MARKETING RESEARCH ASSIGNMENT

SYNOPSIS ON

“TO FORM CLUSTERS BASED ON REASONS FOR

CHOOSING HOTELS & SOCIO-DEMOGRAPHIC
ELEMENTS USING CLUSTER ANALYSIS”

SUBMITTED TO- SUBMITTED BY-

Dr. Purva Kansal Himanshu Handa
UBS, Panjab University Karan Bansal
Kuldeepak Sharma
Table of Contents
Introduction.................................................................................................................................................3
Literature Review.........................................................................................................................................4
Need & Scope of Study................................................................................................................................6
Research Methodology................................................................................................................................7
Method of Data Collection......................................................................................................................7
Research Objectives.................................................................................................................................7
Research Questions.................................................................................................................................7
Hypothesis...............................................................................................................................................7
Conceptual Model:..................................................................................................................................8
Population of the Research:.....................................................................................................................9
Measurement Scales and Instruments:...................................................................................................9
Data Analysis and hypothesis testing techniques..................................................................................10
 Introduction

The Indian tourism and hospitality industry has emerged as one of the key drivers of growth among the
services sector in India. India with over a billion people is experiencing significant growth in its tourism
and hospitality sector. Tourism and hospitality is also a potentially large employment generator besides
being a significant source of foreign exchange for the country. During 2018, FEEs from tourism increased
4.70 per cent* year-on-year to US$ 28.59 billion. FEEs during January 2019 were US$ 2.55 billion.
According to IBEF, July’19, International hotel chains are increasing their presence in the country, as it
will account for around 47 per cent share in the Tourism & Hospitality sector of India by 2020 & 50 per
cent by 2022. India offers geographical diversity, attractive beaches, 30 World Heritage Sites and 25 bio-
geographic-zones. During the period April 2000-March 2019, the hotel and tourism sector attracted
around US$ 12.35 billion of FDI, according to the data released by Department for Promotion of Industry
and Internal Trade (DPIIT). Under the Swadesh Darshan scheme, 13 thematic circuits in the country have
been selected for development of tourism infrastructure and allotted Rs 160.50 crore for development of
tourist circuits under Budget 2019-20. The road ahead for the tourism and hospitality industry in India is
very promising. In addition, few studies have explored to explain the importance level of various
attributes generating customer satisfaction , which might shed light on how hotel can satisfy their
customers and retain customers, as well as how to recruit customers as marketing channel for their
products or services via the WOM simultaneously. Thus, it is meaningful to investigate the attributes of
hotel customer satisfaction. This research aims to find those attributes and reduce them into clusters
based on similarities in choices as observed in the respondents.

The rest of this paper is organized as follows. A literature review on hotel customer satisfaction research
is presented in the next section. Section three describes an exhaustive research methodology which will
contain conceptual model, research questions and objectives, hypothesis of the study, research design,
measurement scales and instruments, sampling, data analysis and hypothesis testing techniques. It also
describes the collection o0f the data. A basic descriptive statistical analysis and interpretation of
collected data is presented in section four. Section five presents the conclusions in this research and
followed by the discussion on research limitations and future research directions.
 Literature Review
Within the hospitality industry, hotel competitive sets play a vital role in providing an accurate
depiction of a hotel’s historical success and predicting future performance. According to Chen, a
competitive set can be defined as “firms operating in the same industry, offering similar
products, and targeting similar customers” (Chen, 1996). Competition, however, has recently
become even more complex for hospitality companies due to the increasing use of the internet
as a convenient and reliable search and transaction channel.

In an increasingly dynamic, consumer-driven environment, it is critical for hotels to accurately

identify and immediately react to potential competitors (Webb & Zvi, 2017). The correct
identification of a competitive set is essential for establishing competitive advantage and
profitability, as shown below:

• Competitive Advantage- Competitive advantage becomes apparent when firms can offer lower
prices than competitors or provide unique benefits that offset the higher price. The primary
purpose of competitive analysis is to “evaluate a company’s position in a market and try to keep
ahead of competition through certain competitive advantages” (Li, 2014). The first step in
working towards competitive advantage is getting the competitive analysis right and knowing
who the competitors are. Once a competitive set is established, it is important to understand
the key forces of supply and demand within a competitive environment in order to attain and
sustain competitive advantage (Phillips, 1999).

• Profitability- When striving to increase profits, it is necessary to understand the competitive

environment in order to prepare for price changes. Kim and Canina reveal that competitive
pricing strategies affect both occupancy and RevPAR across market segments (Kim & Canina,
2011). In order to sustain long-term profitability, firms must respond strategically to competition
(Porter, 1996). Again, defining the competitive set is the first step in order to accomplish this
goal.

According to Kim and Canina, a hotel’s position is heavily determined by the way the consumer
views that property against its competition (Kim & Canina, 2009). The competitive set from a
guest’s perspective consists of the properties viewed as substitutes. This group of hotels that
are alternatives to the initial search is exactly where the target hotel’s true competition lies.
While hoteliers must be aware of their hotel’s position in terms of product tiers, consumer
perception should be a crucial consideration when determining a competitive set (Kim &
Canina, 2009).
One work that is similar to ours in terms of the research goal is a paper by Jun Li and Serguei
Netessine. They “not only construct the competition network from the customer perspective,
but also compare it against the competition network from the hotelier perspective to examine
the degree of network mismatch” (Li & Netessine, 2012). They focus on the notion that hotels
should see themselves in the eyes of potential consumers because ultimately hotels are
competing for customers. They argue that rather than asking themselves with whom they think
they are competing with, hotel executives should ask who their customers identify as their
competition. Instead of TripAdvisor and STR data, Li and Netessine analyze a similar research
question with clickstream data (Li & Netessine, 2012)
 Need & Scope of Study

The main purpose of this study is to segment the population of Indian consumers based on the
reasons of choosing a hotel as per the socio-demographic profile.

We have studied eight factors due to which a consumer choice is affected while choosing a hotel
and through this research we will be able to present the population of hotel customers in the
form of specific segments using the cluster analysis technique.

This study aims to provide a better understanding of the consumers’ perceptions about hotel
based on different pertinent variables that help hotel industry managers to establish more
effective marketing strategies. Using cluster analysis method, the proposed study promotes
marketers to analyze their hotel’s position in the market and modify the marketing-mix based
upon the current consumer preference.

With Indian marketing chains like OYO, Fan Hotels etc. becoming popular among the millennial,
it becomes all the more important to study the consumer behavior based on the various
identified factors of Location, Price, Hotel Amenities, Promotion & Discounts, Reviews &
Recommendation, Prior personal experiences, Age and Income. Such an analysis will help to get
effective insight that will help the hotel industry managers to formulate strategy and target their
intended set of customers in an efficient way.
Research Methodology
The purpose of this study is to define different segments of guests based on different factors
which represent the reasons for guest decision-making in choosing a hotel, as well as socio-
demographic data.

Method of Data Collection: Both Primary & Secondary Data will be used for research.

Research Objectives:

 Determine the reasons for choosing a hotel corresponding to various variables involved
like location of the hotel, price, facilities offered, Discounts offered, Reviews &
Recommendations and prior personal experience.

 Determine the socio-demographic characteristics of hotel guests

 Define segments (clusters) of guests based on the reasons for choosing a hotel

 Statistically test the given hypothesis

Research Questions:

The fundamental question addressed in this study is if it is possible to form segments (clusters)
based on reasons for choosing hotels and socio-demographic elements. The major questions
covered from this study will be as follows:

1) How a customer can be cluster based on the reasons for choosing hotels

2) How a customer can be clustered based on the socio-demographic elements

Hypothesis:

In accordance with the purpose, objectives and research question, we formed the following
hypothesis:

H1: “Hotel guests can be divided into different segments (clusters) with similar characteristics
based on the reasons (factors) for choosing a hotel and socio-demographic variables.”

H10: “Hotel guests cannot be divided into different segments (clusters) with similar
characteristics based on the reasons (factors) for choosing a hotel and socio-demographic
variables.”

In order to test the hypothesis, a quantitative study was conducted using the survey method.
Conceptual Model:
As per the literature review, we have chosen the following variables for our research that impact
consumer choice while choosing a hotel:

1) Location

2) Price

3) Hotel Amenities

4) Promotion & Discounts

5) Reviews & Recommendation

6) Prior personal experiences

7) Age

8) Income

Sampling:

Data collection will take place from hotels of different economic categorization in order to apply
the cluster analysis technique efficiently.

Sampling Technique Used: Stratified sampling

In order to analyze the consumers’ perception and how it drives the buying decisions we will
use stratified random sampling. In stratified random sampling, first, the population is divided
into sub-groups & then members from each sub-group are selected randomly. This technique is
adopted when the population is not highly homogeneous. Hence, firs the population is divided
into homogeneous sub-groups on the basis of similarities of the members. Then, members from
each sub-group are randomly selected. The purpose is to address the issue of less homogeneity
of the population and to make a true representative sample.

We will be collecting the data from diverse set of hotels across the tri-city that will provide
details about the different type of customers that choose hotels based on the various factors
listed in the conceptual framework.

Population of the Research:

The targeted population for this research study is divided on basis of income levels into 3
groups:

 Low Income group (<6 lpa)

 Middle Income group (6 to 15 lpa)
 High Income group(>15lpa)

Mode of data collection:

 Pen & paper based questionnaire

 Online Google form based questionnaire

Area Targeted:

The area of Tricity comprising of Chandigarh, Mohali & Panchkula will be targeted for
undergoing the data collection.

Measurement Scales and Instruments:

We will use questionnaire for the hotels specifically in the area of Chandigarh, Mohali &
Panchkula (Tricity).

However, for the purpose of this study, we used only two sets of questions in order to evaluate
the reasons for choosing a hotel and socio-demographic data.

Hotel guests will be approached to anonymously participate in the survey. The questionnaire
regarding segmentation contained questions about the reasons for choosing the hotel that were
measured with the multiple-choice questions: location, price, hotel facilities, promotion,
review/recommendations and prior personal experiences. These questions were developed by
Medlick (1996), other relevant literature and often exposed hotels competitive advantages as
these are the key factors which are relevant for marketing management. At the end, socio-
demographic data were collected (age and income).

Table 1. Measurement Scales & Type of Variable

Data Analysis and hypothesis testing techniques :

Data analysis and Hypothesis testing will be done using Cluster Analysis technique using SPSS.