Operational System Analysis A Holiday Inn Case Study

1
Table of Contents
Executive Summary ........................................................................................................ 2
1. Introduction ............................................................................................................... 3
2. Operations and Positioning ........................................................................................ 3
2.1. Holiday Inn and its Market .............................................................................. 3
2.2. Service Strategy Triad ...................................................................................... 4
2.3. Market Positioning and Service Concept ........................................................ 5
2.4. Product/Service Mix ........................................................................................ 6
2.5. 4Vs .................................................................................................................. 6
3. Customer Satisfaction and Measurement ................................................................. 7
3.1. Performance Objectives .................................................................................. 7
3.2. Measuring Customer Satisfaction ................................................................... 9
4. Appreciation of Operations Performance .................................................................. 8
4.1. Operations Strategy Reconciliation ................................................................. 7
4.2. Service Delivery System .................................................................................. 9
4.3. Potential Problems .......................................................................................... 9
5. Positive Changes and Justifications .......................................................................... 10
6. Conclusion and Recommendations.......................................................................... 10
Reflection14
List of References ......................................................................................................... 12

Table of Figures
Figure 1 Service Strategy Triad ................................................................................... 12
Figure 2 Total Service Concept: Elements and Examples ........................................... 12
Figure 3 External Effects of the Five Performance Objectives ................................... 13
Figure 4 Operations Strategy Reconciliation .............................................................. 13
Figure 5 The four stages of operations contributions ................................................ 14
Figure 6 Balanced Scorecard Principles ...................................................................... 14

2
Executive Summary
Positioned as an upper-scale hotel chain, Holiday Inn precisely targets its customers
business and leisure travellers and develops unique product/service mix to meet
market requirements. This report identified key areas for considering when planning
the operational strategy. Operational analysis, including customer satisfaction and
measurement, operations performance, service delivery system and justified positive
changes were carried out around Holiday Inn. In terms of performance objectives,
five core objectives, cost, dependability, speed, quality and flexibility were discussed
and examples from Holiday Inn were used to support the discussion. In order to
better appreciate the operations performance, the Operations Strategy
Reconciliation model was proposed. Reconcile operations capabilities and market
requirements are always the essence in operational analysis and planning. It was
suggested that Holiday Inn employ balanced scorecard to correct customer
complaints about over-standardised services and help the brand gain operations
advantage over competitors.


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1. Introduction
As a global hotel group, the IHG boasts 672,000 rooms in over 4,500 hotels in nearly
100 countries and territories around the world. Its brands include InterContinental,
Crowne Plaza, Hotel Indigo, Holiday Inn, Holiday Inn Express, Staybridge Suites, EVEN
Hotels and HUALUXE Hotels. The mission of IHG is to create the Great Hotels Guests
Love (IHG, 2013d).
This report aims to identify key areas for consideration when planning the
operational strategy. This will be achieved by investigating the InterContinental
Hotels Group (IHG). The Holiday Inn brand within IHG will be used as an example. To
be specific, this report will cover the following areas: the operation and positioning
of IHG and Holiday Inn; an investigation into the customer experience and the use of
systems and procedures to measure customer satisfaction; an assessment of the
operations performance. After the analysis of Holiday Inns operations, the report
will propose justified plausible solutions for positive change.
2. Operations and Positioning
Operational strategy is defined as the packages of decisions that shape the long-term
operations capability with required operations resources (Slack et al, 2010). The
entire report will be structured around operational strategy for Holiday Inn.
2.1. Holiday Inn and its Market
Holiday Inn is an international hotel brand in the IHG Group. Unlike its brother
Holiday Inn Express which is a more economic chain, Holiday Inn is an up-scale and
mid-priced hotel brand. With 228,626 rooms in 1239 hotels (IHG, 2012b), Holiday Inn
is one of the worlds most recognised hotel brands. Outside the USA where there are
146,661 rooms in 820 hotels, Europe is the second largest market with 46,610 rooms
in 288 hotels with another 20 coming on their way (IHG, 2012). Holiday Inns
expansion in Asia, especially in China is exceptional. For example, with more than 64
properties, Holiday Inn is one of the most recognised hotel brands in China (IHG,
2012b). The opening of Pudong Nanpu Holiday Inn in Shanghai in 2009 marked the
100
th
hotel in Asia Pacific (IHG, 2012b).
Holiday Inn targets at both business and leisure travellers who seek convenience,
reliability, relaxation and casual atmosphere. Its properties are located all over the
world and are always conveniently located (IHG, 2012b).
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2.2. Service Strategy Triad
The Service Strategy Triad (Figure 1) addresses the interrelationship between target
market and service concept and service delivery system. By understanding the
Service Strategy Triad, an organisation can deploy its operations effectively so that it
can provide the right offerings at the right time to the target customers (Roth and
Menor, 2003, p. 148). Specifically, service concept (coined by Sasser et al., 1978, p.
14) is a package of tangible and intangible offerings made by the business to its
customers and service delivery system concerns about how the service concept is
delivered to target customers (Roth and Menor, 2003). The centre part service
encounters are the moments of truth (Chase et al., 1998, p. 142 cited by Roth and
Menor 2003) as only at this time the customers can experience and evaluate the
delivered services which will influence their overall satisfaction, intentions to
repurchase and loyalty (Roth and Menor, 2003, p. 148).
This model highlights the need for an integrated approach to service design. It also
demonstrates the importance to decide the service concept and design the service
delivery system in a way that they can be aligned to the target market. As stressed by
Prajogo and McDermott (2008), the congruence between the organisations goals
and the outside world the external fit (p. 507) which is an important constituent of
an organisations strategic fit. Therefore it is meaningful to look at Holiday Inns
service concept and its alignment to the target market.
2.3. Market Positioning and Service Concept
The parent company of Holiday Inn, the IHG has the strength of segmenting its
market precisely following market analysis. It segments the market into high-end,
mid-range, economical and very economical sectors. In this way almost the entire
target market can be served. An accurate positioning is vital in choosing appropriate
strategies and therefore builds brand characteristics (Slack et al., 2010) and achieves
competitive advantage. According to Slack et al (2010), there are four approaches to
position the hotel, namely positioning based on properties and interests, positioning
based on quality and price, positioning based on consumer demands and positioning
based on product quality and class. Based on the positioning approaches, Holiday Inn
lies between economical and mid-range in IHGs mapping of its house of brands
(McDonald and Wilson, 2011).
Roth and Menor developed a list of elements (Figure 2) that consists of a service
concept. As examples of applying this framework to Holiday Inn case, the supporting
facility is convenient online-booking, facilitating good is sleek reception, facilitating
information is comprehensive hotel information on the website and brochure,
explicit services can be standardised lobby soundtrack and scent as well as easily
accessible properties, and implicit services are the friendly and relaxed atmosphere.
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From how IHG position the brand, the essence of Holiday Inns service concept can
be summarised in five words: dependability, friendliness, accessibility, attractiveness,
and value. As mentioned before, customers in this specific target market are different
from those in high-end sector. They are looking for a hotel that can provide
dependable, delicate, and easily accessible service at an average or slightly
above-the-average price. It seems that what Holiday Inn can offer matches what its
customers want.
2.4. Product/Service Mix
Holiday Inn is keen to develop differentiated product/service offerings to its
customers. Its differentiated offerings can be either location-based or time-based or
global. For example, during Summer time in UK 2013, Holiday Inn brings the option
that kids under 18-year-old can stay for free if they share the rooms with their
parents. Kids aged under 13-year-old can even eat for free if they order from
childrens menu (Holiday Inn, 2013). Holiday Inn also offers location-specific
product/service. For example, in Holiday Inn Resort on Phi Phi Island, guests can
enjoy Bungalows and modern studio and Jacuzzi and location cuisines at the
restaurant. Thai Dance performances and sunset trips are available local features.
Guests can even hold Thai & Western Weddings on site (Holiday Inn Resort Phi Phi
Island, 2013).
Globally, Holiday Inn Hotels participate in IHGs Priority Club Rewards programme so
that its guests can earn rewarding points for being the guests and use earned points
for free nights at any hotels within the IHG family of brands (Holiday Inn, 2013).
There are a number of other little features that differentiate Holiday Inn. For example,
Holiday Inn Europe provides its guests with Park Stay and Go package which
includes one night accommodation and up to fifteen nights parking at selected hotels
(Holiday Inn, 2013b). It also provides travel planner and guide in case that its guests
want to explore the destination.
2.5. 4Vs
Operations management is mainly concerned with how to better use resources to
produce goods and services (McDonald, 2008). It was concluded by McDonald (2008)
that although firms operations are similar in the transformational process from
resources to products and services, they are different in 4 dimensions defined as
volume, variety, variation in demand and visibility. Therefore, it is viable to examine
Holiday Inns operations from these 4 dimensions, namely 4Vs.
In terms of volume, as Holiday Inn is an up-scale and mid-priced hotel brand, the
number of properties is much higher than other higher-end brands in IHG. For
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example, there are 1239 Holiday Inn Hotels around the world, while there are only
53 InterContinental Hotels. The market positioning of Holiday Inn determines the fact
that this brand requires a lot more properties to better serve the need for
convenience by its target markets.
In terms of variety, Holiday Inn itself is highly standardised, especially after its first
rebranding (Anonymous, 2008). It re-designed the logo and introduced standardised
lobby decoration, music and scent in the re-branding. But apart from the
standardisation, Holiday Inn is keen to match its services to what guests want. The
aforementioned example of Holiday Inn at London Brentford Lock is an example of its
flexibility.
The variation dimension is about the influences of demand patterns and seasonality
on sales volume (McDonald, 2008). To Holiday Inn, some of its properties locate in
tourist destinations and will definitely be affected by seasonality. But as its major
target market is business and leisure travellers, its variation is not as higher as its
sister brand - Holiday Inn Resort.
The visibility dimension decides how much of the organisations operations can be
seen by its customers. For a hotel brand like Holiday Inn, the visibility is mainly
reflected in observable aspects such as decoration of lobby and tidiness of rooms.
But the overall visibility may not be as high as other luxury hotel brands in IHG.
3. Customer Satisfaction and Measurement
3.1. Performance Objectives
The five performance objectives framework (Figure 3) was proposed by Slack et al
(2001). It was stressed that by achieving these objectives, organisations can achieve
high total productivity internally and customer satisfaction externally. Although this
framework was not built intentionally for hospitality industry, it still fits the industry
perfectly. The five core performances are cost, speed, quality, flexibility and
dependability.
Speed refers to the short time length between request for service and being actually
served. In hospitality industry specifically, short lead and delivery time is an
important aspect of high service quality. For Holiday Inn, speed has always been one
of the focuses in its service delivery. For example, in 2004, Holiday Inn started to
strengthen its room service standard by introducing an online certification system
that must be passed by its employees. And one of the key components in the process
was quoting the time of delivery (Davis, 2006).
Quality is continuously meeting customers expectation. It is the heart and soul for
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the entire service delivery. Quality does not necessarily need to be superior; it can
also be innovative and personalised, as long as it can meet customer expectations
(Sila and Ebrahimpour, 2002). For Holiday Inn and the entire IHG, high quality is
considered to be the most important trait. Higher-end IHG brands pursue superior
quality while Holiday Inn focuses more on keeping consistent high-level quality, for
both services and hardware. One example of its attention to quality is the hotel
mangers replies to guest comments on TripAdvisor. A guest complained about the
slow catering service he received on 25
th
April, the hotel manager followed-up
promptly on 30
th
April and express her apologies and attitude to take remedial
actions (see TripAdvisor, Holiday Inn Bristol Filton page).
Flexibility refers to the organisations ability to change its strategies so as to meet
changing customer demands. One most recent example of Holiday Inns willingness
to stay flexible comes from Holiday Inn at London Brentford Lock. IHG discovered
from its travel insights report that the target market of Holiday Inn, especially those
business travellers, increasingly prefer to work in casual and creative environment
and hold quick and informal meetings in hotel lobby (IHG, 2012c). IHG then gives
Holiday Inn the resource to trial a new lobby concept, and this leads to the open
lobby in this London Holiday Inn. In order to align with customer expectation, this
Holiday Inn provides iMac computers in its lobby with free Wi-Fi and power outlets.
In order to meet their need for flexibility, dining and bar drinks are provided all-day,
along with the to-go Caf that provides Starbucks coffee.
Dependability is the ability to keep its promises made to customers on products and
services. Organisations like Holiday Inn should always stay dependable in terms of
quality and accessibility while improving service speed. According to its own
statement, Holiday Inn can meet the demand for dependable accommodation
service by business and leisure travellers.
Cost is always the major operational objective to allow a company to remain both
competitive & profitable (Lecture note, 2013). For an upper-scale hotel brand like
Holiday Inn, cost advantage is not as prominent as economic brand like Holiday Inn
Express. However, by shortening service delivery time and standardise service
procedures, it can still achieve high productivity internally, and operate on high
margin while keeping the prices lower than high-end hotel brands.
3.2. Measuring Customer Satisfaction
Given the five performance objectives, organisations need to measure customer
satisfaction to assess the level of fulfilment of these objectives. There are a number
of measurements that can be used to understand customer satisfaction such as
reliability of promises made, ability to cope with increased demand, customisation of
information, ability to recover service failures and accuracy of information (Lecture
note, 2013). Zone of tolerance is another important concept when measuring
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customer satisfaction (Zainol et al, 2010). The zone of tolerance is generally
recognised to fall between the desire service level and the adequate service level
(p.325). Therefore, it is important for Holiday Inn to keep its guests within the zone of
tolerance. If service failure occurs, it should carry out remedial actions to minimize
the negative impact on customer satisfaction.
Mendelsohn (1998) asserted that measuring customer satisfaction is not the end of
service encounters and only by managing customer satisfaction, a service
organization can improve its overall service. He further concluded that managing
customer satisfaction requires commitment to process improvement, not to the
measurement itself (p. 42). Therefore, the benefit of understanding customer
satisfaction is changing product/service mix to meet customer needs.
Holiday Inn seems to understand the importance of managing customer satisfaction.
Therefore, it tries to understand and solve guests problem wherever there is one. It
employed a Guest Reviews system on its own booking page, so that existing guests
can comment on their stays with the hotel from Staff and Service, Room and Comfort,
Value, Variety of Breakfast Choices, and Able to Relax on a 5-point scale. The
information can provide reference for the decision making of prospect guests. There
are also other hotel booking sites that provide such features (e.g. Booking,
TripAdvisor), but Holiday Inns self-ran Review section still provides guests with the
feeling of being respected and valued. Also, in areas such as service failure recovery,
the aforementioned dialogue on TripAdvisor proved Holiday Inns willingness to
correct service failures as soon as possible.
4. Appreciation of Operations Performance
4.1. Operations Strategy Reconciliation (Figure 4)
After years of development, IHG has gained high operations capabilities in terms of
tangible (properties) and intangible (service experiences, guest loyalty, etc.)
resources. Therefore, it is an educated guess that IHG can provide all-round
operations resources to Holiday Inns development to meet market requirements.
Major components that describe market requirements are customer needs, market
positioning, and competitor actions. These 3 components further set the
performance objectives as discussed before. Customer needs and market positioning
for Holiday Inn have been discussed before. Therefore, only Competitor Activity is
remained to be discussed. Holiday Inn needs to keep a close eye on competitor
activities as they may alter market requirements. For example, while other
competitive hotel groups upgrade their loyalty programmes (e.g. Starwood spg.), IHG
is also upgrading its own programme. The new IHG Reward Club is scheduled to be
launched in July and this re-branding move brings free Internet to all the club
9
members in 2014 and other benefits such as never-expire reward points and
extended check-out (IHG, 2013e).
4.2. Service Delivery System
Service is the core for organisations in hospitality industry. Service delivery system
concerns about how the service concept is delivered to target customers (Roth and
Menor, 2003) and it has impact on responding time and waiting time, which can
further impact customer satisfaction (Pullman and Gross, 2004).
Service delivery designs in hotels of a similar positioning are mostly identical. But
differences exist in the actual execution of the design. These characteristics are used
for the assessment of Holiday Inns service delivery system. As Holiday Inn is a
world-renowned hotel chain under the world-renowned IHG, the training for
employees must be sufficient and thus the level of employee skills and degree of
employee discretion must be high. In order to achieve precise service delivery,
employees of Holiday Inn needed to pass the online certification from as early as
2004 (Davis, 2006). This certification system brings highly standardised and efficient
service offerings and is supposed to bring definite higher customer satisfaction.
However, telling from reviews from online hotel booking sites like TripAdvisor, there
are customer complaints about the actual service they received. And these
complaints fall on degree of routineness and automation. Some customers feel that
they are being treated indifferently and this goes against Holiday Inns service
concept of friendliness and attractive. For professional service providers, the degree
of routineness and automation should be minimized.
In terms of location, Holiday Inn has done an excellent job thanks to the resource
support from IHG as customers can find Holiday Inn hotels throughout the world. It is
reasonable to assume that despite the complaints from a few customers, Holiday Inn
has designed a good service delivery system and it serves the target market well.
4.3. Potential Problems
The highly organised service delivery system may make some guests feel being
treated indifferently. More personal connections are suggested in addition to
standardisation and efficiency. Also, the delivery system seems to be focused only on
customers. Although customers are important to Holiday Inn, employees are still the
most valuable asset the brand has. Therefore, more attention should be paid to
employees, for example, a better performance measure system.

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5. Positive Changes and Justifications
As Holiday Inn currently enjoys rapid global expansion and generally good reputation,
it is recommended to adopt a continuous improvement approach. Figure 5 shows the
four stages of operations contributions. It is estimated that Holiday Inn is currently
positioned between Stage 3 and Stage 4. In order to reach the Stage 4, Holiday Inn
need to improve its systematic quality management and performance measurement
systems.
McPhail et al (2008, p. 624) reiterated the important of appropriate performance
measures as the fundamental link between strategies and actions. Among a wide
range of performance measurement systems, balanced scorecard (BSC, Figure 6)
stands out for its focus on HRs, intangible assets, and challenges associated with
regard to maintaining consistent product standards, while not neglecting financial
performance (McPhail et al, 2008, p.624). Instead of focusing on one aspect,
Balanced Scorecard can provide Holiday Inn with a more holistic view of its
organisational strategy. Among the 4 aspects of Balanced Scorecard (Figure 6),
Customer and learning and growth is especially important as Holiday Inn is a service
company. To be specific, from the HRM perspective, only if employees of Holiday Inn
learn and develop themselves all the time can they better serve the customer. From
the company perspective, Holiday Inn needs to stay agile and open to changes in
order to retain the competitive advantages.
Therefore, for example, now that some guests complain about the indifferent service
they received. In order to achieve the vision of To Create Great Hotels Guests Love,
the learning and growth department should react by setting goals to introduce more
personal feelings into the service process. Customer department should then
monitor the negative reviews about services and provide feedback to Learning and
Growth, so that it can adjust its objectives about personal feelings accordingly.
6. Conclusion
In conclusion, this report has addressed 4 aspects relating to operations
management. Holiday Inn hotel brand from InterContinental Hotel Group was used
as a case. Firstly, Holiday Inns upper-scale positioning and its target market were
identified. Based on market positioning, product/service mix and 4 Vs of Holiday Inn
were discussed. As a hotel, customer satisfaction is important to Holiday Inns overall
performance. Five performance objectives were introduced and examples from
Holiday Inn were used to support the discussion. Holiday Inns service delivery
system was discussed later with potential problems from the design of system. Lastly,
balanced score was proposed as a tool for Holiday Inns further improvement for its
holistic view and balanced aspects.
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Reflection
By proper operational analysis and reconcile operations capabilities and market
requirements, Holiday Inn achieved great success. The entire process works as the
following: market positioning, identifying target market, develop product and service
offerings, design service delivery system, setting performance objectives, achieving
objectives. The fundamental and most important step in operational analysis is
identifying the market positioning and target market. Only these are correct,
products and services that meet market demand can be developed and appropriate
delivery system can be designed.
The practice of operational analysis is supposed to be driving operational
improvements in other hospitality environment as the industry shares some
distinctive characteristics, such as intangible nature of services, and time dependent
capacity. For example, a restaurant can carry out an operational analysis to identify
what capabilities it has and what the market expect. If there is reconciliation
between these two, the restaurant should focus more on the delivery of services,
otherwise, it will need to identify the gap and improve itself to meet market
requirements. As it has already carried out an operational analysis, the improvement
process will be well guided, so as to achieve efficiency in operational improvements.


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Appendices
Figure 1 Service Strategy Triad

Source: Roth and Menor (2003)

Figure 2 Total Service Concept: Elements and Examples

Source: Roth and Menor (2003)
13
Figure 3 External Effects of the Five Performance Objectives


Figure 4 Operations Strategy Reconciliation

Source: Slack et al. (2010)



14
Figure 5 The four stages of operations contributions

Source: Hayes, R. H., Wheelwright, S. C., Clark, K. B. (1988)
Figure 6 Balanced Scorecard Principles

Source:
http://www.meshekah.com/wp-content/uploads/2012/10/BSC-concept-BalancedScorecardReview.com_1.jpg?dur=4738
15
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