Crisis Management, Reputation, and Performance of Upscale Hotels in the Post-COVID-19 Crisis
Abstract
The tourism and hospitality industry has been badly affected by the COVID-19 pandemic. The consumption patterns and the brand-building process face an uncertain future because of the unprecedented economic crisis impacts. Therefore, this study investigates how crisis management influences brand reputation and performance, including the factors that influence upscale hotels in the post-COVID-19 crisis in Indonesia. A total of 341 upscale hotel managers were selected as respondents. The hypotheses were tested using the covariance-based structural equation modeling (CB-SEM) analysis. The results indicate that crisis management mitigates the adverse long-term effects of a crisis instead of directly affecting brand reputation and performance. In addition, the result also shows that brand reputation significantly influences brand performance. The findings of the study confirm that guests will keep from ignoring the brand and the brand will suffer long-term damage if the crisis is not managed effectively. Lastly, it is empirically proven that crisis management and a strong brand specifically in the Indonesian hotel industry can assist the hotel industry in selecting the best mitigation strategies to preserve brand performance if a future crisis occurs.
Keywords: Brand reputation, brand performance, crisis management, upscale hotel
Introduction
The Coronavirus (COVID-19) pandemic has been one of the most devastating events of this century, drastically altering the global scenario and reshaping people’s personal and social lives (Bhargava et al., 2020; Zwanka & Buff, 2021). Since the arrival of COVID-19 in China at the end of 2019, a new episode has unfolded, with an unprecedented crisis occurring almost everywhere (Li et al., 2020). For instance, some behavioral changes in movement accelerated before the outbreak as new habits and expectations emerged (Deloitte, 2020b; Scott & Gössling, 2022). They also added that the hospitality industry should not expect a swift pre-pandemic level as consumers may slowly revert to old habits and crowds. The infection brings a significant human crisis (Sohrabi et al., 2020) that encompasses financial interruption, limitations on movement, termination of the production line, and a sharp decrease in various industry segments. The virus affects supply and is a total distraction to the global economy, with a decline in demand and significant reductions in revenue (Bachman, 2020).
However, the COVID-19 pandemic continues to spread significantly around the globe, especially in the tourism and hospitality industries (Dwiedienawati et al., 2021; Purba et al., 2021; Setiati & Azwar, 2020). For the hotel industry, Beirman (2016) highlighted that crisis management plays a crucial role in disaster mitigation to restore the tourism and hospitality industries by ensuring tourist confidence, reducing crisis impact on the industry, and increasing safety and security. Consumption patterns are affected by the unprecedented economic crisis, and the brand-building process faces an uncertain future (Tongare, 2021). Additionally, the pandemic has resulted in a primary concern for service safety and the transformation of service operations into a new mode of practice for increased separability and decreased contact (Margherita & Heikkilä, 2021; Wen et al., 2021). Similarly, COVID-19 has disrupted the hotel industry and prompted significant changes to offerings and operations to meet new standards (Kim & Han, 2022). As a result of the offensive of information and fake news that causes anxiety, fear, anger, panic, and psychological trauma, COVID-19 has dampened people’s enthusiasm for travel (Chen & Eyoun, 2021; Jian et al., 2020; Rather, 2021).
During the COVID-19 pandemic, Indonesia barred Chinese tourists from entering the country, resulting in a 97 percent annual drop in March arrivals (Suroyo & Rizki, 2020). In 2020, the COVID-19 pandemic wreaked havoc on the tourism industry, causing revenue losses of Rp 179.76 trillion ($12.1 billion) or a 54 percent loss in revenues across the hotel, restaurant, leisure, aviation, and other sub-tourism industries (Purba et al., 2021). The contribution to the GDP has decreased by 1.1 percent, contributing to the 2020 recession in Indonesia (Wuryandani, 2020). In Indonesia, hotel profits have been reduced by more than 40 percent, impacting hotel operations and threatening business continuity during the COVID-19 pandemic (Purba et al., 2021). Additionally, the Indonesian Hotel and Restaurant reported that the losses in the hotel sector due to COVID-19 had reached IDR 30 trillion (Rosana, 2020; Wahyudi, 2020). As a result of the pandemic crisis, the occupancy rate of Indonesia’s star hotels pushed up from 34.3 percent in 2020 to 36.2 percent in 2021, but a significant 65.1 percent decrease when compared to the position in 2019 (BPS-Statistics Indonesia, 2021, 2022). However, the COVID-19 pandemic and the ensuing lockdowns have significantly impacted people’s lives, brands, and businesses, as stated by Morris (2020) and Tien (2022).
Researchers have developed many theories to guide the response to a brand crisis based on case studies and crisis management experiences. Apologia theory, image restoration theory, decision theory, diffusion theory, excellence theory, and situational crisis communication theory (SCCT) are some of the many theories developed to explain how people respond to crises (Daboul, 2016). Several studies showed that a powerful brand could lessen the impact of the COVID-19 pandemic crisis (Fahmy et al., 2020; Knowles et al., 2020; Singh et al., 2020). However, there are limited findings that specify the role of crisis management in mitigating the effect of a crisis. That is the argument supported by Baghi and Gabrielli (2021), who assert that the framework for evaluating performance is crucial in crisis management. According to this study, no brand performance application can assess the impact of crisis management (Mikušová & Horváthová, 2019), and how research should be conducted in the area of crisis management is yet to be known (Baum et al., 2020; Yan et al., 2022). Because of limited studies, Indonesian hotels’ internal dimensions of crisis management are unexplored. Previous studies also questioned how crises affect the hotel industry and how the industry adapts to change through innovative techniques (Baghi & Gabrielli, 2021).
Although brand studies were examined, Dutta and Pullig (2011) conceptualize two corporate crises: performance-related and values-related. Performance-related crises affect expected functional brand benefits, whereas values-related crises affect symbolic and psychological brand benefits, such as brand reputation and positioning (Baghi & Gabrielli, 2021). Similar to Venkatakrishnan (2020), who stated that one in three customers who tried new brands eventually favored their new purchases and stated they would continue buying them post-crisis, one in three customers who tried new brands eventually favored their new purchases and stated they would continue purchasing them post-crisis. Another gap to consider, and one of the impediments to the strategy of maintaining brand reputation during the COVID-19 period, is the high cost of new health technologies entering the market, which has created a new problem for hotel managers on a budget (Dabbous et al., 2020). As a result of the relationship between brand reputation and financial facets, the role of employees in reputation management should be profoundly analyzed (Esenyel, 2020).
The underlying concept of crisis management is based on two fundamental crisis response theories, namely Attribution Theory (AT) by Weiner (1985) and Situational Crisis Communication Theory (SCCT) by Coombs and Holladay (1996). The current study adds to the body of the crisis management literature by Mitroff et al. (1987) on brand dimensions. Specifically, the origin of SCCT theories can be traced back to efforts to improve and protect brand reputation (Benoit, 1997; Coombs, 2007a; Hearit, 1995). The objective of this study is to fill a gap in the literature by suggesting and empirically confirming the set of brand reputation and brand performance strategic measures to assist hotels in resuming business activity after the COVID-19 crisis. To accomplish this, a total of 341 hotel managers in Indonesia were involved in the present cross-sectional study.
Literature Review
The Theories of Crisis
The Situational Crisis Communication Theory is one of the numerous studies that have applied attribution theory to crisis management (SCCT) (Coombs, 2007b; Kwok et al., 2021; Payton, 2021; Zhou et al., 2019). The first to integrate crises and response strategies were situational crisis communication theory (SCCT), which argued that the choice of a crisis response strategy is determined by some factors (Zhou et al., 2019). According to Kim and Sung (2014), crisis response has two major components: (a) base crisis response strategies versus reputation management strategies (i.e., guiding and modifying information) and (b) two-sided crisis messages (sharing both positive and negative information) versus wrong messages (only sharing positive). Furthermore, Coombs (2007b) Coombs and Laufer (2018) stated that crisis response has two main components: (a) base crisis response (i.e., instructing information and adjusting information) and (b) reputation management crisis response. However, Coombs et al. (2020) present a review of the situational crisis communication theory (SCCT) that revises the current understanding of the theory. They explained that the SCCT is crucial to enhance knowledge during crisis communication. Taking a situational approach, the SCCT proposes three parts for a successful crisis response: first, instructing information; second, information that modifies (adjusting information); and third, reputation management strategies (Coombs, 2015).
In the organization or management literature, corporate reputation is frequently viewed as an intangible strategic asset with a significant potential for value creation and as a barrier to replication by competitors (Bodeklint et al., 2017; Dwiedienawati et al., 2021; Iglesias et al., 2020; Tawaha, 2021). Sturges (1994, p. 300) advises SCCT to approach each crisis stage with a focus on meeting the diverse management needs and challenges posed by the different dynamics and dimensions in each stage. Therefore, Coombs and Holladay (1996, p. 292) expressed that “organizations say to their various publics during a crisis should influence the extent of the reputational and financial damage a crisis can inflict on the organizational image.” It could be argued that SCCT has many roots in Attribution Theory, which describes how an organization attempts to make sense of a situation, event, or behavior by attributing responsibility to either dispositional (internal) or situational (external) factors (McLeod, 2012).
Although prior studies on the brand crisis in the hotel industry by (Hegner et al., 2021) and brand crisis in other industries by Frandsen and Johansen (2020), Iglesias-Sánchez et al. (2022), Lim and Brown-Devlin (2023), demonstrated the relationship between crisis communication and organizational reputation by demonstrating that internal communication drives the crisis response perception both directly and indirectly, thereby influencing how the public perceives or assumes (Bridgewater, 2023). In particular, the origin of SCCT theories can be traced back to efforts to improve and protect brand reputation (Benoit, 1997; Coombs, 2007a; Hearit, 1995). Poor internal communication can create a problem during a crisis because customers rely on the organization for information. As a result, the customer’s perception of the company will be positively or negatively affected by the disclosure of this information. However, the managerial and business practices that may be affected by improvements in internal communication during times of organizational crisis have not been subjected to rigorous empirical and theoretical testing (Andersson, 2019). Inconsistencies were found between hotel crisis response strategies and situational crisis communication theory guidelines, where instructive information was rarely included (Liu-lastres et al., 2020). Consequently, it is necessary to re-identify all the areas of brand reputation and performance due to the massive change that followed COVID-19 (Goyal et al., 2022).
Crisis Management during COVID-19 Pandemics
Numerous researchers have agreed that a crisis can be defined as a disturbance that physically affects a system and threatens its basic assumptions, subjective feelings, and the core of its existence (Hartmann, 2011). A broader perspective has been adopted by Bilić et al. (2017), in which they argue that a crisis is termed as any issue, drawback, or disruption that triggers an adverse stakeholder reaction that affects the business and financial strength of the organization. Therefore, according to Pearson and Clair (1998), a crisis is defined as a low-probability or high-impact event threatening the organization’s viability. The severity of a crisis depends on the ambiguity of cause, effect, means of resolution, and a belief in how fast decisions must be made.
The main objective of crisis response is to reduce uncertainty between citizens seeking services and organizations attempting to manage risk and ensure operational continuity (Grace & Tham, 2021; Reynolds & Seeger, 2005; Walsh & Walker, 2016). On the other hand, Hartmann (2011) categorized crisis as being four major groups, which suggests the type of crisis that most typically exists within the realm of crisis as follows: (1) Natural Crisis events are caused by nature, for instance, floods, earthquakes, hurricanes, tsunamis, and volcanic eruptions. (2) Epidemics spread widely and rapidly in more than one country: swine flu, SARS, foot-and-mouth disease, and the COVID-19 pandemic. (3) Technological failures concern nuclear issues, computer malfunctions, plane crashes, and power outages. (4) Civil conflict refers to political tension between conflicting countries, such as war, violence, strikes, and demonstrations, and non-political civil conflict including suicide, sabotage, and violence.
Several authors have demonstrated that crisis management is an interdisciplinary field comprised of theoretical problems, practical activity, people management, and the art of resolving crises (Hollá et al., 2018). According to Andrianopoulos (2015), crisis management can be divided into three phases: pre-crisis, crisis response, and post-crisis. (1). Pre-crisis phase. The objective of the pre-crisis phase is to avoid a crisis utilizing risk assessment, a means of identifying, measuring, and responding to project threats. It comprises scanning and analyzing the environment to ascertain, appraise, evaluate, and systematically select environmental risks to companies and estimate the likelihood of a particular risk. Employees must be prepared to contribute to crisis management by having the knowledge and qualifications to use organizational tools, and this can be done through training sessions to make them aware of the procedures, protocols, and action plans to be followed when a crisis approaches. (2). Crisis response steps. When prevention attempts fail and a crisis is triggered, the organization enters “crisis mode” and enters a response process. Because the possibility of immediate risk still exists, decision times are short and characterized by uncertainty and ambiguity. The first step to containing a crisis is to quickly analyze the situation by obtaining as much detailed information as possible. After evaluation, the crisis management team mobilizes the necessary resources and performs the assigned tasks. The next step is to inform the public and stakeholders of the situation. A quick and organized response can help you frame the crisis in a way that maintains your organization's credibility and trust, avoids the spread of misinformation, and demonstrates that your organization is under control. (three). Post-crisis phase. Once the crisis subsides, companies reach the final stage, the post-crisis stage, where the crisis is over and business as usual resumes. So the crisis, while still necessary, is no longer a concern for management.
In the context of hospitality, crisis management refers to the planning and implementation of structured and deliberate processes to manage and overcome the adverse effects of crises and disasters on tourism stakeholders (Fink, 1986; Ghaderi et al., 2012; Liu et al., 2015). It also provides the chances for improvement in hospitality systems and procedures. Hang et al. (2020) argue that during the current COVID-19 pandemic, crisis management focusing on shared emotions is critical, as it can establish emotional attachment with tourists. Similarly, Wut et al. (2021) suggest that most mainstream crisis management research focuses on crisis impact and recovery, risk management, risk perception, and disaster management. All prevention practices remain in the priority quadrant during the pandemic stage, such as marketing practices (lowering office service list prices and marketing to new segments), human resources practices (reducing the labor force by unpaid vacation), and governmental assistance should be at a low priority (Lai & Wong, 2020). Proper crisis communication is necessary to keep stakeholders informed, secure, and planned (Kwok et al., 2021). They believe that organizations can protect employees and customers and maintain business continuity by applying a crisis communication strategy that is perfectly designed to enable immediate and effective communication during a crisis. In contrast, Davahli et al. (2020) analyzed the impact of the crisis on hospitality and found that the pandemic caused severe problems for luxury hotels. They assumed that the crisis was global and that there were no significant differences between hotels, regardless of their facility type, brand, or level of quality, and hospitality management reacted to the crisis caused by the pandemic (Kukanja et al., 2020).
The Effect of Crisis Management and Brand Reputation
According to Christensen and Lægreid (2020) study, reputations are negatively affected by crises, they argued that as the number of crises has increased, so has interest among researchers in determining how these crises impact reputation. Reputation is essential to the success of an organization (Bass, 2018). Previous academics appear to concur that presenting the truth is vital when considering crisis management and its impact on brand reputation (Bodeklint et al., 2017; Coombs & Laufer, 2018; Greyser, 2009; Johar et al., 2010). Organizations can rebuild their reputations by speaking the truth unless challenged by a crisis or its onset (Fors-Andrée & Ronge, 2015). According to a study by Daboul (2016), both crises decrease the perceived functional/experiential and symbolic brand benefits. He argues that the crisis has a profound effect on the notion of perceived benefits. Bundy et al. (2017) and Coombs (2020) identify crisis impacts by focusing on reputational risk, corporate branding, and organizational reputation rehabilitation.
Although different crises can affect a company, the consumer relationship with a brand is at risk if the crisis is not well controlled (Greyser, 2009; Salvador et al., 2017). Furthermore, Walsh et al. (2009) pointed out that a person's relationship with the organization is an important factor in that person's perception of the company's reputation and that customers are more likely than other stakeholders to have a relationship with the company and the brand, which improves brand performance. Therefore, effective marketing methods for establishing a “hotel chain” provide brand reputation benefits during a pandemic (Mocanu, 2020; Piga et al., 2022; Toklu & Kucuk, 2016). Hence:
H1: Crisis management has a significant influence on the reputation of large-scale hotel brands during the post-COVID-19 pandemic.
The Effect of Brand Reputation and Brand Performance
According to Foroudi (2019), Gonring (2008), and Reid (2002), brand reputation is a critical performance indicator for a brand and relates to how others perceive a given brand (person or corporation). In addition, O’Neill and Xiao (2006) suggest that brand reputation is one of the most important contributors to a property’s profitability, along with net operating income and revenue per available room. Another research on brand reputation has been undertaken by Fiaz et al. (2019) to assess the impact of brand image in a firm on product and service sales, brand success, and company performance.
Contrarily, the frequent poor performance may also be linked to the firm’s inability to implement a viral marketing approach in its marketing program (Jennifer, 2022). This view is like de la Fuente Sabaté and de Quevedo Puente (2003), who state that it is important to understand that brand reputation is not always a catalyst for increased sales and profits. However, brand reputation can improve current or future hotel brand performance, brand loyalty, brand repurchase, and brand recommendation. Thus,
H2: The brand reputation of the large-scale hotel has a significant influence on its brand performance during the post-COVID-19 pandemic.
The Effect of Crisis Management and Brand Performance
There has been little research on how hospitality organizations respond to and recover from brand crises during a pandemic (Paraskevas & Quek, 2019; Piga et al., 2022; Shen et al., 2020). Nevertheless, Rezkalla’s (2021) study indicates the impact of the COVID-19 outbreak on firms’ brand performance. However, Wu et al. (2020) and Polemis (2021) argued that brand performance fluctuated during the COVID-19 pandemic based on the tendency of room rates to decline significantly. According to Chaudhuri and Holbrook (2001), brand performance results from desirability and profitability. Iyer et al. (2019) define brand performance as a combination of financial performance measurements (such as market share and profitability) and non-financial performance measures focused on the medium- to long-term maintenance of brands. Return on investment has been added to the metrics of brand performance models to measure the brand’s financial performance (Badenhausen, 2017).
Previous studies on brand performance in the hotel industry mainly investigate brand marketing performance and assess brand performance from the visitor's views. Similarly, field studies on brand performance in tourism typically focus on hotel companies and attempt to define the connection between other variables influencing a hotel brand’s performance in the views of guests (Do & Nham, 2021; Gupta et al., 2020). This research investigates the relationship between crisis management and brand performance factors. To our knowledge, this study is the first to examine the simultaneous effects of indicators derived from various theories on the performance of Indonesian hotel brands during the COVID-19 pandemic. To conform, brand market share and sales volume were utilized as metrics of a brand’s market performance (Tuan, 2012). Unlike the normal environment where the brand pulls the customers, and the customers pay a premium for their preferred brands, the case was not so similar during the COVID-19 pandemic (Gogoi, 2021). The COVID-19 pandemic has accelerated the shift in the hotel business (Arabadzhyan et al., 2021; Deloitte, 2020a; Musadad, 2020). Nevertheless, Rezkalla’s (2021) study indicates the impact of the COVID-19 outbreak on firms’ brand performance. However, Wu et al. (2020) and Polemis (2021) argued that brand performance fluctuated during the COVID-19 pandemic based on the tendency of room rates to decline significantly. Therefore:
H3: Crisis management has a significant influence on the performance of large-scale hotel brands during the post-COVID-19 pandemic.
The Mediating Effect of Brand Reputation in Crisis Management and Brand Performance Relationship
Previously, Cabral (2012) claimed that a firm’s performance depends on its reputation and is stochastically reliant on its efforts to improve its reputation. Apart from that, reputation management was more frequently associated with crisis management, so administrators prioritized their reputation when it was essential (Aronczyk, 2020; Breier et al., 2021; Do & Nham, 2021; Li & Wei, 2016; Singh et al., 2020). Most crisis management before dealt with financial crises (Alonso-Almeida & Bremser, 2013) or crises from health risks (Dwiedienawati et al., 2021; Stergiou & Farmaki, 2021). Regarding building reputation, Urde and Koch (2014) point out that companies need to evaluate how they are perceived in their environment. Through this method, brand reputation creates the brand's 'attractiveness' recognized by employees, suppliers, investors, communities, and customers. Bodeklint et al. (2017) found that crisis management minimizes the negative effect that a crisis can have in the long-term perspective.
Thus, this study considers that a good reputation is a key factor in achieving a sustainable competitive advantage for organizations and finds a positive correlation between brand reputation and performance during the COVID-19 pandemic. In addition, this study seeks to fill the gap by adding brand reputation in the field of crisis management to the brand performance literature. Even, if a firm is dependent on a group of stakeholders who have critical resources and sufficient autonomy to sanction (reward) the organization because of its reputation, a poor (better) reputation will lead to worse performance (Neville et al., 2005). Therefore, this study investigates the mediating role of brand reputation during the post-epidemic period of COVID-19. Based on the previous discussion, the hypothesis constructed is as follows:
H4: The brand reputation of large-scale hotels mediates the connection between crisis management and brand performance during the post-COVID-19 pandemic.
Methodology
This study is based on a quantitative research design. The questionnaire was constructed using a seven-point Likert scale (1- strongly disagree to 7- strongly agree). Questionnaire items consist of items from previous research instruments that have been adapted and validated by previous researchers. The first part of the questionnaire measured demographic information, including gender, age, education level, and position. Multivariate analyses are used in structural equation modeling (SEM) to show relationships between constructs and the causal dependencies between endogenous and exogenous variables (Hair et al., 2013).
Sample and Data
Questionnaires frequently collect large amounts of quantitative information (Sekaran & Bougie, 2016). There are approximately 1,400 IHGMA members spread across Indonesia’s 34 provinces, and nearly 95% of general hotel managers in Indonesia are locals, as reported by the Indonesia Hotel General Manager Association (IHGMA) (Gunawan, 2021). Furthermore, the questions in the questionnaire were translated into Indonesia Language because large populations of IHGMA members were anticipated prior to data collection. Brace (2013) emphasized the significance of proper selection to guarantee that respondents comprehend the meaning, nuances, and shades of meaning.
The second view helps the researcher to construct better items for data collection when developing the questionnaire for this study. This study interviewed 10 senior hotel managers and 5 academics. Cronbach's alpha coefficient was also used to assess the reliability of the questionnaire. Cronbach's alpha coefficient should be greater than 0.70 for all variables and more than 95% for the entire questionnaire, to show sufficient coefficients and ensure that the research tool has sufficient reliability. After pre-testing, a pilot study was conducted with a convenience sample of 50 people (Fraser et al., 2018; Su et al., 2016). Subject to ERC approval, 50 questionnaires were distributed to senior hotel managers of four- and five-star hotels in Jakarta, Bandung, and Yogyakarta from September 21, 2022, to October 31, 2022.
Based on the Conroy sampling formula and at a 95 percent confidence level, the sample size appropriate for this study was 341 respondents with a 5 percent sampling error (Conroy, 2016). This sample size is also referred to as the 10-times rule, states that the minimum “sample size should be equal to the greater of 10 times the largest number of formative indicators used to measure one construct or ten times the largest number of structural paths directed at a specific latent construct in the structural model,” as stated by Hair et al. (2017, p. 108). However, the present study adopted the sample size suggestion by Peng and Lai (2012), Hair et al. (2017), and Memon et al. (2020). The researchers adopted a cluster sampling technique for this study, which falls under probability sampling. A cluster sample is a subsample taken from a population where data points are taken from subgroups that approximate their natural aggregation (Sekaran & Bougie, 2016). Since IHGMA has branches in all regions of Indonesia, researchers can use cluster sampling widely, which is spread across 14 regions in Indonesia with the highest concentration of 4 and 5-star hotels, as listed by the Indonesian Central Bureau of Statistics (BPS-Statistics Indonesia, 2021). The author undertakes that of Indonesia's 38 provinces, 30 samples can sufficiently reflect the Indonesian population.
Measures
The purpose of this study, developed by Alkhawlani et al. (2016), Mitroff et al. (1987), and Fink (1986), is to examine crisis management. More than 487 references refer to "Effective Crisis Management" by Mitroff et al. (1987), as shown by the search engine. Mitroff et al. (1987) proposed the five-stage crisis management model. Alkhawlani et al. (2016) introduced five additional related items, whereas Faulkner (2001) utilized five related items, and Liu et al. (2015) utilized three items. Lastly, Coombs (2007b) only utilized two items.
In hotels, product and service quality are vital in attracting new customers and encouraging return visits (Schürhoff, 2021). Some researchers revealed that the quality of the product and service is the most influential factor in a company’s reputation (Borda et al., 2017; Park et al., 2014). According to the reputation approach, hotel managers’ perceptions of social expectations influence the brand identity and customers’ perception of image (Foroudi, 2020; Ritter & Pedersen, 2020; Schürhoff, 2021).
The empirical literature is mixed in determining whether these branded hotels perform (Carvell et al., 2016; Iyer et al., 2021). As mentioned in the previous section, demand for travel and accommodation decreased during the COVID-19 pandemic. Brand support systems, such as global marketing, distribution, and guest loyalty, will be beneficial to branded hotels, leading to higher profits for those hotel properties. The present study will employ average daily rate (ADR), rooms revenue per available room (RevPAR) based on Carvell et al. (2016) and O’Neill and Carlbäck (2011), and market share by Chaudhuri and Holbrook (2001), Iyer et al. (2019) to investigate the financial performance of a brand.
Results
Demographic Profiles
Descriptive statistics show the main demographic profile of the respondents. Table 1 reports the frequency for sex, age, and education level. and job positions of the respondents as can be seen, the ratio of men to women in the sample is 81.2 percent to 18.8 percent. In terms of age distribution, the age group 40-59 (62.8 percent) is the most, followed by 31-39 (28.6 percent) and under 30 (7.1 percent). The results of the study show that experience and reputation are more common among those aged 40 and over (Ben Aissa & Goaied, 2016). Analysis of education level further shows that degree holders (40.9 percent) dominate the education level category. Graduates (36.3 percent) lag in developing countries such as Indonesia where the literacy rate is low. This result confirms the sentiment one way or the other. Among other categories, postgraduate education (13.5 percent) ranked third. and high school participation (9.2 percent) is relatively low. Senior administrators play an important role in answering this survey, followed by the position of Vice President, Chief Operating Officer, Cluster General Manager, General Manager, and Hotel Manager (56.3 percent) is another group that stands out in this regard. The categories of Assistant Managers (5.8 percent) and Director/Head of Department (37.8 percent) comprise the minority of positions in the survey.
Descriptive Analysis
As mentioned earlier, at least 330 questionnaires were distributed, with 341 successfully returned, for a collection success rate of 103.3 percent. Consequently, the preparation of data for SEM analysis requires careful preparation, screening of potential issues, and corrective actions, as recommended by Kline (2016), who found that 16 respondents had problematic data, and only 325 (98.5%) were valid. Table 2 summarizes the descriptive statistics for crisis management. The magnitude of the mean score ranging from 5.88 to 6.57 indicates that most top-level management anticipates or has created a potential recovery scenario for the COVID-19 pandemic crisis. The highest mean among the fifteen items is preparation and prevention (PP2, M=6.57, SD=.757), indicating that hotel managers have suggested that employees receive adequate training on how to help keep team members and customers safe during the COVID-19 pandemic. The lowest mean score for recovery (R2, M=5.88, SD = 1.133) indicates that the economic stabilization package and support for workers and enterprises from the Indonesian government help hotels in facing the uncertainty caused by the COVID-19 pandemic. Additionally, the tax relief is intended to help individual hotel taxpayers manage their cash flow during the uncertain times caused by COVID-19. Brand reputation is measured by looking at two variables: a resource-based view and a focus on competitiveness. In the resource-based perspective, respondents agreed to improve their brand reputation with customers and manage inventory effectively. Businesses must have effective resources (M = 6.24 - 6.45). The highest score indicates that hotel managers believe that brand reputation is related to the role of credibility in improving quality (M= 6.45: SD= .847). They not only have a resource-based perspective on the type of crisis and response strategy for brand reputations but also tend to spread good news about competitiveness, which encourages hotels to be inventive and innovative (M= 6.36; SD= .851) and have bargaining power -bargaining in dealing with trading partners (M= 6.36; SD= .893). However, hotel operators said that the crisis caused by the COVID-19 pandemic made it difficult to create opportunities to increase customer loyalty to existing businesses (M= 5.86; SD= 1.150). This represents the lowest mean score recorded for items focusing on competitiveness.
Brand performance further showed a slight wide deviation between items, with the lowest mean score recorded by Pf 1 (M=5.97, SD = 1.015) and the highest in Pf 3 (M=6.27, SD = .926). The item with the lowest score is item Pf 1 (M=5.97, SD = 1.015), indicating that hotel managers agree that Average Daily Rate (ADR) is an important determinant of brand performance. The highest mean score was achieved by Pf 3 (M=6.27, SD = .926), which indicates that hotel managers slightly agree that hotel market share is important in understanding brand performance.
Structural Equation Modelling
The Measurement Model
This part consists of an evaluation of the measurement model. A measurement model evaluation by Hair et al. (2013) was used to examine the reliability and validity of the constructed measure. By estimating model parameters and comparing confirmed correlations or covariances with observed values, correlations between variables are confirmed (Shaheen et al., 2017). This study contains five latent constructs, thirty-three measurement items, and measurement errors. In addition, three items on crisis management (SD1, R2, R3) and one on brand reputation (BR5) were deleted mainly due to their low factor loadings of less than 0.70.
As suggested by Awang (2012) and Hair et al. (1998) for construct reliability: The critical ratios for all constructs should be well above the required value (C.R. ≥ 0.6), and therefore the retained items are reliable for measuring the constructs. Additionally, items demonstrated strong internal reliability (α > .70), suggesting that the decision to keep items in a particular group was accurate and highly reliable. For validity assessment, four constructs were just above the cutoff for the average variance extracted, particularly crisis management (AVE = 0.683), brand reputation (AVE = 0.545), brand position (AVE = 0.874) and brand performance (average = .588). However, the measurement model had no problems with convergent validity, as all constructs exceeded the cutoff value (AVE ≥ 0.5). Validity and reliability values for all scales are summarized in Table 3.
Structural Model
Three to four indices are enough to conclude that the model is a good fit, as Hair et al. (2013) recommended. According to Table 4, the ratio of chi-square df (χ2/df) reached a threshold value of less than 5.00 (2.829). The values of AGFI (0.792), GFI (0.834), CFI (0.916), TLI (0.901), and NFI (0.876) also show that the hypothesized model fits the data well. The value shown by the root mean square estimate (RMSEA) for the overall model (0.075) is ideal (0.03 < x < 0.08), showing an excellent fit. In addition, the results also strengthen the fit of the overall model in terms of the adequacy of the observed data.
Evaluating the structural model is the second step of SEM analysis, a path analysis that evaluates all proposed hypotheses. The modified structural research model was displayed in the table (Table 5) after removing non-significant paths to improve model fit. All modified, maintained causal paths between crisis management had significant paths with brand reputation (S.E. = .077, C.R. = 12,510, p < .01), while there were no significant paths with brand performance (S.E. = .235, C.R. = .692, p = .489 > .01). Finally, brand reputation has no significant influence on brand performance (S.E. = .07, C.R. = -.746, p > .05); therefore, H2 is not supported. Based on the structural research model, the causal path representing H2 was found to be insignificant, and Byrne (2016) suggested removing non-significant paths to improve model fitting when revising the structural research model. These results show that crisis management does not have a direct impact on the performance of Indonesian hotel brands but must be conveyed through brand reputation. The results of this study contradict previous research by (Eltamboly & Abdallah, 2022; Golubeva, 2021; Rezkalla, 2021; Vo-Thanh et al., 2021). They found that the COVID-19 pandemic crisis had an impact on performance. These results conclude that brand performance, which is not influenced by crisis management, is one-dimensional. No significant relationship between crisis management and brand performance is important to justify the indirect effects of other mediating variables found in the study.
Conclusion
The research question investigates the influence of crisis management initiatives on the reputation and performance of high-end hotel brands in the post-COVID-19 crisis. The results confirm that overall crisis management and brand reputation building in the hotel industry is proceeding as predicted. The results indicate a positive significance influence and thus support hypothesis one in this study. This result is consistent with previous research that found a significant relationship between crisis management and brand reputation (H1) (Bodeklint et al., 2017; Dwiedienawati et al., 2021). Given the crisis in the tourism industry, the hospitality industry is also affected as it is one of the main pillars of the tourism industry. During the crisis caused by the COVID-19 pandemic, operating costs were adjusted to the changing needs and the brand reputation helped regain customer trust (Van Leeuwen Boomkamp & Vermolen, 2021). Initiate a brand crisis when the issue, such as a health risk, has the potential to negatively impact many consumers or a subset of them (Aronczyk, 2020).
This study found that brand reputation has a significant and positive influence on brand performance according to the original structural research model and both hypotheses (H2). However, this result calls into question the direct impact of brand reputation on brand performance as found in Casidy et al. (2019) and Foroudi (2019) was determined. Furthermore, O'Neill and Xiao (2006) point out that brand reputation is one of the most important factors in real estate profitability, along with net operating income and revenue per available room. Neville et al. (2005) explained that a large impact on the company's reputation leads to a reduction in performance.
Apart from the impact of crisis management initiatives on the performance of major hotel brands in the post-COVID-19 crisis. The hypothesized relationship (H3) between the determinants of crisis management and brand performance is not significant in the measurement model. This study found that crisis management through signal detection, preparation and prevention, recovery, and learning processes does not have a direct impact on the implementation of brand performance depending on how an organization can be managed (Farooq et al., 2021; Schürhoff, 2021). Regarding the indirect effects, the study found that hotel managers believe that measuring the organization's brand performance from a profit perspective can help evaluate the usefulness of strategies to reduce the impact of the crisis and provide information about, whether these strategies are effective and need to be adjusted.
This study found that brand reputation partially mediates the relationship between crisis management and brand performance (H4). This finding shows that brand reputation has direct and indirect effects on brand performance. An indirect effect is crisis management. The indirect effect shows that mediation has a significant and positive effect on crisis management and brand performance. The results show that hotel managers maintain a positive brand reputation, increase customer loyalty, or attract new customers, build trust in the market, and help position themselves as leaders in their field.
Implications of the Study
This study will provide practitioners with insights to help them navigate the crisis, gain an advantage during the slow growth recovery, and thrive after the crisis passes, especially in the hotel industry. The results of this study show that the difference in crisis management is one-dimensional, that is, the processes of signal detection, preparation, prevention, recovery, and learning have a significant indirect impact on brand performance. The final items were then reduced to four using a comprehensive theory-based analysis (one on signal detection, two on preparation and prevention, and one on brand reputation). Next, this study expands knowledge about brand reputation as a mediating variable. It is worth noting that this study provides strong evidence of the direct and indirect effects of crisis management on brand performance. However, one of the main empirical contributions of this study, which contradicts prevailing previous findings, is that the consequences of crises do not have a significant direct impact on brand performance.
This study recommends that hotel managers closely monitor brand reputation in the context of the pandemic's impact on customer expectations, for example, by monitoring their perceptions during and after the crisis. Hotel managers should review and improve company policies on travel, payroll, meeting attendance, and vacations, and communicate them to all their employees. Consider whether new policies such as workplace security or working from home are necessary. However, this also helps with financing as the process appears less risky to potential investors.
Limitations and Recommendations
This study is limited to Indonesia only. This study chose four- and five-star hotels (classified as high-class hotels) which are more convenient, sophisticated, and organized than three-star hotels, which have more services and facilities, although still limited. During a crisis, the size of a hotel's star rating may have an impact on the extent to which the hotel can engage in other branding strategies during the crisis. In addition, it is interesting to suggest a future study that includes the perspective of hotel managers from three-star hotels in Indonesia.
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Riyadi, A., Leonandri, D. G., & Jamaluddin, M. R. (2024). Crisis Management, Reputation, and Performance of Upscale Hotels in the Post-COVID-19 Crisis. In A. K. Othman, M. K. B. A. Rahman, S. Noranee, N. A. R. Demong, & A. Mat (Eds.), Industry-Academia Linkages for Business Sustainability, vol 133. European Proceedings of Social and Behavioural Sciences (pp. 1032-1055). European Publisher. https://doi.org/10.15405/epsbs.2024.05.84