Adopting a Hybrid Strategy with Strategic Flexibility, Strategic Capability and Organisational Learning Creating New Business Model in the Hotel Industry

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Chapter And Authors Information

Narentheren Kaliappen

School of International Studies, College of Law, Government, and International Studies, Universiti Utara Malaysia, Malaysia

Siti Nur Atikah Moktar

School of Business Management, College of Business, Universiti Utara Malaysia, Malaysia

Dzulhilmi Ahmad Fawzi

School of Government, College of Law, Government, and International Studies, Universiti Utara Malaysia, Malaysia
Adopting a Hybrid Strategy with Strategic Flexibility, Strategic Capability and Organisational Learning Creating New Business Model in the Hotel Industry
From the Edited Volume
Edited By:
Professor John Metselaar
Content

Abstract

This chapter explains the impact of a hybrid strategy, strategic flexibility, strategic capability, and organisational learning on hotel performance. This chapter would highlight the power of hybrid strategy as a business level strategy on hotels’ performance by utilising strategic flexibility, strategic capability, and organisational learning as functional-level strategies. In the hyper-competitive market climate, each strategic consideration has a more significant potential to mitigate hoteliers’ problems. If proper plans were not introduced to deal with this challenging situation, the hotel’s efficiency and prospects could be threatened. By integrating these strategies, this chapter could create a new business model to enhance the hotel industry’s performance and competitiveness. This chapter also provided some practical implications and contributions in terms of theories and practices. Finally, it is hoped that this chapter would assist the hoteliers to make the right decision regarding the implementation of the hybrid strategy, strategic flexibility, strategic capability, and organisational learning to boost their performances.

Keywords

hybrid strategy, strategic flexibility, strategic capability, organizational learning, hotel performance

Introduction

Due to today’s ‘VUCA’ environment – which is defined as the volatility, uncertainty, complexity, and ambiguity – the global hotel industry has undergone significant changes over the past 15 years. In the VUCA world today, hoteliers are still influenced by various changes in the way they work (Liat, Mansori, Chuan & Imrie, 2017). The former Malaysian Prime Minister, Tun Dr Mahathir Mohamad has targeted 30 million international tourists’ arrivals and RM100 billions of tourist receipts in the year 2020 due to the Visit Malaysia 2020. According to Tun Dr Mahathir, to remain competitive in the industry, the tourism sector needs to move in tandem with digital transformation (Anis & Kaos Jr, 2019). However, the entire plan was upside down when we hit by pandemic COVID 19 in 2020.

In 2020, Malaysia’s tourism industry was projected to be a big year for its “Visit Malaysia 2020” initiative. Sadly, in March, the country’s ‘Visit Malaysia 2020’ campaign was cancelled due to the devastating effects on the local and international tourism sector from the COVID-19 outbreak. The country received more than 26 million foreign visitors last year and this year expected about 30 million tourists to cross USD 21.5 billion (Nortajuddin 2020). The emergent of the current pandemic of COVID-19 has imposed negative impacts on the supply chain networks for many industries globally.

The global crisis has potentiated closure for many hotels, retrenchment of employees, laying off workers, and drastically reducing the operational functions. The local media has been headlined by the reports of shuttered hotels in Malaysia amidst the crisis. The critical explanation has been many terminations of operations from budget hotels to 5-star hotels – citing the COVID 19 crisis. The sector has, therefore suffered considerable job losses (Mahalingam, 2020). MAH CEO Yap Lip Seng said 50% of the hotels said they are thinking about halting operations, and 35% of hoteliers said they would stop their businesses for the time being (Ying, 2020).

In the current turbulence business setting, strategic management literature emphasises how to achieve a competitive advantage and superior performance (Okumus, Altinay & Chahoth 2010; Okumus, 2003). Various theories, concepts, typologies, taxonomies and methodologies were developed by several well-known scholars, strategists, and practitioners to achieve that superior level (Nandakumar, Ghobadian & O’Regan, 2011). Thus, Porter’s competitive strategies are one of the famous strategy typologies that help the firms focus on a particular strategic direction (Kaliappen & Hilman, 2017).

Other than that, the hotels are also forced to adapt in this challenging environment, hence push them to be more alert with the implementations of a new strategy which is executed by streamlining their whole process of hotel operation to achieve a competitive advantage. Kaliappen (2014) urged the hoteliers to implement business strategy effectively and systematically using the organisational resources, structuring, and functional competencies to remain competitive in the industry and gain a superior return.

Hence, it is essential to develop a study that integrates all strategic factors such as the business strategy (hybrid strategy), strategic flexibility, strategic capability, organisational learning, and hotel performance. It is crucial to examine these strategic factors from the holistic perspective to scrutinise several deficiencies found in the existing literature gaps.

Overview of Global Hotel Industry (During COVID 19)

In mid-December 2019, Wuhan, the most populous city in central China, was hit by a novel and infectious coronavirus (COVID-19). The COVID-19 is similar to the Severe Acute Respiratory Syndrome (SARS) that arise in 2003, where it such an airborne illness that highly infectious between humans. The strict preventive measures have been implemented immediately after the information about the virus has been shared publicly by the China government in late January 2020. It includes the quarantines among the communities and temporary business closures across China (Yang, Zhang and Chen, 2020).

According to Wu, Zhang, Law and Zheng (2020), the global tourism industry’s development and operations were crippling due to the rapid spread of infectious pneumonia caused by COVID-19. In late 2019, this infectious was first identified in China, and the number of infections has risen across the globe. On January 31, the World Health Organization declared the viral epidemic a “global public health emergency” and labelled as a “global pandemic” on March 11. On top of that, with the large investment and high operating costs, the hotel industry has been significantly affected due to capital and labour.

In 2020, Farmaki, Miguel, Drotarova, Aleksic, Casni and Efthymiadou (2020) said the international tourism at a standstill stage caused by the COVID-19 pandemic. The global tourism and hospitality market must face the unprecedented effects of the emergence and rapid spread of a new coronavirus (COVID-19). Kim and Lee (2020) stated that the whole world has dramatically forced COVID-19 pandemic to live in a new normal. In other to mitigate the adverse effects of the COVID-19 in the aspects of socioeconomic, most countries around the world have steered to adopt the social distancing and isolation efforts (Polemis & Stengos, 2020).

Sharma and Nicolau (2020) stated that one of the four significant travel and tourism pillars that have been hit by the SARS-COV-2 was the hotel industry. The COVID-19 hit the hotels industry on the supply and demand side. In terms of supply, the emergence of COVID-19 has hit the hotels terribly. The decrease in travel during the peak or off-peak season was impacted by the strict restriction measures adopted by every country to prevent the pandemic spread. For example, lockdowns, national borders close, closure of airport and port.

On the other hand, the demand aspects were based on the customer’s situation. The customers were subject to the orders, staying at home to minimize the virus affected and health risk exposure (Cook, Newberger and Smalling, 2020). Therefore, the international hotel industry has been disrupted by this pandemic significantly.

Moreover, Zhang et al. (2020) indicated that hotels are public places that are accomplished through interaction between the employees and guests, which attract most people and service. During the pandemic, most of the hotels were fully or partially closed due to the COVID-19 that can be spread through the physical contact and respiratory droplets. In just two months, the COVID-19 pandemic spread shifted from China to Italy, Spain, and the United States (USA). This pandemic has affected the tourist’s visitor, especially in the initial stage of the outbreak where the Chinese are the primary visitors throughout Asia’s destination. This pandemic has spread worldwide, and the hotel industry needs a longer time to recover (Lai & Wong, 2020). Thus, the hotels should implement strategies to return competitive and sustain within an uncertain environment.

Most of the hotel all over the world significantly affected by this pandemic. The industry of hospitality has shown low occupancy rates and closures. For example, hotels in Europe were closed by about 76 per cent due to the outbreak (OECD, 2020). Meanwhile, in June, the overnight stays in Spain hotels fell to 95.1 per cent. On the other hand, about 17.6 per cent of bed places and only 35.4 per cent were open because of the restriction of COVID-19 pandemic. The hotels in Malaysia have a loss of revenues amounting to RM 68,190,364 from 170,084 hotel room bookings due to the room cancellation from the 11 January until 16 March 2020. The revenue of the local hotel sector in Malaysia is projected to lose RM 3.3 billion by June 2020 because of the movement control order that extended to 12 May 2020 (Foo, Chin, Tan & Phuah, 2020).

Challenges Faced by Global Hotel Industry

Before COVID-19 pandemic, the hotel industry was one of the fastest-growing industry worldwide (Nain, 2018). However, in the current competitive world, the hotel industry faces more challenges such as intense rivalry, high technology, demand changes, and a COVID 19 pandemic (George Assaf et al., 2017; Liat et al., 2017; Kaliappen 2014).

The intense rivalry is one of the challenges among hoteliers globally. The hotel industry always becomes a flourishing business. Each year, travel and tourism are growing vastly. Usually, travellers will choose the best accommodation. Thus, this creates high competition in this business due to the high demand for accommodation. In order to achieve the high performance, new or existing rival could significantly lower the rates or give the better services, convenience or amenities, or introduce the new facilities in the markets compared to the rivals. The competition among hoteliers resulting in the prices cutting in attempts to deliver the guests with the best value reduces the profit generated. This tight competition has dropped room rates across the globe. Besides, to sustain in the competition, hoteliers lower the rate of rooms and complete with the packages such as breakfast, airport transfers, or a day’s sightseeing (Nain, 2018).

To reiterate, besides the competitions among the hotels in the tourism industry, the fierce competition also comes from short-term rental homes like Airbnb. Nowadays, most Malaysian residents like to lease private properties as opposed to booking hotel rooms because of the minimal charges offered via Airbnb. The development of Airbnb has affected the performance of the hotel industry in Malaysia, around 5% to 15% (Meikeng, 2016). The performance of the hotel industry in Malaysia has been diverted around 5% to 15% due to the development of Airbnb. The President of the Malaysian Association of Hotels (MAH), Sam Cheah admitted to witnessing the hotel industry feeling threatened by expanding home-sharing such as Airbnb (Meikeng, 2016).

The hotel industry is one of the industries affected by the growth of technology. The high technology affects the hotel industry because it is necessary as the hotel guests demand it to be connected during their stay. Fortunately, it gives a good impact on the hospitality in terms of efficiency, quality and flexibility, adaptability, and commitment with the changes technologies, to maintain relevance in the industry. According to Koutroumanis (2011), hotels need to be proactive in facing technology innovation, incessantly changing. There are essential strategies that can offer the best outcomes within the current context of the economy. The survey of Oracle Hotel 2025 conducted in February 2017 showed that the hotels guest is interested in the new technology offered by hotels. For example, the robotics, smart minibars, and voice control technology. According to Nain (2018), the Amazon Echo already uses by the Wynn hotel in Vegas. Meanwhile, the Marriot Hotel is offering guest in their rooms with Amazon Alexa and Google Home.

A few main strategies require achieving the agenda of the economy (Awang et al., 2008). In the hotel industry, the primary factor in profitability depends mainly on the hotel’s occupancy rate. To calculate the occupancy rate, the number of rooms booked must be divided into ten rooms. Thus, the number of rooms occupied may also indicate the efficiency of the hotel. The higher the number of rooms and vice versa, the more significant income is received (Abdullah & Hamdan, 2012).

Meanwhile, the changes in customers’ preferences also cause an impact on hotel performance. The way hotels react to their guests’ expectations will influence their profitability in an increasingly competitive environment. According to Abdullah and Hamdan (2012), businesses will improve when customers are satisfied. Nevertheless, dissatisfied customers will affect their businesses. It is becoming challenging to manage the rapid changes in customers’ demands and grant their needs. Since the COVID-19 spread worldwide, hotel companies are involved with the dual crisis, decreasing demand and prices increasing for the service offer, which affects their profitability (Polemis & Stengos, 2020).

It is pivotal to the hotels in understanding their customers in facing the customers’ demand changes. The previous studies show a significantly positive relationship between the organisational learning and performance in various industries (Alonso-Almeida, Celemín-Pedroche, Rubio-Andrada, & Rodríguez-Antón, 2016; Chahal, Jyoti, & Rani, 2016; Lee & Lee, 2015; Barba Aragón, Jiménez Jiménez, & Sanz Valle, 2014; Kohtamäki, Kraus, Mäkelä, & Rönkkö, 2012; Akhtar, Arif, Rubi, & Naveed, 2011; Michna, 2009; Yeung, Lai, & Yee, 2007). On top of that, it is imperative to the hoteliers to implement organisational learning as a dynamic capability to enrich the business strategy and performance. Hotels will be able to have a strong customer base by understanding the customer in the long run. It also gives the hotels competitive advantage in gaining and sustaining profits.

The world’s economy was shut down almost overnight due to the COVID-19 pandemic (UNWTO, 2020) and has put the hospitality industry in an extraordinary situation. Every country in the world has implemented many ways to flatten the COVID-19 curve, such as community lockdowns, social distancing, stay-at-homes orders, and travel and mobility restrictions. Most hospitality businesses have been temporary closed their operation, and the COVID-19 affects the demand for their business significantly (Bartik, Bertrand, Cullen, Glaeser, Luca & Stanton, 2020).

Moreover, the hotels facing a problem with their occupancies and revenues during this pandemic because of the restriction order by authorities from the travel ban and quarantine period (Gursoy & Chi, 2020). The COVID-19 pandemic impacts the hospitality business on how they operate, although this industry is slowly recovering. Gössling, Scott & Hall (2020) indicated that hotels should concern the customer’s safety and health to attract the customers towards their business again and developing the best strategy in their operation.

However, the external and internal factors influence the hotel occupancy rate. The economic situation, technologies, politics, legislation, and demographics are the most significant external issues. On the other hand, the internal factors refer to hotel management such a service quality, pricing, facilities, and hotel location (Abdullah & Hamdan, 2012).

Hotels can mitigate these obstacles by being conscious of the hotel activity process’s strategy by optimizing their strategies to gain competitive advantage. Besides, hoteliers can efficiently and consistently apply business strategy to stay competitive in the industry and achieve a superior return, using organizational tools, structuring, and working skills (Kaliappen, 2014).

Solution (New Business Model)

This chapter would highlight the hybrid strategy’s power as a business level strategy on hotels’ performance by utilising strategic flexibility, strategic capability, and organisational learning as functional-level strategies. In the hyper-competitive market climate, each strategic consideration has a more significant potential to mitigate hoteliers’ problems. If proper plans were not introduced to deal with this challenging situation, the hotel’s efficiency and prospects could be threatened. Therefore, it is fundamental for hotels to stay competitive when the market is unstable. The hotels can improve their competitiveness and performance by implementing and practising the best strategy as Figure 4.1.

Figure 4.1. New Business Model

Hybrid Strategy

The hybrid strategy is one of the strategic approaches emphasised on integrating cost leadership and differentiation strategy (Gopalakrishnan & Subramaniam, 2001; Proff, 2000). The hybrid strategy also can be understood as a mixed, integrated or combination strategy (Acquaah & Yasai-Ardekani, 2008; E. Kim et al., 2004; Spanos et al., 2004). The combination of strategies (cost leadership and differentiation) was generated from the Porter Generic Competitive Strategies (1980,1985). The hybrid strategy successfully enhances organisational performance and gives a competitive advantage over rivals (Kaliappen, Suan, Almutairi & Almutairi, 2019; Claver-Cortes et al., 2012; Pertusa‐Ortega, Molina‐Azorín, & Claver‐Cortés, 2009; Acquaah & Yasai-Ardekani, 2008; Kim et al., 2004).

The hybrid strategy is also much more profitable than pursuing only one strategy at one time. Fulfilling customers’ needs, low duplication and flexibility are advantages of utilising the hybrid strategy (Claver-Cortes et al., 2012). Miller (1992) indicated that the hybrid strategy is useful in reducing the risk of specialisation. It exposes the organisations to the advantages through exploiting the potential strategies and various abilities with the mixed strategies, which are cost leadership and differentiation. The hybrid strategy is also appropriate when the customers are relatively insensitive towards the price. For example, the price is not relevant for prestige goods like brand image and perfumes (Miller, 1992). The hybrid strategy is also an ideal strategy which enables the organisations to survive in a dynamic environment. Thus, the hybrid strategy is more competitive than the pure strategy as a hybrid strategy is better intending to the customers’ demands. This combination of strategies enables organisations to concentrate on satisfying customers’ needs in terms of quality, novelty, convenience, service, and price.

The hybrid strategy also causes the competitors to struggle in imitating, as several items including the cost leadership and differentiation strategy are different in each organisation (Claver-Cortes et al., 2012; Pertusa-Ortega, Molina-Azorin & Claver-Cortes,2009; Miller, 1992).

The organisation that applies a hybrid strategy, mainly a mix of cost and differentiation strategies, can sustain better flexibility in supplying products (Leitner & Guldenberg, 2010). Another study by Proff (2000) revealed that the organisation achieved better performance by integrating cost leadership and differentiation, especially during market volatility involving supply and demand. The hybrid strategy is believed to have a significant correlation with the complex and turbulent and fast-changing environment. The combination of cost leadership and differentiation harmoniously creates flexibility and adaptation with the volatile and fast-growing environment (Lapersonne et al., 2015). For example, the adoption of the hybrid strategy in Ghana’s organisation resulted in a superior performance although the economy, at the time, had changed from the state-controlled to free-market capitalism (Acquuah & Ardekarni, 2008).

According to Lapersone et al. (2015), the hybrid strategy is a fundamental strategic approach that reinforces the organisation’s competitive advantage within the competitive environment. The hybrid strategy also reacts as a vital mechanism in changing the strategy used during the demand-supply volatile environment. Gabrielsson, Seppälä and Gabrielsson (2015) in the study among ICT firms that had foreign businesses in Sweden and Finland, suggested that the implementation of hybrid strategy boosts the organisation ahead to global alignment.

Furthermore, it has proven that the hybrid strategy is essential and applicable in various sectors. Based on the previous studies, there has been researched conducted on the hybrid strategy’s effectiveness in multiple industries’ organisational performance. The results revealed that there are generally positive relationships between the hybrid strategy and organisational performance. The hybrid strategy enhances organisational performance with a combination of cost leadership and differentiation strategy (Ozdemir & Mecikoglu, 2016; Manev et al., 2015; Claver-Cortes et al., 2012; Leitner & Guldenberg, 2010; Acquaah et al., 2008; Spanos et al., 2004; Proff, 2000).

CitizenM hotel was one of the hotels implementing the concept of hybrid strategy. This hotel made an innovation by ‘getting rid’ of the things the customers did not need. CitizenM chose to cancel many facilities usually offered by traditional hotels such as porters, concierge, check-in desks, restaurants, and conference facilities. Citizen M hotel managed to save cost, citizenM was also able to provide the customers with the things they wanted, such as location, competitive pricing, great atmosphere and convenience (Vermeulen, 2017). In short, the CitizenM hotel made their guests feel like they were comfortably at their own home. CitizenM’s concept applies to the five -star hotels because it offers the guests luxury hotel experiences in central city locations with affordable prices. It leaves the guests with an impression that the hotels value them by meeting their needs and demands.

Strategic Flexibility

Flexibility is considered one of the vital strategies that help the firms sustain and compete in unpredictable environments. The flexibility is viewed as the firm’s capacity and skill in utilizing the opportunities due to the environmental changes (Dreyer & Gronhaug, 2004). In a dynamic and competitive environment, strategic flexibility is the essential aspect of competitive advantage to the firms (Zahra, Hayton, Neubaum, Dibrell & Craig, 2008; Hitt, Keats & DeMarie, 1998).

Meng, Lei, Jiao and Tao (2020) have viewed strategic flexibility as a capability to cope with the turbulence environment through continuous changes in resources arrangement and strategic action. According to Sanchez (1995), the flexibilities in the concept of strategic flexibilities is related to the product creation resources and the organizational capability play a prominent role in product competition through the resources coordinating. Besides that, the strategic flexibility enables firms in an uncertain environment to respond promptly towards the changing competition conditions by utilizing the opportunities and rearranging the resource chain (Combs, Ketchen, Ireland & Web, 2011; Nadkarni & Herrmann, 2010).

Moreover, Zahra et al. (2008) indicate that strategic flexibility refers to the degree that the firms willing to change their strategy in reaction towards the threat, opportunities and changes in the external environment. This represents the organisation’s ability to become proactive and reactive in managing economic and political risks (Grewal & Tansuhaj, 2001). Besides, strategic flexibility assists the firm manages in economic crisis (Grewal & Tansuhaj, 2001), achieve the potential of the technological capabilities (Zhou & Wu, 2010) swing resources (Sanchez, 1995), inspire the creativeness and innovation (Li, Su & Liu, 2010) and initiate changes for the new business (Bock, Opsahl, George & Gann, 2012). Therefore, strategic flexibility is very appropriate to enhance the hotel’s performance in the dynamic business environments, especially during the pandemic COVID-19.

Strategic Capability

Strategic capabilities encompass the skills and knowledge that should be developed by the firms into their strategic assets advantageously (Hao & Song, 2015). Moreover, the strategic capability is defined as complex bundles of skill, knowledge, resource and asset that will empower the organisation to sustain competitive advantage and create a better performance (Parnell, 2011; Desarbo, Benedetto, Song & Sinha and Day, 1994).

Strategic capabilities can be identified, such as technological capabilities, marketing capabilities, management capabilities, market-linking capabilities, and information technology capabilities. However, this study only focused on management and technological capabilities (strategic capabilities). Desarbo et al. (2005) explained that management capabilities include;

  • managing human resources,
  • managing the financial, profit estimate,
  • the capability to integrate the system of logistics,
  • cost control,
  • revenue forecasting, and
  • Managing marketing planning.

Furthermore, the technological capabilities related to efficiency in the production process, cost reduction, consistent delivery, greater competitiveness, predicting the changes in technology, and developing new products and facilities (Desarbo et al., 2005; Day, 1994). Hence, hoteliers can create uniqueness and give quality services that can satisfy and fulfil the guest’s desire by implementing technological capabilities. Furthermore, the management and technological capabilities assist the hoteliers to differentiate their offering and at the same time, keep lowering the costs (Kaliappen, Chuah, Gorondutse & Moktar (2019).

Organizational Learning

Slater and Narver (1995) described the organisational learning as a process that will improve the organisation’s performance by developing new knowledge that influences the organisation’s behaviours. To recapitulate, organisational learning is the process of knowledge development through the participation and interaction among the individuals in an organisation. The constant knowledge process ensures the organisation’s committees acquire new knowledge and apply it in the changing environment, to improve the organisational performance.

Organisational learning plays a role as a key to enhancing the organisation’s performance and sustaining a competitive advantage (Kalmuk & Acar, 2015; Brockman & Morgan, 2003; Dodgson, 1993). Dickson (1996) explained that learning is the best indicator compared to other resources or capabilities. It is because, the organisations can improve the market information processing activities faster than their competitors, at the same time, sustain the competitive advantage (Day, 1994; Slater & Narver, 1995).

Besides that, organisational learning is a crucial attribute which will create sustainability in achieving the superior customer value that allows an organisation to collect the information regarding their suppliers, competitors, and customers (Kasim et al., 2018; Slater & Narver, 1995). Organisational learning is an essential element in any industries. According to Öztürk et al. (2016), in dynamic project-based industries, organisational learning empowers the organisation to remain competitive. It is because the need for new knowledge is vital in securing projects. Nonetheless, the learning process requires data such as information, knowledge, and wisdom to perform (Öztürk et al., 2016).

Liu, Horng, Chou, Huang, and Chang (2018) indicated that organisational learning improves the relationships among the shared goals, dynamic capabilities, and social capitals to gain a competitive advantage. This is the most critical attribute found to influence travel agencies to achieve better performance. Besides that, organisational learning helps the organisation respond to a dynamic environment and changes in customers’ preferences (Liu et al., 2018). Also, according to Cheng, Niu and Niu (2014), organisational learning is associated with managing information that could positively enhance performance. Organisational learning reacts systematically to confront the dynamic environment with the capacity acquired (Kumaraswamy & Chitale, 2012).

According to Barakat and Moussa (2014), organisational learning reacts as a key that drives the organisation to sustain and gain a competitive advantage in a turbulent environment. Leonidou, Leonidou, Fotiadis and Aykol (2015) stated that hotels could create an eco-based competitive advantage with organisational learning as a capabilities’ tool.

Santos-Vijande et al. (2012) revealed that organisational learning is a valuable tool in the global context, enabling organisations to enhance their performances flexibly and adapt in the dynamic market environment. Organisational learning also acts as a forerunner towards the firm’s strategic flexibility in enhancing cost-leadership and differentiation strategies. Santos-Vijande et al. (2012) pointed out that this matter had been shown in the Spanish firms that organisational learning and strategic flexibility could reduce their cost without lowering the differentiation levels.

According to Zhao, Li, Lee, and Chen (2011), organisational learning helps the organisation transition economies to compete in acquiring managerial capabilities and technologies. Zainul, Astuti, Arifin and Utami (2016) indicated that organisational learning improves innovation by sharing knowledge and improving skills. This was reinforced by Senge’s (1990) idea, which suggested that organisational learning involves the continuity of the learning process and then transforms it for innovation and growth. Notably, organisational learning through knowledge sharing and increased skills can also enhance competitive advantage by measuring the quality and uniqueness of the product (Zainul et al., 2016).

Additionally, organisational learning enables the organisation to boost its valuable resources by developing a long-term relationship with strategic customers. This is because organisational learning is a continuous dynamic process that requires the organisation to interpret and assimilate the information to generate knowledge of behaviour as organisational goals. Therefore, this learning could enhance the organisation’s trust and commitment to better provide for its strategic customers (Santos-Vijande et al., 2005).

Tamayo-Torres, Gutiérrez-Gutiérrez, Llorens-Montes and Martínez-López (2016) revealed that organisational learning is essential as an antecedent of strategic fit. Organisational learning can install new ideas and innovations in the organisation as part of their work cultures. The knowledge learning acquired from the organisation’s resources will help the workers be innovative in complex environments. The organisations that practise organisational learning are taught to learn from their mistakes and experiences. Thus, new ideas, products, services and processes can be developed by the organisations to nurture superior performance (Tamayo-Torres et al., 2016).

In the meantime, Leon and Garcia (2011) stated that knowledge is an intangible asset obtained from the learning process. The knowledge-sharing process permits the organisation to have more opportunities to develop more innovative products and services, which automatically maximises the customer’s profitability and market intelligence (Kasim et al., 2018).

The organisation could improve by developing new knowledge and insights as organisational learning is antecedent to innovation (Jimenez-Jimenez et al., 2008). Furthermore, according to Gilaninia, Ganjinia and Karimi (2013), organisational learning acts as a crucial instrument towards facing the rapid market evolution. Organisational learning motivates the organisation to be adaptive and efficiently competitive in providing the values to the customers. In order to attain a continuous competitive advantage in the environment, organisational learning serves the organisations strong ability to find new investments and opportunities.

Hotel Performance

The origin of organisational performance is very familiar among the researchers who evaluate it as a dependent variable, especially in management (Richard et al., 2009). According to Yesil and Kaya (2013), studies on organisational performance have been the core subjects among practitioners, scholars and researchers for the last 30 years. Organisational performance is an essential requirement for the managers in evaluating the achievement of the organisation strategy that has already been implemented (Nazarian et al., 2017).

Besides, there are three elements related to organisational performance, which are sustainability, growth and internationalisation. The sustainability concerns with the firms’ needs while the organisations’ growths are exemplified by their scales such total scale, and the internationalisation can be evaluated by the depth of the firms (Lo & Fu, 2016). However, in this study, organisational performance refers to the organisations’ effectiveness to achieve its goal based on financial performance measurement, including market share, sales, selling cost, and return on investment (ROI).

In this globalisation era, the business environment is in fluctuated condition and is always changing from time to time (Kasim & Altinay, 2016). It has become more challenging for organisations to compete in the marketplace. Thus, researching performance measurement and management is quite famous and has been topical among researchers and scholars in the last two decades (Valmohammadi & Servati, 2011). On top of that, the performance measurement consciously reacts as the necessary element in the well-advanced economy and complex business environment (Neely, 1999).

Additionally, the need to resolve customer preferences due to intense competition and globalisation has led to performance measurement (Bourne et al., 2000). Organisations must know their business potential by creating a comprehensive view of performance measures (McAdam & Bailie, 2002). Besides, the organisations will be aware of their real ability, from the performance measurement results (Sainaghi, 2010). The organisations need to have performance measurement in the context of the decisional process. Hence, performance measurement is one indicator of benchmarking the organisations in doing the right thing with the right approach (Punniyamoorthy & Murali, 2008).

Organisational performance can be observed in two perspectives: financial and non-financial aspects. Financial performance was used to measure organisational performance in this chapter. In a complex and unsure environment, organisations need financial performance to survive (Öztürk et al., 2016; Kyoon Yoo & Ah Park, 2007).

Usually, at the end of the year, organisational performance will be evaluated by accessing the values of their revenues or the profits that organisations earn (Billy et al., 2010). It is classified as a financial method whenever it could demonstrate monetarily and indicate financial values (Teeratansirikool, Siengthai, Badir, & Charoenngam, 2013).

Venkatraman and Ramanujam (1986) categorised performance measurement into ten classifications. They then narrowed the category down to three, financial performance, business performance and organisational effectiveness. The financial performance, in broad perspectives, includes the growth of sales, and profitability that are commonly observed mostly the returns on investment (ROI), returns on sales (ROS) and returns on assets (ROA) as well as earning per share (Shavarini et al., 2013).

How These New Business Model Solves the Challenges of Global Hotel Industry?

In this chapter, the hybrid strategy is a crucial strategy for hoteliers to set a better direction in facing the worldwide challenging. Hoteliers must pursue the hybrid strategy as a business strategy to adapt and sustain in the current turbulent environment. Previously, a hybrid strategy has been linked to having a positive relationship with organisational performance. The hotels can enhance their competitiveness and achieve superior performance when implementing the hybrid strategy. This combination of strategies enables organisations to satisfy customers’ needs in quality, novelty, convenience, service, and price. The hybrid strategy also causes the competitors to struggle in imitating, as several items including the cost leadership and differentiation strategy are different in each organisation (Claver-Cortes et al., 2012; Pertusa-Ortega Pertusa-Ortega, Molina-Azorin & Claver-Cortes,2009; Miller, 1992).

The organisation that applies a hybrid strategy, mainly a mix of cost and differentiation strategies, can sustain better flexibility in supplying products (Leitner & Guldenberg, 2010). Another study by Proff (2000) revealed that the organisation achieved better performance by integrating cost leadership and differentiation, especially during market volatility involving supply and demand situation. The hybrid strategy is believed to have a significant correlation with the complex and turbulent and fast-changing environment. The combination of cost leadership and differentiation harmoniously creates flexibility and adaptation with the volatile and fast-growing environment (Lapersonne et al., 2015). For example, the adoption of the hybrid strategy in Ghana’s organisation resulted in a superior performance although the economy, at the time, had changed from the state-controlled to free-market capitalism (Acquuah & Ardekarni, 2008).

According to Lapersone et al. (2015), the hybrid strategy is a fundamental strategic approach that reinforces the organisation’s competitive advantage within the competitive environment. The hybrid strategy also reacts as a vital mechanism in changing the strategy used during the demand-supply volatile environment.

Moreover, with the dynamic environments’ situation nowadays, strategic flexibility is another strategy that can assist the hoteliers to face it. Hence, the hotels’ performance can be enhanced with strategic flexibility through the hybrid strategy. In other to sustain in the competitive advantage, the implementation of strategic flexibility brings the benefits to the hotels in terms of product innovation. This condition creates more chances and external knowledge within the uncertain environment to rearrange the existing flexible resource for the developing process. For instance, strategic flexibility is vital for the hoteliers and encourages the hotelier to prosper the new products. The hoteliers should cultivate the flexibility in resource coordination and distribution by combining useful resources towards the new chances to create an innovation to the development of new products. Moreover, with the applying of strategic flexibility, the firms can benefit through the environmental changing in terms of variation of demand and the technical change.

Besides that, the strategic capability is a tool to evaluate the effort of hybrid strategy in the hotel industry. It can also be used to determine the strategies’ effectiveness to attain the best performance. By utilizing management capabilities, hoteliers can generate revenue by lowering their overall cost and increase their internal efficiency. Meanwhile, technological capabilities allow the organization to make new product development, manufacturing/ service process, technology development, production facilities, quality control and predicting the technological changes (Y. Wang et al., 2006; Desarbo et al., 2005). According to Y. Wang et al. (2006), technological capability compiles practical and theoretical knowledge sets of know-how, methods, procedures, experience, physical devices, and tools. It also related to the technology of product, design, process, and information, which is an asset to the organization. By employing technological capabilities, hoteliers can create unique and quality service that could fulfil the guests’ desire. Hence, both management and technological capabilities allow the hotels to keep lower cost and differentiate their offerings. Therefore, this study suggested a possible linkage between hybrid competitive strategy and strategic capability due to the same characteristics and objectives.

Furthermore, the cost involved in the hotels could be reduced by using a resource. When the learning process occurs, this resource would be able to complete their works with cumulative experience. Thus, it enhanced their performances. Organisational learning helps organisations reduce cost and improve quality at the same time by learning from their mistakes and experiences. Thus, new ideas, products, services, and processes can be developed by the organisation.

Experiencing rapid changes within the industries and learning faster than competitors are advantages to the organisations. Recently, the study of Tamayo-Torres et al. (2016) mentioned that organisational learning is crucial as an antecedent of strategic fit. Moreover, according to Arago & Cordo (2007) and Weerawardena, O’Cass, & Julian (2006), organisational learning occurs by inspiring the latest knowledge and idea, creating creativity towards implementing the strategy.

Hotels that apply organisational learning can satisfy the customers’ preference changes by generating ideas continuously. Improving the products and services by learning from past mistakes is essential, and the hotels’ competitive advantage. Organisations that implement the learning strategy will be better in developing new ideas and innovations and performing their potentials among the competitors. The hotels can enrich their performances when transforming themselves as learning organisations through better strategies in the current business environment. On the other hand, the adoption of technology in the hotels within the dynamism period is also right to reduce the cost and increase hotels’ products and services’ uniqueness. This demonstrates the importance of organisational learning in mediating and impacting the hybrid strategy in developing good performances.

Managerial Implications and Conclusion

Managerial Implications

This chapter contributed to hospitality management literature by systematically examining the relationship between hybrid strategy, strategic flexibility, strategic capability and organisational learning. In other words, this chapter provides vital message to the hoteliers who desired to implement a hybrid strategy as their business strategy. Based on the literature, the hybrid strategy means pursuing low cost and differentiation simultaneously (Anwar and Hasnu, 2017). In order to create unique products or low cost, the hoteliers need to believe that the ability to learn is their competitive advantage. The hoteliers need to improve their products or services by learning from their past mistakes (Sinkula et al., 1997).

Besides, strategic flexibility is one of the best strategies that complement the new business model that has been the focus of this chapter. This flexibility helps the hoteliers to sustain and creatively tackle the external environment, especially during COVID-19. The hoteliers may benefit from the dynamic environment in which they manipulate it becomes an advantage for them, especially for development product innovation. With the COVID-19 pandemic, adaptation towards flexibility will bring the hoteliers in finding the best way in communicating their service to the customers as well as the strategic flexibility plays a vital role in the activity of entrepreneur through the combination of remain resources for a new desire (Meng et al., 2019)

The strategic capability implemented in this chapter could help the hoteliers be more adaptable to the changes in their work surroundings. Using these strategies, the hoteliers may modernise their offerings of services. This is because, in a globalised digital era, the hospitality sector particularly, is forced to face the ever-shifting expectations of guests. For example, a revolutionised robot performs in delivering room services, managing amenities, and sorting automated baggage. The strategies implementation will automatically increase the efficiency and accuracy of deliveries and reduce the cost of manual employees, at the same time, increase the guests’ level of satisfaction towards these streamlined services.

Furthermore, hotels should transform itself as a learning organisation to be more proactive in the current business environment. Vitally, hoteliers should adopt technology that could reduce the overall cost and enrich their products or services (Sinkula et al. 1997). This chapter suggested that organisational learning is equally essential as a hybrid strategy to achieve a competitive advantage. This means that hoteliers should implement organisational learning as their functional strategy where hybrid strategy becomes their business-level strategy. Bayraktoroglu and Kutanis (2003) emphasised that learning in hotels needs mental transformation among managers to support innovative ideas and develop an organisational culture by providing a suitable learning atmosphere.

Besides, the learning process allows the employees especially the frontline, to have the opportunities to improve their skills which, in the end, maximise the efficiency and minimises the mistake while serving the guests. For example, the front office staff may give attentive service without deterring the long lines by training such a web video at the end or beginning of the shift. The hoteliers may also leverage the virtual platform such as mobile use for check-in or check-out activities and a self-service kiosk. This may enhance the effectiveness and efficiency of the services provided, which results in the increase guests’ satisfaction towards the hotels’ services.

The hoteliers may learn through the customers’ feedback at the front desk and on social media such as Booking.com, Agoda, and TripAdvisor. The hoteliers will learn through the comments received and discuss them while in the briefing or routine meeting. This learning may inspire instant feedback for customers and increase the service quality provided. To be competitive among the competitors, the strategies used may assist the hoteliers in turning the hotels into open living spaces where everyone can mingle with each other. For example, the collaboration or partnerships between the hoteliers, organising concerts, fashion weeks, international designs, contemporary art exhibitions or significant film festivals. It will increase the frequency of encounters by customising the experience and interacting with the guests; thus, hoteliers’ organisational performance is improved. This is achievable without adding to the cost; instead, the extensive experiences increase the guests’ sense of loyalty. Hence, the hoteliers’ confidence levels could be elevated by making the right decision in matching the strategies appropriately based on the finding results. Therefore, this chapter provides the hoteliers with insights on the best matching strategies to be implemented.

Conclusion

This chapter has contributed to the body of knowledge allied to the strategic implementation of a hybrid strategy, strategic flexibility, strategic capability, and organisational learning in a holistic view.

It has specifically examined a hybrid strategy’s roles, flexibility, capability, and organisational learning as mediating variables on the strategy and performance nexus in the hotel business.

As such, it is hoped that this chapter would assist the hoteliers in making the right decision regarding the implementation of the hybrid strategy, strategic flexibility, strategic capability, and organisational learning strategy to boost their respective performance.

The integration among the strategies has undoubtedly contributed to the building of strategic management theory, which automatically strengthens the hotels’ performances as the tourist’s number has decreased due to the government’s restrictions and bans. The tourism industry is hugely impacted by the COVID-19 pandemic when the tourists worldwide are cancelling hotel bookings and delaying their travel. However, the choice of a hybrid strategy and implementation of its specifics as described, together with the package of economic stimulus provided by the government, will attain the tourism industry to survive in this so turbulent environment of the COVID-19 outbreak and the emergence from it.

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