Transcript Competition in the Lodging Business

Chapter 12
Competition in the Lodging
Business
Copyright © 2010 by John Wiley & Sons, Inc. All Rights Reserved
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.
2.
3.
4.
5.
Wyndam Hotel Group—7,043 hotels
Choice Hotels International—5,827 hotels
InterContinental Hotels Group—4,186 hotels
Best Western International—4,000 hotels
Accor—3,982 hotels
Others: Hilton, Marriott, Carlson, Starwood,
and Groupe du Lourve
COMPETITION IN THE
LODGING BUSINESS
• Despite the visibility of several large hotel companies,
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
• 5,642 projects nationwide were planned in 2008
including renovations, new construction, and
conversions of one flag to another
• 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 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. Internet,
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 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
• 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 print media (newspapers and magazines)
• Some hotels favor 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
PROMOTION
• Sales Promotion provides an incentive for the
consumer
• Sales promotions often take the form of
rewards programs, partnerships (generally with
airlines), and special events (special rates)
• Rewards programs reward regular guests for
continued patronage
• Special deals are aimed at boosting business
during traditionally slow periods