E-COMMERCE STRATEGY INTERCONTINETAL BALI RESORT

ABSTRACT

Global and dynamic competition is one of the challenges for hospitality industry.
Internet is a global network of interconnected networks. In 2012, the approximately
2,4 billion users connected to the internet worldwide represent just 34,3% of the
global population. In these conditions, the usage of internet technology in business
strategy plays an important role to assure service quality optimization, provide
ultimate customer value and / or increase company profitability. E-commerce is the
subset of e-business focused on transaction. The average contribution of e-commerce
business in Inter Continental Bali Resort (ICBR) showed 18,39% in the last five
years. However, data 2012 showed negative performance whereby from19.17% in
2011 down to 17.72% or decrease 1.45% or 2.586 room nights, below average
market performance area which range between 20 – 25%. This study wants to
analyze and discuss the e-commerce strategies of ICBR. The research concluded
some strategies, such as; managing hotel website, maintaining reservation access
and security transactions of credit cards were runned very well. Other strategies need
to be further improved and developed, such as; offering the best availability rates
and customer loyalty program. In contrast, the speed of customer response and
attractive promotion packages need much improved.

Key words: hotel, competition, internet, e-commerce, strategy

Background of the Study

The development of internet technology today leads to changes in the way we
communicate with customers and run the business. In today’s highly dynamic market
situation, the utilization of technology plays a very important in ensuring the
smoothness and optimization of services as well as improvement on the company
performance (Ministry of Research and Technology, Republic of Indonesia, 2013).
The bigger of opportunities owned by each company would make the
challenge harder. Therefore, companies need the right model of business and
technology management solutions that can use all the assets and help companies
responsive to the needs of the business and the market. Website has radically changed
the customer expectations on the convenience and speed of transactions, price,
service quality, and the ability to compare with other products, services, and include
suppliers.

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 The increased intensity of competition requires every business owner and
practitioner always pay attention to the dynamics of consumer needs, wants, and
preferences, as well as trying to fulfill those with a more effective and efficient
approach compared with its competitors. The use of internet technology is expected to
provide great benefits to the business. Companies will win the competition, produce
more sales and profits if they able to implement internet technology in trading of their
products and services or known as electronic commerce or e-commerce.
The growth of e-commerce is likely growing steadily in line with the
recognition of the global network of the internet, and even some information
technology experts predict that the internet will become part of everyday or a life
style of modern society in the future. In picture 1, it shows the internet users was only
75 millions in 1997 and continue to increase from year to year. In 2012, the internet
users had reached 2,4 billions or 34,3 % of world population. This also describes a
great potential market for companies to focus on.
Picture 1
History and Growth of Internet, 1997 - 2012

Source: www.internetworldstats.com (2012)

This means that communities are more frequent dealing with the internet in all
things including buying or selling goods and services. Similarly, companies are
seeking widening its market share through the internet as a new global marketing
strategy. In other words the e-commerce will transform into a very important
bussiness strategy to improve and optimize the company performance.
For improving business position, every company requires continuous
approaches for achieving cost efficiency, improving the quality of products and
services as well as creating innovations. Efficiency principles have to be put in place
at the whole business functions, from planning, production processes, marketing and
distribution. The use of the internet can reduce labor costs, infrastructure, and other

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costs are usually paid by traditional companies. If the company does not change the
way of their business then it is difficult to compete with other companies that are able
to offer the same goods and services with cheaper price. Due to the ease and great
advantages offered by e-commerce, many companies are bringing their business
towards online. Internet marketing is a revolution of the hotel and booking online that
has a very important role in the hotel business.
Hotel competition in Bali is very tight. Hospitality business owners and
managers need to rethink and renew the marketing approaches to respond the changes
of market conditions. The marketers are encouraged to develop and market their
products and services are not only targeted to the local market but also to the global
market. Through the internet, information about the availability of hotel rooms as
well as a variety of information are accessible by potential guests around the world
with very easy, fast, and cheap. When it is optimally utilized, the e-commerce
potential to increase the hotel performance which is represented by the increase of
market share, business mix, occupancy rates, revenues and profitability.
InterContinental Bali Resort (ICBR) started launching e-commerce strategies
in in 1993, which is a five-star hotel with the concept of the resort, located in
Jimbaran - Bali, wherein has the major markets from France and Germany. The hotel
also focus on develop some potential markets like China and Russia. E-commerce
activities of ICBR are carried out among others; working with the company web
portals, creating the independent website (http://bali.intercontinental.com/), and in
cooperation with one of the biggest corporate email server to process correspondence
with guests via email. The company used web portals like booking.com, agoda.com,
wotif group, travelocity, expedia, gullivers, and many others. The contribution of e-
commerce activities to total hotel room revenues can be seen in Table 1 below.

Table 1
E-commerce Revenue InterContinental Bali Resort, 2008 - 2012
(in room nights)
Source: Revenue Analyst, InterContinental Bali Resorts, 2012

In table 1 decribes the comparison of e-commerce revenue and non e-

commerce revenue appears. In addition, it shows that e-commerce revenue is derived
from portal agent websites and home or hotel website, and other sources of hotel

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revenue were generated from travel agents and direct bookings . The year 2012
showed a decrease of e-commerce performance over 2011 performance, from 19.17%
down to 17.72%, or the equivalent with 2,586 decreased in room nights. Meanwhile,
other five-star hotels in the area claim the e-commerce contribution range between
20-25% and while in Tuban - Kuta areas claim 25-30% of the total room revenue.

Picture 2
E-commerce Production InterContinental Bali Resort, 2008 – 2012
(in room nights)

Sumber : e-commerce report, InterContinental Bali Resort 2012

Table 2
E-commerce Revenue InterContinental Bali Resort, Year 2012
(in Rp.)

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In table 2 above shows the contribution of e-commerce 22.4%, equivalent to Rp.
45,166,685,630 of total hotel room revenue of Rp. 201,528,521,013.

Table 3
Contributions Survey E-commerce at Hotel Competitors in 2012

Tabel 3
E-commerce Revenue of Hotel Competitors, 2012

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Source : e-commerce report, InterContinental Bali Resorts 2012

Picture 3
E-commerce Revenue of Hotel Competitors, 2012

Sumber : e-commerce report, InterContinental Bali Resorts 2012

2. Research Question and Methodology

Based on the background of the study, it is formulated the research question is

"How were the e-commerce strategies implemented by ICBR?" This study aimed at
reviewing and discussing the e-commerce strategies implemented by ICBR. Data
were collected through questionnaires, semi structured interviews, and study
documentation. The population was guests who have stayed and made reservations
either through the hotel website or portal agent website in 2013 with 1,710 guests in
total. The sample size was 94 guests and was drawn using the Slovin formula cited in
Sedarmayanti and Syarifudin (2002: 143) with a 10% degree of error. Furthermore,
the data were discussed and critised using descriptive qualitative techniques which
consists of several stages, such as: reporting data obtained from the field as what it is,
processing the data, then analyzed based on relevan theory (Burgin, 2001:130).

3. Literatures Review

3.1. Definition of Strategy and E-commerce

According to Andrew cited from Craig (2002: 5) defined strategy is goals,

objectives, and policy, and important plans for achieving objectives. Lesser Robert

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Bittel in Buchari Alma (1978: 972) defined strategy as fundamental plans to achieve
objectives. Asri (2002: 30), strategy as well thought plans for optimizing results. Alex
D. Triyana (1985: 17) stated there four key controllable variables related to strategy,
such as market segmentation, marketing mix, marketing budget, and timing. It is
concluded that strategy is important policies and plans to achieve company
objectives.
E-commerce defined as any forms of trade transaction of goods and services
using electronic. Turban (2005: 275) defined e-commerce as a process of purchase,
trade, move or exchange of products/services or information through computer
networks, include internet. Kienan (2001: 4) defined e-commerce is creating, manage
and expand commercial links online. Adi Nugroho (2006: 5) deined e-commerce as a
method for selling and purchase products and services through internet which
involved purchase transactions and fund transfer through internet. There are three
main elements of e-commerce, such as; purchase, trade, and fund transfer through the
internet.
Turban (2005 : 275) classified e-commerce activities into business-to-business
(B2B), collaborative-commerce (c-commerce), business-to-customer (B2C),
consumer-to-business (C2B), consumer-toconsumer (C2C), business-to-employee
(B2E), government-to-citizen (G2C), dan mobile-commerce (m-commerce)

3.2. E-commerce Benefits

E-commerce benefits are not only for suppliers, such as hotel, but also by
customers include public community (Turban, 2005: 279). For organization, e-
commerce expand market share, obtain products and services from suppliers very
quick andwith low cost, to cut distribution channels, to make product cheaper and
profitable.For customers, product and services are cheaper, to make comparison, to
get quick information on the products and services they are interested in, and can
make purchase anytime and anywhere. For community, e-commerce enable
community to make transactions from homes, these resulted in people less travel,
decrease traffic and pollution.

3.3. E-commerce Strategy

Alison and Ashton found in Keller (2003: 89) mentioned two main strategies
of e-commerce, first strategies are related to attract customers and second strategies
are related to maintain customer loyalty. Furthermore, they suggested the critical
elements of e-commerce strategy, such as; maintain simple, give value added, easy to
purchase, show security transaction, maintain customer privacy, best availability
rates, easy access, customer service number, promptly customer response, use
automatic response, low cost of delivery, and give guarantee service. Nowdays,

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online customers are not only concerning the value of products and services, but also
speed and convenient of transaction (Nykiel, 2003:23).
Law and Chung (2003: 88) stated a quality website has complete, relevan and
up to date information on facilities and services, is easy accessible, is enable to
develop direct communication between customers and hotel, has access to make
reservation, has information of surrounding hotel areas, and has website management
to assure the quality standard.
The best availability rates are an important tool for persuading customers to
purchase. Kotler (2002:79) and Nykiel (2003:23) suggested a strategy which
considers market demand conditions and competition, such as selling up, selling
down, discount based on time purchase, early bird, and last minute. Selling up is
implemented when forecast show demand increase, on contrary, selling down or
discounted rates implemented if forecast show decrease in demand. Early bird is
aimed at generating advance bookings, where in last minute is implemented if many
supply still available. Furthermore, to guarantee a prompt response on customer
inquiry, room allotment and rates are closely monitored
The customers want to get the best value from their purchase. To assure
getting a good quality of hotel products and services, customers are normally looking
at past customer reviews before making room reservation. Nykiel (2003: 36) stated
customer evaluate hotel qauliry using four elements, such as: room cleanliness,
employee attitude, comfort, and value for money.

4. Discussion

In this part, e-commerce strategy ICBR was described, discussed, and

analyzed in details using descriptive qualitative approach.

4.1. E-commerce Strategy InterContinental Bali Resort

ICBR started e-commerce in 2009 with worldwide web for featuring hotel
information, room availability and making room reservation. Visitors are also allowed
to give their reviews through tripadvisor.com.This strategy is aimed at building and
communicating hotel image to targeted markets, maximizing room reservations and
room revenue particularly from online market segment. For achieving this goal sales
and marketing department add position in organization chart with e-commerce
division under Director of Revenue (DoR). All direct reservations, either from
telephone, fax, email, and website are monitored daily by DoR. Furthermore, based
on internal and external analysis are carried out by DoR then deciding effective
selling strategies. The e-commerce strategies are described in an E-commerce
Manager (EM) job description as of as listed below;
a. to develop good relationship with third party, particularly key accounts of OTA
b. to prepare and implement marketing plan for online market segments

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c. to monitor room allotment utilization from OTA and hotel competition for
determining a proper e-commerce strategy for maximing reservations and room
sales
d. to assure website content and pictures are always up to date, either hotel website
nor third party websites
e. to supervise and ascertain e-commerce strategies are right in place
f. to desain and promote promotion packages for online market segments
g. to select key words in website and develop links with other related websites for
increasing website popularity or doing Search Engine Optimitization (SEO)
h. to develop programs for maintaining customer loyalty

Based on jobs description above, it is found that the job description has been
properly designed because the jobs have covered website and OTA management,
market analysis, and developing marketing and selling strategy as suggested by
Alison and Ashton theory. However, marketing actvities through social media are not
clearly stated.

4.2. E-commerce Strategy InterContinental Bali Resort

As previously decribed in research methodology, data in this study were

collected by questionnaire and semi-structured interview. Questionnaires were
distributed to customers who have stayed and booked through hotel website and OTA
in 2013, from 1 – 23 August 2013, and 94 respondents were participated. Samples
were drawn using stratified random sampling methods. To complete data, semi-
structured interview with EM and DoR were also conducted on September 5, 2013.

4.2.1 Respondents Based on Continent

Online market segment in ICBR are dominated by Europe (46.8%) or 44

respondents (46.8%), then Asia (29.7%) or 28 respondents, Australia (14.9%) or 14
respondents (14.9%), and America (8.5%) or 8 respondents. These data are similar
with data were released by www.internetworldstats.com which mentioning that the
internet users are in America, Asia, Europe, and Australia. ICBR has reached the right
market segments.

Picture 4
Respondents Based on Continent, N=94

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 Source: Questionnaire, 2013
4.2.2 Respondents Based on Reservation Sources

Based on oline room reservation sources, it is discovered that there were 33

respondents (35.1%) making reservation through hotel website, then followed by
booking.com was 17 respondents (18%), agoda.com was 14 respondents (14.9%),
expedia.com was 12 respondents (12.8%), gullivers.com was 10 respondents
(10.6%), and other sources were 8 respondents (8.5%). In addition, this describes
that ICBR has a good online business mix because most share were generated from
hotel website so that makes better yield. Hotel does not need provide commission to
OTA. But, less production compare other same hotel category. Resort Manager Grand
Nikko Bali claimed producing average 54.54% of the total online room revenue was
from hotel website.

Picture 5
Respondents Based on Reservation Sources, N=94

Sumber :
Data olahan penelitian,
2013.

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 Source: Questionnaire, 2013

4.2.3 Customers Review on E-commerce Strategy of ICBR

Reviewing and discussing on e-commerce strategy of ICBR were mainly

based on Alison and Richard Ashton theory found in Keller (2003: 89), and Nykiel
(2003) wherein stated two main e-commerce strategies, first attracting customer
interest and second maintaining customer loyalty. These strategies were futher
brokendown into more specific strategies which consist of seven elements, such as;
maintaining website quality, providing prompt response on customer inquiries,
convenient on reservation process, secure transaction of credit card, maintaining best
availibility rates (BAR), attractiveness of promotion packages, and maintaining
loyalty customers. Summary of customers review were decribed in table 4.

Table 4
Customer Review on E-commerce Strategy of ICBR, year 2013

No Type of Strategy Customer Perception

Hotel booking.com agoda.com expedia.com gullivers.com Others

1 Website quality 4.18 3.47 3.36 3.42 2.70 3.42

Response on
customer's
2 inquiries 2.58 3.65 3.35 3.41 2.20 3.00
Easy reservation
3 access 3.97 3.41 3.14 3.16 3.40 2.75

4 Secure transaction 3.91 3.82 3.42 3.50 3.00 2.75

Best availability
5 rates 3.12 3.47 3.14 3.25 2.20 3.00
Attractive
promotion
6 packages 2.61 2.70 2.78 2.79 2.40 2.38
Customer loyalty
7 programmes 3.12 3.29 3.85 2.91 3.00 3.25
Source: Questionnaire, 2013

From tabel 4 was shown that almost all portal agents which were cooperated
with ICBR have good quality of website, except gulliver.com (2.70) was satisfactory.
Website is a critical marketing and selling tools. Law and Chung (2003: 88)
recommend a website should has complete, relevan and up to date information on
company’s facilities and services, easy accessible, enable to develop direct
communication between customers and hotel, has access to make reservation, has
information of surrounding hotel areas, and has website management to assure the
quality standard. In website ICBR has been disvored all those elements. Moreover,

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the website is available on the mobile app store, Android app on google pay,
socializes through social medias such as facebook, twitter, you tube, and google plus,
has customer care, travel advisory, and tool free.
The speed in responding customer inquiries are critical variables to convince
and build professional image. Customers tend to continue with a booking room if the
website provides all required information and all inquires are being responded
efficiently and professionally. It is discovered almost all portal agents provided
prompt response on customer’s inquiries, except gulliver.com was poor (2.20) and
hotel’s website (2.38). Furthermore, 16 out of 33 respondents reviewed poor and very
poor on the speed of responding customer inquiries. This may resulted in many
potential hotel guests turned way to competitors.
Hotel webiste and almost all portal agents have provided an easy access to
make booking, except other online booking sources was satisfactory (2.75). Each
portal agent has its own booking engine which enables customers obtain an instant or
real time confirmation. ICBR using a booking engine which is called IHG reservation
system. This system provides access to create a new reservation, modify, and cancel
existing reservation.
In e-commerce business, most of the transactions uses by credit cards. To
avoid credit card frauds, customers need to be ascertained by the credit card security
system. It is found that hotel website and almost all portal agents have put secure
online transaction over credit cards, except other online booking sources was
satisfactory (2.75). ICBR uses TRUSTe to guarantee the privacy of personal data
from customers, include credit card data. In addition, others credit card security
systems are istall in the hotel website, such as: PayPal and VeriSign.
Customers want to get the best value from the purchased products or services.
Therefore, the best availability rates are important selling tools. Nykiel (2003)
suggested hotel requires undertaking both competition analysis and forecasting
demand before setting room rates. Hotel may implement selling up or selling down
depending on market conditions. It is found booking.com gave the best availability
rates (3.47) among other portal agents include hotel website (3.16)
Hotel demand fluctuates depending on season. For boosting demand, hotel
creates variety of promotion packages, such as early bird and last minute booking.
Early bird promotion is aimed at encouraging bookings from customer who
preferable to make booking far in advance. Meantime, last minute promotions are
targeted to those customers who want to make booking close to arrival. To
communicate promotion packages, hotel and OTA send an email blast (e-blast) to
customers in the data base. It is found that the promotion packages, either offered by
hotel and OTA are satisfactory (2.61) mean that the promotion package were less
attractive. Alison and Ashton reminded to put value added for customer in the
packages.
Kotler (1998) suggest concept of marketing relationship in post purchase
stage which hotel focus on building relationship with a company’s profitable
customers. To put into practice this concept, hotel and OTA offer loyalty programmes,
send a thank letter, birthday card, and send an email (e-blast) informing new

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developed products to customers. ICBR offer a loyalty programme which is named
InterContinental® Ambassador: a recognition programme offers members a full range
of first-class services and exclusive benefits to enhance their stay. It is found
agoda.com has very good customer relation programs to maintain their loyalty, such
as offering a bonus program, frequent email blasts informing special offers of holiday
packages.

5. Conclusions and Research Implications

The ICBR has assigned a special division in sales and marketing department for
handling e-commerce activities and properly designed job description. The target
market target has been clearly defined and as well as online market segments mix
have been achieved. Some e-commerce strategies, such as; managing hotel website,
maintaining reservation access and security transactions of credit cards were runned
very well. Other strategies need to be further improved, such as; offering the best
availability rates and customer loyalty program. However, the speed of customer
response and attractive promotion packages need much improved. The implication of
these findings are the ICBR need to review procedure of setting rates, selling strategy
of customer loyalty programme, standard of customer response, and promotion
package components. It is suggested to undertake further research on the same topic
with more sample size using quantitative approach, online market segment
characteristics and behaviors.

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