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70710604 Michelin Stars Ranking System

Aug 26, 2014

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Running head: THE USE OF MICHELIN STARS RANKING SYSTEM AS A MARKETING TOOL IN HOSPITALITY ESTABLISHMENTS 1

The use of Michelin Stars Ranking System as a marketing tool in Hospitality Establishments Aida Glion Institute of Higher Education

The use of Michelin stars ranking system in hospitality establishments Table of Contents

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The use of Michelin stars ranking system in hospitality establishments Abstract

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This paper investigates the use of the star rating system used by Michelin, in the hospitality industry as a marketing tool, with the aim of advising Alain Ducasse; a Michelin rated establishment in London. The approach is based on finding out whether the system can be a marketing tool for promotion of the organizations services. The competitive advantage that emanates from holding a better rate may be effective in fostering the organizations objective. This paper takes into consideration the customers perspective by studying both; the rating system and the customers behavior. In order for a Michelin rated establishment to be well perceived, the Michelin rating system must first be well perceived by the market.

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Chapter 1 Introduction Marketing is one of the important aspects in any business. Hospitality industry is made of different establishments that compete for customers from different parts of the world. The Michelin stars ranking system has been accredited for being the best known star system (Blah Le Guide Rouge, 2003, p. 16). Stars are given to restaurants in the hospitality industry to acknowledge their standard. One star represents a very good establishment in its category, two stars mean excellent cooking that is worth a detour, and three stars represent an exceptional cuisine that is worth a special journey. An establishment that has acquired many stars performs better than other firms and therefore the Michelin starts system has an impact on business as a marketing tool. The system rates the quality of food separately from the level of luxury. The Michelin rating system is the most respected and best known star ranking system for quality and cuisines of restaurants in Europe (Blah Le Guide Rouge, 2003, p. 16). The respect and extend in which customers value Michelins ratings, may or may not be transferred to the brand of Alain Ducasse. The research will examine the value placed on Michelin rated establishments before and after the rating. Alain Ducasse had two stars in 2009 and three stars in 2010. The management has to decide whether to retain Michelins ranking or suspend it, after evaluating the effect it brings on the brand of the organization. According to Marylou Costa (2011), industry rankings are highly esteemed in the industry especially in the valuation of performance, and future potential of organizations brands. This paper will determine whether this statement is true. Problem statement The effect of star rating systems in the hospitality industry bears great uncertainty and has unclear significance. One would expect a four star hotel to charge more than a three star

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hotel which are located in the same city, but be surprised to find a contrary reality to these perceptions. The ratings could be influenced by many other unanticipated factors including tax obligations, among other quantitative measures which require research (Martin, 2012). These uncertainties call for immediate research on the relationship between the effectiveness of the rankings and the customers behavior. According to Grossman David (2004), there is a great confusion over the star and hotel rating system, because some facilities are ranked high but provide low customer services while others which are very efficient are ranked low. Research Objectives This paper aims at studying the Michelin star rating system, to determine whether it can be used as a promotional tool in an attempt to give the hospitality establishments a competitive advantage. 1. To assess whether Michelin star rating system can be used as a marketing tool 2. To analyze the use of Michelin star ranking system as a strategy for achieving brand promotion in the hospitality industry. 3. To determine whether Alain Ducasse should use the Michelin star rating system to compete against her rivals in the industry Research Questions 1. Does the Michelin ranking system offer the hospitality establishments any promotional advantage as a strategy for competitive advantage? 2. Is the Michelin star ranking effective as a driver of perceived value for hospitality products and/or services, and can this be substantiated by the secondary data acquired from GIHE?

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Chapter 2 Literature Review Hospitality establishments ranking system as a marketing tool The Michelin stars ranking system classifies establishments in the hospitality industry according to the quality of services they offer to the customers. A high rated establishment is perceived as one that offers high quality services to the customers and therefore this increases its competitive advantage in the market. Establishments therefore rely of the Michelin stars ranking system as a marketing tool to expand their market share for economic and financial games. The background of the ranking system is quite vast. In order to investigate whether the ranks provided by Michelin have any effect, it is viable to ascertain whether the system is well perceived by customers. From the background of the system, it may be stated that many customers have in one way or another referred to the Michelin guide in the past. Michelin green guides provided a wealth of destination information and travel guide including tips for longer trips. The guides can be rated based on the efficiency, organization and accuracy of the information on art, architecture, restaurant and hotel information (Michelin guides, 2011-2012). The star represents the quality provided by the hotel in terms of amenities and services. Highly ranked establishments will be perceived to be providers of high quality. However, it must be determined whether the process of awarding these stars is fair and viewed by the public to be fair. Either way, the customers response will dictate whether the ratings have any effect at all (Blank, 2007). The hospitality ranking system is partially responsible for the growth in the hospitality industry, as a result of competition between different establishments to meet the requirements for the highest number of stars (Muller, 1999). Ranking systems are important as methods of comparing the standards of different hospitality establishments internationally (Muller, 1999). Although the ranking system isnt

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focused on marketing the organization, but as a guide to customers, it is an indirect tool for increasing quality services in different hospitality establishments. The management of hospitality establishments has to assess whether the ranking system that they endorse, relates to the needs and expectations of their customers. Ranking systems which fail to influence the behavior of customers are not essential in improving the position of the organization in the industry. Consumer needs and satisfaction The organization must understand the consumer in order to satisfy their needs. According to the study carried out by Porte (2004), and Szmigin (2003), the success of any business strategy is dependent on the extent to which it meets perceived consumer satisfaction. The aim of advertisements and other promotional services that are carried out in business organization are meant to create competitive advantage in the market. Promotional activities are conducted to increase the consumer awareness about existence of a particular product in the market. In the hospitality industry, the Michelin stars ranking system can be used as an effective strategy to communicate to the consumers about the quality of services offered in a particular establishment. Consumers are rational and therefore they focus on maximization of utility subject to their incomes. They would perceive an establishment with more stars in the ranking as one that can offer better quality services and therefore they would be attracted to it. This will benefit the establishment significantly since the increased customers imply an increase in the volume of sales. As a result, the profits of the establishment will increase which facilitate realization of the goals of shareholders. Firms view the Michelin stars ranking system as an ineffective evaluation scheme especially before they have exercised its use. However, once they are rated and they continue to improve the quality o services they offer, they acquire benefits that make the management develop positive attitudes towards the rating system. In addition, they become more

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competitive since they can be compared with other firms in the industry that have used the rating system before. It is therefore important for the firms to understand consumer behavior before they can apply the rating system to increase competitive advantage in the market. The satisfaction from meals may form just a segment of the overall vacation of such customers (Atila and Fisun, 2003). Customers who value esteem and self actualization need more than the basic levels and will be enticed by the quality of services more than the price levels. These customers will use the hospitality guide and Michelin stars ranking system to find the best establishment for their vacation. They will prefer to make a statement by separating themselves fro