Vienna’s private hotels: From personal to business relationships

The Austrian hotel sector is characterized by a large share of small to medium sized enterprises, although business sizes in Vienna are above average, with a median of 67 beds per establishment. 

Currently, about one third of hotel beds in Vienna are supplied by privately owned and managed hotels, however they are facing a challenge. Given the rise of chain operated hotels seen in Vienna over the last couple of years and the expected developments in the near future, the competitive situation for private hotels is likely to become increasingly difficult.

Recent initiatives such as the internet distribution platform Private City Hotels, which offers users one-stop access to a variety of private hotels, are attempts to strengthen the individual competitive position through strategic cooperation networks.

To find out more about the situation of the existing networks among Vienna’s private hotels, the Vienna Chamber of Commerce awarded Dr. Florian Aubke with a 2013 ‘Wirtschaftskammerpreis’ to carry out a pilot study on this topic.

Dr. Aubke and MU graduate Phillip Redl investigated these networks and found that soft factors such as trust, loyalty and other partners’ motives are paramount for the decision to engage in a network.

‘’This is important for the longevity and success of networks since friendship networks tend to trigger better communication and opportunistic behavior is generally reduced,’’ says Dr. Aubke.

‘’In consequence, friendship networks often increase organizational performance through potential of cooperation, better flow of information and competitive norms. In contrast, a lack of network connections is equivalent to being deprived of access to resources and information.’’

In tourism, organizational networks allow exchange of knowledge about market developments, trends and other relevant innovations. These knowledge resources can help shortening learning curves and can help in a swifter reaction to changes in market conditions.

The study showed an ambivalent attitude towards communication in networks. On the one hand, access to information was not named a superior motive to engage in a network, suggesting that networks are formed on the basis of affective motives rather than expected values. However, once a member in the network, information exchange becomes the core activity. 

The analysis of the network structure showed that network connections are primarily made with other private hotels, lesser so with chain hotels. Furthermore, relationships are more likely to be entertained to hoteliers of the same category leading to tendencies of clusters, which hampers the flow of resources. As a consequence, few hotels hold key positions in the network. They function as brokers and thus can thus control the dissemination of information across the network.

The degree to which a hotel is linked to others in a market is also likely to affect the ability to achieve higher rates.

After a thorough analysis of their results, Dr. Aubke and Mr. Redl have advice for Vienna’s private hoteliers: ‘’Despite a small sample size, we could conclude from this study that positive network effects exist, yet the potential thereof is not yet fully utilized by the hoteliers. We therefore suggest that they use the existent private networks to further define and formalize network goals and to take a more strategic stance on networking in order to use the innovative potential embedded in organizational networks.’’