Developing new boutique hotels

Boutique hotels are believed to have been invented in the early 1980s. (Anhar,2001) There is no single definition of a boutique hotel but most of the boutique hotels do share some common characteristics. The first, boutique hotels put more emphasis on design and architecture than traditional chain hotels. (Anhar.L.2001) Creating unique design with additional lifestyle amenities in order make hotel guest feel ‘something special’ than others. For example each guest room in Blakes Hotel in South Kensington, London was designed by celebrity stylist Anouska Hempel. This kind of hotel is very individual and focuses on their ‘look’. (Jones.P,2002) The aim is to create an environment with sense of style, warmth and distinction which they are willing to pay premium room rates. Second, the common feature of boutique hotel is superior personal service.(Drayton.P & Rodwell.K,2001) Providing personal service guide to hotel guests is importance to enhance guest experience rather than efficiency, to truly be in touch with hotel guests rather than ignorance them when they faced to problem, to makes guest with unforgettable memories will come back on next time rather than terrible service that not return again. The third feature is the number of rooms. The number of room should not exceed 150 rooms to maintain the intimacy between the guests and the hotel staff, and the personalized attention by the staff. (Anthar,2001) However, there seems to be not upper limit on the maximum number of room. The last common feature of boutique hotel is the target market. The middle to upper income group of people tend to be target market of boutique hotel. In addition, the image of boutique hotel is major element for promoting through media, fashion, entertainment and advertising companies that are attracted to the trendy design and lively atmosphere.(Jones Lang Lasalle report) literature

Location of the boutique hotel can be classified into two types. The first is the city destination hotels. Accordingly, most existing city boutique hotels are located in urban edgy and chic neighbourhoods in major cities like New York, London, San Francisco, and Miami. (Anhar,2001) Nevertheless, more companies are targeting less cosmopolitan cities. Location of traditional hotels often seeks for convenience to their customer but for boutique hotel, they are often located in cities with big fashion capitals to best attract their target market. The second type of boutique hotel is located in generally well-hidden, tucked always in deserted corners of the island or the mountains. Each boutique resort hotels promote the non-existence of electronics and communication devices in guestrooms as a competitive advantage. (Anhar,2001)

1.1 What are the operational challenges associated with developing new boutique hotels?

Small or big organizations often face variety operational challenges while running their businesses. Business management needed to ensure the business running smoothly. There are variety challenges associated with developing new boutique hotels are discussed in the following.

Boutique hotel tend to serve their guest with high degree of service quality therefore the greater customer contact, the greater degree of interaction between the service system and the customer. Service systems with high degree of customer contact are more difficult to control and rationalize rather than low degree of customer contact. In high-contact systems, the customer can affect the time of demand, the exact nature of the service, and the quality, or perceived quality of service because the hotel guests are involved in the process. (Jacobs.R,Chase.R,2008) This is reason why boutique hotel manager should take into account on this particular area of service design process. This is not easy as all customers are different and have different expectations of what the service will provide.

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Perhaps a boutique hotel guest is waiting too long to check-in at resulted he or she might not come again due with the expectation on their speed of their service provided was disappointment. Hence, boutique hotel can offers several counters with different type of function such as registration check-in, check-out counter, and complaint counter to shorten the time of waiting by other guests.

As mentioned above, for boutique hotel the customer indeed is greater extent involved in the actual delivery of the service. The service employees by boutique hotel have frequently work together with their customer thus the behaviour if employees is likely to have a major effect on the customer’s perceived level of service quality.(Greasley.A,2009) Unlike tangible products, technology can be replaced the workforce on certain jobs but in services, it is difficult to replace the element of human interaction completely. (Greasley.A,2009) For service industry, the service operation for boutique hotel greater ‘front office’ tasks by adding value to their customer both input and output of the operation while ‘back office’ task is lesser. (Figure 1.1)) Lack of skilled hotel employee can become a greater challenge that tends to provide superior service quality their guests. The shortage of skilled employees will become threats to the boutique hotel that provide poor service as opposite thought that guests expected to have great service. The whole image and reputation of boutique may ruined by those non-skilled hotel employees.

The hotel boutique employees are expected to know their guests needs very well with caring, polite, friendly, and etc. A group of skilled employees owned by boutique hotel is not great enough because assurance service quality is not a day mission. Hence, the manager of boutique hotel has to invest on a series of training program in order to maintain the quality of the service provided by their employee especially front-line employees which interact with customer most of the time. Assume a boutique hotel employees does not know well about a potential customer whose is vegetarians, but sending meal with chicken to the customer. This in the result, the potential customer will feel very disappointed on the careless of service provider by particular boutique hotel. The customer definitely switches to other brand of boutique hotel and not to return again if there is no a good service recover to resolve the problem. Service is unlike product that can be easier to argue back but in service industry especially with high service quality provided by boutique hotel, customers tend to be correct most of the time.

Quality is a particular challenge for boutique hotel in both the tangible and intangible aspects, for example the quality of the food served, the quality of the mattress in the room and service of the staff must meet quality standards in order to retain customer. However, intangible service may be difficult to measure and often depends on an unpredictable interaction between the service provider and customer. (Greasley.A, 2009) The boutique employees cannot predict what the next will be happen thus they have to get ready to resolve problem at anytime. However, there are three authors; Parasuraman, Zeithaml, and Berry (1985) define the quality in service with five principal dimensions that customers use to judge service quality which is Reliability, Responsiveness, Assurance, Empathy and Tangible based on a comparison between expectations and perceptions of the service quality.

Marketing strategy: For the side of marketing view of point on boutique hotel, the image is very important to enhance the quality of the ‘hotel’ itself to their target market. What are so special about boutique hotel compare to other hotel chain without paying high price of room rate? This is why Integrated Marketing Communication (IMC) gets involved to work together to promote the brand and image of boutique hotel. A good service cannot be successful without the demand in a market. To open a new boutique hotel in a market place obviously is very fresh on the particular ‘brand’. Hence, branding can become one of the challenges to a new boutique hotel. At that point, the new brands that were ill-conceived and lacking clear definition and marketability ultimately become the weaker performers which are then often “absorbed” by the stronger ones.( ISHC Annual Conference,2007)Investing on brand proliferation to attract consumer interest toward the new boutique hotel. Marketing research effort should not be neglected by collecting information on favourable design of hotel room, service encounter and etc. By doing marketing research better performance outcome in order to meet customer needs.

Virtual advertising can be useful to let customer know more information about the boutique hotel. An addition, online booking hotel becomes more convenience to customer in the purchase processes. A system that can let customer choose the theme or design of the room that they prefer including the menu of pillow, type of food to serve and etc. Public relation is also a powerful tool to get useful public opinion from the public.

Distribution channel renovation : In 2006, it is estimated that $24 billion worth of hotel rooms in the US alone will be booked through internet sites representing 27% of US hotel industry room revenues — up from $15.5 billion just two years ago. (INSH,2007) Meanwhile, this is current challenge of distribution management, manage and market to the consumer in the online world. Without understanding online consumer’s buying behaviour, the possible investment on marketing will be wasted. Buying process changes rapidly nowadays with advancement of technology device support. Connection between the service provider and their potential customer is linked. Click and Mortar approach can be applied in boutique hotel strategy in order to serve the best quality by using online or offline form of service provided.

Construction cost: To build up a new boutique hotel, cost definitely has to take into account because it involved a huge amount of money on constructing, furniture, equipments and labour cost. The cost of raw materials for construction such as wood, steel, sand and so on is categorized as dramatically changes according the demand of the world. For example steel prices experienced a 48.8-percent increase in 2004, which was preceded by significant increases in scrap iron and steel prices in 2002 and 2003.(INSH,2007) By constantly monitoring changes in the markets for both construction materials and labor costs, a developer has to ensure that a project can be completed on time within the budget.

Understanding their market:

Demand can affect the success on any kind of businesses. Thus, every company has to understand their market very well before to start a business. Each boutique hotel rooms are designed to a theme. The company has to identify which interior design of the room properly suits their target market. What interior design will be attractive for current market? What kind of services that concern? To make something unique for someone requires unique information. Culture issues have to take into consideration whether the sensitive culture design in term of symbol or graphic does mind of people. Market research play importance role for understating their market needs not only in term of rooms design but as whole for boutique hotel.

Shortage of rooms: The size of boutique normally tends to be small and the number of room usually less compare to traditional hotel chain in order the hotel staff can provide superior service quality to their guests. Due to the small number of room, boutique hotel has to concern issue on shortage rooms especially in peak season. Boutique hotel should ensure there is sufficient capacity to meet demand at a right time.

Figure 1.1: Front Office and Back Office in Operations Management (Greasley.A, 2009 pg13.14)

High Customer Contact

Low Customer Contact Back Office Front Office

Customers

1.2 What can we learn from the mass customization of tangible goods (e.g Lands’ End and Dell) that can be applied to the mass customization of services (e.g. boutique hotels)?

Mass processes that produce high-volume and low variety products are termed line or mass processes. Because of the high volumes of product it is cost-effective to use specialized labour and equipment. Because of the low variety, setting up of equipment is minimized and utilization of equipment is high. Examples of mass process included automobile plant, television factory, vehicle manufacturing, DVD production and food processes. (Greasley,2009 pg78)

Customisation processes is special customized to the need of the customer with high variety but low volume. This customisation processes can be applied on goods such as big size shoes, special design for wedding cake and while service on or services like facial treatment, cosmetic, and hair style that can meet individual needs. Customisation process usually takes time because to meet unique needs specialized and times to finish that required by individual. The target market is niche market with a small group of people with the similar needs.

However, the variety is very low for mass processes, customer could not have much choices. Meanwhile, with the customization goods and services the selling price might be too expensive because does not adopt economic of scale which only produce on small quantity. It is difficult to meet individual needs with low cost. It can be either want to pay higher price to meet individual price or low price but limited range of choice.

Based on the statement above, the trend of the layout process changed to Mass customisation. What is mass customization? According to Gilmore and Pine (1997) mass customisation can be described as “enabling a customer to decide the exact specification of a product or service, and have that product or service supplies to them at a price close to that for an ordinary mass produced alternative.” Mass customisation is processes that combine the Mass and Customisation feature in one which mean high volume and high variety at a relatively. (Figure 1.2) An attempt to combine high-variety and hiagh-volume output to provide the customer with customised products at a relatively low price. (Greasley,2009)

For example, Dell is the world’s largest volume producer of personal computers yet allows each customer to ‘design’ (albeit in a limited sense) their own configuration. (Slack et al, 2007) Customer can select the specification feature of the computer that they wanted before they make an order. Once Dell received the order, they will make customized computer requirement by the customer and delivery to them within two weeks. (Dell)

In 2001, Land’s End has introduced mass customization to provide customers with order made-to-measure trousers and shirts. Every single product is made to order in a specially assigned factory. A substantial number of design options and varieties are offered by the company. (Piller, 2007).

Low cost by technological application: Information technology (IT) and flexible processes allow an organization to customize goods or services for individual customers in high volumes and at a relatively low cost.(Gilmore and Pine,1997) Mass customisation is made possible by technological applications with realtively low price .Technology has been extensively in a supporting role to enhance performance and effectiveness in hospitality industry. (McIntosh and Goeltiner,1995). Mass customization on production can avoid creating inventories of finished stock. However, most of the service industry provide in both tangible and intangible goods. In service industires which are less dependant on human interactions have been replacing by laborsaving technology techniques. For example, banks replace human tellers with automatic teller machines, which can save labor costs and also offer 24 hour service year round.(Kaye Chon)

Long term relationship between customer and supplier: Customisation demand transfer their needs and desires into a concrete product specification. Co-design activities are performed in an act of company-to-customer interaction and cooperation which can offer possibilities for building up a lasting relationship (Piller.F,2007) Furthermore, companies will build a close relationship with their suppliers, distributors and customers as they return again and again to require further unique products. Normally customised products or services are hardly to obtain, once you can find a products or services that not perfectly but it almost fix with your particular needs then you will return to the shop frequently when you need it.

For hospitality industry, high service quality is key element to lock their repeat customer. Unexpected service in term of their personal interest provided to the customer, they will feel very surprise and get a good impression for building a long-term relationship between an organisation and the customer. In another word of this operation is transparently customized for those customers who do not want to be bothered with direct collaboration. For example, Ritz-Carlton uses software to personalize guest’s experience by linking to database filled with quirks and preferences of half a million guests. The company uses it to tailor the service to each guest on his/her next visit. (Canny Mok,2000)

Value creation: Personalised and customised products and services will differentiate against commodity type products.(Piller.F,2007) Albeit, there is wider range products or services which are similar in a market, but customised product by individual based on their needs will be more attractive in term of value to customer. Customer gain from customisation the increment of utility of a good that better fits their needs than the best standard product attainable.(Piller.F,2007) For example Cupcake retail chain, you can customise the design in term of the colour of the cup paper, the favourite of cake, and the topping you like. Each person has their own ‘design’ for their cup cake even this is just a design but the value of the feel of getting different from others might be greater than the amount of money. Another example Regent, Hong Kong is a fine dining restaurant, which printing their customer’s name on paper napkins and matchbox. Although personalizing a service in this way is cosmetic, it is of value to many customers (Connie Mok ed al,2000).

Able to be Flexible: To support mass customisation, an agile supply network is needed. Agile operation has the ability to respond quickly to changing market demand in order to retain current market s and gain new market share by developing the capability of resources. (Greasley,2009) It must have the flexibility and the responsiveness to take individual customers’ order and deliver the finished customized good quickly (Jacob.F,2008). In hospitality industry, mass customisation has to supported flexibility and speed objectives to respond uncertainty in the market. For example, a flexible hospital can speedily transfer extra skilled staff and equipment to the Accident and Emergency department will provide the fast service which the patients from a road accident.( Slack ed al,2007) Addition, flexible in ‘changing over’ from one to the next can saves time. To respond successfully uncertainty in the market involving several working practice element such as autonomy, total people involvement, flexibility, and creativity on its staff for implementing JIT.

Excellent references and referrals: Mass customisation often capture repeat customer that willing to pay for individuals custom made products or services. They want to have products and services that can meet their particular needs. Companies want repeat customer to gain business easily while building up good relationship in between for a long-term strategy. Word-of-Mouth is a free powerful tool by their past experience customer to spread either good or bad news about company’s products or services to their friends. (—-) This is the reason mass customisation trend to maintain a good relationship by capturing their potential customer’ interests thus follow up to date. Usually mass customisation in service industry not only delivers quality service but also deliver a memorable experience.(Fouts.R,2007) Besides that, companies can focus on the pattern of buying behaviour by loyal customer thus improve the weakness on particular area.

Q3. How can boutique hotels maintain a consistent standard level of service without compromising their unique personalized service mission?

Service quality concept can be viewed from different perspectives from different type of people. How can boutique hotels maintain a consistent standard level of service without compromising their unique/personalized service mission for a wide range of customer? Of course, there is no easy way to maintain a standard level of service. There are various methodologies for quality improvement. Different organizations may choose to focus on different aspects of quality however understanding needs of customer is important in determining a quality strategy. (Andrew Greasley) Maintaining a consistent standard level of service can also retain customer for a long term period. Once customers are happy with the good services, they are willing to pay premium charge for getting good services again and again.

A SERVQUAL model was developed by Parasuraman, Zeithaml and Berry in year of 1985 based on principle that level of service quality is the difference between perceived service and the customer’s expectations in term of five dimensions: Reliability, Responsiveness, Assurance, Empathy and Tangibles(Greasley,2009 pg468).The level of service quality is the difference between perceived quality of the product and service provided by boutique hotel and the boutique hotel guest’s expectation. The ‘service quality gap’ can be used to identify for improvement in service quality. For example service quality gap occur when employees do not have the skills to solve their guest’s problem therefore management strategy should provide training program to particular employees. SERVQUAL model contains five service delivery gaps – knowledge gap, delivery gap, standard gap, communication gap and closing gap. Everything must be right by choosing the right strategy, get right people of doing right things, get the processes right and finally get the expectations right. SERVQUAL can be used either to track service quality for a long term period or by coordinating a multisite survey to identify poor-performing units in order to improve and serve their guest for better services. (Anon,-)

According to Prideaux B, Moscardo G, and Laws E (2006) states analyse the concept between quality and consumer satisfaction in the service industry consist two important elements are importance performance analysis (IPA) and service quality (SERVQUAL). The benefit of using IPA is to identify areas for service quality for improvements in order to help operation manage prioritize performance objectives. The results are displayed on a graph and by a simple visual analysis of this matrix, plot the raking where the resources and programmes need to be concentrated or eliminated. This model has been spread into various fields such as health care market (Cunnigham and Gaeth,1989), hotel industry (Bush and Ortinau,1986; Martin,1995), tourism policy (Evans and Chon,1990) and banking service (Ennew et al,1993). Strategy management cannot be separated from how resources and processes are manage at a detailed and day-to-day level (Slack and Lewis,2008). Hence, performance measurement practice is useful to prevent poor performance to goes further worst in order to adopt pro-active solution rather than re-active as result to provide service quality standard to their customers.

Total Quality Management (TQM) is a set of management practices throughout the organization ensure organization consistently meets or exceeds customer requirements. (Anon,2010) Achieving the delivery of quality products and services are not simple therefore top management should act as leader for TQM to create an environment to the whole organization that ensures its success. For boutique hotel, TQM puts as a center point by focusing commitment to continuous improvement of processes, products and services. An addition, a series of training program should be provided regularly with the concepts of quality for the employees in order to maintain a standard level of service quality provider to their guests. It also adopts an approach of empowerment which employees are given more autonomy and responsibility in decision making because service delivery may require a response differ each time it is performed. Boutique hotel ensure their employees practice the TQM concept with teamwork building value and understanding their customer’s satisfaction as a result of meeting customer needs more exactly. The aim of TQM not only ensures the customer needs are meet up but also reduce the cost of direct and indirect costs of quality problems such as dealing with customer’s compensation, handling of returned items, and cost of correction material.

Quality assurance is not easy to provide goods and services that meet customer requirements. There are various methods for controlling quality but does not mean all methods that can produce good result at the end. For some organization they may design own quality control system that fix with their requirements and it can really work. For example The Ritz-Carlton Gold Standards of service able to assess their work through appropriate sensory measurement and take appropriate actions through three types of control processes to deliver quality services. First, self-control of individual employees based on their spontaneous and learned behaviour. Second, used a basic control mechanism carried out by every member of the workforce. Third, process teams to determine customer-satisfaction data which need for corrective action and resource allocation. (Raturi and Evans,2005,pg189) Developing an own quality control system for boutique hotel may be more reliable or referring to other organizations with successful in quality control system as benchmark.

Six Sigma is an improvement approach that can find and eliminate causes of defects and errors in manufacturing and service processes for organizations. The main objective of Six Sigma is to deliver high performance, value and reliability to the customer (Anon,2010). There are two key methodologies included in Six Sigma: DMAIC for existing process while DMADV is used when creating a new product or product. Boutique hotel can employ DMAIC five phases: (1) D-Define: identify customers needs what priorities the most impact on quality that they concern. (2)M-Measure: collect relevant data and use it to measure the performance and satisfaction level from the hotel guests (3) A-Analyze: determine factors the most likely causes of defects on the complaints (4) I-Improve: confirm the key causes either to modify or remove it in order to make adjustment in service recovery (5) C-Control: use pilot run to ensure that new process in under control avoiding loss of quality. Many companies have adopted Six Sigma for quality improvement such as General Electric expected to save $7 billion to $10 billion over a decade (-15–), Citigroup reduced internal callbacks by 80 percent(16,181) and Samsung Electronics reduction in defects of 50 percent.(17–) For majority of organization, the Six Sigma methodology has helped them be competitive advantage and lower the costs.

Moment-of-truth Analysis is the identification of the critical instances when a customer judges service quality and determines the experience enhances, standard expectations and experience detractors. (Finch, 2006 pg234) Customer past experience is useful for hotel boutique management to determine the quality that their guest had received. Experience enhancer is the experiences that can make the customer feel happy and good interaction with an organization. Standard expectation is just normal feeling that customer expect to get it usually. Experience detractors signify a reduction in the quality of service received by the customer. Boutique hotel can gather all data from the enhancer, detractors and standard expectations for all service encounters to go through an analysis procedure work in order to make improvement in process, employee training and reduce the number of detractors by adding value and enhancers.

How the hotel boutique to choose from the various methods of quality control? The answer should not be an either decision. It can should any combination of quality control methods that fits its requirements with sufficient resources are needed.

Conclusion

Boutique Hotel is one example of mass customization that offers high volume and high variety of services to their guests. Developing new boutique hotels definitely will face a lot of challenges such as insufficient resources, market, quality control, and design of service processes. However, mass customization is a new trend of market in nowadays. People is looking something which is unique, special from others, they are willing to pay premium charge for getting it. Controlling quality of service to anyone of boutique hotel is a major challenge because it is not easy. Hence, quality control and performance improvement are key elements to boutique hotel to practice in order can serve the best for their customer. Quality control system has to develop in any organization to ensure standards quality will be maintained. Once customers satisfied the services, they will stay longer with the company. Retaining customer relationships is importance in nowadays which can increase profit and reducing costs. The effects of word-of-mouth communication as a result of improving profit to the company. An addition, relationship between the customers and the organization can become closer once customers feel happy in their past experience.