Analysis of Service Innovation Strategies in Hospitality Industry

This essay delves into the critical aspects of managing service innovation within the hotel and hospitality industry. It begins by highlighting the industry's shift towards customer-centric and experience-driven models, emphasizing the importance of adapting service strategies to meet evolving customer needs. The essay explores various theoretical perspectives, including service innovation theory, role theory, and customer retention management, and their application in different hospitality sectors such as hotels, events, and catering. It examines real-world examples of service innovation, such as self-service technologies and brand collaborations. Furthermore, the essay identifies key issues in the hospitality industry, including human resource challenges, marketing and service quality failures, and cultural communication barriers. It concludes by emphasizing the need for organizations to address these issues through employee motivation, customer retention strategies, and effective training programs to ensure sustained success and competitiveness.

Running Head: SERVICE INNOVATION 1
Managing Service Innovation

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Introduction
In today’s business world, the hospitality industry is shifting from service-focused, physical asset
intensive business to customer centric and experience centric. The organizations in this industry
are making various innovations for managing the service by focusing on needs and demands of
customers. The major objective of this essay is to evaluate different issues, which are significant
for managing the service strategies in hotel and hospitality industry. Moreover, this essay will
examine different theoretical perspectives on service in a range of settings like; events and
conferences, hotels, licensed retails, commercial catering, transport catering and other service
sectors (Robinson and Picard, 2016). For a hospitality business, it is essential to analyze these
factors and theoretical perspectives to stay competitive in the industry.
Theoretical Perspectives of Service
The impact of economic conditions, globalization, service development and increased
competition have led to changes in the business and operating environment of global hospitality
industry. It needs service organizations, like hotels to adopt competitive and marketing strategies
to enhance the competitiveness and sustain the customers (Bilgihan, and Neiad, 2015). There are
various theoretical perspectives, which can be used for examining the services offered by
hospitality industry and its sectors such as; events and conferences, hotels, licensed retails,
commercial catering, transport catering etc. These theoretical perspectives offer the activities and
practices, which are fully associated with the service recovery and service failure management.
One of the most important theoretical perspectives of service is service innovation theory. This
theory states that implementing innovation in services assists the organizations or businesses to
find new revenue systems by fulfilling the needs and demands of customers to get the things
done. For successful service innovation, it is very important to develop synergy between all the
elements of service. It enables the organization to respond effectively to the changes in customer
behavior with innovative practices and services. In hotel and hospitality industry, service
innovation is a major source of competitive advantage in markets, where the needs and
preferences are changing rapidly (Bowen, 2016). The major reason behind adopting service
innovation is innovative business models and technologies. The hotels are making several
innovations like; self-service, mobile booking, phone as key cards, check-in kiosks, electronic
luggage tags, smartphone boarding passes, guest connectivity devices etc.

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To make innovation, there are innovative collaborations among different brands, which operate
their business different sectors are also building service industries, like; hospitality and tourism.
For instance, the Line Hotel in US has partnered with the Linus Bike by offering a vehicle of
branded bikes for its guests in hotels (Lusch, and Nambisan, 2015). In addition to this, the hotel
has created the maps of domestic bike routes for the guests, so that they can discover their routes.
Moreover, Marriott Hotel has collaborated with IKEA Company to develop Moxy brand. Three
star hotels aim at millennial customers, who do not spend on their stay at expensive hotels.
Under their service offering, they provide stylish rooms, using neutral tones and artistic
characteristics and buildings, which are eco-friendly. There are various event organizations,
which are using innovative technologies for interactive engagement with the audiences
(Carlborg, Kindström, and Kowalkowski, 2014).
Another theoretical perspective, which can be applied on service and service strategies in
hospitality industry, is role theory. Role theory of HRM has served as a theoretical and
conceptual framework for the study of behavior of employees in an organization. In the service
organizations, a major objective is to fulfill the needs and demands of customers. This theory
emphasizes on the need to consider how the roles are differently played by the people of
organization. For instance, behavior of managers in a service organization is different from the
behavior of lower level employees. In the hospitality industry, it is useful to implement this
theory as a major source to enhance the understanding of HRM behaviors and practices
(Kusluvan, Kusluvan, Ilhan and Buyruk, 2010). There are various five star hotels such as;
Holiday Inn and Marriott International are adopting role theory for effective service delivery.
Implementation of this theory assists the management for developing service interactions in
hotels and other hospitality sectors.
Apart from above theories, customer retention management is another important theory. In the
context of this theory, authors stated that regardless of the efforts of service companies to adopt
competitive strategies for enticing customers and their efforts to manage the productivity,
demand and supply, the customers do not stay loyal to the same service organization. Customers
may buy same services from its competitors due to better quality and prices. To become
successful, service organizations especially hospitality organizations should focus on satisfying
their customers and develop relationship. It will lead the organizations to customer retention.

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Customer retention framework at hotel should include various efforts such as; defection
management, relationship marketing, compatibility management, service recovery and failure
management. Relationship marketing is one of the most significant processes that assist the
hotels in building strong relationships with guests (Coussement, 2014). The organizations need
to manage customer to customer interactions for retaining the customers. Marriott is the best
example that made various efforts for retaining the customers and made innovation in its
hospitality services worldwide.
For a service organization, it is essential to manage the service failure. According to the service
failure management theory, service failure is defined as the incapability to fulfill the needs and
expectations of clients related to service delivery. Customer retention management and service
failure management theories are interrelated with each other, because the management should
not rely on the service recovery and they should do the things appropriately from the beginning.
In the case of transport catering, the organizations should find out the requirements of food
products according to the requirements of travellers (Petzer, and Styen, 2006). It is very
important to analyze the demands and needs of food products according to the number of
travellers in train, aircraft, buses and ships. These theoretical concepts are significant for
effective service delivery and these aspects can work as service strategies for the organizations in
hospitality industry. By the help of these theories, service organizations will be able to overcome
the issues, which are important for managing the service strategies in hospitality industry.
Issues in Hospitality Industry
During past few decades, service industries such as hospitality and tourism industries have
experienced a significant growth as people love to spend their money and time on travelling and
exploring new destinations. It has increased the profits and revenues of this industry. Along with
this growth, this service sector is still facing some complex issues, which are arising from
strategic management, human resources, marketing, service quality and culture. After analyzing
the above theoretical perspectives, it can be stated that non-compliance of these aspects will
generate various issues for service organizations. Human resources play a vital role in effective
service delivery (Clarke, 2016). This industry is confronting different issues, which are rising
from human resource context. These issues are such as increased costs of training and decreased
employee morale, while they are working in hotel’s workplace. Each and every service

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organization ensures that it recruits the experienced and talented human resources for managing
its routine operations (Boella, and Goss-Turner, 2013). This process makes it very difficult to
supervise and organize all the roles and responsibilities of employees, so it needs proper training
and development program for meeting the quality standards of service delivery. Organizing
training and development programs may lead to higher costs of training that increases the
administrative expenses to organization.
Moreover, hospitality industry may confront the issue in context of decreased employee morale
that may influence the service delivery to customers or guests. There is a major connection
between employee satisfaction and guest satisfaction. If the employees will be satisfied then they
will be able to satisfy the customers effectively. Motivation of employees is a significant
component because it directs the company to become successful and stay competitive. For
example, in low occupancy period, the staff feels demotivated as they get dissatisfaction from
their salaries. In this situation, the staff will not be able to fulfill the needs of guests, so that
organizations in service sector have to emphasize on enhancing morale of human resources by
involving them in decision making process (Crick, and Spencer, 2011). For instance, Hotel
Career Expo, Sydney is one of the major examples that have faced the problems related to lower
employee morale and employee turnover.
In addition to human resources, marketing and service quality has an important role in the
operations of hospitality organizations. Under this, two major issues, which are faced by service
organizations, are service delivery failure and insufficient efforts for promotion and marketing.
With the development of modern technology and innovation, there are several options, which are
available for service firms, so that they can capture the online market (Mok, Sparks, and
Kadampully, 2013). But there are various hospitality organizations, which are still using old and
traditional methods. Due to these poor marketing and promotional practices, sales and brand
image of hotels are influenced negatively. In service industry, it is a major issue as it impacts the
number of guests, which are arriving to these hotels.
Furthermore, these service sector organizations are confronting the issue related to service
quality failure. This service failure can be evaluated by measuring the guest satisfaction level.
The major reason behind service failure is that the organization does not offer the committed
service to the customers (Dedeoaylu, and Demirer, 2015). Other reasons behind this issue are

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such as; lack of coordination and communication, lack of effective service delivery, poor
services, ignoring the customer complaints etc. These issues can leave the customers or guests
dissatisfied towards organizations’ services and it has negative effect on repeat intention of
guests.
The above theoretical perspectives indicates, there may be some issues in hospitality and service
industry, which may be related to cultural communication between employees and managers and
employees and guests from different backgrounds. In a service organization, issues may occur,
when individuals from different backgrounds are not able to understand each other that is not
only the result of language barrier but it is due to differences in cultures also (Grobelna, 2015).
So, it is important to train the staff to speak foreign language and become aware about the
cultural differences in different nations. As the hospitality industry is going global, so cultural
communication and cultural awareness are two important components for both hotel employees
and guests as well. In the increase in globalization, several hotels are going under business
expansion into international markets. For instance, The Accor Hotel is operating its business
operations internationally and has its hotels in different cities all over the world. In this way,
shifting in different nation for international project is possible when functioning with
international hotel. To develop service strategies, hospitality organizations need to conduct a
marketing research, so that they can understand needs and market trends in service industry
(Aragon-Correa, Martin-Tapia, and Torre-Ruiz, 2015). The organizations find it very challenging
to acquire and collect the market information to develop strategies for its products and services.
Thus, these are the issues, which can affect the growth and success of different service sectors
such as hospitality, commercial catering, transport catering etc.
Conclusion
In the limelight of above analysis, it can be concluded that hospitality industry is a major
contributor to world economy. There are some specific theories and concepts, which are useful
for different service organizations. From the theoretical concepts, it can be understood that there
are some issues, which are affecting the business growth and operations of service organizations.
These issues may be related to human resources, strategic management, marketing, products and
services and service quality. From the above analysis, it has been analyzed that of the employees

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will not be satisfied then they cannot fulfill the needs of customers. So, top management should
make efforts to enhance the morale of employees and implement customer retention strategies.
However, the organizations need to spend money on providing training to its employees. Thus,
the service organizations need to emphasize on different issues and try to overcome these issues
to stay competitive in the industry. Functioning in service industry, hotels need to emphasize on
above theoretical perspectives and develop strategies to overcome the above issues.

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