Boutique Hotels - Literature review Example

? Dissertation- literature review (Do s percept boutique hotels as a unique product. How is the perspective of the boutique hotels Table of Contents Dissertation- literature review (Do customer’s percept boutique hotels as a unique product. How is the perspective of the boutique hotels?) 1 Table of Contents 2 Introduction 3 Research Objectives (can put my aim and objective) 4 Literature Review 5 Market Overview of Boutique Hotels 5 Segmentation 7 The next section would focus on the aspects of targeting the market segments. This is important considering the fact that organizations do not have sufficient abilities to target every market segment. 11 Targeting 11 Positioning +intro 16 Elements of Marketing Mix 18 Product 18 Price 18 Place 19 Promotion 19 People 20 Process 20 Physical Evidence 20 Conclusion 20 References 22 Bibliography 24 Introduction Travel and tourism is one of the most attractive and lucrative industry segments which has attracted considerable attention from business organizations and individuals alike. Tourism is no longer a local phenomenon as the rise in disposable income has made travel and tourism one of the most booming industry segments of the world. This has also led to growth of hotels in almost every tourist destination around the world. The recent financial meltdown took a sever toll on the profitability and revenue margins of the hotel industry particularly in UK which whose economy took a major beating after the economic recession. However a recent report published by Price water house Coopers presents a comeback for the hotel industry in UK. The report states a growth rate projection of 7.8 percent in 2011 for London however the other provinces would have a lower growth rate which is pegged at approximately 3.1 percent in 2011. The report also forecasts a moderate growth with regards to room rates in the provinces (PricewaterhouseCoopers, 2010, p.2). Figure 1: Revenue forecasts for hotels in UK (Source: PricewaterhouseCoopers, 2010, p.4) The present study would contrite its focus on the boutique hotels in Brighton, UK. The study would try to analyse the marketing perspective of the boutique hotels which would include an analysis of the segmentation and positioning strategies adopted by these hotels. In this context a primary and a secondary study would be carried out. The primary study would comprise of a questionnaire survey which would be conducted in two parts. The first section would cover the managerial aspects of these hotels while the second survey would be aimed at finding out the positioning of the boutique hotels in the minds of the consumers. The secondary study would encompass an analysis of the existing literature on the topic of study. This would include an analysis of the various marketing concepts which would be linked with the practical aspects of the industry. Finally a set of plausible recommendations would be framed on the basis of the analysis of primary and secondary data which could be used by the concerned organizations to create greater value for the organization in the long run. Research Objectives (can put my aim and objective) The main objectives of the research study would be to analyze the different aspects of marketing associated with the boutique hotels. This would include an analysis of the segmentation, targeting positioning as well as the elements of the marketing mix. The study would also include a discussion on the perception of the managers as well as the general consumers with regards to the concept of boutique hotels. These would be carried out by using a combination of primary and secondary research. The primary research would be based a questionnaire survey and the secondary data in the form of an analysis of the existing literature would be used to analyse and prepare a set of plausible recommendations and conclusions so as to sustain the business of boutique hotels in the long run. Literature Review Market Overview of Boutique Hotels Boutique hotels have evolved as one of the major participants of the tourism industry sector. These hotels have carved a niche for themselves and have earned widespread fame and popularity among the target market audience. The concept of boutique hotels follows from the concept of ‘designersim’ which has become the buzzword for the participants of the tourism industry. These hotels are unique in the aspect that marketers have different and distinct views on the concept of these hotels. According to some operators it represents a boutique culture whereas a few view these hotels as an enhancement of the ‘townhouse’ concept. John Jarvis, an industry expert and owner of the famous Jarvis Hotels states the strategists behind these hotel chains as ‘fashion terrorists’. Critiques points out the similarities between fashion retailers and boutique hotels as he draws a line of similarity in the business models of the two related industry segments. A striking similarity in the different schools of thought is that most of them consider boutique hotels as an alternate option from the mainstream hotels. In view of the contrasting thoughts the Boutique Hotels and Resorts International (BHRI) which is a consortium of different boutique hoteliers presents a set of criteria for defining boutique hotels which includes present at a good location, unique interior designs, specific amenities and high levels of personalised service to the consumers (Download it, 2009, p.148-149). The success of the hotel industry is largely dependent on the marketing aspects which include segmentation targeting and positioning of the market apart from the elements of the marketing mix. The future sections would contain an in-depth analysis of the above stated aspects by analysing the present available literature available for the topic. Figure 2: List of Leading Boutique Hotels (Source: Download it, 2009, p.149) Since customers have needs and wants that are highly specific hence it calls on the need for organizations to divide the market into specific segments. These segments should be prepared in a manner that the constituents of a segment are homogeneous within the segment and heterogeneous with the characteristics of the market audience of the other segments. The following section analyses a possible segmentation approach for the boutique hotels. Segmentation Market segmentation is an essential tool that is used by marketers for splitting the consumer market. This is important due the fact that consumers have different needs and wants and it is not possible to satisfy the needs of every consumer present in the market. Doing so may generate greater confusion among the consumers which could create issues for the organization. Market segmentation is defined as “the process of splitting consumers, or potential consumers in a market into different groups, within which customers share a similar level of interest in the same or comparable set of needs satisfied by a distinct marketing proposition” (McDonald & Dunbar, 2007, p.37). Market segments are defined in a manner that the members within a segment display homogeneity in the consumer preferences. This helps firms to target customers with a product offering specific to their needs and wants. Segmentation can be done on the basis of benefits, status of users, rate of usage, customer loyalty, and product or service based attitudes and preferences (Kotler, p.289). Segmentation has widespread effect on the success of an enterprise. This assumes greater significance for the hotel industry particularly due the presence of a large section of consumer each of which has its share of specific needs and wants which are again dependent on a large number of factors. A research conducted by the European Travels Association states that segmentation process helps in understanding consumer needs and wants; in addition it also helps in initiating a pull based effect on the customers. The report also lays puts importance on a number of factors that could serve as prerequisites for designing a segmentation strategy. (Firstly the segments which are formulated have a discrete nature which is also differentiated from the others. In designing an appropriate segmentation strategy the most important aspect that must be considered is that of the needs and wants of the target market segments. This would help marketers to design an appropriate product or service mix strategy for a particular segment of the population. Secondly the size of the market and the segment must be carefully analysed to analyse the potential of the targeted market segment. Thirdly the value of the market segment must be analysed to realise the short and long term profitability and sustainability of the market segment. This would also serve to help the marketer frame up an appropriate promotional policy. Finally, marketers must also understand the aspect of sustainability of the market segment. ) This is important considering the fact that a large amount of resources are required for sustaining the market segments. This makes it extremely important to analyse the financial viability of the consumer segments so that proper service could be provided in the long run (European Travel Commission, 2010, p.5). Figure 3: Segmentation Process (Source: Kotler, 2008, p.287) Segmentation can be undertaken in two major ways which is dependent on the approach towards designing the market segment. The two approaches towards segmentation are normally referred to as a ‘priori’ and a ‘posteriori’ approach. The two approaches differ in the sense that the ‘priori’ approach is based on the certain predesigned attributes such as dividing the target market population on the basis of demographics or geography. In short this approach segments the market population before analysing the market data. The ‘poteriori’ approach on the other hand segments the target market population on the basis of market research studies which have been specifically conducted by an organization. The figure shown below gives an idea of the two approaches toward market segmentation. This approach is more suitable for the hotel industry as consumers for this industry segments have highly specific needs and wants which vary distinctly across different segments (Olsen & Zhao, 2008, p.432-433). Figure 3: ‘Priori’ and ‘Posteriori’ Segmentation Approach (Source: European Travel Commission, 2010, p.6). The figure shown below provides a snapshot of the difference in the approach of the two strategies for segmentation. Figure 4: Difference in Segmentation Approaches (Source: European Travel Commission, 2010, p.7). The next section would focus on the aspects of targeting the market segments. This is important considering the fact that organizations do not have sufficient abilities to target every market segment. Targeting Targeting forms the next important stage in the marketing of products and services. The marketer after deciding on the segment to be targeted decides upon an effective strategy to target the desired and potential consumer segments. Targeting is defined as the process by which marketers of a firm selects a section of the segmented market. The size of the segmented population is the most important basis for targeting the market population. The size of the segmented market must be such that attracting the segment would yield profitable results for the organization (Larreche, 2006, p.135-138). It is normally assumed that a larger size of the segmented population would imply greater returns for the organization. Growth is another aspect that plays an important role in shaping a targeting strategy. The targeted segment must be such that has good growth potential. Other important criteria include competition in the market. The firm must undertake an internal analysis of the company so that it can analyse whether it would be able to fulfil the demands of the target market segment. The competitive scenario includes aspects like number of players, suppliers and entry barriers for new players. A firm trying to target a market segment must effectively analyze the above stated aspects and its effects on the market potential and the proposed future earnings from the market segment (Keegan, 2002, p.51). Most of the boutique hotels tend to target the premium segment customers with their vast array of personalised services. These also include features like greater privacy, unique locations, design and ambience etc (Mill, 2008, p.7). “Bottom line prognosis” is one of the means to effectively target a market segment which is based on the principle that a segment to be targeted must be such that it provides the best possible financial gains for an organization (European Travel Commission, 2010, p.8). Figure 5: Targeting and Growth Matrix (Source: European Travel Commission, 2010, p.21) The figure shown above represents the relationship between growth, volume and value with regards to targeting and segmentation. According to the matrix shown above an ideal segment for targeting would involve a segment which offers high potential for growth as well as value for the stakeholders. It also shows that segments with a low growth potential and offering low value to the stakeholders must be appropriately be rejected by the organization as it would not offer any value to the organization and the stakeholders as a whole. The key to identify ideal markets with high growth potential lies in analysing the market. This can be achieved by undertaking effective market research. In case of boutique hotels in Brighton, analysing the surveys conducted on visitors which would provide enough data so as to analyse the profitability and return on investments for the market segment. A research study carried out by the European Travel Commission differentiates the entire target market audience into different categories based on numerous aspects. The research study covers many cities and towns of UK which have a good inflow of tourists and visitors across the year. The figure shown below identifies the key customer segments in the UK market and also highlights their bass for differentiation. A research conducted by the ETC uses an Arkleisure model for segmenting the markets. The details of the model as applied in the context of hospitality industry are illustrated below. Figure 6: Segmentation on the basis of ‘Arkleisure’ Segmentation Model (Source: European Travel Commission, 2010, p.63) The segmentation model divides the entire target population into different market segments. The model uses four parameters to create a positioning map of the different customer segments. These segments along with their consumer behaviour are shown in the figure above. A firm eyeing the market would have to analyse its capabilities and the available resources to effectively tap the market. The research study also analyses the market segments with regards to the geographical locations. These locations have been selected keeping in mind the popularity of the destinations. The perceptual map links the behavioural traits of the different market segments with the geographical locations (European Travel Commission, 2010, p.63). Figure 7: Perceptual Map showing the customer segments with the Geographical locations in UK (Source: European Travel Commission, 2010, p.63) It is very clear from the perpetual map shown in the figure above that most of the potential consumers in the Brighton area revolve around the ‘cosmopolitan’ and ‘discoverers’ segment. Any organization trying to establish a boutique hotel in Brighton can use the two perceptual maps shown above to create a strategy that would help t to identify and devise suitable strategies. The consumer behaviour of the two segments for Brighton would be available from the perceptual map generated by the ‘Arkleisure’ Segmentation Model (European Travel Commission, 2010, p.63). Summary Analysing a perception map would help a firm to analyse the gaps in the service offering offered by the present market players as well as the consumer’s expectations. Identification of gaps would help a marketer to frame an appropriate service mix that is profitable and meets the expectations of the potential customers by satisfying their unrealised needs which would provide sustainable competitive advantage to the organization. The next step for an organization after identifying and targeting a suitable customer segment would be to design a strategy that would help the firm position itself in the minds of the consumers. The basis of this positioning would be based on an effective product and service mix which would be discussed below. Positioning +intro Positioning is defined as the process of creating an image of a particular product or service in the minds of the consumers. Positioning is very important as it serves as the basis for consumer buying behaviour for a consumer while making a purchase decision (Hiebing & Cooper, 2004, p.145-146). The importance of positioning is vital as it determines the consumer behaviour of the target market audience. The brand image of a particular organization and its services are largely dependent on positioning of the product or service in the minds of the customer (Manning & Reece, 2007, p.124-125). Boutique hotels are unique in their aspect of positioning as their strategies are directed towards targeting a niche consumer segment. Style and design are the two factors that are being used by marketers to differentiate themselves from the rest of its competitors. Boutique hotels are different from the traditional hotels in the aspect that they have smaller rooms with a unique blend of aesthetics and design. Most of these hotels are theme based hotels which are being used to target the affluent segment of the consumer market (University of Minnesota, 2005, p.1). Perception mapping is an effective tool that can be used to determine an effective positioning strategy for an organization. Figure 8: General Perception map for the Hospitality Industry (Source: Kumar, 2010, p.190) The perception map show in the figure above represents the different parameters that applicable to the market players of the hospitality industry with regards to the positioning of the products or service levels. A perceptual map would help a firm to understand the gap between the demands of the consumers and the present levels of product or service level offering which is available to the consumers to satisfy their demands. In case of Brighton, any firm planning to enter or establish itself in the market can prepare a perceptual map which would help in identifying the gaps between the current level of service offering and the demands of the consumers. Accordingly a product or service mix must be created which should be backed by an effective promotional strategy so as to create a favourable impression of the hotel in the minds of the consumer (Kumar, 2010, p.187-190). Elements of Marketing Mix Marketing mix is the final step in the marketing plan for any product or service offering. This step follows from the conclusions drawn for the other aspects of marketing. The marketing mix encompasses elements like product, price, place, promotions, people, process and physical evidence. Collectively these seven aspects are also referred to as the service mix for an organization (Gupta, 2006, p.22). Product Products refer to the actual product features for a particular organization. In case of boutique hotels it signifies the unique aspects of the hotel. The product features are designed in a manner that would tend to satisfy the demands of the target consumers. It would also create a difference between the product or service levels of the firm with respect to the rest of its competitors in the market (Bias & Mayhew, 2005, p.146). Price Price implies the price that the consumer would have to pay for availing the product or service offering. The price for a particular good or service represents the cost incurred by the firm and the profit margins. Price is one of the most significant and important aspects of a product or service offering as it represents the target market segment. The pricing structure must be designed in a manner that it tends to provide maximum value to the consumers in return for the price paid for a particular god or service. Pricing structure is also related to the product offering as it is normally observed that the price of the good or service is directly dependent on the product features (Bias & Mayhew, 2005, p.146). Place Place represents the location in which the good or service would be made available to the consumer. In case of hotel industry it assumes greater significance as location plays an important role in shaping the positioning of a god or service (Bias & Mayhew, 2005, p.146). Promotion Promotions describe medium in which a firm interacts with the members of the target market audience. In case of boutique hotels the possible channels for communication include television and print media, direct marketing and tie ups with local and international tourist operators. Internet has evolved as one of the most important tools for marketing communication. This has become more important considering the popularity of the social networking websites. A marketer willing to set up a boutique hotel in Brighton would have to effectively promote the location and would have to link it with the product offering so as to create a favourable positioning in the minds of the consumers (Buhalis & Schertler, 1999, p.42). People ‘People’ refer to the employees of the firm ho would actually provide the service to the consumer. It is important for a boutique hotelier to ensure the presence of a well trained staff so as to provide the maximum level of satisfaction to the customers (Ennew & Waite, 2006, p.177-178). Process Process refers to the manner in which the service is delivered efficiently to the consumer. A marketer in Brighton must attain better operational abilities so as to provide customer satisfaction. This can be achieved by processes like generic benchmarking and adopting efficiency techniques like TQM and Six Sigma in their operations (Ennew & Waite, 2006, p.178). Physical Evidence Physical evidence refers to the various tangible aspects associated with the service offering of a particular organization. In case of hotels it includes aspects like ambience and looks, interior design etc. Physical evidence plays an important role in shaping the brand image of a hotel in the minds of a consumer. This is even more important for boutique hotels which have a niche marketing segment (Ennew & Waite, 2006, p.179-180). Conclusion The analysis of the existing literature revels large scale business opportunities for boutique hotels in towns. It also reflects the large scale competition prevailing in the local market with regards to capturing a share of market. The key for success lies in effectively analysing the consumer demands and preparing an effective product and service mix that tends to cover the gap between the perceived demands of the consumers and the actual level of product or service levels available in the market. Preparing an effective marketing mix with efficient service quality would not only help a firm to build a formidable brand image but would also generate long term strategic and sustainable advantage to the organization in the long run. The findings from the secondary research suggest considerable information on the present market conditions and the theoretical aspects. However a primary research would help in gaining a first and market information specific to the service that is being offered. It would also revel a more customised learning of the demands of the customers and the perceived gap between the service being offered and the customer expectations. Hence a primary research would be carried out which would reveal a better practical approach to aid the decision making process. References Bias, R.G. & Mayhew, D.J. 2005. Cost-justifying usability: an update for an Internet age. Morgan Kaufmann. Buhalis, D. & Schertler, W. 1999. Information and communication technologies in tourism 1999: proceedings of the international conference in Innsbruck, Austria, 1999. Springer. Download it, 2009. Sectors of the Tourism Industry. [Pdf]. Available at: http://www.download-it.org/free_files/filePages%20from%205.%20Section%203%20-%208%20Case%20studies%20on%20Sectors%20of%20the%20Tourism%20Industry.pdf [Accessed on February 28, 2010]. Ennew, C. & Waite, N. 2006. Financial services marketing: an international guide to principles and practice. Butterworth-Heinemann. European Travel Commission. 2010. Handbook on tourism market Segmentation. [Pdf]. Available at: http://www.etc-corporate.org/resources/uploads/_101013_UNWTO_ETC_segmentation_MEDIA%20.pdf [Accessed on February 28, 2010]. Gupta, D.K. 2006. Marketing library and information services: international perspectives. Walter de Gruyter. Hiebing, R.G. & Cooper, S.W. 2004. The Successful Marketing Plan:A Disciplined And Comprehensive Approach. Tata McGraw-Hill. Keegan, W.J. 2002. Global Marketing Management. Pearson Education India. Kotler, P. 2008. Marketing For Hospitality And Tourism, 4/E. Pearson Education India. Kumar, P. 2010. Mktg Of Hospitality & Tourism Serv. Tata McGraw-Hill. Manning, G.L. & Reece, B.L. 2007. Selling Today: Creating Customer Value, 9/e. Pearson Education India. McDonald, M. & Dunbar, I. 2007. Market segmentation: how to do it, how to profit from it. Butterworth-Heinemann. Mill, R.C. 2008. Resorts: Management and Operation. John Wiley and Sons. Olsen, M. & Zhao, J. 2008. Handbook of Hospitality Strategic Management. Butterworth-Heinemann. PricewaterhouseCoopers, 2010. UK hotels forecast 2010 and 2011: On the comeback trail. [Pdf]. Available at: http://www.lotus-uk.co.uk/pdf/pricewaterhouse-hospitality-and-leisure.pdf [Accessed on February 26, 2010]. University of Minnesota. 2005. Implications. [Pdf]. Available at: http://www.informedesign.org/_news/june_v03r-p.pdf [Accessed on March 01, 2010]. Larreche, W.M.B. 2006. Marketing Strategy. Tata McGraw-Hill Education. Bibliography Burtonshaw-Gunn, S. 2009. The Essential Management Toolbox: Tools, Models and Notes for Managers and Consultants. John Wiley and Sons. Larreche. W.M.B. 2006. Marketing Strategy: A Decision Focused Approach. Tata McGraw-Hill. Read More