Marketing Strategy for Hyatt Regency Birmingham - Research Paper Example

Report on the Future Marketing Direction for Hyatt Regency Birmingham Contents 1. Background to Report & Marketing Issues 2. Strategic Choices & Marketing Options 2.1 Branding 2.2 Collaboration 2.2 Specialisation 2.3 Penetration 2.4 Differentiation 3. Selected Strategy: Implications and Justifications 3.1 Short term implications 3.2 Long term implications 3.3 Suitability 3.4 Acceptability 3.5 Feasibility 4. Marketing Mix 5. Summary of Recommendations 5.1 Competitive Level Strategy 5.2 Corporate Level Strategy 5.3 International Level Strategy References Section B: Report on the Future Marketing Direction 1. Background to Report & Marketing Issues Hyatt Regency in Birmingham, UK is described as “a hotel within a hotel” (Cunill, 2006: 164) due to its numerous and spacious rooms, halls, services and facilities. It is one of an international chain of hotels. In the current economic climate of financial instability and a looming recession, people are more cost-conscious but still remain demanding at the same time, and the hotel market is still highly competitive. Budget hotel operators are more likely to thrive and short breaks will be more common than the arrival of international travellers. Consumers are seeking “more authentic experiences and responding better to value-related offers” (Nassetta, 2009). There is always a need to understand customers, but luxury hotels need to adapt their brand strategy in order to attract these more cost-conscious customers, and look at “establishing ways of making the same brand more accessible” (Brownsell, 2009). Strategic direction is a challenge faced by all organisations whether there is a recession or not, especially when there exist opportunities or to help overcome major problems (Johnson, 2009: 2). Characteristics of strategic decision: Short and long term directions. Scope of activities (e.g. whether spread too thinly in different directions), Advantages over competition, which requires a look at the actions of competitors. Strategic fit with business environment i.e. Hyatt’s ‘positioning’ and market needs. Hyatt’s resources and competences, technology, strategic capability, opportunities etc. Values and expectations (of powerful actors in and around the hotel; the interests/influences of all stakeholders “Uncertainty is inherent in strategy, because nobody can be sure about the future.” (Johnson, 2009: 6) But a strategic direction helps to focus on a course of action and follow an integrated approach based on clear objectives and an informed knowledge of the operating environment. This of course can affect the organisation’s operational decisions, involve a reconsideration of the relationships and networks, and can be complex reorientation requiring considerable change. 2. Strategic Choices & Marketing Options A range of strategic choices and marketing options will be briefly discussed before promulgating the selected marketing strategy and giving recommendations. Strategic directions at a competitive or business level deal with issues of pricing, competitive advantage, competition, collaboration, game theory etc. Innovation or differentiation for example can be done though bettering the quality or a implementing a distinctive distribution channel. Strategic directions at a corporate level deals with market penetration, consolidation, product development, market development, diversification etc. This includes cost leadership, differentiation and specialisation based on Porter’s generic strategies. It also includes e.g. geographical coverage, diversity of products/services, allocation of resources within the organisation, expectations of owners i.e. Shareholders. Portfolio matrices viz. BCG (also known as growth/share), directional policies and other tools were used in the analysis prior to this report. Strategic direction at a global or international level deals with internationalisation drivers, national/international sources of advantage (which can be ascertained from Porter’s National Diamond or International Value Network), market selection and entry including entry modes. 2.1 Branding “Branding is a vital part of a hotel company’s marketing strategy” (Taylor, 1995) for spreading awareness in customers. Although only large international hotel chains can afford the heavy advertising and promotional campaigns that establishing a strong brand needs, there is also scope for creating brand awareness by subdividing the lines of products and services, and ‘sub-branding’ them so as “to serve specific customers with specific hotel needs” (ibid). Regardless, branding has a fundamental role in a marketing strategy (Cunill, 2006). It promotes loyalty too as customers trust the brand and are more unlikely to seek alternative accommodation. “Building and successfully managing strong brands is considered to be one of the key drivers of success in the hotel industry. [Moreover,] CEOs of hotel companies that own brands recognize that brand equity drives stock price and shareholder value” (Rao, 2002). Allowing more franchise setups to operate using the brand name can significantly further brand visibility. And, co-branding is also an option to forge relationships with other existing brands in delivering specific hotel services such as the extra leisure facilities. This could be a very successful strategy if the partner companies have a good working relationship (Mininni, 2007). Hyatt already enjoys an internationally well-known and strong deluxe brand name (Cunill, 2006: 13), and has associated with itself the recognition of luxury and high quality. It is thought to be difficult for competitors to replicate Hyatt’s brand strength. And, this is upheld by the difficulty of others to enter the highly luxury hotel segment that is well established internationally. This would require considerable resources, which at least in the short term is unlikely to happen. 2.2 Collaboration Given the intensely competitive nature of the hotel industry and globalisation, collaboration offers a way of gaining mutual competitive advantage in the global marketplace. It can be “an easier way of gaining access to consumers” (Fyall, 2003) than advertising, promotions and public relations alone, and also “to distribution channels, reducing investment costs, and avoiding global economic, social and political uncertainty…” (ibid). A study consisting of interviews with executives and managers of international hotel chains suggests “collaborative strategies enable international hotel chains to compete and develop successfully in worldwide markets” (ibid) over the long term. Success however will depend on the level of sophistication involved and handling of resulting implications and issues such as governance and control. 2.2 Specialisation This is a more focused strategy targeting a niche position in the market i.e. “effort and resources [are directed] at a narrow, defined segment of a market” (Marketing Teacher). So the key is to focus the strategy to providing a service that caters to that particular segment (Harrison, 2005). In this way, competitive advantage is generated but it is for the chosen niche. Once a niche is made, the organisation can then focus within that niche on either minimising costs or through differentiation to create the competitive advantage. This specialisation strategy is suitable for organisations that cannot afford either a competitive pricing strategy or focus on overall product differentiation. It is therefore a more popular strategy used by smaller companies or those with a low market share. One risk however is that in the longer term the niche could be challenged or even dissolve, which could jeopardise the company unless it either establishes another niche or diversifies. Hyatt enjoys the status of being “one of the few [luxury hotels] in Birmingham that combines a central location for both business and leisure” (Hyatt, 2009) and already has a high relative market share and is operating in high-growth markets (Lynch, 2006). However, there is scope for enhancing catering to the niche market of facilities for business meetings and conferences for example. Hyatt’s location is a great advantage as is its spacious halls and meeting rooms. 2.3 Penetration Cunill (2006) suggests that market penetration leads to expansion of market share, as is the case with Hyatt. Johnson and Scholes (2008) also state that market share can increase by achieving market penetration through targeting either existing customers with the same service, or by innovating to increase activity in a company. This entails consolidating either the company’s existing hotel services by seeking new markets, or its existing markets by offering new services. So, it usually requires “some diversifying adjustment of products or markets” (Johnson, 2008: 262). It is a defensive strategy but Its success depends on “how aware the prospects are of what you are offering, competition, growth rate of the industry and demographics” (BRS, 2009). The consolidation strengthens the hold on the market and could lead to greater market control. A typical market penetration strategy involves setting prices low unless for example short-term liquidity is low. But it is not necessary to lower prices too much lest the higher paying customers are deterred over a perceived decline in quality. 2.4 Differentiation Differentiating products and services requires market segmentation so that they can better target specific segments. The advantage is that a sustainable competitive advantage is created by allowing the hotel “to desensitise prices and focus on value” (Marketing Teacher). This generates a comparatively higher than average price due to incurring additional costs but a better margin. The likely increased bookings will generate greater revenue. Whether or not competitors follow suit, innovation is necessary to ensure continuous improvement. 3. Selected Strategy: Implications and Justifications The focus of the overall marketing strategy should be predominantly market penetration. It is important that the marketing strategy is not too diluted so that the focus and opportunities are not missed. A combined strategy is advised to reap benefits from more than one as appropriate but penetration is the chosen driving strategy. This is judged using success criteria based on suitability, acceptability and feasibility to indicate the worth of this strategy. But first an outline of the short and long-term implications is given. 3.1 Short term implications Hyatt regency will largely continue to maintain its existing customers and have a stable market share as long as the penetration strategy is implemented. Otherwise there is a high risk of reduced market share due to high prices and business people eager to avail themselves of alternatives because of greater financial strain on their budgets. 3.2 Long term implications In the longer term, Hyatt Regency will benefit from the penetration strategy by surviving the recession and coming through with a greater market share that could possibly make it dominate the deluxe hotel market. For this to happen, Hyatt Regency Birmingham must pursue a penetration strategy in which it capitalises on its key advantages such as building and location. At the same time, this will also strengthen its brand name. 3.3 Suitability Hyatt already enjoys a strong brand name, has some collaborative ventures, specialises in providing luxury accommodation amongst other services and facilities, and so on. The suitability of the selected marketing strategy will largely be determined by the current economic climate. As this is one of needing to reduce costs, lower prices, consolidate existing market strength etc. the most suitable overriding strategic plan recommended is market penetration. Business people are already the main customers and Hyatt Regency has an excellent location and provisions for services and facilities that business people want. Therefore it is important that it focuses on maintaining these customers and consolidates its own position. The hotel is currently catering excellently to these customers but they must be retained as there is a risk from the relatively cheaper alternatives in Birmingham. 3.4 Acceptability Providing even more and better services, facilities and other arrangements for business people will not only be accepted it is expected. This is mainly due to Hyatt’s central location, proximity to other important buildings and local amenities such as the NEC and excellent transport links. Also, its building is easily capable of providing these and should be utilised for this purpose to the fullest extent possible. 3.5 Feasibility The initial marketing analysis shows that Hyatt Regency has a relatively high market share and is operating in a high growth market. Also, it is in a strong financial position to avoid seeking customer from the low-end market and signifiantly lowering prices. It therefore is also in a strong position to engage in a market penetration strategy. 4. Marketing Mix An outline of an appropriate marketing mix for each of the 7Ps is given in the table below. The main marketing strategy for each mix is stated and the marketing communications activity to deliver that strategy is described. P Main Strategy/Sub- Details Product Penetration Offer greater services for business customers such as chauffeurs, secretaries, translators and interpreters. Specialisation Strengthen provision of services and facilities for meetings and conferences Price Cost Leadership /Pricing Reduce prices to reflect the changed economic times and be competitive with other luxury hotels, but not so much that it affects the brand image. Place Technology Further develop existing Internet and communication provisions and facilities and keep them up to date. Penetration Capitalise on building and location advantages Promotion (Incentives/Offers) Give greater incentives such as discounts and vouchers so customers can feel they are getting better value for their money. Process (Atmosphere) Create a warm, welcoming and relaxing atmosphere for a greater variety of customers with specific backgrounds and tastes. People (Professionalism) Respond and provide for customers in a quick, convenient and efficient manner. Business customers particularly expect it. Physical (Environmentalism) Show greater care for the environment and implement protective policies. 5. Summary of Recommendations The market penetration strategy is recommended overall and the salient points are noted below for each of three levels of strategy. Consistency is also stressed in applying the marketing strategy. 5.1 Competitive Level Strategy At a competitive level, Hyatt’s pricing strategy should be brought under review. It has very high prices because it caters primarily to customers with luxurious tastes but these are higher than other similar competitors in the area such as Marriot, City Inn, Hilton, Intercontinental and Holiday Inn. Competitive pressures are also strong from other “corporately owned branded hotels and the burgeoning branded budget hotel product, as well as other independent hotels in the mid-market sector” (Fyall, 2001) generally. Hyatt should examine whether it is feasible to continue the existing pricing strategy in the current economic climate and seriously consider expanding the range of customers it serves, for example, by expanding its promotional offers and creating new loyalty programmes. At the same time, the financial strains facing all businesses demand questioning whether it is advisable to sustain high costs. It is a time to be ‘leaner’ rather than ‘meaner’, which means cost cuttings are necessary. Hyatt Regency should especially curtail extravagant expenditure at least whilst there is a recession or there are financial difficulties. For example, the excessive £1 million Hyatt spent on a new urban spa called Amala in 1996 (Leisure Opportunities, 1996) was unjustified when such facilities are becoming more widely available to the general public and at more moderate prices. As far as market penetration strategies are concerned, Hyatt Regency neither suffers from a problem of low liquidity nor feels the need to set prices drastically low if it wants to maintain its image. Nonetheless, a consolidation exercise could help it to better hold on to existing customers than risk losing them to relatively cheaper hoteliers. It could achieve this conducting satisfaction surveys of existing customers to better understand and respond to their accommodation requirements and desires, by targeted advertising and improving its distribution channels. Currently, Hyatt concentrates almost exclusively on business customers. This is appropriate for this hotel but if it wants to retain its existing business customers at a time when it is more than likely they will seek more economical alternatives, it could do so by innovating in the way it caters to business people and in the provision of facilities for businesses. 5.2 Corporate Level Strategy Increased focus is advisable for business customers who have greater purchasing power and require convenient locations coupled with suitable facilities for their meetings and conferences. Hyatt already provides excellent space for such functions as well as provisions for good communication and Internet services. It should therefore strengthen its marketing strategy by way of promotional literature and advertising in business circles to make these points better known especially its convenient location and accessibility. Differentiation in services is advisable for Hyatt and indeed many companies in this recession because it makes customers less sensitive to prices (Cunill, 2006: 156). Hyatt should strive to deliver an improved service to this niche market of business travellers and conference holders compared to its competitors because it can take good advantage of its central location and conference, communication and other related facilities. 5.3 International Level Strategy Although this was not examined in detail above, at the international level Hyatt could benefit from its global presence to include suitable elements from the enhanced cultural knowledge and understanding into its overall marketing strategy. This way it could improve its competitive edge over other competing local hotels and challenge other competing international hotels in Birmingham. Co-branding and collaboration are possible sub-strategies that would also be useful to sail through the recession. References Brownsell, Alex. (2009). Top hotels urged to alter marketing strategy. Marketing Magazine. March 2009 issue. Cunill, O. M. (2006), The Growth strategies of hotel chains, Best business practices by leading companies. The Haworth Hospitality Press, Inc./ Routledge (illustrated edition). Fyall, Alan. (2001). Independent mid-market UK hotels: Marketing strategies for an increasingly competitive environment. Journal of Vacation Marketing. Vol. 7, No. 1, pp. 63-74. Fyall, Alan and Spyriadis, Athanasios. (2003). Collaborating for growth: the international hotel industry. Journal of Hospitality and Tourism Management. August 2003. Harrison, J. S., and Enz, C. A. (2005). Hospitality Strategic Management, New Jersey: John Wiley & Sons, Inc. Johnson, Gerry et al. (2008). Exploring Corporate Strategy: Text & Cases with Companion Website Student Access Card. Prentice Hall. 8th edition. Johnson, G., Scholes, K. and Wittington, R (2009). Fundamentals of Strategy. Financial Times Prentice Hall. Lynch, R. (2006) Corporate Strategy, England: Financial Times Prentice Hall. Nassetta. (2009). Quoted in Brownsell, Alex. (2009). Top hotels urged to alter marketing strategy. Marketing Magazine. March 2009 issue. Rao, Vithala et al. (2002). Brand extension and customer loyalty: evidence from the lodgings industry (Marketing). Cornell Hotel & Restaurant Administration Quarterly. August 2002. Taylor, Hugh. (1995). How to develop a strong hotel branding strategy with a weak branding budget. Journal of Vacation Marketing. Vol. 2, No. 1, pp. 63-66. Electronic Sources BRS. (2009). Marketing Plan. Centre For Business Planning. http://www.businessplans.org/Market.html [12 May 2009]. Hyatt Regency. (2009). http://www.hyatt.co.uk, http://birmingham.regency.hyatt.com/hyatt/hotels/index.jsp. Leisure Opportunities. (1996). Urban spa opens at Hyatt Regency Birmingham. 28 Jun 2006. http://www.leisureopportunities.co.uk/LOemail/wider_newsdetail1.cfm?codeID=15842&CFID=10877744&CFTOKEN=89084465 [Accessed 10 May 2009]. Marketing Teacher. (N.d.). Generic Strategies – Michael Porter (1980). http://www.marketingteacher.com/Lessons/lesson_generic_strategies.htm [11 May 2009]. Mininni, Tec. (2007). The Latest Marketing Strategy in the Hospitality Industry: Spas. Marketing Profs Daily Fix. 18 July 2007. http://www.mpdailyfix.com/2007/07/the_hottest_new_hotel_amenity.html [11 May 2009]. Read More