Competing through coopetition: a strategy for success in hotel marketing consortia

Journal of Mediterranean Tourism Journal of Mediterranean Tourism Research Research Volume 1 Issue 1 Article 4 August 2021 Competing through coopetition: A strategy for success in hotel Competing through coopetition: A strategy for success in hotel marketing consortia marketing consortia Sofia Almeida Universidade Europeia, Portugal , [email protected] Ana Cláudia Campos Universidade Europeia, Portugal , [email protected] Carlos Costa University of Aveiro, Portugal , [email protected] José Manuel Simões Universidade Lisbon, Portugal , [email protected] Follow this and additional works at: https://digitalcommons.usf.edu/jometr Part of the Hospitality Administration and Management Commons, and the Marketing Commons Recommended Citation Recommended Citation Almeida, S., Campos, A. C., Costa, C., & Simões, J. M. (2021). Competing through coopetition: A strategy for success in hotel marketing consortia. Journal of Mediterranean Tourism Research, 1 (1), 39-52. https://www.doi.org/10.5038/2770-7555.1.1.1004 Corresponding Author Sofia Almeida, Faculty of Tourism and Hospitality, Universidade Europeia, Rua Laura Ayres, nº4, Lote 17 1600-510 Lisboa, Portugal Revisions Submission date: April 16, 2021; 1st Revision: April 27, 2021; Acceptance: August. 20, 2021 Competing Through Coopetition: A Strategy for Success in Hotel Marketing Consortia Sofia Almeida1, Ana Cláudia Campos2, Carlos Costa3 and José Manuel Simões4 Faculty of Tourism and Hospitality Universidade Europeia, Portugal and Ceg-Territur Universidade Lisboa, Portugal [email protected] 2 [email protected] 4 [email protected]isboa.pt Universidade de Aveiro, Portugal 3[email protected] Abstract Coopetition is a strategy for a company to achieve a competitive advantage in the market environment. However, little is known about how coopetition works in the hotel sector and which organizational departments perform better in terms of coopetitive behaviour. In this research, coopetition is analysed in the context of international hotel marketing consortia (HMC) operating in Portugal. Exploratory interviews and a survey were conducted to consortia members to analyze managers’ perceptions on coopetitive behaviour and the organizational departments engaged in coopetition. The results show that there is higher cooperation than competition in the marketing and research & investigation departments. The research findings support consortia managers to make an informed decision to augment or reduce coopetition inside and outside companies based on two dimensions: internal and external. Internally by enhancing cooperation and reducing competition behaviour according to relationships observed between members; externally, by formulating strategies for the future, thereby increasing the intensity of coopetition according to expansion goals. Finally, theoretical and managerial contributions are presented, followed by recommendations for further research. Keywords: coopetition, cooperation, competition, hotel marketing consortium, hotel sector Introduction Coopetition was first discussed by Brandenburguer and Nalebuff (1996), referring to a market situation in which two or more organizations cooperate and compete simultaneously. Prior research emphasizes coopetition as a strategy to achieve a firm’s competitive advantage and its sustainable development (Della Corte & Aria, 2016). The findings in the literature show that it materializes in different forms of alliances (Doz & Hamel, 1998) and networks (Bengtsson & Kock, 2000; Gnyawali & Madhaven, 2001; Gomes-Casseres, 1994; Grngsj & Gummesson, 2005). Coopetitive behaviour is evident in the hotel sector (Almeida & Guerreiro, 2012; Titmas, 2012), however, the research on coopetition dynamics is still scarce (Chim-Miki & Batista-Canino, 1 Almeida et al.: Competing through coopetition: A strategy for success in hotel marketing consortia Published by Digital Commons @ University of South Florida, 2021 2017; Luo, 2007), in particular with a focus on analysis and measurement of coexistence of cooperative and competitive behaviours in networks. Given the scarcity of the research on coopetition in the hotel sector, the question addressed in this research is to which extent are HMC informed by a coopetitive orientation, assuming HMC differ in their internal dynamics. Coopetition is here discussed from a business management perspective focused on the hotel sector, characterized by a lack of consistency in theory and conceptualization. Accordingly, the research objectives are: i) to analyse the cooperation and competition dynamics in the HMC operating in Portugal; ii) to identify the consortia departments, which perform better in terms of coopetitive behaviour; iii) to explore if the HMC departments closest to the end customer outperform the others in coopetitive behaviour. The structure of this paper is as follows: firstly, a literature review is conducted on coopetition, drawing from key management and organizational research insights to the hotel sector. Then, the section of methods will describe main procedures followed the data collection methods, exploratory interviews and a questionnaire applied to seven international HMCs operating in Portugal. The last section of this paper will cover main findings and discussion, addressing also its limitations, as well as theoretical and managerial recommendations and suggestions. Literature Review Cooperation Astley and Fombrun (1983, p.578) refer to cooperation relations as a collective strategy: “the joint mobilization of resources and formulation of action within collections of organisations”. On the other hand, Mitchell and Singh (1996, p.170) describe cooperation as “(...) cooperative agreements between legally separable organizations that do not involve establishing separate organisations”. With a voluntary perspective, Das and Teng (2000) define strategic alliances as voluntary cooperative inter-firm agreements for the purpose of achieving competitive advantage for parties involved. Others, such as Doz and Hamel (1998); Jorde and Teece (1989) emphasize the role of cooperation and trust in alliances. In each of the definitions mentioned above, emphasis is placed on how joint action between companies allows them to compete, reducing uncertainty, through increasing interdependence. Beresecká and Papcunová (2020) studied the cooperation applied to public-private partnerships in tourism in the Slovak Republic, focusing on the combination of knowledge, involving the share of risks, costs and benefits. Networks are a perfect business model to a society in constant transformation and allow individuals and organisations to be in a relational structure and interact with other actors. Thao, von Arx and Frlicher (2020) conducted a research on cooperation in transportation and tourism companies. Interfirm cooperation allows firms to acquire access to resources, thus helping them to overcome resource constraints and to achieve their own objectives more fully (Das & Teng 2000). Competition The competition paradigm has dominated strategic management (Barney, 1986; Porter, 1986), organizational economics (Williamson, 1989), and marketing management (Drucker, 1996; Kotler, 1996). Brandenburger and Nalebuff (1996, p.7) claim that “the goal is to do well for yourself. Sometimes that comes at the expense of others, sometimes not. In business, your success 2 Journal of Mediterranean Tourism Research, Vol. 1, Iss. 1 [2021], Art. 4 https://digitalcommons.usf.edu/jometr/vol1/iss1/4 DOI: 10.5038/2770-7555.1.1.1004 doesn’t require others to fail - there can be multiple winners”. Regarding horizontal interdependence, the competitive perspective emphasizes the search for profit, either through the acquisition of a favourable position for the company (Porter, 1986) or through the mobilization and implementation of the company's distinct resources and competences that allow offering superior quality products when compared to competitors. Some examples of the competition paradigm could be found in the tourism sector. According to Gajdoik and mardová (2016), creation of competitive products in urban destinations requires the cooperation of stakeholders in the development of tourism. A climate of competition stimulates improvement and discourages stagnation, although efficiency and effectiveness of resources deployment create competitive advantage, as referred by Ritchie and Crouch (2003). Vodeb (2012) added that competition between destinations plays a critical role in shaping the global tourism industry. Patsouratis, Frangouli, and Anastasopoulos (2005) research on tourism competition among the Mediterranean destinations, which could be a good example for this. Although sun and sea tourism destinations are still popular, demand is decreasing, consequently competition among Mediterranean countries increases as destinations try to keep their sharing quota in the market. Conceptualizing Coopetition Coopetition was first discussed by Brandenburger and Nalebuff (1996), defining a market situation in which two or more organizations cooperate and compete simultaneously. Coopetition allows superior advantage for firms, which could not be achieved if engaging separately in cooperation and competition behaviours. The term is now widely accepted among the academic community, although the literature about the topic is mainly conceptual and dispersed (Chim-Miki & BatistaCanino, 2017; Loebecke et al., 1999). Bengtsson and Kock (2000, p. 412) define coopetition as “a dyadic and paradoxical relationship that arises when two companies are cooperating in some activities, while competing with each other in other activities”. Luo (2004) suggests that global success of companies in an environment of high uncertainty and dramatic change requires the simultaneous adoption of competition and cooperation strategies. However, a coopetition behaviour does not arise simply from the combination of competition with cooperation, but instead from the creation of a new form of strategic interdependence between companies which gives rise to a coopetitive value system (Dagnino & Padula, 2002). Most studies on competition propose a conceptual framework (Dagnino & Padula, 2002; Lado et al., 1997) and discuss empirical evidence as well (Bouncken et al., 2015; Gnyawali et al., 2008). Some researches focus on specific facets of coopetition. Walley (2007) examined coopetition in different economic periods and types of coopetition (internal-external). Other studies examined coopetition through the relationships developed between companies that compete in the same market and target the same consumer segments (Bengtsson & Kock, 2000; Dagnino & Padula, 2002). Bonel and Rocco (2007) identified different types of coopetition and discussed levels of analysis in types of coopetition, despite literature treating competition and cooperation as two extremes of one dimension (Gnyawali & Madhavan, 2001). Brandenburger and Nalebuff (1996), Lado et al. (1997) and Gnyawali and Madhavan (2001) highlight the growing importance of coopetition in the market dynamics and argue that the research has so far concentrated on conceptualization. Specifically, the previous research on coopetition 3 Almeida et al.: Competing through coopetition: A strategy for success in hotel marketing consortia Published by Digital Commons @ University of South Florida, 2021 strategies examined its determinants, instances and impacts on company performance (Yami et al., 2010). Thus, the implementation of strategies and management of coopetition are less studied topics (Walley, 2007), despite their critical role to the success of involved companies (Gnyawali et al., 2008). The early conceptualization of coopetition goes back to the Game Theory of Von Neumann and Morgenstern in 1944 (Bonel & Rocco, 2007). Currently, the topic faces challenges rooted in the dynamics of environmental changes, which require companies to elaborate strategic thinking and action. Coopetition Applied to Business Management and Organization Coopetition as approached by Brandenburger and Nalebuff (1996) broke away from the mainstream literature, usually focused on firm strategic management and competitive position in the market. The new focus is now based on value creation and competitive advantages (Hill et al., 1990), as the most stable markets eventually become hypercompetitive, aggressively competitive, or in the stage for voracious competition (Yami et al., 2010). The early studies on coopetition were conducted in the context of manufacturing industry. The lack of robust knowledge in service industries has been acknowledged (Dagnino & Rocco, 2009; Drupe & Grn, 2004; Huggins & Izushi, 2007; Ritala & Vlimki, 2009). One exception to this was Lusch, Vargo and O’Brien’s research (2007). Cooperation is based on trust and reciprocity, while competition rests on the assumption that individuals act to maximize their own interests (Bengtsson & Kock 2000; Bonel & Rocco, 2007; Eriksson, 2008). Companies, usually seen as competitors, increasingly cooperate to achieve a competitive advantage in a globalized, less differentiated world. By working together, companies increase customer service and create a larger market at a lower cost than any other company working exclusively on its own. More recently, Bounken et al. (2015) refer to shared costs, mitigated risks, shared economies of scale gained through investment activities. Companies involved proactively share their activities in the cooperation in upstream research (R&D) area (Walley, 2007) and have access to knowledge and external resources, which can then apply to the company (Bengtsson & Kock, 2000), increasing the efficiency of involved companies, generating win-win results with lower global costs. As a result of coopetition, partners develop a common knowledge base, using the experience and expertise of both companies (Ritala & Vlimki, 2009), which increases innovation capacity (Bonnel & Rocco, 2007; Quintana-Garcia & Benavides-Velasco, 2004). Coopetition Strategy Applied to the Hotel Marketing Consortia HMC are networks of hotels, whose members share an umbrella brand, as well as resources (Almeida & Campos, 2020). According to Kotler et al. (1996, p. 460), a HMC is “a group of hospitality organization that is allied for the mutual benefit for the members”. Marketing is often the reason why consortia are formed (Ivanova & Ivanov, 2015). Jafari (2000, p.104) defined a consortium as “an organization of individual trading units which combine for a common commercial purpose such as joint marketing services and purchasing”. Prior research on hotel management explores cooperation practices (Astley & Fombrun, 1983; Dyer & Singh, 1998; Porter, 1986) or competition strategies (Ferrier, 2001; Porter & Fuller, 1986; Zairi, 1996), but not how they do both simultaneously, within a coopetition mind-set. Coopetition 4 Journal of Mediterranean Tourism Research, Vol. 1, Iss. 1 [2021], Art. 4 https://digitalcommons.usf.edu/jometr/vol1/iss1/4 DOI: 10.5038/2770-7555.1.1.1004 in networks has been analysed among districts or regions (Dei Ottati, 1994), industries (Mariani, 2007), consortia (Carayannis & Alexander, 2004), interest groups (Doucet, 2006), or networks of firms (Chaudhri & Samson, 2000; Ims & Jakobsen, 2006). As a network, consortia develop a spirit of coopetition, i.e., members practice cooperative behaviours when they come together to promote the brand of a consortium or a common tourist destination, but they also compete, by developing mechanisms to obtain more reserves. Apparently, consortia are competing within networks and, thus, the type of relationship is to be an alliance between competitors. Consortia cooperate through the common promotion of services. Consortia compete, since they are opponents struggling among them to attract two target audiences, the hotel members (Business-to-business) relationship and the end-consumer (Business-to-consumer) relationship. In tourism, firms compete locally whilst cooperating at the destination level to outperform other destinations (Pesmaa & Hair, 2008). Advantages of coopetitive relationships are recognized in the sharing of industry-based information (Belleflamme & Neysen, 2006), as well as in collective marketing communication with the purpose of promoting a destination (Grngsj & Gummesson, 2005). Titmas (2012) researched coopetition among the luxury hotels in Cape Town, concluding that both external (market environment) and internal (organizational) factors affect performance of coopetitive behaviour. Additionally, Titmas (2012) also found that certain activities are more likely to result in cooperation than others and that impacts are seen in increase revenues, occupancies, brand equity and cost. Sharing knowledge, resources, cost saving, maximising revenue, customer retention, improved product quality, improved service and highly skilled staff are observed as the elements of a successful coopetition strategy. Methods A mix-methods approach was applied in this research. This popular classification was introduced in 1989 by Greene et al. identifying five purposes for using mix-methods research: triangulation, complementary, development, initiation, and expansion. Triangulation was adopted in this study, looking for convergence, correspondence, and corroboration of results. The effectiveness of mixing methods is that qualitative and quantitative approaches are complementary rather than competitive methods (Decrop, 1999; Wilson, 1981). Accordingly, data collection methods included in this study were exploratory qualitative interviews, which were conducted in combination with literature review in the first stage of the research, so as to assist in the design of the survey. Additionally, these interviews intended to explore understanding and interpretation of technical concepts and meaning of the research themes. Subsequently, in the second stage, a survey was developed to address the research objectives. As for data analysis, exploratory interviews were content analysed according to the previously defined themes described below. The survey data were analysed by using SPSS software. Measurement of Coopetition The measurement of coopetition deserves some well-studied references in the literature. According to Walley (2007), coopetitive relations vary, each having its own idiosyncrasies. Afuah (2000), Hamel et al., (1990) analysed micro-coopetition, i.e., between departments or divisions within a company in North America, Europe and Japan. Later, Walley (2007) researched the existence of 5 Almeida et al.: Competing through coopetition: A strategy for success in hotel marketing consortia Published by Digital Commons @ University of South Florida, 2021 Research & Development Distribution Promotion Sales Buying Marketing Sales internal coopetition (interdepartmental, departments cooperate in certain areas and compete in others) and external coopetition (among consumers, for example, e.g., “Black Friday”). Measuring internal coopetition, Walley (2007) found that employees often cooperate in upstream activities and compete more in downstream activities, as shown in Figure 1 below. R&D activities is well documented in Luo (2007) explains the emergence of coopetition and discusses situations in the business environment that promote increased cooperation and coopetition, presenting a model to understand the intensity and diversity of coopetition between rival companies. Figure 1: Cooperation and Competition at the Organizational Department Level COOPERATION COMPETITION Source: Walley (2007) Sample This study was conducted on two samples. The first one was composed of seven international HMC operating in Portugal, as seen in Table 1 below. Criteria for inclusion in the analysis were: (i) number of members operating in Portugal, (ii) consortia referenced in the literature in the last seven years, and (iii) consortia listed in the top 25 consortia worldwide (Hotelmag, 2020). Table 1: Characterization of Hotel Marketing Consortia Item Headquarters Country International Presence Members ARTEH http://www.arteh-hotels.com Portugal Lisbon, 2000 12 137 Design https://www.designhotels.com Germany USA 1993 56 288 Great Hotels of the World (GHOW) https://www.ghotw.com Portugal London 2004 23 285 Leading Hotels of the World (LHW) https://www.lhw.com Egypt 1928 80 430 Preferred Hotels https://preferredhotels.com USA, Chicago USA 1968 85 750 Relaís & Chateaux https://www.relaischateaux.com France France, 1954 61 549 Small Luxury Hotels (SLH) https://slh.com England London, England 1989 90 520 Source: Adopted from Ayazlar (2016); Holverson (2010); Holverson and Revaz (2006); Hotelmag (2020); Roper (1995). The second sample was composed of 57 hotels taken from a population of 688 4 and 5-star hotels operating in Portugal and the members of the above identified consortia. A survey was sent to 688 hotels and a total of 327 was validated. These 327 hotels are part of the seven consortia presented in Table 1 above. 6 Journal of Mediterranean Tourism Research, Vol. 1, Iss. 1 [2021], Art. 4 https://digitalcommons.usf.edu/jometr/vol1/iss1/4 DOI: 10.5038/2770-7555.1.1.1004 Data Collection Exploratory Interviews In order to prepare and design the survey, this study’s key constructs were discussed with the experts in tourism. The exploratory interviews were conducted to a group of experts in the areas of sales, marketing and hotel management, using a script based on the following themes (Bengtsson & Kock, 2000; Walley, 2007): (i) definition of HMC; (ii) mention to national and international HMC; (iii) reasons behind the emergence of HMC and critical success factors; (iv) advantages and disadvantages of being part of an HMC; (v) HMC operations; (vi) evidence of cooperation and (vii) competition inside these networks. The interviews allowed validation of the questionnaire design and wording, and implementation lasted for two months. The participants were the members of ARTEH – hotels and resorts consortia. The average duration of interviews was one and a half hour. The following procedures were observed to subsequent data treatment and analysis: i) interviews were recorded with the consent of interviewees; ii) eight open questions were asked to interviewees to assess sensitivity and level of knowledge about the subject to be discussed; iii) the interviews were subsequently transcribed and content analysed. The criteria adopted to select the hotel units to participate in these exploratory interviews were size (number of rooms) of a hotel, geographic location, target market segments and affiliation with hotel HMC. A questionnaire was afterwards designed and sent to hotel managers aiming at exploring their perceptions on coopetition within these international HMC. The questionnaire application lasted for four months, from March until June. Survey Structure and Measurement of Constructs The questionnaire was designed from the literature review (Bengtsson & Kock, 2000; Walley, 2007) and from the results of the exploratory interviews. The first section of the survey addressed to the respondents’ profiles. The second section focused on cooperation and competition in seven HMC departments. The first question was about the level of cooperation intensity and the second question was about the level of competition in consortium departments (marketing, research & investigation; distribution; purchase; sales; service provision and production activities) (Bengtsson & Kock, 2000; Walley, 2007). To measure coopetition, a scale was created based on the work of Walley (2007). For the purpose of this research, the consortia were divided in seven departments, upstream departments (production, purchasing and research & development), and downstream departments (distribution, service provision, sales and production and marketing department) (Walley, 2007). A scale from 0 to 100 was used to measure the existence of cooperation and competition activities within the company departments. Data Analysis As argued by Babbie (1992), qualitative content analysis is increasingly being applied in management studies (Hsieh & Shannon, 2005). Accordingly, the interviews were analysed using the predefined categories of the analysis. In turn, the data obtained from the questionnaire were analysed using a box of whiskers to measure the intensity of cooperation and competition. Quartiles are location measures that allow each variable to be accurately measured (White et al., 2015). The set of sample values between the 1st and 3rd quartiles is represented by a rectangle (box) with the median indicated by a bar. Next, two lines are considered that join the mediatrix on the 7 Almeida et al.: Competing through coopetition: A strategy for success in hotel marketing consortia Published by Digital Commons @ University of South Florida, 2021 sides of this rectangle with the so-called adjacent values. An adjacent lower AI value is defined as the lowest sample value (possibly the minimum), which is greater than or equal to Q1-1.5 * (Q3Q1). Adjacent value superior to AS is defined as being the largest value of the sample (possibly the maximum), which is less than or equal to Q3 + 1.5 * (Q3-Q1). Afterwards, a t-test for paired samples was run to compare the means of the variables for the same group. Findings The first statistical sample, the 7 HMC are mainly located in Europe (Germany, France, the United Kingdom, and Portugal) and two in the USA (New York and Chicago). Only two consortia were created after the year 2000. The main services provided to the members are targeted marketing programs, joint branding advertising, sales support, social media campaigns, public relations and press office, international promotion (fairs and sales calls), advice on quality and technological solutions, marketing and branding and reservation centres. The second statistical sample consists of 57 hotel units operating in Portugal, the majority classified as being 5 stars. The district with the largest population is Lisbon, followed by Faro district. Hotels are mostly urban and, according to more than 50% of the respondents were belonged to the luxury segment as the targeted customers. Most hotels were small-sized (less than100 rooms) and employed between 21 and 60 employees. The interviews provided useful insights regarding events organized by the HMC, which, according to the participants, show potential to build coopetition but achieve poor results, due to mismatch between target segments and travel agencies, concierge companies and tour operators’ profiles. The interviewees also discussed the issues raised in the process of member selection, especially the one related to reputation. Often, new members did not fulfil the pre-requisites of service excellence demanded by the HMC. The participants complained about the lack of training programs for employees. Considering cooperation vs. competition results, the data show that there is more cooperation than competition in the marketing and research & development departments in the consortia, as shown in Figure 2. Figure 2: Cooperation and Competition Behaviour in Departments of Marketing and R&D However, no statistically significant differences were found in the other departments as shown on Table 2. 8 Journal of Mediterranean Tourism Research, Vol. 1, Iss. 1 [2021], Art. 4 https://digitalcommons.usf.edu/jometr/vol1/iss1/4 DOI: 10.5038/2770-7555.1.1.1004