estimated by 2022 the luxury hotel market will be valued at £20,442 million,
growing steadily at a Compound Annual Growth Rate of 4.0% from 2016 to 2022 (Allied
Market Research, 2017). With this present and projected revenue it is not hard
to see why the luxury hotel industry has taken up a large chunk of the
hospitality industry. According to data from STR, Best Stay 2017 Luxury Hotel Performance Overview published on
October 20th 2017, the luxury hotel segment saw increases in revenue
per available room (RevPAR) globally (up to 41.2%) except for only 2 locations
as of August 2017. It is a piece of this
extremely lucrative market that the Cotton House Hotel would like to claim as
its own and put their brand out there. But,
with the definition of luxury ever changing, as it no longer just entails
scarcity and expense that has limited availability; luxury now is defined based
on different individuals in different circumstances like demographics, time or
even the ability to rent or hire (InterContinental® Hotel, 2016). Hotels
have to ensure that the brand equity is strong ensuring their customers always
choose them above all others.
1.2 Purpose of Study
with this ever-changing definition of luxury in mind, that hotels need to cater
to their customer base as the services they provide cannot be trademarked. They
have to find way to maintain a steady customer stream. As these customers see it,
branding is the only way to separate one company’s products or services from
another. This is even more the case with hotels. The customer’s experience will
either add to or take away from their brand equity. These experiences broken
down into perceptions and attitudes are what represent the brand equity of the
hotel. Literatures tell us that building
strong brands are the chief aims of many if not all businesses, hotels included
(Aaker, 1996; Keller, 2013; O’Cass & Weerawardena, 2010). Keller 2003
states that Customer Based Brand Equity (CBBE) is the varying effect brand
knowledge has on customer response to the marketing of the brand. So a brand
must ensure that value is given to customers, in terms of what is heard, felt
or seen pertaining to the brand; so the CBBE level will be high. CBBE has four
elements brand awareness, perceived quality, brand association and brand
loyalty. The extent customers are prepared to pay for your brand compared to
others providing the same services is mirrored by their readiness to pay
‘premium prices’ (Lassar et al, 1995; Netemeyer et al., 2003 cited by Amegbe,
2016). Customers are less sensitive to high prices and are willing to pay more
if they think there is a distinct and special value in a brand that they can’t
get elsewhere mainly because of Brand Equity (Hoeffler and Keller, 2003; Keller
and Lehmann, 2003; Chaudhuri, 1995; Seitz et al., 2010 cited by Amegbe, 2016).
the ever increasing significance of the luxury sector in the hospitability
industry, Firat, et al. (2013) found that people often partake in conspicuous
spending to amaze others and show their position, fiscal power and societal
class; thus ensuring envy from others. This research aims to find out factors
affecting a customer choosing to pay premium prices to stay at The Cotton House
Hotel, though they have choices to stay numerous hotels and the factors of CBBE
(brand awareness, perceived quality, brand association and brand loyalty) that
influence Consumer Behaviour Intention. A methodical evaluation will be done to
evaluate and determine the relationship between these variables and if The
Cotton House Hotel is effectively managing its CBBE.
reading up on the luxury hotel industry, I wanted to find out why customers
have chosen to stay at these hotels with their premium prices when other
options are available. As I am working on Mustique, which has a luxury hotel of
its own – The Cotton House Hotel, I wanted to do a case study with the use of this
hotel to find this out.
1.3 Objectives of Study
In order to ascertain if customer based brand
equity impacts hotels, these objectives were put in place to, with the use of
The Cotton House Hotel as a case study:
identify the factors associated with Customer Based Brand Equity.
– To gain in-depth knowledge about and analyze the
correlation between consumer behavior intentions, the willingness to pay
premium prices and the brand equity factors.
– To evaluate how effectively The Cotton House
Hotel is managing its Customer Based Brand Equity and give recommendations on
if and how it can be improved.
1.4 Research Questions
This research was
conducted to answer the following questions:
1. What are the factors that contribute
to Customer Based Brand Equity?
2. What, if any, is the correlation
between customer behaviour intention, the willingness to pay premium prices and
the brand equity factors?
3. Is The Cotton House Hotel effectively
managing its Customer Based Brand equity?