-war period (197021988), Croatian tourism recorded a continuous and dynamic growth which reached ®gures of over 68 million overnights in 1988 and approximately 62 million in 1989, the last pre-war year. The war in Croatia and its immediate surroundings had a disastrous eect on Croatian tourism. During 1998, which was the most successful year in the post-war period, 31.2 million overnights were recorded, about half of the performance level in 1989. The incomplete, and from the entrepreneurship point of view, not very encouraging process of privatisation of a large part of the Croatian tourism portfolio, has blocked many entrepreneurial initiatives, and it has had a discouraging eect on the entry of investment capital into Croatian tourism (Radnic and Ivandic, 1999). The new hotel industry ownership structure is being slowly installed. The dominant owners are banks, small shareholders, investment funds and other insitutional owners. The owners wonder whether to restructure the enterprise or sell their shares. Know-how and money are necessary for restructuring and very few owners possess them. It can be concluded that the hotel industry owners' structure still cannot eciently perform its ownership mission (Dragicevic et al., 1998). In such a complex situation, it is of primary importance to examine the marketing eectiveness of the hotel companies in order to establish its impact and put forth proposals for the upgrading of business activities. This was why the primary goal of this research was to investigate some aspects of the marketing eectiveness of the Croatian hotel industry based on the research of the eectiveness of marketing departments in a number of hotel companies.
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2. Marketing eectiveness of the hotel industry: a conceptual framework In an increasingly competitive industry it is essential to implement marketing as a business philosophy focused on the customer. Although many de®nitions exist, they all put the customer as the central focus for business decision making. According to Kotler (1984), marketing is a ``social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging product and values with others''. Another marketing guru, Levitt (1986), states that ``a truly marketing minded ®rm tries to create value providing goods and services that consumers will want to buy''. According to Foxall (1988), marketing orientation itself is no more than an appropriate response to a given market structure: high levels of intra-industrial competition, the capacity for supply to exceed demand and consumer auence manifested in a large measure of discretionary spending, which can all be applied to modern tourism and the hospitality industry. Although the role of marketing in contemporary businesses is recognised and marketing philosophy is widely accepted, the tourism industry is one of the last to experience the change from a seller's to a buyer's market (Calantone and Mazanec, 1991); the hotel sector was slow to accept and implement the marketing concept (Appiah-Adu et al., 1999) and marketing planning is rarely discussed in hospitality related journals. Bowen and Sparks (1988) made an overview of hospitality marketing literature and reported that over half of the empirical studies were in the areas of consumer behaviour and market segmentation indicating the importance of marketing research. Despite the lack of empirical work on marketing eectiveness in the hospitality industry and especially on the link between marketing eectiveness and performance, its importance has lately been pointed out (Philips, 1996; Philips and Moutinho, 1998; Appiah-Adu et al., 1999). According to Kotler (1984), a company's marketing eectiveness is re¯ected in the degree to which it exhibits ®ve major attributes of a marketing orientation: customer philosophy, integrated marketing organisation, adequate marketing information, strategic orientation and operational eciency. The ®rms need to be able to conduct marketing analysis and to plan and implement marketing strategies (Hart and Troy, 1985; Buttle, 1986; Kotler et al., 1996; Seaton and Bennett, 1996). Although the results of most marketing eorts are dicult to asses, previous research ®ndings suggest that marketing eectiveness is positively associated with business performance (Norburn et al., 1988; Taylor, 1996; Appiah-Adu et al., 1999). Successful hospitality companies are those that are developing eective strategic plans and those that have adequate information available to managers (Moncarz, 1996). Marketing eectiveness also depends on the ability of managers to produce pro®table strategies from their philosophy, organisation and information resources. Finally, marketing eectiveness depends on the ability to implement marketing plans successfully at various levels of an organisation. It can be concluded that the marketing eectivess of a company depends on various attributes of a marketing orientation. The rating instrument used in this study involved only some of those attributes (the use of adequate
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marketing information, marketing activities and planning and operational eciency). 3. Methodology 3.1. Goals and hypotheses The purpose of the research was to examine the in¯uence of marketing on the performance of the hotel industry by determining the level of marketing eectiveness in the Croatian hotel industry and its changes within a 4-year period of time (199421998). The goals of the study were as follows: *
*
*
To assess the status of the marketing departments within the hotel companies by identifying: (a) the formal organisational form of the department and its relationship with other departments, i.e. its function within the hotel companies and (b) the informal status of the department within the companies, measured by its in¯uence on business decision making. To test the eectiveness of the marketing departments' work by determining the degree of in¯uence a particular department has on strategic and operational management. The eectiveness is tested through the following arguments: (a) the scope and intensity of the marketing activities which were carried out and (b) the way marketing information was used in strategic and operational management as well as the top management's satisfaction with the functioning of their respective marketing departments. To examine the interdependence between the eectiveness levels of the marketing departments and the actual market performance of the respective hotel companies.
The paper also examines the impact of the company size (small, medium-sized or large companies) on speci®c characteristics of the status and eectiveness of marketing in hotel companies. With regard to the presented goals of the paper, the following hypotheses were tested in the research: H1: Some aspects of marketing eectiveness are positively associated with the performance level of a respective hotel company, H2: Some aspects of marketing eectiveness are positively associated with the scope of marketing activities that were carried out, H3: Some aspects of marketing eectiveness are positively associated with the way marketing information was used in strategic and operational management, H4: Some aspects of marketing eectiveness are positively associated with the status of the marketing department within the hotel company, H5: The level of some aspects of marketing eectiveness depends on the size of the company.
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3.2. The sample The research was carried out on a non-strati®ed sample of 35 major hotel companies in Croatia during 1994 and 1998, both times on the same sample and using the same questionnaire. All the interviewed Croatian hotel companies were seasonal resorts with mixed portfolios: hotels, apartments and camping sites. They were mostly located along the Adriatic coast and represented half of the total Croatian hotel and apartment capacities (Table 1). The 40 companies were identi®ed for the purpose of this study and contacted by letter in 1994; 35 companies agreed to participate and they were again contacted in 1998. The questionnaires were sent to the companies and returned to the researchers by mail. Concerning the type and size of the company, the interviewed companies properly represented the overall structure of the Croatian tourist sector. Their average size, measured by the capacity, is 3027 beds in hotels and apartments and 5895 camping places per company. Hotels and apartments represent 34% of their total capacities. Covering more than 60% of the overall tourist capacity in the destination, a speci®c characteristic of these companies was their oligopoly (or monopoly) position within the respective destination. The hotel companies in Croatia, by their size, almost equal the size of smaller national hotel chains in the world, but their whole capacity is concentrated in a single destination. Furthermore, concerning the structure of the capacities, the hotels in Croatia are, on average, larger than those in competitive tourist countries. The average number of rooms per hotel in Croatia amounts to 238. In terms of their organisation structure, almost all the interviewed companies (97%) are centralised joint stock companies, while just 3% of them are holdings, consisting of several limited liability companies, located at the same destination. The major share of companies (90%) are characterised by the classic functional organisation structure and centralised type of management. Just 10% of the companies have a mixed regional and functional organisation, with a certain degree of management decentralisation at the lower management level (micro-destination).
Table 1 The main characteristics of the interviewed companies Characterisics Capacities No. of beds in hotels and ap's No. of persons in camp sites Share of hotels and ap's in total capacities (%) Formal status Centralised joint stock companies (%) Holdings (incl. more ltd's) (%) Organisation Functional organisation (%) Mixed functional (%)
1994
1998
Percentage of change
3447 6313 35.32
3027 5895 33.93
ÿ12.2 ÿ6.6 ÿ3.9
93.20 6.80
96.97 3.03
4.0 ÿ55.4
89.70 10.30
90.91 9.09
1.3 ÿ11.7
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3.3. Data collection Data for this exploratory study were collected using a two-part questionnaire that was distributed to each general manager. He/she was asked to further distribute the ®rst part of the questionnaire (data on organisation, employees and performance measures) to the planning and analysis manager and the second part of the questionnaire (questions on marketing activities, marketing planning and status of the department) to the marketing manager of the company. All the questions were tested in a pilot study conducted among ®ve general managers of the hotel companies and their comments and suggestions were taken into consideration when designing the ®nal version of the questionnaire.
4. Findings and discussion 4.1. Basic operating performance measures The chosen, basic operating performance measures represent the physical and ®nancial indicators of marketing eectiveness (Philips, 1996). They are as follows: (1) yearly occupancy, measured by the yearly number of overnights per available bed and (2) total revenue per available bed. The averages of the above indicators of marketing eectiveness clearly show that Croatian hotel companies operate in the seasonal resort business. The level of occupancy in the overall capacities, including hotels, apartments and campsites (21.1% at the yearly base) and the respective revenue (US$ 20 per overnight) indicate that the Croatian hotel industry achieves lower performance results than the competitive Mediterranean resort markets (Table 2). Furthermore, although the occupancy of the examined Croatian hotel companies increased in 1998, by 46.8 percentage points in comparison with 1994, as a consequence of the market recovery after the 199121995 war in Croatia, the average revenue per overnight decreased (by 16.8 percentage points). Comparing Croatian hotels in the 325 star international quality level to the hotels in the same category in other Mediterranean countries, Croatian properties are larger and have lower business performances than hotels in other countries. According to the latest survey, Croatian hotels achieve a 40% lower occupancy rate, a 60% lower average room rate and a 75% lower average revenue per available room
Table 2 Key ®gures of the Croatian hospitality industry (hotels, apartments and campsites) Indicator
1994
1998
Percentage of change
Average occupancy (%) Average daily revenue per overnight (US $)
14.4 23.57
21.1 19.61
46.8 ÿ16.8
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(REVPAR). Furthermore, Croatian hotels' cost eectiveness is also lower: they achieve only half of the relative gross operating pro®t (GOP) level realised by the hotel industries of other Mediterranean countries. The results presented in Table 3 show the actual market and ®nancial status in the Croatian hotel sector, which is a consequence of the ®ve-year war period. A 40% decline of the overnight volume was realised in the 199821990 period. However, at the same time, the existing situation in the Croatian hotel industry is the result of the matured products and slow and inecient privatisation process that has further slowed down the process of upgrading the hotel products and decreased the marketing and cost eectiveness levels at Croatian hotels. After 10 years of privatisation, 60% of the assets in the Croatian hotel sector are still state-owned. Therefore, the Croatian hotel industry is in a crisis: it has both market and ownership/management problems. According to the survey results, it can be concluded that the Croatian hotel industry is positioned the worst out of all comparable Mediterranean countries, in the domain of marketing management (cost) eectiveness. 4.2. Key ®nancial operating results With regard to the overall dicult macroeconomic and market conditions in which the Croatian hotel industry operates, three indicators were examined: (1) the share of companies which achieved a net operating pro®t (NOP), with the average rate of NOP in comparison with the total revenue, (2) the share of companies which achieved an operating loss, with the average rate of loss in comparison with total revenue and (3) the average share of the marketing budget in total revenue. The indexes of change from 1994 to 1998 were calculated as well. Based on the assumption that the level of the marketing budget in¯uences marketing eectiveness, the correlation of the respective variables was calculated. The results (based on the hotel industry performance in 1998) are as follows: 42.4% of the total number of interviewed companies achieved NOP, with the average rate of 4.7% NOP in the realised total revenue,
*
Table 3 Key ®gures of the Croatian hotel industry in Croatia and competitive Mediterranean countries (1998)a
Average size of the hotel property Average room occupancy on a yearly basis (%) Average room rate (US $) Gross operating pro®t (% of net revenue) a
Croatia
Spain
France
238 40.8 370.00 13.9
254 74.0 730.29 28.4
159 69.7 1040.98 30.1
Sources: Horwath Hotel Survey Croatia (1999), Horwath Consulting Zagreb; Worldwide Horwath Hotel Industry Study (1999), Horwath International, New York.
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57.6% of the total number of companies achieved an operating loss, with the average rate of 13.6% loss in the realised total revenue.
The analysis shows that in comparison to 1994, in 1998 the overall business performance of the interviewed companies improved only in terms of physical indicators such as the occupancy rate, while the pro®tability decreased due to lower average rates. The average share of the marketing budget in the total revenue is 5.4%, varying from 8.5% in the companies that achieved NOP to 1.4% in the companies that achieved an operating loss. However, two issues should be pointed out. Firstly, the average share of the marketing budget in total revenue was, in 1994, 6.4 times lower than in 1998. Secondly, the companies which achieved an operating loss in 1994, had a relatively higher share of the marketing budget in the total revenue than those which achieved NOP. This indicates that in 1994, as the ®rst year of normal operation after the war, managers in less successful operations tried to achieve market recovery by investing more in marketing. 4.3. Marketing organisation With regard to the overall functional organisation of the interviewed companies, marketing is, in most cases, organised as a sector which is a part of centralised overhead departments of the whole company. The centralised marketing sector covers marketing and sales activities of all hotels within the company, since marketing (or sales) department does not exist on the level of individual properties. Such an organisation of marketing and sales is possible due to the high share of allotment arrangements in the total business of the hotel companies in Croatia. Furthermore, the research revealed that 39.4% of the interviewed companies in 1998 did not sell any packages, only the half- and full-board arrangements. It is interesting to point out that, compared to 1994, the sales of dierent packages decreased by 8 percentage points. Although it is usually called ``Sales and Marketing Sector'', this department in half of the interviewed companies actually consists just of sales and reservation functions. The marketing department, which covers all the marketing functions, does not exist in any of the investigated hotel companies. Sales promotion and public relations are the least represented marketing functions according to the number of employees in the marketing and sales departments, less than 5% of the total employees. Analysing the development of the organisation of the marketing department over a four-year period (199421998), the strengthening of the market research function, measured by the structure of employment per dierent marketing function within the marketing department as well as the type of marketing activities carried out, has been noted. In the same period, the product development function was neglected. This was accompanied by a downward trend in the sales of packages, which was also noted in the same period.
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4.4. Marketing eectiveness The results of the survey show that in Croatian hotel companies marketing is focused on two main activities: (a) price policy adjustments in order to attract the demand by competitive prices rather than developed products and (b) producing promotional materials, which still serve as a major promotional tool. In 1998, 97% of the interviewed companies published promotional materials and 91% of them adjusted their pricing policy. A comparison of the scope and intensity of the marketing activities carried out in 1998 and 1994 indicate that the adjustments in the pricing policy as well as the printing of promotional materials became, in 1998, even more exploited than four years before. On the other hand, product development (quality improvements, changing product characteristics) as an important marketing activity, had been neglected during that period (a decrease of 17 percentage points). However, a high level of awareness on this issue exists among the interviewed managers; 71% of the respondents think that it is necessary to develop new products or to upgrade the existing ones. Since marketing planning is usually a prerequisite of marketing eectiveness, the existence of formal marketing plans, on the strategic and operational levels, was evaluated in the survey. The results showed that just 27% of the Croatian companies had a strategic marketing plan, and 64% of them had an annual (operational) marketing plan. During the analysed period, the implementation of strategic planning in the companies had insigni®cantly increased, and the implementation of operational planning had, at the same time, decreased. The results of the survey clearly indicated that strategic plans had previously not been among the business tools used; 67% of the companies worked on a strategic marketing plan in the period 199421998 for the ®rst time ever. These data indicate: (1) strategic planning procedures have not been known and practised enough in the regular management and marketing processes in the Croatian hotel industry, and (2) in a very unstable political and business environment during the analysed period, hotel companies' management has neglected operational planning, since the unpredictability of business results was very high even in the short-run. Marketing eectiveness has also been tested based on the way the marketing information was used in top management's decision-making processes as well as the top management's satisfaction with the functioning of their respective marketing departments. The ranking of the marketing information which is, according to the interviewed top management, the most important for strategic management, is shown in Table 4. In the analysed period, the trends in tourist demand remained the key information for strategic decision making. Furthermore, the focus of top management's interest moved from the analysis of guests' requests and motives of arrival to competition and price analysis, showing that hotel companies have become more aware of their competitive position. In the area of operational management, the focus of interviewed managers also moved to the day-to-day price analysis and realised daily revenue (Table 5). The correlation analysis which was carried out in order to test previously mentioned hypotheses indicated that marketing eectiveness, as de®ned as the result
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Table 4 Important marketing information (for strategic management decision making) Type of information
Trends in tourist demand Market analysis (guests' requests) Motives of arrivals Competition analysis Socio demographic pro®le of guests Strenghts/weaknesses of the company Quality of its own products Trends in macroeconomic environment Price analysis Vision of company Quality of human resources in the company Political situation in the country
1994
1998
Share (%)
Rank
Share (%)
Rank
37.1 22.9 14.3 14.3 11.4 11.4 8.6 5.7 5.7 5.7 2.9 2.9
1 2 3 4 5 6 7 8 9 10 11 12
42.9 20.0 8.6 34.3 0.0 8.6 14.3 14.3 22.9 2.9 2.9 0.0
1 4 6 2 8 6 5 5 3 7 7 8
Percentage of change 15.4 ÿ12.5 ÿ40.0 140.0 } ÿ25.0 66.7 150.0 300.0 ÿ50.0 0.0 }
Table 5 Important marketing information for operational management decision making Type of information
Actual occupancy Average price Booking status Special daily requirement of the guests Daily revenue Guests' complaints Dates of opening/closing down the properties Collection status
1994
1998
Share of sample %
Rank
Share of sample %
Rank
40.0 17.1 8.6 8.6 5.7 5.7 2.9 2.9
1 2 3 4 5 6 7 8
20.0 34.3 25.7 8.6 11.4 5.7 8.6 5.7
3 1 2 5 4 6 5 6
Percentage of change
ÿ50.0 100.0 200.0 0.0 100.0 0.0 200.0 100.0
of two performance indicators } occupancy and revenue per available bed } is positively associated with: (a) the performance level of the company, (b) the scope and intensity of marketing activities carried out, (c) the way marketing information was used in management processes (Table 6). The negative correlation between occupancy (as one of the two tested variables of business performance) and the use of marketing information (marketing eectiveness variables), has been noted. This result indicates that more informed and marketing funded management achieves better ®nancial results. At the same time, management that is not completely aware of the importance of marketing information, achieves better occupancy, but followed with lower average prices and worse revenue. The fact that the positive correlation between the revenue per available bed and the two
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Table 6 Correlation coecients of marketing eectiveness and performance variables Correlation coecient H1 Occupancy Revenue per available Marketing budget H2 Occupancy Revenue per available H3 Occupancy Occupancy Revenue per available Revenue per available
Revenue per available bed NOP Total revenue
0.1932 0.1686 0.5749
bed
Marketing activities carried out Marketing activities carried out
0.0449 0.2655
bed bed
Inclusion of marketing information in MIS Awareness of signi®cance of marketing information Inclusion of marketing information in MIS Awareness of signi®cance of marketing information
bed
ÿ0.4877 ÿ0.1105 0.1636 0.0657
variables of the use of marketing information has been registered, con®rms the hypothesis that marketing eectiveness is positively associated with the status of the marketing department within the hotel company. Survey results indicate that marketing eectiveness, by all the examined variables, is at a higher level as the size of the hotel company increases (Table 7). The larger companies have formal strategic and operational planning documents, intensively use the marketing information in the regular management information system and carry out, more extensively and more intensively, the marketing activities. The awareness of top management of marketing importance for the performance of the company as well as the awareness of necessary various marketing innovations, is higher in larger companies. The larger hotel companies are also more opened to external advice and consulting. 5. Conclusions and implications The research results showed that the level of marketing eectiveness of the hotel industry in Croatia is far below the eectiveness levels of the hotel industries in the Mediterranean countries which are Croatia's main competitors in the tourism sector. The Croatian hotel industry is in a speci®c position in which these external factors are extremely pronounced, primarily due to the consequences of the war which raged in the area at the beginning of the nineties (Radnic and Ivandic, 1999) and secondly, due to the relatively slow process of the privatisation of the hotel industry (Cizmar and Poljanco-Boric, 1997). In such a complex situation it is of primary importance to examine the marketing eectiveness of hotel companies in order to establish its impact and put forth proposals for the upgrading of business activities.
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Table 7 Marketing eectiveness variables (results by size of the companies (1998)) Groups of variables
Existence of strategic marketing Plan Existence of operational marketing Plan Type of services oered: Board only Board & packages Accomplished marketing activities in 1997: Advertising Promotional materials PR Inclusion of market information in regular MIS Top management' awareness of importance of marketing information: Vital Very useful Satisfaction of top management with marketing information: Always good Innovations in marketing } attitude of top management: Innovations are not necessary Product development should be introduced Market research should be introduced Strategic marketing should be introduced Use of external consultancy in marketing: Combined problem solving (internal + external) Exclusively internal problem solving
Total sample (%)
Division by size of the company Small (%) Medium (%) Large (%)
27.3 63.6
0.0 28.6
17.6 64.7
66.7 88.9
39.4 60.6
71.4 28.6
29.4 70.6
33.3 66.7
87.9 97.0 78.8 84.8
57.1 100.0 57.1 85.7
94.1 94.1 82.4 88.2
100.0 100.0 88.9 77.8
45.5 54.5
42.9 57.1
35.3 64.7
66.7 33.3
90.9
100.0
82.4
100.0
45.5 27.3 24.2 12.1
28.6 42.9 14.3 0.0
52.9 11.8 11.8 5.9
44.4 44.4 33.3 11.1
18.2
0.0
17.6
33.3
69.7
100.0
64.7
55.6
Besides the external factors which have heavily in¯uenced the overall market eciency of Croatian hotel industry, the internal reasons for insucient marketing eectiveness are *
* *
unde®ned business and marketing strategies of the hotel companies with no monitoring system of the implemented marketing activities, inappropriate internal marketing information system within the companies and insucient management capabilities to use the existing information.
The study results support the fact that marketing practices are positively contributing to business performance. The study has investigated some of the factors of marketing eectiveness and the link between marketing eectiveness and business performance. Empirical results con®rmed the postulated relationships (research hypotheses con®rmed a positive correlation among the marketing
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eectiveness variables and the operating performance measures) supporting the results of previous studies. In our study, eective marketing practices also implied a higher level of business performance as indicated in the literature. The ®ndings of this study also con®rmed the results of the study on the competitiveness of Croatian tourism regarding the major shifts that will have to be made on the tourism and hospitality company levels (Ivandic et al., 1997). Our ®ndings suggest that hotel companies in Croatia, in order to achieve a higher level of marketing eectiveness, have to implement marketing as a business philosophy more thoroughly. The understanding of the existence of a link between market orientation and business success must increase in order to allow for the application of a long term marketing concept rather than a strategy of survival from one season to the next (Weber, 1998). Although some positive shifts was noted in the period 199421998 (strengthening of the market research function, pricing policy and promotion), for marketing to be eective there must be commitment and involvement throughout the hotel company. In order to compete successfully with the hotel sectors of Mediterranean rivals, Croatian hotel managers have to believe that a positive correlation exists between marketing eectiveness and their business performance and they have to understand all the components of marketing eectiveness. Although this study has its limitations (unstable period of operation for the Croatian hotel industry and limited statistical analysis) it con®rmed the results of previous research in the domain of marketing eectiveness. Although the ®ndings of this study may not necessarily be generalisable to other countries, it is hoped that this study has contributed to the body of knowledge on the marketing eectiveness of the hotel industry. The main suggestions for future research is to develop a more objective set of variables that can be used for testing marketing eectiveness in the hotel sector and also to further examine the relationships between marketing eectiveness and other performance measures..
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Hart, C.W.L., Troy, D.A., 1985. Strategic Hotel/Motel Marketing. The Educational Institute of the American Hotel and Motel Association, East Lansing, MI. Horwath Hotel Survey Croatia, 1999. Horwath Consulting Zagreb, Zagreb. Ivandic, N., Cizmar, S., Kunst I., Horak, S., Radnic, A., Telisman-Kosuta, N., Weber, S., 1997. Competitiveness of Croatian tourism. Unpublished Study, Institute for Tourism, Zagreb. Kotler, Ph., 1984. Marketing Management: Analysis, Planning and Control, 5th edition. Prentice-Hall, Englewood Clifs, NJ. Kotler, Ph., Bowen, J., Makens, J., 1996. Marketing for Hospitality and Tourism. Prentice-Hall, Englewood Clifs, NJ. Levitt, T., 1986. The globalisation of markets. In: Enis, B.M., Cox, K.K. (Eds.), Marketing Classics: A Selection of In¯uential Articles, 6th Edition, pp. 2922304. Allyn and Bacon Inc., USA. Moncarz, E.S., 1996. Recipes for success: lessons learned from successful hospitality companies. FIU Hospitality Review 14 (2), 13226. Nicholls, J.A.F., Roslow, S., 1989. Segmenting the hotel market. FIU Hospitality Review 7 (1), 39247. Norburn, D., Birley, S., Dunn, M., 1988. Strategic marketing eectiveness and its relationship to corporate culture and beliefs: a cross-national study. International Journal of Management Studies 18 (2), 832100. Philips, P.A., 1996. Strategic planning and business performance in the quoted UK hotel sector: results of an exploratory study. International Journal of Hospitality Management 15 (4), 3472362. Philips, P.A., Moutinho, L., 1998. The marketing planning index: a tool for measuring strategic marketing eectiveness. Journal of Travel & Tourism Marketing 7 (3), 41260. Radnic, A., Ivandic, N., 1999. War and tourism in Croatia } consequences and the road to recovery. Tourism 47 (1), 43254. Seaton, A.V., Bennett, M.M., 1996. The Marketing of Tourism Products: Concepts, Issues and Cases. International Thompson Business Press. Taylor, H., 1996. Competitive advantage in the hotel industry } success through dierentiation. Journal of Vacation Marketing 3 (2), 1702173. Weber, S., 1998. Life cycle of Croatian tourism product: what have we learned from the past. In Europaische Tourismus und Freizeitforschung, Tagungberichte (Band 6). Institute for Tourism and Leisure Studies, Vienna University of Economics and Business Administration, pp. 37251. Worldwide Horwath Hotel Industry Study, 1999. Horwath International, New York.
Marketing eectiveness of the hotel industry in Croatia Sanja Cizmara,*, Sanda Weberb a
Horwath Consulting Zagreb, Mihanoviceva 40, 10000, Zagreb, Croatia b Institute for Tourism, Vrhovec 5, 10000 Zagreb, Croatia
Abstract Despite the scarcity of empirical investigation, marketing eectiveness is recognised as an important prerequisite of the overall market eectiveness of the hotel industry. The purpose of this empirical study was to examine the in¯uence of eective marketing practices on business performance in the Croatian hotel industry. Our ®ndings indicate that the marketing eectiveness is positively associated with the performance level, the scope of marketing activities, the way marketing information is used in strategic and operational management and also with the status of the marketing department within the hotel company. The managerial implications of the ®ndings are presented along with future research directions. # 2000 Elsevier Science Ltd. All rights reserved. Keywords: Marketing eectiveness; Business performance; Marketing activities; Marketing information; Marketing department; Hotel industry
1. Introduction The frames of today's market environment are, to a large extent, determined by globalisation trends in all the industries and nearly all the countries of the world (Finnie, 1994). During the past several decades, globalisation has penetrated into the tourism ¯ows. As a result of this, competition in tourism, including the hotel industry, has become ®ercer. This is why the marketing eectiveness in the sense of impacts of marketing practices on business performance of the hotel industry has become a focal point of research. The fact that marketing functions provide an answer to the question of how to attract guests under these conditions of ever growing competition gives rise to a thesis that marketing eectiveness, to a large *Corresponding author. E-mail addresses: [email protected] (S. Cizmar), [email protected] (S. Weber). 0278-4319/00/$ - see front matter # 2000 Elsevier Science Ltd. All rights reserved. PII: S 0 2 7 8 - 4 3 1 9 ( 0 0 ) 0 0 0 2 0 - 7
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extent, determines the overall market eectiveness of the hotel industry. The long-term survival of the hotel industry in a competitive environment depends on its ability to satisfy customers' demand eciently and eectively (Nicholls and Roslow, 1989). But in comparison with commercial service operations such as banking, insurance or retail distribution, the hotel sector was slow to implement marketing as a management discipline (Calantone and Mazanec, 1991; Appiah-Adu et al., 1999). Recent research results show that the level of the market eectiveness of the hotel industry in Croatia is far below the eectiveness levels of the hotel industries in the Mediterranean countries which are Croatia's main competitors in the tourism sector. It has already been proven, theoretically, that destination choice (primarily the country, and then resort } travel destination) represents one of the ®rst and most important decisions made by a tourist; this decision is subject to a number of factors (country image, accessibility, attractiveness, safety level, etc.) which highlight the fact that the market eectiveness of the hotel facilities is, to a large extent, determined by external factors. The Croatian hotel industry is in a speci®c position in which these external factors are extremely pronounced, primarily due to the consequences of the war which raged in the area at the beginning of the 1990s, and secondly, due to the process of privatisation of the hotel industry which is currently under way. Major overall and losses in the tourism industry, insolvency and a lack of cash, are the most striking characteristics of the Croatian economy. Throughout the 20-year pre-war period (197021988), Croatian tourism recorded a continuous and dynamic growth which reached ®gures of over 68 million overnights in 1988 and approximately 62 million in 1989, the last pre-war year. The war in Croatia and its immediate surroundings had a disastrous eect on Croatian tourism. During 1998, which was the most successful year in the post-war period, 31.2 million overnights were recorded, about half of the performance level in 1989. The incomplete, and from the entrepreneurship point of view, not very encouraging process of privatisation of a large part of the Croatian tourism portfolio, has blocked many entrepreneurial initiatives, and it has had a discouraging eect on the entry of investment capital into Croatian tourism (Radnic and Ivandic, 1999). The new hotel industry ownership structure is being slowly installed. The dominant owners are banks, small shareholders, investment funds and other insitutional owners. The owners wonder whether to restructure the enterprise or sell their shares. Know-how and money are necessary for restructuring and very few owners possess them. It can be concluded that the hotel industry owners' structure still cannot eciently perform its ownership mission (Dragicevic et al., 1998). In such a complex situation, it is of primary importance to examine the marketing eectiveness of the hotel companies in order to establish its impact and put forth proposals for the upgrading of business activities. This was why the primary goal of this research was to investigate some aspects of the marketing eectiveness of the Croatian hotel industry based on the research of the eectiveness of marketing departments in a number of hotel companies.
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2. Marketing eectiveness of the hotel industry: a conceptual framework In an increasingly competitive industry it is essential to implement marketing as a business philosophy focused on the customer. Although many de®nitions exist, they all put the customer as the central focus for business decision making. According to Kotler (1984), marketing is a ``social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging product and values with others''. Another marketing guru, Levitt (1986), states that ``a truly marketing minded ®rm tries to create value providing goods and services that consumers will want to buy''. According to Foxall (1988), marketing orientation itself is no more than an appropriate response to a given market structure: high levels of intra-industrial competition, the capacity for supply to exceed demand and consumer auence manifested in a large measure of discretionary spending, which can all be applied to modern tourism and the hospitality industry. Although the role of marketing in contemporary businesses is recognised and marketing philosophy is widely accepted, the tourism industry is one of the last to experience the change from a seller's to a buyer's market (Calantone and Mazanec, 1991); the hotel sector was slow to accept and implement the marketing concept (Appiah-Adu et al., 1999) and marketing planning is rarely discussed in hospitality related journals. Bowen and Sparks (1988) made an overview of hospitality marketing literature and reported that over half of the empirical studies were in the areas of consumer behaviour and market segmentation indicating the importance of marketing research. Despite the lack of empirical work on marketing eectiveness in the hospitality industry and especially on the link between marketing eectiveness and performance, its importance has lately been pointed out (Philips, 1996; Philips and Moutinho, 1998; Appiah-Adu et al., 1999). According to Kotler (1984), a company's marketing eectiveness is re¯ected in the degree to which it exhibits ®ve major attributes of a marketing orientation: customer philosophy, integrated marketing organisation, adequate marketing information, strategic orientation and operational eciency. The ®rms need to be able to conduct marketing analysis and to plan and implement marketing strategies (Hart and Troy, 1985; Buttle, 1986; Kotler et al., 1996; Seaton and Bennett, 1996). Although the results of most marketing eorts are dicult to asses, previous research ®ndings suggest that marketing eectiveness is positively associated with business performance (Norburn et al., 1988; Taylor, 1996; Appiah-Adu et al., 1999). Successful hospitality companies are those that are developing eective strategic plans and those that have adequate information available to managers (Moncarz, 1996). Marketing eectiveness also depends on the ability of managers to produce pro®table strategies from their philosophy, organisation and information resources. Finally, marketing eectiveness depends on the ability to implement marketing plans successfully at various levels of an organisation. It can be concluded that the marketing eectivess of a company depends on various attributes of a marketing orientation. The rating instrument used in this study involved only some of those attributes (the use of adequate
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marketing information, marketing activities and planning and operational eciency). 3. Methodology 3.1. Goals and hypotheses The purpose of the research was to examine the in¯uence of marketing on the performance of the hotel industry by determining the level of marketing eectiveness in the Croatian hotel industry and its changes within a 4-year period of time (199421998). The goals of the study were as follows: *
*
*
To assess the status of the marketing departments within the hotel companies by identifying: (a) the formal organisational form of the department and its relationship with other departments, i.e. its function within the hotel companies and (b) the informal status of the department within the companies, measured by its in¯uence on business decision making. To test the eectiveness of the marketing departments' work by determining the degree of in¯uence a particular department has on strategic and operational management. The eectiveness is tested through the following arguments: (a) the scope and intensity of the marketing activities which were carried out and (b) the way marketing information was used in strategic and operational management as well as the top management's satisfaction with the functioning of their respective marketing departments. To examine the interdependence between the eectiveness levels of the marketing departments and the actual market performance of the respective hotel companies.
The paper also examines the impact of the company size (small, medium-sized or large companies) on speci®c characteristics of the status and eectiveness of marketing in hotel companies. With regard to the presented goals of the paper, the following hypotheses were tested in the research: H1: Some aspects of marketing eectiveness are positively associated with the performance level of a respective hotel company, H2: Some aspects of marketing eectiveness are positively associated with the scope of marketing activities that were carried out, H3: Some aspects of marketing eectiveness are positively associated with the way marketing information was used in strategic and operational management, H4: Some aspects of marketing eectiveness are positively associated with the status of the marketing department within the hotel company, H5: The level of some aspects of marketing eectiveness depends on the size of the company.
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3.2. The sample The research was carried out on a non-strati®ed sample of 35 major hotel companies in Croatia during 1994 and 1998, both times on the same sample and using the same questionnaire. All the interviewed Croatian hotel companies were seasonal resorts with mixed portfolios: hotels, apartments and camping sites. They were mostly located along the Adriatic coast and represented half of the total Croatian hotel and apartment capacities (Table 1). The 40 companies were identi®ed for the purpose of this study and contacted by letter in 1994; 35 companies agreed to participate and they were again contacted in 1998. The questionnaires were sent to the companies and returned to the researchers by mail. Concerning the type and size of the company, the interviewed companies properly represented the overall structure of the Croatian tourist sector. Their average size, measured by the capacity, is 3027 beds in hotels and apartments and 5895 camping places per company. Hotels and apartments represent 34% of their total capacities. Covering more than 60% of the overall tourist capacity in the destination, a speci®c characteristic of these companies was their oligopoly (or monopoly) position within the respective destination. The hotel companies in Croatia, by their size, almost equal the size of smaller national hotel chains in the world, but their whole capacity is concentrated in a single destination. Furthermore, concerning the structure of the capacities, the hotels in Croatia are, on average, larger than those in competitive tourist countries. The average number of rooms per hotel in Croatia amounts to 238. In terms of their organisation structure, almost all the interviewed companies (97%) are centralised joint stock companies, while just 3% of them are holdings, consisting of several limited liability companies, located at the same destination. The major share of companies (90%) are characterised by the classic functional organisation structure and centralised type of management. Just 10% of the companies have a mixed regional and functional organisation, with a certain degree of management decentralisation at the lower management level (micro-destination).
Table 1 The main characteristics of the interviewed companies Characterisics Capacities No. of beds in hotels and ap's No. of persons in camp sites Share of hotels and ap's in total capacities (%) Formal status Centralised joint stock companies (%) Holdings (incl. more ltd's) (%) Organisation Functional organisation (%) Mixed functional (%)
1994
1998
Percentage of change
3447 6313 35.32
3027 5895 33.93
ÿ12.2 ÿ6.6 ÿ3.9
93.20 6.80
96.97 3.03
4.0 ÿ55.4
89.70 10.30
90.91 9.09
1.3 ÿ11.7
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3.3. Data collection Data for this exploratory study were collected using a two-part questionnaire that was distributed to each general manager. He/she was asked to further distribute the ®rst part of the questionnaire (data on organisation, employees and performance measures) to the planning and analysis manager and the second part of the questionnaire (questions on marketing activities, marketing planning and status of the department) to the marketing manager of the company. All the questions were tested in a pilot study conducted among ®ve general managers of the hotel companies and their comments and suggestions were taken into consideration when designing the ®nal version of the questionnaire.
4. Findings and discussion 4.1. Basic operating performance measures The chosen, basic operating performance measures represent the physical and ®nancial indicators of marketing eectiveness (Philips, 1996). They are as follows: (1) yearly occupancy, measured by the yearly number of overnights per available bed and (2) total revenue per available bed. The averages of the above indicators of marketing eectiveness clearly show that Croatian hotel companies operate in the seasonal resort business. The level of occupancy in the overall capacities, including hotels, apartments and campsites (21.1% at the yearly base) and the respective revenue (US$ 20 per overnight) indicate that the Croatian hotel industry achieves lower performance results than the competitive Mediterranean resort markets (Table 2). Furthermore, although the occupancy of the examined Croatian hotel companies increased in 1998, by 46.8 percentage points in comparison with 1994, as a consequence of the market recovery after the 199121995 war in Croatia, the average revenue per overnight decreased (by 16.8 percentage points). Comparing Croatian hotels in the 325 star international quality level to the hotels in the same category in other Mediterranean countries, Croatian properties are larger and have lower business performances than hotels in other countries. According to the latest survey, Croatian hotels achieve a 40% lower occupancy rate, a 60% lower average room rate and a 75% lower average revenue per available room
Table 2 Key ®gures of the Croatian hospitality industry (hotels, apartments and campsites) Indicator
1994
1998
Percentage of change
Average occupancy (%) Average daily revenue per overnight (US $)
14.4 23.57
21.1 19.61
46.8 ÿ16.8
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(REVPAR). Furthermore, Croatian hotels' cost eectiveness is also lower: they achieve only half of the relative gross operating pro®t (GOP) level realised by the hotel industries of other Mediterranean countries. The results presented in Table 3 show the actual market and ®nancial status in the Croatian hotel sector, which is a consequence of the ®ve-year war period. A 40% decline of the overnight volume was realised in the 199821990 period. However, at the same time, the existing situation in the Croatian hotel industry is the result of the matured products and slow and inecient privatisation process that has further slowed down the process of upgrading the hotel products and decreased the marketing and cost eectiveness levels at Croatian hotels. After 10 years of privatisation, 60% of the assets in the Croatian hotel sector are still state-owned. Therefore, the Croatian hotel industry is in a crisis: it has both market and ownership/management problems. According to the survey results, it can be concluded that the Croatian hotel industry is positioned the worst out of all comparable Mediterranean countries, in the domain of marketing management (cost) eectiveness. 4.2. Key ®nancial operating results With regard to the overall dicult macroeconomic and market conditions in which the Croatian hotel industry operates, three indicators were examined: (1) the share of companies which achieved a net operating pro®t (NOP), with the average rate of NOP in comparison with the total revenue, (2) the share of companies which achieved an operating loss, with the average rate of loss in comparison with total revenue and (3) the average share of the marketing budget in total revenue. The indexes of change from 1994 to 1998 were calculated as well. Based on the assumption that the level of the marketing budget in¯uences marketing eectiveness, the correlation of the respective variables was calculated. The results (based on the hotel industry performance in 1998) are as follows: 42.4% of the total number of interviewed companies achieved NOP, with the average rate of 4.7% NOP in the realised total revenue,
*
Table 3 Key ®gures of the Croatian hotel industry in Croatia and competitive Mediterranean countries (1998)a
Average size of the hotel property Average room occupancy on a yearly basis (%) Average room rate (US $) Gross operating pro®t (% of net revenue) a
Croatia
Spain
France
238 40.8 370.00 13.9
254 74.0 730.29 28.4
159 69.7 1040.98 30.1
Sources: Horwath Hotel Survey Croatia (1999), Horwath Consulting Zagreb; Worldwide Horwath Hotel Industry Study (1999), Horwath International, New York.
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57.6% of the total number of companies achieved an operating loss, with the average rate of 13.6% loss in the realised total revenue.
The analysis shows that in comparison to 1994, in 1998 the overall business performance of the interviewed companies improved only in terms of physical indicators such as the occupancy rate, while the pro®tability decreased due to lower average rates. The average share of the marketing budget in the total revenue is 5.4%, varying from 8.5% in the companies that achieved NOP to 1.4% in the companies that achieved an operating loss. However, two issues should be pointed out. Firstly, the average share of the marketing budget in total revenue was, in 1994, 6.4 times lower than in 1998. Secondly, the companies which achieved an operating loss in 1994, had a relatively higher share of the marketing budget in the total revenue than those which achieved NOP. This indicates that in 1994, as the ®rst year of normal operation after the war, managers in less successful operations tried to achieve market recovery by investing more in marketing. 4.3. Marketing organisation With regard to the overall functional organisation of the interviewed companies, marketing is, in most cases, organised as a sector which is a part of centralised overhead departments of the whole company. The centralised marketing sector covers marketing and sales activities of all hotels within the company, since marketing (or sales) department does not exist on the level of individual properties. Such an organisation of marketing and sales is possible due to the high share of allotment arrangements in the total business of the hotel companies in Croatia. Furthermore, the research revealed that 39.4% of the interviewed companies in 1998 did not sell any packages, only the half- and full-board arrangements. It is interesting to point out that, compared to 1994, the sales of dierent packages decreased by 8 percentage points. Although it is usually called ``Sales and Marketing Sector'', this department in half of the interviewed companies actually consists just of sales and reservation functions. The marketing department, which covers all the marketing functions, does not exist in any of the investigated hotel companies. Sales promotion and public relations are the least represented marketing functions according to the number of employees in the marketing and sales departments, less than 5% of the total employees. Analysing the development of the organisation of the marketing department over a four-year period (199421998), the strengthening of the market research function, measured by the structure of employment per dierent marketing function within the marketing department as well as the type of marketing activities carried out, has been noted. In the same period, the product development function was neglected. This was accompanied by a downward trend in the sales of packages, which was also noted in the same period.
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4.4. Marketing eectiveness The results of the survey show that in Croatian hotel companies marketing is focused on two main activities: (a) price policy adjustments in order to attract the demand by competitive prices rather than developed products and (b) producing promotional materials, which still serve as a major promotional tool. In 1998, 97% of the interviewed companies published promotional materials and 91% of them adjusted their pricing policy. A comparison of the scope and intensity of the marketing activities carried out in 1998 and 1994 indicate that the adjustments in the pricing policy as well as the printing of promotional materials became, in 1998, even more exploited than four years before. On the other hand, product development (quality improvements, changing product characteristics) as an important marketing activity, had been neglected during that period (a decrease of 17 percentage points). However, a high level of awareness on this issue exists among the interviewed managers; 71% of the respondents think that it is necessary to develop new products or to upgrade the existing ones. Since marketing planning is usually a prerequisite of marketing eectiveness, the existence of formal marketing plans, on the strategic and operational levels, was evaluated in the survey. The results showed that just 27% of the Croatian companies had a strategic marketing plan, and 64% of them had an annual (operational) marketing plan. During the analysed period, the implementation of strategic planning in the companies had insigni®cantly increased, and the implementation of operational planning had, at the same time, decreased. The results of the survey clearly indicated that strategic plans had previously not been among the business tools used; 67% of the companies worked on a strategic marketing plan in the period 199421998 for the ®rst time ever. These data indicate: (1) strategic planning procedures have not been known and practised enough in the regular management and marketing processes in the Croatian hotel industry, and (2) in a very unstable political and business environment during the analysed period, hotel companies' management has neglected operational planning, since the unpredictability of business results was very high even in the short-run. Marketing eectiveness has also been tested based on the way the marketing information was used in top management's decision-making processes as well as the top management's satisfaction with the functioning of their respective marketing departments. The ranking of the marketing information which is, according to the interviewed top management, the most important for strategic management, is shown in Table 4. In the analysed period, the trends in tourist demand remained the key information for strategic decision making. Furthermore, the focus of top management's interest moved from the analysis of guests' requests and motives of arrival to competition and price analysis, showing that hotel companies have become more aware of their competitive position. In the area of operational management, the focus of interviewed managers also moved to the day-to-day price analysis and realised daily revenue (Table 5). The correlation analysis which was carried out in order to test previously mentioned hypotheses indicated that marketing eectiveness, as de®ned as the result
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Table 4 Important marketing information (for strategic management decision making) Type of information
Trends in tourist demand Market analysis (guests' requests) Motives of arrivals Competition analysis Socio demographic pro®le of guests Strenghts/weaknesses of the company Quality of its own products Trends in macroeconomic environment Price analysis Vision of company Quality of human resources in the company Political situation in the country
1994
1998
Share (%)
Rank
Share (%)
Rank
37.1 22.9 14.3 14.3 11.4 11.4 8.6 5.7 5.7 5.7 2.9 2.9
1 2 3 4 5 6 7 8 9 10 11 12
42.9 20.0 8.6 34.3 0.0 8.6 14.3 14.3 22.9 2.9 2.9 0.0
1 4 6 2 8 6 5 5 3 7 7 8
Percentage of change 15.4 ÿ12.5 ÿ40.0 140.0 } ÿ25.0 66.7 150.0 300.0 ÿ50.0 0.0 }
Table 5 Important marketing information for operational management decision making Type of information
Actual occupancy Average price Booking status Special daily requirement of the guests Daily revenue Guests' complaints Dates of opening/closing down the properties Collection status
1994
1998
Share of sample %
Rank
Share of sample %
Rank
40.0 17.1 8.6 8.6 5.7 5.7 2.9 2.9
1 2 3 4 5 6 7 8
20.0 34.3 25.7 8.6 11.4 5.7 8.6 5.7
3 1 2 5 4 6 5 6
Percentage of change
ÿ50.0 100.0 200.0 0.0 100.0 0.0 200.0 100.0
of two performance indicators } occupancy and revenue per available bed } is positively associated with: (a) the performance level of the company, (b) the scope and intensity of marketing activities carried out, (c) the way marketing information was used in management processes (Table 6). The negative correlation between occupancy (as one of the two tested variables of business performance) and the use of marketing information (marketing eectiveness variables), has been noted. This result indicates that more informed and marketing funded management achieves better ®nancial results. At the same time, management that is not completely aware of the importance of marketing information, achieves better occupancy, but followed with lower average prices and worse revenue. The fact that the positive correlation between the revenue per available bed and the two
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Table 6 Correlation coecients of marketing eectiveness and performance variables Correlation coecient H1 Occupancy Revenue per available Marketing budget H2 Occupancy Revenue per available H3 Occupancy Occupancy Revenue per available Revenue per available
Revenue per available bed NOP Total revenue
0.1932 0.1686 0.5749
bed
Marketing activities carried out Marketing activities carried out
0.0449 0.2655
bed bed
Inclusion of marketing information in MIS Awareness of signi®cance of marketing information Inclusion of marketing information in MIS Awareness of signi®cance of marketing information
bed
ÿ0.4877 ÿ0.1105 0.1636 0.0657
variables of the use of marketing information has been registered, con®rms the hypothesis that marketing eectiveness is positively associated with the status of the marketing department within the hotel company. Survey results indicate that marketing eectiveness, by all the examined variables, is at a higher level as the size of the hotel company increases (Table 7). The larger companies have formal strategic and operational planning documents, intensively use the marketing information in the regular management information system and carry out, more extensively and more intensively, the marketing activities. The awareness of top management of marketing importance for the performance of the company as well as the awareness of necessary various marketing innovations, is higher in larger companies. The larger hotel companies are also more opened to external advice and consulting. 5. Conclusions and implications The research results showed that the level of marketing eectiveness of the hotel industry in Croatia is far below the eectiveness levels of the hotel industries in the Mediterranean countries which are Croatia's main competitors in the tourism sector. The Croatian hotel industry is in a speci®c position in which these external factors are extremely pronounced, primarily due to the consequences of the war which raged in the area at the beginning of the nineties (Radnic and Ivandic, 1999) and secondly, due to the relatively slow process of the privatisation of the hotel industry (Cizmar and Poljanco-Boric, 1997). In such a complex situation it is of primary importance to examine the marketing eectiveness of hotel companies in order to establish its impact and put forth proposals for the upgrading of business activities.
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Table 7 Marketing eectiveness variables (results by size of the companies (1998)) Groups of variables
Existence of strategic marketing Plan Existence of operational marketing Plan Type of services oered: Board only Board & packages Accomplished marketing activities in 1997: Advertising Promotional materials PR Inclusion of market information in regular MIS Top management' awareness of importance of marketing information: Vital Very useful Satisfaction of top management with marketing information: Always good Innovations in marketing } attitude of top management: Innovations are not necessary Product development should be introduced Market research should be introduced Strategic marketing should be introduced Use of external consultancy in marketing: Combined problem solving (internal + external) Exclusively internal problem solving
Total sample (%)
Division by size of the company Small (%) Medium (%) Large (%)
27.3 63.6
0.0 28.6
17.6 64.7
66.7 88.9
39.4 60.6
71.4 28.6
29.4 70.6
33.3 66.7
87.9 97.0 78.8 84.8
57.1 100.0 57.1 85.7
94.1 94.1 82.4 88.2
100.0 100.0 88.9 77.8
45.5 54.5
42.9 57.1
35.3 64.7
66.7 33.3
90.9
100.0
82.4
100.0
45.5 27.3 24.2 12.1
28.6 42.9 14.3 0.0
52.9 11.8 11.8 5.9
44.4 44.4 33.3 11.1
18.2
0.0
17.6
33.3
69.7
100.0
64.7
55.6
Besides the external factors which have heavily in¯uenced the overall market eciency of Croatian hotel industry, the internal reasons for insucient marketing eectiveness are *
* *
unde®ned business and marketing strategies of the hotel companies with no monitoring system of the implemented marketing activities, inappropriate internal marketing information system within the companies and insucient management capabilities to use the existing information.
The study results support the fact that marketing practices are positively contributing to business performance. The study has investigated some of the factors of marketing eectiveness and the link between marketing eectiveness and business performance. Empirical results con®rmed the postulated relationships (research hypotheses con®rmed a positive correlation among the marketing
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eectiveness variables and the operating performance measures) supporting the results of previous studies. In our study, eective marketing practices also implied a higher level of business performance as indicated in the literature. The ®ndings of this study also con®rmed the results of the study on the competitiveness of Croatian tourism regarding the major shifts that will have to be made on the tourism and hospitality company levels (Ivandic et al., 1997). Our ®ndings suggest that hotel companies in Croatia, in order to achieve a higher level of marketing eectiveness, have to implement marketing as a business philosophy more thoroughly. The understanding of the existence of a link between market orientation and business success must increase in order to allow for the application of a long term marketing concept rather than a strategy of survival from one season to the next (Weber, 1998). Although some positive shifts was noted in the period 199421998 (strengthening of the market research function, pricing policy and promotion), for marketing to be eective there must be commitment and involvement throughout the hotel company. In order to compete successfully with the hotel sectors of Mediterranean rivals, Croatian hotel managers have to believe that a positive correlation exists between marketing eectiveness and their business performance and they have to understand all the components of marketing eectiveness. Although this study has its limitations (unstable period of operation for the Croatian hotel industry and limited statistical analysis) it con®rmed the results of previous research in the domain of marketing eectiveness. Although the ®ndings of this study may not necessarily be generalisable to other countries, it is hoped that this study has contributed to the body of knowledge on the marketing eectiveness of the hotel industry. The main suggestions for future research is to develop a more objective set of variables that can be used for testing marketing eectiveness in the hotel sector and also to further examine the relationships between marketing eectiveness and other performance measures..
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