Marketing Marketing AccommodationAccommodation

ObjectiveObjective:: Introducing the meaning and Introducing the meaning and applications in the practice of marketing applications in the practice of marketing

accommodations.accommodations.

The nature of the The nature of the marketing task for marketing task for

accommodation businessesaccommodation businesses One of the former presidents of Holiday Inn One of the former presidents of Holiday Inn

summarizes the marketing task as follows;summarizes the marketing task as follows;““All segmentsAll segments of our travel and tourism business of our travel and tourism business have become more competitive. A growing have become more competitive. A growing number of competitors offer their products to the number of competitors offer their products to the same customer groups. Travelers have a wider same customer groups. Travelers have a wider range of choices than ever before for matching a range of choices than ever before for matching a hotel to their particular travel needs. Those needs hotel to their particular travel needs. Those needs change according to the travel purpose. If a change according to the travel purpose. If a company can understand those changing needs company can understand those changing needs and deliver a quality product and services and deliver a quality product and services appropriately targeted to specific customers needs, appropriately targeted to specific customers needs, wants, and expectations, that business can wants, and expectations, that business can survive”.survive”.

Strategic Marketing Strategic Marketing TasksTasks

There are six main elements in the There are six main elements in the strategic marketing response that strategic marketing response that accommodation suppliers make to their accommodation suppliers make to their external business environment and the external business environment and the operational characteristics. These are:operational characteristics. These are: Evaluating strategic opportunities for Evaluating strategic opportunities for

growth.growth. Planning the most profitable business mix Planning the most profitable business mix

of segments and products/price ranges, of segments and products/price ranges, that aim profit rather than volume.that aim profit rather than volume.

Deciding the positionDeciding the position, brand , brand or image or image each accommodation unit (or chain of each accommodation unit (or chain of units) should occupy.units) should occupy.

Internet marketingInternet marketing Encouraging and rewarding frequent Encouraging and rewarding frequent

usersusers (relationship marketing) (relationship marketing).. Developing marketing integration Developing marketing integration

between units in common ownership between units in common ownership (chains) or units in individual (chains) or units in individual ownership.ownership.

Evaluating strategic Evaluating strategic opportunities for growthopportunities for growth

Strategic growth through Strategic growth through globalization, developments in globalization, developments in information and communications information and communications technologies, through mergers, technologies, through mergers, alliances and acquisitions are among alliances and acquisitions are among opportunities that should be opportunities that should be evaluated. evaluated.

Planning the business Planning the business mixmix

Because of the demand potential of Because of the demand potential of each location, one of the basic strategic each location, one of the basic strategic decisions for accommodation decisions for accommodation businesses is to determine the businesses is to determine the most most profitable target marketprofitable target market for their for their product. For example, a city center product. For example, a city center hotel will target clients traveling for hotel will target clients traveling for business purposes. On the other hand, business purposes. On the other hand, a resort will target leisure visitors and a resort will target leisure visitors and so on. so on.

The optimum (most profitable) customer The optimum (most profitable) customer mix for most businesses will usually mix for most businesses will usually include several segments (e.g. a resort include several segments (e.g. a resort hotel may have both business and leisure hotel may have both business and leisure travelers in their target market) in order travelers in their target market) in order to maximize revenue and minimize the to maximize revenue and minimize the effects of seasonality and other normal effects of seasonality and other normal business fluctuations. business fluctuations.

Designing the optimum mix for any Designing the optimum mix for any accommodation business requires accommodation business requires marketing research or at least an marketing research or at least an analysis of guest-registration records to analysis of guest-registration records to analyze the volume and revenue analyze the volume and revenue potential of current and prospective potential of current and prospective (future) customers in each location.(future) customers in each location.

Deciding the position or Deciding the position or imageimage

After determining the target market, After determining the target market, the accommodation suppliers should the accommodation suppliers should decide about the image that the decide about the image that the product is going to create in the product is going to create in the minds of the customers. In today’s minds of the customers. In today’s competitive environment, it is competitive environment, it is necessary for operators to necessary for operators to differentiate and branddifferentiate and brand their their products. products.

Branding is important in order to Branding is important in order to create and increase the repeat create and increase the repeat business which is valuable for the business which is valuable for the profitability of the operation. For profitability of the operation. For example, statistics indicate that example, statistics indicate that people who stay at least 21 nights a people who stay at least 21 nights a year in hotels are estimated to year in hotels are estimated to contribute two-thirds of all nights contribute two-thirds of all nights stayed in British hotels.stayed in British hotels.

Internet marketingInternet marketing

Recent trends including Web 2.0, paid Recent trends including Web 2.0, paid search marketing, eCRM (online search marketing, eCRM (online customer relationship marketing, web customer relationship marketing, web analytics and ROI tracking will impact analytics and ROI tracking will impact future hotel marketing.future hotel marketing.

Today electronic tools and management Today electronic tools and management information systems are important information systems are important tools for marketing managers to collect tools for marketing managers to collect information on who their customers information on who their customers are. This is important to retain them. are. This is important to retain them.

Consumer Generated Media (CGM) such Consumer Generated Media (CGM) such as blogs, discussion boards, review and as blogs, discussion boards, review and social networking sites can help to retain social networking sites can help to retain customers.customers.

Therefore, dealing with CGM is becoming Therefore, dealing with CGM is becoming a necessity. a necessity.

In addition, most accommodation In addition, most accommodation businesses is shifting to direct marketing businesses is shifting to direct marketing on-line. on-line.

Internet has become the most preferred Internet has become the most preferred channel to plan and book accommodation. channel to plan and book accommodation. It is also the cheapest form of distribution. It is also the cheapest form of distribution.

Encouraging and rewarding Encouraging and rewarding frequent customers frequent customers

The third element in strategic marketing The third element in strategic marketing responses for accommodation suppliers is responses for accommodation suppliers is to find ways to encourage and reward to find ways to encourage and reward regular customers. Like airline regular customers. Like airline companies, most hotel groups created companies, most hotel groups created membership clubsmembership clubs since 1980s in order to since 1980s in order to attract their regular customers. Some of attract their regular customers. Some of these programs offer credit facilities in these programs offer credit facilities in addition to the normal range of benefits, addition to the normal range of benefits, such as rapid check in and check out. such as rapid check in and check out.

Some also offer awards through which Some also offer awards through which frequent travelers can earn points for frequent travelers can earn points for each stay, leading to attractive prizes each stay, leading to attractive prizes according to the number of points according to the number of points collected over a given period. collected over a given period.

In most cases, the frequent customer In most cases, the frequent customer programs require building up of name programs require building up of name and address lists into databases suitable and address lists into databases suitable for direct mail. With the help of direct for direct mail. With the help of direct mail, it is not only possible to reach the mail, it is not only possible to reach the regular customers, but also possible to regular customers, but also possible to reach the friends and relatives of those reach the friends and relatives of those customers.customers.

However, not all the programs However, not all the programs currently in use are fully successful, currently in use are fully successful, because they are difficult and because they are difficult and expensive to administer. In addition, expensive to administer. In addition, they may also serve unintentionally they may also serve unintentionally to reduce the average room rate to to reduce the average room rate to some customers who were prepared some customers who were prepared to pay a higher price.to pay a higher price.

Integrating marketing Integrating marketing across several unitsacross several units

The fourth strategic consideration The fourth strategic consideration focuses on focuses on coordination between the coordination between the individual unitsindividual units in marketing the in marketing the products. The strategic advantages of products. The strategic advantages of marketing coordination can be marketing coordination can be summarized as:summarized as: DistributionDistribution referrals of business referrals of business

between units central reservation service between units central reservation service better access to distribution networksbetter access to distribution networks

Promotion Promotion corporate branding joint corporate branding joint advertising opportunities, use of advertising opportunities, use of promotional marketing teams, access to promotional marketing teams, access to group brochures and leaflets, group group brochures and leaflets, group representation at trade fairs and showsrepresentation at trade fairs and shows

Product andProduct and harmonization in group harmonization in group qualityquality

PricePrice guarantee programs designed to build guarantee programs designed to build up customer satisfactionup customer satisfaction

Coordination is most easily obtained Coordination is most easily obtained with the help of ownership. That is why, with the help of ownership. That is why, large accommodation chains have come large accommodation chains have come out over the last 20 years. Large chains out over the last 20 years. Large chains are now found in all over the world, and are now found in all over the world, and many of them are international in their many of them are international in their scope. scope.

Tactical MarketingTactical Marketing

Strategic decisions are expected to Strategic decisions are expected to generate a profitable mix of bookings and generate a profitable mix of bookings and room occupancy as the result of the room occupancy as the result of the production and distribution of production and distribution of appropriately priced, distinctive products appropriately priced, distinctive products which satisfy the needs of identified which satisfy the needs of identified customer segments. In other words, for customer segments. In other words, for accommodation operators, three of the accommodation operators, three of the four Ps of marketing mix are strategic four Ps of marketing mix are strategic decisions, and even the fourth, promotion.decisions, and even the fourth, promotion.

The main contribution of tactical The main contribution of tactical marketing is to secure additional sales marketing is to secure additional sales from targeted buyers at times when room from targeted buyers at times when room occupancy is less than the optimum level. occupancy is less than the optimum level. Its other contribution is to cope with Its other contribution is to cope with sudden losses of business which often sudden losses of business which often happen as a result of unpredictable happen as a result of unpredictable economic or political events.economic or political events.

In certain destinations at certain times, In certain destinations at certain times, room occupancies in hotels may exceed room occupancies in hotels may exceed 80 percent on an annual basis. This 80 percent on an annual basis. This results in a rise in prices and results in a rise in prices and profitability. Such circumstances are profitability. Such circumstances are exceptional and usually are not exceptional and usually are not achieved by marketing alone but by a achieved by marketing alone but by a combination of favorable circumstances combination of favorable circumstances in the external environment. It is more in the external environment. It is more common for accommodation businesses common for accommodation businesses to operate somewhere between 55 and to operate somewhere between 55 and 65 percent of room occupancy. 65 percent of room occupancy.

Because of the high perishable nature Because of the high perishable nature of services, marketing managers are of services, marketing managers are required to manage demand by required to manage demand by encouraging additional bookings on a encouraging additional bookings on a daily and weekly basis. In addition, the daily and weekly basis. In addition, the high fixed costs and low variable costs high fixed costs and low variable costs of operating accommodation gives of operating accommodation gives importance in providing short term importance in providing short term incentives to buyers. That is why, incentives to buyers. That is why, tactical marketing for accommodation tactical marketing for accommodation businesses require choosing from the businesses require choosing from the range of sales promotion tools.range of sales promotion tools.

Specifically, sales promotion tactics for Specifically, sales promotion tactics for accommodation businesses include:accommodation businesses include: Short-term price discounting which is used Short-term price discounting which is used

especially to sell unsold capacity in especially to sell unsold capacity in anticipated situationsanticipated situations

Sales promotions which add temporary Sales promotions which add temporary value to products in order to attract value to products in order to attract targeted customer segments, basically targeted customer segments, basically used to increase business in low season.used to increase business in low season.

Commission incentives which is designed Commission incentives which is designed to motivate a retail distribution system and to motivate a retail distribution system and achieve added influence at points of sale, achieve added influence at points of sale, including improved display for brochures.including improved display for brochures.

Deep price discounts designed to Deep price discounts designed to motivate and conclude deals with e.g. motivate and conclude deals with e.g. tour operators or other agents making tour operators or other agents making bulk contracts for accommodation. bulk contracts for accommodation. (This form of selling may also be (This form of selling may also be strategic)strategic)

Use of sales force to generate Use of sales force to generate additional sales.additional sales.

Tactical use of advertising in order to Tactical use of advertising in order to achieve better communication of achieve better communication of promotional offers.promotional offers.

The use of these tactical techniques The use of these tactical techniques is sales orientated, but their efficient is sales orientated, but their efficient use depends on the detailed use depends on the detailed knowledge marketing managers knowledge marketing managers have about their target markets. have about their target markets. The accommodation sector is often The accommodation sector is often subject to unpredictable external subject to unpredictable external factors. That is why, it is always factors. That is why, it is always necessary for operators to allocate necessary for operators to allocate contingency funds to be held in contingency funds to be held in reserve for use in influencing short-reserve for use in influencing short-run demand.run demand.

SourcesSources

Kotler, P.; Bowen, J. and Makens, J. (1999). Kotler, P.; Bowen, J. and Makens, J. (1999). Marketing for Hospitality and Tourism (2nd Marketing for Hospitality and Tourism (2nd ed.). Prentice Hall: NJ.ed.). Prentice Hall: NJ.

Kotler, P. and Armstrong, G. (2006) Principles Kotler, P. and Armstrong, G. (2006) Principles of Marketing (11th ed.). Prentice Hall: NJ. of Marketing (11th ed.). Prentice Hall: NJ.

Middleton, V. T. C. (2004) Marketing in Travel Middleton, V. T. C. (2004) Marketing in Travel and Tourism (3rd ed). Elsevier: Oxford.and Tourism (3rd ed). Elsevier: Oxford.

Middleton, V. T. C.; Fyall, A.; Morgan, M. And Middleton, V. T. C.; Fyall, A.; Morgan, M. And Ranchhod A. (2009). Marketing in Travel and Ranchhod A. (2009). Marketing in Travel and Tourism (4th ed). Butterworth-Heinemann: Tourism (4th ed). Butterworth-Heinemann: Oxford.Oxford.