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Journal of Sustainable Tourism

ISSN: 0966-9582 (Print) 1747-7646 (Online) Journal homepage: https://www.tandfonline.com/loi/rsus20

A hotel sustainability business model: evidence from Slovenia

Tanja Mihalič , Vesna Žabkar & Ljubica Knežević Cvelbar

To cite this article: Tanja Mihalič , Vesna Žabkar & Ljubica Knežević Cvelbar (2012) A hotel sustainability business model: evidence from Slovenia, Journal of Sustainable Tourism, 20:5, 701-719, DOI: 10.1080/09669582.2011.632092

To link to this article: https://doi.org/10.1080/09669582.2011.632092

Published online: 06 Dec 2011.

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Journal of Sustainable Tourism Vol. 20, No. 5, June 2012, 701–719

A hotel sustainability business model: evidence from Slovenia

Tanja Mihalič∗, Vesna Žabkar and Ljubica Knežević Cvelbar

Faculty of Economics, University of Ljubljana, Kardeljeva pl. 17, 1000 Ljubljana, Slovenia

(Received 7 December 2010; final version received 6 October 2011)

This research explores and develops a hotel sustainability business model (HSBM) to study the sustainability orientation of the Slovenian hotel industry. Based on a compara- tive analysis of the existing sustainability and triple bottom line models, the usual content of a three-line HSBM (economic, environmental and sociocultural) was extended to in- clude customer satisfaction, environmental education and power to implement changes. Financial, marketing and tourism sustainability experts investigated best practices in sustainability measurements and gathered appropriate sustainability indicators; expert opinion and the Delphi method refined and reduced an initial 79 indicators to 36 oper- ational indicators, able to fulfil the HSBM’s sub-categories within the extended triple bottom line. The HSBM’s concept was used to study the sustainability of Slovenian hotel firms to reveal how important these indicators are for hotel managers and do they monitor them. Results indicated strong importance and measurement of economic and market- ing indicators, such as profitability and customer satisfaction. Following the socialist tradition, companies recognise the importance of human resources, but the importance of environmental education and awareness building, biodiversity, and the establishment of partnerships with stakeholders to implement sustainable tourism development are neglected. Economic performance was, for example, monitored by 66% of respondents, environmental performance by 28% and social performance by 42%.

Keywords: sustainability business model; sustainability indicators; environmental per- formance; hotel sector; Slovenia

Introduction

In tourism, sustainable development – based on the three pillars of economic, environ- mental and sociocultural assessments – and its implementation have been well researched and discussed. Tourism is arguably the world’s fastest growing industry, and, especially in developing countries and regions, is seen as a means of economic development. Since the 1970s it has been clear, however, that tourism brings with it considerable pressure in terms of its impacts on natural, cultural and social environments (UNEP and UNWTO, 2005). This pressure has brought some novel changes to the understanding of tourism. For the past 40 years, sustainable development concepts and their implementation have been growing discussion topics in tourism. Notably, debates and case studies have tended to focus on the destination level rather than the micro-level of the firm (Dwyer, 2005). Indeed, tourism firms have been slow to add sustainability principles to their management agenda. Although the first sustainable development wave began long ago, it has not been easy for corporate business to understand, let alone comply with, sustainability practices.

∗Corresponding author. Email: [email protected]

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New business models have been developed with sustainability values in mind, but the most comprehensive approach for measuring the sustainability performance of firms continues to be the triple bottom line (TBL) approach developed by Elkington (1998). TBL is a plan- ning and reporting system and decisionmaking framework that focuses on measuring and controlling companies’ economic, environmental and social performance. Nevertheless, in tourism, the industry seems to have little awareness of the existence of TBL or its relevance to the achievement of sustainable development (Dwyer, 2005). In this paper, the elements of the United Nations World Tourism Organisation (UNWTO, 2004) sustainability model are combined with Elkington’s (1998) TBL reporting model to create a hotel sustainable business model (HSBM). The HSBM is an innovative tool that can be used for measuring how sustainable hotel companies are in their awareness and reporting different business bottom lines and sub-categories. The paper goes on to test the importance and monitoring of sustainability indicators in the post-communist Slovenian hotel industry.

The post-communist countries are often referred to as transitional countries to stress their shift away from central economic planning towards a market-oriented economy (Hall, 2000). Transition also brought the change to a multi-party democratic system of government and the liberalisation of culture, demanding that different players in the tourism development process, including the local population and the non-governmental sector, be reckoned with (Verbole, 2000). The Slovenian hotel sector has experienced a transitional shift, widely supported through European Union (EU) accession in 2004. The privatisation process is now complete, and private owners have initiated major operational investments that resulted in a change towards orientation to higher spending markets, seen as one of the priorities of sustainable tourism development in post-communist states (Hall, 2000; Jordan, 2000). With these new investments, tourist products have developed, and the efficiency of hotels has improved (Assaf & Knežević Cvelbar, 2010). Hotel firms have had to learn how to operate in a fully market-based environment, and much effort has been expended in following the goals of the economic business development. However, the question remains regarding how other sustainability business issues have been taken into account in hotel practice. Thus, there is a need to develop an instrument that will measure the attitude and performance of hotels in all aspects of business. Research indicates that Slovenian hotel managers are aware of the importance of environmental and social performance goals, but are under pressure to achieve financial results and are thus fully dedicated to economic goals (Mihalic, 2009). Empirical evidence from the hospitality industry in developed countries has shown similar results (Bohdanowicz & Martinac, 2003; Bramwell & Alletorp, 2001). In addition, some authors also argue that in post-communist countries, environmental problems in the 1990s were and are considered less important than economic issues (Hall, 2000). Therefore, in this paper, we study whether the environmental and social areas are neglected and which parts of the TBL receive the least attention. How important are different sustainability aspects (indicators) for Slovenian hotel managers? Do they monitor them? In discussing these issues, the paper proceeds as follows: an overview of the development of the HSBM; a detailed overview of the Slovenian hotel industry; a description of the methodology and data used in the research; a description of the hypotheses; a presentation of the results of the study; and a consideration of the implications of the data with concluding remarks.

Conceptualisation and operationalisation of the HSBM

There are many concepts that refer to changes in business environments and new values and fields in business operations. One concept is sustainable tourism, or tourism that ensures that any current tourism economic activity will not have negative environmental and

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social (including economic) consequences on future tourist destinations and environments. Another concept is corporate social responsibility, which is a “business’s contribution to sustainable development” (OECD, 2001, p. 13). A business-based concept known as the TBL is a variation of the sustainability agenda for corporate firms (Elkington, 1998). Further, the concept of societal or social marketing also attempts to maintain and improve the wellbeing of customers and society in the long run (Houston, 1986; Kotler, Bowen, & Makens, 2006).

Indeed, new business concepts extend financial agendas to take environmental and so- cial business dimensions into account. The UNWTO’s definition of sustainable tourism is based on these three pillars (Figure 1). The first pillar, economic sustainability, re- quires the generation of prosperity and the cost-effectiveness of all economic activities. The second, the sociocultural sustainability pillar, means respecting human rights and equal opportunities for all of society. It requires an equitable distribution of tourism ben- efits, with a focus on alleviating poverty; it calls for the respect of different cultures and the avoidance of any form of exploitation or cultural destruction. The third pillar, environmental sustainability, refers to conserving and managing resources in such a way that the pollution of air, land and water is minimised and biological diversity and natural heritage are preserved (UNWTO, 2004). Experience gained over the years through numer- ous attempts to understand and implement the three-pillar sustainability model in tourism destinations and businesses has shown that there are additional requirements that have to be met in order to make implementation possible and successful. Mihalic (2009) sug- gests extending the three-pillar sustainability model into a 3+3 sustainability model. The three additional requirements would be customer satisfaction (a precondition for sustaining

Figure 1. Conceptualisation of the HSBM. Sources adapted from UNWTO (2004), Elkington (1998) and Mihalic (2009).

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tourism business), environmental education (a precondition for environmentally responsi- ble behaviour of both staff and customers) and political power and support which enables the implementation of sustainability strategies. Although these issues have been discussed and applied in the tourism literature, and there have been attempts to take them into account in the framework of sustainability indicators (ECETAT and ECOTRANS, 2004; UNWTO, 2004), there is still a need for a systematic approach and for the extension of the three-pillar sustainability model in order to bring it into line with the above-mentioned findings and experience with sustainability implementation (Mihalic, 2009; UNWTO, 2004; Figure 1).

Figure 1 shows UNWTO’s (2004) sustainable tourism model, its pillars and discusses additional requirements, Elkington’s (1998) TBL model and then the creation of the HSBM. The HSBM introduces three innovations to the existing models. Firstly, tourist satisfaction is defined as a part of the economic business category, and we refer to it as an intangible firm performance. Secondly, the environmental pillar is extended to include environmental education. Thirdly, because of the huge diversity of social components, the social business category is broken down into three business sub-categories: human capital (employees), cultural capital (local culture) and power to change/participation (relationships with local inhabitants, organisations and communities that help to build consensus and partnerships for sustainable development).

The marketing dimension is moved to the economic business category because a firm’s profitability and customer satisfaction can be seen as complementing competitiveness mea- surements. A company is profitable if its ultimate value exceeds the collective costs of performing the activities required to gain a sustainable competitive advantage over its rivals (Porter, 1979, 1989). Hunt (1995) suggests that sustainable profitability can only be created by intangible sources such as responsiveness to consumer needs and preferences, innova- tiveness, quality and image. Cost efficiency remains a necessary condition for the creation of profit; however, non-price factors add most of the value to a product. It is thus logical to expect that some researchers would call for an intangible effectiveness approach that takes into account items such as customer satisfaction and service quality instead of tangible efficiency alone to measure profitability (Huang, Chu, & Wang, 2007; Israeli, Barkan, & Fleishman, 2006; Mihalic, 2009; Sigala, Airey, Jones, & Lockwood, 2004). In services, especially the hospitality industry, the focus is on customer satisfaction, long-term rela- tionships and customer-perceived service quality, and it is expected that the industry would favour service-related indicators over traditional performance and financial indicators. A study of the Chinese hotel sector has shown a strong linkage between non-financial per- formance or the customer perspective and the financial performance of a company (Huang et al., 2007). For these reasons, our model combines financial and marketing satisfaction indicators within the group of economic indicators (Figure 1).

The next extension to the three-pillar model is education for sustainable development, awareness raising and the creation of environmental ethics. The UNWTO specifically ad- dresses the responsibility of tourism suppliers to educate visitors and thus promote demand- side sustainable behaviour. Nevertheless, sustainability information, awareness raising and ethics are also integral elements of changed sustainability on the supply side, through em- ployee and management education (Bohdanowicz, 2005). In our model, we added education and awareness raising to the environmental pillar, emphasising the responsibility of firms to take action in this regard.

In the implementation process, the political dimension plays an important role, as recognised by the UNWTO (2004) and many other sustainability models (ECETAT and ECOTRANS, 2004; Mihalic, 2009). The VISIT model for tourism destinations suggests indicators for the political implementation of the sustainability concept. According to VISIT,

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examples of these indicators include the existence of a sustainable tourism development strategy and policy at a destination, the involvement of all relevant stakeholders in the process, a system for environmental quality monitoring and reporting and the number of eco-labelled tourism facilities. The indicator in the HSBM called “power to change and participation” is placed in the social and political category (Figure 1). This category also includes human capital, as employees are the driving force of tourism development. Local culture, including the local population (Verbole, 2000), is also included here, as it is an important asset of any tourism destination.

After the model was conceptualised, three independent groups of researchers with different expertise worked on the operationalisation of the proposed model. Three financial and four marketing experts worked on the economic business category; three tourism sustainability experts covered the environmental and social business category. The experts were selected based on their expertise and experience in the subject area. The groups independently carried out a review of literature and best practices in their area of expertise. Each group created an initial pool of identified indicators in their area of main expertise, sustainable tourism or business performance. Then, each group evaluated the importance of each indicator and created reduced pools of indicators, with the criteria for the final number of indicators per field of around 20.

The group of experts in finance studied theoretical and practical financial and accounting indicators and measurement models. A valid body of literature was found in accounting- based research (Archel, Fernández, & Larringa, 2008; Deegan, 2007; Ho & Taylor, 2007; Lamberton, 2005; Vanclay, 2004). They also looked closely at the set of sustainability indicators suggested by the Uniform System of Accounts for the Lodging Industry (USALI, 2006), Horwarth (2008) and MANOVA (2008). Finally, they examined annual reports of international hotel companies such as Accor (2007, 2008), Choise Hotels (2007), Marriot International (2008) and Willard Intercontinental (2008), and identified the most commonly used sets of indicators to measure financial performance in the hospitality industry. As a result, the group suggested 17 financial indicators to be included into the final model.

Marketing indicators were screened from marketing performance literature and hotel best practices by the marketing expert group. Key marketing performance indicators include those for customer satisfaction, loyalty and perceived value to tourists, the contribution of marketing activities (e.g. marketing communications) to business results, brand equity and market position (Briggs, Sutherland, & Drummond, 2007; Fuchs & Weiermair, 2004; Kim & Kim, 2005; Phillips & Louvieris, 2005; Rust, Ambler, Carpenter, Kumar, & Srivastava, 2004; Sin, Tse, Chan, Heung, & Yim, 2006). The marketing group created a list of 22 marketing indicators.

Environmental and social business indicators were studied by the third group. Seven different categories of sources were reviewed: green accounting (Bartelmus, 2008; Cairns, 2000; Hartwick, 2001); sustainability indicators (ECETAT and ECOTRANS, 2004; Tourism Sustainability Group [TSG], 2007; UNEP, 1995; UNWTO, 2004); best practices such as the TUI hotel environmental checklist (TUI, 2008), Accor’s (2007, 2008) annual report and Fairmont (2008); environmental codes of conduct such as UNEP (1995) and UNWTO (1999); environmental labels and awards (Font & Buckley, 2001); environmental standards (such as ISO, EMAS); and CO2 footprint models. Twenty indicators for natural environment and 20 indicators for social and political environment were suggested.

Lists of the 79 financial, marketing and environmental and sociopolitical indicators were sent to the panel of participating experts. In order to develop a final list of indicators, the study then employed a modified Delphi technique (Choi & Sirakaya, 2006). The small size of the panel (10 experts selected based on their expertise and experience in the subject

706 T. Mihalič et al.

area) enabled an efficient flow of the study and a better control of the work generated. The panel size did not reduce with additional rounds of the study. The panel members reached consensus on the operationalisation of indicators and reduced the number of indicators to 69 after the first rounds of discussion. Additionally, a pilot test with respondents from a relevant population of hotel managers was conducted. The pilot test showed that several indicators were not recognised as important or were not monitored by hotel managers. Armed with findings from the pilot test, the panel members further trimmed and refined the pool of indicators and reached consensus on 36 indicators for the HSBM. The final scale with 36 indicators represents all the studied business categories (Table 1).

The Slovenian hotel industry

Slovenia is an alpine and Mediterranean country located at the north-east corner of the Adriatic Sea. In 1991, Slovenia separated from Yugoslavia and became an independent country. Since independence, Slovenia has achieved remarkable economic results. In 2004, Slovenia became a full member of the EU and introduced the euro as its currency in 2007. Among transition economies that entered the new, larger Europe, the Slovenian economy is most developed, and Slovenia is seen as a benchmark for other post-communist economies in the region due to its successful transition process (Lahovnik, 2010). The economic efficiency of firms increased in response to changing competitive pressures associated with the transition to market and competitive pressures that sorted out inefficient firms (Orazem & Vodopivec, 2009). Economic growth was stable until the financial and economic crisis in 2009, when Slovenia’s gross domestic product (GDP) dropped 7.8% (Statistical Office of the Republic of Slovenia [SORS], 2010). During the crisis, tourism faced reduced and negative visitation growth rates and fell in yield.

Tourism is an important economic sector in the Slovenian economy, but does not receive attention in national and regional development strategies. It is estimated that in 2010, Slovenian tourism contributed about 12% to Slovenia’s GDP both directly and indirectly, and contributed around 13% to total employment (WTTC, 2010). Many kinds of tourism exist in Slovenia, including mountain tourism, ski tourism, sun and beach and spa tourism, city and cultural tourism, farm tourism and gambling. The country is small (2 million inhabitants) but receives about 2.7 million visitors per year, with more than 60% of these visitors coming from outside Slovenia (SORS, 2010).

The hospitality industry represents an important part of Slovenian tourism. The country has 186 hotels owned by 124 hotel firms. The total hotel capacity is about 33,000 beds, or 40% of the total bed capacity. The average yearly hotel occupation rate is 45% (SORS, 2009), well below the EU average of over 60% (UNWTO, 2010a). More than half (55%) of the hotel capacity is concentrated in seaside and mountain resorts, adding a strong seasonal component to the hospitality industry.

The hospitality industry in Slovenia witnessed an important restructuring since the completion of the privatisation process in 2000 when new owners, mainly domestic compa- nies, started to invest in the refurbishment of rooms and the development of new products, such as conferences and wellness and thermal facilities (Assaf & Knežević Cvelbar, 2010). Following Slovenia’s entry into the EU in 2004, tourism firms were able to access EU fund- ing programmes (primarily structural and cohesion funds) through the European Regional Development Fund. In total, 96 infrastructural projects were funded, costing up to 357.5 million euros (Tomin Vuckovic & Turk, 2008).

With these investments, hotel quality has improved significantly. Currently, more than 90% of all hotel properties in Slovenia operate at the three-, four- or five-star level (SORS,

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Table 1. HSBM indicators by business lines and sub-lines.

Basic indicators Business

sub-category Business

bottom line

1 Profitability of assets (ROA) = net income/asset Financial Economic 2 Profitability of capital (ROIC) = operating profit after

taxes/(equity + financial liability) 3 Profit margin = operating profit/operating income 4 Economic value added (EVA) = net income – capital

costs 5 Total revenue per employee 6 Average room rate 7 Average occupancy rate 8 Share of guests who evaluate quality as very high Marketing 9 Share of guests who evaluate quality vs. price ratio as

very high 10 Share of highly satisfied guests 11 Share of returning guests who have stayed at hotel at

least three times 12 Share of guests who would recommend the hotel to

friends and acquaintances 13 Energy consumption Resource Environmental 14 Consumption of energy from renewable sources (e.g.

biomass, solar, geothermal, wind energy, photovoltaic, etc.)

15 Water consumption 16 Water recycling 17 Quantity of solid waste 18 Recycling waste 19 Direct CO2 emissions 20 Selecting plants that are adapted to a particular

environment (% of hotel establishments) Biodiversity

21 Planting at least one tree per year (% of hotel establishments)

22 Environmental activities for the employees (e.g. number of seminars or environmental education hours per employee)

Environmental education

23 Environmental activities for guests (e.g. workshops, information brochures)

24 Employee satisfaction (e.g. the proportion of very satisfied employees in the comparable periods)

Human capital

Social

25 Employee salaries (e.g. comparison with other hotels) 26 Training of employees (e.g. in hours per employee per

year) Number of cultural events in the hotel enterprise (local culture)

Cultural capital

The proportion of local dishes on offer 27 Cooperation with the municipality (e.g. the number of

projects) Power, partic-

ipation 28 Cooperation with local residents (e.g. the number of

joint activities in the comparable periods) 29 Satisfaction of local residents with the development of

tourism 30 Cooperation with non-governmental environmental

organisations 31 Participation in the overall strategy of sustainable

development of tourism in the destination (Continued on next page)

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Table 1. HSBM indicators by business lines and sub-lines. (Continued)

Basic indicators Business

sub-category Business

bottom line

32 Monitoring of the implementation of hotel’s sustainable/ecologic development strategy (e.g. the realisation of the objectives)

35 Environmental quality standards (ISO 14001 certificate)

36 Number of other ecological quality labels (e.g. Green Key, Green Dot, EU Flower, Blue Flag)

Note: Cronbach’s alpha for economic business bottom line indicators (importance): 0.92; for environmental bottom line: 0.95; for social bottom line indicators: 0.93. For each item correspondents answered two questions: (1) Our hotel measures the item specified: yes, no. (2) How important do you consider the indicator is: 1 – not at all, 5 – very important.

2009). The Slovenian hotel industry still lags, however, on several aspects, including brand recognition and internationalisation. In Slovenia, only a few international hotel brands are represented, such as Kempinski, Best Western, Trend Hotels and Relais Chateau. The industry suffers from a skill shortage in middle and top managers (Sibila Lebe et al., 2009), probably due to low wages and the absence of training programmes. There is also a lack of initiative in the environmental field. The country’s hotel managers follow environmental legislation and directives; they also try to minimise energy, water and fuel consumption in order to reduce costs, and they are not totally ignorant of visual pollution (Mihalic, 2004). At the same time, voluntary environmental initiatives in the sector are rare. In 2010, only two hotel firms had an environmental ISO standard and only one hotel business was eco-labelled by the EU. It was in 2010 that Slovenia received its first Green Globe hotel.

Research and hypothesis

The HSBM has been used to study the sustainability of the Slovenian hotel sector. In our research, it is assumed that hotel firms are not equally aware of the importance of all three bottom lines. They do not strategically address all of the business categories and are less aware that non-economic (environmental and social) business dimensions should receive an equal share of their attention as economic dimensions. Consequently, the following hypotheses are proposed:

H1a: There is a difference in how Slovenian hotel firms perceive the importance of each of the three bottom lines.

H1b: There is a difference in how Slovenian hotel firms monitor the performance of each of the three bottom lines.

Within the economic business bottom line, our HSBM distinguishes between tangible economics and intangible marketing performance. Based on previous research in Slovenia, in the tourism industry it is evident that there is a rising trend in identifying the importance of the marketing issues (Dwyer, Knežević Cvelbar, Edwards, & Mihalič, 2011); however, managers are still pressured to primarily deliver good financial results (Assaf & Knezevic Cvelbar, 2010). Therefore, further hypotheses are as follows:

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H2a: There is a difference in how Slovenian hotel firms perceive the importance of each of the two economic sub-categories (marketing and financial).

H2b: There is a difference in how Slovenian hotel firms monitor each of the two economic sub-categories (marketing and financial).

In the hotel study context, the majority of existing studies claim that environmental initiatives are linked to better performance, and that a firm’s investment in the natural environment may produce a sustained competitive advantage (Bogdanowicz, 1996; Bo- hdanowicz & Martinac, 2003; Bramwell & Alletorp, 2001; Chan & Wong, 2006; Erdogan & Barris, 2007; Kirk, 1995). The current body of literature indicates that environmental incentives in hotels are usually motivated by direct cost saving and are, therefore, focused on green performance for energy consumption, water consumption and waste management. In line with our HSBM, the question is how aware hotel firms are of the importance of environmental issues and we hypothesise that:

H3a: There is a difference in how Slovenian hotel firms perceive the importance of each of the three environmental sub-categories (resource use, biodiversity and environ- mental education).

H3b: There is a difference in how Slovenian hotel firms monitor each of the three envi- ronmental sub-categories (resource use, biodiversity and environmental education).

Further, we tested the social sustainability category and sub-categories. Some studies suggest a link between social initiatives and improved financial performance (Aragón- Correa, 1998; Reinartz, Thomas, & Kumar, 2005; Sharma & Vredenburg, 1998). Un- fortunately, empirical research testing the link between social initiatives and financial performance in the tourism industry is limited. Thus, our last hypotheses are as follows:

H4a: There is a difference in how Slovenian hotel firms perceive the importance of each of the three social sub-categories (human capital, cultural capital and power to change and participation).

H4b: There is a difference in how Slovenian hotel firms monitor each of the three social sub-categories (human capital, cultural capital and power to change and participation).

Data and methodology

The survey was carried out online from 10 March 2009 to 10 June 2009, and was supported by online and telephone reminders. The sample frame was a combined list of 124 hotel companies from two sources: the Slovenia Chamber of Commerce and the Slovenian Tourism Organisation. Substantial efforts were devoted to increase the response rate from the small population of hotel companies in Slovenia. Usable responses from 54 hotel managers were collected, yielding a 43.55% response rate. The response rate is above typical response rates in industrial mail surveys (Diamantopoulos & Schlegelmilch, 1996). The sample is representative of the population of hotel companies in Slovenia in terms of the number of rooms in hotels of specific categories, as seen in Table 2.

The respondents evaluated the importance/usefulness of each indicator on a Likert scale (1 = not useful to 5 = very useful). They were also asked to indicate which of these indicators they currently monitor (yes/no).

The analysis was based on the aggregated indicators for the importance/usefulness and monitoring for each of the three business bottom lines: financial and marketing indicators for the economic business bottom line; resources, biodiversity and environmental education

710 T. Mihalič et al.

Table 2. The Slovenian hotel sector in 2009.

Category of hotels

Population structure according to no. of

rooms ∗

Sample structure according to no. of rooms

Significance (chi-square difference test)

3 star hotels 38.1 35.0 0.733 4 star hotels 51.3 55.6 5 star hotels 7.4 7.7

Source: SORS (2010).

for the environmental business bottom line; and human capital, power and participation, and cultural capital for the social business bottom line. Hypotheses were tested using statistical tests to establish the difference between the means for importance/usefulness variables (paired sample t-test) and the distribution between counts for monitoring variables (chi-square statistic). Internal consistency was estimated using the reliability coefficient Cronbach’s alpha.

While the results of our study are expected to be useful to tourism firms to help them understand and improve the performance of their business categories and sub-categories, some possible limitations of the approach must be acknowledged. Our study measured the importance and not the actual economic, environmental and social performance. We assumed that what is strategically followed is monitored and vice versa. Thus, we assumed that there is a strong correlation between monitoring and performance.

Results

The reliability of the indicators for the importance of each of the business bottom lines was estimated first by using internal consistency reliability coefficient Cronbach’s alpha (Nunnally & Bernstein, 1994). The scales revealed very high internal consistency (0.92, 0.95 and 0.93 for economic, environmental and social bottom lines, respectively; Table 1). We began our research with the assumption that hotel companies do not equally perceive the importance of all three bottom lines (H1a). The results showed that hotel companies

Table 3. Importance and monitoring of HSBM social business sub-categories.

Importance Monitoring

Paired differences for indicators Mean SD

Significance (two-tailed

t-test) % of

companies

Significance (chi-square

difference test)

Pair 1 Economic 4.02 0.75 0.000 66 0.021 Social 3.56 0.84 42

Pair 2 Economic 4.02 0.75 0.000 66 0.000 Environmental 3.39 1.01 28

Pair 3 Social 3.56 0.84 0.069 42 0.094 Environmental 3.39 1.01 28

Note: SD, standard deviation.

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did not approach the three business bottom lines in the same manner (see Table 3). The economic bottom line was perceived as significantly more important than both the social and the environmental bottom line (paired sample t-test significant at 0.00). Most of the surveyed hotels were aware of the importance of economic indicators, and, on average, both financial and marketing indicators were considered important. Bohdanowicz, Simanic and Martinac (2005), Bramwell and Alletorp (2001), and Kirk (1995) all showed a tendency to neglect the environmental pillar. Social indicators were also considered significantly less important than economic indicators (paired sample t-test significant at 0.00), however, not significantly more important than environmental indicators (paired sample t-test not significant). We can therefore support the hypothesis that hotel firms are not equally aware of the importance of all three bottom lines.

Our research also assumed that hotel companies do not monitor all three business bottom lines equally (H1b). If we compare the percentage of companies that monitored each of the indicators, we find that economic indicators were monitored in the majority of companies (66%), whereas all other business bottom lines were significantly lower than the economic bottom line (chi-square test significant at 0.02 and 0.00, respectively; Table 3). We can therefore support the proposed hypothesis.

Economic business bottom line

Contrary to our hypothesis (H2a), profitability and customer satisfaction seemed to be equally important for hotel managers (t-test not significant; Table 4). Their understanding of intangible performance was well developed and appropriate for the service sector. Similar conclusions can be derived for monitoring. Hotels were not monitoring financial indicators significantly more than marketing indicators (chi-square test not significant; Table 4). H2b is, therefore, also not confirmed. Hotels do monitor marketing indicators and seem not to be weak in defining marketing strategies and goals that would reasonably result in monitoring (Dwyer et al., 2011).

Environmental business bottom line

We anticipated that hotel firms would manage the use and costs of resources, but there would be less focus on biodiversity and environmental education (H3a). Consistent with expectations, the importance of biodiversity and environmental education was significantly lower than that of resources (paired sample t-test significant at 0.00). Further, there was no significant difference in the importance of biodiversity and environmental education (paired sample t-test significant at 0.27; see Table 5). The monitoring of indicators in the environmental business line seemed to be consistent with the perceived importance of

Table 4. Importance and monitoring of HSBM economic business sub-categories.

Importance Monitoring

Paired differences for indicators Mean SD

Significance (two-tailed

t-test) % of

companies

Significance (chi-square

difference test)

Pair 1 Economic–financial 4.02 0.75 0.981 77 0.360 Economic–marketing 4.01 0.88 66

Note: SD, standard deviation.

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Table 5. Importance and monitoring of HSBM environmental business sub-categories.

Importance Monitoring

Paired differences for indicators Mean SD

Significance (two-tailed

t-test) % of

companies

Significance (chi-square

difference test)

Pair 1 Environmental–biodiversity 2.97 1.20 0.000 28 0.007 Environmental–resources 3.64 0.99 52

Pair 2 Environmental–resources 3.66 1.01 0.000 52 0.010 Environmental–education 3.17 1.13 29

Pair 3 Environmental–biodiversity 2.89 1.24 0.273 28 0.894 Environmental–education 3.09 1.15 29

Note: SD, standard deviation.

indicators: more than half of the hotel companies that replied to the survey were monitoring environmental resource indicators, and less than one third were monitoring biodiversity or environmental education (chi-square test significant at 0.00; 0.87). Motivated by direct cost saving, hotels seemed to be focused on green performance for energy consumption, water consumption and waste management.

Social business bottom line

The HSBM divides the social business bottom line into three business sub-categories: human capital, power/participation and cultural capital. We assumed that Slovenian hotel managers would give the highest value to human capital. The results reveal, however, that human capital was not significantly more important than cultural capital (paired sample t-test not significant; see Table 6). However, both human capital and cultural capital were considered significantly more important than power/participation (significant at 0.00 and 0.02, respectively). When asked about the monitoring and execution of social bottom line indicators, the majority of companies reported monitoring human capital, more than

Table 6. Importance and monitoring of HSBM social business sub-categories.

Importance Monitoring

Paired differences for indicators Mean SD

Significance (two-tailed

t-test) % of

companies

Significance (chi-square

difference test)

Pair 1 Social–human capital 3.84 1.04 0.005 70 0.011 Social–power/participation 3.43 0.90 43

Pair 2 Social–power/participation 3.43 0.90 0.028 43 0.135 Social–cultural capital 3.63 1.01 58

Pair 3 Social–human capital 3.84 1.04 0.170 70 0.288 Social–cultural capital 3.63 1.01 58

Note: SD, standard deviation.

Journal of Sustainable Tourism 713

half reported monitoring cultural capital and less than half reported monitoring the sub- category of power/participation (chi-square test significant at 0.01 for human capital and power participation, while non-significant for other comparisons). The hypotheses H4a and H4b can therefore be only partially supported. Contrary to a substantial body of research on human resource management in tourism and the hospitality industry (Hinkin & Tracey, 2000; Riley & Szivas, 2003), Slovenian hotel managers did not neglect cultural capital in favour of human capital. Relationships with local populations and other relevant organisations, and administrative organisations with political power were the weakest points, attracting the least amount of attention from hotel companies. Yet the ability of all relevant stakeholders to count and contribute plays a major role in the implementation of sustainable development in a tourist destination.

Discussion and conclusion

The aim of this study was to further develop an HSBM in order to increase the understand- ing of hotel management attitudes towards monitoring economic, environmental and social business bottom line performance. Although it has been argued that alternative destination sustainability models and differently named business sustainability models converge and follow the aims of sustainable development, there seem to be little awareness in tourism practice about alternative business-based sustainability models such as TBL (Dwyer, 2005; Mihalic, 2009). In order to go a step further in the development of sustainability models for tourism firms, a new HSBM with new business sub-categories was defined and ap- plied to measure sustainability in the Slovenian hotel sector. The Slovenian hotel sector recently moved from being state owned and governed to being part of a fully privatised market-oriented business environment. Thus, the presented empirical study is especially relevant because it reflects managerial attitudes towards newer environmental and social performance indicators in a transitional environment, where purely economic thinking has become predominant. The results indicated that Slovenian hospitality firms closely monitor economic performance (66%), while environmental and social performance are less monitored (28% and 42%, respectively). Nevertheless, sustainability values have been recognised in Slovenia and are gaining popularity in both the public and private sectors. In the near future, hotel managers will have to take on the challenge of implementing new behaviours that are more in line with all the issues leading to sustainability.

The results showed that financial and marketing indicators are equally important, and not significantly differently monitored. A previous study has shown that the financial performance of Slovenian hotels has improved over the last few years (Assaf & Knežević Cvelbar, 2010). The new private and mainly domestic owners have initiated investment cycles, developed new products and intensified advertising campaigns. Privatisation in the Slovenian hospitality industry was therefore associated with higher capital investments. Major investment cycles took place especially in the areas of room, food and beverage, spa, wellness, thermal, congress and recreational facilities. High levels of financial monitoring can be explained by a focus on financial performance that results in following the financial indicators in order to measure the strategy’s implementation and success.

Privatisation prompts firms to adopt a more decentralised management structure and a greater customer orientation (Cuervo & Villalonga, 2000). Orientation towards marketing indicators has also been stimulated by the increased role of the market in a transitional economy, as hotel firms become more aware of how dependent their business is on tourism market conditions and demand. New owners, therefore, put pressure on managers to closely monitor and improve marketing performance. Previous studies on the hotel and destination

714 T. Mihalič et al.

level have shown that the Slovenian tourism sector made significant improvements in the field of marketing (Dwyer et al., 2011; Makovec Brencic et al., 2007; Žabkar, Makovec Brencic, & Dmitrović, 2010). Nevertheless, Slovenian hotel managers still have room to improve their monitoring of marketing indicators and marketing performance.

Environmental performance was shown to be neglected and is certainly less of an is- sue in Slovenia than in competing European countries. Despite governmental subventions for joining the EU’s eco-labelling project for accommodation facilities, so far only one Slovenian hotel has taken advantage of the incentive. In neighbouring Austria, the Austrian eco-label has been awarded to 146 accommodation providers (UMWELTnet, 2010), 14 firms have EU eco-flower (European Commission, 2010) and there are many other accom- modation providers that have joined other available eco-certification schemes. In Slovenia, sustainability is still considered too costly and sustainable actions have low priority. Slove- nian firms are interested in doing business in a sustainable way, but this desire is related to lowering direct costs and overall improved financial performance. Therefore, energy con- sumption, water consumption, waste management and recycling are important and closely monitored issues in Slovenian hotels. Environmental education (an investment in the fu- ture) is neglected and considered a less important issue, even though educating employees, customers and local communities in environmental issues would increase awareness and result in better environmental performance in the long run (see Bohdanowicz, Zientara, & Novotna, 2011).

Issues of biodiversity were rarely raised, and most of the tourism companies were not aware of them. This trend could be easily changed. Planting vegetation that is adapted to a particular environment is a sound business practice that is easy to achieve, although it is not a main course of action at present. It can be expected that biodiversity issues will gain more importance in line with a rise in environmental awareness and education. A positive example is the action of UNWTO which dedicated the World Tourism Day 2010 to biodiversity (UNWTO, 2010b). Celebration of World Tourism Day in Slovenia has informed tourism stakeholders and increased the understanding and awareness of this aspect, and companies are now expected to incorporate this value into their management practices.

Slovenian hotel firms find human and cultural capital important and were closely moni- toring social performance in these fields. Almost two thirds of hotel companies considered employee satisfaction, training and salaries as important issues. This is to be expected from an ex-socialist country where social values were high on the agenda. However, other surveys found that hotel companies needed to invest more in human resource development, as most investments were in facilities (Sibila Lebe et al., 2009).

Slovenian hotels claimed that cultural capital was important, and that they were moni- toring their performance with respect to it. A number of cultural events in the hotel industry and the proportion of local dishes on offer in hotels were issues that were addressed in this research.

The political dimension, such as the power to implement and change, participa- tion of all relevant stakeholders and partnerships, was a sub-category that investigated the relationship between hotel companies and local and state governments, local com- munities and other relevant organisations. It was shown that Slovenian hotels do not closely monitor activities within this category. One of the main challenges for the Slove- nian tourism industry is to improve collaboration, initiate strategic alliances and de- velop networks and partnerships. This would help it to market consistent messages, develop complementary products, develop economies of scale, improve market intelli- gence and improve quality control and cooperation along value chains (Dwyer et al., 2011).

Journal of Sustainable Tourism 715

Partnerships and the involvement of all stakeholders, including local populations and non- governmental sectors, are an issue that must be further addressed.

The results of our study showed the influence of Slovenia’s transitional status from being state owned and governed to being fully privatised. When ownership was transformed so were the goals of the firms. Higher profits and market orientation were important considerations while care of the environment and social/cultural performance was less important. Slovenia has experienced a high rate of economic growth, and economic-based thinking is in line with the economic success stories of a transitional state.

It is up to future research to show how hotel firms have changed their attitudes towards non-economic business categories and values after the industry has recovered from the financial and economic crisis of 2009. According to some researchers (Kester, 2010; Oku- mus & Karamustafa, 2005; Papatheodorou, Rosselló, & Xiao, 2010; UNWTO, 2010a), the economic crisis might bring non-economic values and new business orientations into the business world and society in general. We are very confident to claim that the economic crisis has stimulated a new greener wave in the Slovenian tourism industry and support this argument with new business orientation towards more green products and green marketing campaigns, such as “Slovenia is green, Slovenia promotes green, Slovenia goes green” (Slovenian Tourism Board [STB], 2010). Yet, only future research will show how economic crises indeed affected the sustainability performance of this transitional country.

Future research should also extend to other hotel industries in other countries and compare hotel firms’ dedication and actual performance along all three business bottom lines of our HSBM. However, tourism operators in different countries may identify their own set of indicators within the concept of their particular business sub-categories. For more advanced business environments that are more dedicated to social performance, we might expect that relations with the local community in terms of residents’ satisfaction and collaboration in joint tourism projects will become more important. Therefore, relations with local residents may become a separate sub-category within the social pillar in the HSBM.

Acknowledgements The research in this paper was in part supported by the Slovenian Research Agency and in part by the Ministry of the Economy grant no. V5-0413, Defining the model for measuring the performance in hotel companies. The authors acknowledge the constructively critical comments from the journal referees, which helped improve the paper.

Notes on contributors Tanja Mihalič (PhD, University of Ljubljana and the University of St. Gallen) is a full-time professor of tourism and the Head of the Tourism Institute at the Faculty of Economics, University of Ljubljana (FELU). She is a member of the European Commission’s Tourism Sustainability Group. She has been involved in many research projects and is a prolific writer of papers and books on tourism, hospitality and sustainable development.

Vesna Žabkar (PhD, University of Ljubljana) is an associate professor of marketing and the Director of the Marketing Institute at the Faculty of Economics, University of Ljubljana. She has been involved in many research projects on marketing and tourism and has published papers in refereed journals on these fields.

Ljubica Knežević Cvelbar (PhD, University of Ljubljana) is an assistant professor of tourism at the Faculty of Economics, University of Ljubljana. She has worked in numerous research projects on tourism and enterprise restructuring and has published papers in refereed journals. Born in Montenegro, she carries Slovenian citizenship.

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