Description
The paper provides empirical evidence on technological activity in the Spanish service sector, in particular for the tourist accommodation in the Balearics.
Innovation activity in the hotel industry:
Evidence from Balearic Islands
Francina Or?la-Sintes
a
, Rafel Cresp?´ -Cladera
a,Ã
, Ester Mart?´ nez-Ros
b
a
Department of Business Economics, Universitat de les Illes Balears, Cra. Valldemossa, Km. 7,5 070122 Palma de Mallorca (Islas Baleares), Spain
b
Universidad Carlos III, Spain
Received 15 April 2003; accepted 25 May 2004
Abstract
The paper provides empirical evidence on technological activity in the Spanish service sector, in particular for the tourist
accommodation in the Balearics. The study wants to ful?l the lack of analyses in the ?eld of tourism. Commonly, the study of
innovation activity has been carried out from a manufacture perspective, for that reason the paper discusses the precise de?nition of
innovation in accommodation services. The data refer to a large representative sample of hotels in Balearic Islands (Spain),
providing a homogeneous set of information. The results show as higher categories hotels are more innovative than lower categories
hotels; an aggregated measure of technological innovation presents a rate over the average for hotels that belong to a chain, and that
for hotels under management contract. Half of innovative companies adjust the human capital skills and abilities. The hotel industry
is a supplier driven sector that innovates introducing R&D embodied technology rather than undertaking internal R&D activities.
r 2005 Elsevier Ltd. All rights reserved.
Keywords: Services innovation; Hotel industry; Balearic Islands
1. Introduction
The tourism sector is a high source of revenues for the
Spanish Economy and accounts for 12% of the GDP.
This is a result of some structural conditions of the
country that contribute to be the second European
destination and the third worldwide destination by
tourist arrivals, and the fourth by foreign currency
income. Arrivals and income have both increased year
after year in the late 90s and the beginning of the 21st
century. By accommodation type, 71% of the tourists
(34.1 million) stayed at hotels, while the remaining
stayed in rented properties and less usual types of
accommodation. As for the main national destinations,
the visitors place the archipelagos, the Balearic Islands
and the Canary Islands, in the top position. These are
two very similar attractive destinations sharing 43% of
the annual Spanish arrivals (Instituto de Estudios
Tur?´ sticos, 2001).
The sector is mainly in hands of private investors
(Marino, 2001). When comparing the innovation
activity of tourism with the ?gures of any manufacturing
sector, nevertheless, the relevance of services innovation
effort accounts only for a small proportion (in 1999, the
internal R&D expenditure was 3.8% over total services).
The statistical aggregated data available on R&D and
innovation expenditures shows for Spanish ?gures
signi?cantly lower values than the European average.
Even within Spain, there are huge differences among
regions. These differences can be explained partially for
the productive structure of the economy. The average
intensity in R&D investment in Spain for the year 2000
is 0.94% of the GDP. The value for a manufacturing
industrial region like the Basc Country is 1.20% of the
GDP and 0.25% for the Balearic Islands. The Innova
tion expenses ?gure in relation to the GDP is 1.9% for
Ã
Corresponding author. Tel.: +34 971 17 13 23;
fax: +34 971 17 23 89
E mail address: [email protected] (R. Cresp?´ Cladera).
1
the whole country, while for the Balearic Islands is
0.36% and 2.71% for the Basc Country. These patterns
stay on when comparing other intensive manufacturing
regions like Catalunya with the Canarias Islands, a
services-oriented economy.
These ?gures lead us to consider to what extent the
R&D and innovation investments are activities only for
manufacturing sectors. The usual measures of innova-
tion expenses seem to be designed for industrial
economies. The aggregated statistics
1
do not ?t for
services economies, with tourism activities as the
Balearic Islands. A more detailed and accurate measure
of innovation is needed for.
The issue is about to maintain the primacy and
competitiveness of the tourism activity through innova-
tion investments. The point of the paper is to investigate
how technology improvements are introduced in the
tourism activity companies in order to determine the
current state of the art in innovation activity.
The positive evolution of the industry proves it as one
of the most steady and promising sectors in the Spanish
and World economy and a key strategic activity.
Nevertheless, the tourism industry is a changing and
dynamic businesses (WTO, 1999) and it will only keep
its competitiveness adjusting to the new customers
demands, adequately reacting to competitors’ innova-
tions and taking advantage of the new technological
developments available in the market place (Camiso´ n,
2000; Huybers & Bennett, 2000; Okumus & Hemming-
ton, 1998). Given the lack of academic empirical
research on the topic, this paper intends to be a
contribution to the knowledge of the current situation
of innovation in the tourism industry.
The tourism industry includes a wide range of
activities such as restaurants, entertainment, transporta-
tion and accommodation. A rigorous and reliable
analysis of the technological change focuses on one of
these activities that include a homogeneous set of
companies with similar production functions inputs,
outputs and available technology and market environ-
ment. The homogeneity of the available data and the
relative importance within the industry, make advisable
to choose the hospitality business as the ?eld of the
study. The lodging sector is an outstanding tourist
activity since is a sine qua non in the provision of all the
other tourism services, being the basic requirement of
the tourist at the destination point.
The Balearic Islands, a leading tourist destination
(Aguilo Perez & Juaneda Sampol, 2000), is an adequate
scenario for studying the technological innovation in the
lodging activity. Most of the hotels in the Balearic
Islands are specialized in providing a standardized
tourist service called ‘‘sun and sea’’.
The paper draws on the innovation features in
tourism activities. The study presents empirical evidence
of hotel activity for the innovation process for a
representative set of hotels to understand the character-
istics and determinants of the managers innovation
decisions. Speci?cally we consider the relationship
between innovation propensity and hotels category,
governance settings, size, and a group of variables
capturing market conditions. The results are that the
higher category is linked with major innovation
intensity. Chain of hotels seem to provide a better
environment for innovation decisions as the professional
management contracts also seem to do. As known from
previous services research, tourism activities are suppli-
er-driven activities in terms of innovations decisions.
The paper is organized as follows: Section 2 intro-
duces the theoretical framework; Section 3 analyzes the
in?uencing elements of accommodation activity;
Section 4 includes methodological aspects of the
research. Finally, there are sections on results, and
discussion, with some concluding remarks.
2. Theoretical framework
Technological innovation is usually de?ned as the
conversion of technological knowledge into new pro-
ducts, new services or new processes introduced into the
market, as well as the signi?cant technological changes
in products, services and processes. In order to achieve
innovation, scienti?c knowledge is not enough: the
outcome of such knowledge must be applied in a
tradable way (Landau, 1991). Technological innovation
is also depicted as an improvement in a product or
service performance in terms of quality, cost, speed or
number of characteristics (Cohen & Levinthal, 1990).
These approaches, typical to the manufacturing indus-
try, refer to a product as the company output.
The technological innovation within the tourist
accommodation activity has to capture the particular
and differential features of the sector, characterized by
the nature of the service. According to Gallouj and
Winstein (1997) there are some aspects that characterize
service and have a great in?uence on the de?nition of
technological innovation. Those can be relevant to the
hotel activity.
First, there is a close interaction between production
and consumption (coterminality) that makes dif?cult
the typical product and process manufacturing
distinction. The coterminality implies that the in-
novation activities will focus on service individualiza-
tion, adapting the service provided to the customer
requirements. Moreover, the coterminality leads to a
1
For the Spanish case, the correlation coef?cient of R&D and
Innovations intensity of the 17 regions with the percentage of the
economy production of industrial goods is 0.71, and statistically
signi?cant.
2
higher degree of service heterogeneity the exchange
object differs from one case to another. Only
institutional changes, effectively implemented as a
business strategy, must be regarded as technological
innovations, and not those spontaneously generated
and derived from human interaction. This character-
istic ?ts on the hotel set of services provided to their
customers.
The second is the intangibility and growing informa-
tion contents in the provision of services. The
information and communication technologies play a
critical role in the innovation activities of tourist
accommodation businesses: to reach the potential
customers with information that helps to get a deeper
understanding of the service purchased; to reach the
largest share of the demand; to obtain and process
the information for a better business performance.
The role of human resources as a key competitive
factor. The importance of the human factor in service
activities is associated with the capability to establish
the quality and features of the service ?nally
provided. Training and education activities are
explicitly considered as one way to improve and
upgrade the technological capabilities of service
companies.
Changes in the organization architecture can be
linked to the introduction of new technologies, and
should be included as technological innovation
activities. These organizational issues are relevant in
the accommodation industry to ful?l the services
requirements
The Community Innovation Survey II
2
de?nition of
technological innovation, based on the Oslo Manual
(OECD, 1997), applies to the accommodation industry
in the sense that innovations refer to implemented new
or signi?cantly improved services or service production
or delivery methods. New or improved services are
regarded as innovation when their characteristics and
ways of use are either completely new or signi?cantly
improved qualitatively or in terms of performance and
technologies used.
It is generally accepted that new or signi?cantly
improved production methods require changes in the
equipment. Also, the technologies used in the imple-
mentation of new or signi?cantly improved services are
frequently associated with machinery, equipment and
software upgrading. These ideas are a starting point of
the Barras’ reverse product cycle framework for the
information technologies based services innovation.
Barras (1986) reverses the product cycle theory for the
services industries in the sense that the technological
innovation is ?rst introduced to increase the ef?ciency of
existing services; for a second step, the technological
innovation increases the quality of services; ?nally the
innovation drives new services or wholly transformed
traditional ones.
The in?uential Barras’ perspective focuses on the
information technologies related innovation in services
where information intensity is important. For those
services where interactivity seems to be more relevant,
like accommodation in tourism, the pattern differs.
Effectively, Sundbo and Gallouj (2000) assert that
Barras’ reverse product cycle is closest to a theory of
diffusion of technological innovations in the services
activity. They draw a set of typical innovations patterns
where accommodation activities would ?t in between the
called ‘‘artisanal pattern’’ and ‘‘network pattern’’ with a
supplier-driven process.
Technological innovation can be generated internally
and also outsourced and there is no empirical evidence
on the accommodation activity innovation pattern. In
this sense, the hypothesis would be in line with some
empirical ?ndings on technological innovation in the
service industry which show that, with the exception of
knowledge intensive based services like data processing
or telecommunications sectors, most companies inno-
vate through purchase of equipment, components and
materials from their suppliers (Barras, 1986; Sirilli &
Evangelista, 1998).
3. In?uencing elements of innovation in accommodation
activity
There are three main characteristics of the hotel
industry that make different from other service activ-
ities. First, there is the regular category classi?cation of
hotels. The ‘‘stars’’ categorization that goes from 1 to 5
determines the type, number and quality of services
provided. Second, it is relatively usual to have ?rms
specialized managing hotels; and many combinations
arise. There are hotels where owners manage themselves
the activity, owners that rent the hotels, or professional
executives running hotels through a management con-
tract; another combination is the hotel management
under a franchise contract. Third, there is remarkable
characteristic of the hotel industry: the organization
through chains of hotels, having a central of?ce which
has, depending on the company, different attributions
and several degrees of vertical integration.
This exploratory research suggests that these hotel
industry speci?c aspects can help to understand the
innovation propensity of the accommodation services
activity. Also, the untested Sundbo and Gallouj (2000)
supplier-driven hypothesis from the patterns they de?ne
is explored. In addition, there are some remarks of the
innovation supporting process that focus more on the
2
The Community Innovation Survey II was launched in 1997 for the
service industry and is able to differentiate services from manufactur
ing schemes.
3
literature on organizational innovations on services,
(Van der Aa & Elfring, 2002) where the organizational
aspects of the implementation of innovations become
relevant. There are also, some variables like ?rm size
that usually have been introduced as explanatory in the
propensity of manufacturing ?rms to innovate and
should also be considered in the services innovation.
Finally, we consider the market and competition
conditions as a potential incentive to innovate and care
for the ?rm competitiveness.
3.1. Hotel-speci?c characteristics: category, governance
and chain structure
The ownership structure and the degree of depen-
dence on other organizational structures in?uence the
framework of management innovation decisions. In this
sense, Davies and Downward (1996) and Jones (1999)
show the importance of chains and groups of hotels.
Some hotels are independently managed; others belong
to a hotel chain or to a more diversi?ed company
conglomerate. Ownership and management do not
necessarily happen together: (i) companies specialized
managing hotels rent the assets or (ii) hotel owners
contract the management abilities through management
or franchise contracts. As Sirilli and Evangelista’s (1998)
suggest, different organizational structures of the
production units may affect the innovative behavior.
The hotel category classi?cation indicates the level
and complexity of services provided. Their in?uence
over the innovation propensity is simultaneously an
endogenous and exogenous outcome. It is endogenous
in the sense that higher categories include more services,
equipments complexities and organizational aspects
to be innovated. On the other side, a category cross
comparison is able to explain some of the innovation
patterns.
3.2. Supplier driven
Some services (e.g., information and communications
technologies) are intensive in the use of new knowledge
to innovate. Pavitt (1984), and more recently Hjalager
(2002), characterize the hotel industry as a supplier-
dominated sector that innovates throughout the incor-
poration of technological elements developed by its
suppliers. Similarly, Sundbo (1997) in a study of
?nancial services, tourism and management consul-
tancy, concludes that these service innovations are not
science based.
The way which technology is introduced reveals the
innovation pattern. Hotels can develop new technology
internally or use elements developed by others. The
hotel’s collaboration in the development and implemen-
tation of these technological assets reveals the innova-
tion patterns.
3.3. Innovation supporting process
Some functional areas, departments and company
services can be easily identi?ed as spaces where
technological innovation takes place. Identifying tech-
nological incorporation implies the assignment of
innovations to the different business areas where
technology is likely to be transformed into competitive
advantage higher productive ef?ciency (costs reduc-
tion) or differentiation. Furthermore, as long as techno-
logical innovation leads to more rapid reaction to the
changing environment conditions and is integrated in an
overall company strategy, it can be considered a way to
improve competitiveness. This can be measured through
the changes in the services provided by hotels along time.
The intensity of the changes introduced and the impact
of the technological innovation have been usually de?ned
as incremental or radical according to Deward and
Dutton (1986) and Ettlie, Bridges and O’keefe (1984). A
radical innovation is the application of a solution for a
problem that had so far not been solved, or had been
solved in a signi?cantly inef?cient manner (such inef?-
ciency may not be evident until the new solution is
found). The management of the solution frequently
carries high costs, derived from the purchase or the
necessary adjustments in the company’s internal organi-
zation. However, the potential positive impact on
performance is usually high too. Incremental innovation
is de?ned as a progressive re?nement of previously used
solutions that allow an ef?ciency increase. This implies
lower costs, and the bene?ts accrued are accordingly
lower, regardless the importance of the continuous
incremental innovation within the overall development.
A typical example of the distinction between both
innovation styles is the use of internet technologies: when
they were ?rst introduced in company management, a
radical innovation occurred, whereas further extensions
of their use resulted in incremental innovation.
Nevertheless, the innovation process does not con-
clude with the incorporation of new or modi?ed
technological elements. A great deal of effort must be
put into their implementation (operation start up,
adjustments, etc.) and their ef?cient use, enabling the
organization to develop the skills required to success-
fully implement the innovations (Olsen & Connolly,
1999; Sirilli & Evangelista, 1998). In order to achieve an
optimal operation of the new or signi?cantly improved
services, some changes in the employee’s organization
and training must be done (Cohen & Levin, 1989;
Griliches, 1990). This study looks also on the training
and human resources investment, as a factor to under-
stand the propensity to innovate and the quality level
offered by a service company.
3
Pine (1992) shows
3
Moutinho et al. (1995); Saleh and Ryan (1992) provide support to
this hypothesis.
4
evidence that the transfer of technology in lodging
activities depends on the staff’s implication.
3.4. Firm (hotel) size
The size dependence of intensity of innovation among
innovative ?rms is idiosyncratic. Some studies suggest a
U-shaped curve, like Brouwer and Kleinknecht (1997)
when analyzing the size distribution of innovative
activity, comparing services and manufacturing.
The production unit size is relevant since the
economies of scale may explain some strategic
decisions made by companies. The in?uence of size on
a company’s innovative behavior has been outlined in
some studies like Cohen and Levin (1989). The in?uence
can empirically be positive (impact of scale economies
on innovation activities) or negative (the effect of
?exibility on the introduction of changes). The size of
the hotel is able to determine the success and pro?t-
ability of the implemented innovations.
An important issue in the hotel industry related to the
size effect is the combined requirement of both ?xed
assets as equipments and human resources in the service
delivery process. Therefore, the industry must face a
very high ?xed costs structure. This fact, together with
the typical seasonal demand of many coastal resorts,
makes it more pro?table for many companies to shut
down during the low and/or medium seasons than
staying operative. Moreover, the acceptable occupancy
break-even level is quite high, which constrains price
policy (Kotas, 1982; Tisdell, 2000). This phenomenon
increases the tour operators’ negotiation power. The
technological innovation may mitigate these dif?culties
by offering tourist products off season (Carey &
Gountas, 1997) short breaks, business trips, etc. or
increasing the use of the installed capacity.
3.5. Market factors and competition
The hotel activity targets to speci?c market segments
related to quality and categories levels, seasonality and
possibilities of product differentiation. The market
segment can be approached, according to Davies and
Downward (1996), through the type of board sold, the
channels used in commercializing the service and the
degree of customer loyalty. Innovation propensity can
be explored according to these features. The channels
used to commercialize the service can also be innovated
through the new possibilities offered by the information
and communication technologies (e.g., booking via the
Internet) or else improved use of these new technologies
(Sangster, 2001).
The hotels’ differentiation is the strategic behavior
related to its closest competitors, companies with similar
services in the same area. Using technological innova-
tions, as a way to differentiate services, can provide
tourist accommodation services in addition or higher
quality than those of their competitors. This differentia-
tion, according to Chung and Kalnins (2001) is
considered a major competitive variable, achievable
through innovation.
The information sources publicly available as data-
bases on R&D, patents registries and similar are useful
to quantify the innovation activities in the manufactur-
ing industry but helpless in our case. To identify
innovation activities within the lodging industry the
information arises from direct sources, from the same
facilities providing tourists accommodation services.
The unit of analysis is the hotel instead of the ?rm.
The hotel is the place where the service is provided,
where the managers have the incentives to innovate,
where the innovations can be measured without the
aggregation of hotels at ?rm level.
4. Data and methodology
The data base used for this study has been provided
by the Conselleria de Turisme (the Regional Tourism
Authority; Conselleria d’Economia). It consists in all the
hotels operating in the Balearic Islands listed in the
of?cial census, 1.586 units since tourist apartments and
those labeled as ‘‘Others’’ are excluded. Tourist apart-
ments are excluded due to differences in type of services
they provide and regulatory schemes. The category
labeled ‘‘Others’’ (e.g., rural tourism) represents a mere
0.5% of the total population and is heterogeneous in its
operations and the package of services offered. There-
fore, the variety of accommodation possibilities includes
guesthouses, hostels, apart-hotels and hotels.
In obtaining a representative sample of the popula-
tion, a pro?le has been outlined according to three
distinctive characteristics: geographical location (three
islands in the Balearic archipelago), category and hotel
size. The population was ?rst divided into homogenous
groups (layers) according to their distinctive character-
istics to undertake, then, a simple random sampling
process in every layer. Therefore, the 1.586 hotel
establishments and their beds were grouped in 12 layers,
resulting in the combination between the four categories
(1, 2, 3 and 4 5 star) with the three geographical
locations: Majorca, Minorca and Ibiza/Formentera.
Table 1 depicts the sample structure and shows the
relevance according to the population composition. The
number of hotels and their size have a similar propor-
tion as that in the population which indicates the sample
is a good representation of the Balearic hotel industry.
To obtain the information from the hotels, a
questionnaire was designed and answered by hotel’s
directors, or management representative they indicated,
through a direct interview in the hotel’s location. In
order to ?lter problems with some questions, a pilot
5
questionnaire was sent to the managers conforming a
total of nine hotels divided into the following categories:
1 to the 1 star in Menorca, 2 to the two stars (one in
Mallorca and one in Ibiza/Formentera), 3 to the three
stars (one in each isle group), 2 to the four stars (one in
Menorca and one in Ibiza/Formentera) and, ?nally, one
to the ?ve stars in Mallorca. From the information
provided by these pilot responses, the questionnaire
design consists of two parts. The ?rst one and more
important, is concerned to the ?rm’s characteristics and
technological activity with compulsory qualitative re-
sponses. The second part includes a set of optional
questions about the labor force as full or part time
contracts, education level; and some operational aspects
as average level of occupation of the hotel.
The ?nal questionnaire was answered by 331 man-
agers of the sample using peer responses of interviewers
which were trained to carry out the work.
The main analyzed variables have been constructed as
follows. Category measures the number of stars that
Tourist Administration catalogues a hotel according to
legal requirements and technical speci?cations. The legal
?ve categories have been aggregated in four jointing
those establishments with 4 and 5 stars. Establishments
in the top category (5 star) represent no more than 1%
of the overall capacity while their technical differences
with respect to 4 star establishments are hardly scarce.
Governance indicates who manages the hotel opera-
tions: the owner of the physical assets or another one
through a management or leasing contract. Those
establishments directly run by the owners i.e., where
property and management fall in the same hands are
labeled ‘‘Owners’’ as a management type. Those
establishments where a professional ?rm runs the
activity with a management contract with the hotel
owners are labeled ‘‘Management’’ as a management
type. Finally, the establishments monitored by who hires
the physical assets to the property to provide accom-
modation services are labeled ‘‘Leasing’’ as a manage-
ment type. Chain structure refers the way in which the
establishment operates in the market: independently or
belonging to a hotel chain or to a business conglomerate
more diversi?ed (together with companies not operating
in the lodging sector). First case is classi?ed as
independent or not-chain while the others are as chain.
Supplier-driven pattern is approached by the way
which technology is introduced purchase, lease, inter-
nal development, subcontract or use of elements
centrally owned by the parent company and the hotel’s
collaboration in the development of these technological
assets captures the hotel technological equipment
activity.
In Innovation Activity measurement, Innovators are
those establishments that in the two previous years have
introduced some changes in one or more key business
areas where technology is likely to be transformed into
competitive advantage higher productive ef?ciency or
differentiation (these areas are listed in Table 4).
Table 1
Sample and population distribution
a
Number and percentage of sample hotels Number and percentage of population hotels
Island Category Total Island Category Total
1
*
2
*
3
*
4
*
5
*
1
*
2
*
3
*
4
*
5
*
Majorca 73 55 96 26 250 Majorca 382 262 421 131 1196
22.05% 16.62% 29.00% 7.85% 75.53% 24.09% 16.52% 26.54% 8.26% 75.41%
Minorca 5 4 9 3 21 Minorca 27 19 37 17 100
1.51% 1.21% 2.72% 0.91% 6.34% 1.70% 1.21% 2.33% 1.07% 6.31%
Ibiza/Form. 22 19 15 4 60 Ibiza/Form. 104 94 76 16 290
6.65% 5.74% 4.53% 1.21% 18.13% 6.56% 5.39% 4.76% 1.01% 18.28%
Total 100 78 120 33 331 Total 513 375 534 164 1586
30.21% 23.56% 36.25% 9.97% 100.0% 32.35% 23.64% 33.67% 10.34% 100.0%
Number and percentage of sample beds Number and percentage of population beds
1
*
2
*
3
*
4
*
5
*
Total 1
*
2
*
3
*
4
*
5
*
Total
Majorca 3780 7257 30951 10500 52488 Majorca 15829 24344 131950 49810 221933
5.36% 10.29% 43.88% 14.89% 74.41% 5.27% 8.10% 43.90% 16.57% 73.84%
Minorca 206 717 4150 1154 6227 Minorca 1238 2294 13787 4704 22023
0.29% 1.02% 5.88% 1.64% 8.83% 0.41% 0.76% 4.59% 1.57% 7.33%
Ibiza/Form. 1215 3440 5710 1456 11821 Ibiza/Form. 5386 16348 29877 4984 56595
1.72% 4.88% 8.10% 2.06% 16.76% 1.79% 5.44% 9.94% 1.66% 18.83%
Total 5201 11414 40811 13110 70536 Total 22453 42986 175614 59498 300551
7.37% 16.18% 57.86% 18.59% 100.0% 7.47% 14.30% 58.43% 19.80% 100.0%
a
Number and percentage of the hotel establishments and capacities in the population and in the sample ranked by categories and by islands.
6
Innovation in the production process at this technical
level account for the introduction of internally devel-
oped innovations or innovations purchased from
suppliers. The managers interviewed were asked to rate
every activity area likely to incorporate innovation, on
the basis of the examples shown by the surveyors, in one
of the four following categories: (i) no change,
(ii) radical innovation, (iii) incremental innovation or
(iv) the activity concerned is being outsourced or
provided by company’s central services. In business
areas or activities outsourced or provided by the central
services of a parent company, the decision to innovate
will not only depend on the hotel. The answers of
categories (i) and (iv) are ranked as non-innovators.
Areas ?rst time innovated are rated as radical innova-
tion while improved, widening or renewal areas pre-
viously innovated are rated as incremental innovation.
The Human capital skills adjustment approximates the
effort put into successful innovation implementation.
The changes experienced in the human capital skills and
capabilities are captured with the changes in training
and human resources investment. That is, the innovators
were asked about the adaptation of skills and capabil-
ities of their human capital through internal training,
external training, contracting new workers, outsourcing
or using the central services. Additionally, the human
capital is approximated in two ways. One way refers to
?xed or temporary contracts. The second one refers to
the education level that has been classi?ed into three
levels: primary education, secondary or professional
education and university education. Given that re-
sponses about human capital skills were optional, these
only covered a 71.9% of hotels for ?xed or temporary
contracts, and around 61% for the education level.
The hotel Size accounts for the number of beds
installed in the hotel. Three reasons justify the use of the
number of beds in measuring the size of a hospitality
establishment. One is the data availability compared to
alternative measures as number of workers. The labor
contracts are commonly registered through intermediate
companies whose activity is not necessarily related to the
subject of this study. The second reason is that for the
study objectives, the size of the operating unit will allow
bypassing higher-order units, such as legal entities or
?rm level. Finally, it is a common practice in the
literature on hotel activities to use the number of beds or
the equivalent number of rooms as an indicator of the
hotel size (Baum & Mezias, 1992; Chung & Kalnins,
2001; Ferna´ ndez & Mar?´ n, 1998) and will allow making
future homogenous comparisons.
The variables that help to de?ne the Market segment
targeted by the establishment are the type of board sold,
the ways to contract the accommodation service and the
degree of customer loyalty. The type of board sold to the
average guest ?t into three categories: less than half
board (accommodation only or bed and breakfast), half
board (accommodation, breakfast and one meal a day)
and more than half board (full board or all-inclusive).
The channels used to commercialize the service may be
one or more from tour operator, travel agency,
reservation center and direct contract. Additionally,
the number of tour operators every establishment
operates with is a proxy of the negotiation power and
of the customer dispersion, with potential in?uence on
the perceived need to innovate. Establishments enjoying
the stay of repetitive average guests have calculated the
customer loyalty.
The total months a year one establishment operates
approximates the intensity in the use of the assets
Seasonality since for some hotels is more pro?table to
shut down during the low season than remains open.
Joint effects of the seasonal demand and the high ?xed
costs structure of the hotels (Kotas, 1982; Tisdell, 2000)
make it more pro?table for some hotels to shut down
during the low and/or med seasons than to stay open,
determining the intensity in the use of the hotel
The strategic behavior related to its closest competi-
tors in the sense of the strategy pursued by every hotel
may be differentiated in terms of service provided or
service provision process and delivery. Then, for
Differentiation analysis the hotels sampled have been
classi?ed attending to the different innovation impacts
approaching their strategies. Establishments with differ-
entiation strategy are those with objectives on customer
loyalty increment or warranty contracts, services differ-
entiation and quality improvements. Establishments
with costs leadership strategy are those identi?ed with
costs reduction, labor productivity or pro?tability
improvement.
Performance is measured following the average
occupancy rate due to the hotel managers reluctant to
provide details about their hotel’s ?nancial performance
while average occupancy rate is widely used among
hotels (Alvarez Gil, Burgos Jime´ nez, & Ce´ spedes
Lorente, 2001). Nevertheless, responses about average
occupancy rate were optional and available data are 271
observations, the response level being around 81.87%.
5. Results
Split the sample into categories, as Fig. 1 shows, the
average size is increasing with category. There are
differences in the average size among categories
statistically signi?cant at 5% level, except for the case
of 4 5 star hotels with respect to 3 star hotels. This is
remarkable because medium and high-quality hotels are
predominant in the hotel activity. The dispersion of the
size (standard deviation) is especially large for 2 and 3
star hotels.
From Table 2, the governance and chain structure
distribution can be linked with category and size. The
7
ownership of hotel not af?liated to a parent company is
the most frequent in the sample (66.47%). The decreas-
ing proportion of hotels operating independently in the
market by category and size is statistically signi?cant
and similar to the characteristics portrayed by Jones
(1999). The increasing average size by categories (Fig. 1)
jointly with the decreasing proportion of independently
operated hotels by category and size (Table 2) show that
independently operated hotels are, in average, smaller
and of inferior category. One interesting data is that
hotels managed by their owners are the dominant
governance structure, remarkably more frequent in 1
star hotel. As category increases, the proportion of
establishments directly runs by the owners and the
proportion of leased property decrease, while the
proportion of establishments runs through management
contracts increases. By size intervals, the proportion of
establishments where ownership and management fall in
the same hands decreases for larger establishments,
while the use of management contracts expands. On the
contrary, the proportion of leased properties is higher in
smaller establishments.
5.1. Supplier-driven pattern
Innovation in the hospitality business implies the use
of technologies usually embodied in new machinery,
equipment or software (technological assets). Then, it is
important to ascertain to what extent the innovations
undertaken have required the development, purchase or
use of new machinery or technological equipment,
termed here ‘‘technological base of the introduced
innovations’’. Of the total 285 de?ned as ‘‘innovators’’,
272 (95.44%) have founded such innovation on a
technological base. Additionally, Table 3 displays the
way in which technology is introduced and the establish-
ments’ collaboration in the development of these
technological assets the hotels’ technological activities.
Almost 80% of the activities have consisted on the
purchase and installation, while internal R&D activities
is not signi?cant and only 6% is committed in joint
efforts basically suppliers collaboration. Additionally,
only 25% of interviewed companies make use of
external information sources to innovate. This is
indicative of a very low level of cooperation among
entities.
5.2. Innovation supporting process
Table 4 presents the technological assets incorpora-
tions in those functional areas, departments and
company services where technological innovations take
place.
Lower rates of innovation are for quality and
environmental quality management, although the
changes, when introduced, have been mostly radical. A
more innovative behavior is found in hardware
and computers facilities and kitchen and restaurant
equipment. ICT (Information and Communication
Fig. 1.
Table 2
Governance and chain structure by category and size
a
Governance and chain Not Chain Governance Total
Owners Management Leasing
Category 1
*
95.00 81.00 9.00 10.00 100
2
*
82.05 74.36 17.95 7 69 100
3
*
44.17 64.17 31.67 4 17 100
4
*
5
*
24.24 66.67 30.30 3 03 100
Size (rooms) p49 91.57 75.90 9.64 14.46 100
50 121 87.95 75.90 21.69 2.40 100
122 299 58.54 70.73 21.95 7.31 100
X300 27.71 65.06 32.53 2.40 100
Total 66.47 71.90 21.45 6.65 100
a
Numbers refer to the percentage of establishments in the sample.
8
Technologies) to manage external information has
experienced twice as much radical innovation as ICT
focused on internal information management in spite of
the high percentage that has introduced no changes. The
most incremental innovation is found in rooms facilities.
The most innovative establishments in all areas are
3 and 4 5 star hotels, while the innovative behavior
in 1 and 2 star hotels takes place in areas such as
computer facilities and hardware, especially with radical
innovations.
Out of the 331 surveyed hotels, 285 (86.10%) have
declared innovators and 46 (13.90%) do not. Innovation
is, therefore, a highly common phenomenon given our
de?nition, in the sense that at least one area has been
incrementally innovated. In terms of statistical signi?-
cance the percentage of 2 star innovative hotels
(87.18%) is higher than for 1 star hotels (68%); the
proportion of 3 star innovative hotels (97.50) is higher
than for 2 star hotels, and there are not signi?cant
differences between the innovation percentages corre-
sponding to 3 and 4 5 star hotels (96.97%). These
conclusions validate the results of the analysis by
categories of innovation in the different areas. Addi-
tionally, the innovators average size, 230.52 beds, is
statistically bigger than the non-innovators average size,
105.15 beds, at a 5% signi?cance level.
The innovative behavior (percentage of innovative
establishments versus non-innovative ones) by chain and
governance structure (Table 5) presents differences as
compared to the general behavior. Only four establish-
ments belong to a conglomerate and thus, the results are
not very representative of this ownership type.
The percentage of innovative establishments is some-
what lower in hotels operating independently and in
hotels managed by the owners. In hotel chains,
establishments managed by contract and in hotels run
in leased properties, this percentage is higher.
In the human capital skills updating, there are 55.44%
of the innovators that have adapted their human capital.
The average size of the hotels that have undergone these
adjustments, 301 beds, is signi?cantly larger than the
average size of the hotels where no adaptation has been
made, 141 beds. A 44.26% of the hotels sampled that
were not integrated in a hotel chain underwent adjust-
ments, whereas for hotels belonging to chains, this ?gure
increases up to 75.49%. As regards the way that human
Table 3
Hotel’s technological equipment activity
Technological equipment activity Abs. freq. % on total activities (
*
)ywith Abs. freq. %
Only purchased and installed 248 78.98 Suppliers 14 73.68
Modi?ed or adapted 44 14.01 Consultants 3 15.79
Developed by itself 3 0.96 Customers 2 10.53
Developed jointly withy(
*
) 19 6.05 Subtotal 19 100.00
Total 314 100.00
Table 4
Technological innovation degree by areas
a,b
Areas of technological innovation No change Radical innovation Incremental innovation Outsource/central
Quality management 73.72 14.50 8.76 3.02
Environmental quality management 80.66 10.27 6.65 2.42
Hardware and computer systems 32.33 11.78 51.65 4.23
ICT in external management 56.50 25.98 13.90 3.63
ICT in internal management 67.67 13.60 16.31 2.42
Kitchen equipment 38.07 2.11 59.21 0.60
Restaurant equipment 36.86 2.42 60.42 0.30
Rooms facilities 23.26 2.11 74.32 0.30
Maintenance and saving in supplies 54.68 18.43 25.98 0.91
Security systems 48.64 14.80 33.84 2.72
Laundry and cleaning 50.76 3.32 24.77 21.15
a
Figures are expressed in percentage of sample hotels.
b
Technological degree is de?ned as:
(a) No change: establishment does not carry out any innovation activity.
(b) Radical innovation: establishment introduces innovation at ?rst time.
(c) Incremental innovation: establishment introduces innovation to improve a previous innovation.
(d) Outsource/central: establishment outsources or use the central services of a parent company.
9
capital skills and capabilities have been updated, Table 6
shows a greater incidence of the internal training.
Referred to the importance of ?xed contracts in the
hotel industry, we observe in Table 7, panel A, that
contrary to expect small innovating ?rms use more those
contracts than large and innovating ?rms. When we split
the sample in the percentage of skill workers employed
in the hotels, panel B, results report interesting
differences between innovators and non-innovators. In
general, the behavior is expected innovating ?rms hire
more skill workers but with an exception the ?rst
category where the percentage of high-skill workers is
bigger for non-innovators due basically. It indicates
some relevant ?nding that non-innovating hotels with a
low category hire quali?ed employees in order to
capture some position in the market.
5.3. Market factors and competition
The currently board regime most contracted by the
average guest is the half board. The board regime
contracted by the average guest is related to innovative
behavior: more than half of non-innovating ?rms
(67.39%) the regime contracted is less than half board
while the customers of a 53.5% of innovators use a full
board or all-inclusive.
From the analyzed channels used to commercialize
the service (tour operator, travel agency, reservation
center and direct contract) booking with a tour operator
is the most common solution. Reservation centers are, in
quantitative terms, the least preferred option. By
categories, 1 and 2 star hotel guests book directly or
via tour operator, whereas tour operators are the
dominant to contract 3 and 4 5 star hotels. Especially
remarkable are the signi?cant number of hotels that
operate with only one tour operator (29%) and the fact
that the average number of tour operators statistically
increases with category. The channel used to commer-
cialized the service is also related to innovative behavior
since the innovators’ percentage increases with the tour
operators’ importance in booking: 71.21% do not use
tour operators, 84.93% make use of tour operators
among others channels and 91.67% only commercialize
with tour operators.
The average customer loyalty found is that 73.72%
of the establishments declared enjoying the stay of
Table 5
Innovation activity by chain and governace structure
a
Innovation activity Chain Governance Total ?rms
No Yes Owners Management Leasing
Innovators 81.36 95.50 82.77 95.77 90.91 285
Non innovators 18.64 4.50 17.23 4.23 9.09 46
Total 100.00 100.00 100.00 100.00 100.00 331
a
Percentage of establishments.
Table 6
Forms of human capital skills updating
a
Hotel speci?c characteristics and size Updating skills Updating human capital skills form
Internal training External training New workers Outsourcing Central/parent services
Category 1
*
25.00 10.29 14.71 2.94 0.00 0.00
2
*
51.47 35.29 16.18 2.94 4.48 4.48
3
*
66.67 47.01 31.62 16.38 11.11 3.42
4
*
5
*
87.50 78.13 28.13 18.75 21.88 9.38
Size p49 29.82 15.79 14.04 5.26 5.26 0.00
50 121 34.72 22.22 18.06 2.78 2.82 0.00
122 299 73.08 47.44 34.62 16.67 7.69 2.56
X300 75.64 62.82 24.36 14.29 15.38 10.26
Chain Yes 75.47 62.26 29.25 15.24 15.09 7.55
No 43.58 25.14 20.11 7.26 3.93 1.12
Governance Owners 52.79 37.56 23.86 4.59 6.63 2.54
Management 61.76 44.12 20.59 23.53 14.71 5.97
Leasing 60.00 35.00 30.00 20.00 0.00 5.00
Total 55.44 38.95 23.51 10.21 8.10 3.52 3.52
a
Percentage of establishments.
10
repetitive guests. Nevertheless, customer loyalty is not
empirically associated with innovation: innovators
customer loyalty hotels enjoying the stay of repetitive
guests equals the non-innovators.
As regards seasonality, the Balearic Islands are
characterized, as a destination, by a high specialization
in the ‘‘sun and sand’’, tourist segment, typical of the
summer season. In the year 2000, 58.3% of all tourists
arrived in the summer season (June through September),
29.6% in the mid season (April, May and October) and
12.1% in the low season (November through March)
(La Despesa Tur?´ stica, 2000). Consequently, half the
establishments are closed during the low season, while
only a ?fth part of the total hotels sampled are open all
year long. The intensity in the use of the hotel is related
to innovation as the innovators percentage increase by
this intensity: 60% opens during the high season, a
84.90% open during high and medium season and a
88.02% open all year.
Differentiation the strategic behavior related to its
closest competitors in terms of service provided or
service provision process and delivery reveals a highly
homogeneous average supply: 56.50% of undifferen-
tiated establishments, 12.08% of costs leadership
strategy and 38.37% of service differentiation strategy.
By categories, 1 and 2 star are the least differentiated
categories and half the establishments in the 3 and 4 5
star categories present no differentiation. Table 8
evidences the relationship between differentiation strat-
egy and innovative behavior:
Finally, we cross-tabulate innovation and a perfor-
mance proxy in order to capture some differences in the
feasibility of innovation activity and its capacity to
generate rents to ?rms. By assuming that a good
performance corresponds to higher levels of occupancy,
results report interesting ?gures. The occupancy rate is
largo for innovators (81%) than for non-innovators
(75%).
6. Discussion
The increasing average size by categories (Fig. 1) can
be associated with the greater organization complexities
and management dif?culties. Categories are associated
with more complex technical requirements required by
law, and size also means more organizations dif?culties.
In fact, Chung and Kalnins (2001) ?nd that large hotels
are typically more luxurious than small ones and argue
that the larger have more features because facility
enhancements require economies of scale.
The decreasing proportion of hotels operating in-
dependently in the market by category and size (Table 2)
may be explained on the basis of the management
complexity and budget constraint. Belonging to a hotel
chain or a business conglomerate allows to the
Table 7
Human capital by innovation activity and category
(A) Fixed versus temporary employees
a
Innovation activity Category
1
*
2
*
3
*
4
*
5
*
No 56.42 83.2 42.00 50.00
Yes 61.09 67.22 57.99 52.91
Total 59.74 69.88 57.81 52.79
(B) Employees education
b
Innovation activity Category Total
1
*
2
*
3
*
4
*
5
*
No U 11.95 2.70 0.00 10.00 8.57
S 11.47 41.40 0.00 40.00 23.18
P 76.58 55.90 0.00 50.00 68.25
Yes U 5.10 6.63 7.16 8.47 6.71
S 36.54 31.77 32.84 42.63 34.47
P 58.36 61.60 60.00 48.89 58.82
Total U 7.17 5.89 7.16 8.55 6.97
S 28.93 33.58 32.84 42.50 32.91
P 63.90 60.53 60.00 48.95 60.12
a
Average percentage of steady employees.
b
Average percentage of employees with university (U), secondary or professional (S) and primary education (P).
11
companies to accumulate management know-how
(Darr, Argote, & Epple, 1995), information ?ows and
the possibility to built intangible assets such as brand
image and prestige (Ingram, 1996; Ingram & Baum,
1997). Thus, belonging to a chain provides management
know-how and intangible assets that can be more
valuable for larger hotels, achieving economies of scale.
The ?ndings about governance decreasing proportion
of hotels run by the building owners and the manage-
ment contract increasing suggest that management
specialization increases with organizational dif?culties
(category, and hotel’s size). The low ratios of rented
properties may be a consequence of the risk associated
to renting contracts of assets managed to provide
accommodation services (the possibility of contract
breakage and the negotiation costs). This risk increases
with size and with hotel category given the more
complex and strict legal regulations to be met by upper
categories. The reduced use of renting and management
contracts in 4 5 star hotels may well be explained by this
argument.
Data about the way in which technology is introduced
and the hotel’s collaboration in the development of this
introduced technology bear witness that the hotel
industry is a sector dominated by suppliers (Pavitt,
1984), a non-intensively knowledge-based services
(Sundbo, 1997) that innovates introducing R&D embo-
died technology rather than undertaking internal R&D
activities (Sirilli & Evangelista, 1998). Also, it supports
the idea of dependence on suppliers product innovation
and the lack of inter-organizational links that would
stimulate technological innovation (Goes & Park, 1997;
Pennings & Harianto, 1992).
The technological assets incorporation by areas where
innovations take place (Table 4) is discussed by areas.
The lowest innovation rates for quality and environ-
mental quality management may be due to the relatively
recent development of the quality control methods
(Font, 2002). It may also be explained by companies
culture that does not favor the implementation of
techniques with immediate costs but long-term bene?ts,
seemingly unaware of the key importance of delivering a
quality service to achieve sustainable competitiveness,
especially in the actual international competition frame-
work unfeasibility of cost leadership strategies (Go,
Pine, & Ricky, 1994; Olsen & Connolly, 1999).
Furthermore, a ‘‘prisoner’s dilemma’’ may be arising:
the environment is a primary productive and competi-
tive resource for the whole tourist destination (Hassan,
2000) whose preservation implies individual costs. Still,
in some cases, the environmental quality management
improves the company’s ?nancial performance (A
´
lvarez
et al., 2001). The higher innovation rate in hardware and
computers facilities and kitchen and restaurant equip-
ment may be explained by the lack of direct intercourse
with the guest in these three operational areas. That is,
these areas can be automated with no loss of the
service’s personal component. Moreover, the providers
of this kind of equipment and technology offer new and
improved tools and machinery that enhance the
production and management ef?ciency, key factors to
the hotel business pro?tability (Sheldon, 1983). As
regards ICT, the double radical innovation to manage
external information than internal may be associated
with the earlier computerization of the internal manage-
ment and the later availability in the market of
computer and virtual webs (Wei, Ruys, van Hoof, &
Combrink, 2001). Nevertheless, the high percentage that
has introduced no changes re?ects the technological lag
with the use of information as a source of sustainable
competitive advantage (Buhalis, 1998; Camiso´ n, 2000).
The high incremental innovation in rooms re?ects the
importance of tangible assets directly used by the guest
in the service consumption (Saleh & Ryan, 1992). The
service perceived quality level captures these improve-
ments.
The ?ndings according to quality categories reveal 1
and 2 star hotels have a lag introducing ICT compared
to the average 3 and 4 5 star hotel. Furthermore,
attending to innovators rate, the known positive
relationship between size and category (Fig. 1) means
that the categories where innovation will be more
pro?table i.e., scale economies also observed in other
industries (Cohen & Levin, 1989) are 3 and 4 5 star
hotels. These categories are most able to differentiate the
product, and as such, they will be prompt to resort to
innovation. The lowest rate of innovation in 1 and 2 star
hotels can be interpreted as the result of a ‘‘follow up
Table 8
Differentiation strategy and innovation
a
Innovation activity Differentiation strategy
Costs leadership Service differentiation No Total
b
No 2.17 17.39 78.26 97.83
Yes 13.68 41.75 52.98 108.42
Total 12.08 38.37 56.50 106.95
a
Percentage of establishments.
b
Total exceeds 100 because some hotels declare their strategy in both terms.
12
behavior’’ that allow these establishments to stay in the
market.
The percentage of innovator hotels in the sense that at
least one area had been innovated, 86.10%, is compar-
able to the 75% of innovators services ?rms in
Germany, while the lower innovation rate, between
25% and 33%, found in other countries like Australia or
the Netherlands are explained by its narrow innovation
de?nition (Hipp, Tether, & Miles, 2000).
The higher innovator percentage among hotel chains
(Table 5) is consequent with the knowledge on the
innovative process ?owing easily among all the members
of the chain (Darr, Argote, & Epple, 1995). Moreover,
Tisdell (2000) ?nds that large hotel chains based in more
developed countries are continually involved in R&D
product development and training. Nevertheless, the
dynamic innovative behavior of the establishments
managed through a management contract and of those
run in a lease property is somehow counterintuitive. The
risk associated to the contract has a negative impact on
innovation incentives. However, the higher degree of
specialization of managing companies (with better
know-how and productivity) may explain a positive
in?uence on the innovation perception bene?ts. That is
to say that the innovation incentives derived from
specialization may outweigh the negative impact of the
highest risk associated to this kind of contracts.
The human capital skills and capabilities updating
(Table 6) con?rm the importance of changes in training
and human resources investment (Cohen & Levin, 1989;
Griliches, 1990; Pine, 1992) to successful innovation
(Olsen & Connolly, 1999; Sirilli & Evangelista, 1998).
The larger size of the hotels updating its human capital
skills and capabilities may suggest that scale economies
arise in this process. As regards the way that human
capital skills and capabilities have been updated, the
greater incidence of internal training could be as a
consequence of the speci?city of the required skills
specially if technological elements incorporated has to
be tailored to the characteristics of the hotel. The higher
proportion of internal training in chains may be
associated also to sharing ?xed costs with a larger
number of employees training. Indeed, chains are
characterized by a better training capacity as they are
in Tisdell (2000).
Market factors results like the positive relationship
between the board regime most contracted by the
average guest and the innovation activity seem to
con?rms its importance in the innovative behavior.
The ?ndings about the channels used to commercialize
the service may be related with following facts: (i)
Reservation centers are mainly used as a way to book
?ights (Beaver, 1992); (ii) Better off segments tend to
avoid non-monetary costs and the risks associated with
direct booking by the guest preferring to contract with a
tour operator; (iii) the aspects most controlled by the
tour operators e.g., characteristics of the accommoda-
tion company’s establishments and facilities; internal
operations and conditions of the accommodation like
security and safety inside the establishment; accommo-
dation, leisure and food and beverage services provided;
the environmental management and information and
communication activities (Medina-Mu´ n˜ oz, Medina-Mu´ -
n˜ oz, & Garc?´ a-Falco´ n, 2003) may be improved
through innovation; (iv) Customer loyalty depends only
partly on the degree of satisfaction derived from the
accommodation service, since other tourist services are
also consumed during the stay (Otto & Ritchie, 1996);
(v) The need to undertake a cost bene?t analysis on
output innovation, offering tourist products usually
consumed off season e.g., short breaks, business trips,
health tourism and heritage and nature-based tourism
(Carey & Gountas, 1997) and to introduce process
technical innovation that reduces the high ?xed costs.
The higher differentiation strategy among upper
categories may be related to a targeted guest that
appreciates quality and may be willing to pay higher
prices for an enhanced quality. Nevertheless, the
emphasis on quality as key competitive strategic
variable, a priority in the current market environment
(Gray, Matear, & Matheson, 2000) does not apply
innovating quality control techniques (Table 4).
Results about performance seem to suggest that
innovation activity may generate rents to ?rms. Any-
way, this innovation capacity is underestimated since
these results link innovation with performance for only
the same period while the capacity to generate rents may
be longer.
7. Conclusion
This paper presents a descriptive analysis of innova-
tion change in the hotels supplying tourist accommoda-
tion services in the Balearic Islands. The concept of
technological innovation has been de?ned drawing upon
the most relevant differential features of the lodging
sector, highlighting the differences derived from its
condition of service provider. According to Community
Innovation Survey II, based on the Oslo Manual
(OECD, 1997), when assessing innovation, the incor-
poration of technologies integrated in productive assets,
in components and in outsourced services must all be
taken into account. Furthermore, the sector follows a
suppliers-dominated pattern and, the assessment of
innovation may not be limited to the valuation of
R&D activities.
A speci?c designed questionnaire targeted to the
managers of a representative sample of the hotels in the
Balearic Islands shows some aspects of the hotel
industry organization. These issues refer to some facts
as: (i) the increasing average size of the hotels with
13
category together with a high variability. (ii) The
predominant ownership and management types are
independent ownership and management by the owners,
although their incidence decreases with category and
average size. (iii) The most frequent channel to
commercialize the service is via tour operators who
may have a potential in?uence on the perceived need to
innovate. Finally, (iv) the specialization in the sun and
sand product implies high seasonality that tends to
cause a low intensity in the use of assets.
The mentioned characteristics of the hotel industry
are able to determine the introduction of innovations.
Some remarks from this relationship are that (i) the
average size of the innovators is larger, with 3 and 4 5
star hotels being more innovative. (ii) The innovation
rate overcomes average for hotels that belong to a chain,
in hotels under management contract and for hotels
managed in leased properties. (iii) Almost 50% of
innovative companies adjust the human capital skills
and abilities. Hotels belonging to a chain are much more
inclined to introduce adjustments. Finally (iv), we
present as the patterns of incorporation of technological
assets and of technological equipment-related activities
show the hotel industry is a supplier-dominated sector
that innovates introducing R&D incorporated technol-
ogy rather than undertaking internal R&D activities.
These ?ndings inform of the levels and characteristics
of the innovation undertaken and about the variables it
is related to. Some of these results are new and
have been studied at descriptive and univariate level.
However, with regard to its potential spread and
signi?cance, these results are a ?rst stage, since they
point out a number of causal relationships that need to
be analyzed with multivariate techniques. This will be
the next step.
Acknowledgements
Authors want to acknowledge the support from the
Catedra Sol Melia. This research also bene?ts from the
BEC2001-2552-C03-03, Spanish Science Ministry re-
search project and the ?nancing of the Regional
Authority for Research, Technological Development
and Innovation of the Govern de les Illes Balears.
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Further reading
Instituto Nacional de Estad?´ stica. (1998 2000). Contabilidad Regional.
15
doc_999303715.pdf
The paper provides empirical evidence on technological activity in the Spanish service sector, in particular for the tourist accommodation in the Balearics.
Innovation activity in the hotel industry:
Evidence from Balearic Islands
Francina Or?la-Sintes
a
, Rafel Cresp?´ -Cladera
a,Ã
, Ester Mart?´ nez-Ros
b
a
Department of Business Economics, Universitat de les Illes Balears, Cra. Valldemossa, Km. 7,5 070122 Palma de Mallorca (Islas Baleares), Spain
b
Universidad Carlos III, Spain
Received 15 April 2003; accepted 25 May 2004
Abstract
The paper provides empirical evidence on technological activity in the Spanish service sector, in particular for the tourist
accommodation in the Balearics. The study wants to ful?l the lack of analyses in the ?eld of tourism. Commonly, the study of
innovation activity has been carried out from a manufacture perspective, for that reason the paper discusses the precise de?nition of
innovation in accommodation services. The data refer to a large representative sample of hotels in Balearic Islands (Spain),
providing a homogeneous set of information. The results show as higher categories hotels are more innovative than lower categories
hotels; an aggregated measure of technological innovation presents a rate over the average for hotels that belong to a chain, and that
for hotels under management contract. Half of innovative companies adjust the human capital skills and abilities. The hotel industry
is a supplier driven sector that innovates introducing R&D embodied technology rather than undertaking internal R&D activities.
r 2005 Elsevier Ltd. All rights reserved.
Keywords: Services innovation; Hotel industry; Balearic Islands
1. Introduction
The tourism sector is a high source of revenues for the
Spanish Economy and accounts for 12% of the GDP.
This is a result of some structural conditions of the
country that contribute to be the second European
destination and the third worldwide destination by
tourist arrivals, and the fourth by foreign currency
income. Arrivals and income have both increased year
after year in the late 90s and the beginning of the 21st
century. By accommodation type, 71% of the tourists
(34.1 million) stayed at hotels, while the remaining
stayed in rented properties and less usual types of
accommodation. As for the main national destinations,
the visitors place the archipelagos, the Balearic Islands
and the Canary Islands, in the top position. These are
two very similar attractive destinations sharing 43% of
the annual Spanish arrivals (Instituto de Estudios
Tur?´ sticos, 2001).
The sector is mainly in hands of private investors
(Marino, 2001). When comparing the innovation
activity of tourism with the ?gures of any manufacturing
sector, nevertheless, the relevance of services innovation
effort accounts only for a small proportion (in 1999, the
internal R&D expenditure was 3.8% over total services).
The statistical aggregated data available on R&D and
innovation expenditures shows for Spanish ?gures
signi?cantly lower values than the European average.
Even within Spain, there are huge differences among
regions. These differences can be explained partially for
the productive structure of the economy. The average
intensity in R&D investment in Spain for the year 2000
is 0.94% of the GDP. The value for a manufacturing
industrial region like the Basc Country is 1.20% of the
GDP and 0.25% for the Balearic Islands. The Innova
tion expenses ?gure in relation to the GDP is 1.9% for
Ã
Corresponding author. Tel.: +34 971 17 13 23;
fax: +34 971 17 23 89
E mail address: [email protected] (R. Cresp?´ Cladera).
1
the whole country, while for the Balearic Islands is
0.36% and 2.71% for the Basc Country. These patterns
stay on when comparing other intensive manufacturing
regions like Catalunya with the Canarias Islands, a
services-oriented economy.
These ?gures lead us to consider to what extent the
R&D and innovation investments are activities only for
manufacturing sectors. The usual measures of innova-
tion expenses seem to be designed for industrial
economies. The aggregated statistics
1
do not ?t for
services economies, with tourism activities as the
Balearic Islands. A more detailed and accurate measure
of innovation is needed for.
The issue is about to maintain the primacy and
competitiveness of the tourism activity through innova-
tion investments. The point of the paper is to investigate
how technology improvements are introduced in the
tourism activity companies in order to determine the
current state of the art in innovation activity.
The positive evolution of the industry proves it as one
of the most steady and promising sectors in the Spanish
and World economy and a key strategic activity.
Nevertheless, the tourism industry is a changing and
dynamic businesses (WTO, 1999) and it will only keep
its competitiveness adjusting to the new customers
demands, adequately reacting to competitors’ innova-
tions and taking advantage of the new technological
developments available in the market place (Camiso´ n,
2000; Huybers & Bennett, 2000; Okumus & Hemming-
ton, 1998). Given the lack of academic empirical
research on the topic, this paper intends to be a
contribution to the knowledge of the current situation
of innovation in the tourism industry.
The tourism industry includes a wide range of
activities such as restaurants, entertainment, transporta-
tion and accommodation. A rigorous and reliable
analysis of the technological change focuses on one of
these activities that include a homogeneous set of
companies with similar production functions inputs,
outputs and available technology and market environ-
ment. The homogeneity of the available data and the
relative importance within the industry, make advisable
to choose the hospitality business as the ?eld of the
study. The lodging sector is an outstanding tourist
activity since is a sine qua non in the provision of all the
other tourism services, being the basic requirement of
the tourist at the destination point.
The Balearic Islands, a leading tourist destination
(Aguilo Perez & Juaneda Sampol, 2000), is an adequate
scenario for studying the technological innovation in the
lodging activity. Most of the hotels in the Balearic
Islands are specialized in providing a standardized
tourist service called ‘‘sun and sea’’.
The paper draws on the innovation features in
tourism activities. The study presents empirical evidence
of hotel activity for the innovation process for a
representative set of hotels to understand the character-
istics and determinants of the managers innovation
decisions. Speci?cally we consider the relationship
between innovation propensity and hotels category,
governance settings, size, and a group of variables
capturing market conditions. The results are that the
higher category is linked with major innovation
intensity. Chain of hotels seem to provide a better
environment for innovation decisions as the professional
management contracts also seem to do. As known from
previous services research, tourism activities are suppli-
er-driven activities in terms of innovations decisions.
The paper is organized as follows: Section 2 intro-
duces the theoretical framework; Section 3 analyzes the
in?uencing elements of accommodation activity;
Section 4 includes methodological aspects of the
research. Finally, there are sections on results, and
discussion, with some concluding remarks.
2. Theoretical framework
Technological innovation is usually de?ned as the
conversion of technological knowledge into new pro-
ducts, new services or new processes introduced into the
market, as well as the signi?cant technological changes
in products, services and processes. In order to achieve
innovation, scienti?c knowledge is not enough: the
outcome of such knowledge must be applied in a
tradable way (Landau, 1991). Technological innovation
is also depicted as an improvement in a product or
service performance in terms of quality, cost, speed or
number of characteristics (Cohen & Levinthal, 1990).
These approaches, typical to the manufacturing indus-
try, refer to a product as the company output.
The technological innovation within the tourist
accommodation activity has to capture the particular
and differential features of the sector, characterized by
the nature of the service. According to Gallouj and
Winstein (1997) there are some aspects that characterize
service and have a great in?uence on the de?nition of
technological innovation. Those can be relevant to the
hotel activity.
First, there is a close interaction between production
and consumption (coterminality) that makes dif?cult
the typical product and process manufacturing
distinction. The coterminality implies that the in-
novation activities will focus on service individualiza-
tion, adapting the service provided to the customer
requirements. Moreover, the coterminality leads to a
1
For the Spanish case, the correlation coef?cient of R&D and
Innovations intensity of the 17 regions with the percentage of the
economy production of industrial goods is 0.71, and statistically
signi?cant.
2
higher degree of service heterogeneity the exchange
object differs from one case to another. Only
institutional changes, effectively implemented as a
business strategy, must be regarded as technological
innovations, and not those spontaneously generated
and derived from human interaction. This character-
istic ?ts on the hotel set of services provided to their
customers.
The second is the intangibility and growing informa-
tion contents in the provision of services. The
information and communication technologies play a
critical role in the innovation activities of tourist
accommodation businesses: to reach the potential
customers with information that helps to get a deeper
understanding of the service purchased; to reach the
largest share of the demand; to obtain and process
the information for a better business performance.
The role of human resources as a key competitive
factor. The importance of the human factor in service
activities is associated with the capability to establish
the quality and features of the service ?nally
provided. Training and education activities are
explicitly considered as one way to improve and
upgrade the technological capabilities of service
companies.
Changes in the organization architecture can be
linked to the introduction of new technologies, and
should be included as technological innovation
activities. These organizational issues are relevant in
the accommodation industry to ful?l the services
requirements
The Community Innovation Survey II
2
de?nition of
technological innovation, based on the Oslo Manual
(OECD, 1997), applies to the accommodation industry
in the sense that innovations refer to implemented new
or signi?cantly improved services or service production
or delivery methods. New or improved services are
regarded as innovation when their characteristics and
ways of use are either completely new or signi?cantly
improved qualitatively or in terms of performance and
technologies used.
It is generally accepted that new or signi?cantly
improved production methods require changes in the
equipment. Also, the technologies used in the imple-
mentation of new or signi?cantly improved services are
frequently associated with machinery, equipment and
software upgrading. These ideas are a starting point of
the Barras’ reverse product cycle framework for the
information technologies based services innovation.
Barras (1986) reverses the product cycle theory for the
services industries in the sense that the technological
innovation is ?rst introduced to increase the ef?ciency of
existing services; for a second step, the technological
innovation increases the quality of services; ?nally the
innovation drives new services or wholly transformed
traditional ones.
The in?uential Barras’ perspective focuses on the
information technologies related innovation in services
where information intensity is important. For those
services where interactivity seems to be more relevant,
like accommodation in tourism, the pattern differs.
Effectively, Sundbo and Gallouj (2000) assert that
Barras’ reverse product cycle is closest to a theory of
diffusion of technological innovations in the services
activity. They draw a set of typical innovations patterns
where accommodation activities would ?t in between the
called ‘‘artisanal pattern’’ and ‘‘network pattern’’ with a
supplier-driven process.
Technological innovation can be generated internally
and also outsourced and there is no empirical evidence
on the accommodation activity innovation pattern. In
this sense, the hypothesis would be in line with some
empirical ?ndings on technological innovation in the
service industry which show that, with the exception of
knowledge intensive based services like data processing
or telecommunications sectors, most companies inno-
vate through purchase of equipment, components and
materials from their suppliers (Barras, 1986; Sirilli &
Evangelista, 1998).
3. In?uencing elements of innovation in accommodation
activity
There are three main characteristics of the hotel
industry that make different from other service activ-
ities. First, there is the regular category classi?cation of
hotels. The ‘‘stars’’ categorization that goes from 1 to 5
determines the type, number and quality of services
provided. Second, it is relatively usual to have ?rms
specialized managing hotels; and many combinations
arise. There are hotels where owners manage themselves
the activity, owners that rent the hotels, or professional
executives running hotels through a management con-
tract; another combination is the hotel management
under a franchise contract. Third, there is remarkable
characteristic of the hotel industry: the organization
through chains of hotels, having a central of?ce which
has, depending on the company, different attributions
and several degrees of vertical integration.
This exploratory research suggests that these hotel
industry speci?c aspects can help to understand the
innovation propensity of the accommodation services
activity. Also, the untested Sundbo and Gallouj (2000)
supplier-driven hypothesis from the patterns they de?ne
is explored. In addition, there are some remarks of the
innovation supporting process that focus more on the
2
The Community Innovation Survey II was launched in 1997 for the
service industry and is able to differentiate services from manufactur
ing schemes.
3
literature on organizational innovations on services,
(Van der Aa & Elfring, 2002) where the organizational
aspects of the implementation of innovations become
relevant. There are also, some variables like ?rm size
that usually have been introduced as explanatory in the
propensity of manufacturing ?rms to innovate and
should also be considered in the services innovation.
Finally, we consider the market and competition
conditions as a potential incentive to innovate and care
for the ?rm competitiveness.
3.1. Hotel-speci?c characteristics: category, governance
and chain structure
The ownership structure and the degree of depen-
dence on other organizational structures in?uence the
framework of management innovation decisions. In this
sense, Davies and Downward (1996) and Jones (1999)
show the importance of chains and groups of hotels.
Some hotels are independently managed; others belong
to a hotel chain or to a more diversi?ed company
conglomerate. Ownership and management do not
necessarily happen together: (i) companies specialized
managing hotels rent the assets or (ii) hotel owners
contract the management abilities through management
or franchise contracts. As Sirilli and Evangelista’s (1998)
suggest, different organizational structures of the
production units may affect the innovative behavior.
The hotel category classi?cation indicates the level
and complexity of services provided. Their in?uence
over the innovation propensity is simultaneously an
endogenous and exogenous outcome. It is endogenous
in the sense that higher categories include more services,
equipments complexities and organizational aspects
to be innovated. On the other side, a category cross
comparison is able to explain some of the innovation
patterns.
3.2. Supplier driven
Some services (e.g., information and communications
technologies) are intensive in the use of new knowledge
to innovate. Pavitt (1984), and more recently Hjalager
(2002), characterize the hotel industry as a supplier-
dominated sector that innovates throughout the incor-
poration of technological elements developed by its
suppliers. Similarly, Sundbo (1997) in a study of
?nancial services, tourism and management consul-
tancy, concludes that these service innovations are not
science based.
The way which technology is introduced reveals the
innovation pattern. Hotels can develop new technology
internally or use elements developed by others. The
hotel’s collaboration in the development and implemen-
tation of these technological assets reveals the innova-
tion patterns.
3.3. Innovation supporting process
Some functional areas, departments and company
services can be easily identi?ed as spaces where
technological innovation takes place. Identifying tech-
nological incorporation implies the assignment of
innovations to the different business areas where
technology is likely to be transformed into competitive
advantage higher productive ef?ciency (costs reduc-
tion) or differentiation. Furthermore, as long as techno-
logical innovation leads to more rapid reaction to the
changing environment conditions and is integrated in an
overall company strategy, it can be considered a way to
improve competitiveness. This can be measured through
the changes in the services provided by hotels along time.
The intensity of the changes introduced and the impact
of the technological innovation have been usually de?ned
as incremental or radical according to Deward and
Dutton (1986) and Ettlie, Bridges and O’keefe (1984). A
radical innovation is the application of a solution for a
problem that had so far not been solved, or had been
solved in a signi?cantly inef?cient manner (such inef?-
ciency may not be evident until the new solution is
found). The management of the solution frequently
carries high costs, derived from the purchase or the
necessary adjustments in the company’s internal organi-
zation. However, the potential positive impact on
performance is usually high too. Incremental innovation
is de?ned as a progressive re?nement of previously used
solutions that allow an ef?ciency increase. This implies
lower costs, and the bene?ts accrued are accordingly
lower, regardless the importance of the continuous
incremental innovation within the overall development.
A typical example of the distinction between both
innovation styles is the use of internet technologies: when
they were ?rst introduced in company management, a
radical innovation occurred, whereas further extensions
of their use resulted in incremental innovation.
Nevertheless, the innovation process does not con-
clude with the incorporation of new or modi?ed
technological elements. A great deal of effort must be
put into their implementation (operation start up,
adjustments, etc.) and their ef?cient use, enabling the
organization to develop the skills required to success-
fully implement the innovations (Olsen & Connolly,
1999; Sirilli & Evangelista, 1998). In order to achieve an
optimal operation of the new or signi?cantly improved
services, some changes in the employee’s organization
and training must be done (Cohen & Levin, 1989;
Griliches, 1990). This study looks also on the training
and human resources investment, as a factor to under-
stand the propensity to innovate and the quality level
offered by a service company.
3
Pine (1992) shows
3
Moutinho et al. (1995); Saleh and Ryan (1992) provide support to
this hypothesis.
4
evidence that the transfer of technology in lodging
activities depends on the staff’s implication.
3.4. Firm (hotel) size
The size dependence of intensity of innovation among
innovative ?rms is idiosyncratic. Some studies suggest a
U-shaped curve, like Brouwer and Kleinknecht (1997)
when analyzing the size distribution of innovative
activity, comparing services and manufacturing.
The production unit size is relevant since the
economies of scale may explain some strategic
decisions made by companies. The in?uence of size on
a company’s innovative behavior has been outlined in
some studies like Cohen and Levin (1989). The in?uence
can empirically be positive (impact of scale economies
on innovation activities) or negative (the effect of
?exibility on the introduction of changes). The size of
the hotel is able to determine the success and pro?t-
ability of the implemented innovations.
An important issue in the hotel industry related to the
size effect is the combined requirement of both ?xed
assets as equipments and human resources in the service
delivery process. Therefore, the industry must face a
very high ?xed costs structure. This fact, together with
the typical seasonal demand of many coastal resorts,
makes it more pro?table for many companies to shut
down during the low and/or medium seasons than
staying operative. Moreover, the acceptable occupancy
break-even level is quite high, which constrains price
policy (Kotas, 1982; Tisdell, 2000). This phenomenon
increases the tour operators’ negotiation power. The
technological innovation may mitigate these dif?culties
by offering tourist products off season (Carey &
Gountas, 1997) short breaks, business trips, etc. or
increasing the use of the installed capacity.
3.5. Market factors and competition
The hotel activity targets to speci?c market segments
related to quality and categories levels, seasonality and
possibilities of product differentiation. The market
segment can be approached, according to Davies and
Downward (1996), through the type of board sold, the
channels used in commercializing the service and the
degree of customer loyalty. Innovation propensity can
be explored according to these features. The channels
used to commercialize the service can also be innovated
through the new possibilities offered by the information
and communication technologies (e.g., booking via the
Internet) or else improved use of these new technologies
(Sangster, 2001).
The hotels’ differentiation is the strategic behavior
related to its closest competitors, companies with similar
services in the same area. Using technological innova-
tions, as a way to differentiate services, can provide
tourist accommodation services in addition or higher
quality than those of their competitors. This differentia-
tion, according to Chung and Kalnins (2001) is
considered a major competitive variable, achievable
through innovation.
The information sources publicly available as data-
bases on R&D, patents registries and similar are useful
to quantify the innovation activities in the manufactur-
ing industry but helpless in our case. To identify
innovation activities within the lodging industry the
information arises from direct sources, from the same
facilities providing tourists accommodation services.
The unit of analysis is the hotel instead of the ?rm.
The hotel is the place where the service is provided,
where the managers have the incentives to innovate,
where the innovations can be measured without the
aggregation of hotels at ?rm level.
4. Data and methodology
The data base used for this study has been provided
by the Conselleria de Turisme (the Regional Tourism
Authority; Conselleria d’Economia). It consists in all the
hotels operating in the Balearic Islands listed in the
of?cial census, 1.586 units since tourist apartments and
those labeled as ‘‘Others’’ are excluded. Tourist apart-
ments are excluded due to differences in type of services
they provide and regulatory schemes. The category
labeled ‘‘Others’’ (e.g., rural tourism) represents a mere
0.5% of the total population and is heterogeneous in its
operations and the package of services offered. There-
fore, the variety of accommodation possibilities includes
guesthouses, hostels, apart-hotels and hotels.
In obtaining a representative sample of the popula-
tion, a pro?le has been outlined according to three
distinctive characteristics: geographical location (three
islands in the Balearic archipelago), category and hotel
size. The population was ?rst divided into homogenous
groups (layers) according to their distinctive character-
istics to undertake, then, a simple random sampling
process in every layer. Therefore, the 1.586 hotel
establishments and their beds were grouped in 12 layers,
resulting in the combination between the four categories
(1, 2, 3 and 4 5 star) with the three geographical
locations: Majorca, Minorca and Ibiza/Formentera.
Table 1 depicts the sample structure and shows the
relevance according to the population composition. The
number of hotels and their size have a similar propor-
tion as that in the population which indicates the sample
is a good representation of the Balearic hotel industry.
To obtain the information from the hotels, a
questionnaire was designed and answered by hotel’s
directors, or management representative they indicated,
through a direct interview in the hotel’s location. In
order to ?lter problems with some questions, a pilot
5
questionnaire was sent to the managers conforming a
total of nine hotels divided into the following categories:
1 to the 1 star in Menorca, 2 to the two stars (one in
Mallorca and one in Ibiza/Formentera), 3 to the three
stars (one in each isle group), 2 to the four stars (one in
Menorca and one in Ibiza/Formentera) and, ?nally, one
to the ?ve stars in Mallorca. From the information
provided by these pilot responses, the questionnaire
design consists of two parts. The ?rst one and more
important, is concerned to the ?rm’s characteristics and
technological activity with compulsory qualitative re-
sponses. The second part includes a set of optional
questions about the labor force as full or part time
contracts, education level; and some operational aspects
as average level of occupation of the hotel.
The ?nal questionnaire was answered by 331 man-
agers of the sample using peer responses of interviewers
which were trained to carry out the work.
The main analyzed variables have been constructed as
follows. Category measures the number of stars that
Tourist Administration catalogues a hotel according to
legal requirements and technical speci?cations. The legal
?ve categories have been aggregated in four jointing
those establishments with 4 and 5 stars. Establishments
in the top category (5 star) represent no more than 1%
of the overall capacity while their technical differences
with respect to 4 star establishments are hardly scarce.
Governance indicates who manages the hotel opera-
tions: the owner of the physical assets or another one
through a management or leasing contract. Those
establishments directly run by the owners i.e., where
property and management fall in the same hands are
labeled ‘‘Owners’’ as a management type. Those
establishments where a professional ?rm runs the
activity with a management contract with the hotel
owners are labeled ‘‘Management’’ as a management
type. Finally, the establishments monitored by who hires
the physical assets to the property to provide accom-
modation services are labeled ‘‘Leasing’’ as a manage-
ment type. Chain structure refers the way in which the
establishment operates in the market: independently or
belonging to a hotel chain or to a business conglomerate
more diversi?ed (together with companies not operating
in the lodging sector). First case is classi?ed as
independent or not-chain while the others are as chain.
Supplier-driven pattern is approached by the way
which technology is introduced purchase, lease, inter-
nal development, subcontract or use of elements
centrally owned by the parent company and the hotel’s
collaboration in the development of these technological
assets captures the hotel technological equipment
activity.
In Innovation Activity measurement, Innovators are
those establishments that in the two previous years have
introduced some changes in one or more key business
areas where technology is likely to be transformed into
competitive advantage higher productive ef?ciency or
differentiation (these areas are listed in Table 4).
Table 1
Sample and population distribution
a
Number and percentage of sample hotels Number and percentage of population hotels
Island Category Total Island Category Total
1
*
2
*
3
*
4
*
5
*
1
*
2
*
3
*
4
*
5
*
Majorca 73 55 96 26 250 Majorca 382 262 421 131 1196
22.05% 16.62% 29.00% 7.85% 75.53% 24.09% 16.52% 26.54% 8.26% 75.41%
Minorca 5 4 9 3 21 Minorca 27 19 37 17 100
1.51% 1.21% 2.72% 0.91% 6.34% 1.70% 1.21% 2.33% 1.07% 6.31%
Ibiza/Form. 22 19 15 4 60 Ibiza/Form. 104 94 76 16 290
6.65% 5.74% 4.53% 1.21% 18.13% 6.56% 5.39% 4.76% 1.01% 18.28%
Total 100 78 120 33 331 Total 513 375 534 164 1586
30.21% 23.56% 36.25% 9.97% 100.0% 32.35% 23.64% 33.67% 10.34% 100.0%
Number and percentage of sample beds Number and percentage of population beds
1
*
2
*
3
*
4
*
5
*
Total 1
*
2
*
3
*
4
*
5
*
Total
Majorca 3780 7257 30951 10500 52488 Majorca 15829 24344 131950 49810 221933
5.36% 10.29% 43.88% 14.89% 74.41% 5.27% 8.10% 43.90% 16.57% 73.84%
Minorca 206 717 4150 1154 6227 Minorca 1238 2294 13787 4704 22023
0.29% 1.02% 5.88% 1.64% 8.83% 0.41% 0.76% 4.59% 1.57% 7.33%
Ibiza/Form. 1215 3440 5710 1456 11821 Ibiza/Form. 5386 16348 29877 4984 56595
1.72% 4.88% 8.10% 2.06% 16.76% 1.79% 5.44% 9.94% 1.66% 18.83%
Total 5201 11414 40811 13110 70536 Total 22453 42986 175614 59498 300551
7.37% 16.18% 57.86% 18.59% 100.0% 7.47% 14.30% 58.43% 19.80% 100.0%
a
Number and percentage of the hotel establishments and capacities in the population and in the sample ranked by categories and by islands.
6
Innovation in the production process at this technical
level account for the introduction of internally devel-
oped innovations or innovations purchased from
suppliers. The managers interviewed were asked to rate
every activity area likely to incorporate innovation, on
the basis of the examples shown by the surveyors, in one
of the four following categories: (i) no change,
(ii) radical innovation, (iii) incremental innovation or
(iv) the activity concerned is being outsourced or
provided by company’s central services. In business
areas or activities outsourced or provided by the central
services of a parent company, the decision to innovate
will not only depend on the hotel. The answers of
categories (i) and (iv) are ranked as non-innovators.
Areas ?rst time innovated are rated as radical innova-
tion while improved, widening or renewal areas pre-
viously innovated are rated as incremental innovation.
The Human capital skills adjustment approximates the
effort put into successful innovation implementation.
The changes experienced in the human capital skills and
capabilities are captured with the changes in training
and human resources investment. That is, the innovators
were asked about the adaptation of skills and capabil-
ities of their human capital through internal training,
external training, contracting new workers, outsourcing
or using the central services. Additionally, the human
capital is approximated in two ways. One way refers to
?xed or temporary contracts. The second one refers to
the education level that has been classi?ed into three
levels: primary education, secondary or professional
education and university education. Given that re-
sponses about human capital skills were optional, these
only covered a 71.9% of hotels for ?xed or temporary
contracts, and around 61% for the education level.
The hotel Size accounts for the number of beds
installed in the hotel. Three reasons justify the use of the
number of beds in measuring the size of a hospitality
establishment. One is the data availability compared to
alternative measures as number of workers. The labor
contracts are commonly registered through intermediate
companies whose activity is not necessarily related to the
subject of this study. The second reason is that for the
study objectives, the size of the operating unit will allow
bypassing higher-order units, such as legal entities or
?rm level. Finally, it is a common practice in the
literature on hotel activities to use the number of beds or
the equivalent number of rooms as an indicator of the
hotel size (Baum & Mezias, 1992; Chung & Kalnins,
2001; Ferna´ ndez & Mar?´ n, 1998) and will allow making
future homogenous comparisons.
The variables that help to de?ne the Market segment
targeted by the establishment are the type of board sold,
the ways to contract the accommodation service and the
degree of customer loyalty. The type of board sold to the
average guest ?t into three categories: less than half
board (accommodation only or bed and breakfast), half
board (accommodation, breakfast and one meal a day)
and more than half board (full board or all-inclusive).
The channels used to commercialize the service may be
one or more from tour operator, travel agency,
reservation center and direct contract. Additionally,
the number of tour operators every establishment
operates with is a proxy of the negotiation power and
of the customer dispersion, with potential in?uence on
the perceived need to innovate. Establishments enjoying
the stay of repetitive average guests have calculated the
customer loyalty.
The total months a year one establishment operates
approximates the intensity in the use of the assets
Seasonality since for some hotels is more pro?table to
shut down during the low season than remains open.
Joint effects of the seasonal demand and the high ?xed
costs structure of the hotels (Kotas, 1982; Tisdell, 2000)
make it more pro?table for some hotels to shut down
during the low and/or med seasons than to stay open,
determining the intensity in the use of the hotel
The strategic behavior related to its closest competi-
tors in the sense of the strategy pursued by every hotel
may be differentiated in terms of service provided or
service provision process and delivery. Then, for
Differentiation analysis the hotels sampled have been
classi?ed attending to the different innovation impacts
approaching their strategies. Establishments with differ-
entiation strategy are those with objectives on customer
loyalty increment or warranty contracts, services differ-
entiation and quality improvements. Establishments
with costs leadership strategy are those identi?ed with
costs reduction, labor productivity or pro?tability
improvement.
Performance is measured following the average
occupancy rate due to the hotel managers reluctant to
provide details about their hotel’s ?nancial performance
while average occupancy rate is widely used among
hotels (Alvarez Gil, Burgos Jime´ nez, & Ce´ spedes
Lorente, 2001). Nevertheless, responses about average
occupancy rate were optional and available data are 271
observations, the response level being around 81.87%.
5. Results
Split the sample into categories, as Fig. 1 shows, the
average size is increasing with category. There are
differences in the average size among categories
statistically signi?cant at 5% level, except for the case
of 4 5 star hotels with respect to 3 star hotels. This is
remarkable because medium and high-quality hotels are
predominant in the hotel activity. The dispersion of the
size (standard deviation) is especially large for 2 and 3
star hotels.
From Table 2, the governance and chain structure
distribution can be linked with category and size. The
7
ownership of hotel not af?liated to a parent company is
the most frequent in the sample (66.47%). The decreas-
ing proportion of hotels operating independently in the
market by category and size is statistically signi?cant
and similar to the characteristics portrayed by Jones
(1999). The increasing average size by categories (Fig. 1)
jointly with the decreasing proportion of independently
operated hotels by category and size (Table 2) show that
independently operated hotels are, in average, smaller
and of inferior category. One interesting data is that
hotels managed by their owners are the dominant
governance structure, remarkably more frequent in 1
star hotel. As category increases, the proportion of
establishments directly runs by the owners and the
proportion of leased property decrease, while the
proportion of establishments runs through management
contracts increases. By size intervals, the proportion of
establishments where ownership and management fall in
the same hands decreases for larger establishments,
while the use of management contracts expands. On the
contrary, the proportion of leased properties is higher in
smaller establishments.
5.1. Supplier-driven pattern
Innovation in the hospitality business implies the use
of technologies usually embodied in new machinery,
equipment or software (technological assets). Then, it is
important to ascertain to what extent the innovations
undertaken have required the development, purchase or
use of new machinery or technological equipment,
termed here ‘‘technological base of the introduced
innovations’’. Of the total 285 de?ned as ‘‘innovators’’,
272 (95.44%) have founded such innovation on a
technological base. Additionally, Table 3 displays the
way in which technology is introduced and the establish-
ments’ collaboration in the development of these
technological assets the hotels’ technological activities.
Almost 80% of the activities have consisted on the
purchase and installation, while internal R&D activities
is not signi?cant and only 6% is committed in joint
efforts basically suppliers collaboration. Additionally,
only 25% of interviewed companies make use of
external information sources to innovate. This is
indicative of a very low level of cooperation among
entities.
5.2. Innovation supporting process
Table 4 presents the technological assets incorpora-
tions in those functional areas, departments and
company services where technological innovations take
place.
Lower rates of innovation are for quality and
environmental quality management, although the
changes, when introduced, have been mostly radical. A
more innovative behavior is found in hardware
and computers facilities and kitchen and restaurant
equipment. ICT (Information and Communication
Fig. 1.
Table 2
Governance and chain structure by category and size
a
Governance and chain Not Chain Governance Total
Owners Management Leasing
Category 1
*
95.00 81.00 9.00 10.00 100
2
*
82.05 74.36 17.95 7 69 100
3
*
44.17 64.17 31.67 4 17 100
4
*
5
*
24.24 66.67 30.30 3 03 100
Size (rooms) p49 91.57 75.90 9.64 14.46 100
50 121 87.95 75.90 21.69 2.40 100
122 299 58.54 70.73 21.95 7.31 100
X300 27.71 65.06 32.53 2.40 100
Total 66.47 71.90 21.45 6.65 100
a
Numbers refer to the percentage of establishments in the sample.
8
Technologies) to manage external information has
experienced twice as much radical innovation as ICT
focused on internal information management in spite of
the high percentage that has introduced no changes. The
most incremental innovation is found in rooms facilities.
The most innovative establishments in all areas are
3 and 4 5 star hotels, while the innovative behavior
in 1 and 2 star hotels takes place in areas such as
computer facilities and hardware, especially with radical
innovations.
Out of the 331 surveyed hotels, 285 (86.10%) have
declared innovators and 46 (13.90%) do not. Innovation
is, therefore, a highly common phenomenon given our
de?nition, in the sense that at least one area has been
incrementally innovated. In terms of statistical signi?-
cance the percentage of 2 star innovative hotels
(87.18%) is higher than for 1 star hotels (68%); the
proportion of 3 star innovative hotels (97.50) is higher
than for 2 star hotels, and there are not signi?cant
differences between the innovation percentages corre-
sponding to 3 and 4 5 star hotels (96.97%). These
conclusions validate the results of the analysis by
categories of innovation in the different areas. Addi-
tionally, the innovators average size, 230.52 beds, is
statistically bigger than the non-innovators average size,
105.15 beds, at a 5% signi?cance level.
The innovative behavior (percentage of innovative
establishments versus non-innovative ones) by chain and
governance structure (Table 5) presents differences as
compared to the general behavior. Only four establish-
ments belong to a conglomerate and thus, the results are
not very representative of this ownership type.
The percentage of innovative establishments is some-
what lower in hotels operating independently and in
hotels managed by the owners. In hotel chains,
establishments managed by contract and in hotels run
in leased properties, this percentage is higher.
In the human capital skills updating, there are 55.44%
of the innovators that have adapted their human capital.
The average size of the hotels that have undergone these
adjustments, 301 beds, is signi?cantly larger than the
average size of the hotels where no adaptation has been
made, 141 beds. A 44.26% of the hotels sampled that
were not integrated in a hotel chain underwent adjust-
ments, whereas for hotels belonging to chains, this ?gure
increases up to 75.49%. As regards the way that human
Table 3
Hotel’s technological equipment activity
Technological equipment activity Abs. freq. % on total activities (
*
)ywith Abs. freq. %
Only purchased and installed 248 78.98 Suppliers 14 73.68
Modi?ed or adapted 44 14.01 Consultants 3 15.79
Developed by itself 3 0.96 Customers 2 10.53
Developed jointly withy(
*
) 19 6.05 Subtotal 19 100.00
Total 314 100.00
Table 4
Technological innovation degree by areas
a,b
Areas of technological innovation No change Radical innovation Incremental innovation Outsource/central
Quality management 73.72 14.50 8.76 3.02
Environmental quality management 80.66 10.27 6.65 2.42
Hardware and computer systems 32.33 11.78 51.65 4.23
ICT in external management 56.50 25.98 13.90 3.63
ICT in internal management 67.67 13.60 16.31 2.42
Kitchen equipment 38.07 2.11 59.21 0.60
Restaurant equipment 36.86 2.42 60.42 0.30
Rooms facilities 23.26 2.11 74.32 0.30
Maintenance and saving in supplies 54.68 18.43 25.98 0.91
Security systems 48.64 14.80 33.84 2.72
Laundry and cleaning 50.76 3.32 24.77 21.15
a
Figures are expressed in percentage of sample hotels.
b
Technological degree is de?ned as:
(a) No change: establishment does not carry out any innovation activity.
(b) Radical innovation: establishment introduces innovation at ?rst time.
(c) Incremental innovation: establishment introduces innovation to improve a previous innovation.
(d) Outsource/central: establishment outsources or use the central services of a parent company.
9
capital skills and capabilities have been updated, Table 6
shows a greater incidence of the internal training.
Referred to the importance of ?xed contracts in the
hotel industry, we observe in Table 7, panel A, that
contrary to expect small innovating ?rms use more those
contracts than large and innovating ?rms. When we split
the sample in the percentage of skill workers employed
in the hotels, panel B, results report interesting
differences between innovators and non-innovators. In
general, the behavior is expected innovating ?rms hire
more skill workers but with an exception the ?rst
category where the percentage of high-skill workers is
bigger for non-innovators due basically. It indicates
some relevant ?nding that non-innovating hotels with a
low category hire quali?ed employees in order to
capture some position in the market.
5.3. Market factors and competition
The currently board regime most contracted by the
average guest is the half board. The board regime
contracted by the average guest is related to innovative
behavior: more than half of non-innovating ?rms
(67.39%) the regime contracted is less than half board
while the customers of a 53.5% of innovators use a full
board or all-inclusive.
From the analyzed channels used to commercialize
the service (tour operator, travel agency, reservation
center and direct contract) booking with a tour operator
is the most common solution. Reservation centers are, in
quantitative terms, the least preferred option. By
categories, 1 and 2 star hotel guests book directly or
via tour operator, whereas tour operators are the
dominant to contract 3 and 4 5 star hotels. Especially
remarkable are the signi?cant number of hotels that
operate with only one tour operator (29%) and the fact
that the average number of tour operators statistically
increases with category. The channel used to commer-
cialized the service is also related to innovative behavior
since the innovators’ percentage increases with the tour
operators’ importance in booking: 71.21% do not use
tour operators, 84.93% make use of tour operators
among others channels and 91.67% only commercialize
with tour operators.
The average customer loyalty found is that 73.72%
of the establishments declared enjoying the stay of
Table 5
Innovation activity by chain and governace structure
a
Innovation activity Chain Governance Total ?rms
No Yes Owners Management Leasing
Innovators 81.36 95.50 82.77 95.77 90.91 285
Non innovators 18.64 4.50 17.23 4.23 9.09 46
Total 100.00 100.00 100.00 100.00 100.00 331
a
Percentage of establishments.
Table 6
Forms of human capital skills updating
a
Hotel speci?c characteristics and size Updating skills Updating human capital skills form
Internal training External training New workers Outsourcing Central/parent services
Category 1
*
25.00 10.29 14.71 2.94 0.00 0.00
2
*
51.47 35.29 16.18 2.94 4.48 4.48
3
*
66.67 47.01 31.62 16.38 11.11 3.42
4
*
5
*
87.50 78.13 28.13 18.75 21.88 9.38
Size p49 29.82 15.79 14.04 5.26 5.26 0.00
50 121 34.72 22.22 18.06 2.78 2.82 0.00
122 299 73.08 47.44 34.62 16.67 7.69 2.56
X300 75.64 62.82 24.36 14.29 15.38 10.26
Chain Yes 75.47 62.26 29.25 15.24 15.09 7.55
No 43.58 25.14 20.11 7.26 3.93 1.12
Governance Owners 52.79 37.56 23.86 4.59 6.63 2.54
Management 61.76 44.12 20.59 23.53 14.71 5.97
Leasing 60.00 35.00 30.00 20.00 0.00 5.00
Total 55.44 38.95 23.51 10.21 8.10 3.52 3.52
a
Percentage of establishments.
10
repetitive guests. Nevertheless, customer loyalty is not
empirically associated with innovation: innovators
customer loyalty hotels enjoying the stay of repetitive
guests equals the non-innovators.
As regards seasonality, the Balearic Islands are
characterized, as a destination, by a high specialization
in the ‘‘sun and sand’’, tourist segment, typical of the
summer season. In the year 2000, 58.3% of all tourists
arrived in the summer season (June through September),
29.6% in the mid season (April, May and October) and
12.1% in the low season (November through March)
(La Despesa Tur?´ stica, 2000). Consequently, half the
establishments are closed during the low season, while
only a ?fth part of the total hotels sampled are open all
year long. The intensity in the use of the hotel is related
to innovation as the innovators percentage increase by
this intensity: 60% opens during the high season, a
84.90% open during high and medium season and a
88.02% open all year.
Differentiation the strategic behavior related to its
closest competitors in terms of service provided or
service provision process and delivery reveals a highly
homogeneous average supply: 56.50% of undifferen-
tiated establishments, 12.08% of costs leadership
strategy and 38.37% of service differentiation strategy.
By categories, 1 and 2 star are the least differentiated
categories and half the establishments in the 3 and 4 5
star categories present no differentiation. Table 8
evidences the relationship between differentiation strat-
egy and innovative behavior:
Finally, we cross-tabulate innovation and a perfor-
mance proxy in order to capture some differences in the
feasibility of innovation activity and its capacity to
generate rents to ?rms. By assuming that a good
performance corresponds to higher levels of occupancy,
results report interesting ?gures. The occupancy rate is
largo for innovators (81%) than for non-innovators
(75%).
6. Discussion
The increasing average size by categories (Fig. 1) can
be associated with the greater organization complexities
and management dif?culties. Categories are associated
with more complex technical requirements required by
law, and size also means more organizations dif?culties.
In fact, Chung and Kalnins (2001) ?nd that large hotels
are typically more luxurious than small ones and argue
that the larger have more features because facility
enhancements require economies of scale.
The decreasing proportion of hotels operating in-
dependently in the market by category and size (Table 2)
may be explained on the basis of the management
complexity and budget constraint. Belonging to a hotel
chain or a business conglomerate allows to the
Table 7
Human capital by innovation activity and category
(A) Fixed versus temporary employees
a
Innovation activity Category
1
*
2
*
3
*
4
*
5
*
No 56.42 83.2 42.00 50.00
Yes 61.09 67.22 57.99 52.91
Total 59.74 69.88 57.81 52.79
(B) Employees education
b
Innovation activity Category Total
1
*
2
*
3
*
4
*
5
*
No U 11.95 2.70 0.00 10.00 8.57
S 11.47 41.40 0.00 40.00 23.18
P 76.58 55.90 0.00 50.00 68.25
Yes U 5.10 6.63 7.16 8.47 6.71
S 36.54 31.77 32.84 42.63 34.47
P 58.36 61.60 60.00 48.89 58.82
Total U 7.17 5.89 7.16 8.55 6.97
S 28.93 33.58 32.84 42.50 32.91
P 63.90 60.53 60.00 48.95 60.12
a
Average percentage of steady employees.
b
Average percentage of employees with university (U), secondary or professional (S) and primary education (P).
11
companies to accumulate management know-how
(Darr, Argote, & Epple, 1995), information ?ows and
the possibility to built intangible assets such as brand
image and prestige (Ingram, 1996; Ingram & Baum,
1997). Thus, belonging to a chain provides management
know-how and intangible assets that can be more
valuable for larger hotels, achieving economies of scale.
The ?ndings about governance decreasing proportion
of hotels run by the building owners and the manage-
ment contract increasing suggest that management
specialization increases with organizational dif?culties
(category, and hotel’s size). The low ratios of rented
properties may be a consequence of the risk associated
to renting contracts of assets managed to provide
accommodation services (the possibility of contract
breakage and the negotiation costs). This risk increases
with size and with hotel category given the more
complex and strict legal regulations to be met by upper
categories. The reduced use of renting and management
contracts in 4 5 star hotels may well be explained by this
argument.
Data about the way in which technology is introduced
and the hotel’s collaboration in the development of this
introduced technology bear witness that the hotel
industry is a sector dominated by suppliers (Pavitt,
1984), a non-intensively knowledge-based services
(Sundbo, 1997) that innovates introducing R&D embo-
died technology rather than undertaking internal R&D
activities (Sirilli & Evangelista, 1998). Also, it supports
the idea of dependence on suppliers product innovation
and the lack of inter-organizational links that would
stimulate technological innovation (Goes & Park, 1997;
Pennings & Harianto, 1992).
The technological assets incorporation by areas where
innovations take place (Table 4) is discussed by areas.
The lowest innovation rates for quality and environ-
mental quality management may be due to the relatively
recent development of the quality control methods
(Font, 2002). It may also be explained by companies
culture that does not favor the implementation of
techniques with immediate costs but long-term bene?ts,
seemingly unaware of the key importance of delivering a
quality service to achieve sustainable competitiveness,
especially in the actual international competition frame-
work unfeasibility of cost leadership strategies (Go,
Pine, & Ricky, 1994; Olsen & Connolly, 1999).
Furthermore, a ‘‘prisoner’s dilemma’’ may be arising:
the environment is a primary productive and competi-
tive resource for the whole tourist destination (Hassan,
2000) whose preservation implies individual costs. Still,
in some cases, the environmental quality management
improves the company’s ?nancial performance (A
´
lvarez
et al., 2001). The higher innovation rate in hardware and
computers facilities and kitchen and restaurant equip-
ment may be explained by the lack of direct intercourse
with the guest in these three operational areas. That is,
these areas can be automated with no loss of the
service’s personal component. Moreover, the providers
of this kind of equipment and technology offer new and
improved tools and machinery that enhance the
production and management ef?ciency, key factors to
the hotel business pro?tability (Sheldon, 1983). As
regards ICT, the double radical innovation to manage
external information than internal may be associated
with the earlier computerization of the internal manage-
ment and the later availability in the market of
computer and virtual webs (Wei, Ruys, van Hoof, &
Combrink, 2001). Nevertheless, the high percentage that
has introduced no changes re?ects the technological lag
with the use of information as a source of sustainable
competitive advantage (Buhalis, 1998; Camiso´ n, 2000).
The high incremental innovation in rooms re?ects the
importance of tangible assets directly used by the guest
in the service consumption (Saleh & Ryan, 1992). The
service perceived quality level captures these improve-
ments.
The ?ndings according to quality categories reveal 1
and 2 star hotels have a lag introducing ICT compared
to the average 3 and 4 5 star hotel. Furthermore,
attending to innovators rate, the known positive
relationship between size and category (Fig. 1) means
that the categories where innovation will be more
pro?table i.e., scale economies also observed in other
industries (Cohen & Levin, 1989) are 3 and 4 5 star
hotels. These categories are most able to differentiate the
product, and as such, they will be prompt to resort to
innovation. The lowest rate of innovation in 1 and 2 star
hotels can be interpreted as the result of a ‘‘follow up
Table 8
Differentiation strategy and innovation
a
Innovation activity Differentiation strategy
Costs leadership Service differentiation No Total
b
No 2.17 17.39 78.26 97.83
Yes 13.68 41.75 52.98 108.42
Total 12.08 38.37 56.50 106.95
a
Percentage of establishments.
b
Total exceeds 100 because some hotels declare their strategy in both terms.
12
behavior’’ that allow these establishments to stay in the
market.
The percentage of innovator hotels in the sense that at
least one area had been innovated, 86.10%, is compar-
able to the 75% of innovators services ?rms in
Germany, while the lower innovation rate, between
25% and 33%, found in other countries like Australia or
the Netherlands are explained by its narrow innovation
de?nition (Hipp, Tether, & Miles, 2000).
The higher innovator percentage among hotel chains
(Table 5) is consequent with the knowledge on the
innovative process ?owing easily among all the members
of the chain (Darr, Argote, & Epple, 1995). Moreover,
Tisdell (2000) ?nds that large hotel chains based in more
developed countries are continually involved in R&D
product development and training. Nevertheless, the
dynamic innovative behavior of the establishments
managed through a management contract and of those
run in a lease property is somehow counterintuitive. The
risk associated to the contract has a negative impact on
innovation incentives. However, the higher degree of
specialization of managing companies (with better
know-how and productivity) may explain a positive
in?uence on the innovation perception bene?ts. That is
to say that the innovation incentives derived from
specialization may outweigh the negative impact of the
highest risk associated to this kind of contracts.
The human capital skills and capabilities updating
(Table 6) con?rm the importance of changes in training
and human resources investment (Cohen & Levin, 1989;
Griliches, 1990; Pine, 1992) to successful innovation
(Olsen & Connolly, 1999; Sirilli & Evangelista, 1998).
The larger size of the hotels updating its human capital
skills and capabilities may suggest that scale economies
arise in this process. As regards the way that human
capital skills and capabilities have been updated, the
greater incidence of internal training could be as a
consequence of the speci?city of the required skills
specially if technological elements incorporated has to
be tailored to the characteristics of the hotel. The higher
proportion of internal training in chains may be
associated also to sharing ?xed costs with a larger
number of employees training. Indeed, chains are
characterized by a better training capacity as they are
in Tisdell (2000).
Market factors results like the positive relationship
between the board regime most contracted by the
average guest and the innovation activity seem to
con?rms its importance in the innovative behavior.
The ?ndings about the channels used to commercialize
the service may be related with following facts: (i)
Reservation centers are mainly used as a way to book
?ights (Beaver, 1992); (ii) Better off segments tend to
avoid non-monetary costs and the risks associated with
direct booking by the guest preferring to contract with a
tour operator; (iii) the aspects most controlled by the
tour operators e.g., characteristics of the accommoda-
tion company’s establishments and facilities; internal
operations and conditions of the accommodation like
security and safety inside the establishment; accommo-
dation, leisure and food and beverage services provided;
the environmental management and information and
communication activities (Medina-Mu´ n˜ oz, Medina-Mu´ -
n˜ oz, & Garc?´ a-Falco´ n, 2003) may be improved
through innovation; (iv) Customer loyalty depends only
partly on the degree of satisfaction derived from the
accommodation service, since other tourist services are
also consumed during the stay (Otto & Ritchie, 1996);
(v) The need to undertake a cost bene?t analysis on
output innovation, offering tourist products usually
consumed off season e.g., short breaks, business trips,
health tourism and heritage and nature-based tourism
(Carey & Gountas, 1997) and to introduce process
technical innovation that reduces the high ?xed costs.
The higher differentiation strategy among upper
categories may be related to a targeted guest that
appreciates quality and may be willing to pay higher
prices for an enhanced quality. Nevertheless, the
emphasis on quality as key competitive strategic
variable, a priority in the current market environment
(Gray, Matear, & Matheson, 2000) does not apply
innovating quality control techniques (Table 4).
Results about performance seem to suggest that
innovation activity may generate rents to ?rms. Any-
way, this innovation capacity is underestimated since
these results link innovation with performance for only
the same period while the capacity to generate rents may
be longer.
7. Conclusion
This paper presents a descriptive analysis of innova-
tion change in the hotels supplying tourist accommoda-
tion services in the Balearic Islands. The concept of
technological innovation has been de?ned drawing upon
the most relevant differential features of the lodging
sector, highlighting the differences derived from its
condition of service provider. According to Community
Innovation Survey II, based on the Oslo Manual
(OECD, 1997), when assessing innovation, the incor-
poration of technologies integrated in productive assets,
in components and in outsourced services must all be
taken into account. Furthermore, the sector follows a
suppliers-dominated pattern and, the assessment of
innovation may not be limited to the valuation of
R&D activities.
A speci?c designed questionnaire targeted to the
managers of a representative sample of the hotels in the
Balearic Islands shows some aspects of the hotel
industry organization. These issues refer to some facts
as: (i) the increasing average size of the hotels with
13
category together with a high variability. (ii) The
predominant ownership and management types are
independent ownership and management by the owners,
although their incidence decreases with category and
average size. (iii) The most frequent channel to
commercialize the service is via tour operators who
may have a potential in?uence on the perceived need to
innovate. Finally, (iv) the specialization in the sun and
sand product implies high seasonality that tends to
cause a low intensity in the use of assets.
The mentioned characteristics of the hotel industry
are able to determine the introduction of innovations.
Some remarks from this relationship are that (i) the
average size of the innovators is larger, with 3 and 4 5
star hotels being more innovative. (ii) The innovation
rate overcomes average for hotels that belong to a chain,
in hotels under management contract and for hotels
managed in leased properties. (iii) Almost 50% of
innovative companies adjust the human capital skills
and abilities. Hotels belonging to a chain are much more
inclined to introduce adjustments. Finally (iv), we
present as the patterns of incorporation of technological
assets and of technological equipment-related activities
show the hotel industry is a supplier-dominated sector
that innovates introducing R&D incorporated technol-
ogy rather than undertaking internal R&D activities.
These ?ndings inform of the levels and characteristics
of the innovation undertaken and about the variables it
is related to. Some of these results are new and
have been studied at descriptive and univariate level.
However, with regard to its potential spread and
signi?cance, these results are a ?rst stage, since they
point out a number of causal relationships that need to
be analyzed with multivariate techniques. This will be
the next step.
Acknowledgements
Authors want to acknowledge the support from the
Catedra Sol Melia. This research also bene?ts from the
BEC2001-2552-C03-03, Spanish Science Ministry re-
search project and the ?nancing of the Regional
Authority for Research, Technological Development
and Innovation of the Govern de les Illes Balears.
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