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

Introduction

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

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

Corporate Social Responsibility in the Hospitality Industry

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

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

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

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

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

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

Content removed…

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

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

Impact of Hospitality Industry on the Environment

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