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Why Corporate Social Responsibility is Important for Developing Customer Loyalty in Hospitality Industry?

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Type of Academic Paper – Report

Academic Subject – Business

Word Count – 2822 words

 

Introduction

In today’s era of a socially and ethically responsible world, the customers’ perception of an organisation’s CSR activities can influence their buying decision (Sen and Bhattacharya, 2001; Werther & Chandler, 2006; Mullerat, 2011). This is the reason the significance of carrying out CSR activities by an organisation has become highly important for its competition, market share and sales etc. (Broomhill, 2007; Miller, & Lewis, 1991; Nolan Norton & Co, 2009). In today’s socially aware world, it is highly essential for organisations to demonstrate socially and ethically responsible behaviour while carrying out their business activities (Broomhill, 2007). It is because nowadays, Corporate Social Responsibility has been observed as a necessary strategy for the survival of most companies worldwide (Crane, & Matten, 2007). According to a study, 42 per cent of the perception of customers about an organisation depends upon its CSR activities (Forbes, 2013). Apart from the benefits that CSR offers to the community, it has an array of added value to the corporation and its stakeholders. (Harrison et al., 2005).

CSR has been highlighted as an important aspect that could help an organisation to create its brand image in the eyes of consumers and can influence their buying decision (Broomhill, 2007; Carrigan, & Attalla, 2001). A significant amount of research has been performed on the benefits CSR bring to companies, spanning from benefits directly related to financial performance and others that are indirectly related to financial benefits; through enhancement of the company’s image, increasing brand loyalty and others (Forehand and Grier, 2003; Lichtenstein et al., 2004; Swanson, 1995; Drumwright, 1996). The importance of ethically responsible business practices has been stressed and recognised (Johnson, 2014; Jerome, 2014; Deloitte, 2010). In this regard, in this essay, the importance of CSR for developing customer loyalty in the hospitality industry will be analysed. To explore the issue, an example of two hotels, Hilton and Marriot, will be used to identify the importance of CSR for developing customer loyalty.

Corporate Social Responsibility in the Hospitality Industry

Businesses and societies are interlinked, reliant and beneficial for each other. A society can offer customers, human resources, guidelines and plans to business while business offers employment,

merchandise, creation and taxes in return (Crane, & Matten, 2007). So both are reliant and in need of each other. Therefore it is essential for both to collaborate, benefit each other while joining forces instead of working at opposite ends. According to Porter and Kramer (2006), the policies of society and decisions made by the business should be parallel with each other to have a collaborative union between the two, which benefits each other.

When a business considers society and walks towards commercial success by respecting and considering people, communities and ethics of the society and its environment, it is performing corporate social responsibility (Clark, 2006; Porter & Kramer, 2006). Generally, there is not a single definition of corporate social responsibility agreed upon by the masses, but the masses accept that it has to do with the betterment of the community (Redford, 2005). CSR can be taken as achieving or surpassing a society’s established expectations by the businesses (Butcher, 2003). According to Roberts (2007), for an organisation, CSR is about performing business reliably in which society, its natural environment, people, market place and workplace are not negatively affected. Every decision that a business takes can affect society, including the national and global community; therefore, businesses are responsible for making a positive impact and avoiding anything that negatively affects the communities (Paton, 2007).

CSR advances an organisation’s image and reputation in society and lifts their morale, and makes them successful in business (Afiya, 2005). It can also pilot the companies’ into a more prolonged and consistent increase in profits (Butcher, 2003). A company can reduce its operating expenses by conserving and reducing the amount of waste that can be conveyed to its customers as sustainable activities resulting in a business boost (Clark, 2006). A firm’s corporate identity can be controlled and informed to its customers resulting in the CSR activities as a component of the firm’s image in the eyes of its customers and the society it operates in (Atakan & Eker, 2007).

Some organisations don’t consider their goals and strategies, which is why their CSR endeavours are not effective but are rather considered common and incoherent (Porter & Kramer, 2006; Redford, 2005). Most of the CSR efforts done by organisations are generic activities like public relations, which have nothing to do with business operations (Porter & Kramer, 2006). Many other CSR programs are only for general business purposes lacking the social cause (Jones,

Comfort & Hillier, 2006). Society and customers, activists, employees, and governments give stress to the companies for CSR and companies in many cases even deliver them too, but the efforts are not integrated with activities related to the core business (Jones, Comfort, & Hillier, 2006).

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According to research, around 80 per cent of the best, ten hotel companies stated that they donated a considerable amount to charity (Dhir, 2014). Similarly, around 40 per cent of these hotel companies reported having CSR as a part of the companies’ mission statement, and 60 per cent stated to have policies concerning diversity (Dhir, 2014). The researchers examined annual reports of the best ten hotel companies and concluded classification based on human resources, morals and vision, society, marketplace and environment. It was discovered that the widest and broadest CSR reporting was of Hilton Corporation, while Marriot was placed second best to have the most comprehensive CSR reporting (Dhir, 2014). According to Okukmus, Holcomb and Upchurch (2007), many hotel companies can improve their CSR reporting by making it more comprehensive, and they need to show hospitality to society.

Disaster management is not listed in the generally accepted CSR literature of hotel companies which was needed after the Tsunami of the Indian Ocean that came in 2004. However, the Intercontinental, Accor, Six Senses, Hilton group. etc., give away around USD 2.5 million in aid for Tsunami victims (Henderson, 2007). CSR activities need to be reasonable and balanced for noncommercial and commercial causes (Henderson, 2007).

Impact of Hospitality Industry on the Environment

When we consider the hospitality industry altogether, they are the basis of considerable waste and devour a lot of resources (Deloitte, 2010). According to Bohdanowicz (2006) estihotels’ hotels’ 75% impact on the environment is to be caused by consuming resources unnecessarily. It gives rise to costs related to operations and wastes resources. The major factors which affect the environment are Water, Energy, and Waste.

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Water

Visitors and inhabitants both need ample and consistent supply of clean water for everyday living, including cooking, bathing, cleaning and drinking. Water is also necessary and essential for hotel facilities such as pools, hot tubs, gardens etc., required by visitors. According to Pigram (1995), water is essential for agriculture which helps sustain tourism. Therefore, we can say visitors and tourists at the individual level require more water than society’s inhabitants (Essex, Kent & Newnham, 2004). According to Salen (1995), a rural family can live for 3 years on 15000 m3 of water than an urban family, which can utilise it for 2 years. The same amount of water will be sufficient for 100 guests of luxury hotels for around two months only (Holden, 2000). Tourists in regions with dry climates can consume up to 440 litres of water in one day, and comparatively, it is around twice the mean consumption of Spanish people (UNWTO, 2008). These impacts can harm the environment rigorously in areas where required systems and infrastructure are unavailable.

Energy

One can achieve great cost reduction by slight energy regulation as unnecessary energy use can be very expensive. The mean energy use for each room in a hotel over a period of one night is about 130 megajoules (Gossling et al., 2005). Hotels have amenities and facilities, i.e. bars, pools, restaurants and large rooms that use a lot of energy for each guest than the average resident of the society (Gossling et al. 2005:6). If we look into studies, we see, on average, a hotel in one night gives out carbon dioxide levels up to 20.6 kg (Gossling et al., 2005).

Waste

According to a study, hotels generate a lot of waste which is a very noticeable impact on the environment, aside from consuming excessively (Bohdanowicz, 2005). Similarly, estimation for hotels is that a hotel generates 1kg of waste for each visitor for each day on average. Around 30% of the total waste generated by hotels can be reduced by reusing and recycling (Bohdanowicz, 2005).

Importance of CSR for Developing Customer LoyaltyAs of today, corporate social responsibility (CSR) is a significant part of the hotel industry (Dhir, 2014). Because of the idea that CSR can influence customers’ loyalty (Dhir, 2014; Deloitte, 2010; Harrison et al., 2005; Forehand and Grier, 2003; Lichtenstein et al., 2004). In current times, climate change and global warming are important concerns globally, and the hotel, tourism and travel industry makes up for 5% of total carbon emissions worldwide (Clark, 2006). According to studies, it is expected to rise to 130% by 2035 (Drake, 2012). So such industries need to create loyalty of customers by working on CSR.

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According to Deloitte, the companies’ hotel industry should create a brand responsible for the environment and has a full view of environmental protection entrenched in their business plan (Deloitte, 2010). As time passes, the decision making of businesses will be more and more influenced by sustainability; however, factors such as the cost of a product, the worth of a brand and expediency of a product will influence the sales and spending of consumers. Deloitte (2010) says that environmental sustainability will turn into a vital concern for businesses by 2015. Organisations will have to teach themselves about shifting consumers and their tastes and make the best use of the market position businesses will have to develop and sort out their approach.

Hilton CSR Activities

Hilton Worldwide corporate responsibility commitment is “Travel with Purpose” which offers importance mutually to its companies and society within four parts- the establishment of chances given to persons to reach their maximum potency; reinforcement of society wherever Hilton Worldwide is operating; rejoicing the potential of tourism and cultures; to live sustainably and to achieve it by use of thorough examination, enhancement and measurement of natural resources belonging to the company (Hilton Worldwide, 2014). The main accomplishments in the report are:

  • The minimisation of waste generation by 26.8%, reduction in output of carbon by 20.2 per cent, energy usage by 13.6%, and conservative water use and reducing it by 13.1% as of 2009.
  • Hilton Worldwide is the first multinational organisation to attain ISO 50001 certification for all of its hotels.
  • Declarations of global opportunities worldwide target around 1 million youth as of 2019 by making them achieve their maximum effectiveness and capability.
  • Starting a tool for business, society, and governments to make the best use of youth and move forward youth’s agendas, programs, and finances by the Global Youth Wellbeing Index declaration.
  • Reached 73,000 young public globally by conducting more than 600 events meant for career knowledge as a division of [email protected]
  • Since the initiation of operation: Opportunity in 2013, around 2000 veterans of the USA and people from their families were hired.
  • Around 2000 managers and departmental chiefs were trained for the awareness of child trafficking, which reached over 45,000 subordinates and team members via training of code of conduct.
  • In the Global Service Week, around 2400 worldwide projects were initiated and contributed 200,000 helping hours.
  • Took part in the Carbon Disclosure Project.
  • Around 700 hotels were helped and supported by Living Sustainably drive for awareness of the environment.

(Hilton Worldwide, 2014)

The aforementioned CSR initiatives of Hilton were aimed to reduce the environmental impact of its business on natural resources, improving sustainability and social welfare.

Conclusion

Based on this essay’s discussion, it was evident that CSR is important for developing customer loyalty in the hospitality industry. The hospitality industry tends to impact the environment and cause deterioration of the natural resources; water, energy and waste. Moreover, in today’s socially and ethically aware world, the eco-friendly trend and social welfare requirements have given rise to hospitality businesses’ CSR. Hospitality businesses need to meet their customers’ needs, and today, the customers are influenced by companies’ sustainable and social welfare initiatives. In this regard, it has become necessary for hospitality businesses to take CSR initiatives to get various benefits that include customer loyalty. It was evident from the examples of Hilton and Marriot hotels that these hotels have increasingly involved in CSR activities and have been investing heavily for social welfare and environmental sustainability. Moreover, both the companies were found to have comprehensive CSR reporting. Through their CRS activities, the Hilton and Marriot hotels highlighted their care for the community and social welfare so that customer psychology, decision and loyalty could be influenced. Using the services of a socially responsible hotel, customers would feel like they are bringing a part of social welfare and environmental sustainability and would be motivated to buy its services repeatedly.

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