Customer Based Brand Equity of Star Hotels in Nepal

Brands are a complex phenomenon that has been in existence already for centuries. It is very essential for every industry to build the brand so that the consumers will have positive feelings and perceptions of the brand. In this respect, American Association (1999), defines a brand as a “name, sign, symbol, term, design, or a combination of them, intended to identify the goods and services of one seller or group of more sellers and to differentiate them from those of competitors.” Brands introduce stability into business, help guard against competitive imitation, and allow consumers to shop with confidence in an increasingly complex world (Aaker, 1991). When customers make a decision about a brand and its associations, they are often loyal to that brand and they will continue to buy the product from the same brand it in the future, will recommend it to their friends, and will definitely choose the product over others, even those with better features or lower prices (Assael, 1991).

Aaker (1996), further claimed that brands are pivotal sources for generating and sustaining a competitive advantage, which not only helps in minimizing quality gaps but also is a source of strong and favorable differentiators (as cited in (Sharma, Popli, & Rao, 2013). These scholars have the opinion that brands serves as an identifier of institutional product and services and differentiated them from other competitors. However, according to (Kapferer, 2008), the brand is the most significant part in the service industry because of its instructive uniqueness like inseparability, heterogeneity, perishability, and tangibility. In the same respect (Prasad & Dev, 2000), argued that branding is an effective way for the hotel industry and the hotel itself to distinguish itself from its competitors as per the consumer’s perceptions.

Today brand equity has become one of the most important marketing concepts (Martensen & Gronholdt, 2004), both in business practice as well as in academic research because marketers can give competitive advantage through successful brands (Kim, Kim, & An, 2003). Further, organizations develop as a way to attract and retain customers by promoting value, image, and lifestyle (Rooney, 1995). Brand equity is actually what brand contains; including brand awareness, brand loyalty, brand association and perceived value of brand which can be seen as an important asset for companies as they provide benefits in various dimensions to marketers and consumers (Davis, 2000 & Ambler, 2003). Brands and brand equity assets help the customers in interpreting and processing information, creating confidence in the purchase decision and also enhancing customer satisfaction (Aaker, 1991). In marketing, brand equity is a fundamental concept and has been the emphasis of research over the last many years. Brand equity is also defined as repeat purchases caused by brand-use satisfaction, perceived superior value (for the price paid), and a preference or loyalty felt for the brand.

The concept of brand equity can be seen as evolving from three perspectives, i.e. cognitive psychology, economic and financial perspective. However, according to (Keller, 1993), brand equity can be classified into two categories i.e. the financial perspective firm brand equity (FBBE), and the consumer-based perspective consumer-based brand equity (CBBE). However, (Keller, 1993), (Cobb-Walgren, Rubble, & Donthu, 1995), argued that if the brand has no meaning to the customer, none of the perspectives of brand equity is meaningful (as cited in (Mohan & Sequeira, 2012)).

In defining customer-based brand equity (Keller, 1993), claimed that consumer-based brand equity refers to brand equity and noted that occurs when the consumer is familiar with the brand and holds some favorable, strong and unique brand associations in their memory. In the same respect scholars (Kamakura & Russell, 1991) adds that customer-based brand equity has been defined as the differential effect of brand knowledge on consumer response to the marketing of the brand.

Prasad & Dev (2000) claimed that building brand equity is considered to be one of the key drivers of a business success. High brand equity levels are known to lead to higher consumer preferences and purchase intentions (Cobb-Walgren et al., 1995), as well as high returns (Aaker & Jacobson., 1994). Further (Ahmad & Hashim, 2010), added that building and properly managing brand equity has become essential for any business organizations and hospitality organizations are no exception.

Bailey & Ball (2006) suggested that goodness and worth which hotel proprietors relate with hotel brand equity also affects the performance of hotels and strong brand equity significantly increases the profitability of hotel business. If there is the absence of brand equity in the hotel industry it can possibly disturb in the outflows of the customers in the hotel. Prasad & Dev (2000), argued that when there is positive customer perception regarding hotels service that will automatically lead the hotel toward strong brand equity.

Nepal is a developing country where the number of tourist visit every year and in almost every season there is a flow of tourist in the hotels. The tourism industry has been playing an important role in generating revenue in Nepal. This sector includes various infrastructures and facilities oriented to the tourists visiting the country. The hotel sector is an integral part of the tourism industry in Nepal. Today there is a number of international hotels chains and local hotels are evolving. Most of the star-rated hotels are situated in the capital of the country. There are thousands of tourists from all over the world who come to Nepal for various reasons and activities. Tourists travel to various parts of the country for various activities but most of them spent their considerable time in Kathmandu. Star rated hotels of Kathmandu are the most and the prime target for accommodation for foreigners who visit Nepal. Hotels in Nepal are broadly classified into 5 categories (five stars, four stars, three stars, two stars and one star) by the (Ministry of Tourism and Civil Aviation, Government of Nepal, 2017), based on their general features and facilities they offer.

The star hotels in Nepal have introduced a branded service to the hotel business in Nepal. By using such brand name star hotels of Nepal are offering standard world-class service, experience, and consistency in the service provided to the visitors so that visitors get well aware of their brand and will be loyal towards their service. Brand awareness is enhanced in a variety of ways such as advertising, direct emails, word of mouth, and promotion activities (Grover & Srinivasan, 1993). It is very important for star-rated hotels in Nepal to focus on brand awareness. The hotels of Nepal are concerned in this matter because the more the customers are aware of the hotel, the greater the possibility the visitors will recognize, recall and revisit the hotel again in their future visit. The star rated hotels of Nepal must expose more towards customers to enhance brand awareness to create and increase brand loyal consumers who will buy their product and re-visit the hotel (Lewis, Chambers, & Chacko, 1995). The loyalty of customers towards the hotels in Nepal is very important to hotels because it helps in increasing higher profitably, will increase referrals, helps in reducing marketing costs such as advertising and promotion. It is believed that loyal customers are a strength to an organization and this adds a positive impact on the success of the organization. Similarly, the star hotels should also focus on building and sustain a positive brand image. It is very important for every star categorized hotel to distinguish them shelf from the other hotel competitors in the market.

The star rated hotels in Nepal should always be updated and should be innovated which leads to differentiation and allows their particular brand to remain up to date and find out the changes in customer taste. The star hotels should also focus on relationship marketing which helps the hotels to strengthen its relationship with existing customers. This leads the hotels to develop a high lifetime value.

In highly competitive hospitality and service industry, the key to increase and preserve market share is not just by winning customers but is also important in retaining them and making them revisit the hotel again and again. It is very important for each and every star hotels to develop and follow a brand equity model that consists of the brand image, brand loyalty, brand association, perceived quality because the combination of these factors will enable the company to achieve higher brand equity.

The star categorized hotels of Nepal should build the right type of experience around their hotel brand so that the customers will have specific, positive thoughts, feelings, opinions and perception about the hotels brand. When there is strong brand equity in those rated hotels, the customers will revisit, recommend the hotel to their friends, families, and others, the customers will be a loyalist and are less likely to switch to other hotels during their next visit and stay. Therefore, this study aims to find out the customer based brand equity of star hotels in Nepal and to find out the impacts of brand awareness, brand loyalty, brand image and perceived quality and to analyze the factors that determine the customer based brand equity of star hotels of Nepal.

There always exits some kinds of problems and challenges faced by every sector. The hotels operated in Nepal are also facing various problems related to branding. There are different types of guest and visitors who prefer different types of hotels and services. The hotel industry is all forms of business relating to the provision of accommodation in lodging, food, and drinks and various types of other services that attract and develops tourism in any country. In the hospitality industry, today all the hotels are very much concerned to be successful in the competitive world.

Tourism and hospitality is an important sector which has helped to generate more revenue and national income. The hospitality of Nepal is emerging because there are thousands of tourists who visit Nepal for various tourism activities like eco-tourism, mountain tourism, wildlife tourism, rural tourism, religious and pilgrimage tourism, E-tourism etc. Tourism has played a vital role in the development of hospitality industry and for the economy of the country as a whole. This research was conducted to find out the level of awareness among hotels customers, level of loyalty and attachment of customers towards a particular hotel, the level of customer’s attitude and their view towards the hotel i.e. brand image and judgment which is to find the level of perceived quality.

In today’s context the hotel business is becoming and is an increasingly growing industry in Nepal in terms of international hotel chains entering the market. Definitely, the hotel industry develops fast in any region and has become a global industry. There are lots and lots of people who depend on hotels when they travel, do business, visit abroad to meet their friends or families and so on. Having a brand is just not enough in the hotel industry they should have a strong brand effectiveness because brand equity has a great effect on consumer perception of the brand.

There has been various research conducted abroad on measuring consumer-based brand equity of hotel and hospitality industry. However, in Nepal concept of hospitality brand equity is a new concept. In this respect, the present researcher did not found any previous research conducted on customer-based brand equity of star hotels of Nepal; there have been researches only on tourism and hospitality. For those various reasons, the present researcher has chosen to conduct research to find out the importance of customer brand equity of star hotels of Nepal and how the independent variables influence brand equity of star hotels of Nepal.

The present researcher was interested in this particular topic to find out the various components of brand equity i.e. Brand awareness, Brand Loyalty, Brand Image and Perceived quality that influences the customer to choose one particular hotel among various alternatives. There may be various positive and negative results while conducting the research but this will help to understand the consumer’s preference and to identify the various components of brand equity of star hotels of Nepal.

In this research, the present researcher is mainly concerned to access and measure consumer-based brand equity (CBBE) of hotel industry of Nepal i.e. Star hotels. During the process of analysis and measurement, present researcher chooses to conduct questionnaire survey among the customers who are staying at the chosen star hotels.

The main purpose of the study is to explore and analyze the consumer based brand equity of star hotels in Nepal. Brand equity has become one of the important components in service and hospitality industry. This study aims to identify the gaps to be fulfilled by the hotels from the perspectives of customers. To achieve the main purpose, specific purposes of this research paper are as follows:

i. To find out the impacts of brand awareness, brand loyalty, brand image and perceived quality on customer-based brand equity of star hotels.

ii. To analyze the factors that determine the customer based brand equity of star hotels of Nepal.

Taking into considerations, the background, the missing link, objectives, and statement of the problem, the present researcher has conducted this study to answer the following Research Questions (RQs):

RQ1: What are the impacts of brand awareness, brand loyalty, brand image and perceived quality on customer-based brand equity of star hotels?

RQ2: What are the factors that determine the customer based brand equity of star hotels?

This research is conducted to analyze and explore the customer based brand equity of star hotels of Nepal. In this study of the customer-based brand equity of star hotels of Nepal, brand equity is the dependent variable whereas brand awareness, brand loyalty, perceived quality and brand image are independent variables. After determining the independent and dependent variables of the research and developing research question the following hypothesis are generated.

Hypothesis 1

H1: There is a significant relationship between brand awareness and brand equity of star hotels.

Hypothesis 2

H2: There is a significant relationship between the brand loyalty and brand equity of star hotels.

Hypothesis 3

H3: There is a significant relationship between brand image and brand equity of star hotels.

Hypothesis 4

H4: There is a significant relationship between perceived quality and brand equity of star hotels.

Brand equity is a critical asset to any organization. Brand equity refers to the added value to the organization. In this respect, the present researcher has forecast and made different future implications on brand equity, consumer-based brand equity and its implication to build strong quality hotel strategic policy level, designing and executing branding activities via communications in brand equity. This research has signified the importance of brand equity to gain higher customers in the star hotels and develop the star hotels as a strong service and tourism brand.

This research finding is also important for all the star rated hotels of Nepal, tourism industries and for the entire hospitality industry as a whole. And this also adds further value in the field of the study of this related subject matter. Also, it will act as a reference for those other students who are planning to study the similar issue. This research can be important to the hotels because it helps in exploring customer-based brand equity of star hotels of Nepal. Those travelers and guests can also be benefited from this research and it will be much easier for the hotels to bring changes and improve within their practices.

This study will be useful for marketers because this study will help them find out dimensions of brand equity and also compare them with the hotel industries. It will help those academics and future researches to know how customers based brand equity is created. It will also help those researches from the field of marketing and branding who follow and support integrated marketing communication that it plays a very important role to create and maintain stakeholder relationships and in leveraging those relations to create customer-based brand equity. The dimensions used in this study will provide a systematic approach to managers so that they can formulate strategies for their brands. This study will open the door for those academicians and future researchers.

The finding of this research is limited to the hospitality industry. The study is limited to star hotels situated just in the capital of the country. Moreover, this research is done in only one city in Nepal. There are only limited visitors from limited hotels selected in the research. Out of star categorized Hotels of Nepal, only a few hotels from each star category of Kathmandu were selected. The data from the two-star hotels could not be collected. Similarly, this research only focused on the star categorized hotels so the results cannot be generalized for the entire hotel industry. Another limitation of this research was satisfying the hotel managers to corporate with the researcher and persuading the hotel customers to cooperate in filling the questionnaire, a lot of the visitors did not have enough time to fill out the questionnaire and few visitors had difficulty in understanding the language. Another limitation of this research is that it is only focused on the perceptions of the customers and did not measure the perception of the hotel's employees and management regarding customer-based brand equity. Thus, this research signifies the importance of brand equity for service industries specifically in star hotels to build their credibility.

Hotel: A commercial establishment which provides lodging, meals and other guest services to travelers and tourists.

Hospitality Industry: In this study, hospitality refers to the industry that comprises of hotel, tourism and service industry.

Brand equity: Brand equity is considered to be one of the timeless management developments that developed into a powerful management topic (Aaker, 1991) & (Burmann, Jost-Benz, & Nicola, 2009)

Brand equity is actually what brand contains; including brand awareness, brand loyalty, brand association and perceived value of the brand.

Customer-based brand equity: Customer-based brand equity is defined as the extraordinary features of brands for which customers are willing to pay a premium price over another brand.

Brand Awareness: Brand awareness is defined as an individual’s ability to recall and recognize a brand (Aaker, 1996) & (Keller, 2003).

Brand Loyalty: Brand loyalty is the attachment that a customer has with a brand (Aaker, 1991).

Brand Image: It is the current view of the customers about a brand which consists of consumer’s opinion, attitude and emotion towards a brand (Gardner & Levy, 1995).

Perceived Quality: It is defined as the customer’s judgment about products overall excellence or superiority in comparison to alternatives brand.

This thesis report has been organized into five chapters. In the following sections, the brief discussion has been prepared for each distinct chapters and contents of the manuscript.

Chapter I: This chapter provides a brief introduction to the study like background information, statement of the problem, the purpose of the study, research questions, research hypothesis, definitions, limitations and significance of the study.

Chapter II: This chapter provides the review of the literature and the theoretical framework relevant to the customer based brand equity of star hotels of Nepal in which the review of books and published articles are done.

Chapter III: This chapter represents the research design and methodology related to the study. The concern of this chapter is with examining the customer- based brand equity of star hotels. This chapter shows the research sampling methods used in data collection. Besides, data analysis techniques adopted in this study are also discussed.

Chapter IV: This chapter is the most important and includes the diagnosis of data. Presentation of the findings from the data analysis stage of the research is done. The tools and techniques that are employed to analyze data in an objective, uniform fashion, adding to the overall reliability and rigor of the research process have been indicated in this chapter. It also incorporates a comprehensive discussion of the research finding on the brand equity of star hotels in Nepal.

Chapter V: This last chapter contains conclusions. It also includes recommendations in the summarized form. This thesis report ends with the conclusion made on research objective and how far have the research succeed in answering research questions. Based on the limitation and recommendations of the work has been made with providing possible directions for future studies.