final submission format instructions for proceedings of

International Conference on Entrepreneurship (IConEnt-2016) “How Innovation could Improve the Performance and Productivity in Entrepreneurship?” March 17, 2016. Universitas Pelita Harapan, Tangerang – Indonesia

SERVICE INNOVATION CAPABILITY IN THE HOTEL INDUSTRY Evo Sampetua Hariandja1), Zoel Hutabarat2) 1) 2)

Business School of Universitas Pelita Harapan, Tangerang, Indonesia 1) 2)

e-mail: [email protected] e-mail: [email protected]

Abstract The hotel business in Bandung, Indonesia has demonstrated noteworthy development and addition more noteworthy consideration in today's business surroundings. Hotel industry gets to be imperative when the government chose to further push the service part and to expand the tourism segment. The hotel business in West Java is confronting new difficulties because of outer and inside elements in a business domain that influence their operation. In rivalry, the hotel business ought to have the capacity to offer imaginative services to visitors through use their service innovation capability in giving excellent service. This study addresses to: (1) investigate how the hotel business in Bandung (3-star to 5-star) can survive and succeed in accomplishing their service excellence utilizing the service innovation capability, (2) test the conceptual framework that rose up out of the audit of writing that delineates how service innovation capability functions through the exercises in the hotel business in Bandung that will bolster in accomplishing service excellence and affirm in alternate hotels, (3) contribute on the learning of the hotel business in Bandung. This study creates proposition: (1) service innovation capability will bolster service excellence. The proposition created from the clear contextual investigation that included five hotels (3-star to 5-star) then tried in an informative contextual analysis included three hotels (3-star to 5-star). The aftereffects of the study demonstrate that the service innovation capability in the eight hotels demonstrate a few similitudes in all exercises of sensing, seizing, and transforming. Keywords: service innovation capability, service excellence, hotel industry

1. Introduction Bandung is the greatest city and the capital of the West Java area. The city is found 140 km southeast of Jakarta, and is the third biggest city in Indonesia after Jakarta and Surabaya. The city is topographically situated in the focal point of West Java territory. Accordingly, Bandung has a key worth to the encompassing zones. Bandung is an exceptionally fascinating destination for culinary, shopping, spa, golf, etc. Most activity from Malaysia and Singapore came to 40% (Kompas, 2014). As a weekend destination for neighborhood visitors, Bandung is likewise an alluring spot for outside travelers who require an inn to sit tight. It affects the development of the inn business. The travelers went by Bandung appeared in Table 1 underneath. There is an expanding pattern over the period

2010-2011, a lessening in 2012 then expanded again in 2013. Table 1. Foreign & Domestic Tourist to Bandung Year 2009 2010 2011 2012 2013

Foreign 168,712 180,603 194,062 158,848 170,982

Domestic 2,928,157 3,024,666 3,882,010 3,354,857 3,726,447

Total 3,096,869 3,205,269 4,070,072 3,513,705 3,897,429

Occupancy Rate (%) 62 61 67 70 66

Source: Bandung Culture and Tourism Department, 2014

At present, keeping in mind the end goal to survive, hotels in Bandung performed with a constrained promotion to adjust to quickly evolving market, do not have a system or worldwide co-operation specifically neighborhood hotels, and restricted service innovation. In rivalry, the hotel business ought to have the capacity to offer inventive services to visitors through 247


use their service innovation capabilities and do the best possible marketing system as per its market section in a dynamic market through using element marketing capabilities in giving fabulous service. To make due in the business rivalry and qualify the operational, the hotel inhabitance rate ought to be in any event of 70%. The inhabitance rate of hotel is the estimation of accomplishment in pulling in guests to a specific hotel which the quantity of rooms sold separated by number of rooms accessible. From the above conditions, brings up the issues of how they improve in serving their customers and what can be gained from their innovation capabilities. The hotel business in Bandung needs to use their capabilities to make new esteem to customers through service innovation and convey esteem. This study locations to: (1) investigate how the hotel business in Bandung (3-star to 5-star) can survive and succeed in accomplishing their service incredibleness utilizing the capabilities of the service innovation, (2) test the theoretical structure that rose up out of the audit of writing that represents how service innovation capability functions through the exercises in the hotel business in Bandung that will bolster in accomplishing service excellence and affirm in alternate hotels. The applied structure serves as a device for hotels in Bandung to recognize their service innovation capability and decide the crevices between the present state and the sought condition of service innovation. In this manner, this structure helps the hotel business in Bandung to be more versatile to market changes and urge them to be more imaginative in accomplishing service excellence for their customers. 2. Literature review 2.1. Service Innovation Capability

Service sector has ruled the world's economy. In many nations, benefits these days help more financial qualities than horticulture, raw materials and manufacturing all together. Service economies' overwhelming position is clearer in developed countries. Up to seventy five percent of the riches and 85% of work are created by services (Tidd and Hull, 2003), and most new occupation development originates from services. The importance of service has been perceived by enterprises, institutes, and governments, and related research is progressing. Inside different angles and orders of Service Science, service innovation along these lines turns into one focal part because of its basic part. Since Goods-Dominant Logic has been standard rationale for quite a while, the extent that innovation is concerned, the experience from manufacturing will be reminded to most corporations and customers firstly. On the other hand, there are fundamental qualifications between service innovation and manufacturing or high-tech innovation. With the movement from Goods-Dominant Logic to Service-Dominant Logic, the innovation concept and process require likewise move from conventional viewpoint to another services point of view. As recommended by Edvardsson (2005), “service is a perspective on value creation rather than a category of market offerings. The focus is on value through the lens of the customer, and co-creation of value with customers is key and the interactive, process, experiential, and relational nature form the basis for characterizing service”. Thus, client focused and process thought can likewise be seen in one of the meanings from TEKES, a Finland's research Agency. “Service innovation is a new or significantly improved service concept that is taken into practice”. It could be for instance another client collaboration channel, a dissemination 248


framework or an innovative idea or a combo of them. A service innovation dependably incorporates replicable components that might be recognized and efficiently recreated in different cases or situations. The replicable component could be the services result or the services handle in that capacity or a piece of them. A service innovation benefits both the service producer and customers and it enhances its developer’s competitive edge. Services are the principle products gave by the hotel. Canina et al. (2005) has expressed that the intensity of labor, immediate consumption, and an enjoyable lodging experience are a few qualities that are stressed by the hotel. With these uncommon qualities, the hotel industry is presently stood up to by the pressures and challenges in giving better service than customers. Particularly for international tourists hotel, traveler markets globalization has expanded the trouble for the hotel management ought to give a positive customer experience and straightforwardly to customers of diverse cultures (Tang et al., 2013). O'cass and Sok (2013) expressed that predominant value for customers made through service innovation. With a specific end goal to make the best customer value and maintain competitive advantage, the hotel must constantly create new services to meet customer’s desires and necessities. Service innovation ought to be connected to give significant services to customers higher than their prices. Enhanced nature of services and products, expand customer value services and expense decrease of services, is possible by the hotel through service innovation. Pine and Gilmore (2011) has expressed that the experience decides how customer value is made. The agreeable convenience and addition visitor experience is a huge traveler hotel customer’s needs. Accordingly, making a practical and

recreational value to live up to customer’ needs is the center of global traveler lodgings. Procurement of amusement services (ie. recreational offices and a voyage through the encompassing attractions), offers convenience and feasting services is vital to the formation of customer value. To please clients and meet the utilitarian prerequisites, the hotel must use imaginative ways and incorporate existing services. According to O'cass and Sok (2013), customer value gave by the service organization is emphatically impacted by service innovation. The development of new service not just gives clients an interesting customer experience and excellent core value (Moller et al. 2008; O'cass and Sok 2013; Paswan et al. 2009), additionally permits hotels to separate themselves from contenders and improves their service quality and notoriety (Ottenbacher and Gnoth, 2005). Consequently, to keep up a heading position in the business, hotels must have the capacity to ceaselessly overhaul their services to stay in front of contenders (Agarwal et al. 2003). For service innovation capability, this study adopted from Pöppelbuß et al. (2011), that contains sensing, seizing, and transforming (Teece et al., 1997). Sensing refers to the distinguishing proof of the need to change service operations or opportunities for service innovation, seizing alludes to investigating and selecting plausible open doors for change, and transforming is concerned with the execution of changed (or new) benefits in the organization. Adjust to this observation, the models of new service development, service engineering, service innovation, or services design might be seen as particular portrayals of the element ability service innovation. Sensing refers to the services of distinctive knowledge and learning that need to be deciphered into heading issues and 249


unmet services needs before a more centered conceptualization of new services results follows in the seizing stage (Den Hertog et al., 2010). Sensing principally incorporate three key exercises: 1) checking, 2) assessment, and 3) enumerating. Examining may require the consistent dialog with clients, faculty, and innovation suppliers. Assessing alludes to the capacity of an organization to immediately screen a specific open door or requirement for administration development as to, for example, the issue circumstance overall (Chai, 2005), business targets (Bitran & Pedrosa, 1998; Bernstein & Singh, 2006) or general attainability (Majaro, 1988). The enumerating movement alludes to decisively characterizing the issue and explaining side conditions (e.g., innovation, enactment and social angles) that need to be considered inside the advancement of conceivable results, e.g., by method for new service process (Basadur et al., 2000) or administration ideas (Goldstein, 2002). Seizing recognize three principle exercises: 1) result improvement, 2) result assessment and determination, and 3) result enumerating. The result improvement alludes to the action of administration association's capability to produce distinctive potential results and therefore to distinguish conceivable ways it could take in upgrading their administration offerings as indicated by the long ago defined issue, for example, administration methodology plan, idea advancement, issues determination, building option results, or thought refinement. The improvement of new results additionally comprise in inventively modifying existing administrations into creative bundles. The movement of result assessment and determination that take into account educated choice making and hence for selecting the most sufficient answer for a particular issue. The result specifying capability includes the last determination of

the to-be procedures, strategies, offices, data frameworks, members, and practices that need to be placed set up for the new service. Here, the improvement of an extensive undertaking arrangement for the execution of the chose result needs to be advanced and usage venture groups and in addition control components must be set up. Transformation isolated into three exercises of unfreezing, changing, and refreezing (Lewin & Cartwright, 1951). Unfreezing alludes to separating existing work structures which is a vital viewpoint when executing new service methods and interfaces to the client. The changing action alludes to the genuine execution of the new service. At last, the solidifying action identifies with all errands important to cultivate disguise of the recently executed service process, for example, persistent inspiration (Mento et al., 2002) and trainings (Scheuing & Johnson, 1989). Moreover, the utilization of data frameworks (in light of the fact that product meets expectations in a characterized manner) and the utilization of correspondence and advancement devices (through which clients embrace institutionalized desires) can help solidifying another administration. The objective of this movement is to attain a routine; this implies that the staff receives the new service offering and changes the unequivocal information about what the new service is similar to and how to convey it into inferred learning (Stevens & Dimitriadis, 2005). 2.2. Service Excellence Organizations are increasingly providing service excellence as an integral part of their superior service to win the customers’ hearts and stay competitive in the market (Berry & Parasuraman, 1992). Service excellence, which is viewed as being “easy to do business with” (Johnston, 2004), delivers promises and is as an expression of very 250


high satisfaction (Oliver, 1997). This suggests that the service organization does not only need to satisfy the customers but has to delight them as well (Aziz & Wahiddin, 2010). Service excellence in this study is based on service process and delivery, service-scape, customer participation, and customer responsiveness. Flexibility and customization in service process and delivery are highly appreciated by customers (Bettencourt & Gwinner, 1996). Well planned and designed service delivery may directly contribute to the whole service excellence. Service-scape is related to the style and appearance of the physical atmosphere and environment in a service organization that has some impacts on customers’ experience (Lovelock et al., 2005). Dube & Renaghan (2000) also confirmed the importance of architecture and design as key value drivers that influence the customers’ perceptions of service excellence. Customers’ participation increasingly play active and even leading roles in service production and delivery processes (Xue & Harker, 2002) in most of the service organizations. The nature of service characteristics that is highly simultaneous requires customers to be part of the service transaction or as a co-producer. The customer’s engagement in service as a co-producer is important in the cost reduction and service quality improvement (Heskett et al., 1997). Thus, the degree of service success may depend very much on the customer’s participation to make the service happens. In other words, in some services, the customer is acting as a partial employee of the organization.

orientation with innovative behaviors and processes (Hou, 2008). Meeting client needs and providing innovative products are essential to deliver service excellence (Eisawi et al., 2012). Such activities as being able to identify the needs; to change, to explore, to select feasible opportunities; and to implement the new services in the organization are supporting factors in the hotel’s service excellence. This study proposes the service innovation capabilities are determining factors for service excellence. Summary of the condition compiled in Table 2.

2.3. Service Innovation Capability and Service Excellence Service innovation capability refers to a firm’s ability to develop new services through aligning strategic innovative

Figure 1. Conceptual Framework

Table 2. Position of the research Service Innovation Capability  Service Excellence Hou (2008) Eisawi et al. This research (2012) Conceptual Review of Conceptual model with innovation within model with hypothesis using the UK banking propositions SIC market sector using  SE using orientation and innovation and sensing, seizing, dynamic service and transforming. capability. excellence Using case study (service delivery) 8 hotels 3-Star to 5-star in Bandung region.

Considering the Table 2 above, this research proposes a conceptual framework that involving the service innovation capabilities in achieving service excellence as shown in Figure 1 below. This study identify and explore specific activities using the case study in the hotel industry context. Service Innovation Capability (SIC):

-Sensing

Service Excellence (SE)

-Seizing -Transforming

The conceptual framework developed in this study is based on research literature and the existence of the void can be filled to make the contribution of the academic sides. 251


This conceptual framework is tentative and flexible to be developed in further studies. This must be done to extend the findings in subsequent research. This study is carried out using the methodology described in the next session. 3. Methodology The philosophical assumptions underlying this research come from the interpretive tradition. This implies a subjective epistemology and the ontological belief that reality is socially constructed. The research strategy adopted was to conduct multiple case studies in eight hotels in two stages. The fieldwork was conducted at the sites during the period from October 2014 to August 2015 and a steady correspondence has been maintained with the different informants at the sites. The main data collection techniques used in this research study were semi-structured interviews, observation, and documentation analysis. To explore and test the propositions, this study gathered data from 5 hotels in descriptive study (stage 1). To test the propositions, this study re-gathered data from 3 current hotels in stage 1 in order to confirm the activities in service innovation capabilities and service excellence and add the 3 new hotels as a comparison. These data were collected as part of a wider study of hotels. Case study methodology was used in this study (Yin, 2003), as it allows the questions what, why, and how to be answered. Cases were selected from hotels based on a literal replication logic, that is, cases were chosen that were expected to lead to similar results (Yin 2003). The replication logic requirement of the multiple-case design provides suggestions to determining the number of cases. The initial decision regarding a satisfactory number of cases is between six to eight for a theoretical replication and three to four for a literal replication (Yin, 1994, pp. 46, 50). For a

theoretical replication, that prescriptive number of cases is considered satisfactory when "rival theories are grossly different," however, the number needs to be increased when "rivals have subtle difference," (Yin, 1994, pp. 50). The final decision about the number of cases is usually a judgmental decision made by the researcher and is positively influenced by the indifference between rival theories, the high degree of certainty the researcher wishes to attain and the differences between the cases (Yin, 1994, pp. 50). A purposive sampling strategy was used to select cases that offered the best opportunities to build theory (Miles & Huberman, 1994). As defined by Kerlinger (1986), purposive sampling is another non-probability based sampling also known as judgmental, selective or subjective sampling. Non-probability sampling focuses on sampling techniques where the units that are investigated are based on the judgment of the researcher and will be based on the researcher's practical knowledge of the research area, the available literature and evidence from the study itself. The main goal of purposive sampling is to focus on particular characteristics of a population that are of interest, which will best enable the researchers to answer the research questions. Purposive sample sizes are often determined on the basis of theoretical saturation (the point in data collection when new data no longer bring additional insights to the research questions). Purposive sampling is therefore most successful when data review and analysis are done in conjunction with data collection. Rather, it is a choice, the purpose of which varies depending on the type of purposing sampling technique that is used. For example, inhomogeneous sampling, units are selected based on their having similar characteristics because such characteristics are of particular interested to the researcher. 252


Our main criteria for case selection based on: 1) Hotel star classification from 3-star to 5-star with independent or chain network, 2) Hotel star classification from 1-star to 2-star not included in this study. Based on the preliminary interview, activities for service innovation capabilities in 1-star and 2-star hotel are rarely done and not have procedures and processes are well documented, 3) The key individuals have had considerable experience in the hotel business with a variety of work that have ever dealt with, 4) The hotel located in Bandung region and surroundings areas. In this study, we have sent a participation letter to 17 hotels but only 5 hotels that provide answers and are willing to be interviewed. This study does not involve consumer of hotels directly due to the time limitation. Comments and reviews from guests who have stayed from Trip Advisor and Agoda will be taken as a basis for data triangulation. From the hotels that have contacted, five hotels agreed to participate in the study stage 1 and six hotels in stage 2. All of the hotels in our final list were tested with an expert to confirm that they were fulfilled as 3 to 5 star hotel classification. The names of the hotel which is the object of this study changed to protect confidentiality between the hotel and researchers. The study descriptions of the chosen hotels are provided in Tables 3. Table 3. Description of case in stage 1 and stage 2 Name

SCDH SRH GFH GPH APH SCDH SRH GPH DBH GRH PPH

Star Network Category STAGE-1 3 Local 4 Independent 4 Local 5 Local 4 International STAGE-2 3 Local 4 Independent 5 Local 3 Independent 4 Independent 5 Local

Founded

2009 1930 2009 1920 2009 2009 1930 1920 2013 1990 2011

In order to guide the execution of the case study research, a research protocol was created before data collection started. The research protocol uses the English but overall the answers from informants in Indonesian. The content of the protocol includes the following aspects: -General questions about the hotel; -Formation phase: about the current hotel industry environment, marketing and service innovation strategy; -Operational phase: about the activities of service innovation capability (SIC); -Evaluation phase: about service excellence (SE) compare to direct competitors. The primary data collection was interviews with managers involved in the hotels studied. The data were collected via semi-structured interviews using a research protocol (consist of competition, service innovation capabilities, and service excellence) during October 2014 and February 2015 for stage 1 and during March 2015 and August 2015 for stage 2. Overall, 5 interviews were conducted typically lasting 1 to 1.5 hours each in stage 1 and six interviews in stage 2. Interviewees came from a variety of positions in the organizations, and their job titles included corporate operational manager, general manager, sales director and business development director. In the interviews, the propositions were not addressed directly in order to prevent leading questions. It is common in case research to use triangulation to extend and validate the data collection through the use of multiple sources of evidence (Eisenhardt 1989; Yin 2003). In the present study, this was done through the documentation in terms of company profile, sales kit, websites, observation of and participation in some of the hotels studied. These were studied as a supplement to the interviews, enabling us to obtain further insights on the design approaches and to look for additional corroborating or contradicting evidence. We 253


coded the interviews using a predefined code list that was expanded during the analysis to capture emerging themes. The use of software and data coding makes qualitative data analysis procedures more systematic and guards against information-processing biases (Eisenhardt, 1989; Miles & Huberman, 1994). The coded interviews were then analyzed to identify support (or lack of support) for our propositions using software QSR N-Vivo 10. Specifically, we examined each case for evidence of the capability practices captured in the propositions. To further ensure the accuracy and validity of the data, the results were written up in a report that was sent to all respondents for approval, to check that the conclusions accurately reflected their practices. The overall text on the interview for each hotel thoroughly readable using narrative analysis to get the main idea of each of the constructs contained in the case study protocol. The result of narrative analysis is used to see whether the activity of each capability found in each hotel and in what form. Within-case analysis is used to explore the characteristics, uniqueness, and insights from each hotel. Then detailed analysis is done using the case description and the collected data. Detailed analysis is used with the help of the variables that have been operationalized in the case study protocol. For the specific questions of each construct, the results of interviews of each informant will be given mark bold, underlined, or colored to indicate that there are those activities in the hotel. The results of the narrative analysis of each indicator on both the capabilities and the interaction then matched with the indicators contained in the case study protocol, and then compared with the indicators contained in the service excellence, the results of the reviews from guests who have stayed, and evidence of

internal documents such as photos, sales kits, hotel profile, and others. Operationalization of variable is the process of translating or defining a variable so that it can be measured. Service innovation capability and service excellence are operationalized and discussed below. Service innovation capability is operationalized through sensing, seizing, and transforming. Sensing is measured as the activity to identify the need to change service operations and innovation. Seizing is measured as the activity to explore and select feasible opportunities for a change. Transforming is measured as the activity to implement the new services in an organization. All items for service innovation capability are based on Pöppelbuß et al. (2011). Service excellence is operationalized through service delivery, service-scape, customer’s participation, and service responsiveness. Service delivery is measured as the method and sequence in which the service operating systems work to create the service experience and outcome (Bettencourt & Gwinner, 1996). Service-scape is measured as the style and appearance of the physical elements encountered by customers at service delivery sites (items based on Lovelock et al., 2005). Customer participation is measured as the actions and resources supplied by customers during service production and/or delivery (Xue & Harker, 2002). Service responsiveness is measured as the ability of a hotel to respond individual guest’s requirements (Gronroos, 1982). 4. Finding The GFH hotel as a convention hotel sense the market activity through guest’s comments, information exchange with competitors, PHRI, Riung Priangan, telemarketers, mass media, and internal data. From the guest’s comments, the GFH hotel can obtain valuable information in order to 254


anticipate the customer’s wants. The information regarding the current trend, market changes in hotel industry being used to make and support marketing decisions. Training is a media for developing staffs and a tool for learning process. The learning process will enrich the knowledge and skill of staff. The idea sharing carried-out formally in morning briefing and informally in team discussions. The teams help and back-up each other and supported by direct supervisor. There is a shift of market segment from government to corporate. Currently, focus of the hotel how to build and communicate their brand to multi-national companies such as Chevron and Petro China while maintain the frequent independent traveler. The profile of guest based on segmentation. The objective of service innovation is to fulfill and responsive to the customer’s wants. The service innovation includes 30 Indonesian traditional cuisines and Sundanese traditional uniforms. Service improvements conducted in accordance with reviews and comments from guests. The physical facility in GFH hotel is still limited. The screening process done formally according to Kagum’s standard for promotion materials and design of theme. The menu development will pass through internal test and market test before launch to market. The market test conducted jointly with media to promote that. GPH hotel as a business and leisure hotel sense the market activity through guest’s comments, information exchange with competitors, PHRI, Riung Priangan, media, and internal data. From the guest’s comments, the GPH hotel anticipate the customer’s wants and get the feedback from their customers. The management encourage and support the staff in sport, training, and seminars. From monthly meeting, the ideas convey to the management and to motivate them to take responsibility. The GPH hotel positioned as 5-star heritage hotel.

The innovation programs are measurable and conduct the survey before programs begin. There are spontaneous innovation programs for small portion of budget. Integrated improvement coordinated with head office. Innovation in saving the energy collaborated with investors. The hotel defines innovation programs based on events and occasions. The overall service carried-out by mystery guests and management. GPH hotel conduct the market test and review for new menu development based on slow-moving and fast-moving items. The APH hotel as a conference center, sense the market activity through guest’s comments, information exchange with competitors, PHRI, Riung Priangan, media, and internal data. From the guest’s comments, the APH hotel anticipate the customer’s wants and get the feedback from their customers through REVINET tools. The hotel has innovation committee from supervisor level up to general manager as a mean to brainstorm and raise the new idea to develop service. The APH hotel positioning is a conference center for corporate and government. The hotel got the ISO-9001 for quality management process so that the process and standard have been recognized. The innovation were carried-out such as a cooking class for kids that is called little chef. The APH hotel, design the service process flow. New menu development tested, reviewed, and compared by partners. The SRH hotel as a resort hotel sense the market activity through guest’s comments, share the information exchange with competitors, PHRI, Riung Priangan. From the guest’s comments, the SRH hotel anticipate the customer’s wants and get the feedback from their customers. The idea comes from staff and discussing it. The SRH hotel positioned as a resort hotel. Innovation programs come from guest’s comments. The hotel does not define the 255


service process and service audit clearly but conduct trial and error only. The hotel conducts market test as regular basis for Ramadhan festival. The SCDH hotel as a family boutique hotel conduct the market sensing activity through guest’s comments, share the information exchange with competitors and PHRI. From the guest’s comments, the SCDH hotel anticipate the customer’s wants and get the feedback from their customers. The idea come from the staffs and share with the others departments. There is an audit service process. The service innovation being defined such as participant, physical evidence, and process according to SCDH’s standard. The hotel conducts the screening process to get the feasible idea. Mostly the hotel in descriptive study, encourage and support their staff to take the responsibility in various manners. The sharing idea carried-out in formal meeting such as morning briefing, monthly meeting, and general meeting. The learning process in the hotel allows the staffs will get and manage the relevant information that needed in achieving excellent service. The dedicated staffs will serve the guests better. The sharing idea forum as a formal meeting will give the staff flexibility to process and deliver services. Each hotel has a different strategy in serving their customers. Each hotel’s innovation strategy formulation and new service development are mostly done by its own department of marketing, sales, housekeeping, and F&B. Other departments are involved when it is related to events and occasions. Most of the innovations in the three hotels concern the menu development. Regular audit is conducted by inviting outsiders to assess the overall services to anticipate changes of customer’s needs, and to evaluate whether the technological options are in accordance with the standard operating procedures and customer expectations.

The innovation made in GPH hotel is by providing a heritage museum and implementation of eco-green, while the innovation made in APH hotel is conducting ‘little chefs’ and air soft gun program. Sensing activities allows hotels to formulate different innovation strategies that can respond to customers and deliver their services to customers. Appropriate service delivery and offering the best service-scape by involving customers will ultimately achieve service excellence in terms of meeting customer expectations. This study offers an interesting view for the general manager in hotel industry. The reason is that the existing service excellence frameworks are mainly based on service innovation capability, and therefore these frameworks have a limited application potential in a hotel industry context. All of the three activities are work and exist in the hotels. General Manager in the hotels can use the proposed different activities for service innovation capabilities as a list of options that needed to achieve their hotels’ service excellence. The Table 4 below summarizes how the three activities for service innovation capability exist in each hotel. Using the data from 5 cases studied, the table below generates the proposition about service innovation capability for service excellence. Table 4. Case study observation Proposition SIC  SE Sensing Seizing Transforming SIC  SE Sensing Seizing Transforming

SCDH

SRH

√ √ √

√ √ √

PPH √ √ √

GRH √ √ √

GFH Stage-1 √ √ √ Stage-2 DBH √ √ √

GPH

APH

√ √ √

√ √ √

√ √ √

√ √ √

Note: A √ indicates that one or more examples of that activity were found in a particular case study hotel. The absence of a √ indicates that such examples were not observed in the hotel studied.

In aggregate, these points motivate the following testable proposition based on 256


theoretical framework in previous section and interview results of descriptive study. Proposition: Service innovation capability that involving sensing, seizing and transforming will support in achieving service excellence. The explanatory study involved the six hotels as a sample. In this study the three hotels are current hotel in the descriptive study such as: SRH, GPH, and SCDH. The current hotel is being used as a comparison in order to confirm the proposition. The additional of three hotel are PPH, DBH, and GRH. Three new hotels as additional in explanatory study are used in order to see whether the proposition put forward in previous section is supported or not. Respondent from three hotels is a general manager with various experiences over 12 to 25 years in the hotel industry. The data analysis of case study in stage 2 only carried-out for 3 hotels as additional case. The data analysis for the current case referred to previous data analysis which described same condition in descriptive study. The PPH hotel as a Meeting, Incentives, Convention, and Exhibition (MICE) hotel conduct the market sensing activity through guest’s comments, share the information exchange with competitors and PHRI. From the guest’s comments, the PPH hotel anticipate the customer’s wants and get the feedback from their customers, especially for VIP guests through Guest Experience Manager (GEM). The idea come from the staffs and share with the others departments. There is an audit service process internally. The service innovation being defined such as participant, physical evidence, and process according to Media Hospitality’s standard. The hotel conducted the screening process to get the feasible idea. The DBH hotel as a new hotel conduct the market sensing activity through guest’s comments, share the information exchange

with competitors and PHRI. From the guest’s comments, the DBH hotel anticipate the customer’s wants and get the feedback from their customers. The idea come from the staffs and share with the others departments. There is an audit service process internally. The service innovation being defined such as participant, physical evidence, and process according to Dafam’s standard. The hotel conducted screening process to get the feasible idea and market test for new menu development. The GRH hotel as a business and resort hotel conduct the market sensing activity through comment of guest, share the information exchange with competitors, PHRI, and Riung Priangan. From the guest’s comments, the GRH hotel anticipate the customer’s wants and get the feedback from their customers. The idea come from the staffs and share with the others departments. There is an audit service process internally. The service innovation being defined such as participant, physical evidence, and process according to GRH’s standard. The hotel conducted the screening process and market test to get the feasible idea. Each hotel has a different strategy in serving their customers. Each hotel’s innovation strategy formulation and new service development are mostly done by its own department of marketing, sales, housekeeping, and F&B. Other departments are involved when it is related to events and occasions. Most of the innovations in the three hotels concern the menu development. Regular audit is conducted by inviting outsiders to assess the overall services to anticipate changes of customer’s needs, and to evaluate whether the technological options are in accordance with the SOP and customer expectations. The innovation made in GRH hotel is by providing an eco-green policy for guest room and kiddy land. Sensing activities allows hotels to formulate different innovation strategies that can 257


respond to customers and deliver their services to customers. Appropriate service delivery and offering the best service-scape by involving customers will ultimately achieve service excellence in terms of meeting customer expectations. The statements contained within the case study protocol have been clustered in terms of the service innovation capability that would impact on service excellence. These factors came to the fore during the interview stage of the research. The interview responses related to each of the factors will be summarized in statements according to the activities in each hotel. In aggregate, these statements are considered indicative of the service excellence within the Indonesian hospitality sector. In case study stage 1 and 2, all the respondent states that they conduct the service system audit. The audit conducted by management, PHRI and mystery guest. The sensing activities have similarity among the hotels. Through the service system audit, the innovation process in hotel will be measurable and structured to its target customers. Mostly the hotel in case study stage 1 and 2 conduct the audit of service process except The SRH only for financial and accounting. The audit of service process conducted in order to maintain the service level to customers, to response, and to design and prepare the facilities and amenities in achieving service excellence. Stage 1 and 2 in case study states that they define clearly the new service system that aligned with their target market. The process, participant, and the extent of change of new service system determine how the service delivers to customers. The seizing activities have similarity among the hotels. Through the new service systems that define clearly, the innovation process in hotel will be useful and right on target. All the hotels in case study stage 1 and 2 define their new service system that involves the process, participant and facilities according

to special occasions and activities in order to fulfill the customers’ wants. The seizing activities enabling the hotel to deliver the service, to response quickly, and to prepare the service-scape in order to achieve service excellence and can attract the customers return. The SRH in stage 1 case study not conduct the transforming activities especially in service prototype test into the market. In stage 2, all the respondent states that they conduct the service prototype test for menu development into market before providing to customers. The transforming activities have similarity among the hotels. The transforming activities define differently for each hotel. In stage 1 case study all the case study conduct the service prototype test into market by various ways. The transforming activities enable the hotel to deliver the service and to test their new service development into the market in achieving service excellence. From the three factors that explained above that involving sensing, seizing, and transforming, the statements from respondents said that service innovation capability support in achieving the service excellence in the hotel. 5. Discussion The activity in service innovation capability indicates that innovation process is carried out have in common at each hotel. The ability to define the process, participants, physical evidence, and design factors, at the most hotel are done by considering the target market, events and occasions. Most of the hotels in this study, conduct market test for new menu development by inviting media. This activity is done as a promotional tool for the hotel to introduce them to potential guests. This activity is also used to communicate their brand and reinforce their position in the minds of customers. Market test is also carried out by inviting the potential customers. Based on 258


the interview sessions from eight key persons of hotel industry in Bandung region, the all case studies indicate that service innovation capability will support in achieving service excellence. Through the intense communication and coordination with all departments in the hotel are involved, it will support in achieving service excellence. In order to achieve service excellence, activities such as market research, direct selling, event promotion, and corporate branding, marketing, and spontaneous innovations like amenities according to seasonal and market demand are communicated directly to customers. The capability interaction occurs mostly in the menu development, event development, price setting, price comparison, and selling. The propositions in previous section along with conceptual framework for analyzing the cases was developed based on various theories and models about service innovation capabilities found in various literature sources. The results of the study suggest that capability highly needed to achieve service excellence. This study offers an interesting view for the general managers in hotel industry especially Bandung areas. The reason is that the existing service excellence frameworks are based on service innovation capability and therefore this framework has a limited application potential of hotel industry context in Bandung. All of the three activities are exist and works in the hotel. General Managers in hotels can use the proposed 3 different activities for service innovation capabilities as a list of options to affect their hotels’ service excellence. From this list, general manager can then select the activities that suit their hotels’ needs and service excellence. Hotel has complex elements, and their service excellence may depend on these various elements or their interaction. These case studies show, that service excellence starts with building the associations of both capabilities. A hotel’s

brand successfully positioned in the consumers’ minds will become an asset of the company that contributes to its service excellence. To conclude, the results of these case studies are limited to the hotel industry only especially Bandung area. 6. Conclusion This study expands research on the service innovation capability that support in achieving service excellence. The following conclusions will be presented as follows: 1) this study fills the gap in the service innovation in hotel industry context; 2) the conceptual model described in this study examines the existence of activities in all case study. All activities works for each hotel through specific ways according to hotel classification, the management system, their positioning, and target market; 3) the results of the study indicate that the service innovation capability in the eight hotels show some similarities. The difference lies in the marketing strategies and innovation strategies, which are tailored to the target markets and occasions; 4) the service excellence is highly depend on how the hotels able to sense trends and events, responds the market demands through the learning process, sorts out the right target markets, and communicate with the customers. The service excellence is achieved by defining the services, participants, and physical facilities clearly; continuously perform the audit services; and conduct market test for the new services; 5) the propositions generated in previous section through the activities of service innovation capability support in achieving service excellence. This exploratory research does not seek to draw statistical inferences, therefore is subject to the following limitations arising from the case study methodology. The application of the service innovation capability in hotels is limited in Bandung area only. The coverage of case study and 259


findings are based solely on the eight unique classified hotels (3, 4 and 5 star-hotels), which may not be generalizable to the other classified hotels (1 and 2 star-hotels), non-classified hotels, and in the other areas. All hotels were very welcome to share their insights, company profile and sales kit. This study just explored the activities that related to service innovation capability. The information about financial and accounting performance does not explored in this study. The first key contribution of this work is its inclusion of the concept of dynamic capabilities; that hotels are able to compete not only due to their ability to exploit their existing competence and capabilities, but also thanks to their ability to renovate and develop their organizational capabilities (Teece et al., 1997). Therefore, this study argue that in order to maintain service excellence it is not enough for hotels to be in possession of valuable capabilities; hotels also require dynamic capabilities to develop and renovate their organizational competence and capabilities (Teece et al., 1997). The application of dynamic capability theory has been done in the various industries. This study applied the dynamic capability theory for service innovation in the hotel industry context. This study seeks to provide the empirical data for the hotel industry to reveal variables service innovation capability such as: sensing, seizing, and transforming. The study by Eisawi et al. (2012) that revealed the relationship between innovation and service excellence using service delivery, this study expand the service excellence variables using service process and delivery, service-scape, customer participation, and customer responsiveness. The findings of this work also could improve current firms’ management by enabling these hotels to achieve their objective of achieving service excellence. This study expected to contribute to the development of conceptual model in service

innovation capability in order to achieve service excellence for hotel industry in Bandung. For the practice, this study is aimed at helping hotel industry to better plan and move towards greater service innovation implementation. This study will hopefully provide insights on some of the factors of service innovation capability which would assist hotel industry in Bandung to prepare and create the activities to achieve service excellence through the co-ordination and communication among department in the hotel and finally to satisfy the customer and make the customer loyal. This study could be the basis for policy makers to prepare the regulation in the hotel industry in Bandung. Further research could apply this conceptual framework to analyze hotels for 1-star and 2-star hotels and non-classified hotel. Therefore, research on other industries (financial service, airlines, consulting, etc.) possessing interaction capabilities is needed. The confirmatory quantitative research is needed to test the model and the causal relationship through statistical inference by generating and testing the hypothesis. From the case studies, the strong brand names of the three hotels seemed to contribute to their service excellence. It is recommended that further research on the causal relationship between capabilities and service excellence to the hotel performance could be applied.

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