997 2739 1 SM PDF
997 2739 1 SM PDF
997 2739 1 SM PDF
Zbigniew Kowalski*1
Commercial hospitality
as a business model
in the independent hotel company
1. Introduction
Research and studies clearly show that commercial hospitality is one of the
world’s oldest businesses.
It is considered as a fact that, although hospitality is rooted in culture as the
social behaviour and the cultural form, it also has its social and economic attach-
ment. Therefore, it is assumed that aspects which shape the expected standards
in relationships based on hospitality (hospitality relationships) are the most im-
portant in the commercial hospitality services.
Until recently hospitality professionals have had a good reputation in the
society. Nowadays, the platform of knowledge and vocational education of hospi-
tality professionals is being built from the beginning in Poland as well as abroad.
It is also under debate how to create the importance of hospitality professions to
the other service professions.
The quality and the value of the hospitality service both in Polish and inter-
national hospitality business is being more and more carefully considered by its
buyers (clients and guests) who booked, purchased and consumed such service.
Hospitality services are offered by hotels and restaurants, categorized and
non-categorized facilities, functioning as the independent enterprises or in
groups as chain facilities. On the other hand, for the last twelve years we have
been observing the process of blurring the differences between service and mar-
keting functioning of individual and chain hotels.
The hospitality business is currently also creating the way of benchmarking
and integrative functioning, which means that similar hotels of the same category
* :URFÏDZ8QLYHUVLW\RI(FRQRPLFV)DFXOW\RI(FRQRPLFV0DQDJHPHQWDQG7RXULVPLQ-HOHQLD*¶UD
Department of Microeconomics (doctoral studies)
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Zbigniew Kowalski
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Commercial hospitality as a business model in the independent hotel company
usual environment for any main purpose (business, leisure or recreation etc.)
and uses the services of the hotel or restaurant, becoming a major participant of
the hospitality business – guest (in case of a hotel) or consumer (in the case of
a restaurant). In other words, hospitality business is oriented to the supplying of
the paid hospitality services.
Meanwhile, hospitality industry is the term broader than hospitality busi-
ness. It refers to the structure, potential and types of entrepreneurs engaged in the
hospitality business in a specific area with all kinds of cooperations and connec-
tions, which enable the correct economic and organizational operation of a single
company – the hotel or restaurant investment. In this context, one can speak of
hospitality industry of a country, city or region as its potential with the certain level
of organization and the diverse structure of hotel and restaurant units.
It should be noted that hospitality business regionally enters a phase of
“competitive integration”, which means that the promotion policy of the touristic
areas will support the development of service quality in the independent hotel
or restaurant companies for the domestic and / or international client (guest or
customer).
A low or high level of organization in the hospitality industry results, among
others, from the type and quality of cooperations operating for the hospitality
business in the specific area (on many levels – local, regional or national level).
This is accompanied by the quality of the hospitality services in the strict sense
provided by hotels and restaurants as well as their value which is more accurately
assessed by the clients and guests who paid for it. This assessment is carried out
at each stage of hospitality service provision – at the time of booking, purchasing
and its consumption. More and better-educated clients (guests or consumers)
seeking and expecting from the service provider the higher quality and standard
of services, even "forces" on the hotel or restaurant entrepreneurs such level of
organization of their services (resulting from the implementation of the appro-
priate model of commercial hospitality), which let the host focus his attention on
the correct and reliable guest service.
In the current market situation and in this strongly competitive environ-
ment, not gaining or losing a client becomes too expensive, which is why more
and more importance is given to the quality and standard of services. They are in-
fluenced by the way of offer and personnel management, establishing the proper
relations with suppliers and – moreover – by the model of commercial hospitality
and how it is managed (this model should be profiled individually for each hotel
or restaurant business, with regard to its offer individuality and the needs of its
base or alternative client).
While hotel chains will still care for their standardized, brand image, whereas
the independent hotel companies will create and emphasize the uniqueness and
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Zbigniew Kowalski
value of their individually profiled commercial hospitality. In this case, the imple-
mentation of commercial hospitality as the innovative business model becomes
for independent hotel companies the way to strengthen their market position.
The starting point for discussion whether commercial hospitality can become
the innovative business model in the hotel or restaurant companies, should be
the clarification of the essence of this type of hospitality as well as the answer to
the question about the differences between the proposed by the the author’s
definition of hospitality and the previous research in this matter.
Previous studies on the issue of hospitality show the rather variable and fluid
use of the terms “hospitality”, “commercial hospitality” and “hospitality manage-
ment”. The term “hospitality” is defined and used by most of the researchers in
a quite indistinct and unsatisfactory manner and the concept of hospitality seen
in the context of its structural or behavioural characteristics is a relatively young
research topic. What is the subject of the scientific debate of the researchers from
the various university centers (mainly in the English-speaking countries) is the
question whether hospitality should be conceived as a product, a process, an
experience, or all three(!).
The example of a relatively general definition of hospitality is one by Ewout
H. Cassee, who defined it as “a harmonious mixture of tangible and intangible
components – food, beverages, beds, ambience and environment, and behaviour
of staff” [3, p. XIV].
On the other hand, there is also a tendency to narrow the field of research
when it comes to the hospitality and focus only on the commercial or economic
dimensions of hospitality to look at the hospitality through the prism of a prod-
uct or a service process. For example, Mauritis C. Tideman defined hospitality
as “the method of production by which the needs of the proposed guest are
satisfied to the utmost and that means a supply of goods and services in a quan-
tity and quality desired by the guest and at a price that is acceptable to him so
that he feels the product is worth the price” [9, p. 1]. In turn, Yann Pfeifer, from
a strongly supply-side economic perspective, said that “Hospitality consists of of-
fering food, beverage and lodging, or, in other words, of offering the basic needs
for the person away from home” [6, p. 191]. Going forward, Peter Jones came
to the conclusion that “the term ‘hospitality’ has emerged as the way hoteliers
and caterers would like their industry to be perceived ... In essence hospitality
is made up of two distinct services – the provision of overnight accommodation
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Commercial hospitality as a business model in the independent hotel company
for people staying away from home, and the provision of sustenance for people
eating away from home” [5, p. 1].
Relatively the most widely recognized (though not undisputed) definition is
one by Bob Brotherton, who said that hospitality is “a contemporaneous human
exchange, which is voluntarily entered into, and designed to enhance the mutual
wellbeing of the parties concerned through the provision of accommodation and
food or drink” [2, p. 168].
The lack of widely recognized and accepted by most of the researchers uni-
form definition of hospitality, which would define the true essence of this concept,
makes it difficult to construct the theory of knowledge on hospitality. The analysis
of the previous studies shows that the idea of hospitality research exists more in
form than in substance. What is common in all the above mentioned definitions of
hospitality is that the place, where the professional commercial hospitality manage-
ment – due to the host-guest relationship – is held, is not clearly enough empha-
sized. And that is essential for the presented issue, because the process innovation
requires a strict defining of the place where it is implemented.
The starting point for giving the author’s definition of commercial hospitali-
ty was to define non-commercial hospitality in the broad sense as a set of natural,
direct, genuine and kind behaviours and actions of hosts and their representa-
tives towards guests arriving and staying in known and unknown for them place,
who expect from them (hosts and their representatives) such behaviours. This
definition refers to the people’s private sphere in general and can be also used
for describing their social or institutional, non-commercial relations.
One of the important features of hospitality is that guests can use it on a non-
commercial or commercial basis and that is the reason for defining hospitality
with reference to services provided on the commercial basis in the hospitality
business. According to the author, commercial hospitality is a set of conventional
and unconventional behaviours and actions put into practice on a commercial
basis by the professional service providers and realized through preparation to
and process of guest service at the hotel or restaurant. Those actions act positive-
ly on guests' mood and behaviour during their staying at the hotel or eating in the
restaurant. Commercial hospitality begins with the professional ability of inviting
the clients and ends with just professional ability of bidding the guests farewell.
What distinguishes commercial hospitality management from non-commer-
cial hospitality is that non-commercial hospitality may be given both by amateurs
and professionals but commercial hospitality management can be performed
only by commercial hospitality professionals. For this reason, defining the hospi-
tality management combines not only the management and hospitality, but also
indicates the existence of a profession related to the commercial hospitality man-
agement and all the related issues.
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Zbigniew Kowalski
3. Non-commercial hospitality
vs. commercial hospitality
In order to analyze the possibility of using commercial hospitality as an in-
novative business model in the operation of hotel or restaurant companies, it is
crucial to define the features differentiating hospitality provided on the commer-
cial basis from the non-commercial hospitality (Tab. 1):
Table 1
The comparison of features of non-commercial and commercial hospitality
according to the behavioural criterion
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Commercial hospitality as a business model in the independent hotel company
Inviting hospitality – used at the stage of communicating the offer with the mar-
ket – is the whole of marketing activities undertaken to persuade the client and guest
as a customer to take a decision about choosing and ordering the offer of a specific
hotel or restaurant. The inviting hospitality is, among others, comprised of: PR and
branding activities, internet marketing, loyalty programmes designed for guests (cli-
ents) who repeat buying the services of a the same hotel or restaurant as well as the
communication system which is used to maintain the relationship with guests who
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Zbigniew Kowalski
don’t take part in loyalty programs (especially those satisfied with the proper high
quality service, so they are willing to return or promote this specific hotel or restau-
rant by providing the positive feedback on the specific hotel or restaurant).
Welcoming hospitality is comprised of all activities and behaviours of service
personnel and managerial team of the specific hotel or restaurant, which are
related to the service of a guest’s arrival and reception at the hotel or restaurant
starting from the arrival and the checking-in as well as on his way to the hotel
room or other areas where the hospitality service is provided. They will also be
all the activities undertaken prior to the client’s arrival, who has already made
the booking, which consist in giving him all the additional information and the
provision of service known as a “personal concierge”.
Service hospitality is understood as a complete and consistent with all stan-
dards and procedures of guest service staying in the hotel or eating in the restau-
rant; it is received by him in the place where the service is consumed (purchased),
e.g. in a hotel room, restaurant, bar, conference room or in wellness & spa area.
Farewelling hospitality is comprised of all activities and behaviours of service
personnel and managerial team that close the process of guest service leaving
the hotel or restaurant. Those activities are also a smooth transition to re-inviting
guest to return to this specific hotel or restaurant. This set of activities plays an
important role in guest service; it may become the opportunity of “forgiving” mi-
nor mistakes that may have occurred during one’s stay and sometimes to settle
the client’s claim. That is why it is crucial that the managers are present during
the process of inviting and bidding guests farewell.
At each stage of performing the hospitality service there are different proce-
dures and standards, which all are necessary to achieve guest satisfaction and to
build the proper relationship with him. Commercial hospitality which is properly
applied and managed affects the whole service process at the hotel and the res-
taurant. It mustn’t be perceived as the added value as it is the integral element of
the full value of the service expressed in the price and paid by the client or guest.
What never changes in the hospitality services, is that: the staff expresses and
provides the commercial hospitality and guests experience, feels and pays the
host (as entrepreneur) for the commercial hospitality.
The positive relationship and emotions between the host and guest are the
economic advantage and a value in itself. Therefore, commercial hospitality man-
agement requires a process approach as the economic success of the hospitality
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Commercial hospitality as a business model in the independent hotel company
business is also or primarily based on the quality of the staff who is aware, under-
stands and is engaged in the service performance. The quality of staff, standards
and procedures can be included in the individual model of commercial hospital-
ity, which may secure the conditions for better, undisturbed and economically
effective management of the hotel or restaurant company.
The implementation of commercial hospitality as the individual business
model results in effective distinguishing the company from the competition as
the business model is by which a firm builds and uses its resources to offer its
customers better value than its competitors to produce a sustainable competitive
advantage. In this view, a business model can be conceptualized as a system made
up of components, link between the components and dynamics [1, p. 19].
The model of commercial hospitality developed and prepared to implement
in the independent hotel company should be based on ten fundamental ele-
ments: 1) customer segments, 2) value proposition, 3) communication, distribu-
tion and sales channels, 4) the customer’s relationship, 5) revenue streams, 6)
key resources, 7) key activities, 8) key partnerships, 9) the cost structure and 10)
ways of preserving the model.
Customer segments: in a modern, highly diversified hospitality business
considering the different categories and types of hotels, the key to the custom-
er segmentation is the classification of client which distinguishes two general
customer segments – the base client and the alternative client. The base client
through a continuous, repetitive use of the paid hotel services should secure
the profitability of the hotel company. Whereas the alternative client is a type
of client which will be „reached” by the hotel marketing in the periods of lower
activity of the base client in order to secure the projected occupancy level as well
as the sales of the other services provided by the hotel or restaurant. Customer
segmentation according to the key of base and alternative client depends on the
specificity and the service individuality of the hotel or restaurant; the economic
existence will be differently protected by the city business hotel and differently
by the wellness & spa hotel located in a tourist or health resort, etc. Prior to the
development of customer market analysis for the specific hotel, one must know
and understand the scope of the basic needs which should be met to satisfy the
base and an alternative client.
Value proposition: a hospitality company as a business organization tries
to solve customer problems and satisfy their needs using the value proposi-
tion which is expressed in the price and service offer of specific independent
hotel company. In hospitality business equally important for the entrepreneur
values are: 1) a guest who arrives and purchases the hospitality service for the
first time, 2) a satisfied guest who – more or less frequently – returns to the
specific hotel and purchases its services (prosumer 1), 3) a satisfied guest who
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doesn’t return to the specific hotel but promotes on his own the services of this
hotel (prosumer 2). In other words, gaining in the expected number the guests
arriving for the first time as well as returning guests will be the value for the
hospitality business.
Communication, distribution and sales channels: communication, dis-
tribution, and sales channels comprise a company’s interface with customers.
Through them hotel service offer (with proposition and value accents) reaches
the appropriate customer segment and gets directly to the client. While building
the right mix of communication and sales channels, it is important to remember
that they should allow to reach directly the appropriate segment of the base
client. Often, there are too many distribution channels used as the managers
trying to protect themselves widely “spread” information on their hotel offer.
Meanwhile, it is important to establish the appropriate distribution channels to
each segment of the base client to get through to the chosen client with the offer.
Besides spreading the information on the hotel offer on the customer market, the
communication channels serve several functions, e.g. they help providing post-
purchase customer relationship management.
Customer relationship: this element of the business model should de-
scribe: the relations at the stage of gaining clients and guests, relations at the
stage of maintaining the relationship with guests and clients who used the ser-
vices of the specific hotel or restaurant as well as the occasional relations with
the segment of base and alternative client using to secure the additional sale of
the services provided by the hotel or restaurant. Nowadays, as the number of
offers and their diversity begins to “overwhelm” the customers and maintaining
the direct relationship with them becomes more and more difficult, the way of
preserving this specific element of the model starts playing the important role.
Revenue streams: in case of the hotel company, it is important to select
and combine such revenue streams from the chosen market segments of base
and alternative client in order to achieve the projected gross operating profit
(GOP), which is the basis for calculating the profitability of the specific ho-
tel company. „If customers comprise the heart of a business model, revenue
streams are its arteries” [7, p. 34]. Moreover, it is possible that with a very
good direct communication and relationship with the base client, each revenue
stream will be based on a different price mechanism (fixed, seasonal, occasional,
promotional, loyalty, etc.).
Key resources: when building the business model of the hotel company, it
is important to establish (for the newly opened hotels) or reconstruct (in run-
ning hotels) the key resources required for the proper functioning of the model
as the process innovation. In the hospitality business very important are the ma-
terial (tangible) resources, but particularly important are intangible assets – both
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Commercial hospitality as a business model in the independent hotel company
human and intellectual. The commercial hospitality will not work without peo-
ple, regardless of whether it is the professional hospitality but used intuitively or
the commercial hospitality applied and implemented as the innovative model in
the management of the hospitality company.
Key activities: key activities are those defined as a priority according to the
schedule which should be taken by the manager to ensure the efficient operating
of the implemented model of commercial hospitality. Key activities in the hospi-
tality business are:
1. to create the systematic work of the general manager as the of strategic ele-
ment of this model.
2. to preserve the model by its modification, improvement or elimination of
unnecessary and outdated assumptions established at the model construc-
tion phase,
3. to verify the results of the model operation; in particular those referring to
the declared to the guest values and efficiency of revenue streams.
Key partnerships: key partnership is the network of suppliers and partners
that make the business model work efficiently. Key partners should be aware
whether the hotel company has its own individual model of commercial hospital-
ity and what the key segments of the base client of this specific hotel facility are.
E.g. the family hotel providing its services for families with young children (as the
base client) requires from its key partner (e.g. food supplier) putting the special
attention to the quality and best-before date of the offered products, their fresh-
ness and environmentally-friendly features.
In collaboration with key partners one should remember about eliminating
all risks resulting from the cooperation agreements.
Cost structure: cost structure should not be confused with the direct costs
associated with the operation and maintenance of the hotel property. In this
case, the cost structure includes all expenses of the hotel owner referring to the
implemented business model which is based on the commercial hospitality. It
is obvious that every entrepreneur will accept the business model with low cost
structure. On the other hand, there is also the tendency, which may be more ap-
propriate for creating the business model of commercial hospitality, based on
cost concentration and expenditures for the value generation and its mainte-
nance. In this case, we can talk about the premium value propositions and a high
degree of personalized service which is especially important in today’s highly
diversified hospitality business [8, p. 45].
Ways of preserving the model: while in many business areas this element
of the business model is not essential, in the case of the business model based
on the commercial hospitality it is the key issue. Unfortunately, hospitality busi-
ness is affected by permanent staff fluctuation, even at the managerial level (as
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