Marketing in Hospitality industry - Essay Example

?Hospitality Marketing Marketing in Hospitality industry In general “marketing concept is based on the premise that firms determine wants and needs and then design products or services…..while achieving company goals” (Reid and Bojanic 2009). This boils down to the fact that reaching a near exact (if not exact) supply and demand equation is important for achieving company goals. In hospitality industry, market supply can be measured by the number of beds or hotels available in an area. They are categorized as budget, mid-market or luxury experiences. Demand, which is an important factor in determining the profitability of a hospitality organization can be categorized as negative, nil, latent, falling, irregular, full , overfull an unwholesome (Bowie and Buttle 2004). Each demand type requires a different marketing strategy. For example if there is a latent demand it means that demand can be created by providing services that customers need. For example, many hotels provide “domestic short breaks” as a way of creating latent demand (Bowie and Buttle 2004). Another demand categorization stems from different types of travel which can be business travel and travel for leisure. Both these could be domestic and international. Marketing environment Hospitality industry is characterized by cyclical trends. For example, many tourist destinations close down during adverse weather conditions like extreme heat (e.g. UAE) or extreme cold (e.g. Canada). Thus, the hotels and restaurants have to ensure that they either earn enough during the peak tourist seasons to sustain their operational costs during the troughs or come up with marketing techniques to attract customers during these times. Socio-cultural factors also impact this industry to a great extent. Eating and drinking habits, travel habits and types of entertainment that people like to indulge in are all important factors that the hotels and restaurants in a particular area need to keep in mind before designing services or products. Demographic factors also impact this industry. For example, countries that have aging population need to have restaurants that have menus according to their liking which would be very different from those in younger countries. Technological advances in communication as well as kitchen equipment are vital factors affecting hospitality marketers. Environmental factors have today become very sensitive issues for marketers of this industry. The race for setting up new leisure properties has had an adverse impact on the environment which the local populations have started acknowledging now. Local population of these places has felt the effects of deforestation and carbon emission resulting from ferrying tourists from one place to the other. Thus, the marketers need to keep these sensitive issues in mind and promote green services which do not harm the environment. The intermingling of the local and foreign population also has impact on the social and cultural values of the local youth. Internal factors that impact this industry are suppliers, employees, intermediaries, competitors, publics and customers (Bowie and Buttle 2004). Suppliers are very important for a restaurant of a hotel to maintain quality. Employees are of utmost significance in this business as they are the face of the organization. Service is an intangible experience which is highly dependent on courtesy as well as skill. Intermediaries are important links between the customers and the hoteliers. They help to influence consumer choices for a particular destination and hotel. Competition like any other industry is very important factor in determining the marketing strategy. Direct competitors can be tackled by designing value add services but indirect competitors pose equal amount of threat as the direct ones. For example, the decision on buying a luxury car vs. going on a holiday has a significant impact on the business generation for this industry. High fixed cost is another important characteristic of this industry. The consumer preferences are of utmost importance as the word of mouth is an important factor that provides publicity. Hence, providing correct product for the specific consumer market is important. Market segmentation Market segmentation is an important strategy in the hospitality industry to use limited resources for maximum benefits. By dividing the market into various segments it becomes easier to focus on a few rather than focus on all segments and not achieve any benefits. “When the market is segmented, different product-service mixes can be promoted to meet the needs of the different segments” (Reid and Bojanic 2009). This helps in identifying the differences in consumer preferences and provides services that suit them the best. For example, a fast food chain like McDonalds needs to segment the market which it is catering to and introduce products accordingly. In India, they cannot serve beef while in UAE they cannot serve pork based on the cultural values of each region. Marketing mix Marketing mix are the various techniques used to generate market demand (Bowie and Buttle 2004). For hospitality industry it has 8 main components – product/service, location, distribution, price, people, marketing communication, process and physical environment (Bowie and Buttle 2004). Product or service is very important for any industry. For the hotel industry there is not tangible product to offer but an experience. Hence, it is important for the marketers to understand the consumer preferences and build services accordingly so as to increase repeat customers. Thus, they should design special packages for week-end customers and a different one for a business customer. Location decision is important because it determines the occupancy. If your target customer is a business traveler or an international traveler, then a location close to an airport would give you maximum occupancy. However, if you are targeting leisure customer, then a location closer to entertainment hub or historical places will fetch you better results. Distribution means the ease with which customers across the globe can book a hotel. Pricing decisions greatly influence the popularity and image of a hotel. A budget hotel will not be popular if it cannot provide competitive prices and big luxury hotels carry a certain price for their brand. Again the pricing decision depends on the target market. Discounts and various packages can be given to clients based on their relationships. People include both the employees and the customers. Employees, as discussed earlier help in enhancing customer experience and hence boost customer loyalty. Hence, they need to be taken care of to achieve employee satisfaction which will lead to customer satisfaction. A right customer mix will ensure high occupancy rates for a hotel. For example, business travelers usually occupy hotels from Monday to Thursday. Hence, weekend packages can be targeted towards short term leisure clients. Marketing communication helps in informing all stakeholders about the various activities of the hotel. These can be individual communications, mass communication through advertising or through e-mails, could be through sales promotions or sponsorships etc. Communication is the key to success of any program. Processes help in image build up. For example efficient booking, checking-in, checking-out and other services processes can leave a positive image in minds of the customers (Bowie and Buttle 2004). And finally the ambience of a place can go a long way in enhancing customer experience and attracting repeat spends. Pricing strategy Pricing strategy in the hospitality industry needs to be flexible. It is highly dependent on many factors – social, economic, environmental, competitive environment and technological environment (Reid and Bojanic 2009). Social culture of a location helps in deciding the pricing policy. For example in South East Asian countries, people tend to save more than they spend. Hence, they do not spend much on leisure activities while Americans spend all they earn; hence they are more price sensitive. Post financial crisis, tourist traffic reduced drastically and businesses also cut down on travel related expenses. Hence hotels saw a reduction both in business and leisure clientele. In such situation room prices reduced drastically. Environmental issues, as discussed earlier, have become critical for the hoteliers and they need to add the costs of green products and services to the pricing. Sometimes prices need to be set based on the competitor pricing. This may at times damage the bottom lines as a new hotel cannot always afford the luxury of lower pricing of an established one. To keep pace with the technology hoteliers need to invest in it and price products and services accordingly. Segmented pricing can be very helpful in reaching the right pricing policy. One way of this segmentation is through buyer identification (Reid and Bojanic 2009). This requires clubbing buyers either by their association with a group (e.g. GE company) or their spending patterns like those who have spent more than $1000 in last quarter etc. and then targeting discounts at this group. Another pricing strategy can be to price according to location. For example lowering the room prices for locations where there is stiffer competition than where there is not. Earning through penalties is also another way of pricing. For example levying penalties for last minute cancellations or earning interest on advances taken for booking earlier. Discount pricing for on-spot payment or for bulk bookings can be very attractive to customers. Promotional pricing is used by many restaurants and bars by offering “happy hours”. They usually provide products at lower prices during non-peak hours. Market skimming strategy can be used by hotels when they are introducing a completely new service or cuisine which no one else has introduced (Andrews 2009). In such a situation they can charge the customer whatever they think suitable. A product mix strategy can be useful for hotels. Thus, we can see that hotels can use many pricing strategies to increase their profitability. Promotional mix and Public Relations Promotional mix comprises of advertising, personal selling, sales promotion, public relations, publicity and merchandising (Kumar 2010). Advertising is a non-personal form of communication which targets a huge audience and communicated through public media like newspapers, television etc (Kumar 2010). Personal selling involves relationship building and selling through sales agents or telemarketing. Let us understand this concept by looking at an example of a hotel “Hotel Paradise” which has recently started operation in a US tourist destination. In our hotel, a database of frequent travelers can be collected and contacted for sales promotion. Sales promotion techniques are run for a short duration to win customer loyalty. In our case, reduced rates on beverages/room can be offered to frequent visitors based on a particular number of visits. Public relation is a very important component of promotional mix in this industry as the industry has no tangible products to offer. It works on perceptions. PR helps in maintaining a positive image in the minds of the stakeholders. For example, in case of Hotel Paradise, a PR campaign should run all round the year as it is a new hotel. Senior company leaders can give interviews regarding the unique services of the hotel and its products. Employees can be used to build positive image of the company. However, the organization should ensure that the processes and services they are promising are worth talking about. Promotional mix through its various components helps in sending out communication to the customers in planned way so as to achieve maximum attention. Sales promotion helps in achieving short term benefits. For example, as discussed earlier, providing discounts on room rent during off-peak periods helps fill the troughs. However, sales promotion cannot be a permanent feature as it involves cost. PR on the other hand focuses on long term relationship building which needs to be done in a more continuous manner to achieve results. This is an important component of the promotional mix because it builds company’s brand value and goodwill which are very important for future growth. Marketing cycle The marketing cycle for Hotel Paradise, like any other organization starts with Market Research (MR) (Appendix: Marketing Cycle). This leads to closing on the right customers. These customers are then focused on for relationship building and further business generation. This can be done through promotional sales, targeted PR effort and adequate advertising. Once a customer loyalty has been achieved, it leads to further referral by the same client leading to further business growth. As seen from the marketing cycle, MR needs to be done at frequent intervals to increase the client base. Thus we can see that MR is the basis for any new venture or growth strategy. It is a tool which helps managers take informed decisions (based on understanding of consumer behavior) regarding products and service to offer and customers to target. It also helps in analyzing the future growth prospects of a company. MR can be done by using internal data and external data (Bowie and Buttle 2004). Internal data includes personal information of present customers while external data can be from published government or other private research firm records. Present customers can be asked to refer friends to the hotel and can be rewarded for generating new clients. They can also be given survey questions regarding their experience with the hotel and their expectations. They can be sent greeting on their anniversaries and birthdays to build relationship. Market research activity Following questionnaire was given to a sample of 5 people who were selected at random at various public locations Mode of transport used to travel personal transport public transport on foot   Prefer which mode of entertainment TV Movies in theatres Reading   Reading habits Magazines Financial newspapers Newspapers Others Programs you watch on tv News channels Reality shows Comedy shows Series The survey results (appendix) show more people use public transport and enjoy watching TV than going out for movies or reading. Those who read like to read mostly read financial magazines. Most of those who watch TV prefer watching series. Thus we need to focus on Television advertising around famous series. And also advertise at railway stations, inside the local trains and buses. Looking at the recent occupancy rates, hotel occupancy has picked up this year but has not reached very high levels (calculatedrisk.com 2011). This shows that more promotional offers than usual need to be doled out to the consumers to entice them. References Andrews 2009, Sales and Marketing: a Tb for hospitality ind., Tata McGraw-Hill Education. Bowie, D and Buttle, F 2004, Hospitality Marketing: an introduction, Butterworth-Hienemann. calculatedriskblog.com 2011, Hotel occupancy rate: Hotels struggling in 2011, viewed on July 15, 2011 http://www.calculatedriskblog.com/2011/02/hotel-occupancy-rate-hotels-struggling.html Crandall, R 2002, Marketing your services for people who hate to sell, Tata McGraw-Hill Professional Kumar, P 2010, Marketing of Hospitality & Tourism Services, Tata McGraw-Hill Education Reid, RD and Bojanic, DC 2009, Hospitality marketing management, John Wiley and Sons. Appendix Plan for advertising campaign Organization: Hotel paradise is a new hotel (one year into operations) which wants to setup base in one of the tourist destinations of US. Mission: To reach out to target customers and achieve market penetration Target customers: Budget conscious, middle class customers and business travelers. Message: “Hotel Paradise” is the only hotel which can provide value for money. Media: The Company plans to use radio, newspapers and television for mass communication. Along with this mass advertising, mailers will also be sent to individuals. The best source for this database would be the budget airlines passenger list or employees of good firms earning a salary of up to $50,000 p.a. Advertisement will be place at railway stations and metro stations which are frequented by the target population for their daily traveling. TV Advertisements will be place during popular family programs which are aired after 6:00 p.m, the time by which most of the working couples are back home from work. To capture the attention of business travelers, the advertisements will be placed in financial news channels and programs. Financial news paper will also carry the advertisements. Sales promotion for business travelers will also be used to attract them. This would provide early bird and bulk booking discounts for them. Period of campaign: Mass media campaign will start at least 4 months in advance of the peak vacation season. This will provide ample time for budget holiday travelers to make up their mind and go for bookings. The total time period for this ad campaign will be 6 months. For business travelers advertising will start just before the ending of peak season and continue all through the trough period. Measurement: The impact of the campaign will be seen by comparing month on month room occupancy of the current fiscal with the previous fiscal when there was no advertising support. The room booking questionnaire will also carry one question asking the customer how he/she came to know about the hotel. Marketing cycle (Crandall 2002) Survey results Customer 1 Mode of transport personal tranport public transport on foot   Prefer which mode of entertainment TV Movies in theaters Reading   Reading habits Magazines Finacial newpapers Newspapers Others Programs you watch on tv News channels Reality shows Comedy shows Series Customer 2 Mode of transport personal tranport public transport on foot   Prefer which mode of entertainment TV Movies in theaters Reading   Reading habits Magazines Finacial newpapers Newspapers Others Programs you watch on tv News channels Reality shows Comedy shows Series Customer 3 Mode of transport personal tranport public transport on foot   Prefer which mode of entertainment TV Movies in theaters Reading   Reading habits Magazines Finacial newpapers Newspapers Others Programs you watch on tv News channels Reality shows Comedy shows Series Customer 4 Mode of transport personal tranport public transport on foot   Prefer which mode of entertainment TV Movies in theaters Reading   Reading habits Magazines Finacial newpapers Newspapers Others Programs you watch on tv News channels Reality shows Comedy shows Series Customer 5 Mode of transport personal tranport public transport on foot   Prefer which mode of entertainment TV Movies in theaters Reading   Reading habits Magazines Finacial newpapers Newspapers Others Programs you watch on tv News channels Reality shows Comedy shows Series Score sheet Mode of transport personal tranport public transport on foot   No.of respondent 1 4 0   Prefer which mode of entertainment TV Movies in theaters Reading   No.of respondent 4 1 0   Reading habits Magazines Finacial newpapers Newspapers Others No.of respondent 0 3 2 0 Programs you watch on tv News channels Reality shows Comedy shows Series No.of respondent 1 1 0 3 Read More