Tourism Management 32 (2011) 207e214

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Tourism Management
journal homepage: www.elsevier.com/locate/tourman

Progress in Tourism Management

Aspects of service-dominant logic and its implications for tourism management:

Examples from the hotel industry
Gareth Shaw a, *, Adrian Bailey a, Allan Williams b
a
Department of Management, University of Exeter Business School, Devon EX4 4RJ, United Kingdom
b
Institute for the Study of European Transformation and Working Lives Research Institute, London Metropolitan University, United Kingdom

a r t i c l e i n f o a b s t r a c t

Article history: This paper introduces the concept of service-dominant logic as a research paradigm in marketing
Received 19 October 2009 management. It does so in the context of tourism management’s need to engage with wider debates
Accepted 27 May 2010 within the mainstream management literature. Moreover it demonstrates the importance of service-
dominant logic in uncovering the role played by co-production and co-creation in the tourism industry.
Keywords: These ideas are developed in detail through a case study of the UK hotel industry that draws on new
Service-dominant logic
empirical research undertaken by the authors.
Co-production
Ó 2010 Elsevier Ltd. All rights reserved.
Co-creation
Hotel innovation

1. Introduction creator of value (Payne, Storbacka, & Frow, 2008:83; Lusch & Vargo,
2006). The approach highlights the customer e supplier relation-
The engagement of tourism management with research in what ship through interaction and dialog. The tourism sector is
can be called ‘mainstream management literature’ remains highly increasingly based around the customer experience and as such
uneven (Li & Petrick, 2008). In some areas this dislocation is suppliers and consumers interact more closely together at all stages
increasingly being recognised with attempts by tourism of their relationship. The shift to tourism products based much
researchers to incorporate new conceptual frameworks as evi- more on consumer experiences has been linked to Pine and
denced by the recent discussions of knowledge management and Gilmore’s (1998) notions of the ‘experience economy’ or what
knowledge transfer mechanisms within tourism (Cooper, 2006; other commentators have in part viewed more generally as shifts in
Yang & Wan, 2004; Hallin & Marnburg, 2007; Shaw & Williams, consumption from Fordism to post-Fordism (Shaw & Williams,
2009). However, there are other key developments, particularly 2004).
within marketing management that have been largely neglected in The general aim of this paper is to introduce the concepts of S-D
tourism management studies. Of particular note is the relative Logic into a tourism management setting. This aim is achieved in
failure of tourism research to incorporate the growing body of work a number of ways. First, as we argue in this paper, the application of
on what Vargo and Lusch (2004) have described as service-domi- the concepts of S-D Logic provides a framework with which to
nant logic (S-D Logic). Such omissions have also been discussed examine supplier e customer processes involved in co-creating
briefly in the context of S-D Logic by Li and Petrick (2008) who the visitor experience. In this context we present an overview of the
argue ‘that more research is needed on the tenets proposed by ideas of S-D Logic and the current state of research within the
Vargo and Lusch’ (p.241); a challenge taken up by this paper. mainstream literature of marketing management, before going on
The ideas surrounding S-D Logic stands in marked contrast to to consider its implications for research in tourism management.
more traditional approaches based on so-called goods e dominant Secondly we illustrate its applications in more detail using case
logic (Lusch & Vargo, 2006). The former is particularly relevant to material from our current research on innovations in the hotel
tourism management since it ‘is based on an understanding of the industry.
interwoven fabric of individuals and organisations’ (Lusch, Vargo, &
O’Brien, 2007:5). In this context it gives critical importance to the
value-creating processes which involve the customer as a co- 2. The development of service-dominant logic in marketing
management

* Corresponding author. Amongst other premises, S-D Logic views ‘the customer as
E-mail address: [email protected] (G. Shaw). an operant resource.’ capable of acting on other resources,

0261-5177/$ e see front matter Ó 2010 Elsevier Ltd. All rights reserved.
doi:10.1016/j.tourman.2010.05.020
208 G. Shaw et al. / Tourism Management 32 (2011) 207e214

a collaborative partner who co-creates value with the firm’ (Lusch statement that ‘the consumer is boss’. Whilst this may partly be
et al., 2007:6). In this context customers become active partici- mere rhetoric it nevertheless embraces the idea of co-creation,
pants in the work of an organisation. More specifically, Auh, Bell, because consumers ‘who buy and use Proctor and Gamble products
McLeod, and Shih (2007: 361) define such co-creation ‘as are valued not just for their money but as a rich source of infor-
a constructive customer participation in the service creation and mation and direction’ (Lafley & Charan, 2008a: 44). This same
delivery process’ requiring meaningful and co-operative organisation has also developed new ways of building social
contributions. connections with consumers via digital media and, as discussed
More broadly we can view S-D Logic as three key inter-related later in the paper, such processes are already significant within the
aspects. First, it can be viewed as a major paradigm shift in hotel industry.
marketing, responding to the call of many researchers (for a review The co-creation process is just one critical dimension of S-D
see Sheth & Parvatiyar, 2000), for an alternative view of marketing. Logic and open innovation culture. Other key elements include
In this context, Lusch and Vargo (2006) and Lusch et al. (2007) have engaging more effectively with employees and understanding
outlined a new dominant logic for marketing, ‘in which intangi- them as operant resources. This, as Lafley and Charan (2008a : 47)
bility, exchange processes and relationships are central’ (Lusch & argue, embraces a business culture based on ‘curiosity, collabora-
Vargo, 2006: 10). S-D Logic therefore argues that marketing is tion and connectedness’. Re-organising a firm such as Proctor and
a continuous social and economic process mainly focussing on Gamble into one based around the ideas of S-D Logic also requires
operant resources. Second, they have identified nine foundational a new leadership culture based around innovative knowledge and
premises that underpin competition through service. As Lusch et al. skills, which in turn changes the role of the team leader or man-
(2007: 8) explain, such a perspective is related to the key drivers of agereemployee interactions (Lafley & Charan, 2008b; Yang, 2008).
firm competitiveness, applied knowledge and collaboration. This These ideas about collaborative competence and competitive
leads to a third and related theme in which the firm needs to advantage cover the first, two key propositions of S-D Logic
consider ‘environments, customers and partners as operant (Table 1). The ability to innovate is of critical importance and relates
resources’ (Lusch et al., 2007: 8; Li & Petrick, 2008). to a firm’s collaborative competence. This in turn aids both
Whilst acknowledging the inter-related nature of these themes, absorptive competence and adaptive competence (Lusch et al.,
our particular concerns in this paper are the ideas within S-D Logic 2007: Michel et al., 2008). The former relates to a firm’s ability to
that encompass the processes of co-creation, particularly in terms understand and absorb new forms of tacit and explicit knowledge
of both incremental and discontinuous innovations. Michel, Brown, from external sources. The notion of adaptive competence relates to
and Gallan (2008) attempt to demonstrate that S-D Logic these ideas since it describes the ability of the firm to adapt or
perspectives enhance understanding of discontinuous innovations, adjust to changing circumstance. Both are of critical importance to
which are identified as those that both change significantly how firms within the tourism sector given the dynamic nature of
customers co-create value and also impact on market share. To changes in demand. Such notions also relate to a firm’s competency
understand the basis of these ideas within S-D Logic we need to in dealing with information technology at a number of levels, i.e.
give more attention to the contrasts between operand and operant within the firm, as well as including the customer. This in turn
resources. In terms of the former, the customer is viewed entirely as relates to ideas of connectivity which makes ‘the market system
a resource upon which marketers examine, analyse and then more timely and quick’ to respond to changes (Lusch et al., 2007:
promote products to them. This is the more familiar and traditional 10). The increased importance of the digital economy based around
approach to marketing which segments the customer base prior to the web and high speed connections has led to ‘an unprecedented
developing a marketing strategy. In contrast, from the perspective number of touch points between the firm and end-consumer’
of S-D Logic customers are seen as operant e a resource that (Etgar, 2008: 99; Blazevic & Lievens, 2008). These ideas relate to the
produces effects, or co-producers of a service. Auh et al. (2007: 359) third proposition of S-D Logic (Table 1) which also raises the
stress that co-creation ‘has become a central tenet of a proposed
service centred logic for marketing’: whilst Bendapudi and Leone
(2003: 14) argue that it may well be ‘the next frontier of compet-
Table 1
itive effectiveness’. In terms of the firm the process of co-creation Key Propositions of Service-Dominant Logic.
can be significant in helping to lower costs since the customer
participates in parts of the production process (Auh et al., 2007). For 1. Competitive advantage relates to how a firm applies its operant resources to
cater for the consumers compared with how other firms use such a resource.
example, within the tourism industry increasing numbers of 2. Collaborative competence is a main determinant of a firm’s knowledge
consumers use the internet to search, arrange and book their acquisition for competitive advantage.
holidays. For many consumers the search process and the arranging 3. The increasing importance of IT provides opportunities for firms to gain
of holidays around information based on the internet is part of their competitive advantage through collaborative innovation.
4 Firms can obtain competitive advantage through engaging customers and
experience (Litvin, Goldsmithy, & Pan, 2008; Pan & Fesenmaier,
value network partners in co-creation and co-production.
2006). Similarly, the rapid growth of low cost airlines is based 5. Competitive advantage through innovation can be gained by an
around a business model that is highly dependent on the co-crea- understanding of how the customer integrates and experiences service-
tion of booking flights via the internet (Mintel, 2005; Gross & related resources.
Schroder, 2007). In turn the customer benefits by price reduc- 6. Provision of service co-creation opportunities and resources consistent with
customer levels of involvement enhances experiences leading to improved
tions and as the early discussions by Lovelock and Young (1979) competitive advantage.
pointed out such gains are particularly important in the 7. Firms can compete effectively by the adaption of collaboratively developed
consumer service sector dependent as it is on labour-intensive and risk-based pricing value propositions.
processes. It also requires ‘a shift to a buyer-centric business model’ 8a. The firm that is the value network member that is the prime integrator is in
a stronger competitive position.
(Auh et al., 2007: 360) which is focussed around co-creation
8b. The retailer (e.g. hotel) is generally in the best position to become the prime
and consumer preferences. Effectively new products and services integrator.
are developed with close customer involvement. This type of 9. Firms that use their employees as operant resources are able to develop
so-called open innovation culture is being used across a range of more innovative knowledge and skills increasing their competitive
business organisations (Huston & Sakkab, 2006; NESTA, 2010). For advantage.

example, Proctor and Gamble have enshrined within their mission Source: modified from Lusch et al. (1992).
 G. Shaw et al. / Tourism Management 32 (2011) 207e214 209

importance of information technology in providing increased process from the managerial perspective of the organisation. These
competitive opportunities through co-creation of value and co- specific ideas are explored within the context of tourism manage-
creation (see also proposition four in Table 1). S-D Logic views co- ment and more particularly via a case study of the hotel industry. In
creation of value as determined by the user during the actual this context we attempt to draw out some of the managerial
process of consumption. This closely relates to the consumption implication of co-creation with consumers.
experience as discussed by Pine and Gilmore (1999), but co-crea-
tion focuses on the process of creating the product/service. This 3. The experience economy: creating consumer experiences
process, as Etgar (2008) explains, ‘encompasses all cooperation and the importance of co-creation
formats between consumers and production partners’ (p.98).
Evidence also suggests that co-creation depends on a variety of Pine and Gilmore (1998, 1999) have argued that post-modern
factors but of particular importance are the characteristics of forms of consumption relate to a changed economy based on
individual consumers with, as Prahad and Ramaswamy (2004) experiences rather than just services and goods. In their recogni-
argue, each consumers uniqueness affecting the process. tion of the so-called emerging experience economy, they encap-
The importance of the characteristics of the customer in the co- sulated previous thinking about the growing importance of
creation process is highlighted in proposition 5 as shown in Table 1. consumer experiences as discussed by Holbrook and Hirschman
Lusch, Brown, and Brunswick (1992) identify six main factors that (1982). Pine and Gilmore (1998) went further and highlighted the
determine the extent of the customer’s role in co-creation (Table 2). significance to both consumers and producers of creating memo-
Smith and Wheeler (2002) and Etgar (2008) also stress that the rable experiences associated with the consumption of services and
customer skill sets are a source of ‘touch points’ and can aid in the products. Memorable experiences are particularly associated with
management of their experiences (see also Schmitt, 2003). Such excellent design, marketing and service delivery and have two
touch points are numerous in tourism as highlighted by Shaw and dimensions; firstly, consumer participation which ranges from
Williams (2009) and also play a key role within the co-creation passive to active and, secondly, the connection which links the
processes identified in S-D Logic. The factors highlighted in Table 2 customer to the experience event (Pine & Gilmore, 1998). The
suggest that engagement in co-creation is highly selective which creation of such experiences is of obvious significance in tourism
has implications for the range and management of co-creation and further stresses the importance of co-creation. This is due to
processes involving consumers, at least in terms of the initial the demand for customised experiences as the interactions of
phases of product and service innovations. consumers with providers change (Etgar, 2008). Single exchange
The descriptive co-creation model outlined by Etgar (2008) transactions are changing into relationships wherein value is
embraces five key stages, namely: (1) the development of ante- created through the interaction process itself (Gronroos, 1990;
cedent conditions related to macro-environmental factors and Etgar, 2008). This idea in turn relates to the notions of open inno-
changes in consumer culture. This includes the ways in which vation and S-D Logic. As Lusch et al. (2007) stress, the shift to S-D
consumers interact with service producers; (2) the development of Logic is also the difference between value delivery (under Goods
motivations that encourage consumers to engage in co-creation. Dominant Logic) and value creation. The latter is associated with
These include economic and socio-cultural drives as well as risk co-creation, with its emphasis on customers as an operant resource,
reduction, whilst Etgar (2006, 2008) argues that cost reduction can and has become increasingly important in many parts of tourism. It
often be a key motivator for consumer co-creation. Certainly the is also worth stressing that Lusch and Vargo (2006) argue that
use of internet booking for holidays and low cost airlines saves time historically value has always been co-produced, but only recently
and money. This was a major driving force for the early take-up of have co-creation processes been identified and consciously inte-
e-booking although evidence suggests that internet searches for grated within service management. As they point out, this shift to
holidays is now part of a pleasure activity itself (Oorni, 2004); (3) S-D Logic is related to marketing management practices rather than
the calculation of co-creation cost benefits; (4) activation during the ontology of value creation.
which consumers become fully engaged in the co-creation activi- Etgar (2008) highlights how the characteristics of products
ties; (5) the generation of outputs and evaluation of the co-creation (p.100) influence the unevenness of co-creation processes across
process Etgar’s (2008) work is significant in highlighting the different business sectors. The key characteristics are the existence
components and stages of the co-creation process as well as in of major differences in the attributes of products which maybe both
linking with the fundamentals of S-D Logic. However, as Etgar physical and perceived. In terms of consumer perception, the
explains it is very much an ‘explicit consumer strategy’ (p.105), perceived importance that consumers attribute to such differences
whilst in this paper we are particularly interested in the co-creation is of particular significance. Within tourism such differences are
often clear to consumers and, in these circumstances, consumers
are more willing to get involved in the co-creation process.
Table 2
Conversely, in terms of value creation, it is critical that producers
Key factors conditioning customer contributions to the co-creation process.
also fully recognise the importance of co-creation, especially in
Factors Impact on Co-creation terms of innovation.
Expertise Consumers likelihood of participation depends on expertise Pine and Gilmore (1998) originally saw the value creation
(co-ordination of skills, efficiency and evolving experience). process from the producers’ perspectives as being associated with
Also importance of computer based skills.
Control More involvement when individual wants to exercise some
five main principles of designing the customer experience, all of
control. which are pertinent to tourism. Of course what Pine and Gilmore
Consumer Increased level of involvement if consumer has requisite did not discuss was the critical importance of implementing such
Capital cultural or physical capital. ideas through the innovation process, which could be significantly
Experiential Gaining of experiential benefits involving new activities.
strengthened by the co-creation processes embedded with S-D
Benefits
Economic Perceived economic gains play a key role in co-creation Logic. Therefore, whilst some researchers within tourism took up
Benefits processes. the challenge of the ‘experience economy’ this was somewhat
Time Consumers with more discretionary time more likely to engage partial (Shaw & Williams, 2004; Weiermair & Mathies, 2004). Since
in co-creation. Pine and Gilmore’s initial work, consumer experiences have been
Source: modified from Lusch et al. (2007) and Etgar (2008). increasingly transformed by the growing importance of the world
210 G. Shaw et al. / Tourism Management 32 (2011) 207e214

wide web, and in particular, the development of social network 2007) and the more substantive but general review by Li and
sites made possible by Web 2.0 technologies (Buhalis, 2003; Petrick (2008). This stands in marked contrast to work on other
Buhalis & Laws, 2008). As Buhalis and Laws (2008: 612) explain, sectors such as financial services (Auh et al., 2007), services more
the developments of on-line communities ‘makes it easier for generally (Michel et al., 2008) and business services and co-
people to obtain information, maintain connections, develop rela- creation in the public sector (Kuusisto & Viljamaa, 2004). Clearly
tionships and eventually make travel related decisions’. Moreover there is considerable scope to explore the ideas of co-creation
social network sites, blogs and twitters are means by which within a tourism context, and this is illustrated here by empirical
consumers can provide views on travel experiences (Wang & material drawn from recent research on innovation and co-crea-
Fesenmaier, 2004). The most recent growth has been associated tion within the hotel industry.
with Twitter the micro-blogging website that had more than 6 m
users posting updates each month in 2009 (Rushe, 2009). As Google 4. Co-creation processes from a service-dominant logic
(2008a: 1) explain, the ‘on-line market has rapidly become the perspective: examples from the hotel industry
number one resource for the travel consumer’ in the UK. Their
research suggests that in the first quarter of 2007 there were 20 m S-D Logic emphasises that the role of consumers in the co-
on-line searchers in the UK e representing almost 41% of the creation process is critical to understanding competitiveness. This
population. Other research from Google (2008b) claims that, in the is particularly so, as argued earlier, in terms of absorptive and
UK, the average time spent on-line per week is 12 h and that adaptive competences (Stefan, Brown, & Gallan, 2008). The focus on
a typical search for beach-based holidays involves, on average, 12 the customer as an operant resource also opens up different roles
different searches across 22 travel sites. for customers in the co-creation process. According to Sheth and
Of equal significance is the enhanced potential offered by the Mittal (2004), there are three key roles with customers as users,
web for co-creation to take place in the virtual environments rep- buyers and payers. These, of course, apply to customers in different
resented by social network sites. Such sites are increasingly contexts. In terms of S-D Logic, these in turn relate to value-in-use
important sources of marketing information about consumer (user’s role), value-in-exchange (buyer’s role) and the payer’s role
experiences. These developments have led some commentators to embraces both value-in-exchange along with value-in-use (Stefan
suggest we are now in a ‘conversation economy’ et al., 2008). Discontinuous innovations can and do change
(Hotelmarketing.com, 2007). The rapid growth of these social, e- customers’ roles, as Stefan et al. (2008) illustrate with a range of
media sites have in part shifted power to consumer communities e short examples. Within the hotel industry, these changing roles are
at least in terms of market information (Rosen, 2000). Increasing associated with innovations particularly, though not exclusively,
numbers of consumers now have their experiences shaped by on- surrounding e-commerce.
line searches together with the use of multi-media (Thinkbox In this part of the paper we want to draw on a number of case
2008) and social network sites such as TripAdvisor (Buhalis & study to illustrate the changing nature of co-creation processes and
Laws, 2008). Research into the leading destinations and accom- the importance of customer as operant. These processes require
modation websites in terms of page rank for the UK, in 2008, certain types of expertise from the consumers as highlighted in
reveals that TripAdvisor (5.44%) had the largest market share, fol- Table 2, but as we shall show there are also implications from
lowed by Travelodge (4.98%), TripAdvisor UK (3.95%), Booking.com a management perspective. Before doing so it is necessary to set the
(3.11%) and LateRooms (2.62%) (Hitwise, 2008). Moreover, such work in context and explain the selection of case studies. Our
trends have brought a new and important dimension to co-creation examples are drawn from a wider survey based on a convenience
in parts of the tourism industry. According to Kirkby (2008) it is sample which forms part of a research project on internationalisa-
increasingly recognised that on-line socialisation amongst tion and innovation in the hotel industry. Table 3 shows the selected
consumers significantly facilitates producer e customer engage- sub-sample of case studies used in this paper represent a range of
ment. Many of these consumers are looking both for conversations national independent hotels (medium-sized enterprises) through to
with each other, together with expectations of some interaction international hotel companies. As Table 3, illustrates a variety of key
with and influence on producers. Within the context of tourism informants were interviewed and, in this respect, variations in
managers, Litvin et al. (2008) highlight the need to develop new emphasis can be expected relating to the interviewee’s position
ways to understand the influence of such e-conversations to within the organisation. However, all the respondents were asked
tourism organisations. We would argue that S-D Logic provides an the same question in interviews which lasted around 2 h on average.
useful framework for such an understanding. The interviews focussed on aspects of innovation, knowledge and
Despite its obvious value, engagement with S-D Logic in co-creation. In terms of the latter, this included co-creation along
tourism has been limited and partial, including notions of the entire value chain along with co-creation with customers. Given
customer participation in service encounters (Liu, Liv, & Chen, the aims of this paper, we focus mainly on the latter.

Table 3
Case Study of Hotels from the Survey Sub-Sample.

Hotel Code/Type Characteristics Turnover Approx. GBP, Key Informant

12 mths to 2008
A National Hotel Group Upscale 4e5 million Group IT Manager
B National Hotel Group Upscale 5e6 million Revenue Manager
C National Hotel Group Micro Boutique 4e5 million Marketing Manager þ Finance Manager
D Major Hotel Chain part of Mid-Upscale þ700 million Accounts Manager
International Group
E Medium-Sized Enterprise Upscale Not Specified Owner/Managing Director
F Medium Sized Micro Eco Boutique New Start Up 2009 Managing Director
G International Hotel Chain Budget þ280 million IT Director
H International Hotel Franchise Multi-Brand 1e2 million (Europe) Vice-President Global Sales

Source: authors’ interviews.

 G. Shaw et al. / Tourism Management 32 (2011) 207e214 211

Other attempts to report consumer co-creation, for example in Hotel A illustrates the complexity of co-creation both with the IT
financial services (Auh et al., 2007), have taken a quantitative supplier (Apple) and co-creation with the consumer. In the case of
approach using information from customers. Our research meth- the former the hotel co-produced with Apple an in-room enter-
odology centres on the producer and is qualitative in nature given tainment system based around an iMac solution. This required
the need for in-depth empirical information in order to understand a high degree of product testing and experimentation by the hotel.
producer’s activities around co-creation. Our hotel survey reports According to the interviewee the starting point was a great deal of:
on two key themes; first the extent of co-creation with customers ‘trial and error, we tried out a few bedrooms and got guests to fill in
and, secondly, the detailed processes involved in this process. questionnaires and see the feedback about what they liked’. Closer
In terms of the former all the cases in our sample exhibited some collaboration was then needed with customers to help perfect the
degree of customer interface as one would expect in an industry product. This took the form of: ‘rather than trialling it on a customer
dominated by the service experience. However, only a few of the who could generate a complaint, we would maybe give him (sic)
interviews revealed any collaboration of the type identified within a bit of a prep beforehand and say, look we’re trying this out and
S-D Logic, i.e. where the consumer was acting as an active operant here’s the bottom line’. In many instances it was regular customers
resource in the co-creation process. At a broad level two distinct that were used primarily because they were perceived as having the
groups of hotels can be identified in terms of the extent of customer user skills or, as Lusch et al. (2007) and Etgar (2008) argue, the
co-creation. The first group, which represented the majority of necessary expertise and consumer capital (Table 2). This stage
cases in our sub-sample, were not actively embracing co-creation involved a trial with 60 customers giving detailed feedback on their
as an overt part of the operational or marketing strategy, although experiences. As the interviewee explained, the customers were
some were beginning to think about how to engage more with interviewed by the hotel staff ‘on one to one basis the night after
consumers. This group included hotels of all types from budget to using it [the iMac in-room system] and went through it and you
Five Star, covering cases B, D, F, G and H in Table 3. In contrast, the know they kind of helped us build a business case’.
second group, represented by hotels A, C and E, had one key The final co-creation stage involved a two month period during
characteristic in common, that being their keenness to innovate, in which the iMac product was placed in 10 rooms in one of the
addition to being actively involved in consumer co-creation. As company’s London hotels. At this point they estimated that the
with the first group, these hotels were drawn from diverse parts of product ‘was probably 70% of the way there’. In this context the
the industry. This is not to imply that the hotels in group one were system was being tested on new, less experienced customers.
not innovating, but rather that the interviews suggested that According to the interviewee these final stage tests were ‘used to
innovation did not seem to be a key driver in their business plan. gauge other guests concerning the effectiveness’ of the iMac tech-
In terms of the detailed processes of co-creation with customers, nology in the bedrooms. In the case of Hotel A the co-creation
it is useful to contrast the approaches taken by the two groups of process surrounding the innovation was developed across three
case study hotels. Within the first group the attitude to co-creation key stages, each of which had differing elements of co-creation
was in many instances somewhat tentative. For example, in the using the consumer as operant in slightly varying ways. Moreover,
case of Hotel B the response to our questions about co-creation was information from these stages was fed back into the co-creation
to talk in general terms about guest comment cards stating ‘She with Apple enabling the product to be further refined.
[the ‘champion’ appointed at each hotel] sits down once a month Our second case of co-creation involves a design-led innovation
and goes through them one by one, and anything negative she and related business model being applied by hotel C (located in
reacts to’. The hotel group had recently started to look at comments Birmingham). In this case the innovation is based around bedrooms
on TripAdvisor ‘making sure that if anything negative is posted we that are prefabricated pods. This, as one of the interviewees
respond to it’. As the interviewee (the revenue manager) went on to (marketing manager) explained, was ‘very much a business deci-
explain ‘Other than general ad-hoc comments I really don’t think sion and a niche in the market and it bridged that gap between
I’ve done anything major with what we have’. One exception being; budget and luxury’. The early stage of co-creation, in this case, was
‘Refurbishments, we tend to listen to what our guests tell us to test the ideas of the pod-designed rooms on an ‘initial reaction
particularly with in-room technology, you know there’s this big from customers, based literally on a description and then visuals’.
question of whether we will still charge for Wi-Fi or not’. The one Given the nature of the innovation it soon became apparent that
pro-active approach they had introduced was that guests who book consumer reactions needed to be more fully gauged by constructing
via the website get an e-mail from the Managing Director asking for a prototype. This was because ‘it’s a very difficult concept to visu-
any comments. However, the respondent stated, ‘he regrets doing alise because there was nothing else like it’. Hotel C also had an
this now with the amount of work it’s making’. This contrasts with extensive customer monitoring system based on face-to-face
the increasing importance noted in the research literature on the discussions with customers, in-room questionnaires and social
harvesting of customer opinions across the hotel industry (Pekar & network sites, particularly TripAdvisor. However, unlike Hotel B,
Ou, 2007). It is worth pointing out that the hotel’s response to the marketing manager at Hotel C considered TripAdvisor as
comments on TripAdvisor was itself unusual within this group. a domain for consumers and had never sought to engage
Examples from the second group of hotels highlight their drive consumers directly through the site. For Hotel E, however, the
for innovation as a competitive strategy together with increasing provenance of customer feedback generated by social network sites
awareness of and capability for co-creation. In hotel A, the was difficult to establish:
importance of innovation was emphasised by the interviewee at
‘TripAdvisor is something that we look at, the down side of
the outset. This was enabled by the close management structure,
TripAdvisor is the fact that it is an open community not a closed
for example between the group’s managing directors and the head
community and actually what a few hotel groups have been
of IT (the interviewee) who stated; ‘I can go and chat to him and
doing is putting bad reviews on competitor sites, really notice-
talk to him about new technology and he’s been very passionate
ably actually, a couple of groups are quite bad at that.’
all along the way of investing in technology’. One of the key
innovations discussed concerned the development of in-room Hotel E, is a family owned luxury group, which operates in
entertainment, which across the hotel industry is seen as an a market where higher levels of customer service and engagement
increasingly important competitive product (Martinez-Roz & would be expected compared to the budget sector. Imaginatively
Orfilia-Sintes, 2009). titled feedback cards provide Hotel E with information about their
212 G. Shaw et al. / Tourism Management 32 (2011) 207e214

room and conference services. The feedback is scrutinised by Java and its really slow, all the way through to fantastic and then
management committees, which seek to improve and innovate the a whole spectrum of comments in between, and we used that to
service provided. More innovative is the use of focus groups, drawn influence the site before we launched the website.. You know,
from key clients: there’s a group of early adopters, you know when you start to
profile people, there is always a group who describe themselves
‘They love doing it and also they get flown over to Spain and put
as early adopters and they like innovation and gadgetry and
in a nice hotel for two days and there’s a wine tasting in the
then they got themselves into that network.
evenings that’s fun, so it’s only four hours of work for them but
we work them hard.’
In other respects, however, Hotel G was self-limiting in its use of
These relaxed meetings are essential in facilitating mutual consumers as operant resources. The business model had two key
learning on behalf of the client and the service provider. For performance indicators of lowering costs through efficiency gains
example, a leading law firm expressed dissatisfaction with the and service improvement. In both respects, these were more
provision of 24 h rolling coffee breaks, requesting that the Hotel dependent upon innovation within the supply chain than upon
‘make it more funky’. Through engaging the client as an operant engaging guests in co-creation interactions.
resource, Hotel E was able to establish that ‘funky’ meant: (i) These case studies provide evidence of the contributions made
delivering ‘the Starbucks’ experience’ in the hotel context, (ii) by customers to the co-creation of innovation, a key feature of S-D
flexibility in the timing and delivery of the service, and (iii) an Logic. In such situations, as Stefan et al. (2008) argue, customers are
element of fun. The improvement to the service was subsequently required to play new roles conditioned by certain key factors (Table
achieved through the creation of a ‘sweet-shop’, which was per- 2). This interface with customers is important in a number of ways
sonalised for different clients, and via the introduction of tech- and as Sundbo (1997) points out innovation often focuses on
nology that could deliver various styles of coffee on demand. The a specific customer need. Within the hotel industry there is an
personalisation of hotel services at Hotel E can be relatively large emerging trend of customers being viewed as an operant resource
scale, such as the overhaul of conference hospitality, but is more in the co-creation process surrounding innovation, although this is
often conducted at a micro-scale with reference to individual guest not as yet the dominant paradigm in our sample (e.g hotels B, D, F, G
histories. The managing director acknowledged that there are and H do not engage in such a process).
limits to the involvement of the client in the innovation process, There are important management implications of such co-crea-
because it would be difficult to maintain elements of surprise that tion processes, not least in how businesses engage with the
are deemed essential to maintaining customer satisfaction; ‘we call customer, although our case studies also emphasise the need to
them critical non-essentials, so it’s those silly little touches that you guard against over generalisation. In this context our case studies are
go away and say “oh wow you’ll never guess what”’. merely representations of a range of hotel types. The case studies
Hotel E has recently introduced an innovative multi-sensory highlight the importance given by hotel management to customer
dining experience, where customers are seated ‘back stage’ to view expertise although this is not to deny that experiential, economic
the processes and skill it takes to prepare their menu, and to and time considerations may also be critical to individual
interact with the staff. The managing director argued that the consumers. Moreover, one case study (hotel E) emphasises that
consumers’ role as co-producers did not extend to the innovation of some firms understood the importance of a virtuous circle of mutual
the physical product, but was significant in shaping the offering. For benefits. Customers were more likely to be operant co-producers
example: where there were experiential and economic benefits, such as a trip
to Spain in return for focus group participation. This highlights the
someone made a comment about, “I don’t know who does what
customisation of innovation as discussed by Stefan et al. (2008) and
in the kitchen”, so we changed the aprons so the . banqueting
Berry, Shankar, Parish, Cadwallader, and Dotzel (2006).
team wear blue, . [another] team wear green and the pastry
Hotels also sought customers who could articulate views on
team wear red aprons, and actually that’s very low cost tiny
potential innovations, and this required knowledge of the product
tweak but that change means people walking in and it becomes
or process, with one firm (hotel A) favouring regular customers as
a talking point
operants. The same hotel had a hierarchical ‘map’ of their
Finally Hotel G, a budget hotel chain, engages the specific customers, engaging with selected regular customers in the
capabilities of customers to improve the technical interfaces formative co-creation stage of innovation and other customers in
between the hotel and the customer. During the launch of a new the confirmative final stages of testing prior to rolling out the
website booking engine, Hotel G utilised the competencies of two innovation across the hotel network. This required a considerable
communities. First, their call centre reservation team trialled the degree of management expertise in the different stages of co-
website and provided feedback to the director of technology. creation.
Second, the Hotel made use of a technical forum, comprising 2000 Another important area of importance for hotels is that
people, drawn from a membership list of 1.6 million. The director of customers involved in co-creation should have expertise in IT. At
technology explained: one level this may only require the ability to deal with on-line
surveys or participate in social network sites. However, co-creation
we gave those 2,000 technical forum members a link to the beta
can also demand relatively high levels of competence, as evidenced
version of the site, which was a live fully functional version of
by the firm (hotel G) which worked with a specific group of
our website, different URL, and then we had that relationship
customers to test out an initial innovation. More generally, Bitner,
with a company called Survey Monkey, so completely inde-
Brown, and Meuter (2000) explain that IT can be a significant tool
pendent to us, asked them to help and give us word of mouth
through which customers co-create value in such encounters.
feedback, tell us instinctively how you felt and we had every-
The case studies also highlight the need to balance the focus
thing from, I’m using RU61, you’re using Google maps and a lot of
given by Lusch et al. (2007) along with Etgar (2008) and others, to
the conditions fostering customer involvement in co-creation,
along with an understanding of how this interacts with the firm’s
1
Rollup v.6 (RU6), a term used to denote the upgrading of software, often ability to understand and negotiate such processes. The latter has
associated with Microsoft Exchange Servers and operating systems. management implications that, in part, relate to those customer
 G. Shaw et al. / Tourism Management 32 (2011) 207e214 213

conditions identified in Table 2. For example, to harness customer both further along the supplier value chain, and in terms of the
expertise the firm requires a management environment which engagement of employees in knowledge sharing via different
embraces knowledge sharing amongst its workforce. Etgar (2008) means (Salis & Williams, 2010).
goes further arguing that those employees who act as ‘boundary
spanners’ (Shaw & Williams, 2009) are critical to the process of co- Acknowledgements
creation. These ideas also relate to shared goals and understanding
amongst staff. The case studies show such experiential benefits The authors would like to acknowledge the funding provided by
(Table 2), to varying degrees, as was visible in the case of hotel A ESRC and the Advanced Institute of Management for this research.
where the group IT manager played a key management role in the
co-creation of the innovation.
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