Cultural and culture-related barriers to the expansion of international hotel companies in Italy. A focus on franchising entry mode.

1. Introduction Italy is the country with the largest hotel stock in Europe with more than one million rooms (Federalberghi, 2010); its heterogeneous hotel industry is dominated by independent, individually and small family owned hotel groups. Although this can be considered a general European phenomenon, it appears to be particularly accentuated in the Mediterranean peninsula. Italian hotel market is suffering a certain degree of maturity and saturation in terms of both offer and demand patterns but Italy can still be considered one of global leader countries with regard to the hotel industry. The operating presence of all the major international hotel companies witnesses its business attractiveness. It has been argued that the market saturation on the one hand and the increasing importance of marketing and technology on the other is putting some pressure on the independent hotels (Holverson and Revaz, 2006); branding appears to be one of the few solutions left to independent owners to keep performing well or even to survive. However, the estimated hotel brand penetration in 2009 was of only 7.4% in Italy, far away from a European level of brand diffusion (BNL Paribas Real Estate, 2010). Only 5.6% of the total rooms in the market belong to the 35 main international companies, regardless of the affiliation strategies. Among the few hotel entrepreneurs nowadays affiliated to companies in Italy, probably less than 5% opted for franchising. Surprisingly, very few studies focused on hotel franchising diffusion in Italy, and those which have been carried out, took Italy into consideration only in the broader EMEA (Europe, Middle East and Africa) context (e.g. Altinay, 2005b; Altinay, 2006; Altinay and Wang, 2006; Altinay and Okumus, 2010). Generally, the authors justified the importance of these studies by mentioning the low brand penetration in the EMEA area (24%). Similarly, it can be argued that Italian scenario, with the largest hotel market and the lowest brand and international franchisor penetration, also needs a closer exploration and more exhaustive analysis. The internationalisation literature does not seem able to provide an answer to the Italian low brand penetration, due to the application in these studies of what could be defined an organisational-centric perspective: particularly the assumption that cultural distance affects the decision on entry mode, implies the possibility for the company to adapt to the market. Some argued that when cultural distance is high, companies should opt for non-equity entry modes (e.g. Erramilli and Rao; Quer et al., 2007); others affirmed the tendency to prefer resource commitment