Commoditization in the lodging industry: examining the perceptions of hotel managers
Date
2010
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Publisher
University of Delaware
Abstract
The U.S. lodging industry is largely considered to be highly matured and intensely competitive to the extent that the lodging product itself is believed to be sliding down the path of commoditization. Commoditization as a phenomenon occurs when competing firms offer products and/or services that consumers deem as having limited differential attributes (Riemann, Schilke, & Thomas, 2009). Consumers and firms alike depend on price to indicate the differentiation between the offerings.
This study examines perceptions of lodging executives regarding commoditization as well as evaluating operational /strategic initiatives being undertaken to negate the effects of commoditization. Adapted from previous research by Riemann, Schilke, and Thomas, this study examines the phenomenon based on the four dimensions of commoditization namely, product homogeneity, price sensitivity, switching cost, and industry stability. The value disciplines of operational excellence, product/service leadership, and customer intimacy have been determined as initiatives that seek to negate the effects of commoditization. The study further examines managerial perceptions’ on their firm’s implementation of these initiatives.
Findings show that high price sensitivity is the strongest driver of commoditization as perceived by lodging executives. This was closely followed by low switching costs for consumers and product homogeneity at a distant third. Interestingly, when it came to operational / strategic initiatives to negate the effects of commoditization, operational excellence (focuses on cost control practices) ranked the highest. At a distant second stood customer intimacy which focuses on building greater customer loyalty and is more effective towards combating commoditization. This combined finding clearly indicates that firms seek to attribute the phenomenon of commoditization more on the consumer (price sensitivity and low switching costs) as opposed to firm related factors namely product homogeneity. Additionally, firms focus relatively more on operational excellence as opposed to reaching out the customer and leveraging service superiority as way of combating the phenomenon more directly. The findings serve as a pointer for industry to reprioritize, while simultaneously working towards differentiating their core offerings through greater innovation.
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