Service Firm Audit: Sonesta International Hotels
Veronica De Paolis
Ibrahim Kara
Duangjai Teeranutranont
Salila Wisetsadee
Table of Contents
I.Executive Summary
II. The Service Offering
a.Sonesta Hotels and the Hotel Industry
b.Current Trends
c.Firm and Competitor Analysis
d.Internal and External Competitors
e.Tangible and Intangible Service Components
f.Technology Analysis
g.Sonesta’s Marketing Mix
h.Customer Profile
i.Personnel
j.Customer Service
III. Customer Loyalty, Satisfaction, Retention and Service Blueprint
a.Customer Loyalty
b.Customer Satisfaction and Retention
c.Service Blueprint
d.Employee and Customer Scripts
e.Visible and Invisible Components
f.Improvement by Blueprinting
IV. The Role of Physical Evidence
a.Servicescape
b.Servicescape and Competitive Advantage
c.Overall Strengths and Weaknesses
d.Marketing Opportunities and Threats
e.Recommendations
V. Group Evaluation
VI. Works Cited
I.Executive Summary
Sonesta International Hotels Corporation is a leading company in the United States hospitality industry and is becoming a key player in the upscale hotels industry worldwide. Presently Sonesta operates 27 hotels and resorts, including 6 Nile cruise ships. Sonesta’s key services include hospitality, cruise arrangement, hotel management, meeting and wedding space leasing, and group event planning and catering services. Sonesta also provides additional services to get customer’s attention and differentiate its offering with spas service, business and fitness centers, and in-room amenities. In the room features Sonesta provides customers with in-room treadmills, internet access, headphones, robes, gourmet food. Bar facilities and additional services like vacation packages, airline miles and loyalty bonus plans are offered to returning customers.
Due to increasing time and money spent on leisure activities tourism has developed and becomes an important industry for many countries. Specifically the hotels and resorts industry has been growing since many countries attempt to attract visitors to their own geographic locations. Sonesta operates three hotels in the U.S. and many more around the world. Sonesta’s geographically diverse U.S. properties do not compete with each other because they are located in distinct cities that attract travelers for different reasons. However, Sonesta has many external competitors including Hyatt Hotels Corporation, Marriott International Inc., and Starwood Hotels and Resorts. Sonesta International Hotels Corporation distributes its products and services through intensive distribution strategies including direct and indirect channels. Customers can book rooms via direct channels which are direct contact with the property (via telephone, fax or e-mail), central reservation and from hotel web sites and also indirect channels which include online agents and corporate agent and global distribution channels.
Sonesta offers a unique experience at its diverse properties and uses supportive management styles with its employees and these factors lead to customer retention and satisfaction. However as in all service businesses Sonesta must ensure it has appropriate response protocols to events that can lead to customer dissatisfaction such as unclean or unsafe facilities. Current reports stipulate increasing, steady and decreasing customer satisfaction in this sector so companies will have to pay careful attention to customer feedback to know where they stand. One critical trend going forward for Sonesta is the desire of affluent people, Sonesta’s key target market, to consume less conspicuously than in the past.
The service blueprint and servicescape analysis allow for a comprehensive overview of the customer experience. Using this information it is possible to visualize points of failure in service delivery at moments of truth. For Sonesta these moments of truth occur when customers make reservations, arrive and check-in at the hotel, experience physical aspects of the hotels and rooms, when they order room service or concierge services, and when customers check out. At these moments of truth it is imperative to minimize waiting and ensure that support systems are accurate and functioning optimally.
Our recommendations for Sonesta center on brand image and awareness, the servicescape (primarily its website), and customer retention programs. Because Sonesta is competing with highly recognizable brands it should add traditional communications to its current marketing mix rather than relying on travel agents and websites. This includes advertising in trade publications and publications consumed by its key target market segment. Sonesta’s website should be update and simplified to make it easier for customers to make reservations as well as to purchase its bath, bedding, and art products. Finally Sonesta’s existing loyalty rewards programs should be expanded to include referral reward incentives.
Sonesta offers a unique class of products and services and has a strong brand but its main challenge is to make that brand more widely known. With the recommendations we suggest Sonesta could significantly expand its business and brand awareness.
II. The Service Offering
a.Sonesta Hotels and the Hotel Industry
With a rising standard of living and the technological advances people find more free time to travel both locally and abroad. Due to increasing time and money spent on leisure activities tourism has developed and becomes an important industry for many countries. Specifically the hotels and resorts industry has been growing since many countries attempt to attract visitors to their own geographic locations.
The hotels and resorts industry’s primary offering are hotels with event facilities and holiday resorts. It is segmented into operating hotel, which account for over 84% of total industry revenues, and resort which accounts for 16.0%. Players in the industry provide accommodations and services to both domestic and international customers. However, according to the industry report (IBISWorld, 2009), major customers are domestic residents who use the service for holiday travel, business, special events, and visiting friends and relatives. Most international travelers will also use the services for business travel, pleasure, and visiting friends and relatives.
In terms of the industry concentration there are four dominant players (Marriott International Inc., Accor, Starwood Hotels & Resorts worldwide Inc., and Hilton Hotels Corporation) in the market which demonstrate the outstanding performance, and accounts for 7% of the market share. The lodging industry is highly competitive and expected to increase because many players expand their operation by franchising and managing properties. Players in the industry attempt to respond consumers’ demand with their locations, activities, the quality of facilities and service standards to lead the market.
Customers for the hospitality industry are generally highly price sensitive and likely to switch when a better offering is met, except in the premium market, where accommodations and services can reach very high prices. Therefore to avoid letting customers look for the alternative forms of service it is important for lodging companies to understand customer needs and provide at least the required quality of facilities and service standards, and preferably exceed these expectations.
Key elements affecting the market share now and into the future of hotels in the industry include the ongoing global economic slowdown reducing buyers’ power, political conditions, social, environmental and demographic factors and a return to high fuel prices (IBISWorld, 2009).
b.Current Trends
The lodging industry operates its business related to activities, the environment and society. Therefore, as mentioned earlier, many factors impact the industry’s overall operations.
• Global economic recession impacts on changing customers’ demand for traveling and hotel rooms. With the changes in disposable income affecting family spending on pleasure travel domestic and international tourism has diminished. In addition, rising gas prices also have an impact around the world by increasing transportation costs, impacting the airline industry as well as personal travel by car. People tend to spend less for unnecessary needs and become more price sensitive for selecting products and services such as hotels. These factors lead to a drop in customers for the hospitality industry. In these conditions budget hotels perform well because customers tighten their purses and spend less.
• Political conditions have a huge impact on many countries’ domestic tourism. The terrorist attacks of September 11, 2001 still have an impact on tourism. The impact of war or terrorist activity makes customers afraid and less willing to travel in certain countries considered more risky.
• The outbreak of flu and diseases increasingly has an impact on tourism industry. People tend to limit their travel due to their fear of contagious diseases. Currently, in April 2009, the Swine Flu pandemic has reduced demand for traveling in Mexico City and some states in the United States.
• People increasingly look for unique lodging experience. According to World Travel Accommodation report (Euromonitor International, 2008), the boutique concept is getting increased attention from customers who demand luxury and become trendy travelers. The boutique hotel has a great emphasis on innovative design, personalized service, and distinctive locations of hotels. For instance, Kimpton Hotels in the US has done an outstanding job attracting customers with all kinds of services – in-room spa services, the offering of quality cosmetics and personal care items.
• The lodging industry cannot avoid the societal trend of going green. According to industry reports studies showed that tourists are increasingly concerned about business, social and environmental responsibility. Therefore it can be beneficial for companies who engage in these corporate responsibility practices to advertise this fact. Many hotels are investing in new green technologies, taking energy-efficiency more seriously and tracking energy and water use. The Royal Sonesta in Boston also shows its responsibility by being green-certified. The hotel purchases local produce, has a chlorine-free swimming pool and has reduced the use of chemicals in cleaning supplies wherever possible (Sonesta).
•With the stress of everyday life, customers increasingly choose and look for hotels in a destination spa where they can relax, improve their health and change their lifestyle. More people consider the presence and quality a spa services important to choosing which hotel to stay at. As a result, to stay competitive against other hotels, large 4- and 5-star hotels provide spa services to attract customers.
• Many major hotels support branding and marketing strategies with their loyalty programs which give customers benefits in exchange for their loyalty. Sonesta has several customer programs including wed club for customers planning weddings at a Sonesta property, as well the travel pass club that offers discounts for loyal customers who return to Sonesta hotels.
c.Firm and Competitor Analysis
Sonesta International Hotels Corp.(SNSTA) is a leading company in the United States hospitality industry and is becoming a key player in the upscale hotels industry worldwide. A.M. Sonnabend founded the company in 1946. Sonestaincludes manyupscale hotels, resorts and cruise ships both in the U.S. and globally in North America, the Caribbean, Central & South America, Africa & Asia Pacific. Sonesta currently operates under the management of Stephanie Sonnabend, CEO and President, and Peter J. Sonnabend, and Executive Chairman of the Board. Presently Sonesta operates 27 hotels and resorts, including 6 Nile cruise ships.
The company owns and leases hotels in Boston (Cambridge), Massachusetts, Key Biscayne, Florida, New Orleans, Louisiana, Coconut Grove (in Florida), Sunny Isles Beach in Florida). In addition, Sonesta also operates cruise properties in Bermuda, the Caribbean, Egypt, Italy, and Peru. According to the company Datamonitor report (2008), Sonesta is able to own, manage, design, and market its hotels and has maintained a high reputation within the hospitality industry over the past sixty years.
The company has about 1,097 employees. Headquartered in Boston, Massachusetts, the company operates its resorts in vacation areas and focuses on luxury accommodations and personal service. The company focuses on creating individual style for each hotel while utilizing common corporate logos and insigniasto take advantage of the benefits of a larger operation, such as cross selling. Every property has its own design character which showcases the culture and history of each location. The company tries to create an authentic and memorable experience for customers through its meticulously designed cuisine, luxury accommodations and high quality customer service which are part of its mission (Sonesta).
Sonesta’s key services include hospitality, cruise arrangement, hotel management, meeting and wedding space leasing, and group event planning and catering services. Sonesta also provides additional services to get customer’s attention and differentiate its offering with spas service, business and fitness centers, and in-room amenities. In the room features Sonesta provides customers with in-room treadmills, internet access, headphones, robes, gourmet food. Bar facilities and additional services like vacation packages, airline miles and loyalty bonus plans are offered to returning customers.
Sonesta’s financial situation and its customer base allow the company to remain competitive in the global hotels and resorts industry. The company reported revenues of $80.5 million during the fiscal year ended December 2008, a decrease of 7.1% over 2007. According to the company financial data (Onesource), Sonesta’s common stock trades on the NASDAQ Stock Market under the symbol SNSTA. As of February 11, 2009 there were 322 holders of record of the Company’s common stock. Company stock price is reported at $13.0 (October 02, 2009).
With the economic recession, the company’s business and performance has been affected since 2008 and into the first quarter of 2009. Hotel business depends heavily on economic activity, therefore, hotels in the industry will be impacted from both lower customers demand and reduce corporate spending. It is still hard for the company to predict the extent of the impact of the economic situation on the company’s performance results for 2009.
The lodging industry is highly competitive and Sonesta competes with many larger upscale hotels in the industry. Major competitors include Accor SA, Four Seasons Hotels Inc., Starwood Hotels & ResortsWorldwide Inc., Marriott International Inc., and Hyatt Corporation.
d.Internal and External Competitors
Sonesta operates three hotels in the U.S. and many more around the world. Sonesta’s U.S. hotels are located in Boston, Miami and New Orleans. Being so geographically diverse these hotels do not compete with each other because they are located in distinct cities that attract travelers for different reasons. New Orleans and Miami’s properties might compete with each other when it comes to travelers from other regions of the country or from abroad who might consider either city for a vacation in the Southern U.S. Sonesta’s South American and Egyptian properties are all in a position to compete with each other in each geographic area. Sonesta has five hotels in Peru, two of them located in the capital, Lima. These properties are El Olivar in Lima, Posadas del Inca Miraflores in Lima, Posadas del Inca Cusco in Cusco, Posadas del Inca Lake Titicaca in Puno, and the Posadas del Inca Sacred Valley in Yucay. Even in the similarity of their names these properties compete with each other, especially for American travelers who might choose their destination in Peru solely on the hotel amenities and features available. Likewise Sonesta’s Chilean properties, the Sonesta Hotel Osorno and Sonesta Hotel Concepcion compete with each other. Both properties have similar capacity and are located in the south of Chile. Sonesta has two properties in Brazil, one on Brasilia and one in Sao Paulo. These are slightly more remote from each other than the properties in Peru and Chile but they still compete with each other for American tourists who might, as mentioned before, choose their destination on the basis of available hotels, amenities, and attractions. In Egypt Sonesta’s properties likely experience the most intense competition amongst themselves. With six hotels and six cruise ships Sonesta has a strong presence in Egypt. The hotels include the Sonesta Hotel & Casino Cairo, the St. George Luxor, the Sonesta Beach Resort & Casino Sharm El Sheikh, the Sonesta Club Sharm El Sheikh, Sonesta Beach Resort Taba, and the Sonesta Pharaoh Beach Resort Hurghada. All of these properties have similar occupancies, in the range of 300 to 520 rooms. The Cairo and Luxor hotels compete closely with each other with luxury packages, while the Hurghada hotel has travel packages oriented toward families and vacation travelers. Sonesta’s cruise ships include the Moon Goddess, Nile Goddess, Star Goddess, Sun Goddess, St. George and Amirat Dahabeya. All ships except the Amirat Dahabeya have similar capacities from 30 to 60 rooms. The Nile, Sun and Moon Goddess ships offer similar cabin sizes and amenities geared toward vacation and family travel. Te Star Goddess and St. George offer more luxurious amenities such as spa features in cabin bathrooms (Sonesta International Hotels, 2009).