Transcript Slide 1

Chapter 12
Competition in the Lodging Business
DEFINITION OF MARKETING
 Marketing is “communicating to and
giving…customers what they want, when they
want it, where they want it, at a price they are
willing to pay” (Lewis, 2000).
COMPETITION IN THE
LODGING BUSINESS
 Based upon what you have learned so far,
how would you characterize the lodging
industry in terms of competitiveness?
 The industry can be characterized as being
highly competitive as well as very fragmented
 There are many different ownership
companies, brands and types of properties
each vying for their share of the market
LEADING “BRANDS”
1. Holiday Inn (InterContinental) – 188,000
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rooms
Best Western – 187,000 rooms
Days Inns (Wyndham) – 142,000 rooms
Marriott – 130,000 rooms
Hampton Inns (Hilton) – 127,000 rooms
Others: Super 8, Comfort Inn, Holiday Inn
Express,, Motel 6, Ramada, Hilton
COMPETITION IN THE
LODGING BUSINESS
 Despite the visibility of several large hotel companies,
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many hotels are still independently owned and
operated
From year to year, the number of hotels that attain
chain affiliation usually equals the number of hotels
that become independent
There were 89,000 hotel new hotel rooms projected
to be built in 2004 – 55,000 were actually built
86,000 new rooms were projected for 2006
As the industry grows, it becomes more competitive
and marketing becomes more important
COMPETITION IN THE
LODGING BUSINESS
 The marketing mix in lodging is much the same as
we described it earlier and how it applies to the food
service industry. How the 4 Ps are interpreted,
however, is slightly different
 “Product” includes both physical goods and services.
It also includes services provided at the chain level
 “Price” refers to what the guest actually pays – which
may differ quite a bit from the “rack rate” (posted rate)
 Price, in the lodging industry, is much more flexible
than in the food service industry
COMPETITION IN THE
LODGING BUSINESS
 “Place” refers not only to the physical location
of the hotel but also to the place where the
hotel room is sold (which is often different).
 “Promotion” refers to marketing
communication – advertising, sales, etc.
Sales plays a much greater role in hotels
because of the importance of group sales
THE PRODUCT
 The “Product” is made up of goods and
services
 The hotel product can sometimes be more
goods and sometimes more services
 This often depends on the type of guest being
served: the “upstairs guest” or the
“downstairs guest”
THE PRODUCT
 The Upstairs guest is interested in the
upstairs, or – primarily the room. They are not
interested in additional services. They are
willing to trade off for lower prices
 The Downstairs guest is interested in services
and offerings in addition to the room. They
want lounges, food service, public space, etc.
and are generally willing to pay more
THE PRODUCT
 Guests may obviously be further segmented
by the extent and sophistication of services
that they desire
 Services can include; food service, concierge
(and concierge floors), spas, fitness centers,
and business centers, among others
 There are also “systemwide” services which
will include reservations, accounting, billing
and quality assurance
THE PRODUCT
 Food service was the most important service
for a long time but hotels are changing the
way that they manage it
 Some hotels are choosing to limit foodservice
(breakfast only)
 Some are choosing to eliminate it
 Others are choosing to outsource it
FOOD SERVICE
 Hotels have been exploring ways to increase
the profitability of various departments
(including rooms) in recent years (e.g.
telephone, catering, fitness facilities, retail
space, etc.)
 The food and beverage area is one
department that has posed unique challenges
to hotels in recent years
FOOD SERVICE
Reasons to outsource:
 Financial considerations
 Ability to focus on core competencies
 Strategic intents
PRICE
 Hotel pricing is meant to be flexible
depending upon the time of year, the time of
day, occupancy, the customer, the amount of
business a group provides each year, etc.
 The “cost” of providing the hotel room
generally sets the floor (the lowest)
 The rack rate generally establishes the ceiling
(the highest)
PRICE
Special rates will include:
 Corporate
 AAA
 Government
 Preferred
 Association
PLACE
 Location is a major factor in hotel success
 Location is decided based upon a “feasibility
study”
 A feasibility study considers proximity to
transportation routes, a demand analysis,
market characteristics and a competitive
analysis
 Hotel locations may change over time
PLACE –
DISTRIBUTION CHANNELS
 Distribution channels refer to how and where hotel
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rooms are sold
Whereas guests used to make reservations through
the hotel (directly), travel agents or through a central
reservations system, now online booking has
changed this
Representation companies – Utell
Online booking through hotel companies lowers costs
resulting in lower cost rooms to customers
Finally, on-line agencies such as Expedia and
Travelocity are gaining market share
PROMOTION
 Advertising – much hotel advertising still focuses on
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print media (newspapers and magazines)
Some hotels favour television advertising such as
Holiday Inn, Starwood and Hilton
Good ads “entice customers to learn more”
Some advertising is a joint effort with local
tourist/promotion boards
Internet advertising continues to increase and is
easier to track success rates than more mainstream
media (Embassy Suites spent 35 % of budget on online advertising)
PROMOTION
 Sales Promotion – provides an incentive for the
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consumer
Sales promotions often take the form of rewards
programs, partnerships (generally with airlines) and
special events (special rates)
Recent example is between Sheraton and Yahoo
Rewards programs reward regular guests for
continued patronage
Special deals try to boost business during
traditionally slow periods