Marketing in Hospitality Industry - Case Study Example

MARKETING IN HOSPITALITY Table of Contents Table of Contents 2 Introduction: 3 Task 3 1 Marketing Concepts used in Hospitality Industry: 3 2 Impact of marketing environment on hospitality industry: 5 1.3 Consumer markets in hospitality industry: 8 1.4 Rationale for developing market segments: 10 2.1 Marketing elements of Song Airlines: 11 2.2 Pricing Strategy of Song Airlines: 13 Conclusion: 14 Introduction: The hospitality industry is one of the fastest growing business segments in the global market. Apart from globalisation, growth of communication and transportation process has contributed largely in the development of the hospitality industry.1 The marketing strategies of the firms operating in the hospitality industry has also transformed with the growing competition. This report will focus on the marketing aspects and strategies adopted by the business houses functioning within the hospitality industry. The research will also analyse the airline industry based on a case study of Song Airlines for evaluating their marketing process and strategies. Task 1 1.1 Marketing Concepts used in Hospitality Industry: According to Hirshleifer and Hirshleifer (2009), the marketing strategies developed by firms are based on their needs rather than the established concepts of marketing.2 Brodie, Brookes and Little (2009) opined that the concepts of marketing help in relating the strategies implemented by a firm and reflect the factors contributing in the marketing strategy. For instance, the marketing strategy of JW Marriot reflects the cultural values of the company and their ability to connect their consumers across the world with their services.3 This type of marketing has been called by Lim and Lusch (2011) as relationship marketing where the consumer can connect with the organisation on a psychological level.4 Marriot also uses 3rd party marketing techniques such as the BrandWorks developed by Pica9 for creating automated online marketing solutions and strategies that will help Marriot in streamlining their marketing activities in all their operational zones.5 Focusing on the concepts of marketing, the basic aspects such as segmentation, targeting and positioning are of major importance within the hospitality industry. In the words of Hirshleifer and Hirshleifer (2009), the marketing concepts of hotels are framed on the basis of their service capability and the organisational aims.6 The area of operations, target consumers and the brand positioning of the firm depends on the existing potential of a firm. For instance, Hilton Hotels are renowned for their authentic and oriental reflection of the cultural backgrounds of their consumers. For instance, Hilton Garden in Portsmouth has been designed in accordance with the history of the place and reflects on the characteristics of the service quality of Hilton Hotels.7 The example of Hilton Hotel highlights the use of physical evidence in their marketing practices which is a component of the extended marketing mix. Brand positioning is a crucial factor in the hospitality industry. Farahmand (2011) stated that hospitality and leisure industry are primarily based on the disposable income of their consumers and considering the instable economic scenario after the global recession, hospitality firms are trying to drive sales with the help of their brand position. Brands are trying to influence the consumer decision making by developing a positive customer brand perception. Selection of the target markets of the hotels is also based on the brand perception of the consumers in the particular market places. For instance, Marriot Hotels are known for the luxury they provide and have their best properties located in holiday spots such as Hawaii, Malaysia, Singapore, etc.8 1.2 Impact of marketing environment on hospitality industry: The marketing environment of hospitality industry is changing with the growth in competition. The macro and micro environmental factors are key contributors in changing the marketing scenario of the hospitality industry. Some of the micro and macro environmental factors will be analysed in this section for evaluating their influence on the marketing process of hospitality industry: Figure 1: Mirco and Macro environmental Factors (Source: Lim and Lusch, p - 651) Customers: According to Hirshleifer and Hirshleifer (2009), the customer base of the hospitality industry generally belongs to the higher middle income or high income group of the social cluster. The brand loyalty among these types of customers is high.9 This urges the hotels to develop their marketing process in accordance to the expectations of their customers and also develop the consumer brand perception in a positive manner. However, as the market is growing and more firms are entering in hospitality industry, consumer behaviour is changing which hampers the marketing influence of the firms. Competitors: Although, the market entry cost is quite high in the hospitality industry, the rate of entry of new firms has increased in the past 5 years.10 This has provided more alternatives for the consumers in context of brand selection. The marketing process of the hotels should be able to reflect their competitive advantage and connect with the consumers in order to sustain in the competitive business scenario. Suppliers: The supplier influence in the marketing process is indirect in case of the hospitality industry. Hotels reflect the quality of service provided to their customers in their marketing process and the raw materials procured from the suppliers are essential in this context. Dess and Lumpkin (2010) stated that, the authenticity of the supplier relations helps in developing relevant marketing process for the business houses. For instance, Intercontinental Hotels reflect the tangible and intangible services provided to their customers in the marketing campaigns.11 Technological: Technology is dominating the business growth and development in every industry. Hirshleifer and Hirshleifer (2009) stated that, influence of technological growth in the marketing process has almost limited the use of traditional marketing tools in the business processes.12 The hospitality industry is also engaged in spreading their brand name in the international market with the help of online marketing processes such as social media marketing, viral marketing, etc. Big firms such as Marriot and Hilton Hotels have engaged in video and SEO marketing for promoting their brand equity in the international market. Socio-Cultural: According to Dess and Lumpkin (2010), hotels are trying to develop a cultural relationship with their customers for enhancing their brand equity.13 The reflection of social and cultural aspects in the marketing process of the hotels can attract more customers. Consumers try to connect with their service providers beyond the professional limits which encourage the hotels to enhance their service offerings by including cultural themes. Legal: Legal regulations that influence the marketing process of the hospitality industry are nominal in comparison to the internal functions. Health and Safety regulations, changes in the minimum wage rates, etc are some of the key legal factors influencing the overall business process of the hospitality industry. Hirshleifer and Hirshleifer (2009) stated that legal bindings in terms of constructions of properties can influence the brand reflection of hotels.14 Political: Changes in the political scenario of the nations influences the business decision making process and the strategies of the hospitality firms. The tourism and hospitality industries all over the world are mostly working in collaboration with the governments which helps the hotels in marketing the national resources for promoting the brand offerings to their customers. However, changes in the service tax rates due to political influence can lead to customer dissatisfaction. 1.3 Consumer markets in hospitality industry: The consumer groups of the hospitality industry are segmented mainly on the basis of their service purchases and needs. According to Berry and Yadav (2008), the most profitable consumer market for the hospitality industry is the business executives.15 Hirshleifer and Hirshleifer (2009) added that, business groups have always formed the majority of the consumer groups of the hospitality industry. Business travels, meetings, events, etc were the primary focus of the hospitality industry till the late 20th century.16 Although, in comparison with solo travellers and family holidays the numbers of business travelling is quite less but the margin of sales is higher in case of business professionals. Dess and Lumpkin (2010) argued that, the ratio of family travellers is growing tremendously all over the world which has increased the focus of the hotels and other leisure industries in redesigning their service structure. 17 Analysing the various consumer markets of hospitality industry across the international market places, the primary consumer groups can be categorised as solo travellers, business executives, family travelling and couples. The solo travellers are mostly the low end buyers of the services as they tend to spend more time travelling around rather than utilising the services provided within the hotels.18 In order to enhance the service offerings for the solo travellers, Marriot Hotels brought in the concept of hotel sponsored tours that were provided as a package deal for the buyers.19 On the contrary, the family travelling groups and the business executives of the hotels are more concerned regarding the comfort and the internal services of the hotels. Big brands such as Intercontinental Hotels, Hilton Hotels, etc. have developed customised services packages that allow the guests to decide on the service packages. These factors help in building communication with the customers and enhance the information database of the firms that in turn increases the efficacy of the marketing and service design process. The couples are among the most lucrative consumer groups. Hirshleifer and Hirshleifer (2009) observed that, most of the couples travelling are looking forward to a better psychological experience and the cost of the services is not the primary factor.20 Lim and Lusch (2011) also stated that, families and couples decision making of the hotels is majorly influenced by their past experience. In case of the hospitality industry, it is necessary for the firms to assess and identify the needs and expectations for their consumers accurately as the consumer diversity is vast in nature.21 Ability to provide the exact needs while maintaining the balance between the cost of services and the market competition is the key to sustainable business in the hospitality sector. 1.4 Rationale for developing market segments: Segmentation process in the hospitality sector is mostly related to the geographic and the demographic features of the target population. In the words of Lim and Lusch (2011), hospitality industry relies on the ability to provide their consumers a homely experience rather than focusing on comfort.22 Berry and Yadav (2008) observed that people are more adjustable with their needs and expectations in known situations in comparison to unknown situations.23 Thus, it can be reflected that hotels are more focused on identifying their consumers’ demographic, geographic and cultural preferences. On a strategic level, Brodie, Brookes and Little (2009) emphasised that market segments help in the decision making process of the hotels in terms of service development, organisational strength for service providing and market competition level in the selected areas. Dess and Lumpkin (2010) focused on the contribution of the demographic features that help hotels to develop their service structure in accordance with the fondness of their customers. For instance, the Bellagio Resort of Las Vegas has introduced a separate casino for kids with duplicate chips and non-monetary rewards. However, Lim and Lusch (2011) argued that the brand equity of a firm can reduce the influence of market segments on the business growth. The core competencies of the hotels can be reflected in order to attract consumers and hence, the operational zone of a hotel can be enhanced to a global level. Bellagio Resort for example is famous for their in-house casino and attracts guests from all over the world based on this competency.24 Task 2 2.1 Marketing elements of Song Airlines: The marketing elements of Song Airlines has been analysed below with the help of the marketing mix or the 4Ps model: Product: The service offerings in the Airlines industry are changing continuously with the growth of the low cost airlines. The introduction of low fares has reduced the dominance of big brands and long haul flights in the airline industry creating more space for new entrants (Smith, 2011).25 The brand switching cost of the consumers has also reduced as a result. Song Airlines focus on providing their customers the best of both high and low-end flights. The fleet consists of both long and short-haul flights with facilities such as in-flight meals, entertainment, spacious interior, etc. Added services such as on-board wifi and more leg room and fully flat seats are being added to improve the service offerings (Berry and Yadav, 2008). Price: Pricing is the key advantage of Song Airlines in enhancing their business scope. They try to control the price of their services by reducing the operational costs and enhancing resource utilisation. Song has reduced their unit costs by increasing the volume of units. The fleet of the airlines has been redesigned with bigger planes which have enhanced the accommodation by almost 70% (Theodosiou, 2008).26 Increase of the operational hours of the human resource and their fleet resources has also contributed in the enhancing the volume of units and hence reduced the costs (Smith, 2011). Even in their marketing process, Song uses internet as the primary medium which is cheaper in comparison to other marketing mediums. Place: Selection of destinations by Song Airlines is mostly based on the gross amount of international and local visits in the particular place. The flight routes target the most desired locations and design their path accordingly (Berry and Yadav, 2008). Even, in the selection of places, Song Airlines tries to reduce their business costs by reducing the turnaround time of the flights, saving both time and money. Promotion: The promotional activities of Song Airlines are mostly conducted online. Song evaluated that, 75% of women make leisure travel decisions and they targeted female customers. The promotional activities mostly reflect the core competencies of Song Airlines and relate them to the customer needs (Theodosiou, 2008).27 Their ability to streamline the logistics and operational activities has also provided them added features to showcase to their customers. However, public relations have also played a major part for Song Airlines in promoting their business to the global consumer base. 2.2 Pricing Strategy of Song Airlines: In the contemporary scenario, rising fuel prices contributed positively in increasing the cost of operations and service price in the airline industry. The pricing strategy of Song Airlines is mainly based on economy pricing where the services are offered below the market price. In order to sustain their pricing strategy and develop a cost competitive advantage, Song airlines focused on optimising the resource usage and streamlining their business expenses with their functional aspects. The added advantage of Song Airlines was their ability to balance the price cut and their service offerings. Berry and Yadav (2008) observed that low cost airlines such as Ryan Air or EasyJet are not able to enhance their customer satisfaction level as they have deducted numerous facilities in order to uphold their low pricing strategy. The “no frills” strategy of Ryan Air is considered as one of the best process to control the price of the services and the costs of operations (Theodosiou, 2008).28 However, Song Airlines have focused on enhancing their service efficiency to reduce the cost of operations which can be more sustainable in terms of consumer satisfaction. Conclusion: The research aimed at identifying the aspects of marketing strategies implemented within the hospitality industry. The growth of competition in the business sphere has enhanced the need for the hotels and resorts to increase their brand presence in the market. Developing a sustainable consumer brand perception with the help of appropriate segmentation, targeting and positioning is the primary need for the hotels to boost up their marketing process. The second phase of the research focused on a low fare airline case of Song Airlines. Song Airlines are transforming themselves into an industry leader with their excellent business strategies of cost reduction by gaining service efficiency. Their ability to maintain a balance between the cost of operations and the services being offered to their customers reflects a major breakthrough in operational aspects of airlines and hospitality industry. Read More